General Motors Corp. v. Mississippi State Tax Com'n, 56334

• Decision Date: 08 July 1987
• Docket Number: No. 56334,56334
• Parties: GENERAL MOTORS CORPORATION v. MISSISSIPPI STATE TAX COMMISSION.
• Court: Mississippi Supreme Court

Page 498

510 So.2d 498

GENERAL MOTORS CORPORATION v. MISSISSIPPI STATE TAX COMMISSION.

No. 56334.

Supreme Court of Mississippi.

July 8, 1987.

Richard D. Gamblin, D. Michael Cockrell, Wise, Carter, Child & Caraway, Jackson, for appellant.

Bobby R. Long, Gary W. Stringer, Jackson, for appellee.

Before ROY NOBLE LEE, P.J., and ROBERTSON and SULLIVAN, JJ.

ROBERTSON, Justice, for the court:

I.

Today's appeal presents a question regarding the amount of tax credit which may be claimed by an affiliated group of corporations filing a consolidated income tax return where one of the corporations has paid a privilege tax. The question requires careful and intricate consideration of our income and privilege tax statutes and regulations. In the end we hold that the privilege taxpayer may claim the entire privilege tax credit, notwithstanding that the amount of the credit exceeds the privileged corporate subsidiary's income tax attributable to its Mississippi operations, and that this credit inures to the benefit of the affiliated group via the consolidated return.

We reverse and render.

II.

General Motors Corporation ("GM"), a Delaware corporation, and all of its subsidiaries filed a consolidated Mississippi Corporate Income Tax Return for the year 1979 and timely paid the total amount of income tax shown thereon to be due. Included in the affiliated group filing the consolidated return was General Motors Acceptance Corporation ("GMAC"), a finance company doing business in the State of Mississippi.

After the consolidation of all taxable income of the subsidiaries filing the consolidated return, and after computing the Mississippi income tax liability of the consolidated group, GM on behalf of the consolidated group took a credit against the tax so determined in the amount of $584,978. This credit represents the amount of 1979 Mississippi privilege tax levied against and paid by GMAC. This privilege tax credit against income tax was claimed under Section 27-21-9 of the Mississippi Code of 1972, as it existed prior to its amendment effective January 1, 1983.

In 1981, the Commissioner of Revenue performed an audit of GM's 1979 consolidated Mississippi Corporate Income Tax Return. The Commissioner's auditors reduced the privilege tax credit taken by GM's consolidated group from $584,978 to $138,166. The Commissioner determined that a credit in the amount of the full privilege tax paid was not allowable; rather, that the credit was limited to the income tax due by GMAC attributable to its Mississippi operations.

GM appealed to the Board of Review of the State Tax Commission that portion of the Commissioner's assessment of additional taxes caused by the disallowance of the full tax credit. Following a hearing, the Board of Review upheld the Commissioner's action. GM then appealed the action of the Board of Review to the full Commission which also affirmed.

GM appealed the action of the Commission to the Chancery Court of the First Judicial District of Hinds County, Mississippi. The Chancery Court considered this matter on stipulated facts and thereafter affirmed the assessment of additional income taxes made against GM by the Commission. GM thereafter perfected an appeal to this Court.

III.

A.

Without doubt, an affiliated group of corporations has the privilege of filing a consolidated corporate state income tax return in lieu of separate returns. Specifically, Miss. Code Ann. Sec. 27-7-37(2) (Supp.1979) provides that "an affiliated group of corporations shall have the privilege of making ... a consolidated return with respect to the income tax imposed by this Article for the taxable year in lieu of separate returns...." General Motors and its affiliates, one of which was GMAC, voluntarily filed a consolidated return for 1979. In that year, GMAC, one of GM's subsidiaries, paid to the State of Mississippi a privilege tax in the amount of $584,978.00. For that same year GMAC's separate income tax liability attributable to its Mississippi operations was $151,690.00. The income tax as reported on the consolidated return for GM and its subsidiaries in the aggregate, of course, greatly exceeded the amount GMAC paid as privilege tax.

The issue arises in the context of Miss. Code Ann. Sec. 27-21-9, as it existed prior to its 1983 amendment. At that time Section 27-21-9 provided:

The tax hereby levied is in lieu of all other privilege taxes upon such business, and shall be paid to the commissioner, as provided by law, previous to enjoyment of the privilege for the period covered by the payment; and the amounts paid by the taxpayer in any given calendar year shall be credited upon such income tax as may be due by the taxpayer for such calendar year, or for the next fiscal year ending after the close of such calendar year; provided, however, the credit so allowed shall, in no event, be in a greater amount than the total amount of income tax due by the taxpayer for such calendar or fiscal year; it being the purpose and effect of this section that whichever of the above taxes is greater in amount shall be paid by the taxpayer. ¹

The question thus presented is whether the tax credit to which GM and its subsidiaries are entitled is the full amount of the privilege tax paid, $584,978.00, or whether the credit is limited to the amount of GMAC's income tax liability attributable to Mississippi income, $151,690.00.

B.

GM argues initially that the consolidated group is the "taxpayer." See Miss.Code Ann. Sec. 27-7-37(2)(iii) (1972). The argument may be dispatched in a word, for "taxpayer" in today's context is defined wholly by reference to Section 27-21-9. "Taxpayer" there means the entity liable for payment of the privilege tax. That entity is GMAC.

GM makes much of the notion that allowing the entire credit is consistent with the economic theory and purpose behind the idea of consolidated returns. Analogies to the federal income tax laws are presented. These considerations have no proper part in our decision. We have no doubt of the authority of the legislature or the State Tax Commission through proper regulations to place limitations upon the privilege tax credit which might arguably be inconsistent with the overall economic theory some have advanced in support of the practice of allowance of the filing of consolidated income tax returns. Indeed, the legislature has amended Section 27-21-9, effective January 1, 1983, to provide expressly that the credit allowed may be taken only against the income derived exclusively from the business which pays the Finance Company Privilege Tax. If that statute had been in effect for tax year 1979, we would have no choice but to affirm. Only because that law was not in effect as of that date, and by reason of the fact that the credit was measured instead by the amount of income tax "due" by GMAC, must we reject the Commission's view.

We emphasize that there is no natural law of income tax liability. No brooding omnipresence nor invisible hand informs our consideration of such cases. The amount of income tax a taxpayer owes to this state is determinable solely by reference to the positive provisions of the income tax laws of this state and the regulations of the State Tax Commission promulgated within the scope of its authority.

To be sure, we attempt constructions of our tax laws in ways that are fair and reasonable and consistent with economic realities, but only insofar as those considerations are allowable via the language of our income tax statutes and regulations. We are not nearly so concerned with what the tax lawmakers and regulators have intended as we are with what they have said. And what they have said here is that the limit upon the privilege tax credit is the actual income tax liability for GMAC for the year in question, a point now to be developed more fully.

C.

Without doubt, the privilege tax was paid solely by GMAC. The Finance Company Privilege Tax Law in Section 27-21-9 provided that companies such as GMAC must pay the privilege tax with the proviso that it be entitled to offset that tax against any income tax due. There can be no question but that, if GMAC were filing a separate corporation income tax return, the amount of its credit would be limited to "the total amount of income tax due by the taxpayer [GMAC] for such calendar or fiscal year."

The computation of the amount of credit is a function of the directives of Section 27-21-9, as it appeared in 1979. Two passages from that statute are pertinent. First, the statute provides that the privilege tax paid by the finance company

shall be credited upon such income tax as may be due by the taxpayer for such calendar year, or for the next fiscal year....

Second, the...