NOTICE: IC § 6-8.1-3-3.5 and IC § 4-22-7-7 require the publication of this document in the Indiana Register. This document provides the general public with information about the Indiana Department of Revenue's (the "Department") official position concerning a specific set of facts and issues. This document is effective on its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register. The "Holding" section of this document is provided for the convenience of the reader and is not part of the analysis contained in this Letter of Findings.

Motor Carrier provided sufficient evidence that it should not be assessed the full overweight civil penalty. Motor Carrier's constitutional claims are beyond the scope of an administrative hearing.

I. Motor Vehicles - Overweight Penalty.

Authority: IC § 6-8.1-5-1; IC § 6-8.1-1-1; IC § 9-20-1-1; IC § 9-20-1-2; IC § 9-20-4-1; IC § 9-20-18-14.5; Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007).

Taxpayer protests the assessment of an overweight civil penalty.

II. Tax Administration - Constitutionality.

Authority: IC § 6-8.1-5-1; Timbs v. Indiana, 139 S. Ct. 682 (2019); Jones v. Flowers, 547 U.S. 220 (2006); United States v. Bajakajian, 524 U.S. 321 (1998); Austin v. United States, 509 U.S. 602 (1993); State v. Sproles, 672 N.E.2d 1353 (Ind. 1996); Clifft v. Indiana Dep't of State Revenue, 660 N.E.2d 310 (Ind. 1995); Ennis v. Dep't of Local Gov't Fin., 835 N.E.2d 1119 (Ind. Tax Ct. 2005); Ind. Const. art. III, § 1.

Taxpayer protests the constitutionality of the imposition of an overweight civil penalty.

Taxpayer is a trucking company that was hauling corn within Indiana. On August 21, 2018, the Indiana State Police ("ISP") examined Taxpayer's commercial motor vehicle and issued an overweight violation. Later, ISP informed the Department of the violation. As a result, the Department issued Taxpayer a proposed assessment for being overweight without a permit in the form of a "No Permit Civil Penalty." Taxpayer protested the assessment of the civil penalty. The Department held an administrative hearing, and this Letter of Findings results. Further facts will be provided as necessary.

I. Motor Vehicles - Overweight Penalty.

ISP reported that Taxpayer needed but did not obtain an overweight permit. Taxpayer was 10,100 pounds over the statutorily allowed limit for gross weight on the Interstate System.

As a threshold issue, it is a taxpayer's responsibility to establish that the existing proposed assessment is incorrect. As stated in IC § 6-8.1-5-1(c), "[t]he notice of proposed assessment is prima facie evidence that the [D]epartment's claim for the unpaid tax is valid. The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made." Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007).

The Department notes that, "[W]hen [courts] examine a statute that an agency is 'charged with enforcing. . .[courts] defer to the agency's reasonable interpretation of [the] statute even over an equally reasonable interpretation by another party.'" Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). Thus, all interpretations of Indiana tax law contained within this decision shall be entitled to deference.

According to IC § 9-20-1-1, "[e]xcept as otherwise provided in [IC Art. 9-20], a person, including a transport operator, may not operate or move upon a highway a vehicle or combination of vehicles of a size or weight exceeding the limitations provided in [IC Art. 9-20]."

According to IC § 9-20-1-2, the owner of a vehicle "may not cause or knowingly permit to be operated or moved upon a highway [in Indiana] a vehicle or combination of vehicles of a size or weight exceeding the limitations provided in [IC Art. 9-20]."

IC § 9-20-18-14.5 authorizes the Department to impose civil penalties against Taxpayers that obtain a permit under IC Art. 9-20 and violate IC Art. 9-20 ("Permit Violation Civil Penalty") or are required, but fail, to obtain a permit under IC Art. 9-20 ("No Permit Civil Penalty"). IC § 9-20-18-14.5(c) provides that a person "who transports vehicles or loads subject to this article and fails to obtain a permit required under this article is subject to a civil penalty . . ." According to IC § 9-20-18-14.5(b), the Department may subject a person to a civil penalty if the person "obtains a permit under" IC Art. 9-20 and violates IC Art. 9-20 by being overweight or oversize.

IC § 6-8.1-1-1 states that fees and penalties stemming from IC Art. 9-20 violations are a "listed tax." These listed taxes are in addition to and separate from any arrangement or agreement made with a local court or political subdivision regarding the traffic stop.

In this case, the Department issued Taxpayer a "No Permit Civil Penalty." According to the ISP report, Taxpayer transported a load of corn at a weight that was more than the amount allowed under IC § 9-20-4-1. Taxpayer concedes that it failed to obtain a permit but provides several arguments claiming that the penalty is improper.

Taxpayer claims that the Department published guidance on its website that contradict its actions in this case. In a letter provided with its protest, Taxpayer quoted the Department's website, which Taxpayer claims should bind the Department to a maximum of a $500 penalty:

An individual with or without an Oversize/Overweight Permit who violates Indiana Code Article 9-20 is subject to the following civil penalties:

• Not more than $500 for the first violation,

• Not more than $1,000 for each subsequent violation . . . .

Taxpayer claims that the phrase "with or without" requires the Department to reduce the penalty in this case. The Department notes that Taxpayer has not completely and accurately reproduced the above quote from the Department's website, as denoted with ellipses. In fact, a review of the Department's records establishes that the website included three bullet points explaining the civil penalties and read as follows:

An individual with or without an Oversize/Overweight Permit who violates Indiana Code Article 9-20 is subject to the following civil penalties:

• Not more than $500 for the first violation,

• Not more than $1,000 for each subsequent violation, and

• Not more than $5,000 for each violation for failure to obtain a permit.

The Department's website stated that a $5,000 penalty is the maximum for each violation for a failure to obtain a permit, regardless of the number of prior or subsequent violations. The Department recognized the potential for confusion arising from this joint discussion of the penalties for permit violation and penalties for the failure to obtain a permit. To add clarity, the Department modified the language on its website in March of 2020 to read as follows:

This new language makes it clearer that the $500 and $1000 penalties are for violations of already-obtained OSW permits. That clarification, however, does not change the meaning of the previous language, which separately states the penalty for "each violation for failure to obtain a permit." The Department is bound by the Indiana Code and its regulations, not by quotes pulled from its website and modified to fundamentally change their meaning.

Taxpayer also argues that the penalty amount should be reduced because of the circumstances around the incident. Specifically, Taxpayer states that it did not know the vehicle was overweight and the reasons for the extra weight were beyond its control. It argues that the driver did not believe he was carrying an oversized load and thus the No Permit Civil Penalty is excessive. The truck in question was loaded at a farm that did not have a scale, so an accurate weight was unobtainable. The driver regularly operates on this route hauling corn and believed he was able to estimate the weight correctly. However, corn varies in weight due to moisture, weather, size, and density, which makes estimating weight difficult.

The Department notes that, first, Taxpayer is required to have a permit for carrying loads that exceed statutory limits at the time of transport. This allows the Department to provide Taxpayer a route safe for transport. In this case, however, Taxpayer believed that their vehicle was below the statutory weight limit. Taxpayer did not have a permit on their vehicle at the time of the traffic stop, and therefore was correctly assessed a No Permit Civil Penalty. However, the Department understands Taxpayer's position that it relied on a third party to accurately load the vehicle in question and had to estimate the weight of corn loaded.

In addition to providing Taxpayer an opportunity to protest, IC § 9-20-18-14.5 provides "not more than" language to the Department when generating a proposed assessment amount. In this case, the Department will generate a proposed assessment with a reduced amount, as authorized by its statutory discretion and this Letter of Finding.

Taxpayer's protest is sustained in part and denied in part.

II. Tax Administration - Constitutionality.

At the hearing, Taxpayer made multiple arguments claiming that the Department had violated the United Stated Constitution. Specifically, Taxpayer claimed that the Proposed Assessment issued by the Department and the subsequent administrative procedure resulted in a violation of the Eighth Amendment Excessive Fines Clause and the Fourteenth Amendment Due Process Clause. Each of these arguments will be addressed in turn.

The United States Supreme Court recently issued an opinion in Timbs v. Indiana, 139 S. Ct. 682 (2019) which found that the Eighth Amendment's Excessive Fines Clause is incorporated by the Due Process Clause of the Fourteenth Amendment. This means that the Department, like the IRS and other Federal agencies, is constitutionally limited in its ability to impose sanctions as punishment for an offense. United States v. Bajakajian, 524 U.S. 321, 327-28 (1998). A civil sanction is considered a punishment for an offense when it "cannot fairly be said solely to serve a remedial purpose, but rather can only be explained as also serving either retributive or deterrent purposes . . . ." Austin v. United States, 509 U.S. 602, 621 (1993)(emphasis in original)(internal quotations omitted).

For a punishment to be considered constitutionally excessive, it must be "grossly disproportional to the gravity of [an] offense." Bajakajian, 524 U.S. at 334. In making this determination, substantial deference is given to the authority of state legislatures for determining the appropriate punishment for different types of violations. Id. at 336. Furthermore, the inherent imprecision in determining the severity of an offense means that strict proportionality is not required. Id.

Taxpayer argues that the penalty at the heart of this case must be analyzed as a punishment and that, when analyzed, the penalty is grossly disproportional to the offense. But Taxpayer has submitted no evidence supporting these claims. Taxpayer provided no civil engineering studies, expert witness reports, or other analysis to show the actual damage done by an overweight vehicle on an Indiana highway. Without showing that the penalty in question goes beyond the funds necessary to remedy damage caused by the violation, Taxpayer cannot prove that the penalty is a punishment.

Even assuming that the penalty at issue is a punishment, it is not constitutionally excessive. The Indiana Legislature is given substantial deference in its ability to set penalties for operating an overweight vehicle without a permit. The penalty in this case did not go beyond that statutory authority. Furthermore, Section 1 of this determination modifies the penalty based on the specific facts and circumstances in this case. The Department therefore is issuing an assessment proportionate to Taxpayer's specific violation. By doing so, the Department goes beyond the constitutional requirement to avoid gross disproportionality discussed by the Supreme Court in Bajakajian.

Beyond incorporating the Excessive Fines Clause and other Bill of Rights guarantees, the Due Process Clause of the Fourteenth Amendment "requires the government to provide notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Jones v. Flowers, 547 U.S. 220, 226 (2006)(internal citations omitted). This is distinct from actual notice, which is not constitutionally required. Id.

The Indiana Supreme Court has previously reviewed the Department's process and found that it provided the opportunity for due process.

Taxpayer states that this case involves several Due Process "concerns" including the length of time between the inspection and the issuance of the Proposed Assessment, the Assessment being sent by standard mail, the lack of a signature or telephone number on the Assessment, and the late hour of the Department's response to Taxpayer's settlement offer. But Taxpayer has not provided any evidence that these claims amount to a violation of Due Process. Indeed, Courts have ruled already that several of these "concerns" do not amount to a Due Process violation. See, e.g., Clifft 660 N.E.2d at 318 ("mere postponement of the opportunity to be heard is not a denial of due process if the opportunity ultimately given is adequate.") and Ennis v. Dep't of Local Gov't Fin., 835 N.E.2d 1119, 1123 (Ind. Tax Ct. 2005) (standard mailing not only provides sufficient constitutional notice, but "a presumption arises that such notice is timely received.") Taxpayer in this case did, in fact, receive notice and timely protested the Proposed Assessment. Taxpayer successfully appealed the penalty at issue, engaged in settlement discussions with the Department, attended an administrative hearing, presented its arguments, and will be afforded the opportunity to appeal this decision pursuant to Ind. Code § 6-8.1-5-1(h). There is no support for Taxpayer's claims of a Due Process violation in this case.

Although the Department believes its actions and the relevant statutes are constitutional, that finding is ultimately outside the scope of this determination. The Department does not have the authority to strike down tax statutes. Ind. Const. art. III, § 1. Indeed, the Indiana Supreme Court has explained that, "[c]onstruing the state and federal constitutions is not the job . . . of the Department of State Revenue." State v. Sproles, 672 N.E.2d 1353, 1360 (Ind. 1996). Thus, without the authority to grant the relief requested on these Constitutional claims, the Department denies the Taxpayer's protest.

Taxpayer's protest is respectfully denied.

For the reasons discussed above, Taxpayer's protest is sustained in part and denied in part. The Department will make appropriate adjustments to the penalty and generate a new proposed assessment.

December 29, 2020