De Novo Review of Tax Assessment – Statutory Construction – Summary-Judgment Procedure


Alabama Dept. of Revenue v. Greenetrack, Inc., [Ms. 1200841, June 30, 2022] __ So. 3d __ (Ala. 2022). The Court (Mitchell, J.; Parker, C.J., and Bolin, Shaw, Bryan, and Stewart, JJ., concur; Wise and Sellers, JJ., concur in the result) reverses the Greene County Circuit Court’s judgment in favor of Greenetrack, Inc. in a tax dispute and renders judgment in favor of the Alabama Department of Revenue. Amendment No. 743 to the Alabama Constitution of 1901, ratified by Greene County voters in 2003, provides that “[b]ingo games for prizes or money may be operated by a nonprofit organization in Greene County.” Ms. *5. The Court explains that “[a]s a for-profit corporation, Greenetrack was ineligible to operate legal bingo games under Amendment No. 743. So Greenetrack developed a system in which the bingo games at its facility would be “operated” – at least on paper – by various nonprofit organizations holding bingo licenses issued by the Greene County Sheriff.” Ms. *6.

The Department’s appeal required the Court to review whether § 45-32-150.15, Ala. Code 1975 – the tax exemption in the racing act – shielded Greenetrack in its bingo operations. The Court also considered whether Greenetrack’s bingo operations complied with Amendment No. 743 so as to exempt from taxation the gross receipts of its bingo operation.

As to the first question, the Court notes “[f]rom beginning to end, the racing act is concerned with one thing: pari-mutuel wagering on dog racing in Greene County. This limited focus thoroughly pervades the racing act’s provisions.” Ms. *23. The Court concludes

Indeed, and strikingly, both the Tax Tribunal and the circuit court read § 45-32-150.15 in isolation from the rest of the racing act – a fundamentally misguided approach. See, e.g., LEAD Educ. Found. v. Alabama Educ. Ass’n, 290 So. 3d 778, 788 (Ala. 2019) (“[T]he rule is well recognized that in the construction of a statute, the legislative intent is to be determined from a consideration of the whole act with reference to the subject matter to which it applies and the particular topic under which the language in question is found. The intent so deduced from the whole will prevail over that of a particular part considered separately.” (citations omitted)).

Ms. *22, some internal quotation marks omitted.

The Court also rejects Greenetrack’s argument that the Court should only prospectively apply its holding rejecting Greenetrack’s interpretation of the racing act’s tax exemption. Citing its holding in McCullar v. Universal Underwriters Life Insurance Co., 687 So. 2d 156 (Ala. 1996), the Court explains

“‘First, the decision to be applied nonretroactively must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied ... or by deciding an issue of first impression whose resolution was not clearly foreshadowed. Second, it has been stressed that “we must weigh the merits and demerits in each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further or retard its operation.” Finally, we have weighed the inequity imposed by retroactive application, for “[w]here a decision of this Court could produce substantial inequitable results if applied retroactively, there is ample basis in our cases for avoiding the ‘injustice or hardship’ by a holding of nonretroactivity.”’” 687 So. 2d at 165 (quoting Chevron Oil Co. v. Huson, 404 U.S. 97, 106-07 (1971)) (internal citations omitted).

Ms. *30.

Noting that “[w]henever a party acts on a dubious understanding of relevant law, it assumes the risk that a court will disagree with it and that it will have to face the consequences,” the Court concludes

The purpose of the general tax laws under which the Department assessed Greenetrack is to raise revenue for the State in an impartial and evenhanded manner. And the purpose of § 45-32-150.15 is to protect Commission licensees from taxation on pari-mutuel wagering on dog races outside the racing act’s regulatory framework. Giving Greenetrack a free pass for taxes on its activities unrelated to dog racing would undermine the first purpose and do nothing to further the second.

Ms. *31.

In rendering summary judgment for the Department on Greenetrack’s non-compliance with Amendment No. 743, the Court first rejects Greenetrack’s argument that the Department’s motion for summary judgment on this issue exceeded the scope of the issues before the circuit court. The Court holds “[s]ection 40-2B-2(m)(4) commands the circuit court to conduct ‘a trial de novo,’ to ‘hear the case by its own rules,’ and to ‘decide all questions of fact and law.’ As held by an unbroken line of authority in this state, a trial de novo means a new trial ‘as if no trial had ever been had, and just as if it had originated in the circuit court.’” Ms. *34.

The Court reiterates that

Once a summary-judgment motion has been made and supported, Rule 56 offers the nonmovant only two ways of responding to the movant’s factual showing. First, if the nonmovant “contends that material facts are in dispute,” it must “file and serve a statement in opposition supported in the same manner as is provided ... for a summary of undisputed material facts,” which means that its statement must “be supported by specific references to” relevant factual material. Rule 56(c)(1). Importantly, in showing that substantial evidence supports the existence of a genuine issue of material fact, the nonmovant “may not rest upon the mere allegations or denials of [its] pleading” but, instead, “must set forth specific facts showing that there is a genuine issue for trial.” Rule 56(e).

Ms. **38-39.

In its summary-judgment response, “Greenetrack conclusorily asserted that its compliance with Amendment No. 743 was not ripe for determination because the relevant facts ‘ha[d] not been fully developed or proven, no evidentiary hearing ha[d] ever been conducted ..., and no facts ha[d] been stipulated to.’” Ms. *47. Consequently, “[t]he Department’s cross-motion and Greenetrack’s response established that Greenetrack’s bingo operations did not comply with Amendment No. 743. Accordingly, Greenetrack’s bingo gross receipts were subject to sales tax.” Ibid.

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