FISHER, Senior Judge.
Vodafone Americas Inc. and Vodafone Holdings LLC (collectively, Vodafone) appeal the two final determinations of the Indiana Department of State Revenue denying their claims for refund of adjusted gross income tax paid during the taxable years ending March 31, 2005 through March 31, 2008 (the years at issue). The appeal is currently before the Court on Vodafone's motion for summary judgment (Motion). In its Motion, Vodafone asks the Court to answer one question: whether the income it received as a partner of a general partnership that was doing business in Indiana was income derived from sources within Indiana. The Court answers that question in the affirmative.
During the years at issue, Vodafone, a Delaware corporation commercially domiciled first in California and then in Colorado, owned a 45% interest in Cellco Partnership, a general partnership also organized under the laws of Delaware.
Upon receiving its distributive shares of Cellco income, Vodafone filed Indiana adjusted gross income tax returns, reporting a portion of its income was attributable to, and therefore taxable by, Indiana. Vodafone subsequently amended its returns and sought a refund of the tax it paid on the basis that it had erroneously determined that its income was derived from sources within Indiana. The Department denied Vodafone's claims for refund.
Vodafone initiated this original tax appeal on February 2, 2010. On November 16, 2012, Vodafone filed its Motion. The Court conducted a hearing on the Motion on May 16, 2013. Additional facts will be supplied as necessary.
Summary judgment is designed to provide speedy resolution to those cases — or those parts of cases — that may be determined as a matter of law because there are no factual disputes. Matonovich v. State Bd. of Tax Comm'rs, 705 N.E.2d 1093, 1096 (Ind. Tax Ct.1999), review denied; Ind. Trial Rule 56(C) (explaining that summary judgment is proper only when "the designated evidentiary matter shows that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law"). When reviewing a motion for summary judgment, the Court will construe all properly asserted facts and reasonable inferences drawn therefrom in favor of the non-moving party. See Scott Oil Co. v. Indiana Dep't of State Revenue, 584 N.E.2d 1127, 1128-29 (Ind. Tax Ct.1992) (citation omitted).
Vodafone is required to pay a tax on that part of its adjusted gross income derived from sources within Indiana. See Ind.Code § 6-3-2-1 (2005) (amended 2011). During the years at issue, "adjusted gross income derived from sources within Indiana" meant:
Ind.Code § 6-3-2-2(a)(1)-(5) (2005) (amended 2011).
In its Motion, Vodafone argues that the income it received as a result of its partnership interest in Cellco is not adjusted gross income derived from sources within Indiana under Indiana Code § 6-3-2-2(a) and is therefore not taxable. In arriving at that conclusion, Vodafone explains that because a partner's interest in a partnership is defined as intangible personal property, the income it received from Cellco was adjusted gross income derived from sources within Indiana only if it was attributable to Indiana under Indiana Code § 6-3-2-2.2(g), "the most applicable" portion of Indiana Code § 6-3-2-2.2. (See, e.g., Pet'rs' Am. Pet. Refund Adjusted Gross Income Tax ("Pet'rs' Am. Pet.") at 4-5 (citations omitted); Pet'rs' Mot. Summ. J. ("Pet'rs Mot.") at 2 (citations
Income in the form of "dividends from investments" is sourced pursuant to Indiana Code § 6-3-2-2.2(g). The term "dividends from investments" is cloaked with meaning that is different than that of the general term "dividends" that is used in Indiana Code § 6-3-2-2, Indiana's sourcing statute. See I.C. § 6-3-2-2(g), (j). See also US Air, Inc. v. Indiana Dep't of State Revenue, 623 N.E.2d 466, 470 (Ind. Tax Ct.1993) (explaining that each and every word used in a statute must be read as having meaning). Indeed, the use of the term "dividends from investments" reflects the distinction between operational income and investment income, a key constitutional concept in the attribution of income among the states.
A general partnership is "an association of two (2) or more persons to carry on as co-owners a business for profit[.]" Ind. Code § 23-4-1-6(1) (2005). In its most elemental form, a general partnership is "[a] partnership in which all partners participate fully in running the business and share equally in profits and losses (though the partners' monetary contributions may vary)." Black's Law Dictionary 1230 (9th ed. 2009). See also Ind.Code § 23-4-1-24 (2005) (stating that the property rights of a partner in a general partnership are "(1) his rights in specific partnership property, (2) his interest in the partnership, and (3) his right to participate in the management") (emphasis added).
Nevertheless, Vodafone argues that the substance of its participation in Cellco's business, and not the business form by which Cellco is organized, should control how its income is characterized. More specifically, Vodafone argues that despite the fact it was a partner in a general partnership, a "lack of control" placed it in essentially the same position as being a limited partner of, or a true "passive investor" in, Cellco. (See Pet'rs' Br. at 4; Pet'rs' Reply Br. at 9, 19.) As support for this argument, Vodafone explains that
(Pet'rs' Br. at 4-5 (citations omitted) (footnote added).)
A limited partner is a partner in a partnership whose liability is limited to the extent of his original investment in the business enterprise. See Black's at 1229. A limited partner is considered a passive investor because the "quid pro quo" for his limited liability is his sacrifice of his right to participate in the management of the enterprise. See id. at 1229 (defining a limited partner as "[a] partner who receives profits from the business but does not take part in managing the business and is [therefore] not liable for any amount greater than his or her original investment"), 1230 (defining limited partnership as "[a] partnership composed of one or more persons who control the business and are personally liable for the partnership's debts (called general partners), and one or more persons who contribute capital and share profits but who cannot manage the business and are liable only for the amount of their contribution (called limited partners)").
The income Vodafone received as a partner of Cellco had the character of operational income and was therefore not income in the form of "dividends from investments" under Indiana Code § 6-3-2-2.2(g).
SO ORDERED.
As previously indicated, limited partnerships are creatures of statute that cannot exist based simply on the proclaimed intention of its partners. See supra n. 7. More importantly, however, the fact that Vodafone holds veto rights deemed not to indicate participation in the management of a business does not negate the fact that it participates in Cellco's management by, among other things, appointing members to Cellco's Board of Representatives and significant officers.