Fort Wayne Nat. Corp. v. Indiana Dept. of State Revenue

Decision Date08 September 1993
Docket NumberNo. 49T10-9204-TA-00017,49T10-9204-TA-00017
Citation621 N.E.2d 668
CourtIndiana Tax Court
PartiesFORT WAYNE NATIONAL CORPORATION, Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, and Kenneth L. Miller in his capacity as Commissioner of the Indiana Department of State Revenue, Respondents.

William F. Landers, Jr., Thomas M. Shoaff, Baker & Daniels, Indianapolis, for petitioner.

Pamela Carter, Atty. Gen. of Indiana, David A. Arthur, Jane E. Griffin, Deputy Attys. Gen., Indianapolis, for respondents.

FISHER, Judge.

The Petitioner, Fort Wayne National Corporation (Fort Wayne National), appeals the final determination of the Respondent, the Indiana Department of State Revenue (the Department), denying Fort Wayne National's claim for refund of a portion of the Financial Institutions Tax (the FIT) 1 it paid for calendar year 1990. The matter is before the court on the parties' cross motions for summary judgment.


The parties' motions raise the following issues:

I. Whether the Department properly included the income on certain municipal bonds in calculating Fort Wayne National's FIT liability.

II. Whether the FIT violates the nondiscriminatory requirement of 31 U.S.C. Sec. 3124(a).

III. Whether Fort Wayne National has a claim under 42 U.S.C. Sec. 1983.


The parties have stipulated the material facts. Fort Wayne National is a bank holding company with various wholly owned subsidiaries. Fort Wayne National and its wholly owned subsidiaries filed a consolidated return for the 1990 taxable calendar year. For 1990, Fort Wayne National paid $1,973,936 in FIT, $1,841,736 out of pocket and $132,200 in credits. The credits are not at issue.

Fort Wayne National paid $685,533 of the total under protest and filed a claim for refund seeking that amount plus interest on October 16, 1991. The disputed amount represents the FIT attributable to municipal and federal bond income on bonds issued before May 1989. The Department neither granted nor denied the claim within 180 days of its filing and Fort Wayne National filed this appeal on April 20, 1992.


At the outset, the court reiterates the familiar standard of review for summary judgment motions. When reviewing a motion for summary judgment, the court is to grant the motion only if no genuine issue of material fact exists and a party is entitled to judgment as a matter of law. Ind.Trial Rule 56(C); Harlan Sprague Dawley, Inc. v. Indiana Dep't of State Revenue (1992), Ind.Tax, 605 N.E.2d 1222, 1224 (citing C & C Oil Co. v. Indiana Dep't of State Revenue (1991), Ind.Tax, 570 N.E.2d 1376, 1378). "[E]ach party to a summary judgment motion must designate to the court all parts of pleadings, depositions, answers to interrogatories, admissions, matters of judicial notice, and any other matters on which it relies for purposes of the motion." Rosi v. Business Furniture Corp. (1993), Ind., 615 N.E.2d 431, 434 (quoting T.R. 56(C)). If, after reviewing the designated evidentiary materials, the court determines no genuine issue of material fact exists, either the movant or the non-movant may be granted summary judgment. C & C Oil Co., 570 N.E.2d at

1378 (citing Indianapolis Pub. Transp. Corp. v. Indiana Dep't of State Revenue (1987), Ind.Tax, 512 N.E.2d 906, 907, aff'd (1990), Ind., 550 N.E.2d 1277).


Fort Wayne National is a financial institution that carried on business within Indiana during 1990. Fort Wayne National was, therefore, subject to the FIT. See IND.CODE 6-5.5-1-17; 6-5.5-2-1. The FIT, which took effect on January 1, 1990, is an 8.5% levy on the remainder of a taxpayer's apportioned income or adjusted gross income minus the taxpayer's deductible Indiana net operating losses and net capital losses for the privilege of exercising its franchise or transacting business within Indiana. IC 6-5.5-2-1(a).

Fort Wayne National had municipal bond income in 1990 and now claims that income is exempt from the FIT by virtue of IND.CODE 6-8-5-1, the General Exemption Statute (the GES). At the time Fort Wayne National's municipal bonds were issued, the GES provided in pertinent part:

All bonds issued after March 11, 1959, or notes, warrants, or other evidences or indebtedness issued in the state of Indiana by or in the name of any county, township, city, incorporated town, school corporation, state educational institution or state supported institution of higher learning, or any other political, municipal, public or quasi-public corporation or body, or in the name of any special assessment or taxing district or in the name of any authorized body of any such corporation or district, the interest thereon, the proceeds received by a holder from the sale of such obligations to the extent of the holder's cost of acquisition, or proceeds received upon redemption prior to maturity, or proceeds received at maturity, and the receipt of such interest and proceeds, shall be exempt from taxation in the state of Indiana for all purposes except the state inheritance tax.

IC 6-8-5-1(a) (emphasis added). When construing a statute, the court is to give the statutory words and phrases their plain, ordinary, and usual meaning unless the legislature's intent reveals a contrary purpose. State v. Hartman (1992), Ind., 602 N.E.2d 1011, 1013; Johnson County Farm Bureau Coop. Ass'n v. Indiana Dep't of State Revenue (1991), Ind.Tax, 568 N.E.2d 578, 580-581, aff'd (1992), Ind., 585 N.E.2d 1336. The court strictly construes statutes creating exemptions from tax against the taxpayer, but must nonetheless always bear the legislature's intent in mind to avoid reading an exemption so narrowly that its application is defeated in cases rightly falling within its ambit. Harlan Sprague, 605 N.E.2d at 1225 (citing General Motors Corp. v. Indiana Dep't of State Revenue (1991), Ind.Tax, 578 N.E.2d 399, 404, aff'd (1992), Ind., 599 N.E.2d 588).

The GES provides that municipal bond income "shall be exempt ... for all purposes except the state inheritance tax." IC 6-8-5-1 (emphasis added). When used as an adjective, as it is in this portion of the GES, "all" means "every member or individual component of: each one of--used distributively with a plural noun or pronoun to mean that a statement is true of every individual considered ... [as in] (a film suitable for all ages)." Webster's Third New International Dictionary 54 (1981). "Shall" within a statute has a mandatory rather than a directory meaning unless it appears clear from the context or purpose of the statute that the legislature intended a different meaning. United Rural Elec. Membership Corp. v. Indiana & Michigan Elec. Co. (1990), Ind., 549 N.E.2d 1019, 1022 (citing State ex rel. City of Indianapolis v. Brennan (1952), 231 Ind. 492, 109 N.E.2d 409). No language could be plainer than these words in the GES, and notwithstanding that courts must construe exemptions narrowly, unambiguous language must be given its plain meaning. See, e.g., Matter of Grissom (1992), Ind., 587 N.E.2d 114, 116.

The main clause of the GES is sweeping in its scope. The legislature desired to enhance the marketability of Indiana municipal The GES's command is clear and unambiguous. The municipal bonds at issue predate the FIT and were therefore exempt from all forms of taxation other than the inheritance tax by the express terms of the GES. See IC 6-8-5-1. In 1990, however, the GES was amended to include the FIT as well as the inheritance tax as exceptions to the exemption it creates. The issue therefore becomes the effect of the FIT and the 1990 amendment to the GES on the otherwise exempt status of Fort Wayne National's municipal bonds.

bonds and to that end exempted those bonds from all Indiana taxes but one. Indeed, the very existence of the exception for the state inheritance tax confirms the otherwise broad scope of the GES. Statutory exceptions and provisos serve to qualify or limit the plain meaning of a statute's main clause by restraining it to except something that would otherwise be within its scope. See Kirkpatrick v. King (1950), 228 Ind. 236, 246, 91 N.E.2d 785, 789 (quoting McDougal v. State (1915), 183 Ind. 168, 170, 108 N.E. 524, 525); Ernst & Ernst v. Underwriters Nat'l Assurance Co. (1978), 178 Ind.App. 77, 83, 381 N.E.2d 897, 900 (citing State v. Shrode (1949), 119 Ind.App. 57, 83 N.E.2d 900, 902).


When the GES was enacted, the FIT did not exist, but that alone does not resolve whether the FIT falls within the ambit of the GES. The FIT is a "measured by" tax, that is, a tax measured by income. See IC 6-5.5-2-1.

Prior to the 1990 amendment, the GES excepted from its terms only the state inheritance tax. The exception of only the inheritance tax, like any statutory exception, must be strictly construed. Natural Resources Comm'n v. Porter County Drainage Bd. (1991), Ind., 576 N.E.2d 587, 589 (citing Common Council of Peru v. Peru Daily Tribune (1982), Ind.App., 440 N.E.2d 726. But it also implies the inclusion of all other taxes, including "measured by" taxes, which existed when the GES was promulgated. See, e.g., Gross Income Tax Division v. Bartlett (1950), 228 Ind. 505, 93 N.E.2d 174, appeal dismissed (1951), 340 U.S. 924, 71 S.Ct. 499, 95 L.Ed. 667. See also Caylor-Nickel Clinic, P.C. v. Indiana Dep't of State Revenue (1991), Ind.Tax, 569 N.E.2d 765, 772-73, aff'd (1992), Ind., 587 N.E.2d 1311 (discussing the rule of construction of express inclusion and implied exclusion: the enumeration of certain items in a statute or regulation implies the exclusion of items not enumerated). The GES therefore included measured by taxes in its scope.

More importantly, though, the subject matter of the FIT was included within the original GES. The FIT is a replacement tax for the gross income tax, adjusted gross income tax, bank tax, savings and loan association tax, and the production credit association tax for financial institutions within the meaning of IC 6-5.5-1-17. See IND.CODE 6-5.5-9-4. Like all taxes...

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