Bicknell v. Kan. Dep't of Revenue

Decision Date20 May 2022
Docket Number120,935
Citation509 P.3d 1211
Parties O. Gene BICKNELL and O. Gene Bicknell as Administrator of the Estate of Rita J. Bicknell, Appellees, v. KANSAS DEPARTMENT OF REVENUE, Appellant.
CourtKansas Supreme Court

James D. Oliver, of Foulston Siefkin LLP, of Overland Park, argued the cause, and Jeffery A. Jordan, of the same firm, of Wichita, and Jeremy L. Graber, of the same firm, of Topeka, were with him on the briefs for appellant.

Jay E. Heidrick, of Polsinelli PC, of Kansas City, Missouri, argued the cause, and Miriam E. C. Bailey, of the same firm, and R. Dan Boulware, pro hac vice, of the same firm, of St. Joseph, Missouri, were with him on the briefs for appellees.

The opinion of the court was delivered by Wall, J.:

This appeal is the culmination of over a decade's worth of litigation between O. Gene and Rita J. Bicknell and the Kansas Department of Revenue (KDOR). While the procedural history is complex and the evidentiary record is enormous, the controlling legal question throughout the litigation has remained relatively simple—whether Gene was a Kansas resident for tax purposes in 2005 and 2006. We hold Gene was domiciled in Florida during those years.

Gene is a successful entrepreneur with deep ties to the city of Pittsburg, Kansas. For most of his life, Gene was a legal resident of Kansas and owned a home in Pittsburg. But Gene also bought a home in Florida in the 1990s. Since 2003, Gene has claimed to be a legal resident of Florida—a state which imposes no income tax on its residents. Gene continued to earn income in Kansas after claiming Florida residency, so he began filing Kansas income tax returns as a nonresident in 2003.

Gene's tax residency status came into question sometime after he filed his 2006 Kansas income tax return. In 2006, Gene sold his largest company, NPC International, which at one time was the largest Pizza Hut franchisee in the world with 800 franchises and over 22,000 employees. If Gene was a resident of Kansas that year, he would owe millions of dollars in state income tax on the proceeds from the sale of NPC International. If not, his tax burden as a nonresident would be relatively marginal.

In 2007, KDOR launched a review of Gene's 2005 and 2006 tax returns. That desk review prompted litigation, including two trials and three appearances before the Kansas appellate courts. This third and most recent appeal arises from the Crawford County District Court's review of an order from the Board of Tax Appeals (BOTA) affirming KDOR's determination that Gene was a Kansas resident in 2005 and 2006. After an eight-day de novo bench trial, the district court ruled that Gene was a Florida resident during the assessment period. As a result, the district court reversed BOTA's order. KDOR appealed.

In a split decision, the Court of Appeals panel reversed the district court's judgment and remanded for a new trial. The panel majority held that the district court committed reversible error by requiring KDOR to prove that Gene was a Kansas resident in 2005 and 2006. The panel majority concluded that by doing so the district court had improperly shifted the burden of proof from Gene to KDOR. The Court of Appeals also held that venue for judicial review of BOTA's order did not lie in Crawford County. Thus, the panel remanded the case to the Shawnee County District Court. Both parties petitioned for review. See Bicknell v. Kansas Dept. of Revenue , 59 Kan. App. 2d 500, 485 P.3d 679 (2021) ( Bicknell III ).

Today, our opinion brings some finality to this litigation by reversing the judgment of the Court of Appeals and affirming the judgment of the district court. First, as for venue, we hold that when an agency concludes that an individual is a Kansas resident for income tax purposes based on the individual's contacts with a particular Kansas county, that Kansas county is a proper venue for judicial review under the Kansas Judicial Review Act (KJRA), K.S.A. 77-601 et seq. BOTA determined Gene was a Kansas resident during the assessment period based on his contacts with Crawford County. Thus, venue was properly situated there.

Second, we hold that the district court properly placed the burden on Gene to prove a change in domicile. KDOR and the panel majority reach the contrary conclusion by focusing on several statements from the district court order. But when read in context, these statements merely explain why KDOR's evidence did not persuasively rebut Gene's competing evidence that he was domiciled in Florida during the assessment period. So construed, these statements merely confirm the district court fulfilled its duty to weigh evidence, assess witness credibility, and resolve disputed issues of fact.

Finally, we conclude that the district court findings are supported by substantial competent evidence. In turn, these findings support its legal conclusion that Gene was domiciled in Florida in 2005 and 2006. We also reject KDOR's claim that the district court ruling was otherwise contrary to established Kansas law.

Summary of Events Before KDOR's 2007 Desk Review

For context, we first summarize the relevant facts that occurred before KDOR initiated its desk review. This summary is based on the evidentiary record developed at trial before the Crawford County District Court, but it is by no means a complete recitation of all facts and evidence from that proceeding.

Gene was born in 1932, and he spent most of his life in Kansas. During his professional career, Gene founded or invested in many Kansas-based businesses. By some accounts, Gene had been involved in nearly 60 businesses during his career. Most notably, he founded NPC International in Pittsburg. Gene later founded NPC Management to house employees who were not part of the "core restaurant operations" with NPC International. Gene also founded Pitt Plastics, which manufactured polyethylene bags in Pittsburg. And he owned a cattle and farming operation called Bicknell Farms.

Gene met his wife, Rita, in 1987, and they wed seven years later. In 1990, he and Rita decided to buy a home in Florida. Gene also owned a home in Pittsburg. The Bicknells kept both homes fully furnished, and they still owned both homes at the time of trial in 2013.

Gene testified that he first decided to become a legal resident of Florida in 1999. According to Gene, he asked his accountants for advice on what he needed to do to become a Florida resident, and they told him that "according to the statutes" he needed to: (1) have a residence; (2) register a vehicle; (3) have a driver's license; (4) register to vote; and (5) have a bank account, all in the state of Florida. Gene already owned a home and had registered a vehicle in Florida, so he obtained a Florida driver's license and registered to vote in Florida. He did not open a Florida bank account at that time.

Gene filed his 1999 Kansas income tax return as a nonresident. And, at the outset of 2000, Gene fully intended to maintain his Florida domicile. But in late 2000, Gene returned to Kansas to address unresolved business issues that could not be managed from Florida. In December 2000, Gene obtained a Kansas driver's license and registered to vote in Kansas. Gene continued to claim residency in Kansas for several years.

In August or September 2002, the Bicknells hired Joan Waters as a full-time housekeeper for their Pittsburg home, and she was still employed in this position at the time of trial. Rita testified that she and Gene hired Waters because they were not spending as much time at their Pittsburg home. Waters lived in a guest house on the property. She cleaned the house and drove the Bicknells’ cars once a week to keep the batteries charged.

Gene testified that he finally decided to retire and return to Florida in January 2003. He said two major factors contributed to this decision. First, he turned 70 in September 2002. After this milestone birthday, Gene began to seriously reflect on his life and consider how he wanted to spend the rest of it. Second, Rita was diagnosed with breast cancer in December 2002. She decided to seek treatment in Florida, and Gene wanted to be with her during that time.

In 2003, Gene applied for a duplicate Florida driver's license and opened a bank account in Florida. He also began filing his Kansas income tax returns as a nonresident that year and has continued to do so ever since.

In 2004, Gene reregistered to vote in Florida. But KDOR also presented evidence that Gene renewed his Kansas driver's license that same year.

While supporting Rita during her cancer treatment in Florida, Gene began writing the music and script for a stage production called Celebrate America. Gene eventually played the lead character. Celebrate America was produced by a theater in Branson, Missouri, and ran from 2004 to 2006. The Branson show season runs from April to December, so Gene often stayed in Branson during this period.

Gene sold NPC International to Merrill Lynch in May 2006. Around that time, Gene's son, Martin "Marty" Bicknell, founded a company called Mariner Wealth Advisors (Mariner) in Overland Park. In July 2006, Gene executed a durable power of attorney in favor of Marty and Mariner to run Gene's remaining companies. Marty also assumed oversight of the Bicknells’ Pittsburg house and Bicknell Farms. In January 2007, Gene began working for Mariner as a consultant.

KDOR Desk Review and Subsequent Litigation

In September 2007, KDOR launched a desk review of Gene's nonresident income tax returns for the years 2005 and 2006. As part of its review, KDOR sent the Bicknells a nonresident questionnaire requesting information and documents relevant to Gene's state of residency during that period. Gene had also filed his 2005 and 2006 tax returns jointly with Rita. But Rita claimed to be a Kansas resident through 2007, so her residency was not in dispute.

In January 2009, KDOR determined that Gene should have filed his 2005 and 2006 tax returns as a Kansas resident and...

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