State Ex Rel. Gregory F. Zoeller v. Aisin U.S. Mfg. Inc.

• Decision Date: 12 May 2011
• Docket Number: No. 36S01–1009–CV–469.,36S01–1009–CV–469.
• Citation: 946 N.E.2d 1148
• Parties: STATE ex rel. Gregory F. ZOELLER, Attorney General of Indiana, Appellant (Plaintiff below),v.AISIN USA MANUFACTURING, INC., Appellee (Defendant below).
• Court: Indiana Supreme Court

946 N.E.2d 1148

STATE ex rel. Gregory F. ZOELLER, Attorney General of Indiana, Appellant (Plaintiff below),

v.AISIN USA MANUFACTURING, INC., Appellee (Defendant below).

No. 36S01–1009–CV–469.

Supreme Court of Indiana.

May 12, 2011.

Gregory F. Zoeller, Attorney General of Indiana, Andrew W. Swain, Chief Counsel, Jennifer E. Gauger, Deputy Attorney General, Indianapolis, IN, Attorneys for Appellant.Phillip R. Scaletta, Mark J. Richards, Edward P. Steegmann, Brian J. Paul, Indianapolis, IN, Attorneys for Appellee.

On Petition to Transfer from the Indiana Court of Appeals, No. 36A01–0909–CV–442

SULLIVAN, Justice.

The Attorney General sought to recover an erroneously issued “tax refund” of approximately $1,150,000 from Aisin USA Manufacturing, Inc. (“Aisin”) in Jackson Superior Court. Aisin argued that the case “arises under” Indiana tax law so that exclusive subject matter jurisdiction rests with the Indiana Tax Court. We hold that this case may proceed in Jackson Superior Court. It does not arise under the tax laws because the “refund” was the result of accounting and clerical errors within the Indiana Department of Revenue (“Department”) that were wholly unrelated to any interpretation or application of tax law.

Background

The factual issues in this case are unique and complex. But because this is an appeal from a trial court's grant of a pretrial motion to dismiss under Trial Rule 12(B)(1), we accept as true the facts alleged in the State's complaint. Title Servs., LLC v. Womacks, 848 N.E.2d 1151, 1153 n. 1 (Ind.Ct.App.2006) (citation omitted); see also GKN Co. v. Magness, 744 N.E.2d 397, 400–01 (Ind.2001) (setting out the standard of review).

Aisin filed its Indiana corporate income tax return for tax-year 2000 in October, 2001, reporting its total tax due as $2,121,242 and its total payments as $2,083,241.¹ Appellant's App. 4, 28, 195. Because it had underpaid its taxes by $38,001, Aisin remitted payment of $39,331, which included interest. Id. In October, 2002, Aisin filed its tax return for tax-year 2001, reporting its total tax due as $1,300,637 and its total payments as $1,457,000.² Id. at 6–7, 70. Because it had overpaid its 2001 taxes, Aisin was entitled to a refund of $156,363, which it requested be applied toward its 2002 taxes. Id. at 7, 70. Even though Aisin was neither entitled to nor expecting to receive a refund check for its 2001 taxes, it received a check for $1,146,062 in September, 2003, which it negotiated. Id. at 7–8, 26, 189.

The Department issued the check because of several accounting and clerical errors that had occurred while entering data from paper records into the computerized Revenue Processing System (“RPS”). Id. at 7, 9. There appear to have been three major errors: First, the Department had given Aisin an erroneous credit of $967,335 ³ for an overpayment of its 2000 taxes. Id. at 4–5, 196. Second, a billing clerk in Audit Review had made a number of errors entering information from Aisin's paper return for 2001 into the RPS, which resulted in the RPS miscalculating Aisin's 2001 tax as $540,584 (minus a $1,000 college-contribution credit), instead of its actual tax due ($1,301,637 (minus a $1,000 college-contribution credit)). Id. at 7, 191. Third, the Department had failed to give Aisin credit for $657,000 worth of payments made toward its 2001 taxes.⁴ Id. at 6, 192–93. The combined effect of these three errors was a miscalculation that Aisin had overpaid its 2001 taxes by $1,227,750. Id. at 7–8, 188. The Department applied $156,363 of this total toward Aisin's 2002 tax liability, as requested, which resulted in a refund amount of $1,071,387 plus interest, for a total of $1,146,062. Id. at 7–8, 188–89.

In October, 2005, Aisin filed an amended return for the 2001 tax year, reporting its total tax due as $1,052,369 and its total payments as $1,457,000 (plus a $1,000 college-contribution credit). Id. at 8, 118. Subtracting the $156,363 refund it claimed on its original return, Aisin claimed a refund of $249,268. Id. While processing Aisin's amended return, the Department discovered some of its earlier miscalculations, and in April, 2006, it issued a “Proposed Assessment” to Aisin stating that Aisin owed $616,062 ⁵ for tax-year 2001. Id. at 11, 157, 194. Aisin filed timely protests to the proposed assessment, claiming that the statute of limitations had expired and requesting a hearing. Id. at 11, 159–60, 163–65. Rather than hold a hearing, the Department cancelled the proposed assessment because it had finally discovered all of the errors and no longer believed that Aisin had underpaid its taxes. Id. at 179, 192, 195; Appellant's Br. 5; Appellant's Pet. to Transfer 3. Rather, the Department agreed that Aisin had paid the proper amount of taxes. Appellant's App. 7, 9, 12–13, 191–92; Appellant's Br. 5; Appellant's Pet. to Transfer 3. Subsequent efforts by the Department to recover the erroneously issued funds were unsuccessful, so the Department referred the matter to the Attorney General.

The State, on behalf of the taxpayers of Indiana, filed a complaint against Aisin in Jackson Superior Court. The complaint raised claims of unjust enrichment, theft, statutory treble damages, and constructive trust. The State claimed a loss of $1,146,062 (and treble damages of $3,438,186).⁶ Aisin filed a motion to dismiss for lack of subject matter jurisdiction, Ind. Trial Rule 12(B)(1), and a motion to dismiss for failure to state a claim, T.R. 12(B)(6).

The trial court granted Aisin's motion to dismiss for lack of jurisdiction, concluding that this matter fell within the exclusive jurisdiction of the Indiana Tax Court. It reasoned that a statutory remedy existed because the State could have used the Department to collect the money and that the payment arose from the relationship of taxpayer and tax collector.

The Court of Appeals affirmed, holding that whether and to what extent mistakes were made in this case were “quintessentially tax matters” and that the Department could not unilaterally cancel a proposed assessment in an effort to circumvent the jurisdiction of the Indiana Tax Court. State ex rel. Zoeller v. Aisin USA Mfg., Inc., 926 N.E.2d 83, 88–89 (Ind.Ct.App.2010).

The State sought, and we granted, transfer, State ex rel. Zoeller v. Aisin USA Mfg., Inc., 940 N.E.2d 823 (Ind.2010) (table), thereby vacating the opinion of the Court of Appeals, Ind. Appellate Rule 58(A).

Discussion

The only issue in this appeal is whether the Jackson Superior Court has subject matter jurisdiction ⁷ over this case. The Jackson Superior Court has subject matter jurisdiction over all civil and criminal cases, except where exclusive jurisdiction has been conferred by law upon a different court with the same territorial jurisdiction. See Ind.Code § 33–33–36–4 (2008) (providing that the Jackson Superior Court has the same jurisdiction as the Jackson Circuit Court); see also I.C. § 33–28–1–2(a) (defining the jurisdiction of the circuit courts).

In 1986, the General Assembly created the Indiana Tax Court to channel tax disputes into a single specialized tribunal, thereby ensuring the uniform interpretation and application of the tax laws. State ex rel. Ind. Att'y Gen. v. Lake Superior Court, 820 N.E.2d 1240, 1247 (Ind.2005) (citation omitted). The Tax Court has exclusive subject matter jurisdiction over “original tax appeals,” I.C. §§ 33–26–3–1, –3, and its territorial jurisdiction is statewide, Ind. Tax Court Rule 13. Therefore, if the Tax Court has jurisdiction over this case, then the Jackson Superior Court does not.

Though exclusive, the Tax Court's jurisdiction is limited to “original tax appeals” and any other jurisdiction specifically conferred by statute. I.C. § 33–26–3–3; Tax Ct. R. 13. We consider only whether the State's case against Aisin is an original tax appeal because no other statute specifically confers jurisdiction on the Tax Court in this case. A case is an original tax appeal only if two statutory requirements are satisfied. First, the case must be one that “arises under” Indiana tax law. I.C. § 33–26–3–1. Second, the case must be an initial appeal of a final determination made by, inter alia, the Department. Id. Interpreting these requirements and determining whether the Tax Court has jurisdiction are matters of legislative intent. Lake Superior Court, 820 N.E.2d at 1247.

I

A

This Court first interpreted the meaning of “arises under” for purposes of Tax Court jurisdiction in State v. Sproles, 672 N.E.2d 1353 (Ind.1996). After Sproles had been charged with marijuana possession, the Department had sought to collect from him $154,996 in unpaid taxes and penalties under the Controlled Substance Excise Tax (“CSET”), which taxed the unlawful possession of a controlled substance. Id. at 1355. Sproles pled guilty to one count of unlawful possession and then filed a claim in Lawrence Circuit Court seeking a declaratory judgment that the CSET violated his rights under the Double Jeopardy Clause of the Fifth Amendment. See id. The circuit court entered judgment in Sproles's favor. Id.

On direct appeal, we were asked to determine the scope of the Tax Court's exclusive jurisdiction. To give effect to the legislative purpose for the Tax Court, we held that a case “arises under” Indiana tax law if (1) “an Indiana tax statute creates the right of action,” or (2) “the case principally involves collection of a tax or defenses to that collection.” Id. at 1357. We concluded that Sproles's claim arose under the tax laws because it principally involved a defense to the Department's attempt to collect a tax—Sproles had contended that the Department could not collect the CSET because to do so would violate his federal constitutional rights. Id.

We have continued to interpret the Tax Court's “arises under” jurisdiction broadly within the framework established by Sproles. For example, any case challenging the collection of a tax or assessment arises under the tax laws, whether the challenge is...