Mississippi Department of Revenue v. Comcast of Georgia/Virginia, Inc. n/k/a Comcast Cable Communications, LLC ( 2020 )

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2019-CA-01134-SCT
MISSISSIPPI DEPARTMENT OF REVENUE
v.
COMCAST OF GEORGIA/VIRGINIA, INC., n/k/a
COMCAST CABLE COMMUNICATIONS, LLC
DATE OF JUDGMENT: 06/13/2019
TRIAL JUDGE: HON. J. DEWAYNE THOMAS
TRIAL COURT ATTORNEYS: JON FRANCIS CARMER, JR.
BRIDGETTE T. THOMAS
MARIA M. TODOROVA
SHELDON G. ALSTON
LOUIS G. FULLER
ALLA RAYKIN
JEFFREY A. FRIEDMAN
LELAND KYLE WILLIAMS
COURT FROM WHICH APPEALED: HINDS COUNTY CHANCERY COURT,
FIRST JUDICIAL DISTRICT
ATTORNEYS FOR APPELLANT: BRIDGETTE T. THOMAS
JOHN S. STRINGER
ATTORNEYS FOR APPELLEE: SHELDON G. ALSTON
LOUIS G. FULLER
DANIEL H. SCHLUETER
JEFFREY A. FRIEDMAN
MARIA M. TODOROVA
ALLA RAYKIN
NATURE OF THE CASE: CIVIL - STATE BOARDS AND AGENCIES
DISPOSITION: AFFIRMED - 08/13/2020
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE KING, P.J., MAXWELL AND GRIFFIS, JJ.
GRIFFIS, JUSTICE, FOR THE COURT:
¶1. The Mississippi Department of Revenue (MDOR)1 appeals the chancellor’s entry of
summary judgment in favor of Comcast of Georgia/Virginia, Inc., n/k/a Comcast
Communications, LLC. Because the MDOR’s franchise-tax assessment does not fairly
represent the true value of Comcast’s capital in Mississippi, the chancellor’s judgment is
affirmed.
FACTS AND PROCEDURAL HISTORY
¶2. Comcast provides cable-network and other related services in various states, including
Mississippi. In addition to holding its own operating assets, Comcast holds investments in
more than fifty subsidiaries that, like Comcast, are engaged in the provision of cable and
cable-related services. Because these subsidiaries are engaged in the same type of business
as Comcast, they are referred to as “unitary subsidiaries.” These unitary subsidiaries provide
services primarily outside Mississippi. Only two of the more than fifty subsidiaries, Comcast
MO Digital Radio, Inc. and Comcast of Arkansas/Florida/Louisiana/Minnesota/Tennessee,
Inc., have any connections in Mississippi.2
¶3. In addition to the unitary subsidiaries, Comcast also holds minority passive-investment
interests in approximately ten “non-unitary subsidiaries” that are not engaged in or related
to the provision of cable. These non-unitary subsidiaries hold nonstrategic assets acquired
by Comcast as a byproduct of previous corporate acquisitions, have no connection to
1
The Mississippi Department of Revenue was formally known as the Mississippi
State Tax Commission.
2
The total value of these two unitary subsidiaries attributable to Mississippi
comprised less than 1 percent of the total value of Comcast’s subsidiaries during the tax years
at issue.
2
Comcast’s business of providing cable or cable-related services in Mississippi, and otherwise
have no connection with Mississippi.
¶4. Comcast filed Mississippi Corporate Income and Franchise Tax Returns for the 2008,
2009, and 2010 tax years. In calculating its capital base for each year, Comcast excluded
certain amounts of capital utilizing the holding-company exclusion located on Line 8 of the
Mississippi Corporate Franchise Tax Schedules. For the amounts that it excluded on the
2009 and 2010 Mississippi Corporate Franchise Tax Schedules, Comcast attached its
calculations used to arrive at these amounts through documentation labeled “Mississippi
Holding Company Exclusion - 2009 Tax Year” and “Mississippi Holding Company
Exclusion - 2010 Holding Company Exclusion - 2010 Tax Year.”
¶5. In calculating its apportionment ratios for each tax year, Comcast combined the net
book value of its Mississippi real and tangible personal property owned at year end with its
Mississippi gross receipts and then divided this total by the combination of its everywhere
counterparts. Comcast did not include in its apportionment ratios all of Mississippi
destination sales as gross receipts in the numerator of the apportionment factor. The
application of these apportionment ratios to Comcast’s reported total capital bases for the
respective tax periods resulted in the taxable capital being apportioned to Mississippi and the
corporate franchise tax due for Comcast.
¶6. In July 2012, the MDOR commenced an audit of Comcast’s Corporate Income and
Franchise Tax Returns for 2008, 2009, and 2010. At the conclusion of the audit, the MDOR
determined that Comcast owed additional corporate franchise tax. Specifically, the MDOR
3
found that Comcast’s preapportioned capital base and its Mississippi apportionment ratios
should be increased for each applicable year. The increase in Comcast’s capital base was
attributable to the MDOR’s disallowance of the holding-company exclusion. The increase
in Comcast’s Mississippi apportionment ratios was attributable to MDOR’s inclusion of all
of Comcast’s Mississippi destination sales as gross receipts. The application of the audited
apportionment ratios to the audited capital base resulted in additional taxable capital
apportioned to Mississippi for each year, with a corresponding increase in franchise tax due
for each year. The MDOR formally issued its assessment against Comcast on December 5,
2014. A detailed list of the calculations and assessments is attached to this opinion as
Exhibit A.
¶7. Comcast timely appealed the MDOR’s assessment to the MDOR’s Board of Review.
The Board of Review upheld the assessment.
¶8. Comcast timely appealed the Board of Review’s order to the Mississippi Board of Tax
Appeals (BTA). At the hearing before the BTA, Comcast argued that the MDOR’s
franchise-tax assessment did not accurately reflect the true value of its capital employed in
Mississippi. Specifically, Comcast argued (1) that capital related to investments in its non-
unitary subsidiaries should be excluded from its preapportioned franchise-tax capital base,
(2) that it could apply factor representation to a divided capital base, and (3) that it could use
the apportionment factors, i.e., the gross receipts or sales as well as the real and personal
property, of its unitary subsidiaries in the apportionment formula. Comcast presented four
alternative franchise-tax computations. The BTA considered those alternatives and
4
specifically determined that one alternative, referred to as the factor-representation method,
“show[ed] that the [MDOR] seeks to tax over 340% more out-of-state value than allowed”
and “result[ed] in a distortion in favor of the state by over-attributing income to the state.”
¶9. The BTA found that Comcast had “met its burden of proof to overcome the
presumption of the correctness of the [MDOR]’s assessment.” Specifically, the BTA found
“substantial credible evidence” that the tax assessment was distortive and did not fairly
represent the true value of Comcast’s capital in Mississippi. As a result, the BTA reduced
Comcast’s corporate franchise-tax assessment for the 2008, 2009, and 2010 tax years.
¶10. The MDOR timely appealed the BTA’s order to the chancery court. The MDOR and
Comcast filed competing motions for summary judgment. After a hearing, the chancellor
found that Comcast’s motion for summary judgment was well taken. The chancellor granted
Comcast’s motion for summary judgment and dismissed with prejudice the MDOR’s petition
appealing the BTA’s order.
¶11. The MDOR timely appealed the chancellor’s order to this Court. On appeal, the
MDOR argues (1) the chancellor applied an incorrect standard of review, (2) Comcast does
not qualify for an exclusion under the franchise-tax statutes, and the franchise-tax statutes
do not permit Comcast to use an alternative apportionment method, and (3) Comcast’s
constitutional claims are not properly before the Court and are therefore barred.
STANDARD OF REVIEW
¶12. Issues related to tax appeals are questions of law, which are reviewed by this Court
de novo. Miss. Dep’t of Revenue v. Hotel and Rest. Supply, 192 So. 3d 942, 945 (Miss.
5
2016). “Further, ‘[a] de novo standard is applied when the Court reviews a chancery court’s
grant or denial of summary judgment.’” Id. (alteration in original) (quoting Miss. Dep’t of
Revenue v. Isle of Capri Casinos, Inc., 131 So. 3d 1192, 1194 (Miss. 2014)).
ANALYSIS
I. Whether the chancellor applied an incorrect standard of review.
¶13. Under Mississippi Code Section 27-77-7(5) (Rev. 2010) (held unconstitutional by
HWCC-Tunica, Inc. v. Miss. Dep’t of Revenue, 296 So. 3d 668 (Miss. 2020)),3
[T]he chancery court shall give deference to the decision and interpretation of
law and regulations by the Department of Revenue as it does with the
decisions and interpretation of any administrative agency, but it shall try the
case de novo and conduct a full evidentiary judicial hearing on the issues
raised. Based on the evidence presented at trial, the chancery court shall
determine whether the party bringing the appeal has proven by preponderance
of the evidence or a higher standard if required by the issues raised, that he is
entitled to any or all of the relief he has requested.
¶14. “Mississippi Code Section 27-77-7(5) provides the process and standard of review for
chancery court review of MDOR and []BTA decisions, and issues related to such are
3
Section 27-77-7(5) was amended effective January 1, 2015. See H.B. 799, Reg.
Sess., 2014 Miss. Laws ch. 476, § 17. But House Bill 799 contained a savings clause, which
states in pertinent part,
The provisions of the laws relating to the . . . judicial review of such actions
which were in effect prior to the effective date of this act are expressly
continued in full force, effect and operation for the purpose of providing . . .
judicial review of any assessment . . . where the initial date of said assessment
. . . is before the date on which this act becomes effective.
H.B. 799, Reg. Sess., 2014 Miss. Laws ch. 476, § 19. Because the assessment at issue in
this case occurred before January 1, 2015, the amendments to Section 27-77-7(5) do not
apply to the chancery court’s judicial review. Robinson v. Morgan, 214 So. 3d 188, 189-90
(Miss. 2017).
6
questions of law.” Hotel & Rest. Supply, 192 So. 3d at 945 (citing Equifax, Inc. v. Miss.
Dep’t of Revenue, 125 So. 3d 36, 41 (Miss. 2013)). “As customary, questions of law are
reviewed de novo.” Id. (citing Equifax, 125 So. 3d at 41).
¶15. In its order granting summary judgment, the chancellor found as follows:
Mississippi Code Annotated §27-77-7(5), as it existed at all times
relevant to this appeal, sets forth the standard of judicial review for decisions
of the BTA:
Based on the evidence presented at trial, the chancery court shall
determine whether the party bringing the appeal has proven by
a preponderance of the evidence or a higher standard if required
by the issues raised, that he is entitled to any or all of the relief
he has requested.
Miss. Code Ann. § 27-77-7(5) (2010). In order to be entitled to reversal of the
BTA decision, Petitioner MDOR “must raise and prove one or more of the
following: the agency’s decision was unsupported by substantial evidence, the
agency’s decision was arbitrary and capricious, the agency’s decision was
beyond the power of the administrative agency to make, and/or the agency’s
decision violated the complaining party’s statutory or constitutional right.”
Equifax, Inc. v. Mississippi Dep’t of Rev., 125 So. 3d 36, 41 (Miss. 2013)
(citing Buffington v. Miss. State Tax Comm’n, 43 So. 3d 450, 453-54 (Miss.
2010). See also Miss. Code Ann. §27-77-7(5). As an administrative appeal,
this Court must limit its analysis to determining whether MDOR has proven
that it is entitled to reversal of the BTA decision for any of these four legal
bases prescribed for reversing an agency decision.
¶16. The MDOR argues that the chancellor applied an incorrect standard of review under
Section 27-77-7. The MDOR asserts that “[t]he standard of review applied by the
[c]hancellor gives deference to the BTA in contradiction to Miss. Code Ann. § 27-77-7 and
this Court’s precedent.” According to the MDOR, “[b]y requiring that [the MDOR] prove
that the BTA had violated the Buffington tenets, the [c]hancellor erroneously gave deference
to the BTA.”
7
¶17. The MDOR asserted a similar argument in Hotel & Restaurant Supply. Id. at 944-45.
This Court explained that
[a]n agency’s interpretation of a rule or statute governing the agency’s
operation is a matter of law that is reviewed de novo, but with great deference
to the agency’s interpretation . . . . However, if an agency’s interpretation is
contrary to the unambiguous terms or best reading of a statute, no deference
is due. An agency’s interpretation will not be upheld if it is so plainly
erroneous or so inconsistent with either the underlying regulation or statute
as to be arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with the law.
Id. at 946 (quoting Buffington, 43 So. 3d at 453-54). This Court concluded that “the issue
of deference . . . is of no moment because MDOR’s interpretation of the underlying statutes
still is reviewed de novo, as it is a matter of law.” Id. (citing Buffington, 43 So. 3d at 453-
54).
¶18. As in Hotel & Restaurant Supply, the MDOR’s assertion that the chancellor
erroneously gave deference to the BTA is “of no moment” because the MDOR’s
interpretation of the applicable franchise tax statutes is reviewed de novo. Id.
II. Whether the franchise-tax statutes allow Comcast to exclude
from its capital base the investments in its subsidiaries and to
use an alternate apportionment method.
¶19. Comcast argues that under the Mississippi franchise-tax statutes, it was “permitted to
exclude the capital value and apportionment factors attributable to its non-unitary
subsidiaries, and to include the apportionment factors of its unitary subsidiaries for purposes
of computing the true value of its capital in Mississippi.” The MDOR, on the other hand,
argues that the Mississippi franchise-tax statutes do not provide Comcast with an exclusion
and do not provide the use of an alternative apportionment method.
8
A. Capital Base
¶20. Under Mississippi Code Section 27-13-9(1) (Rev. 2010),4 “[t]he tax imposed, levied
and assessed . . . shall be calculated on the basis of the capital employed in this state . . . ,
measured by the combined issued and outstanding capital stock, paid-in capital, surplus and
retained earnings . . . .” Comcast argues that the MDOR’s franchise-tax assessment does not
reflect the true value of Comcast’s capital employed in Mississippi because it erroneously
included the value of Comcast’s non-unitary subsidiaries in Comcast’s capital base.
¶21. But Section 27-13-9(1) specifically states that “[t]here shall not be any exclusion of
capital by a corporation relating to the stock of another corporation . . . .” Miss. Code Ann.
§ 27-13-9(1). Indeed,
[t]he express language of the franchise tax statutes provides no exemptions for
the retained earnings of a subsidiary. The intent of the legislature to include
the assets of a subsidiary corporation in the parent corporation’s franchise tax
base was made clear by the amendment in 1988 of Miss. Code Ann. § 27-13-9.
To that statute was added the statement that “[t]here shall not be any exclusion
of capital by a corporation relating to the stock of another corporation.” Miss.
Code Ann. § 27-13-9 (1994 Supp.).
Tower Loan of Miss., Inc. v. Miss. State Tax Comm’n, 662 So. 2d 1077, 1084 (Miss. 1995).
¶22. Mississippi Code Section 27-13-9(2) (Rev. 2010) provides an exception to the
inclusion of a subsidiary’s assets in the corporation’s franchise tax base. Under Section 27-
13-9(2), “[i]n the case of a holding corporation, the value of the capital used, invested or
employed in this state shall exclude that portion of the book value of the holding
corporation’s investment in stock or securities of its subsidiary corporation . . . .” But
4
The parties agree that the franchise-tax statutes in effect during the tax years at issue
apply to this case.
9
Comcast admittedly does not qualify for the holding-company exclusion.5
¶23. Having failed to meet the exception under Section 27-13-9(2), Comcast argues that
it is entitled to exclude its investment in its non-unitary subsidiaries under Mississippi Code
Section 27-13-11 (Rev. 2010). Under Section 27-13-11,
For the purpose of determining the amount of capital, as defined in
Section 27-13-9 . . . , the book value of the accounts as regularly employed in
conducting the affairs of the corporation shall be accepted as prima facie
correct, except where the commissioner determines that the book value does
not properly reflect capital employed in this state and in that situation the
commissioner’s determination of capital shall be prima facie correct.
If any organization has cause to believe that the calculations required
on the return prescribed are not sufficiently informative or do not properly
reveal the true franchise or excise tax to be due as measured by the value of the
capital of that organization, or shall feel aggrieved at the requirements upon
it for information or tax, then such organization shall have the right to file with
the commissioner a petition and affidavit signed as returns are by this chapter
required to be signed, setting forth the facts showing the true value of its
capital.
Miss. Code Ann. § 27-13-11. Relying on Section 27-13-11, Comcast asserts that it has the
right to present evidence setting forth the facts showing the true value of its capital. This
Court agrees.
¶24. As noted by the BTA, under Section 27-13-11, the MDOR’s determination of capital
is prima facie correct. But such a presumption of correctness can be overcome. Miss. Code
Ann. § 27-13-11. Section 27-13-11 contemplates that a taxpayer, “for any number of
reasons, might maintain its financial records in a manner that would not fairly reflect its
capital structure consistent with the spirit of the taxing law.” Miss. Power & Light Co. v.
5
Comcast filed its subject tax returns electing the holding-company exclusion, but
it later acknowledged that it did not qualify for such exclusion.
10
Miss. State Tax Comm’n, 704 So. 2d 1343, 1344 (Miss. 1997). As a result, Section 27-13-
11 allows a taxpayer to set forth facts “showing the true value of its capital” when it believes
MDOR’s computations “do not properly reveal the true franchise . . . tax to be due . . . .”
Miss. Code Ann. § 27-13-11.
¶25. Here, as determined by the BTA, Comcast has overcome the presumption of
correctness of the MDOR’s franchise-tax assessment. The record shows that by including
the value of Comcast’s non-unitary subsidiaries in Comcast’s capital, the MDOR’s
computation included billions of dollars in non-unitary assets in Comcast’s tax base. These
assets represented passive, non-unitary investments with no connection to Comcast’s
business in Mississippi. The value of Comcast’s non-unitary subsidiaries is not “capital
employed in the state” nor is it “business that is actually being done or carried on in
Mississippi.” Miss. Code Ann. § 27-13-9(1); see also Miss. State Tax Comm’n v. Chevron
U.S.A., Inc., 650 So. 2d 1353, 1357-58 (Miss. 1995) (“A franchise tax is a tax generally
measured by capital for the privilege of doing business in the state. In other words, a
company is taxed on business that is actually being done or carried on in Mississippi.”).
Because these non-unitary subsidiaries have no connection to Comcast’s business in
Mississippi, it was error to include Comcast’s investments in them in its franchise-tax base.
¶26. The MDOR asserts that Section 27-13-9 “provides the sole exclusions from a
taxpayer’s capital base” and that Comcast “does not qualify for any exclusion provided for
under [Section] 27-13-9.” But such a strict interpretation of Section 27-13-9 ignores Section
27-13-11, which allows a taxpayer to “set[] forth the facts showing the true value of its
11
capital” when “the calculations required on the return . . . are not sufficiently informative or
do not properly reveal the true franchise . . . tax to be due as measured by the value of the
capital of that organization . . . .” Section 27-13-9 must yield to Section 27-13-11 when it
produces an assessment that “do[es] not properly reveal the true franchise . . . tax to be due
. . . .” Miss. Code Ann. § 27-13-11.
B. Apportionment Method
¶27. Mississippi Code Section 27-13-13(1) (Rev. 2010) provides the apportionment
method to be used for franchise tax determination:
In the case of organizations doing business both within and without
Mississippi, the value of capital employed in this state shall be determined by
first computing the ratio between (1) the real and tangible personal property
owned in Mississippi and gross receipts from business carried on in
Mississippi, and (2) the total real and tangible personal property owned and
gross receipts wherever located and from wherever received. Said ratio then
shall be applied to the total capital stock, surplus, undivided profits and true
reserves and the result of that application shall be the capital employed in this
state.
Miss. Code Ann. § 27-13-13(1).
¶28. Comcast argues that the MDOR’s computation of Comcast’s capital was erroneous
because it failed to account for the apportionment factors, i.e., the gross receipts/sales and
property, of its unitary subsidiaries. Stated differently, Comcast does not dispute that its
capital invested in the unitary subsidiaries was properly included in its tax base, but it
maintains that the capital was not fairly apportioned because the statutory apportionment
formula applied by the MDOR failed to account for the receipts and property of the unitary
subsidiaries. Comcast asserts that the MDOR’s failure to account for the apportionment
12
factors of its unitary subsidiaries “created an inherent mismatch between the values and the
factors used to compute [Comcast]’s Mississippi franchise liability.” Comcast explains that
“[s]uch a mismatch does not reflect a rational relationship between the values being taxed
and the activities giving rise to the values, and results in distortion in favor of the State by
over-attributing income to the State.”
¶29. In support of its argument that the sales and property factors of its unitary subsidiaries
should be included in the apportionment method used to determine its capital, Comcast, once
again, relies on Section 27-13-11. While Comcast acknowledges that Section 27-13-13 is
the “applicable computation to determine ‘capital employed in the state,’” it asserts that
Section 27-13-11 allows it to deviate from the statutorily prescribed apportionment method
when the value does not properly reflect capital employed in this state. This Court agrees.
¶30. Section 27-13-11 allows a taxpayer to set forth facts showing the true value of its
capital when the calculations “do not properly reveal the true franchise . . . tax to be due as
measured by the value of the capital of that organization . . . .” Miss. Code Ann. § 27-13-11.
As noted by the BTA, Comcast presented four alternative franchise-tax computations to show
that the MDOR’s tax assessment was distortive. While the BTA considered all four
alternatives, it focused on one, the factor-representation method.
¶31. The factor-representation method was recognized by this Court in Ashland Pipe Line
Co. v. Marx, 623 So. 2d 995 (Miss. 1993). In Ashland, Ashland was incorporated under the
laws of Ohio, had its commercial domicile in Kentucky, and carried on business activities
in Mississippi. Id. at 997. The commission audited Ashland’s books and discovered that
13
Ashland excluded dividend income from two of its subsidiaries in determining taxable
income for Mississippi. Id. The commission included the dividends paid by its subsidiaries
in its income-tax base but excluded the subsidiaries’ apportionment factors in the
computation of its apportionment method. Id. Ashland objected and argued that such a
method was not authorized by law. Id.
¶32. This Court found that Ashland failed to meet its burden of proof because it did not
provide any evidence in support of its contention. Id. But, as Comcast asserts, the Court “set
forth a road map for taxpayers seeking to assert [a] similar challenge[].” Specifically, the
Court stated,
Ashland did not provide the lower court with a tax assessment applying the
factors of the subsidiaries. It is evident that this would be required to show that
a disproportionate assessment resulted from application of the Commission’s
formula. The only way for Ashland to show a disproportionate result would be
to compare the assessment as computed by the Commission and the
assessment including all of the factors of the subsidiaries.
Id. at 1004 (emphasis added).
¶33. Although Ashland involves corporate-income tax, not franchise tax, the overall result
is the same. Ashland demonstrates that while the taxpayer may ultimately fail to meet its
burden, the taxpayer is not precluded from presenting evidence to show that the tax
assessment is unreasonable.
¶34. Here, as noted by the BTA, Comcast presented evidence that the MDOR’s tax
assessment was unreasonable. Indeed, as the Court in Ashland instructed, Comcast
compared the MDOR’s assessment to Comcast’s assessment including the factors of its
subsidiaries. Using the factor-representation method, which included the apportionment
14
factors of its subsidiaries, Comcast showed that the MDOR sought to tax more than 340
percent out-of-state value than allowed.6
¶35. The MDOR’s assessment disregarded the receipts and property of Comcast’s
subsidiaries from the computation of Comcast’s apportionment forumla even though those
very same subsidiaries comprised between 77 percent and 80 percent of Comcast’s total asset
value during the years at issue.7 As the BTA noted, this created an inherent mismatch
between the value and the factors used to compute Comcast’s Mississippi franchise-tax
liability. Such a mismatch does not reflect a rational relationship between the values being
taxed and the activities giving rise to the value. As a result, the MDOR’s assessment resulted
in a distortion in favor of the state by overattributing income to the state.
¶36. The Mississippi franchise-tax statutes were designed to impose a franchise tax on the
value of the capital employed in this state and to provide a standard method for computing
6
Comcast provided the following calculations showing the difference between the
capital value assessed by Comcast using the factor-representation method versus the capital
value assessed by the MDOR:
2008 2009 2010
Factor-Representation Method $171,615,836 $171,360,910 $175,466,481
MDOR Assessment $589,356,265 $604,526,421 $611,456,216
MDOR Assessment as a % of
Factor-Representation Method 343% 353% 348%
7
Regarding the 77 percent to 80 percent figures, Comcast explained as follows:
2008 2009 2010
Book value of
Comcast’s subsidiaries $20,012,364,755 $19,416,119,639 $20,932,774,420
Book value of
Comcast’s total assets $25,970,604,878 $24,616,810,284 $26,065,282,723
Value of subsidiaries as
a % of total assets 77% 79% 80%
15
that capital. Miss. Code Ann. §§ 27-13-9(1), 27-13-13. But the franchise-tax statutes also
provide a statutory-relief mechanism that can be utilized by a taxpayer when the standard
method produces a distortive or an unreasonable result. Miss. Code Ann. § 27-13-11. This
Court agrees with the BTA and the chancellor that Comcast has shown that the MDOR’s tax
assessment produced a distortive or an unreasonable result and did not fairly represent the
true value of Comcast’s capital employed in Mississippi. Comcast demonstrated under
Section 27-13-11 that its capital base and apportionment factor should be modified.
Accordingly, the chancellor’s entry of summary judgment in favor of Comcast should be
affirmed.
III. Whether federal constitutional limitations require the MDOR’s
assessment to be invalidated.
¶37. In its appellee’s brief, Comcast asserts “an alternative basis for upholding the [BTA’s
and chancellor’s] decisions.” Specifically, Comcast asserts that “the federal constitutional
limitations imposed by the due process and interstate commerce clauses of the U.S.
Constitution require the MDOR’s assessment to be invalidated.” In response, the MDOR
asserts that Comcast’s constitutional argument is not properly before this Court and is
therefore barred.
¶38. Because Comcast has shown that the MDOR’s tax assessment does not reflect the true
value of Comcast’s capital employed in Mississippi, it is unnecessary to consider Comcast’s
alternative argument of whether the assessment produced an unconstitutional result.
CONCLUSION
¶39. Based on our de novo review, this Court finds that the MDOR’s tax assessment does
16
not fairly represent the true value of Comcast’s capital employed in Mississippi. As a result,
the chancellor’s dismissal of the MDOR’s appeal of the BTA’s order and his entry of
summary judgment in favor of Comcast were proper. Accordingly, the chancellor’s “order
granting summary judgment and dismissing petition” is affirmed.
¶40. AFFIRMED.
RANDOLPH, C.J., KITCHENS AND KING, P.JJ., COLEMAN, MAXWELL,
BEAM, CHAMBERLIN AND ISHEE, JJ., CONCUR.
17
EXHIBIT A
Comcast filed Mississippi Corporate Franchise Tax returns for the 2008, 2009, and
2010 tax periods.
Comcast excluded the following amounts of capital based on the holding-company
exclusion:
2008 - $15,001,779,798.002
2009 - $15,537,496,416.003
2010 - $16,139,311,537.004
As a result of this excluded capital, Comcast’s total capital base was as follows:
2008 - $4,466,448,988.007
2009 - $4,161,784,835.008
2010 - $3,957,198,833.009
Under the apportionment-ratio section, Comcast reported the net book value of its
Mississippi Real and Tangible Personal Property and Everywhere Real and Tangible
Personal Property as follows:
Mississippi Real and Tangible Personal Property
2008 - $80,283,917.0010
2009 - $86,730,211.0011
2010 - $80,562,619.0012
Everywhere Real & Tangible Personal Property
2008 - $2,847,300,674.0013
2009 - $2,961,855,591.0014
2010 - $2,704,531,428.0015
18
Under the apportionment-ratio sections, Comcast reported its Mississippi Gross
Receipts and Everywhere Gross Receipts as follows:
Mississippi Gross Receipts
2008 - $33,626,978.0017
2009 - $34,360,670.0018
2010 - $30,351,379.0019
Everywhere Gross Receipts
2008 - $2,891,134,308.0020
2009 - $2,915,534,007.0021
2010 - $3,108,119,980.0022
Comcast arrived at the following overall apportionment ratios for each tax period by
combining the net book value of its Mississippi Real and Tangible Personal Property Owned
at Year End with its Mississippi Gross Receipts and then by dividing this total by the
combination of its everywhere counterparts:
2008 - % 1.9851
2009 - % 2.0603
2010 - % 1.9081
The application of these apportionment ratios to Comcast’s reported total capital bases
for the respective tax periods resulted in the following taxable capital being apportioned to
Mississippi, and the resulting corporate franchise tax due for Comcast:
Mississippi Apportioned Capital
2008 - $88,663,479.0026
2009 - $85,745,253.0027
2010 - $75,507,311.0028
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Franchise Tax Due
2008 - $221,660.0029
2009 - $214,365.0030
2010 - $188,770.0031
The MDOR audited Comcast’s corporate franchise-tax returns for the 2008, 2009, and
2010 tax periods. At the conclusion of this audit, the MDOR determined that Comcast owed
additional corporate franchise tax, primarily due to the disallowance of the holding company
exclusion. Through this disallowance, Comcast’s respective capital bases increased to the
following:
2008 - $20,032,503,905.0033
2009 - $20,373,632,423.0034
2010 - $20,810,571,644.0035
The MDOR likewise increased the capital-apportionment ratio by including all
Mississippi destination sales as gross receipts in the numerator of the apportionment factor,
and not through Comcast’s methodology, as outlined below:
Audit Gross Receipts
2008- $86,281,902.0037
2009 - $84,063,677.0038
2010 - $85,860,631.0039
Through the increase in gross receipts identified above, Comcast’s overall
apportionment ratio increased to the following:
2008 - % 2.9420
2009 - % 2.9672
2010 - % 2.9673
The application of these audited apportionment ratios to Comcast’s total audited
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capital bases for the respective tax periods resulted in the following taxable capital being
apportioned to Mississippi, and the resulting corporate franchise tax due for Comcast:
Mississippi Apportioned Capital
2008 - $589,356,265.0043
2009 - $604,526,421.0044
2010 - $611,456,216.0045
Franchise Tax Due
2008 - $1,251,733.0046
2009 - $1,296,953.0047
2010 - $1,339,873.0048
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