Court Opinion

ID: 9645876
Source: CourtListenerOpinion
Date Created: 2023-08-22 21:38:34.259236+00
Date Added: 2024-06-11T18:11:32.404203
License: Public Domain

Larrow, J.
(dissenting). I have no substantial disagreement with the conclusions of the majority opinion in this case, or with the rationale employed to reach those conclusions. Implied, however, in the majority opinion is tacit agreement with the conclusions arrived at in the first appeal in this matter. F. W. Woolworth Co. v. Commissioner of Taxes, 130 Vt. 544, 298 A.2d 839 (1972). Insofar as assent to the majority opinion would seem to me to imply acquiescence in the first opinion also, I feel obligated to dissent.
In several places (cf. Woolworth, supra, pp. 551, 557) the prior opinion refers to “gross-up” as a dividend or as dividend income. This, coupled with the garbled definition set forth at the bottom of p. 551, impels me to conclude that the essential nature of “gross-up” was misconstrued. Although it is “deemed” paid under Federal tax law for the purpose, where appropriate, of determining the Federal tax credit of a domestic corporation, it is never, in fact, received by or paid out by that corporation. It is merely a determined proportion of the taxes paid directly by the foreign subsidiary to the foreign country, thereafter treated for determining tax liability to the United States as though it had been received as a dividend and paid out in foreign taxes against the domestic corporation. The obvious purpose, essentially Federal, is to encourage domestic ownership of foreign corporations through special tax treatment.
In my view, this particular item, which the domestic corporation never received, either actually or constructively, and which it was not at any time entitled to receive, does not become taxable income of the taxpayer, even though “deemed” or treated as such for the purpose of computing its tax in the event it elects to claim credit in that amount. It is merely, as the prior opinion acknowledges (Woolworth, supra, p. 551) one step taken in the computation of taxable income.
*101Two further items tend to strengthen my view. 32 V.S.A. § 5888(2), as then in effect, made payment to the United States of an income tax prima facie evidence that the various included items of income, deductions, exemptions and credits are in fact such. The prior opinion, in my view, made such payment conclusive evidence rather than prima facie. If the words have any meaning at all, they must permit, upon a showing that an item was never either actually or constructively received and that the taxpayer never had any entitlement to it, a conclusion the item was not in fact income. Also, prior to the rendition of the opinion but unmentioned in it, the Vermont Legislature (Sec. 12, No. 73, Acts of 1971) expressly amended 32 V.S.A. § 5811(18) to exclude “gross-up” from Vermont net income. I am aware that an argument from legislative intent is at best a weak one. But the legislative change must be attributed either to a policy of lessened taxation on foreign corporations or a recognition that the amendment embodies and clarifies its previous intent. The latter conclusion seems the more logical.
The findings and conclusions below set forth the formula used by the Commissioner in making the computations required by the previous opinion. I do not agree to its accuracy, nor do I understand the majority opinion to expressly endorse it. But its accuracy was not put in issue, either below or in this Court, and is therefore not for determination.
I would review and revise the prior opinion, remanding to the Commissioner for new computations, excluding “gross-up” from the Vermont net income of the taxpayer for the years in question.