Rent-A-Center East, Inc. v. Indiana Department of State Revenue
952 N.E.2d 387
| Ind. T.C. | 2011Background
- RAC East (formerly Renter’s Choice) formed in 1986 to operate rent-to-own stores servicing Indiana and other states.
- In 1998 RAC Inc. acquired the RAC Marks, transferred them to Advantage, and renamed entities during a 2003 reorganization.
- In 2003, RAC East assumed RAC Inc. name; Advantage became RAC West; new entities RAC Holdings and RAC Texas were formed.
- During 2003, RAC East operated 1,932 stores (106 in Indiana); RAC West operated 437 stores; RAC Texas operated 278 stores in Texas.
- RAC East filed a 2003 Indiana corporate AGI tax return on a separate company basis, reporting no tax due; the Department audited 2001–2003 and proposed $513,272.60 in AGI tax, penalties, and interest.
- Department required RAC East to file a combined Indiana AGI tax return with RAC West and RAC Texas; RAC East protested; final Department determination upheld the audit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Department may require combined return under §6-3-2-2(l) and (p)? | RAC East argues separate filing default; needs show of unfair representation and reasonable alternative. | Department may require combined return when standard rules fail to fairly reflect Indiana income. | Department failed to prove compliance with §6-3-2-2(p); summary judgment denied. |
| Did RAC East’s separate return fairly reflect Indiana income? | Separate return should fairly reflect income from Indiana sources. | Flow of value and centralized management justify combined filing as fair. | Evidence designated by Department insufficient to establish fairness; in part merits remand due to lack of §6-3-2-2(p) compliance. |
| Was the Department’s consideration of alternatives sufficient under §6-3-2-2(p)? | Department considered alternatives but failed to designate them as material facts. | Department rejected alternatives to prevent greater tax burden. | The Department did not designate requisite facts showing consideration of §6-3-2-2(p) alternatives; summary judgment denied. |
Key Cases Cited
- Kohl’s Dep’t Stores, Inc. v. Ind. Dep’t of State Revenue, 822 N.E.2d 297 (Ind.Tax Ct. 2005) (separate filing default under standard sourcing rules)
- C & C Oil Co. v. Ind. Dep’t of State Revenue, 570 N.E.2d 1376 (Ind.Tax Ct. 1991) (illustrates use of summary judgment principles in tax cases)
- U-Haul Co. of Ind., Inc. v. Ind. Dep’t of State Revenue, 896 N.E.2d 1253 (Ind.Tax Ct. 2008) (prima facie standard and proof at summary judgment)
- Richards-Wilcox, Inc. v. Cummins, 700 N.E.2d 496 (Ind.Ct. App. 1998) (specifically cautions against relying on counsel arguments as evidentiary facts)
- Watson v. Medical Emergency Servs., Corp., 532 N.E.2d 1191 (Ind.Ct. App. 1989) (hypothetical testimony cannot create genuine issue of fact)