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AGAIN THROUGH THE LOOKING GLASS: WHICH IS TO BE MASTER?

May 25, 2005

The Iowa Department of Revenue explained how it figures what the tax law means in a recent protest response:

Statutes allowing exemptions from taxation are to be strictly construed with all rational doubt regarding the meaning of any words or phrases contained in them resolved against exemption and in favor of taxation.

A reader* who has some experience in this area points out a case where the Iowa Supreme Court seems to take a different view. In N. F. SORG v. IOWA DEPARTMENT OF REVENUE (no link available) the court said:

"Taxing statutes are strictly construed against the taxing body--liberally in favor of the taxpayer. It must appear from the language of the statute the tax assessed against taxpayer was clearly intended." Scott County Conservation Bd. v. Briggs, 229 N.W.2d at 127 , quoting Dodgen Industries, Inc. v. Iowa State Tax Commission, 160 N.W.2d 289 , 296 (Iowa 1968); see Iowa Movers & Warehousemen's Ass'n v. Briggs, 237 N.W.2d 759 , 769 (Iowa), cert. denied, 429 U.S. 832 , 50 L.Ed.2d 96 (1976). Construing § 422.43 and the applicable definitions in § 422.42 liberally in favor of Sorg and strictly against the Department, we cannot find language signaling a clear legislative intent to tax in the situation before us.

(Emphasis added.)

So which is it? In Sorg, The court says the law leans in favor of the taxpayers; the Department now says the opposite. As Humpty Dumpty told Alice, "The question is, which is to be master -- that's all."

* Thanks to reader Richard Lyford, who successfully argued Sorg at the Iowa Supreme Court.

Related Post: HUMPTY DUMPTY LAW AT IOWA DEPARTMENT OF REVENUE AND FINANCE

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