Potential Corporate Officer Liability. In the case Crow v. Department of Revenue, a company was assessed Nebraska use tax on its purchase of items used in its business. The assessment was protested. After the date of protest, the company went out of business and did not keep money sufficient to pay the assessment. The Department then issued a Demand for Payment to an officer of that company, alleging that the officer was personally liable for the tax at issue because the officer paid other creditors of the company while the assessment was still under protest. The Department alleged this was willful nonpayment of taxes, even though the Department’s assessment was still under protest. This matter is still under consideration by the Lancaster County District Court. However, if the Department’s position is upheld, this could create significant personal risk for responsible officers of companies. Those officers could be held personally liable for a company’s tax if they simply knew about the assessment, even though it was under protest, and paid other creditors instead of the Department of Revenue. Effect of Prior Guidance From NDOR. The case NPPD v. Department of Revenue involved a narrow issue regarding the classification of certain electric distribution systems as real versus personal property. The tax commissioner held that the systems constituted personal property, so the lease of those systems was taxable. The bigger issue for most taxpayers was the Department’s treatment of its prior guidance to NPPD. The Department had previously treated the systems at issue as real property and reversed its position in this assessment. The commissioner did not require the Department to follow its prior guidance. Instead, the commissioner simply found that NPPD did not need to pay penalties on the transaction because the Department changed its position. This was appealed to the District Court, which has not yet ruled. We’ve seen a number of times in which the Department’s current legal staff has decided to reverse the Department’s prior positions on certain matters. While results of a legal challenge vary based on specific facts of a situation, there can be a number of legal defenses that can apply in those cases. Procedure and Practice Standard of Review. The Acklie decision also highlighted another important legal principle—that theNebraskaSupremeCourtwill givea certain amount of deference to theDistrict Courts, which in turn gives a certain amount of deference to the tax commissioner. So, to win or reach an optimal settlement, it’s critical that the legal positions and legal defenses be fully and properly expressed as early in the process as possible. Where this hasn’t been done in pending audits, claims, and appeals, the protest or refund claim should be amended to cover this. Looking Ahead As we move to 2023, expect to see the Department of Revenue, and possibly the Nebraska Legislature, further addressing remote workforce issues. Nick Niemann and Matt Ottemann are partners with McGrath North Law Firm. As state and local tax and incentives attorneys, they collaborate with CPAs to help clients and companies evaluate, defend, and resolve tax matters and obtain various business expansion incentives. See their websites at www.NebraskaStateTax. com and www.NebraskaIncentives.com for more information. For a copy of their full publication, The Anatomy of Resolving State Tax Matters, or their Nebraska Business Expansion Decision Guide, please visit their websites or contact them at (402) 341-3070 or at nniemann@mcgrathnorth.com or mottemann@mcgrathnorth.com, respectively. Continued from page 21 I S S U E 6 , 2 0 2 2 22 nebraska cpas
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