Woodmen of the World v. Nebraska Dept. of Rev.
299 Neb. 43
Neb.2018Background
- Woodmen of the World (a Nebraska fraternal benefit society) applied for exemption from Nebraska sales and use taxes and sought a refund exceeding $2 million, relying on Neb. Rev. Stat. § 44-1095 (exemption for a society’s “funds”).
- NDOR denied the exemption and refund; Tax Commissioner held a consolidated hearing and concluded § 44-1095 exempts only taxes on a society’s funds, not transactional sales/use taxes imposed on purchases.
- The parties stipulated facts (no factual dispute); dispute centered on statutory interpretation of § 44-1095 and whether fraternal societies are covered by the nonprofit sales/use tax exemption statute, § 77-2704.12(1).
- The hearing officer excluded testimony from Woodmen’s tax-law professor as inadmissible legal-opinion testimony but allowed Woodmen to submit his analysis in posthearing briefing.
- The Lancaster County District Court affirmed the Tax Commissioner; Woodmen appealed to the Nebraska Supreme Court by bypassing the Court of Appeals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 77-2704.12(1) exempts fraternal benefit societies from sales and use tax | Woodmen: the statutory scheme (including § 44-1095) yields an exemption from sales/use tax | NDOR: fraternal societies are not listed in § 77-2704.12(1) so no exemption applies | Held: No — fraternal societies are not enumerated and § 77-2704.12(1) does not exempt them |
| Whether § 44-1095 exempted Woodmen from sales and use tax | Woodmen: § 44-1095’s language ("all of its funds shall be exempt from all and every state . . . tax") should be read as an entity-based exemption covering sales/use taxes | NDOR: § 44-1095 exempts taxes on a society’s funds, not transactional sales/use taxes levied on purchases | Held: No — § 44-1095 exempts taxes on funds only; sales/use taxes are transactional excise taxes on purchases, not taxes on funds |
| Whether Woodmen was denied due process when NDOR changed its stated rationale for denial | Woodmen: NDOR’s initial denial (religious-organization rationale) deprived Woodmen of adequate notice of the legal theory to be litigated | NDOR: parties exchanged legal positions, discovery, and NDOR provided a prehearing legal explanation; Woodmen had meaningful notice | Held: No due process violation — record shows adequate notice and opportunity to be heard |
| Whether exclusion of Woodmen’s tax-law professor’s testimony was an abuse of discretion | Woodmen: the professor was a relevant expert on statutory construction and Nebraska tax law | NDOR: expert legal opinion on statutory interpretation is inadmissible; testimony would be irrelevant given no factual dispute | Held: No abuse — expert testimony on questions of law is generally inadmissible and Woodmen could submit the professor’s analysis in briefing |
Key Cases Cited
- Anthony, Inc. v. City of Omaha, 283 Neb. 868 (2012) (explains sales/use taxes as excise/transactional taxes imposed on acts, not on funds)
- Bridgeport Ethanol v. Nebraska Dept. of Rev., 284 Neb. 291 (2012) (administrative appeal standards under APA)
- J.S. v. Grand Island Public Schools, 297 Neb. 347 (2017) (statutory interpretation principles)
- United Transp. Union v. Tracy, 82 Ohio St. 3d 333 (1998) (similar statute construed to exempt only funds, not use tax on transactions)
- Dept. of Rev. v. Woodmen of the World, 919 P.2d 806 (Colo. 1996) (similar holding that fund-exemption statutes do not exempt transactional sales/use taxes)
- Supreme Council of the Royal Arcanum v. State Tax Commission, 358 Mass. 111 (1970) (another authority interpreting fraternal fund exemptions)