Opinion ID: 1990251
Heading Depth: 1
Heading Rank: 9

Heading: GTE and Its Aftermath.

Text: Protest was not long in coming. GTE, a New York corporation active in Kentucky that had filed combined reports uniting it with its subsidiaries, promptly challenged the legality of the new policy. In an opinion rendered on December 22, 1994, this Court invalidated RP 41P225 as inconsistent with the Cabinet's own long-standing interpretation of KRS 141.120. That interpretation was a reasonable statutory reading, the Court held, and so, under the doctrine of contemporaneous construction, that reading had become binding on the Cabinet until the General Assembly expressed a contrary intent. GTE, 889 S.W.2d at 792-93. In the wake of GTE , the Cabinet proposed a regulation mandating combined reporting in Kentucky. Kathryn L. Moore, Taxation, 86 Ky. L.J. 875, 877-81 (1997-98). Corporate opposition was intense, however, prompting the withdrawal of the proposed regulation and adoption instead of the 1996 amendments to KRS 141.120 and 141.200 discussed above, the amendments disavowing the unitary business concept and providing for voluntary, federal-style consolidated returns. Id. In the meantime, several corporate groups, including the Appellees, that had been precluded from filing combined reports during the life of RP 41P225 responded to GTE by filing amended returns on a combined or unitary basis for some or all of the affected tax years. Alleging that their tax liability was reduced when calculated on the basis of a combined report, these corporate groups also sought tax refunds. The Cabinet initially processed and settled a few of these refund claims, but by late 1996 or early 1997 its estimate of the claims' worth had risen substantially, [5] and at that point, apparently, the Cabinet ceased processing the claims and sought legislative intervention. During its 1998 session the General Assembly enacted H.B. 321, which merely postponed the issue by providing that no post- GTE refund claims would be paid during the biennial budget period. That legislation expired in 2000. The 2000 session of the General Assembly then enacted H.B. 541, the legislation at issue here. As previously noted, H.B. 541 seeks to nullify Appellees' refund claims in two ways. First, it purports to withdraw retroactively in this small class of cases the refund remedy ordinarily available to taxpayers who pay taxes later determined to be invalid. Second, it purports to remove the legal basis of the Appellees' claims by retroactively validating RP 41P225. The Court of Appeals held that the retroactive reach of H.B. 541 exceeds what the Due Process Clause allows. On appeal to this Court, the Cabinet challenges the Court of Appeals' reading of the due process issue and argues as well that in any event its sovereign immunity trumps Appellees' due process rights. But first, the Cabinet invites us to do some retroactive validating of RP 41P225 of our own by revisiting GTE . In their cross-motion for discretionary review, Appellees maintain that H.B. 541 is unconstitutional for reasons in addition to its due process infirmities, most notably equal protection concerns arising from the fact that some taxpayers' post- GTE refund claims were processed. These other concerns are significant and are given short shrift by the majority. Because I would affirm the Court of Appeals on the due process issues, however, I will not address those other claims.