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Stine, LLC v. USA On Behalf of Internal Revenue Service

United States District Court, W.D. Louisiana, Lake Charles Division

January 27, 2015

STINE, LLC
v.
USA on behalf of INTERNAL REVENUE SERVICE

MEMORANDUM RULING

JAMES T. TRIMBLE, Jr., District Judge.

Before the court are two motions: "Motion for Summary Judgment" (R. #14) filed by plaintiff, Stine LLC ("Stine") and the "Government's Motion for Summary Judgment" (R. #32) filed by the United States of America. In its motion, Stine seeks to have the government ordered to refund taxes it paid under protest. The government's motion seeks a ruling from this court that Stine is not entitled to take an accelerated depreciation allowance granted by the Gulf Opportunity Zone Act of 2005 (hereinafter referred to as the "Go Zone" allowance); the government disallowed the incentive allowance because the relevant buildings[1] were not open for business prior to December 31, 2008.

On January 21, 2015, the court heard oral arguments as to the motions; the parties have submitted their summary judgment evidence and fully briefed their arguments. For the following reasons, Stine's motion will be granted and the govermnent's motion will be denied.

FACTUAL STATEMENT

The undisputed facts are as follows: Stine, LLC is a retail operation that among other things sells home building material and supplies. This matter was filed by Stine to recover corporate income taxes and interest collected from Stine by the Internal Revenue Service ("IRS").[2] In its 2008 tax returns, Stine took the Go Zone allowance which was a 50% depreciation of two (2) buildings constructed in Walker and Broussard, Louisiana. The accelerated depreciation deduction created a loss for 2008 which allowed Stine to carry back those losses for the 2003, 2004 and 2005 tax years. Thus, after filing the appropriate forms, Stine received a refund for the 2003, 2004 and 2005 tax years. The IRS disallowed Stine's Go Zone depreciation deduction and assessed Stine with taxes owed in the amount of $2, 164, 486.00 for the tax years 2003 through 2008. Stine remitted payment in this amount with a Notice of Deficiency Waiver.[3]

Stine is seeking a refund of its corporate income taxes which it alleges the IRS erroneously collected in the amount of $2, 164, 486.00 for the tax years 2003 through 2008, plus interest on the refund pursuant to IRC § 661, and attorney fees, costs and any other sums allowed by law.

SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, when viewed in the light most favorable to the non-moving party, indicate that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law."[4] A fact is "material" if its existence or nonexistence "might affect the outcome of the suit under governing law."[5] A dispute about a material fact is "genuine" if the evidence is such that a reasonable jury could return a verdict for the non-moving party.[6] As to issues which the non-moving party has the burden of proof at trial, the moving party may satisfy this burden by demonstrating the absence of evidence supporting the nonmoving party's claim."[7] Once the movant makes this showing, the burden shifts to the non-moving party to set forth specific facts showing that there is a genuine issue for trial.[8] The burden requires more than mere allegations or denials of the adverse party's pleadings. The non-moving party must demonstrate by way of affidavit or other admissible evidence that there are genuine issues of material fact or law.[9] There is no genuine issue of material fact if, viewing the evidence in the light most favorable to the non-moving party, no reasonable trier of fact could find for the non-moving party.[10] If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted."[11]

LAW AND ANALYSIS

The accelerated depreciation allowance taken by Stine involved tax incentives enacted by Congress to stimulate the economy, business activity and capital investment in and around Southeast and Southwest Louisiana after the devastation caused by Hurricanes Katrina and Rita in 2005. The "Go Zone" legislation, among other things, allowed for an immediate 50% deduction for nonresidential real property "placed in service" after August 28, 2005 and before January 1, 2009.[12]

IRC § 1400N(d)(1)(A) is the Go Zone incentive depreciation provision and provides in pertinent part:

(A) the depreciation deduction provided by section 167(a) for the taxable year in which such property is placed in service shall include an allowance equal to 50 percent of the adjusted basis of such property....
To qualify, property must meet the following conditions:
(I) be property which is described in section 168(k)(2)(A)(I), or, be property which is nonresidential real property ...

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