Mississippi: Chancery Court Upholds Board of Tax Appeals Decision in Franchise Tax Dispute

The Mississippi Chancery Court recently granted a taxpayer’s motion for summary judgment.

Podcast Transcript

A Mississippi Chancery Court recently granted a taxpayer’s motion for summary judgment, holding that the Mississippi Department of Revenue failed to prove by a preponderance of the evidence that a Board of Tax Appeals (“BTA”) decision should be reversed. The taxpayer at issue, a provider of cable television and other related services, excluded capital related to passive investments in ten subsidiaries unrelated to the taxpayer’s cable television business activities from its franchise tax base. The taxpayer then applied an alternative apportionment method to arrive to the amount of corporate franchise tax it owed. After an audit, the Department assessed tax against the taxpayer— primarily based on the disallowance of the capital exclusion— and also adjusted the taxpayer’s apportionment computation. On appeal, the internal Board of Review sustained the Department’s assessment, but the BTA later held in favor of the taxpayer. The Department petitioned the Chancery Court to reverse the BTA decision. 

In Mississippi, the party appealing a BTA’s decision must prove by a preponderance of the evidence that it is entitled to the relief sought. Citing to the Mississippi Supreme Court’s decision in Equifax Inc., the court noted that the Department was entitled to a reversal of the BTA decision only if it proved that the agency’s decision was unsupported by substantial evidence, was arbitrary and capricious, was beyond the power of the administrative agency to make, and/or violated the complaining party’s statutory or constitutional rights. The Department argued that the BTA misapplied the law and the Department’s regulations and incorrectly excluded the taxpayer’s capital related to the non-unitary subsidiaries. Related to the non-unitary subsidiaries, the court disagreed noting that during the BTA hearing, the taxpayer provided substantial evidence to establish that the Department’s assessment was distortive and did not reflect the taxpayer’s business activities in Mississippi. Thus, the court held that based on the Equifax factors, the Department had failed to meet the burden of proof required to obtain a reversal of the BTA decision. For more information on Miss. Dep’t of Rev. v. Comcast of Georgia/Virginia Inc., please contact Kevin Polli at 404-222-3340.

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