Associated Ins. Companies, Inc. v. Indiana Dept. of State Revenue
| Decision Date | 29 September 1995 |
| Docket Number | No. 49T10-9405-TA-00152,49T10-9405-TA-00152 |
| Citation | 655 N.E.2d 1271 |
| Parties | ASSOCIATED INSURANCE COMPANIES, INC. and subsidiaries, Petitioners, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent. |
| Court | Indiana Tax Court |
Stephen H. Paul, David A. Given, Brian S. Fennerty, Baker & Daniels, Indianapolis, for petitioners.
Pamela Carter, Attorney General, Brian D. Scott, Deputy Attorney General, Indianapolis, for respondent.
Associated Insurance Companies, Inc. (AICI) and several of its subsidiaries appeal the final determination of the Indiana Department of State Revenue (the Department) partially denying the application of the Indiana Comprehensive Health Insurance Association (ICHIA) tax credit against their consolidated gross income tax liability.
Whether an ICHIA member may apply its ICHIA credit against the full amount of its consolidated gross income tax liability.
ICHIA is a non-profit legal entity that provides health insurance to Indiana residents who cannot obtain private insurance. IND.CODE 27-8-10-2(a) 1. All health insurance carriers, prepaid health care delivery plans, and self-insurers providing health insurance or health care services in Indiana are required to be members of the ICHIA. Id.
Because it is statutorily required to charge "reasonable rates" 2 for the insurance it provides, the ICHIA usually generates losses rather than profits. It recoups these losses by making assessments to its members in proportion to the amount of health insurance premiums that the member earned in Indiana during the calendar year. IC 27-8-10-2(g). Each member may then take a credit against its income tax liability up to the aggregate amount of assessments paid to the ICHIA. IC 27-8-10-2(n)(i). This credit may be carried forward if necessary. Id.
AICI, an Indiana corporation, is a member of the ICHIA. AICI wholly owns another member, Health Maintenance of Indiana (HMI), as well as several other Indiana corporations which are not ICHIA members. AICI, HMI, and these other Indiana corporations constitute a single affiliated group under IND.CODE 6-2.1-5-5(a), and file a consolidated gross income tax return under IC 6-2.1-5-5(b). 3
For tax years 1986-1988, AICI and HMI both earned ICHIA credit in an amount greater than the gross income tax liability arising from their income. AICI and HMI applied these "excess" credits against the gross income tax liability attributable to the other corporations in their affiliated group. In other words, AICI and HMI applied the credits against the total gross income tax liability on their affiliated group's consolidated return. Subsequently, the Department audited the affiliated group, and issued a final determination disallowing the credit to the extent it exceeded the tax liability arising from the income of AICI and HMI alone. The affiliated group filed a timely original tax appeal from that final determination.
The court reviews appeals from the Department de novo, which means that the court is bound neither by the evidence nor the issues presented at the administrative level. Mechanics Laundry & Supply, Inc. v. Indiana Dep't of State Revenue (1995), Ind.Tax, 650 N.E.2d 1223, 1227. The parties in this case have filed cross motions for summary judgment. A motion for summary judgment may be granted only when no genuine issue of material fact exists and a party is entitled to judgment as a matter of law. Koufos v. Indiana Dep't of State Revenue (1995), Ind.Tax, 646 N.E.2d 733, 735; Ind.Trial Rule 56(C). The standard for granting summary judgment does not change when cross motions for summary judgment have been filed. Roehl Transport, Inc. v. Indiana Dep't of State Revenue (1995), Ind.Tax., 653 N.E.2d 539, 541.
While the parties do not dispute the facts in this case, they do dispute how the law applies to the facts. Specifically, they differ on how the ICHIA credit is applied in the context of an affiliated group filing a consolidated gross income tax return. AICI asserts that the credit may be applied against the gross income tax liability of a member's entire affiliated group. The Department argues that the credit may be applied against gross income tax liability arising from the member's income only. Each party relies on Members who ... have paid one (1) or more assessments levied under this chapter may ...:
language in the ICHIA credit subsection. That subsection provides:
(i) take a credit against premium taxes, gross income taxes, adjusted gross income taxes, supplemental corporate net income taxes, or any combination of them, or similar taxes upon revenues or income of member insurers that may be imposed by Indiana, up to the amount of the taxes due for each calendar year in which the assessments were paid and for succeeding years ...
IC 27-8-10-2(n)(i) (emphasis added).
AICI maintains that the language "[m]embers ... may ... [t]ake a credit ... up to the amount of the taxes due " controls this case. It argues that the amount of tax "due" from a member filing a consolidated gross income tax return with an affiliated group is the full amount of tax liability on the consolidated return. To support this interpretation, AICI cites IC 6-2.1-5-5(c), which imposes joint and several liability on each affiliate for the full amount of taxes due on the consolidated gross income tax return.
The Department alleges that the language "[m]embers ... may ... take a credit against ... gross income taxes ... or similar taxes upon revenues or income of member insurers " is dispositive. It maintains that "members" and "of member insurers" will be nullified if a non-member is permitted to take the credit. Additionally, the Department points out that the adjusted gross income tax consolidated filing statute explicitly states that affiliates may share credits, while the gross income consolidated filing statute does not mention credits at all. See IND.CODE 6-3-4-14(d); IC 6-2.1-5-5. 4 The Department argues that this omission from the gross income statute was intentional, and concludes that the legislature did not intend to permit the sharing of credits in the gross income context. 5
The court's foremost goal in construing a statute is to give effect to the true intent of the legislature. Caylor-Nickel Clinic v. Indiana Dep't of State Revenue (1991), Ind.Tax, 569 N.E.2d 765, aff'd 587 N.E.2d 1311. The true intent of the legislature is best evidenced by the language in the statute. F.A. Wilhelm Constr. Co., Inc. v. Indiana Dep't of State Revenue (1992), Ind.Tax, 586 N.E.2d 953, 956. In interpreting statutory words and phrases, the court gives them their plain, ordinary, and usual meaning. Shoup Buses v. Indiana Dep't of State Revenue (1994), Ind.Tax, 635 N.E.2d 1165, 1168. The plain, ordinary, and usual meaning of a word is generally found in a dictionary. Mechanics Laundry, 650 N.E.2d at 1228.
As stated earlier, a member may take the credit "up to the amount of taxes due." The plain, ordinary, and usual meaning of "due" is "that which one contracts to pay or perform to another; ... The word 'due' always imports a fixed and settled obligation or liability." Black's Law Dictionary 448 (5th ed. 1979). Another dictionary provides that "due" means "a payment or obligation required by custom, law, morality, or ethics." Webster's Third New International Dictionary 699 (1981). Taken together, these definitions indicate that "due" is a broad term which connotes a legal obligation to pay.
The gross income tax consolidated filing statute provides that each corporation participating in a consolidated filing is jointly and A broad interpretation of "due" is consistent with the policy and goals of the ICHIA statutes in general and the credit subsection in particular. See Indiana State Bd. of Registration for Professional Engineers and Land Surveyors v. Nord (1992), Ind.App., 600 N.E.2d 124, 128 (). The policy behind the ICHIA is to ensure that health insurance is available to all Indiana residents. In order to carry out its operations and implement its policy, the ICHIA makes assessments to health insurers in Indiana. The credit subsection gives health insurers an opportunity to recoup the assessments. If the credit did not exist, companies would be discouraged from participating in the Indiana health insurance market, and the policy behind the ICHIA would not be served. Correspondingly, an interpretation of "due" which limits the availability of the credit is adverse to the policy behind the statute.
severally liable for the full amount of the affiliated group's gross income tax liability. IC 6-2.1-5-5(c). In the case at bar, if any or all of the other affiliates fail to pay their portion of the consolidated gross income tax, the Department has a right to obtain full payment from AICI and/or HMI. The Department could seek such contribution because each corporation has a legal obligation to pay the full amount of the consolidated gross income tax liability. See id.
The Mississippi Supreme Court recently interpreted "due" in a statutory context that is strikingly similar to the case at bar. General Motors Corp. v. Mississippi State Tax Comm'n (1987), Miss., 510 So.2d 498. In GM, GM and its subsidiaries filed a consolidated return under Miss.Code Ann. § 27-7-37(2) (Supp.1979). One subsidiary had generated income tax credit in an amount greater than the income tax arising from its operations. The Mississippi Tax Commission sought to limit application of the credit to tax attributable to the subsidiary's income only. Id. at 498-99. The relevant statute provided that the subsidiary could take the credit up to the "total amount of income tax due." Id. at 501 (emphasis added).
The Court held that the amount of income tax "due" from the subsidiary was the "total amount of income tax due by the entire affiliated group." Id....
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