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Dunn v. Idaho State Tax Commission

Supreme Court of Idaho

September 25, 2017

LINDA DUNN, individually, and as surviving spouse of BARRY DUNN, deceased, Plaintiff-Appellant,

         Appeal from the District Court of the First Judicial District of the State of Idaho, Kootenai County. Hon. Cynthia K.C. Meyer, District Judge.

         The judgment of the District Court is affirmed. Costs on appeal are awarded to respondent.

          Richard Kochansky, Coeur d'Alene, attorney for appellant.

          Hon. Lawrence G. Wasden, Idaho Attorney General, attorney for respondent. David B. Young argued.

          JONES, Justice.

         I. Nature of the Case

         Linda Dunn ("Linda") appeals from a district court's judgment affirming the Idaho State Tax Commission's (the "Commission") deficiency determination. The Commission issued a deficiency against Linda after determining that her one-half community interest in her husband's, Barry Dunn ("Husband"), out-of-state earnings should have been included as Idaho taxable income for 2000-01, 2003-05, and 2007-10 (the "Taxable Years").

         II. Factual and Procedural Background

          The crux of this appeal concerns the proper tax treatment of Linda's one-half community interest in Husband's out-of-state earnings. The facts are uncontested. Linda was married to Husband during the Taxable Years. During the Taxable Years, Husband lived primarily in Texas and was employed by a Texas offshore drilling company. All of the earnings at issue were earned by Husband personally as a wage earner in Texas, Alaska, or Washington and were directly deposited into his bank account in Tomball, Texas. Husband never worked or was domiciled in Idaho during the Taxable Years. Throughout the Taxable Years, Linda temporarily lived with Husband at his work location, but always returned to Idaho to operate a horse farm. She was a resident of Idaho for all of the Taxable Years. Linda and Husband's tax filing status was "married filing jointly."

         On April 13, 2012, the Commission issued a Notice of Deficiency Determination. The Commission's deficiency was only addressed to income attributed to Linda. Linda appealed the decision to the Idaho Board of Tax Appeals, and the Board affirmed the Commission's decision. On May 11, 2015, Linda petitioned a district court for review of the Commission's decision.

         On June 8, 2016, the district court issued a memorandum decision and order affirming the Commission's decision wherein it held that: (1) Linda owned a one-half undivided interest in the Texas earnings of Husband, and, because she was domiciled in Idaho at the time she acquired the interest in Husband's wages, her interest was subject to the tax laws of Idaho; (2) Linda owned a vested interest in the community property wages earned by Husband in Washington, which were subject to taxation under the laws of Idaho as the domicile of Linda; and (3) Idaho's personal income tax scheme did not violate the dormant Commerce Clause or the Privileges and Immunities Clause of the United States Constitution because Linda failed to show a substantial effect on an identifiable interstate economic activity or market. The district court denied the Commission's request for costs and attorney fees because, although Linda's argument was ultimately failing, it was not devoid of merit. A corresponding judgment was issued on August 3, 2016.

         Linda appeals.

         III. Issues on Appeal

         1. Did the district court err by holding that there were no constitutional violations?

         2. Did the district court err by holding that Linda's one-half community interest in Husband's wages was subject to the tax laws of Idaho?

         IV. Standard of Review

A taxpayer may appeal a determination by the Commission by filing a complaint against the Commission in district court. I.C. § 63-3049. The case is to proceed as a de novo bench trial. I.C. § 63-3049; cf. I.C. § 63-3812(c). A deficiency determination issued by the Commission is presumed to be correct, and the burden is on the taxpayer to show that the Commission's decision is erroneous. Albertson's Inc. v. State Dep't of Revenue, 106 Idaho 810, 814, 683 P.2d 846, 850 (1984).

Parker v. Idaho State Tax Comm'n, 148 Idaho 842, 845, 230 P.3d 734, 737 (2010) (footnote omitted).

         "Because constitutional questions are purely questions of law, they are . . . reviewed de novo." V-1 Oil Co. v. Idaho State Tax Com'n, 134 Idaho 716, 718, 9 P.3d 519, 521 (2000) (citing Idaho State Ins. Fund v. Van Tine, 132 Idaho 902, 905-906, 980 P.2d 566, 569- 570 (1999)).

         V. Analysis

         Throughout her briefing, Linda focuses solely on Husband's Texas earnings and Texas law. She does not proffer an argument related to Husband's Washington earnings or Washington law. "We will not consider an issue not 'supported by argument and authority in the opening brief.'" Bach v. Bagley, 148 Idaho 784, 790, 229 P.3d 1146, 1152 (2010) (quoting Jorgensen v. Coppedge, 145 Idaho 524, 528, 181 P.3d 450, 454 (2008)). Accordingly, we only consider Linda's appeal as it relates to her one-half community interest in Husband's Texas earnings.

         A. The district court correctly held that there were no ...

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