Cities Service Gas Co. v. Administrative Hearing Commission, 652 S.W.2d 684

Cities Service Gas Co. v. Administrative Hearing Commission

652 S.W.2d 684 | Mo. | 1983

Lead Opinion

ROBERT E. SEILER, Senior Judge.

We have jurisdiction of this review because it involves construction of the revenue laws and is here on a petition for review of a decision of respondent Administrative Hearing Commission on that subject. Mo. Const., art. V, § 3; § 161.337, RSMo 1978.

This case is a companion case to No. 63297, Mid-America Television and Oliver Advertising, Inc. v. State Tax Commission, 652 S.W.2d 674, decided this date, and involves the same question as to the Missouri income tax deduction allowable under § 143.171, RSMo 1978 for federal income tax liability of a subsidiary or member corporation which participates in filing a consolidated federal income tax return, but which files a separate Missouri income tax return.

Cities Service Gas Company (Gas Company) is one of over one hundred subsidiary companies owned by the parent company, Cities Service Company. For the years in question, 1974, and 1975, the parent corporation filed consolidated federal income tax returns. Gas Company was included in these consolidated returns as a member of the group. Pursuant to their agreement, each member, including Gas Company, pays *685to the parent company the amount which the member would have paid in federal income taxes had a separate return been filed. The parent company then pays the consolidated group’s federal income tax. The monies available to the group as a result of the individual payments over and above the consolidated liability are then distributed to those members whose negative tax liability created the excess.

In both 1974 and 1975 Gas Company filed separate Missouri income tax returns. To determine its Missouri taxable income, Gas Company subtracted its federal income tax liability as computed on a separate return .basis from its separate federal taxable income. The resulting figure was then multiplied by an apportionment factor (Gas Company markets gas in Texas, Oklahoma, and Kansas as well as Missouri) in order to attribute to Missouri that portion of the federal taxable income and the federal income tax liability which it derived from Missouri sources. Gas Company then used this figure on its separate Missouri income tax return as its deduction for federal income tax.

The director disallowed Gas Company’s proposed deduction and permitted only a proportionate share of the consolidated group’s actual federal income tax liability, determined by multiplying the consolidated group’s tax by the ratio of Gas Company’s separate federal taxable income over the federal taxable income of all members in the group making a profit. To this sum was added any recomputed investment credit generated by Gas Company.

Final notices of deficiency were issued by the director, together with interest to date of notice, as follows:

Additional Tax Interest

1974 $ 80,155.98 $ 11,622.61

1975 247,155.25 21,008.19

The director’s decision was appealed to the Administrative Hearing Commission, which affirmed the decision of the director. A petition for review was then filed in this court.

The issues in this case are the same as those in No. 68297, S.W.2d 674, Mid-America Television Company and Oliver Advertising, Inc. v. State Tax Commission. What was said in that case applies equally here. The judgment is therefore affirmed and the cause is remanded for entry of judgment with whatever additional interest is determined to be due.

RENDLEN, C.J., HIGGINS, GUNN and DONNELLY, JJ., and DOWD, Special Judge, concur. WELLIVER, J., dissents in separate opinion filed. BILLINGS and BLACKMAR, JJ., not participating because not members of the Court when cause was submitted.

Dissenting Opinion

WELLIVER, Judge,

dissenting.

I respectfully dissent for the reasons stated in my dissenting opinion in Mid-America Television Co. v. State Tax Commission, 652 S.W.2d 674 (Mo. banc 1983), decided herewith.