Indiana Court Decisions: Feb. 22-March 6, 2024

7th Circuit Court of Appeals

Feb. 22

Donald A. Pierce v. Frank Vanihel

22-2073

7th Circuit affirms judgment that trial counsel’s failure to object was ‘reasonable strategic choice’

The Indiana Court of Appeals correctly denied a convicted child molester’s post-conviction relief petition after finding his counsel behaved competently, the 7th Circuit Court of Appeals affirmed Thursday.

According to court records, in June 2008, Donald Pierce was charged with three counts of Class A felony child molesting and one count of Class C felony child molesting and being a repeat sexual offender. The jury convicted Pierce on all counts.

There was no physical evidence of the molestation and J.W., Pierce’s ex-fiancé’s daughter, was the only eyewitness.

The state sought to prove its case through the testimony of J.W. and the several adults in whom she confided.

The state’s case consisted of seven witnesses: J.W.’s paternal grandfather, J.W.’s father, an investigating sheriff’s deputy, J.W.’s mother, J.W., and two medical witnesses.

Most of these witnesses testified to what and when J.W. told them about Pierce’s conduct. Pierce’s trial counsel did not object to the witnesses.

On cross-examination, Pierce’s trial counsel questioned J.W.’s mother about her daughter’s “changing story.”

J.W.’s mother stressed that J.W. was “not a liar,” but simply “didn’t want to tell me all the rest of the details.”

When J.W. testified she stated that in her first interview she didn’t give all the details because she didn’t want to hurt her mother and that the second interview gave a truthful account of what happened to her.

On cross-examination, Pierce’s trial counsel highlighted the inconsistencies in J.W.’s story. Counsel asked whether J.W. ever spoke with her father or mother about the conduct, to which J.W. responded that she did not “go into details” with them.

Counsel also repeatedly asked whether the varying versions of J.W.’s testimony were lies, and J.W. confirmed that anything inconsistent with her second interview was inaccurate.

When counsel asked J.W. which parts of her story she lied about, J.W. responded, “the part of me being asleep.”

During Pierce’s closing statement, trial counsel argued that it was plausible for a child to fabricate a molestation story.

The evidence, counsel stressed, was “essentially one person’s many, many versions” of what transpired.

Pierce was convicted on all four counts of child molestation and was sentenced to 124 years imprisonment.

In 2010, the Court of Appeals of Indiana affirmed Pierce’s convictions, but remanded the trial court to correct a sentencing error.

Pierce then appealed to the Indiana Supreme Court, which affirmed his convictions but revised his sentence to 80 years.

Pierce subsequently pursued post-conviction relief, relying in part on an Indiana hearsay doctrine.

He first petitioned pro se for post-conviction relief in the trial court in 2012 and amended his petition in 2017 after obtaining counsel.

Among other alleged errors, Pierce invoked the drumbeat rule to argue that he received ineffective assistance of counsel due to trial counsel’s failure to object to the sequence of the adult witnesses’ hearsay testimony.

The trial court denied Pierce’s petition, noting his trial counsel had observed the trial judge in similar cases and chose not to object in order to downplay the testimony.

The court determined her failure to object to the drumbeat testimony was a reasonable strategic choice that did not raise to the level of constitutionally deficient performance.

The court also found Pierce had not shown he had suffered prejudice as a result of his trial counsel’s failure to object.

A split Court of Appeals affirmed the trial court’s judgment. Pierce appealed to the Indiana Supreme Court, which denied review.

Pierce then brought a federal habeas petition to the U.S. District Court for the Southern District of Indiana.

The district court found the appellate court reasonably applied clearly established law in determining that Pierce’s trial counsel strategically chose not to object to the testimony and therefore did not provide deficient representation.

However, the district court granted Pierce a certificate of appealability and cited the dissent from the appellate court.

Pierce claims that the appellate court made two interrelated errors under § 2254(d).

First, he argued that the appellate court’s decision was “based on an unreasonable determination of facts” because it unreasonably found that trial counsel’s failure to object was a knowing strategic decision.

“Without clear and convincing evidence to the contrary, it was not unreasonable for the Indiana Court of Appeals to find that Pierce’s counsel’s failure to object at trial was strategic,” Judge Amy St. Eve wrote.

Secondly, Pierce claimed that the appellate court unreasonably applied established Supreme Court precedent in Strickland v. Washington, 466 U.S. 668, 687 (1984).

“Pierce’s counsel’s stated trial strategy was to paint J.W. as a liar by highlighting the inconsistencies in her accounts over time. Pursuant to that strategy, trial counsel elicited repeated admissions from the adult witnesses that J.W.’s stories were inconsistent,” St. Eve wrote. “A competent attorney might well have determined that culminating the trial with J.W.’s testimony rather than beginning with it helpfully enabled the defense to undermine her credibility before she took the stand.”

The 7th Circuit affirmed the district court and denied the writ because the state appellate court offered a reasonable argument that counsel behaved competently.

The case is Donald A. Pierce v. Frank Vanihel, 22-2073.

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Feb. 29

United States of America v. Jamic C. Johnson

22-2174

7th Circuit vacates drug trafficking sentence, finds district court erred

The 7th Circuit Court of Appeals vacated a man’s sentence for drug trafficking after determining a district court did not account for the difference in mixed and pure substances.

While executing a warrant at Jamic Johnson’s home, police officers discovered guns and baggies containing substances that appeared to be methamphetamine.

Lab tests later confirmed that one baggie held 68.2 grams of a substance that was 83% pure methamphetamine and another baggie contained 33.1 grams of a substance that was 39% pure methamphetamine.

Two other baggies contained a total of eight grams of a methamphetamine mixture of unknown purity.

Following his arrest, Johnson agreed to speak with officers about his drug dealing.

He eventually pleaded guilty to possessing more than 50 grams of methamphetamine with intent to distribute, possessing a firearm in furtherance of a drug trafficking crime and unlawfully possessing a firearm as a felon.

In anticipation of sentencing, the probation office prepared a presentence investigation report.

The PSR attributed to Johnson more than 150 grams and less than 500 grams of actual methamphetamine, corresponding to a base offense level of 32. The probation office also calculated a criminal history score of five.

At the sentencing hearing, the U.S. District Court for the Northern District Court of Indiana adopted the PSR’s methamphetamine calculation and Johnson did not object. The court also adopted the recommended guideline range of 135 to 168 months’ imprisonment.

When imposing the sentence, the court settled upon a 135 month term of imprisonment for the drug trafficking charge and added five years for the § 924(c) offense. As for the felon-in-possession count, which carried a 120-month statutory maximum sentence, the court imposed a sentence of 120 months’ imprisonment to run concurrently with the sentence for the drug offense.

On appeal, Johnson argued that the PSR’s determination that he had trafficked 150 to 500 grams of methamphetamine ignored the difference between actual methamphetamine and a mixture or substance containing methamphetamine and treated all of the drugs attributable to him as though they were the former.

“The problem is that the district court went on to assume that all five ounces were comprised of 100% actual methamphetamine—a proposition that finds no support in the record,” the court wrote in its per curiam opinion.

The court wrote that the assumption was critical because police officers only recovered 69.5 grams of actual methamphetamine in Johnson’s home which is “well short of the 150 to 499 grams needed to support the sentencing range.”

Johnson’s total offense level would be 29 and the guideline range would be 120 to 135 months imprisonment. The court noted the Johnson did not object to the PSR’s drug-quantity calculation and so they had to look for plain error.

“Here, the error resulted in a higher guidelines range, and we presume that an error affecting a defendant’s guidelines range also affects his substantial rights,” the court wrote.

The 7th Circuit vacated Johnson’s sentence and remanded for resentencing.

The court found the district court must account for the difference in the way the sentencing guidelines treat mixtures or substances containing methamphetamine and actual methamphetamine.

Indiana Court of Appeals

Feb. 23

Fernando Marroquin v. Christina Reagle

23A-MI-2545

Elkhart County man not required to register as sex offender upon return to state, COA rules in reversal

An Elkhart County man does not have to register as a sex offender for a crime that doesn’t fall under Indiana’s registration requirement just because he registered for it in Virginia, the Court of Appeals of Indiana ruled in a Friday reversal.

According to court records, the state charged Fernando Marroquin in 1998 with Class D felony sexual misconduct with a minor. Marroquin pleaded guilty and was sentenced to a short period of incarceration followed by 2½ years of probation.

Marroquin’s conviction did not require him to register as a sex offender in Indiana.

But Marroquin moved to Virginia in 2000 and lived there until 2018. Virginia law required that he register for 10 years based on the Indiana conviction.

Then in 2007, Virginia amended its law to require lifetime registration for offenders like Marroquin.

In 2018, Marroquin moved back to Indiana. The Elkhart County Sheriff’s Office told him he needed to register in Indiana for life, just as he had been required to do in Virginia.

Marroquin sued the commissioner of the Indiana Department of Correction, seeking a declaratory judgment that he need not register.

The parties filed cross-motions for summary judgment.

The Elkhart Superior Court denied Marroquin’s motion and granted the commissioner’s.

The trial court held that, under Ammons v. State, 50 N.E.3d 143 (Ind. 2016), the registration requirement under Indiana Code § 11-8-8-19(f) “is triggered if, when an offender moves to Indiana, he is required to register in the state from which he came, regardless of the state of conviction.”

Marroquin appealed, arguing the statute didn’t apply when the requirement to register in another jurisdiction is based entirely on the existence of an Indiana conviction — that is, when there is no “independent requirement” to register in another jurisdiction.

The Court of Appeals agreed and reversed the trial court’s grant of summary judgment to the commissioner and remanded for the entry of summary judgment for Marroquin.

Judge Nancy Vaidik wrote the opinion for the appellate court.

According to Vaidik, the purpose of I.C. 11-8-8-19(f) is to ensure that a person who is required to register in another jurisdiction because of a sex offense in that jurisdiction cannot avoid registration by moving to Indiana.

“And Section 11-8-8-19(f) simply establishes how long such out-of-state offenders must register in Indiana,” she wrote. “Because Marroquin committed his sex offense in Indiana, he is not included in Section 11-8-8-5(b)(1) and is not subject to Section 11-8-8-19(f).”

Vaidik pointed out that the offender in Ammons didn’t raise the statutory issue Marroquin raised, and had only argued that applying the statutes to him violated the ex post facto clause of the Indiana Constitution because the statutes didn’t exist when he committed his crime.

“Our Supreme Court addressed and rejected that constitutional argument, but it didn’t address the statutory argument Marroquin makes here,” she wrote. “Therefore, the Court’s holding doesn’t control the outcome of this appeal.”

Judges Melissa May and Dana Kenworthy concurred.

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Oscar Contreras Zamilpa v. State of Indiana

23A-CR-1309

COA affirms 12-year sentence in rape case, but cites double jeopardy in reversing criminal confinement, pair of sexual battery convictions

An Evansville man’s 12-year aggregate sentence for rape and one count of sexual battery was appropriate, given his prior criminal history and the nature of his sex crimes, but his criminal confinement and two additional sexual battery convictions violated his protection against double jeopardy, the Court of Appeals of Indiana has ruled in a partial reversal.

According to court records, Oscar Contreras Zamilpa and C.M. both resided at an assisted living facility in Evansville.

They lived in separate apartments on the third floor and would occasionally spend time together in a lobby located at the end of the hallway.

In February 2022, C.M. told Zamilpa that she was replacing a loveseat in her apartment with a new sofa and offered her old loveseat to him.

He said that he did not think he had enough room in his apartment but invited her to his apartment to see if there was enough room.

After C.M. entered Zamilpa’s apartment, he closed the door and shoved her against the wall. He took her walker and “slung” it into another room. Zamilpa then sexually assaulted C.M., despite her telling him to stop and to leave her alone.

The assault stopped when another resident knocked on Zamilpa’s apartment door.

Zamilpa answered the door, and the woman told Zamilpa that she had soup for him in her apartment.

Zamilpa and C.M. exited Zamilpa’s apartment shortly thereafter. Zamilpa left to eat his soup, and C.M. sat down in the lobby. Other residents stopped and talked with C.M. while she was sitting in the lobby, and she told them about the incident with Zamilpa.

Someone reported the incident using an anonymous tipline, and Officer Jacob Hassler of the Evansville Police Department went to the assisted living facility to investigate.

Hassler spoke with C.M. and advised her to go to the hospital.

At the hospital, a nurse performed a sexual assault examination on C.M. The nurse observed bruises on C.M.’s breasts and abrasions in C.M.’s vaginal area. The nurse also collected DNA samples from C.M. during the examination, and the samples revealed the presence of Zamilpa’s DNA on C.M.’s left breast, right breast, and neck.

The external genital swabs of C.M.’s vagina indicated the possible presence of male DNA, but the quantity was insufficient to determine whether the DNA belonged to Zamilpa.

Detective Robert Waller interviewed Zamilpa at the police station, and Zamilpa denied having sexual contact with C.M.

Waller noticed during the interview that Zamilpa’s fingernails were freshly cut.

The state charged Zamilpa with Level 3 felony attempted rape, Level 5 felony criminal confinement and three counts of Level 6 felony sexual battery.

A year later, in 2023, the state amended the charging information to change the Level 3 felony charge from attempted rape to rape.

The jury returned a guilty verdict and Zamilpa was ordered to serve all the sentences concurrently for an aggregate term of 12 years.

Zamilpa appealed.

The first issue brought on appeal was whether the trial court violated Zamilpa’s protection against substantive double jeopardy by entering convictions of both rape and criminal confinement and three counts of sexual battery.

The appellate court affirmed Zamilpa’s rape conviction, but reversed his criminal confinement conviction.

“Because neither the charging information nor the way the State presented the charges to the jury differentiated between the force Zamilpa used in raping C.M. and the additional degree of force meant to support the criminal confinement conviction, we hold the trial court erred in entering convictions of both rape and criminal confinement,” Judge Melissa May wrote.

The appellate court also reversed the Vanderburgh Superior Court’s entry of multiple convictions of sexual battery and remanded with instructions for the trial court to vacate two of the three convictions.

“The three sexual touches occurred during the same assault in the same apartment and the objective of each was to satisfy Zamilpa’s own sexual desires. Thus, they were part of the same continuous transaction, and the trial court should have entered only one conviction of sexual battery,” May wrote.

The second issue on appeal was whether Zamilpa’s sentence was inappropriate given the nature of his offenses and his character.

“The pre-sentence investigation report indicates Zamilpa was convicted of making a terroristic threat in California in 1997, and Zamilpa self-reported a second conviction involving an unspecified felony in California in 1979. Even though these past convictions are substantially removed in time from Zamilpa’s current offenses, they still reflect poorly on his character,” May wrote.

The appellate court wrote that it cannot say Zamilpa’s aggregate 12-year sentence was inappropriate.

Judges L. Mark Bailey and Paul Felix concurred.

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Feb. 28

The Trustees of Purdue University v. American Home Assurance Company

23A-PL-1413

Purdue’s COVID insurance claim doesn’t fall within policy parameters, COA affirms

Purdue University is not entitled to compensation under a COVID-19 related insurance claim for lost income, the Indiana Court of Appeals affirmed in a unanimous ruling Wednesday.

According to court records, Purdue University purchased a commercial insurance policy from New York-based American Home Assurance Co., with an effective date of Sept. 30, 2017, through Sept. 30, 2020, insuring Purdue’s real and personal property not subject to exclusions.

In March 2020, Gov. Eric Holcomb issued Executive Order 20-02 declaring COVID-19 a disaster emergency for the state.

Holcomb also issued Executive Order 20-08, which closed all non-essential businesses and ordered persons living in Indiana to stay at home through at least April 6, 2020, with some limited exceptions.

The stay-at-home order was subsequently extended.

On April 6, Purdue filed a claim with American Home for loss of income during a business interruption, identifying its date of loss as March 23, 2020.

Purdue’s claimed losses included those stemming from cancellation of athletic events and conferences, lower rates of housing and campus hotel occupancy, and decreased sales of food, retail items, and health services.

American Home did not pay the claim but rather issued a reservation of rights letter, identifying two potential bases for non-payment:

“The insuring agreement for business interruption requires that the interruption of your business be the result of direct physical damage by a covered cause of loss. There is no claim of direct physical damage.”

“Additionally, the COVID-19 virus is considered a contaminant or pollutant and may be specifically excluded by the policy.”

On Aug. 17, 2021, Purdue filed a complaint for a declaratory judgment against American Home, which American Home moved to dismiss.

Purdue later filed its first amended complaint, seeking a declaration that Purdue’s losses are covered under the terms of the policy and requesting an order for the payment of such losses.

American Home filed its motion to dismiss the amended complaint.

The Allen Superior Court conducted a hearing on the pending motion to dismiss and advised the parties that the motion would be treated as a motion for summary judgment due to the filing of materials outside the pleadings.

The trial court issued its summary judgment order in favor of American Home.

Purdue appealed.

The university argued the trial court erroneously construed the policy at issue to require a physical alteration of real property for coverage and the order foreclosed Purdue’s opportunity to show that some of its facilities were uninhabitable.

The Court of Appeals affirmed, finding the trial court did not err in granting summary judgment in favor of American Home.

Judge L. Mark Bailey wrote the opinion for the appellate court.

Bailey noted that when the parties then presented arguments to the trial court, they primarily focused upon two Court of Appeals’ decisions regarding claimed business-income insurance coverage for COVID-19 related losses: Ind. Repertory Theatre v. Cincinnati Cas., 180 N.E.3d 403 (Ind. Ct. App. 2022), trans. denied, (“IRT I”) and Ind. Repertory Theatre v. Cincinnati Cas., 203 N.E.3d 555 (Ind. Ct. App. 2023), trans. denied, (“IRT II”).

The appellate judge wrote that Purdue claimed that it procured an “all risk” policy from American Home not excluding COVID-19.

“An ‘all risk’ policy is one which provides coverage ‘for all fortuitous losses in the absence of fraud or misconduct of the insured, unless the policy contains a specific provision expressly excluding the loss from coverage,’” Bailey wrote, citing Associated Aviation Underwriters v. George Koch Sons, Inc., 712 N.E.2d 1071, 1073 (Ind. Ct. App. 1999), trans. denied.

But Purdue experienced no covered loss, Bailey wrote, because COVID does not cause “direct physical loss or damage.”

Bailey wrote that the policy is not ambiguous, and the trial court did not err in applying the law to the claim for a declaratory judgment.

“Because Purdue’s claim does not fall within the coverage of the Policy for physical property loss or damage, we need not address the alternative argument that the claim would fall within the pollution and contamination exclusion of the Policy,” Bailey concluded.

Judges Terry Crone and Rudolph Pyle concurred.

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Goalsetter Systems Inc. d/b/a Escalade Sports v. Estate of Nolan Gerwels et. al.

23A-CT-1896

Appeals court affirms the motion to compel a company to produce reports after teen’s death

The Indiana Court of Appeals found a trial court did not abuse its discretion in compelling a basketball goal company to produce discovery materials following a teenager’s death.

In June 2018, 14-year-old Nolan Gerwels was killed when a basketball goal detached from the wall of an in-home gymnasium and fell on him.

His parents opened an estate and filed a complaint against Dick’s Sporting Goods, the seller, Goalsetter Systems Inc., the manufacturer and other defendants who had engaged in residential construction and equipment installation services.

In November 2018, the parties entered into a Stipulated Protective Order to “govern the production and handling of any protected information in this action.” A party who produced protected information could designate it as “confidential” and a non-party would receive a copy of designated information only after agreeing to be bound by specific confidentiality terms according to the order.

The estate requested discovery materials from Goalsetter and received materials that included communications from the Consumer Product Safety Commission to Goalsetter. Specifically, in response to Goalsetter’s self-reporting to the commission regarding Gerwels’ death, the agency had stated in writing that it was taking no action at that time.

In January 2022, Goalsetter and the estate’s attorney each reported to the safety commission that there had been an adverse incident in Utah involving a Goalsetter basketball goal. Eventually, four separate incidents were reported.

On Oct. 27, 2022, the safety commission announced that Goalsetter had issued a recall of Goalsetter wall-mounted basketball goals, identifying the hazard as: “The basketball goal can detach from the wall and fall to the ground posing a serious impact injury hazard and risk of death.”

The estate’s attorney submitted a Freedom of Information Act request to the safety commission seeking, among other things, consumer reports of injuries from Goalsetter wall mount products, all related records in the commission’s files, and correspondence between the commission and Escalade Sports after June 22, 2018.

The FOIA request was denied due to “articulable harm to the current investigation while the recall is still in monitoring status.”

The estate requested supplemental discovery from Goalsetter, which provided some responsive materials and objected to the production of others. Goalsetter asserted that materials it provided to the CPSC are protected by a privilege of self-critical analysis.

Goalsetter also claimed that documents exchanged between it and a governmental entity are privileged trade secrets, confidential, and not subject to discovery under the Consumer Product Safety Act, 15 U.S.C. § 2055.

In February 2023, the estate filed a motion to compel Goalsetter to produce discovery materials in response to the estate’s first, second, third and fourth requests for production.

It sought discovery materials of correspondence between Goalsetter and the safety commission, communications between Goalsetter and consumers; communications between Goalsetter and other persons such as independent contractors or inspectors. Other requests concerned research and development and test reports related to such things as dynamic load, static load, and engineering stress.

Goalsetter objected to the requests and claimed that such documents are privileged trade secrets under the CPSA and the FOIA, attorney work product, and “protected by the privilege of self-critical analysis.” It further claimed that the release of such information would be harmful to the safety commission’s investigation and enforcement.

Goalsetter then sought a corresponding protective order “that discovery related to any CPSC reporting, investigation, research, testing, training, or recall, including any internal communication and communications with the CPSC and any documents exchanged, should be protected from discovery.”

The St. Joseph Superior Court held a hearing in March 2023 at which Goalsetter advised the trial court that the safety commission had opened a new investigation in 2022 and denied the estate’s FOIA request. The parties presented arguments with regard to Indiana’s non-recognition of a self-critical analysis privilege.

The etate argued that Goalsetter was at fault for failing to maintain a log of claimed work product items while Goalsetter deemed the estate at fault for failure to pursue the administrative remedy of an appeal after the FOIA denial.

The next month the trial court issued an order granting the motion to compel “subject to the limitations and restrictions set out in this order.”

Goalsetter then requested the trial court certify its order for interlocutory appeal and issue a stay pending appeal.

The trial court certified its discovery order for interlocutory appeal and granted Goalsetter’s motion for a stay.

The first issue on appeal was whether the trial court abused its discretion in denying Goalsetter’s request for a protective order and compelling the production of documents that the safety commission had refused to produce in response to the estate’s Freedom of Information Act request.

“The trial court was not empowered to create a common law privilege that materials withheld in a FOIA request are non-discoverable due to a federal interest. Goalsetter has not shown that the trial court misapplied the law or otherwise abused its discretion,” Judge Mark Bailey wrote.

The second issue on appeal was whether the trial court abused its discretion by failing to adequately protect Goalsetter’s work product.

“The trial court’s discovery order, which anticipates further development of Goalsetter’s factual claims of work product, if necessary, does not amount to an abuse of discretion,” Bailey wrote.

Judges Terry Crone and Rudolph Pyle concurred in Goalsetter Systems Inc. d/b/a Escalade Sports v. Estate of Nolan Gerwels, et al., 23A-CT-1896.

INDIANA TAX COURT

Feb. 29

PENN Entertainment Inc. (f/k/a PENN National Gaming Inc.) v. Indiana Department of State Revenue

22T-TA-15

Owner of Lawrenceburg casino must pay more Indiana taxes, court rules

The Pennsylvania-based company that operates Hollywood Casino in Lawrenceburg must pay additional Indiana taxes accumulated over a three-year period, the Indiana Tax Court ruled Wednesday.

The court granted summary judgment in favor of the Indiana Department of Revenue in a lawsuit filed by PENN Entertainment Inc., f/k/a Penn National Gaming Inc.

On its 2015, 2016, and 2017 Indiana adjusted gross income tax returns, PENN reported the value of income taxes it had paid in other states.

PENN had deducted those payments from its federal income tax returns and added the value of those taxes back to its Indiana tax base.

The Indiana Department of Revenue audited PENN’s AGIT returns for the years at issue. Afterwards, the department determined certain other payments by PENN to other state governments also needed to be added back to the calculation of PENN’s Indiana tax base.

As a result, the department determined PENN owed additional taxes for 2015, 2016, and 2017, plus interest and penalties.

PENN protested the department’s proposed assessments of additional taxes, the amount of which is not spelled out in the court ruling.

Following an administrative hearing, the department eliminated the assessment of penalties but otherwise denied PENN’s protest after concluding that PENN should have included in its Indiana tax base the value of certain payments made to other state governments, as required by Indiana Code § 6-3-1-3.5(b).

PENN requested a rehearing, which the department denied.

PENN challenged the ruling and argued it does not have to add back those payments.

It claimed the department misapplied the governing statute. PENN further argued that adding back the value of the out-of-state payments violates its rights under the United States Constitution and the Indiana Constitution.

The Indiana Tax Court denied PENN’s motion for summary judgment and granted the department’s motion for summary judgment.

Special Judge John Baker wrote the opinion for the court.

Baker noted that, for business entities such as PENN, Indiana defines “adjusted gross income” the same as federal “taxable income” as defined in Section 63 of the Internal Revenue Code with certain adjustments.

PENN did not deny that some of its out-of-state tax payments should be included in its Indiana tax base.

But the company argued the specific out-of-state payments at issue, which are discussed below, should not be added to its Indiana tax base because the payments were for “un-apportioned excise taxes, privilege fees, and other non-tax payments” that are not measured by income.

Baker wrote that PENN cites Smith v. Indiana Department of State Revenue, 122 N.E.3d 489, (Ind. Tax Ct. 2019), in which the court distinguished between gross income and adjusted gross income.

“But Smith provides little guidance here because it is procedurally and factually dissimilar to the current case. In Smith, the key question was whether the Department had timely issued assessments to taxpayers, and the Court’s discussion of gross income versus adjusted gross income was in the context of the statute of limitations set forth in Indiana Code section 6-8.1-5-2(b) (2011),” Baker wrote.

Baker also rejected PENN’s argument that requiring it to add back the out-of-state tax payments would conflict with the department’s regulations governing adjusted gross income.

The judge wrote that none of these regulations conflict with the application of the add-back provision to PENN’s out-of-state tax payments.

“In summary, the out-of-state taxes at issue are based on income or measured by income for purposes of the add-back provision, and by statute PENN’s tax payments must be included in its Indiana tax base for the years in question. The law is with the Department on this issue,” Baker wrote.

PENN also argued the department’s proposed assessments under the add-back provision, as applied here, violate the company’s rights under the U.S. Constitution’s commerce clause, due process clause, and the equal protection clause.

The company contended the department’s application of the add-back provision to its out-of-state payments violates the internal consistency test because Indiana added back the full amount of the payments, and if every other state did not, PENN’s tax debt would increase by “18 times” the regular amount.

But Baker wrote that PENN’s argument relates to the size of its tax bill, not whether the tax at issue disadvantages interstate commerce and the company concedes elsewhere that Indiana apportions its fair share of interstate taxes only after the add-back process is complete.

“Also, PENN points to no evidence that Indiana will fail to follow the standard apportionment process here. Thus, the Department’s assessments will not disadvantage interstate commerce even if other states sought to add back PENN’s out-of-state payments in their jurisdictions,” Baker wrote.

Baker added that there is no dispute that once the department adds back the out-of-state tax payments to PENN’s tax base, the department must apportion the payments to take only Indiana’s fair share of the payments and the assessments do not discriminate against interstate commerce.•