In the Matter of the Appeal of MLY Liquidating Corporation Docket No. 1386-86-DT
Corporate Income Tax
Order Denying Motion for Rehearing
BEFORE THE BOARD OF TAX APPEALS OF THE STATE OF KANSAS
IN THE MATTER OF THE APPEAL OF
MLY LIQUIDATING CORPORATION FROM
A NOTICE OF ASSESSMENT OF
ADDITIONAL INCOME TAX DATED
FEBRUARY 7, 1983, PURSUANT TO
Docket No. 1386-86-DT
ORDER DENYING MOTION FOR REHEARING
Now, on this 20th day of May, 1987, the above captioned matter comes on for consideration and decision by the Board of Tax Appeals of the State of Kansas, upon the Motion for Rehearing filed by MLY Liquidating Corporation. The Board previously issued its Order in this matter on April 1, 1987. That Order sustained the February 29, 1986, Order of the Director of Taxation which had assessed additional tax together with interest against the taxpayer. Having reviewed the Motion for Rehearing, and the arguments and authorities cited in the Supporting Brief of the taxpayer as well as the Department of Revenue Brief in Opposition, the Board makes the following findings, conclusions and orders:
1. The taxpayer first asserts that K.A.R. 92-12-73(b) was misinterpreted and misapplied by the Board. Essentially, this argument of the taxpayer plows no new ground. The taxpayer in its original briefing and argument relied heavily upon the language of K.A.R. 92-12-73(b). The Board, in its Order, addressed the regulation, its interpretation and effect. The Board extensively reviewed the statutory frame work and the interpretation given to the statutes by both the Kansas Supreme Court and the Courts of other states determined that the regulation would not be interpreted in the manner urged by the taxpayer.
2. The taxpayer maintained that the Board's reliance upon
Western Natural Gas Company v. McDonald,
202 Kan. 98, 446 P.2d 781 (1968) was misplaced and that statutory changes since the decision in that case mandate a different outcome in this case. Again, this matter was addressed in the Board's original Order. The Board examined the statutes in effect when
Western Natural Gas
was decided and the subsequent Multistate Tax Compact and found no difference in the two acts with regard to the definition of "business income." The Board found that
Western Natural Gas
was still good law and applied to the facts of this case.
3. The taxpayer argues that the Board erred and misapplied the law of other jurisdiction to the issues. In particular the taxpayer asserts that the Board's reliance upon General Care Corp. v. Olson, 705 SW 2d 642 (Tenn. 1986) was wrong and that it should have accepted the interpretation of the California Courts. The taxpayer has misinterpreted the Board's Order in this regard. The Board did not opt for Tennessee law over California law, but found no conflict in the interpretation of the states as applied to the facts of this case. This is not to say that Tennessee and California would have ruled the same in each of the cases cited by the taxpayer, but in fact, the taxpayer has cited no case from any jurisdiction which involved a Section 337 liquidation and where the court applied the law in the manner urged by the taxpayer. These matters were fully addressed in the Board's original order.
4. The taxpayer urges the Board to clarify its Order with regard to the burden of proof. The Board recognizes that the burden of proof is on the Department of Revenue to show that the income which is the subject of the assessment is taxable. Further the tax law is to be interrupted strictly in favor of the taxpayer and against the taxing authority.
5. The taxpayer next contends that the Board made erroneous findings of fact and conclusions regarding the issue of unconstitutional double taxation. The taxpayer asserts that the implication of the Board's Order is that the taxpayer did not pay an apportioned tax in Montana. Such is not the case. The evidence showed that a tax was paid in Montana. However, no evidence was presented to show that Montana had made a determination either administratively or judicially that such tax was due. Therefore, the Board does not believe that a conflict between the states has arisen or that incurable double taxation has been shown. Again, this is covering old ground and the Board addressed this issue in its original Order.
6. Finally, the taxpayer contends that the Board did not fully address the issue of estoppel which was raised by the taxpayer in its arguments to the Board. The Board agrees that there was insufficient coverage of this issue in its original Order. The Board notes that the taxpayer in its original brief to the Director of Taxation did not raise the issue of estoppel. However, the issue does appear in the taxpayers original brief to this Board. The Board has examined the record in this case and finds no evidence bearing on the subject of estoppel. The taxpayer frames the issue by asserting that the Department of Revenue is taking a position in this case which is contrary to its own published regulations. The position taken by the Board in its original Order was essentially that K.A.R. 92-12-73(b) was not void but rather should be interpreted in the context of a Section 337 liquidation in harmony with the intent of the statute to which it is subservient (Multistate Tax Compact) and in line with the Kansas case law and the case law of other jurisdictions. The Board did not make an interpretation which requires the voiding of the regulation. The Board believes the regulation is not inconsistent with its Order. Additionally, there was no evidence in the record that the Department of Revenue had applied or lead the taxpayer to apply K.A.R. 92-12-73(b) to the taxpayer in the past, in a manner inconsistent with the Director's Order to any other taxpayers. That being the case, the Board does not believe it is necessary to comprehensively address whether estoppel would be applicable had a factual record been made. The Board considered the case cited by the taxpayer of
Benson v. City of DeSoto
, 212 Kan. 415, 510 P.2d 1281 (1973). The Board finds no factual basis for applying the doctrine of that case to the facts in this case. The Board does not believe it would be helpful to allow the parties to undertake a completely new line of discovery at this point. The issues have been fully litigated and argued and the Board concludes that its Order in this matter or this Order on Rehearing fully address all of the issues raised by the parties and that a Rehearing would not be appropriate.
IT IS, THEREFORE, BY THE BOARD OF TAX APPEALS OF THE STATE OF KANSAS, CONSIDERED AND ORDERED that, for the reasons more fully set forth herein, the application must be, and the same is hereby, denied.
IT IS SO ORDERED
FRED L. WEAVER, CHAIRMAN
DALLAS E. CRABLE, MEMBER
DAVID C. CUNNINGHAM ROBERT C. HENRY, MEMBER
ATTORNEY & SECRETARY
KEITH FARRAR, MEMBER
Return to KSA Listing