Caterpillar, Inc. v. Indiana Department of State Revenue
988 N.E.2d 1269
Ind. T.C.2013Background
- Caterpillar, a Delaware corporation with Indiana plant, received dividends from both U.S. and foreign subsidiaries during 2000–2003, including Foreign Source Dividends (FSDs).
- Caterpillar started from federal taxable income to compute Indiana adjusted gross income (AGI) and deducted FSDs under Indiana law, reporting Indiana NOLs on a separate company basis for the Loss Years.
- The Indiana Department of State Revenue audited 1996–2003 returns and recalculated NOLs by adding back FSD income, reducing NOL carrybacks/forwards.
- Department denied Caterpillar's protest; LOF issued in 2008 denying relief.
- The court granted Caterpillar summary judgment, holding FSDs are deductible when calculating Indiana NOLs under the NOL Statute.
- The decision interprets how AGI, NOLs, and FSDs interact under Indiana Code provisions and legislative history.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is AGI a component of the Indiana NOL Statute calculation? | Caterpillar asserts AGI, defined via federal taxable income modified under IC 6-3-1-3.5, is part of the NOL calculation. | Department contends the NOL statute does not expressly incorporate AGI. | AGI is a component of the NOL calculation. |
| Are FSDs included in Caterpillar's AGI for the NOL | Caterpillar maintains FSDs are included in AGI and thus deductible under the FSD statute when computing NOLs. | Department argues FSD deduction is not applicable to NOL calculations absent explicit incorporation. | FSD income is included in AGI for NOL purposes; FSD deduction applies. |
| Does Indiana's FSD statute apply to NOL calculations? | Caterpillar contends the FSD statute applies whenever FSDs are included in AGI, including NOL calculations. | Department disputes application to NOLs absent express reference. | |
| FSD deduction applies to Indiana NOLs. |
Key Cases Cited
- Subaru-Isuzu Auto., Inc. v. Indiana Dep’t of State Revenue, 782 N.E.2d 1071 (Ind. Tax Ct. 2003) (defines AGI as federal taxable income modified by Indiana statute)
- Endress & Hauser, Inc. v. Indiana Dep’t of State Revenue, 404 N.E.2d 1173 (Ind. Ct. App. 1980) (statutory interpretation guiding NOL conformity)
- Kraft Gen. Foods, Inc. v. Iowa Dep’t of Revenue & Finance, 505 U.S. 71 (U.S. 1992) (foreign dividend treatment under tax schemes)