DEPARTMENT OF REVENUE, ET AL V. HON. R. JEFFREY HINES, JUDGE, MCCRACKEN CIRCUIT COURT, DIVISION 1 AND MARQUETTE TRANSPORTATION COMPANY, INC.
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NOT-TO BE-PUBLISHED OPINION
THIS OPINION IS DESIGNATED "NOT TO BE
PUBLISHED," PURSUANT TO THE RULES OF
CIVIL PROCED URE PROMUL GA TED BY THE
SUPREME COURT, CR 76.28 (4) (c), THIS OPINION
IS NOT TO BE PUBLISHED AND SMALL NOTBE
CITED OR USED AS A UTHORITYINANY OTHER
CASE INANY COURT OF THIS STATE.
RENDERED : AUGUST 24, 2006
NOT TO BE PUBLISHED
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2006-SC-0113-MR
DEPARTMENT OF REVENUE, FINANCE AND
ADMINISTRATION CABINET,
COMMONWEALTH OF KENTUCKY
V.
APPELLANT
REVIEW FROM COURT OF APPEALS
2005-CA-2528
McCRACKEN CIRCUIT COURT NO. 05-CI-0793
HON. R. JEFFREY HINES, JUDGE
McCRACKEN CIRCUIT COURT, DIVISION I
APPELLEE
AND
MARQUETTE TRANSPORTATION
COMPANY, INC.
REAL PARTY IN INTEREST/
APPELLEE
MEMORANDUM OPINION OF THE COURT
AFFIRMING
Appellant, Department of Revenue, Finance and Administration Cabinet,
Commonwealth of Kentucky, (hereinafter "Revenue"), seeks the extraordinary writ of
prohibition merely to review the trial court's routine decision to deny a Motion to
Dismiss. The merits to be determined in this matter involve the application of Kentucky
corporation income taxes, and the question ultimately to be decided in this proceeding
is the financial impact of KRS 141 .120(8)(b)' on the taxes to be paid by Marquette
Transportation Company, Inc., (hereinafter "Marquette") the real party in interest. This
dispute concerns the extent of the compensation/wages to be included in the numerator
of Marquette's payroll apportionment factor. The McCracken Circuit Court found that it
had subject matter jurisdiction pursuant to KRS 131 .370(1) and KRS Chapter 1382 .
Since Revenue has failed to show it lacks an adequate remedy by appeal, we
affirm the denial of the petition for an extraordinary writ. A challenge to the interlocutory
denial of a motion is appropriately addressed by appeal once the case has been
concluded on the merits, and not by a petition for an extraordinary writ of prohibition or
KRS 141 .120(8)(b) provides for calculating apportionment according to a payroll factor
which is defined as follows:
(b) The payroll factor is a fraction, the numerator of which is the total
amount paid or payable in this state during the tax period by the
corporation for compensation, and the denominator of which is the total
compensation paid or payable by the corporation everywhere during the
tax period . Compensation is paid or payable in this state if:
1 . The individual's service is performed entirely within the state ;
2. The individual's service is performed both within and without the
state, but the service performed without the state is incidental to the
individual's service within the state ; or
3. Some of the service is performed in the state and the base of
operations or, if there is no base of operations, the place from which the
service is directed or controlled is in the state, or the base of operations or
the place from which the service is directed or controlled is not in any state
in which some part of the service is performed, but the individual's
residence is in this state .
2 Any party aggrieved by any final order of the Kentucky Board of Tax Appeals, except
on appeals from a county board of assessment appeals, may appeal to the Franklin
Circuit Court or to the Circuit Court of the county in which the party aggrieved resides or
conducts his place of business in accordance with KRS Chapter 13B . Any final orders
entered on the rulings of a county board of assessment appeals may be appealed in like
manner to the Circuit Court of the county in which the appeal originated . KRS
131 .370(1).
mandamus . Revenue will suffer neither a great injustice nor irreparable harm if this
matter proceeds forward on the merits .
PROCEDURAL HISTORY
On December 23, 2003, Marquette filed a Petition of Appeal with the Kentucky
Board of Tax Appeals, (hereinafter "KBTA") in response to Revenue's Final Ruling
Letter pursuant to KRS Chapter 13B, KRS 131 .110, KRS 131 .340 and 802 KAR 1 :010.
In its Petition of Appeal to the KBTA, Marquette stated :
The primary issue presented in this Petition of Appeal is whether payroll of
Marquette's employees working on towboats which travel on the
Mississippi River and the Illinois River should be excluded from the
numerator of the payroll factor for purposes of Kentucky corporation
income and license taxes because it does not constitute "compensation
[that is] paid or payable in this state" pursuant to KRS 141 .120(8)(b) and
KRS 136 .070(3)(c).
Marquette also requested, inter alia, that the KBTA: (1) set aside Revenue's Final
Ruling Letter; (2) state that Marquette was not subject to the tax assessments alleged
by Revenue; and (3) direct Revenue to issue refunds to Marquette for the 1995, 1996,
and 2001 tax years .
On June 23, 2005, the KBTA issued a Final Order which Revenue interpreted as
being in Marquette's favor, but Marquette interpreted as being unclear and adversely
affecting some of its legal rights .
On July 5, 2005, Marquette filed a Motion for Clarification with the KBTA, asking
KBTA to clarify whether the wages of its captains/pilots were excluded from the
numerator of its payroll factor and to direct Revenue to award Marquette its refund
claims for the 1995 and 1996 tax years . Instead of issuing an Order, the KBTA, by
letter dated August 31, 2005, declined to act on Marquette's Motion for Clarification
because Marquette's appeal to the McCracken Circuit Court (filed July 15, 2005)
divested the KBTA of jurisdiction .
Marquette's petition for judicial review in McCracken Circuit Court (filed pursuant
to KRS Chapter 13B and KRS 131 .370) purported to address the portion of the KBTA
Order adversely affecting its legal rights. In its Petition for Review, Marquette requested
that the McCracken Circuit Court order Revenue to issue the 1995 and 1996 refunds
and to hold that the compensation/wages of all towboat employees, not just crew
members, must be excluded from the numerator of Marquette's payroll factor.
On August 8, 2005, Revenue filed a Motion to Dismiss for Lack of Subject Matter
Jurisdiction, or in the alternative, for Failure to State a Claim, in McCracken Circuit
Court. Revenue's Motion to Dismiss was ultimately denied by order on November 4,
2005. On December 9, 2005, Revenue filed a Motion for Intermediate Relief from the
November 4, 2005, order pursuant to CR 76.36(4) with the Court of Appeals . The Court
of Appeals denied Revenue's Motion for Intermediate Relief pursuant to CR 76.36(4) on
December 16, 2005.
ANALYSIS
We must determine whether a writ of prohibition is an appropriate remedy under
these circumstances . "A writ of prohibition may be granted upon a showing that: 1) the
lower court is proceeding or is about to proceed outside its jurisdiction and there is no
remedy through an application to an intermediate court; or 2) the lower court is about to
act incorrectly, although within its jurisdiction, and there exists no adequate remedy by
appeal or otherwise and great injustice and irreparable injury would result if the petition
is not granted ." Hoskins v. Maricle, 150 S.W.3d 1, 10 (Ky. 2004).
In Bender v. Eaton , 343 S.W .2d 799, 800 (Ky.1961) we stated :
Relief by way of prohibition or mandamus is an extraordinary remedy and
[courts] have always been cautious and conservative both in entertaining
petitions for and in granting such relief. This careful approach is
necessary to prevent short-circuiting normal appeal procedure and to limit
so far as possible interference with the proper and efficient operation of
circuit and other courts . If this avenue of relief were open to all who
consider themselves aggrieved by an interlocutory court order, we would
face an impossible burden of non-appellate matters.
Id . ; see also Newell Enterprises, Inc . v. Bowling , 158 S.W . 3d 750 (Ky. 2005).
Here, extraordinary relief is not appropriate because KRS 13B .160 provides
authority for Revenue to appeal any adverse judgment by the McCracken Circuit Court
on the merits . Id . ("Any aggrieved party may appeal any final judgment of the circuit
court under this chapter to the Court of Appeals in accordance with the Kentucky Rules
of Civil Procedure ."). "It is beyond dispute that mandamus may not be used as a
substitute for appeal ." National Gypsum Co . v. Corns, 736 S.W.2d, 325, 326 (Ky. 1987)
(citing Merrick v. Smith, 347 S .W.2d 537 (Ky. 1961)).
Revenue may, if it loses in whole or in part, simply appeal the jurisdictional
decision of the McCracken Circuit Court on the merits . In Farmers National Bank of
Danville v. Speckman , 312 Ky. 106, 109, 226 S .W .2d 315, 317 (1949), we held : "[i]t is
not in every case where the inferior court is proceeding without jurisdiction that the writ
will be granted, since usually there is an adequate remedy by appeal and this precludes
the granting of the writ."
We also do not find this to be one of those "limited situations where the action for
which the writ is sought would blatantly violate the law, for example, by breaching a
tightly guarded privilege or by contradicting the clear requirements of a civil rule." The
Independent Order of Foresters v. Chauvin , 175 S.W. 3d 610 (Ky. 2005) .
CONCLUSION
As Revenue simply has not demonstrated that it is without an adequate remedy
by appeal, we affirm the Court of Appeals' order denying Revenue extraordinary relief in
the nature of a writ of prohibition or mandamus .
All concur.
COUNSEL FOR APPELLANT
Douglas M. Dowell
Laura M. Ferguson
Stewart Douglas Hendrix
Department of Revenue
Office of Legal Services
P .O. Box 423
Frankfort, KY 40602-0423
COUNSEL FOR APPELLEE
Judge R. Jeffrey Hines
McCracken County Courthouse
301 S. Sixth St.
Paducah, KY 42001
Jennifer Sartor Smart
Greenebaum Doll & McDonald PLLC
300 West Vine St.
Suite 1100
Lexington, KY 40507-1655
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