Equifax, Inc., et al. v. Miss. Dep't of Revenue
| Docket Number: | 2010-CA-01857-COA Linked Case(s): 2010-CA-01857-COA2010-CT-01857-SCT2010-CT-01857-SCT2010-CT-01857-SCT |
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| Oral Argument: | 11-29-2011 | |
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| Court of Appeals: |
Opinion Link Opinion Date: 05-01-2012 Opinion Author: Griffis, P.J. Holding: Reversed and Remanded |
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| Additional Case Information: |
Topic: Tax assessment - Standard of review - Section 27-77-7(4) - Alternative-apportionment formula - Regulation 402.10 - Administrative Procedures Act - Section 25-43-3.105(1) Judge(s) Concurring: Lee, C.J., Barnes, Ishee, Roberts, Carlton, Maxwell, Russell and Fair, JJ. Dissenting Author : Irving, P.J. Procedural History: Admin or Agency Judgment Nature of the Case: CIVIL - STATE BOARDS AND AGENCIES |
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| Trial Court: |
Date of Trial Judgment: 11-04-2010 Appealed from: Hinds County Chancery Court Judge: J. Dewayne Thomas Disposition: CHANCERY COURT AFFIRMS DECISION OF MISSISSIPPI STATE TAX COMMISSION Case Number: G-2009-884-T/1 |
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| Party Name: | Attorney Name: | Brief(s) Available: | ||
| Appellant: | Equifax, Inc. and Equifax Credit Information Services, Inc. |
LOUIS G. FULLER
TIMOTHY J. PEADEN
KATIE LOFTON WALLACE
MARY T. BENTON |
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| Appellee: | Mississippi Department of Revenue f/k/a Mississippi State Tax Commission | GARY WOOD STRINGER STEPHANIE RUTLAND JONES HAROLD RAY ROGERS II | ||
| Amicus #2: | ||||
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| Topic: | Tax assessment - Standard of review - Section 27-77-7(4) - Alternative-apportionment formula - Regulation 402.10 - Administrative Procedures Act - Section 25-43-3.105(1) |
| Summary of the Facts: | The Mississippi Department of Revenue conducted an audit of state income taxes and determined that additional taxes were owed. The taxpayers, Equifax, Inc. and Equifax Credit Information Services, Inc., disputed the assessment and appealed the Department’s assessment to the chancery court. The chancery court affirmed the assessment. The taxpayers appeal. |
| Summary of Opinion Analysis: | Issue 1: Standard of review The correct standard of review in a case such as this is found in section 27-77-7(4). Section 27-77-7(4) neither sanctions nor allows the chancellor to give a “rebuttable presumption . . . in favor of” the Department’s finding. Section 27-77-7(4) required the chancellor conduct a trial de novo. The chancellor’s application of the standard of review was error. The matter tried before the chancellor had to be tried just as if it were first tried before the Department. The problem is that the chancellor in effect switched the burden of proof by giving the Department “deference” or the benefit of a “rebuttable presumption.” This case must be decided based on whether the Department met its burden of proof that the alternate-apportionment method was appropriate rather than the standard-apportionment method set forth in its regulations. For the Department to prevail, the Department must first meet this burden of proof. The order indicates that the chancellor’s decision was based on his incorrect application of the standard of review. Equifax as the taxpayer apparently relied on the prescribed income tax formula for service companies. After receiving no tax payments, the Department concluded that the income tax reported by Equifax did not fairly represent the amount of business Equifax did in Mississippi. The Department sought to use the alternative-apportionment formula provided in Regulation 402.10. Thus, before the Board of Review and on appeal to the chancery court, the Department had the burden of proof to prove: (1) the standard formula does not fairly represent the activities of Equifax within the State; and (2) the alternative formula to be used is reasonable. The chancellor committed reversible error, under section 27-77-7(4), when he gave the Department the benefit of a rebuttable presumption and when he applied an arbitrary-and-capricious standard. Having applied this standard, the chancellor did not conduct a de novo review of the matter. Issue 2: Administrative Procedures Act Equifax argues that the Department implemented a new rule to determine the amount of taxes it owed without following the procedure for an agency adopting an amendment to a specific rule. Specifically, Equifax argues the Department failed to consider the economic impact of the proposed rule as required in section 25-43-3.105(1). Here, the Department did not create a new tax policy, but rather relied on a regulation that was previously in place. Regulation 402.10 is currently in the tax regulations relied on by taxpayers and the Department. In the regulation, a taxpayer or the Commissioner may seek to use alternative apportionment. Further, the Department did not issue a rule for all service companies, but rather relied on a previously existing regulation for use in Equifax’s situation. Applying a regulation on an ad hoc basis does not conflict with the Mississippi Administrative Procedure Act. |
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