Horizon Bancorp v. Indiana Dept. of State Revenue

• Decision Date: 20 December 1993
• Docket Number: No. 49T10-9108-TA-00042,49T10-9108-TA-00042
• Citation: 626 N.E.2d 603
• Parties: HORIZON BANCORP and First Citizens Bank, N.A., Petitioners, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent.
• Court: Indiana Tax Court

Page 603

626 N.E.2d 603

HORIZON BANCORP and First Citizens Bank, N.A., Petitioners, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent.

No. 49T10-9108-TA-00042.

Tax Court of Indiana.

Dec. 20, 1993.

Paul F. Lindemann, Jeffery S. Dorman and Garry R. Stamm, Krieg DeVault Alexander & Capehart, Indianapolis, for petitioners.

Pamela Carter, Atty. Gen., David A. Arthur and Jane E. Griffin, Deputy Attys. Gen., Indianapolis, for respondent.

FISHER, Judge.

The Petitioners, Horizon Bancorp, a bank holding corporation, and its subsidiary bank, First Citizens Bank, N.A., appeal the final determination of the Respondent, the Indiana Department of State Revenue (the Department), denying in part Horizon's claim for refund of excess bank tax credits. The matter is before the court on the parties' cross motions for summary judgment.

ISSUES

I. Whether a taxpayer must carry over excess bank tax credits three years back and three years forward before filing a claim for refund to recover those credits.

II. Whether the limitations period for filing a claim for refund of bank tax credits commences in the year the right to claim a bank tax credit refund accrues.

III. Whether a taxpayer must apply current year bank tax credits against current gross income tax liability before "carryover" bank tax credits from previous years.

IV. Whether enterprise zone loan interest credits (loan credits) under IND.CODE 6-3.1-7 are applied against gross income tax liability before or after bank tax credits are applied.

FACTS

The parties have stipulated the following undisputed material facts. First Merchants National Bank, the predecessor of First Citizens Bank, began doing business as an Indiana corporation in 1873. In 1983, Horizon Bancorp was established as a bank holding company for First Merchants. Three years later, First Merchants National Bank and Citizens Bank merged, creating First Citizens Bank as the wholly owned subsidiary of Horizon Bancorp. ¹

During the years at issue, 1984 through 1989, Citizens operated as a national banking association in Indiana. In each of those years, Citizens' bank tax liability exceeded its gross income tax liability. Citizens also earned enterprise zone loan interest credits in the years at issue. Under statutes in effect at the time, both enterprise zone loan interest credits and bank tax payments were available as credits against gross income tax liability.

On April 9, 1991, Horizon filed its claim for refund seeking $968,283 in excess bank tax credits. On May 23, 1991, the Department issued Horizon a refund of $503,887 and $58,965 in interest. The Department denied the balance of the claim for refund, and Horizon initiated this appeal.

DISCUSSION AND DECISION

STANDARD OF REVIEW

The court reviews appeals from the Department de novo and is bound by neither the issues nor the evidence at the administrative level. Maurer v. Indiana Dep't of State Revenue (1993), Ind.Tax, 607 N.E.2d 985, 986 (citing IND.CODE 6-8.1-9-1(d); Hoosier Energy Rural Elec. Coop., Inc. v. Indiana Dep't of State Revenue (1988), Ind.Tax, 528 N.E.2d 867, 869, aff'd (1991), Ind., 572 N.E.2d 481, cert. denied (1991), --- U.S. ----, 112 S.Ct. 337 116 L.Ed.2d 277). In a summary judgment case, though, this court, like any other Indiana court reviewing a motion under Ind. Trial Rule 56(C), views the evidence in the light most favorable to the non-movant. See C & C Oil Co. v. Indiana Dep't of State Revenue (1991), Ind.Tax, 570 N.E.2d 1376, 1379 (citing Cromer v. City of Indianapolis (1989), Ind.App., 540 N.E.2d 663, 666). Summary judgment may be granted only when there is no genuine issue of material fact and a party is entitled to judgment as a matter of law. 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., 570 N.E.2d at 1378).

THE BANK TAX

This appeal hinges largely on the meaning of one statute, IND.CODE 6-2.1-4.5-1, which grants national banks a credit, in the amount of bank taxes paid, against gross income tax liability. The statute allows taxpayers to carryover excess credits from any given year to the three preceding and three succeeding years and to claim refunds of any unused credits. Citizens had excess credits in each year at issue, and it is the disposition of these credits that has generated the present dispute. To evaluate IC 6-2.1-4.5-1 in its proper context, the court briefly reviews the bank tax in general.

The bank tax, IND.CODE 6-5-10, has been part of Indiana's tax scheme for sixty years. See 1933 Ind. Acts, ch. 83, Sec. 2. Its significance, however, has decreased dramatically in the wake of the 1990 passage of the financial institutions tax, which supplanted the bank tax for most taxpayers. See IND.CODE 6-5.5-1-1 through 6-5.5-9-5; Fort Wayne Nat'l Corp. v. Indiana Dep't of State Revenue (1993), Ind.Tax, 621 N.E.2d 668, 672. The bank tax is a 0.25 percent annual charge "on the value of all [a bank's] taxable deposits, taxable shares, and taxable surplus and profits." IND.CODE 6-5-10-3(a). During the years at issue, the bank tax statutes defined a bank as a "(1) bank, trust company, savings bank, private bank, bank of discount and deposit, or loan and trust and safe deposit company organized under the law of this state; or (2) national banking association organized under the law of the United States and engaged in business in this state." IND.CODE 6-5-10-1.

Normally, banks pay the bank tax monthly to the treasurer of the county in which the bank is located.

Except as provided in section 14 of this chapter, each bank shall, on the last day of each month, determine the tax on taxable deposits in the bank, taxable shares of the bank, and taxable surplus and profits of the bank. Except as provided in sections 11 and 14 of this chapter, the entity liable for the tax shall pay the tax to the treasurer of the county in which the bank is located before the twenty-first day of the following month.

IC 6-5-10-3(c) (emphasis added). If a bank intends to claim a refund of bank tax, however, Section 11 of IC 6-5-10 allows it to pay the tax directly to the Department, rather than the county treasurer, pending administrative and judicial review. "A taxpayer that intends to claim a refund under IC 6-8.1-9 of any tax imposed under this chapter may pay the tax and any interest or penalty to the department." IND.CODE 6-5-10-11. ² IC 6-5-10-11 is not the only path to relief, however. In addition to the direct refund mechanism, the bank tax and gross income tax act as credits one against the other in certain circumstances.

IND.CODE 6-5-10-7 grants state chartered banks ³ credits against bank tax liability for gross income tax paid.

(a) For purposes of this section, "taxable year" has the same meaning as the definition of taxable year contained in IC 6-2.1-1-15.

(b) A bank that elects to pay the tax imposed by this chapter and that is not a

national banking association is entitled to a credit against the tax in the amount of the tax paid by the bank under IC 6-2.1. If the credit for a taxable year exceeds the amount of tax for which the bank is liable under this chapter for that taxable year, the bank may claim the excess:

(1) first, against the tax that it paid under this chapter in any one (1) or more of the thirty-six (36) months that immediately precede the taxable year; and

(2) second, if additional excess credit remains, against the tax for which it is liable under this chapter in any one (1) or more of the thirty-six (36) months that immediately succeed the taxable year.

(c) Notwithstanding anything in this chapter or IC 6-2.1 to the contrary, the department shall pay to a taxpayer any refund to which the taxpayer is entitled that is attributable to a credit claimed under subsection (a).

IC 6-5-10-7 (emphasis added). On the other hand, as already mentioned, national banks receive credits against gross income tax liability for bank tax paid.

(a) A national banking association is entitled to a credit against the tax for which it is liable under this article in the amount of the tax paid by the association under IC 6-5-10. If the credit for a particular taxable year exceeds the amount of tax for which the national banking association is liable under this article for that taxable year, the association may claim the excess:

(1) first, against the tax that it paid under this article in any one (1) or more of the three (3) taxable years that immediately precede the particular taxable year; and

(2) second, if additional excess credit remains, against the tax for which it is liable under this article in any one (1) or more of the three (3) taxable years that immediately succeed the particular taxable year.

(b) Notwithstanding anything in this article or in IC 6-5-10 to the contrary, the department shall pay to a taxpayer any refund to which the taxpayer is entitled that is attributable to a credit claimed under subsection (a).

IC 6-2.1-4.5-1 (emphasis added). It is against this statutory backdrop that the present appeal arises.

I

Horizon claims IC 6-2.1-4.5-1(a) required it to carry over its excess credits three years back and then three years forward before it could claim a refund. The Department counters that IC 6-2.1-4.5-1(b) allowed a refund at any time and that Horizon could have followed IC 6-5-10-11 had it wanted a bank tax refund. The answer lies in the intent of the legislature. The true intent of the legislature embodied in its statutes constitutes the law. Harlan Sprague Dawley, 605 N.E.2d at 1225 (citing Johnson County Farm Bureau Coop. Ass'n v. Indiana Dep't of State Revenue (1991), Ind.Tax, 568 N.E.2d 578, 580-81, aff'd (1992), Ind., 585 N.E.2d 1336). In determining the legislature's intent, it is proper to take into account the history and development of the statute in question. State v. Kuebel (1961), 241 Ind. 268, 273, 172 N.E.2d 45, 47-48 (citing Merchants' Nat'l Bank v. Delaware School Township (1916), 185 Ind. 658, 666, 114 N.E....