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Goggin v. State Tax Assessor

Supreme Court of Maine

August 2, 2018

JAMES GOGGIN et al.
v.
STATE TAX ASSESSOR

          Argued: May 15, 2018

          James G. Goggin, Esq. (orally), Verrill Dana, LLP, Portland, for appellants James and Ann Goggin

          Janet T. Mills, Attorney General, and Thomas A. Knowlton, Asst. Atty. Gen. (orally), Office of the Attorney General, Augusta, for appellee State Tax Assessor

          Panel: SAUFLEY, C.J., and ALEXANDER, MEAD, GORMAN, JABAR, HJELM, and HUMPHREY, JJ.

          SAUFLEY, C.J.

         [¶1] The question presented in this appeal is whether an individual resident of Maine is entitled to a Maine income tax credit for any portion of the business taxes imposed by New Hampshire on a New Hampshire limited liability company of which the Maine resident is a member. In its judgment entered in the Business and Consumer Docket, the court [Murphy, /.) determined that the Maine resident's proportion of business taxes paid in New Hampshire by the LLC did not qualify that resident for a tax credit against her individual Maine income taxes. We affirm that judgment.

         I. BACKGROUND

         [¶2] James and Ann Goggin appeal from a judgment affirming the State Tax Assessor's denial of a tax credit for a share of New Hampshire business taxes paid by a New Hampshire LLC proportional to the membership interest that Ann had in the LLC. They argue that the court erred in interpreting Maine's individual income tax statutes and that, as applied, Maine's income tax statutes discriminate against interstate commerce in violation of the Commerce Clause of the United States Constitution.

         [¶3] The facts are drawn from the parties' stipulations of fact and their joint exhibits. The joint exhibits consist, primarily, of Maine and New Hampshire tax documents. James and Ann Goggin lived in Maine at all relevant times, and they filed joint federal and State income tax returns. GHK Company, LLC, is a limited liability company formed in New Hampshire in 1994 to own, develop, maintain, and lease a parcel of commercial real estate in New Hampshire. For federal income tax purposes, the LLC was classified as a partnership for the 2012 through 2014 tax years, which are the years at issue here. In each of those three years, the LLC received rental income from its property. For each of those years, Ann was allocated a percentage interest in the profits and losses of the LLC.

         [¶4] The State of New Hampshire does not impose income taxes on individuals except on certain "income received from interest and dividends" not at issue here. N.H. Rev. Stat. Ann. § 77:3(I)(a) (2012). The State of New Hampshire imposed on the LLC, however, both a "business profits tax" and a "business enterprise tax." See N.H. Rev. Stat. Ann. §§ 77-A:2, 77-E:2 (2012).[1] On its federal "Return of Partnership Income" forms, the LLC took deductions for the New Hampshire business taxes it paid. Specifically, among other deductions, it deducted the amount of the New Hampshire business taxes from the amounts of rental real estate income that the LLC reported to the federal government. Ann Goggin's share of the rental income was determined as a percentage of those reduced amounts for purposes of the LLC's attached Schedule K-l forms stating her "Partner's Share of Income, Deductions, Credits, etc."

         [¶5] For each of the 2012 to 2014 years, the Goggins reported in their joint federal income tax return an amount of income from the LLC that was similar to the amount stated in the corresponding year's federal LLC form reporting Ann Goggin's share of the LLC's rental income.

         [¶6] When the Goggins filed their joint Maine income tax returns for the 2012 through 2014 tax years, they did not claim a credit for the New Hampshire business taxes paid by the LLC. Because the calculation of the Maine tax obligation was based on the Goggins' federal adjusted gross income, the income that they reported in their Maine tax returns also did not include any income that the LLC had received but then paid in New Hampshire business taxes.

         [¶7] In January 2016, the Goggins filed an amended Maine return for each of the 2012, 2013, and 2014 tax years seeking a personal income tax credit, and corresponding refund, for the portion of the New Hampshire business tax paid by the LLC that was proportional to Ann's membership interest. The amended Maine returns did not, however, add to the Goggins' Maine adjusted gross income any amount of the LLC's income that went to pay the New Hampshire LLC taxes.

         [¶8] Maine Revenue Services denied the refund by letter dated May 9, 2016, and the Goggins requested reconsideration. See 36 M.R.S. ยง 151(1) (2017). In a written decision dated September 21, 2016, the ...


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