On appeal from the Tax Court of New Jersey, Docket No. 007445-05.
The opinion of the court was delivered by: Kestin, J.A.D. (retired and temporarily assigned on recall).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 24, 2008
Before Judges A. A. Rodríguez, Kestin and Newman.
Plaintiff, Praxair Technology, Inc. (PTI), a Delaware corporation with its principal place of business in Connecticut, appeals from the Tax Court's June 27, 2007 order granting partial summary judgment to defendant, the Director of the Division of Taxation (the Director), regarding PTI's liability under the Corporation Business Tax (CBT), N.J.S.A. 54:10A-1 through -41, for the 1994-1996 tax years. The remainder of the complaint regarding plaintiff's liability under the CBT was dismissed. The Director had also imposed a late-filing penalty and a post-amnesty penalty on PTI's initial challenge to the assessment of its tax liability for a longer period, tax years 1994-1999. The Tax Court, in upholding the imposition of the tax for 1994-1996, also upheld the late-filing and post-amnesty penalties for that period as well as the ensuing years that had initially been challenged.
The Tax Court judge set out the reasons for his decision in a letter opinion dated June 18, 2007; and he amplified those reasons in an August 13, 2007 memorandum issued pursuant to R. 2:5-1(b). We reverse the decision with respect to plaintiff's tax liability for 1994-96, and remand for a recalculation of plaintiff's liability for the penalty assessments post-1996, in the light of our decision on the basic tax liability issue.
The complaint contained seven claims for relief. As characterized by the judge in his letter opinion, the cross-motions for partial summary judgment presented issues regarding PTI's challenges [to] three aspects of the Director['s] . . . Final Determination: (1) The March 12, 2002 assessment of a corporate business tax for the audit years 1994-1996 under N.J.S.A. 54:10A-1 after the addition of an example in 1996 to N.J.A.C. 18:7-1.9; (2) the assessment of a [30%] late filing penalty; and (3) the assessment of a [5%] post-amnesty penalty.
The order disposing of the motions, and the letter opinion, both noted the parties' stipulation that the remaining issues in the case were governed by the outcome of Lanco, Inc. v. Director, Division of Taxation, 188 N.J. 380 (2006), cert. denied, ___ U.S. ___, 127 S.Ct. 2974, 168 L.Ed. 2d 702 (2007). Accordingly, the order resolving the motions was, as it noted, a final disposition of the case.
The background facts recited by the Tax Court judge in his letter opinion are undisputed.
PTI is, and at all times during the relevant audit period of 1994-1999 was, a wholly owned subsidiary of Praxair, Inc. (hereinafter "Parent"). PTI was incorporated, conducted all business, and placed all offices outside of New Jersey. PTI had no employees working in or conducting business in New Jersey. From 1994-1999, PTI owned various patents, trade secrets, and technologies relating to the manufacture and use of certain industrial gases. These intangible properties were licensed by PTI to Parent[,] and Parent implemented the properties at various facilities in the United States, including facilities in New Jersey. PTI received substantial licensing fees from Parent for the use of these properties. In addition, PTI received a portion of the profits from the use of the properties and a portion of any fee paid to Parent as part of third-party relicensing. PTI's practice of licensing these properties to Parent did not change throughout the audit period.
PTI's brief illuminates the background further.
[Parent] used the licensed technology to manufacture gases at [Parent's] domestic facilities, including those facilities located in New Jersey, and paid PTI license fees in accordance with [their a]greement.
PTI did not maintain an office in New Jersey, did not own or lease property or have employees in New Jersey, and did not otherwise ...