June 07, 2002
Friday - 12:10 am

The Department of Revenue has won a court victory in an income tax case against a medical corporation owned by an Alaska-licensed doctor. The taxpayer claimed he was not a corporation even though he signed contracts as a corporation, billed for services as a corporation, maintained a checking account in the corporate name and leased a vehicle in the corporate name.

"The taxpayer thought he had found a clever way to avoid paying corporate taxes to Alaska," said Carl Meyer, Chief of Appeals for the Tax Division. "He was wrong." Meyer said the Department of Law was key to the state's success in court. Although individuals pay no personal income tax in Alaska, corporations are liable for state income taxes.

Superior Court Judge Patricia Collins ruled May 31 in Juneau in favor of the state's motion to return the case to the Office of Tax Appeals to determine the doctor's corporate tax liability for the years 1991-1995. According to the Department of Revenue, Northwest Medical Imaging Incorporated owes $74,970 in taxes, penalties and interest for the five years. Although the corporation filed returns for those years, the department disputed several tax deductions.

Dr. James Pister, a radiologist, was the sole shareholder in the corporation when it was established in Washington State in 1988. Dr. Pister lists an Anchorage post office box on his current medical license in Alaska, but has not applied for the Permanent Fund dividend since 1996. He owns property in Alaska and Washington, according to the Department of Revenue.

The Office of Tax Appeals, an administrative hearing agency within the Department of Administration, ruled in favor of Northwest Medical Imaging in March 2001. The administrative law judge ruled that Northwest Medical Imaging was not liable for Alaska corporate taxes because Washington dissolved the corporation in 1990 for failing to file a list of its officers and directors. The Department of Revenue appealed the decision to Superior Court, where Judge Collins overturned the Office of Tax Appeals decision.

"Despite its apparent administrative dissolution, NWMI (Northwest Medical Imaging Inc.) actively operated as a corporation for many years beyond the effective date of its dissolution," Judge Collins stated in her order.

"While perhaps an over-simplification," she added as a footnote, "the statutes, regulations and case law discussed in this opinion rather strongly suggest that if a business entity 'walks like a corporate duck' and 'talks like a corporate duck,' it likely is a 'corporate duck' for income tax purposes."

This is the third time since the Office of Tax Appeals was established in 1997 that the Department of Revenue has appealed a decision to court. The Department has won all three appeals.

Source of News Release:

Office of the Governor
Web Site

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