Blackmon v. Gable Industries, Inc., s. 49061

• Decision Date: 22 April 1974
• Docket Number: 49086,3,Nos. 1,Nos. 49061,2,s. 49061,s. 1
• Citation: 132 Ga.App. 354,208 S.E.2d 101
• Parties: John A. BLACKMON v. GABLE INDUSTRIES, INC. GABLE INDUSTRIES, INC. v. John A. BLACKMON
• Court: Georgia Court of Appeals

Page 101

208 S.E.2d 101

132 Ga.App. 354

John A. BLACKMON v. GABLE INDUSTRIES, INC.

GABLE INDUSTRIES, INC. v. John A. BLACKMON.

Nos. 49061, 49086.

Court of Appeals of Georgia, Division Nos. 1, 2, 3.

April 22, 1974.

Rehearing Denied July 11, 1974.

Syllabus by the Court

The Revenue Commissioner's permissions for the plaintiff taxpayer and its affiliated corporations to file consolidated returns, were, both under the law and their specific terms, only tentative, subject to the commissioner's audit to determine the appropriate type of return. The taxpayer having failed to establish that its taxes were erroneously or illegally collected, and prove its correct tax liability, its action for refund should have been resolved in the commissioner's favor on motion for summary judgment.

Plaintiff, Gable Industries, Inc., a Maine corporation domesticated in Georgia, is the successor in interest to Fuqua National, Inc. (Fuqua Industries, Inc., until 1967), a Georgia corporation with principal offices and place of business in Augusta, by virtue of a merger in 1971.

Fuqua Industries, Inc., was primarily engaged in the business of owning and operating a television station in Augusta, Georgia; it derived substantially all of its income from sources within this state, consisting primarily from providing services in Georgia pursuant to contracts accepted and paid for in this state, and nearly all of its assets, property, business, and employees were located within this state.

Claussen's, Inc., a wholesale bakery business, was a wholly-owned Georgia subsidiary corporation of Fuqua Industries, Inc., with its principal place of business in Augusta. It owned and operated several plants in this state and did most of its business within this state.

Rentavision of Brunswick, Inc., another Georgia corporation and subsidiary of Fuqua Industries, Inc., owed and operated a cable television business entirely within this state, with all income derived from within the state.

On August 18, 1964, the Georgia Department of Revenue granted 'tentative permission' to Fuqua Industries, Inc., and its subsidiary, Claussen's, Inc., to file consolidated corporate income tax returns beginning with the fiscal year ended June 30, 1964, 'conditionable (sic) upon findings revealed in future audits.' On September 20, 1966, similar 'tentative permission' was granted to Fuqua Industries, Inc., and its subsidiary, Rentavision of Brunswick, Inc., beginning with the fiscal year ended June 30, 1966. The latter permission stated as follows: 'This tentative permission is subject to audit by a representative of this department within the period provided by the statute of limitation and in the event such audit reveals that this method does not reflect the true income attributable to the state of Georgia, this department reserves the right to revoke the permission hereby granted. This tentative permission is also subject to the provision that net operating losses sustained by each member of the group filing a consolidated return shall apply against that member's income in accordance with the provisions of Section 92-3109(m) of the Georgia Income Tax Act. When the net operating loss of the member corporation has been exhausted, the available taxable income must then be included in the applicable consolidated return.'

Fuqua Industries, Inc. (and subsequently Fuqua National, Inc.) filed consolidated returns in 1965 with Claussen's, Inc.; in 1966 and 1967 with Claussen's, Inc., and Rentavision of Brunswick, Inc.; and in 1968 with Claussen's Bakery Products, Inc., for which permission to file a consolidated return had neither been sought nor granted. After audits of the affairs of Fuqua National, Inc., and its aforesaid subsidiaries, the State Revenue Commissioner determined that the corporations were separate businesses; that Fuqua had apportioned income derived in Georgia to other states; that Fuqua had deducted the losses of Claussen's, Inc., and Rentavision from its income; that the three corporations did not meet the requirements for filing a single return, i.e., they did not constitute a unitary business; that separate returns should have been filed; and that his predecessor in office had been without authority to grant the 'tentative permissions,' which he revoked, issuing assessments for tax deficiencies and interest against Fuqua National, Inc. That corporation paid the tax assessments under protest in 1970, and filed separate claims for refunds for each of the aforesaid four years, which claims the department denied.

The plaintiff successor corporation brought this action against the State Revenue Commissioner for refund of the said taxes. Both parties moved for summary judgment. The showing on the motions was that the corporations filed consolidated federal returns during these same periods that the corporations' affairs would have been conducted in a radically different manner if it had been known that the tentative permissions could be revoked (as indicated by the commissioner's letters); that it was the commissioner's practice to automatically grant requests for permission to file consolidated corporate income tax returns, subject to revocation of the permission when it was determined that the net effect was to lower the overall taxes paid, or offset profits of one corporation against losses of another, or that the corporations were not in the same type of business (unitary).

The trial judge granted the plaintiff's motion as to its fiscal years 1965, 1966, and 1967, and granted the defendant commissioner's motion as to fiscal year 1968, reserving the right for the defendant to determine the correctness of the plaintiff's returns for all tax years in question even upon a consolidated return basis.

The defendant commissioner appeals from the denial of his motion for summary judgment as to fiscal years 1965, 1966, and 1967, and the plaintiff corporation cross appeals from the denial of its motion for summary judgment as to fiscal year 1968, the order having been certified for immediate review.

Arthur K. Bolton, Atty. Gen., H. Perry Michael, Lauren O. Buckland, Asst. Attys. Gen., Atlanta, for appellant.

Troutman, Sanders, Lockerman & Ashmore, Carl E. Sanders, Dale M. Schwartz, Atlanta, for appellees.

STOLZ, Judge.

The plaintiff taxpayer bases its claim upon the contention that the qualifying phrase (which we have italicized) in the provision of Code Ann. § 92-3202, 'The income of two or more corporations shall not be included in a single return except with the expressed consent of the Commissioner,' which was added by Ga.L.1941, pp. 210, 219 (as amended by Ga.L.1943, p. 109), gave it the right to file a consolidated income tax return, having obtained the alleged 'expressed consent of the Commissioner.'

The above statute provides for the inclusion (with consent) of the income of two or more corporations in a single return, and does not use the term consolidated return. Although there was a limited right to file consolidated federal income tax returns during the period in question, there was no Georgia statute making such specific provision in effect during the periods in question. On February 14, 1969, the Attorney General rendered an opinion (Opinions of the Attorney General, #69-77) that the right to file consolidated income tax returns was not granted by Code Ann. § 92-3202. Although this opinion is not binding on the courts, we adopt it as a correct statement of the law as of the periods in question, and quote from it as follows:

'This is in reply to your recent letter requesting my opinion as to whether the 1941 amendment (Ga.L. 1941, pp. 210, 219) to Code Ann. § 92-3202 confers the right to file a 'consolidated income tax return' on corporations affiliated by common ownership or control.

'If by a 'consolidated income tax return' is meant one prepared on the basis that each member of a group of corporations owned or controlled by the same interests is not a taxable entity but is merely a part of a taxable entity, then, in my opinion, neither the 1941 amendment nor any other provision of the Georgia Income Tax Act (Code Ann. Chs. 92-30, 92-31, 92-32, 93 (sic)-33), for that matter, creates such a right. Such a right would result in a reduction of the aggregate liability of the group in years in which some, but not all, of its members sustained a net loss, for each member sustaining a net loss would, in effect, be allowed to offset its net loss against the net income of those members having net income. If the General Assembly had intended such a result, it would have made provision for it in clear and unmistakable language, for it is said that a statute levying a tax will not be extended by implication beyond the clear import of its terms. Gould v. Gould, 245 U.S. 151, 153, 62 L.Ed. 211, 213, 38 S.Ct. 53 (1917).

'It should be noted that the only change the act of 1941 (Ga.L.1941, pp. 210, 219) made in Code Ann. § 92-3202 was to add the words 'except with the expressed consent of the Commissioner' to the second sentence of that Section. Prior to 1941, the second sentence read, 'The income of two or more corporations shall not be included in a single return.'

'In arriving at the conclusions expressed herein, I have not been unmindful of the fact that, for federal income tax purposes, Congress has granted the right of filing a consolidated return to certain affiliated corporations. I.R.C. (1954) §§ 1501 to 1505. However, in 1941, that right did not extend to corporations generally, it having been limited to railroad corporations in 1934. 8A Mertens, Law of Federal Income Taxation, §...