ORDER ON PARTIES’ CROSS-MOTIONS FOR SUMMARY JUDGMENT
This mаtter concerns the proper calculation of Indiana net operating losses (NOLs) available for carryover when a cor
FACTS AND PROCEDURAL BACKGROUND
Caterpillar is a Delaware corporation commercially domiciled in Illinois. (Jt. Stipulation Facts (“Jt. Stip.”) ¶ 1; Pet’r Br. Supp. Mot. Summ. J. (“Pet’r Br.”) at 2.) It is the largest manufacturer of construction and mining equipment in the world, and it conducts its operations from several international and domestic locations, including a manufacturing plant in Lafayette, Indiana. (Jt. Stip. ¶¶ 2-3.) During 2000 through 2003, Caterpillar directly or indirectly owned over 250 subsidiaries, the majority of which were foreign corporations that operated exclusively outside the United States. (Jt. Stip. ¶ 4.) Caterpillar received dividends from both its domestic subsidiaries (U.S. Source Dividends) and its foreign subsidiaries (Foreign Source Dividends or FSDs) in each of the years 2000 through 2003 (the Loss Years). (See Jt. Stip. ¶¶ 6, 8.)
When Caterpillar calculated its Indiana adjusted gross income tax liability for the Loss Years, it started with its federal taxable income, which did not include its U.S. Source Dividends under I.R.C. § 243(a). (See Jt. Stip. ¶ 12.) Caterpillar’s federal taxable income did include, however, its Foreign Source Dividends. (See Jt. Stip. ¶ 12.) As a result, Caterpillar took the Foreign Source Dividend deduction under Indiana Code § 6-3-2-12 and reported Indiana NOLs on a separate company basis in each of the Loss Years. (See Jt. Stip. ¶¶ 11-12.)
Prior to the Loss Years, Caterpillar rеported taxable adjusted gross income on its 1996 through 1999 Indiana tax returns on a separate company basis. (Jt. Stip. ¶ 10.) Thereafter, Caterpillar filed amended returns for those years to carryback the unused Indiana NOLs reported on its 2000, 2001, and 2002 Loss Year returns, requеsting a refund for overpaid taxes. (Jt. Stip. ¶¶ 13-14.)
The Department subsequently audited Caterpillar’s 1996 through 2003 tax returns. (Jt. Stip. ¶ 15.) The audit determined that Caterpillar’s Indiana NOL deductions were inaccurate because they deducted Caterpillar’s Foreign Source Dividend income. (Jt. Stip. ¶ 17.) The Department recalculated Caterpillar’s NOLs for the Loss Years by adding back the Foreign Source Dividend income, which reduced the NOL amount available for carryback and carryforward. (Jt. Stip. ¶ 18, Ex. 16A.)
Caterpillar protested the Department’s recalculation of its Indiana NOLs. (Jt. Stip. ¶ 20.) On October 10, 2008, the Department issued its Letter of Findings
On December 9, 2008, Caterpillar initiated this original tax appeal. On October 30, 2009, Caterpillar moved for summary judgment, and on January 15, 2010, the Department filed its cross-motion for summary judgment. The Court held a hearing on the parties’ cross-motions on June 29, 2010. Additional facts will be added as necessary.
STANDARD OF REVIEW
Summary judgment is proper when the designated evidence demonstrates that no genuine issues of material fact exist and the mоving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C). Cross-motions for summary judgment do not alter this standard. Mirant Sugar Creek, LLC v. Indiana Dep’t of State Revenue,
LAW & ANALYSIS
Indiana Code § 6-3-2-2.6 (the NOL Statute) provided the method tо determine an Indiana NOL:
An Indiana net operating loss equals the taxpayer’s federal net operating loss for a taxable year as calculated under Section 172 of the Internal Revenue Code, derived from sources within Indiana and adjusted for the modifications required by IC 6-3-1-3.5.
Ind.Code § 6-3-2-2.6(c) (2004) (footnote omitted).
A corporation that includes any foreign source dividend in its adjusted gross income for a taxable year is entitled to a deduction from that adjusted gross income.
Ind.Code § 6-3-2-12(b) (2003).
The parties disputе whether the deduction of FSDs under the FSD Statute applies when calculating Indiana NOLs under the NOL Statute. The Department claims that Caterpillar was not entitled to deduct its FSDs in calculating its Indiana NOLs because the NOL Statute neither expressly incorporates the FSD Statute nor specifically references deducting FSDs as a modification in Indiana Code § 6-3-1-3.5. (See, e.g., Resp’t Br. Supp. Cross-
1.
The term “adjusted gross income” does not appear in the Indiana NOL Statute. See I.C. § 6-3-2-2.6. Nonetheless, a corporation’s “adjusted gross income” is “the same as ‘[federal] taxable inсome’ (as defined in Section 63 of the Internal Revenue Code)[,]” as modified under Indiana Code § 6-3-1-3.5. Ind.Code § 6-3-l-3.5(b) (2003); see also Subaru-Isuzu Auto., Inc. v. Indiana Dep’t of State Revenue,
To determine the amount of an Indiana NOL, a taxpayer begins with its federal NOL calculated under I.R.C. § 172. See I.C. § 6-3-2-2.6(c). A federal NOL “means the excess of the deductions allowed by this ehapter[, as mоdified,]
The federal taxable income component within the Indiana NOL Statute must also be modified under Indiana Code § 6-3 — 1—3.5(b), however, if it is to constitute “adjusted gross income.” The plain language of the Indiana NOL Statute itself requires the federal NOL to be modified under Indiana Code § 6-3-1-3.5; thus, the resulting calculations contain “adjusted gross income.” See I.C. § 6-3-2-2.6(d)(l). Consequently, even though the term “adjusted gross income” is not used in the Indiana NOL Statute, the components of the NOL calculation establish its presence.
2.
Next, the Court must determine whether Caterpillar’s FSD income is included in its “adjusted gross income” within the NOL Statute. Caterpillar’s federal taxable income is the starting point fоr determining its Indiana adjusted gross income. See I.C. § 6 — 3—1—3.5(b); see also Endress & Hauser,
The plain meaning of definitions and words used in each of the relevant federal and Indiana statutes compel this conclusion. See Johnson Cnty. Farm Bureau Coop. Ass’n v. Indiana Dep’t of State Revenue,
A statutory amendment raises the presumption that the Legislature intended to change the law, unless it plainly аppears that the amendment was passed in order to express its original intent more clearly. Endress & Hauser,
Similarly, in 1987, the Legislature added a separate FSD Statute to the Indiana Code, like many other states, to ensure the calculation of taxable income did not discriminate аgainst taxpayers with Foreign Source Dividends by more favorable treatment of taxpayer’s with U.S. Source Dividends. See P.L. 383-1987(ss), § 4; see
CONCLUSION
For all the reasons stated above, the Court GRANTS summary judgment to Caterpillar and DENIES summary judgment to the Department.
SO ORDERED.
Notes
. For example, the parties dispute whether Indiana Code § Ó-3-2-2 or certain federal elections controlled the inclusion/exclusion of FSDs in calculating an Indiana NOL. (Cf., e.g., Pet’r Reply Br. at 18-19; Pet'r Br. Supp. Mot. Summ. J. ("Pet’r Br.”) аt 13-16 with Resp’t Resp. Br. at 2-3, 5-8; Resp’t Br. Supp. Cross-Mot. Summ. J. ("Resp’t Br.”) at 9-10, 16-17.) The parties also dispute whether the inclusion/exclusion of FSDs in calculating an Indiana NOL violated the Foreign Commerce or Equal Protection Clauses of the United States Constitution. (Cf. Pet'r Br. at 25-30 with Resp’t Br. at 22-24.)
. The parties dispute whether the 2002 or the 2004 version of Indiana Code § Ó-3-2-2.6 applies in this case. (Cf. Resp't Br. at 14-15 with Pet’r Reply Br. at 5-6.) A non-code section enacted with the 2004 version of the statute indicates that the 2004 version controls:
(f) The following provisions apply to deductions for net operating losses that are claimed after December 31, 2003:
(2) Deductions for net operating losses that were incurred in taxable years ending before January 1, 2004, and that are carried forward and deducted in taxable years ending after December 31, 2003, must be calculated under IC Ó-3-2-2.5 and IC 6-3-2-2.Ó, both as amended by this act.
P.L. 81-2004, § 62 (repealed 2010). (See also Hr’g Tr., Pet’r Ex. (Instructions for 2004 Form IT-20 at 24) citing the non-code section and instructing that: ”[a]ll loss years ending after January 1, 2004 and pre-existing NOL(s) carried over to a taxable year after this date must be recomputed by applying the amended provisions of this Act”).)
. The modifications either disregard or adjust an otherwise allowable deduction in computing taxable income. See I.R.C. § 172(d) (2003). The only modification applicable here eliminates any federal NOL deduction to prevent NOL carrybacks and carryforwards to other taxablе years from enlarging an NOL for the loss year. See id. at (d)(1).
. The deduction allowed under I.R.C. § 245 applies exclusively to the U.S. source portion of foreign dividends. See I.R.C. § 245 (2003). Caterpillar was not entitled to take this deduction because its foreign subsidiaries did not operate in the U.S. (See Pet'r Br., App. at Ex. 2 ¶ 14.)
. As originally еnacted, Indiana Code § 6-3-1-3.5(b) defined "adjusted gross income” similar to today as "federal taxable income.” As a result, Indiana conformed 100% to the federal NOL. In 1983, the Legislature added subsection (b)(4) to Indiana Code § 6 — 3—1— 3.5(b), which stated:
Add an amount equal to the deduction аllowed under Section 172 of the Internal Revenue Code for net operating losses that are derived from sources outside Indiana. The amount of net operating losses that are derived from sources outside Indiana shall be determined in the same manner that the amount of business income derived from outside Indiana is determined under IC 6-3-2-2.
P.L. 82-1983, § 1.