Nelnet, Inc. v. State Tax Assessor

STATE OF MAINE SUPERIOR COURT

CIVIL ACTION

KENNEBEC, ss. DOCKET NO. AP-97-24

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NELNET, INC., et al.,

Petitioners

v. DECISION AND ORDER

STATE TAX ASSESSOR

Respondent

Before the court are cross-motions for summary judgment! on petitioners' M.R.

Civ. P. SOC petition for judicial review challenging an assessment of corporate income

tax by the State Tax Assessor (Assessor). For the following reasons, the petitioners'

motion is granted.

FACTS

1. Petitioners' Business Structure

Nelnet, Inc. is a Nebraska corporation. (PSMF en: 1; RRSMF en: 1.) During 2002,

2003 and 2004 (the "Contested Tax Years"), Nelnet and its subsidiaries (together,

"petitioners") operated as a unitary business doing business in almost all 50 states,

including Maine. (PSMF en: 2; RRSMF en: 2.) Generally, petitioners business was

originating, acquiring, holding, servicing and guaranteeing student loans. (PSMF en: 3;

RRSMF en: 3.)

I Petitioners filed their motion on April 22, 2008. The State Tax Assessor (the Assessor) filed his motion

on April 23, 2008. Additionally, the Assessor filed a Motion to Exclude expert testimony on April 23,

2008.

2

During the Contested Tax Years, petitioners' unitary business consisted of

approximately 25-35 entities. 2 (PSMF 9[ 4; RRSMF <JI 4.) Some of the entities were known

as "special purpose corporations" (SPCs), formed to protect their assets from

bankruptcy and hold beneficial interests in trust indentures used to fund student loans.

(PSMF 9[ 5-6; RRSMF 9[ 5-6.) The SPCs were separate legal entities, had their own tax

identification numbers, held beneficial interests in the student loans, had no employees,

and were incorporated primarily in Nevada, Nebraska or Delaware. (PSMF 9[<JI 7-10;

RRSMF <JI<JI 7-10.)

II. The Loan Process

As part of its Maine loan business, Nelnet established itself as a preferred lender,

which Maine residents attending schools inside and outside of Maine could select.

(PSMF <JI~ 31-46; RRSMF <JI<JI 31-46.) Following the submission of a federal financial aid

application, the u.s. Department of Education provided financial eligibility information

to a student's school. (RRSMF <JI 36.) Pursuant to this eligibility information, schools

attended by Maine borrowers sent award letters to students. (PSMF ~ 37, RRSMF <JI 37.)

After receiving an award letter, the student completed the standard promissory note

and selected a lender. If a student selected Nelnet as the lender, the SPCs would hold

the legal title to the promissory note and the student/borrower would be obligated to

repay the SPCs. (PSMF ~<JI 39, 40; RRSMF <JI~ 39, 40.) Once the borrower was approved

for the requested financial aid, the school would direct Nelnet to forward the loan funds

to the school for disbursement to the student's account. (PSMF <]I 43; RRSMF <]I 43.) The

SPCs also acquired student loans from lenders to whom other Nelnet entities provided

2 Each entity was assigned separate tax identification numbers, except for entities organized as limited

liability companies that were 100% owned by the parent company, Nelnet. (PSMF 'J[ 4; RRSMF 'J[ 4.)

3

marketing and/ or origination services, and/ or from lenders who had agreed to sell

loans to the SPCs. (RRSMF <j[ 45-46.)

III. Petitioners' Maine Loan Activities

Petitioners have maintained an office in Portland since 2001, staffed during the

Contested Tax Years by employees of Nelnet Marketing Solutions, Inc., Nelnet Loan

Services, Inc., Nelnet, Inc., and Nelnet Corporation. (PSMF <j[<j[ 16-17; RRSMF <j[<j[ 16-17.)

During the Contested Tax Years, between 6 and 14 employees worked in the Maine

office. (PSMF <j[ 18; RRSMF <j[ 18.) During the Contested Tax Years, petitioners offered

loans to Maine residents for post-secondary education in schools both within and

outside of Maine. (RRSMF <j[ 19.) For a period in 2003, employees in the Maine office

administered parts of the loan origination process, including marketing and solicitation

activities and data entry in connection with student loans that petitioners funded and

disbursed to Maine colleges and universities. (PSNIF <j[ 19; RRSMF <j[ 19.) In the spring

of 2004, these activities were relocated from the Maine office to other offices throughout

the country. (PSMF <j[ 20; RRSMF <j[ 20.) Prior to 2001, all activities related to

peti tioners' student loan business were performed in offices located outside of Maine.

(PSMF <j[ 21; RRSMF <j[ 21.)

During the Contested Tax Years, certain SPCs received interest and servicing fees

from loans to Maine residents ("Maine Student Loan Income"). (PSNIF <j[ 22.) Because

not all Maine residents receiving student loans attended colleges or universities in

Maine, these loans were disbursed to schools both within and outside of Maine. (PSMF

9I 22.) Certain SPCs also received interest and servicing fees generated by student loans

that were acquired by the SPCs, but were originally funded and disbursed by other

lending intuitions. (PSMF 9I 22.)

4

During 2003 and 2004, National Education Loan Network (NELN), a separate

legal entity with its own tax identification number, received interest generated by

student loans funded and disbursed to Maine residents attending colleges or

universities both within and outside of Maine, by NELN or other lending institutions,

whose loans NELN subsequently acquired. (PSMF <J[<J[ 24-25; RRSMF <J[<J[ 24-25.) NELN

had a line of credit so that it could fund loans for a temporary 30-90 day period until the

loan could be fully funded. (PSMF <J[ 26; RRSMF <J[ 26.) All federally-guaranteed

student loans initially funded and temporarily held by NELN were ultimately

transferred to an Spc. (PSMF <J[ 27; RRSMF <J[ 27.)

In 2004 Nelnet, Inc. received servicing fees generated by loans funded and

disbursed to schools attended by Maine residents both within and outside of Maine.

(PSMF <J[ 28; RRSMF <J[ 28.) Other than NELN and Nelnet, Inc., all of the entities in

Nelnet's unitary business receiving interest and servicing fees related to student loans

to Maine residents attending schools both within and outside of Maine in 2002, 2003,

and 2004, were SPCs. (PSMF <J[<J[ 29-30; RRSMF <J[<J[ 29-30.)

Petitioners filed a single Maine combined corporate income tax return for 2001,

and each of the Contested Tax Years, listing each taxpayer entity in its Combined

Report, including the SPC that received interest and servicing fees. (PSMF <J[ 47; RRSMF

<J[ 47.) In 2001, one SPC, MELMAC, sourced $27,080,819 in sales to Maine, an amount

petitioners contend was erroneous and for which they could have demanded a refund.

(PSMF <JI 48; RRSMF <JI 48.) Subsequent to 2001, petitioners ceased reporting Maine

sales. (PSMF <JI 49; RRSMF <JI 49.)

IV. The Assessment

On May 18, 2006, the MRS issued an Assessment of Income Tax, Interest and

Penalties for $600,428.96, based upon Nelnet's failure to include Maine Student Loan

5

Income in the Maine sales factor numerator during the Contested Tax Years. On

January 29,2007, on reconsideration, the Assessor upheld the assessment based on its

determination that interest and servicing fees received by SPCs during the Contested

Tax Years were "incidental" to Maine sales, and properly includable in the numerator

of the sales factor. See Me. Dep't of Admin. & Fin. Serv., 18125 CMR 801.06(A).

Pursuant to 36 M.R.S. § 151 (2007), petitioners seek judicial review of this decision.

STANDARD OF REVIEW

[A]lthough summary judgment is no longer an extreme remedy, it is not a

substitute for trial. It is, at base, "simply a procedural device for obtaining

judicial resolution of those matters that may be decided without fact­

finding." If facts material to the resolution of the matter have been

properly placed in dispute, summary judgment based on those facts is not

available except in those instances where the facts properly proffered

would be flatly insufficient to support a judgment in favor of the

nonmoving party as a matter of law.

Arrow Fastener Co. v. Wrabacon, Inc., 2007 ME 34, <j[ 18, 917 A.2d 123, 127

(quoting Curtis v. Porter, 2001 ME 158, <j[ 7, 784 A.2d 18, 21-22).

In reviewing final determinations of the State Tax Assessor, the Superior Court

shall review the case

in accordance with the Maine Administrative Procedures Act, except that

Title 5, sections 1106 [power of the court to modify the record] and 1107

[manner and scope of review] do not apply. The Superior Court shall

conduct a de novo hearing and make a de novo determination of the

merits of the case. Either the taxpayer or the assessor may raise on appeal

in Superior Court any facts, arguments or issues that relate to the

assessor's decision on reconsideration, regardless of whether the facts,

arguments or issues were raised during the reconsideration proceeding

being appealed, provided that the facts, arguments or issues are not

barred by any other provision of law. The court shall make its own

determination as to all questions of fact or law, regardless of whether the

questions of fact or law were raised during the reconsideration

proceeding. The Superior Court shall enter such orders and decrees as the

case may require. The burden of proof is on the taxpayer.

36 M.R.S. § lSI.

DISCUSSION

6

The question in this case is the correct percentage of petitioners' income that is

subject to Maine corporate income tax. The applicable statute is 36 M.R.S. § 5211.

Corporate taxpayers that have income from business that is taxable both within and

outside of Maine are required to apportion their net income on the basis of a statutory

formula. See 36 M.R.S. § 5211(1). Section 5211(8), at the time of the Contested Tax

years, provided that "[a]ll income shall be apportioned to this State by multiplying the

income by a fraction, the numerator of which is the property factor plus the payroll

factor plus twice the sales factor, and the denominator of which is 4." Id. at § 5211(8).

Essentially, the issue in this case is the proper computation of the sales factor.

Section 5211(14) provides that the "sales factor is a fraction, the numerator of

which is the total sales of the taxpayer in this State during the tax period, and the

denominator of which is the total sales of the taxpayer everywhere during the tax

period." Sales, for the purposes of calculating the sales factor, are "all gross receipts of

the taxpayer." 36 M.R.S. § 5210(5).3

Only sales "in this State" are included in the sales factor numerator. Section

5211(16)4 provides that a sale is "in this State" if: 1) "[t]he income-producing activity is

performed in this State," or 2) "[t]he income-producing activity is performed both in

and outside this State and a greater proportion of the income-producing activity is

performed in this State than in any other state, based on costs of performance." Both

3 "G ross recelp

. t s " means

the gross amounts realized (the sum of money and the fair market value of other

property or services received) on the sale or exchange of property, the performance of

services, or the use of property or capital (including rents, fees, royalties, interest and

dividends) in a transaction that produces income, in which the income or loss is

recognized (or would be recognized if the transaction were in the United States) under

the Internal Revenue Code.

Dep't of Admin. & Fin. Serv., 18 125 CMR 801.06(B).

Which was repealed and replaced with section 5211(16-A) on June 7, 2007, after this assessment.

7

parties appear to agree that the Maine Student Loan Income constitutes "sales other

than tangible personal property," and therefore falls under 36 M.R.S. § 5211(16).5 Thus,

the specific issue is where the "income-producing activity" giving rise to the Maine

Student Loan Income was performed.

1. Whether Interest and Servicing Fees Were "Incidental" to Maine Sales?

The Assessor's reconsideration decision determined that the Maine Student Loan

Income was "incidental" to petitioners' Maine sales. See Me. Dep't of Admin. & Fin.

Serv., 18125 CMR 801.06(A). Rule 801.06(A) provides, in pertinent part, that "[i]nterest

income, service charges, carrying charges or time-price differentials incidental to a sale

must be included as sales in the state to which the sale is attributable, regardless of the

place where the accounting records are maintained or the location of the contract or

other evidence of indebtedness./I The Assessor argues that, under this provision, Maine

Student Loan Income is "incidental" to the underlying "sale" at issue: the Maine Loans. 6

The Assessor's argument is unpersuasive. To fall within Rule 801.06(A), Maine

Student Loan Income would have to be incidental "to a sale." Me. Dep't of Admin. &

Fin. Serv., 18 125 CMR 801.06(A). Maine Loans cannot fall within the definition of a

sale, which is defined as "gross receipts"-essentially income. See 36 M.R.S. § 5210(5);

Me. Dep't of Admin. & Fin. Serv., 18125 CMR 801.08(B) ("gross amount realized (the

sum of money and the fair market value of other property or services received) on the

sale or exchange of property, the performance of services, or the use of property or

capital (including rents, fees, royalties, interest and dividends) ..."). Thus, Maine

5 (See State's Opp'n to Pet'r Mot. at 11-13) (arguing that, even assuming Rule 801.08(A) does not apply,

the Maine Student Loan Income itself constitutes Maine sales, and should be sourced to Maine under the

plain language of 36 M.R.S. § 5211(16».

6 Maine Loans refers to "(1) the student loans that [the SPCs, NELN and Nelnet, Inc.] funded and

dispursed to Maine colleges and universities, and (2) student loans that were originally funded and

dispursed to Maine colleges and universities by other lending institutions, bu t were subsequently

acquired by the SPCs or NELN." (State's Opp'n Mot. at 2.)

8

Student Loan Income is not "incidental" to any "sale." Indeed, Maine Student Loan

Income is the predominant purpose of the loan transaction, and the predominant, if not

the only, "receipt" from loans to Maine residents.

Moreover, notwithstanding the parties' assertions regarding the applicability

and validity of Rule 801.06(A) to this case, resolution of this case ultimately requires a

determination of where "income producing activity" was performed. See 36 M.R.S. §

5211(16); Me. Dep't of Admin. & Fin. Serv., 18125 CMR 801.06(A) ("[i]nterest income ..

. incidental to a sale must be included as sales in the state to which the sale is attributable")

(emphasis added). This determination-where the "income producing activity"

occurred-essentially hinges upon two queries: 1) What entities are properly

considered in the analyzing "income producing activities"?; and 2) What are "income

producing activities"?

II. What entities should be considered in evaluating "Income Producing Activities"?

Section 5211(14) provides that "[t]he sales factor is a fraction, the numerator of

which is the total sales of the taxpayer in this State." 36 M.R.S. § 5211(14) (emphasis

added). In determining, for the purposes of calculating the numerator of the sales

factor in section 5211(14), whether each individual corporation or the entire unitary

business is "the taxpayer," statutory language provides a useful guide. "'Taxpayer'

means any person required to file a return under this Title or to pay, withhold and pay

over or collect and pay over any tax imposed by this Title." Id. at § 111(7). The term

"person" includes a "corporation/I? id. at § 111(3), and an income tax return is required

to be filed by "[e]very taxable corporation that is required to file a federal income tax

7 "'Corporation' means any business entity subject to income taxation as a corporation under the laws of

the United States," with certain enumerated exceptions. 36 M.R.S. § 5102(6).

9

return." Id. at § 5220(5). Affiliated corporations engaged in a unitary business} like

petitioners', file a combined report listing in aggregate and by corporation federal

taxable income, property, payroll, and sales. See 36 M.R.S.A. §§ 5220(5), 5244; Great

Northern Nekoosa Corp. v. State Tax Assessor, 675 A.2d 963, 965 (1996).9 This language

appears to demonstrate that the term "taxpayer," for purposes of calculating the sales

factor numerator, refers to each individual Maine nexus corporation, rather than an

entire unitary business. In Greater Northern Nekoosa, the Law Court held that the term

"taxpayer" as used in the "throwback rule," 36 M.R.S. § 5211(15), for the purposes of

calculating the sales factor numerator, did not refer to an entire unitary business group.

675 A.2d at 966. Although Greater Northern Nekoosa involved section 5211(15), the

underlying issue-who is the "taxpayer" for purposes of the sales factor numerator?­

was the same. Therefore, this court concludes that "taxpayer," for purposes of

calculating the sales factor numerator in section 5211(14), is limited to only those

corporations in the unitary business that have a Maine nexus. As it is undisputed that

the Maine Student Loan Income was received by the SPCs, NELN and Nelnet, Inc., (see

PSMF <JI<JI 22, 24, 25, 28), these entities are the "taxpayers" at issue.

Resolution of this issue, however, does not determine whether, under 36 M.R.S. §

5211(16), the sales of "the taxpayers"-the SPCs, NELN, and Nelnet, Inc.-are in this

State. This issue requires a determination of where the "income producing activity"

giving rise to the Maine Student Loan Income was performed. The term "income­

8 "Unitary business" means "a business activity which is characterized by unity of ownership, functional

integration, centralization of management and economies of scale." Id. at § 5102(10-A). In the case of a

unitary business carried on by 2 or more members of an affiliated group, such as Nelnet Group, the

"Maine net income of a corporation is determined by apportioning that part of the federal taxable income

of the entire group that derives from the unitary business." Id. at § 5102(8).

9 The aggregate income on the combined report is apportioned in accordance with the statute, and the

corporate taxpayer includes the Maine share of income on its Maine tax return. Tambrands v. State Tax

Assessor, 595 A.2d 1039, 1044 (Me. 1991).

10

producing activity" is not defined by statute. Rule 801.01(E) defines "income­

producing activity" as:

each separate item of income and the transactions and activity directly

engaged in by the taxpayer for the ultimate purpose of obtaining gain or

profit. For income apportionment purposes, such a<:tivity does not include

transactions and activities performed on behalf of a taxpayer, such as

those conducted on the taxpayer's behalf by an independent contractor.

Income-producing activity includes, but is not limited to:

(1) The rendering of personal services by employees or the

utilization of tangible and intangible property by the taxpayer in

performing a service;

(2) The sale, rental, leasing or licensing the use of, or other use of

real property; and

(3) The rental, leasing, licensing the use of, or other use of tangible

or intangible personal property.

Me. Dep't of Admin. & Fin. Serv., 18125 CMR 801.01(E).

The Assessor argues that the court may only consider the "income producing

activities" in which the taxpayers themselves (the SPCs, NELN, and Nelnet, Inc.) are

engaged, and not the activities engaged in by others on the taxpayers behalf. The

Assessor points to the definition of "independent contractor," which, under Rule

801.10(E), "means any individual who performs services for a taxpayer but who is not

an employee of the taxpayer, and who is not otherwise subject to the supervision or

control of the taxpayer in the performance of the services." Id. at 801.1O(E).1O The

Assessor argues that activities performed on behalf of the spes by employees of other

entities in petitioners' unitary business may not be considered. This, according to the

10 The "independent contractor" provision cited to by the Assessor is found in the provision providing for

the calculation the payroll factor. Me. Dep't of Admin. & Fin. Serv., 18 125 CMR 801.10(E). Petitioners

argues that this definition, which is used for determining whether an individual is an independent

contractor or an employee, is not applicable to a determination of whether Nelnet Group entities should

be treated as independent contractors of the SPCs.

11

Assessor, leaves only the activities undertaken by the SPCs, NELN, and Nelnet, Inc. to

be considered as "income producing activities."

Nelnet argues that the provision of Rule 801 excluding independent contractors

from consideration in determining "income producing activities" impermissibly limits

36 M.R.S. § 5211(16) by adding a restriction not found in the statutory text, and should

be rejected. See UAH-Hydro Kennebec, L.P. v. State Tax Assessor, 659 A.2d 865, 867

(Me. 1995) (rejecting the Assessor's attempt to add a requirement to the sales and use

tax exemption statute); see also Gen. Motors Corp. v. Dep't of Taxation, 602 S.E.2d 123

(Va. 2004) (finding a similar department rule impermissibly narrowed the plain

language of a statute because "[n]othing in the language [of the statute] limits costs of

performance to direct costs or suggests that the Department may exclude costs incurred

for activities performed on behalf of a taxpayer by a third party").

Assuming Rule 801's exclusion of independent contractors is valid, the activities

of other Nelnet Group entities cannot be excluded because they are not akin to activities

conducted by an independent contractor. See California Franchise Tax Board, Legal

Ruling 2006-02, at *5 (May 3,2006) (finding that "when the contractor and subcontractor

are in a unitary relationship and are members of the same combined reporting group,

the activities of the subcontractor will be considered income producing activities directly

engaged in by the contractor"). Because the activities undertaken by petitioners are all

integral parts of the activity directly engaged in by the SPCs for the ultimate purpose of

obtaining Maine Student Loan Income, they constitute "income prodUcing activities."

The SPCs can only function as lenders in concert with other Nelnet Group entities as

part of the Nelnet Group.ll

11 Logically, Rule 801's exclusion of costs of activities performed "on behalf" of corporate taxpayers could

not exclude all possible actors who perform services on behalf of taxpayers. This is because a corporation

12

Accordingly, although only the Maine-nexus corporations of petitioners' unitary

business are the "taxpayers" for purposes of calculating the sales factor numerator

pursuant to section 5211(14), all income-producing activities performed by employees

in the entire Nelnet Group on behalf of spes, NELN, and Nelnet, Inc. must be

considered in determining where to situs the Maine Student Loan Income under 36

M.R.S. § 5211(16). Petitioners' Cost of Performance Study,12 which properly includes all

income-producing activities performed by Nelnet entities in the petitioners' unitary

business, demonstrates that the cost to perform the income-producing activity was

greater in a state other than Maine. See 36 M.R.S. § 5211(16)(B). Consequently, the

Maine Student Loan income cannot be sitused to Maine, see id., and summary

judgment in favor of the petitioners is appropriate.

is an arhficiallegal entity that can only act through its members, officers, or agents. See Shanny v.

Androscoggin Mills, 66 Me. 420,424 (1876) (holding a corporation can"only act by servants or agents").

A corporation can never literally perform an act for itself, and thus the "on behalf of" limitation cannot be

read to exclude all actors acting on behalf of the corporation. Therefore, under the Assessor's own

interpretation, the officers and directors of the SPCs and NELN, which have the authority to carry out the

business affairs of the SPCs and NELN, would have to be considered. It is undisputed that none of the

activities of the officers and directors of the SPCs or NELN occurred in Maine. (PSMF 11 87, 88.)

12 The Assessor only contests that the COP study improperly includes income-producing activities

performed by non-SPC employees. (See, ~ PSMF 9[153-117; State's Opp'n SMF 9[1 53-117.) This issue

was essentially the basis for the Assessor's motion to exclude. (See State's R. Mot. to Exclude Expert Test.

at 1-2.) Thus, while the Assessor disputes the relevancy of the COP study, the Assessor has not otherwise

objected to the accuracy or methodology used. (See Resp't Opp'n at 9.) Because, based upon the

reasoning articulated in this decision, the COP study properly includes all income-producing activities

performed by Nelnet entities in the unitary business, and is otherwise uncontested, there remains no

issue of material fact.

13

The entry is:

The petitioners' Motion for Summary Judgment is

GRANTED. The State Tax Assessor's Motion for Summary

Judgment is DENIED. The State Tax Assessor's January 29,

2007 Reconsideration Decision is VACATED and

REMANDED for an abatement of the Maine income tax

(plus associated interest and penalties) assessed against

petitioners for tax years 2002, 2003, and 20~

December <£:2008 C_

J e Joseph Jabar

0_2/_2_7 /07__~_

Date Filed __ Kennebec Docket No. AP-07-24

-~-----------------

County

Action P_e_t~i_t_i_o-;,nc""F:-o_r_R_e_v_i_e

__w _

80c

Nelnet, Inc., et al Ys.

State Tax Assessor

Plaintiff's Attorney Defendant's Attorney

Sarah H. Beard, Esq. Kelly L. Turner, AAG

Pierce Atwood 6 State House Station

One Monument Square Augusta, Maine 04333-0006

Portland, ME 04101

Date of

Entry

2/28/07 Petition For Review And De Novo Determination, filed 2/27/07. s/Beard, Esq.

3/13/07 Replaced Exhibit B, filed. s/Beard, Esq.

3/15/07 Letter entering appearance, filed. s/Turner, AAG (no record ~o be filed)

4/18/07 Notification of Discovery Service, filed. s/Turner, AAG

State Tax Assessor's First Request for Production of Documents; State Tax

Assessor's First Set of Interrogatories to Petitioner, served on S. Beard,

Esq. on 04/17/07.

4/20/07 Joint Motion For An Order To Specify The Future Course ef Proceedings,

filed. s/Beard, Esq. s/Turner, AAG

Proposed Order, filed.

4/26/07 ORDER SPECIFYING FUTURE COURSE OF PROCEEDINGS, Marden, J.

Discovery to close within 8 months of date of order. Motions to be filed

within 2 months of close of discovery.

Copies mailed to attys o~ record.

7/30/07 Petitioner's Response to State Tax Assessor's First Request for Production of

Documents served on Kelly L. Turner, AAG on 7/27/07

8/14/07 Notification of Discovery Service, filed 8/13/07. s/Beard, Esq.

Petitioner's Answers to State Tax Assessor's First Set of Interrogatories

to Petitioners, served on K. Turner, AAG on 8/10/07.

8/23/07 Notification of Discovery Service: Petitioners' Designation to Expert Witness

served on Kelly L Turner on August 22,2007. Filed by S.Beard Esq.

10/4/07 10/1/07: Notification of Discovery Service: State Tax Assessor's Second

Request for Productionof Documents served on Sarah Beard on 9/28/07

filed by K Turner AAG

10/24/07 Notification of Discovery Service, filed. s/Turner, AAG

Notice of Deposition of Nelnet, Inc., served on S. Beard, Esq. on 10/19/07.

10/29/07 Notification of Discovery Service, filed. s/Turner, AAG

Notice of Deposition of Darren J. Hurlbury,CPA served on Sarah H. Beard, Esq.

on 10/26/07.

Date of

Entry Docket No.

10/30/07 Notification of Discovery Service. filed. s/Beard. Esq.

Petitioners' Response to State Tax Assessor's Second Requests for

Production of Documents served on Kelly L. Turner. AAG on 10/29/07

11/20/07 Notification of Discovery Service: First set of Interrogatories to

Respondent State Tax Assessor Propounded by Petitioners served on Kelly

Turner on November 19.2007. filed by S Beard

11/27/07 Petitioners first request for production of documents served on Kelly

Turner on 11/26/07. filed by Atty Beard on 11/27/07.

12/12/07 Filed 12/06/07: Respondent's Consented to Motion to Modify

Scheduling Order filed by AAG Turner.

12/14/07 ORDER MODIFYING SCHEDULING ORDER. Marden. J. (12/13/07

The discovery deadline is extended to 2-23-08 and all subsequent deadl~

are hereby extended by two(2) additinal months.

Copies mailed to attys. of record.

12/26/07 Notification of Discovery Service. filed. s/Turner AAG

State Tax assessor's Answers to Petitioneri' First Set of Interrog~tori

and State Tax's assessor's Response to Petitioners' First Request for

Production of Docuements served on sarah H. Beard. Esq. on 12/21/07.

12/29/07 Letter notifying the Court of withdrawal as co-counsel. s/Good. Esq.

2/14/08 Notification of Discovery Service. filed. s/Beard.AAG

Notice of Deposition of State Tax Assessor Pursuant to Rule 30(b)(6)

served on Kelly L. Turner. AAG on 2/12/08.

4/22/08 Petitioners' Motion for Summary Judgment. filed. s/Beard. Esq.

Memorandum of Law in Support of Petitioners' Motion for Summary Judgmen:,

filed. s/Beard. Esq.

Petitioners' Supporting Statement of Material Facts not in Dispute. fil·J.

s/Beard. Esq.

Affidavit of Scott M. Gubbels. filed. s/Gubbels

Affidavit of Darren J. Hurlburt. s/Hurlburt

Proposed Order. filed.

Request for Hearing. filed. s/Beard. AAG

Notice of seumg tof....... 'fJJ~la;l \' ..... ,.;. . .

sentto attomeys of record.

4/23/08 State Tax Assessor's Motion for Summary Judgment with Incorporated

Memorandum of Law. filed. a/Turner. AAG

State Tax Assessor's Statement of Material Favts. filed. s/Turner. AAG

Proposed Decision and Order. filed.

Request for Hearing; filed. a/Turner. AAG

State Tax Assessor's Motion to Exclude Expert Testimony of Darren J.

Hurlburt. CPA. with Incorporated Memorandum of Law. filed. s/Turner. AAG

Proposed Order. filed.

Depositions of Scott Gubbels and Darren Hurlbert. filed.

5/5/08 Respondent's Unopposed Motion for Enlargement of Time to File

Opposition to Petitioners' Motion for Summary Judgment with Incorporated

Memorandum of Law. filed. s/Turner. AAG

Proposed Order. filed.

PAGE 3

Date of

Entry Ne1net, Inc., et a1 vs. State Tax A~~~§~~~· AP07-24

5/12/08 ORDER, Jabar, J.

Granted. Extended to June 6, 2008.

Copies to attys. of record.

5/20/08 Petitioners' Memorandum in Opposition to State Tax Assessor's Motion to

Exclude Expert Testimony of Darren J. Hurlburt, CPA, filed. s/Beard, Esq.

(filed 5/14/08)

State Tax Assessor's Reply Memorandum in Support of His Motion to Exclude

Expert Testimony of Darren J. Hurlburt, filed. s/Turner, AAG

6/5/08 Petitioner's Objection and Incorporated Memorandum of Law in Opposition

to Respondent's Motion for Summary Judgment, filed. s/Beard, Esq.

Petitioners' Rule 56(h)(2)Statement in Respondent's Statement of Material

Facts, filed. s/Beard, Esq.

Supplemental Affidvit of Scott M. Gubbels, filed. s/Gubbe1s

6/6/08 State Tax Assessor's Opposition to Petitioners' Motion for Summary Judgment,

filed. s/Turner, AAG

State Tax Assessor's Opposing Statement of Material Facts, filed. s/Turner

AAG

6/13/08 Petitioners' Reply Memorandum in Support of Their Motion for Summary

Judgment, filed. s/Beard, Esq.

Petitioners' Reply Statement of Material Facts, filed. s/Beard, Esq.

State Tax Assessor's Reply Memorandum in Support of his Motion for Summary

Judgment, filed. s/Turner, AAG

State Tax Assessor's Response to Petitioners' Statement of Additional

Material Facts, filed. s/Turner, AAG

Notice of seltmg tor _W-_lJ_( _

sent to attorneys of record.

12/8/08 DECISION AND ORDER, Jabar, J.

The petitioners' Motion for Summary Judgment is GRANTED. The State Tax

Assessor's Motion for Summary Judgment is DENIED. The State Tax Assessor's

January 29, 2007 Reconsideration Decision is VACATED and REMANDED for an

abatement of the Maine income tax (plus associated interest and penatlties

assessed against petitioners for tax years 2002,2003, and 2004.

Copies mailed to attys. of record.