Court Opinion

ID: 7826300
Source: CourtListenerOpinion
Date Created: 2022-09-07 18:07:45.06466+00
Date Added: 2024-06-11T16:30:52.395514
License: Public Domain

ROBERT L. Brown, Justice, concurring. I concur with the conclusion in the majority opinion that the Department of Finance and Administration must first address the issue of combined reporting as it relates to Jacuzzi, Inc., and Jacdisc, Inc., and this has not been done. See Ark. Code Ann. § 26-51-718 (Repl. 1992). What concerns me is the following exchange that occurred between justices of this court and counsel for the Department at oral argument: COUNSEL FOR DEPARTMENT: One final issue I’d like to address with the few seconds I have left is the issue of discretion. That is the key to this case. The director is vested with the discretion to use an alternative method should a taxpayer request an alternative method. JUSTICE BROWN: What factors would the director look to in determining whether combined reporting was appropriate or not? COUNSEL FOR DEPARTMENT: At this point, I do not believe that the director will allow combined reporting under any circumstances. JUSTICE BROWN: Well then discretion goes out— COUNSEL FOR DEPARTMENT: It is discretionary and he cannot be forced to exercise that discretion by a taxpayer. JUSTICE BROWN: But as far as if he is, if there has been a petition filed and he is in the process of determining whether combined reporting is appropriate or not, what factors would the director look to? COUNSEL FOR DEPARTMENT: Uh, whether or not it would equitably or more equitably allocate or apportion the income of the taxpayer. But like I said earlier, the director does not allow combined reporting at present, and that is a discretionary matter with him. JUSTICE BROWN: So I mean, he’s exercised his discretion by saying we’re just not going to allow combined reporting under any circumstances. COUNSEL FOR DEPARTMENT: Correct, your honor. And with that, it gets back to the discretion, that it’s within his discretion as to— JUSTICE GLAZE: Well that’s no discretion at all, is it? COUNSEL FOR DEPARTMENT: Well, that is the exercise of discretion not to allow that. It does come back to the same issue should someone, who wants, because they’re asking for a refund here. Of course they’re gonna say this more accurately or equitably reflects their income. They get a refund. If it were on the — if the tables were turned and they owed taxes, it would be a different matter. They wouldn’t be here asking to file a combined return. It would be a non-issue. So, the same holds true with individual income tax. They could possibly find another way to apportion their income when they have in-state and out-of-state income. Individuals must report that out-of-state income— JUSTICE BROWN: Well, if we sent this back for an appropriate petition to be filed for combined reporting, and for a hearing to be held, you’re telling me that under no circumstances would the director authorize combined reporting? COUNSEL FOR DEPARTMENT: It is my understanding at this point that is correct, your honor. For combined reporting, it would not be allowed. The only conclusion that can be reached from this colloquy is that if Jacuzzi filed a petition for combined reporting, it would be a vain and useless act. We do not mandate exercises in futility. Our statutes provide that a taxpayer may petition the Department for a more equitable allocation and apportionment of the taxpayer’s income related to the extent of the taxpayer’s business activity in this state, and that the Director of the Department will consider the reasonableness of the request. Ark. Code Ann. § 26-51-718 (Repl. 1992). Thus, the Department cannot simply dismiss all petitions for combined reporting out of hand. It must consider the relevant factors and exercise its discretion. To do otherwise violates § 26-51-718 and would constitute arbitrariness in my judgment. I concur in the majority opinion only because I conclude that Department counsel is not the final word on the subject and because I agree that the chancery court is limited to reviewing actions taken by the Department. In this case, the chancery court made the initial decision to permit combined reporting and in doing so exceeded the scope of its review.