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Corning v. Hegar

Court of Appeals of Texas, Fourth District, San Antonio

April 5, 2017

OWENS CORNING, Appellant
v.
Glenn HEGAR, Comptroller of Public Accounts of the State of Texas, and Ken Paxton, Attorney General of the State of Texas, Appellees

         From the 200th District Court, Travis County, Texas[1] Trial Court No. D-1-GN-15-001998 Honorable Gisela D. Triana, Judge Presiding

         AFFIRMED

          Marialyn Barnard, Justice Patricia O. Alvarez, Justice Irene Rios, Justice

          OPINION

          Patricia O. Alvarez, Justice

         The underlying lawsuit arises out of Owens Corning's request for a franchise tax refund for report year 2008. Owens Corning appeals the trial court's order granting a summary judgment in favor of Glenn Hegar, Comptroller of Public Accounts of the State of Texas, and Ken Paxton, Attorney General of the State of Texas (collectively the State). The issue presented on appeal is whether the trial court erred in concluding Owens Corning's payment for product liability damages is not within the scope of the "costs of quality control" as that term is used in section 171.1012(d)(9) of the Texas Tax Code. We affirm the trial court's order.

         Background

         In its 2008 franchise tax reporting period, as part of an asbestos products liability settlement during its bankruptcy reorganization, Owens Corning made a one-time payment of $2, 195, 316, 694 into an asbestos trust fund. After it filed its franchise tax return, Owens Corning filed a franchise tax refund claim in which it included the trust fund payment as a cost of goods sold, specifically, under costs of quality control. The Comptroller denied the refund claim, and Owens Corning sued.

         Owens Corning and the State filed competing motions for summary judgment based primarily on stipulated facts. In the State's motion for summary judgment, it included a list of facts to which the parties stipulated for purposes of the motion. We recite some of them here.

3. Owens Corning timely submitted an administrative refund request for franchise tax paid in report year 2008.
4. The administrative refund request included an argument that Owens Corning's cost-of-goods-sold deduction should include an additional $2, 195, 316, 694, which would lower Owen[s] Corning's franchise tax for report year 2008 by $882, 182.59. Owens Corning requested a refund in that amount.
. . .
7. Owens Corning sold products containing asbestos until 1973. Owens Corning has not made products containing asbestos since 1973. Many of Owens Corning's products containing asbestos remained in use after 1973.
8. Many plaintiffs sued Owens Corning, alleging that the products containing asbestos were defective and caused them personal injuries ("asbestos product-liability lawsuits").
9. In report year 2008, Owens Corning took advantage of a federal law which allowed it to be free of all pending and future asbestos product-liability lawsuits in return for a payment of $2, 195, 316, 694 into an asbestos trust fund. The purpose of the trust fund is to pay personal-injury claims in pending and future asbestos product-liability lawsuits.

         The trial court granted the State's motion for summary judgment. The trial court's order states the following:

While the Court does not accept either side's proffered interpretation of the statutory meaning of "costs of quality control" found in Tex. Tax. Code § 171.1012(d)(9), the Court does find that the costs at issue are not the costs of quality control under Tex. Tax. Code § 171.1012(d)(9). The Court equates the payment made to the trust, which is to compensate for injuries resulting from the use of products that have not been manufactured since 1973, to product ...

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