Tax Court grants judgment to real estate company in withholding dispute

The Indiana Tax Court has granted summary judgment to a real estate company after finding it was entitled to a refund of money levied out of its bank account by the Indiana State Department of Revenue.

Indianapolis real estate company Crown Property Group, LLC was involved in a years-long dispute with the Indiana Department of Revenue that began when it was issued a proposed assessment for more than $2,000 of withholding tax, interest, and penalties for the third quarter of 2009.

Crown, which had not employed or paid wages to any individuals since that time, had stopped filing tax withholding returns in 2009 but failed to close its withholding registration account with the department until several years later. When Crown attempted to close the account in April 2015, the department did not process the submitted form because it lacked supporting documentation and was not notarized.

By June 2015, the proposed assessment turned into a demand notice seeking $2,500, which subsequently turned into a tax warrant when the amount still went unpaid. The department’s collection agent next filed a duplicate tax warrant with the Marion County Circuit Court Clerk for more than $3,000 of withholding tax, interest, penalties, collection fees, clerk’s costs, and damages.

In June 2016, the collection agent levied $1,811.30 from Crown’s bank account, prompting Crown to request a refund because its Form BC-100 shows that it “was no longer required to be registered for [withholding] tax as of December 31, 2009.” An additional Form BC-100 was filed and the account was ultimately closed at the end of 2017.

Crown was denied its request for a refund, which it protested was wrongfully denied because the department had no authority to collect the withholding tax, among other things. Both parties ultimately filed cross-motions for summary judgment, but the Indiana Tax Court granted Crown’s motion in Crown Property Group, LLC v. Indiana Department of State Revenue, and Adam J. Krupp, 18T-TA-27. https://www.in.gov/judiciary/opinions/pdf/11131901mbw.pdf

The tax court noted that the main question was whether the department’s mailing of Crown’s withholding notifications to Crown’s former attorney-in-fact Summit PM’s Pennsylvania Street address was reasonably calculated to apprise Crown of the notifications.

“Even though Summit continued to serve as Crown’s property manager until 2013, the designated evidence does not establish that Summit was authorized to represent Crown in tax matters beyond the 2006 through 2009 tax years,” Judge Martha Blood Wentworth wrote. “Furthermore, the Department has not identified any legal authority that allowed it to satisfy the statutory notice requirements by sending the Withholding Notifications to an entity that was not authorized to receive them.”

The Tax Court therefore found unpersuasive the department’s arguments that Crown had failed to inform that it had no employees or income and that Summit was no longer its attorney-in-fact by 2013, and that Crown filed a defective Form BC-100 rather than paying the withholding tax or filing a protest.

“… [F]or purposes of the notice provisions under Indiana Code §§ 6-8.1-5-1(b) and 6-8.1-8-2(a)(1) and (c), Crown did not need to update its mailing address with the Department or advise the Department that it had no employees in 2009 or that Summit’s tenure as its property manager concluded in 2013. Instead, the Department simply needed to review its own records,” Wentworth wrote.

“Second, even if actual notice were required, which it is not, the designated evidence does not reasonably indicate that Crown received actual notice of the Demand Notice or the Tax Warrant … Third, the designated evidence does not indicate exactly what prompted the Department to select one mailing address over another,” the Tax Court wrote.

It therefore concluded that the withholding notifications were void because they did not meet the statutory requirements. The Tax Court additionally ordered the department to refund Crown an amount of attorney fees equal to its filing fee as damages.