Equifax, Inc. v. Mississippi Department of Revenue
125 So. 3d 36
| Miss. | 2013Background
- Equifax, a Georgia consumer credit-reporting company, provided services to Mississippi customers (≈$22.68M revenue during 2000–2003) but reported zero Mississippi taxable income using the Commission’s standard apportionment regulation.
- The Mississippi State Tax Commission audited Equifax, concluded the standard apportionment did not fairly reflect in-state activity, and required an alternative (market-based) apportionment, assessing income tax, interest, and penalties; Equifax paid under protest and appealed.
- The Tax Commission Board of Review and then the three-member Commission upheld the assessments (reduced amount); Equifax sought judicial review in Hinds County Chancery Court under Miss. Code § 27-77-7(4).
- The chancellor held an evidentiary hearing, found Equifax failed to prove the Commission’s decision was unsupported by substantial evidence, arbitrary or capricious, beyond the Commission’s power, or violative of statutory or constitutional rights, and affirmed the assessments and penalties.
- The Court of Appeals reversed, holding the chancery court should apply a de novo standard as if it sat in the Commission’s place and placing the burden on the Commission to justify alternative apportionment; the Mississippi Supreme Court granted certiorari.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper standard of review in chancery under § 27-77-7(4) | Chancery must review de novo, substituting its judgment for the Commission | Statute mandates deference; chancery hears legal issues anew but limits relief to statutory bases for reversal | Chancery must defer to agency but hold an evidentiary hearing on legality; review is limited to statutory bases (substantial evidence, arbitrary/capricious, ultra vires, constitutional/statutory violations) |
| Burden of proof on appeal | Commission (as proponent of alternative apportionment) should bear burden to justify alternative method | Taxpayer appealing Commission decision bears burden to prove entitlement to relief by preponderance (or higher if applicable) | Burden rests on taxpayer to prove by preponderance that Commission’s decision is reversible under statutory bases; Court of Appeals erred in shifting burden to Commission |
| Whether requiring alternative apportionment amounted to unlawfully promulgating a new rule under MAPA | Equifax: forcing alternative method for service companies was effectively a new rule applied generally without rulemaking procedures | Commission: acted under existing regulation authorizing alternative methods when standard apportionment is unfair; applied to Equifax’s facts | Court held Commission relied on existing regulation (Miss. Admin. Code 35-III-8.06-402.10); no new rule promulgation, no MAPA violation |
| Imposition of penalties under Miss. Code § 27-13-25(3) | Penalties should be abated because chancery court should re-evaluate reasonableness; de novo review would allow abatement | Penalties proper where failure to pay additional tax not shown to be due to reasonable cause and not willful neglect; chancery can only reverse if statutory reversal bases met | Chancery did not err; penalties were supported by substantial evidence and not arbitrary/capricious; disagrement alone insufficient to abate penalties |
Key Cases Cited
- Buffington v. Mississippi State Tax Commission, 43 So.3d 450 (Miss. 2010) (grounds for reversing agency tax decisions: substantial-evidence, arbitrary/capricious, ultra vires, statutory/constitutional violations)
- W.C. Fore v. Mississippi Department of Revenue, 90 So.3d 572 (Miss. 2012) (chancellor is trier of fact on appeal under § 27-77-7(4))
- California Co. v. State Oil & Gas Bd., 27 So.2d 542 (Miss. 1946) (definition of trial de novo and effect of substituting court’s findings for administrative body)
- Hankins v. Maryland Casualty Co./Zurich American Ins. Co., 101 So.3d 645 (Miss. 2012) (court reviews questions of law de novo)