Supreme Court rejects Navistar’s appeal in $27M tax case

The Ohio Supreme Court sided with the Ohio Department of Taxation in a legal case involving Navistar.
The Ohio Supreme Court sided with the Ohio Department of Taxation in a legal case involving Navistar.

The Ohio Supreme Court sided with the state in a legal fight with Navistar over how tax credits are applied to manufacturers throughout Ohio.

The truck maker had appealed a previous decision by the state tax commissioner and the Board of Tax Appeals that Navistar was ineligible to receive about $27 million in commercial activity tax credits.

The justices ruled 5 to 2, affirming a decision by the Board of Tax Appeals.

The ruling was relatively narrow based on Navistar’s specific situation, said Matt Chafin, chief legal counsel for the Ohio Department of Taxation.

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Still, he said it helps clarify the rules if a similar case arises in the future.

“Any time we get any direction from the courts it’s always helpful in doing our job in the future,” Chafin said.

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Navistar officials said they believe the company was entitled to the credit, but the case had no impact on day-to-day operations.

“It’s a one-time deal” said Lyndi McMillan, a spokeswoman for Navistar. “It was something we went after but we acted as though that money was not there.”

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The dispute focused on whether the Springfield manufacturer should be allowed to use tax credits created when the state implemented the Commercial Activity Tax in 2005.

Navistar sought to spread about $27 million in net operating losses over future tax years through a credit allowed when the CAT Tax was implemented. But the company later revised financial statements from 2004 after seeking the credit, and the state tax commissioner used that updated information to reject the credit.

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Attorneys for Navistar had argued the tax commissioner exceeded his authority in denying the credit, in part because he based his decision on financial statements that did not exist at that deadline.

This was the second time the Ohio Supreme Court considered Navistar’s objection to being denied the credits. In 2015, the court ruled that the Board of Tax Appeals did not fully consider expert testimony provided by Navistar’s witnesses, and the court sent the case back to the board for further review.

However, Navistar appealed again when the board ruledNavistar wasn't entitled to the credits for a second time.

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This time, the court decided the tax board did explain why Navistar didn’t qualify for the tax credit, and the justices affirmed the tax board’s original decision.

Navistar is one of Clark County’s largest employers with roughly 1,800 people employed at its Springfield plant. The company manufactures commercial trucks, buses military vehicles and other products at facilities in Springfield, Tulsa, Okla. and Escobedo, Mexico.

The truck maker reported a net loss of $73 million for the first quarter this year, including $46 million in charges as a result of debt refinancing in November last year. Navistar reported a net loss of $62 million for the same quarter last year.

However, the company raised its revenue projections for this year, in part due to strong results in the company’s truck segment.