The Kansas Supreme Court issued an opinion Friday overturning a Kansas Court of Appeals decision in businessman Gene Bicknell’s legendary tax case. The Supreme Court said Bicknell was a resident of Florida, which has no state income tax, during the period in which Kansas officials claimed he owned millions of dollars in state income taxes on sale of a company comprised of Pizza Hut franchises. (Tim Carpenter/Kansas Reflector)
TOPEKA — The Kansas Supreme Court waded through more than a decade of complex procedural history and an enormous evidentiary record Friday to reverse the Kansas Court of Appeals by answering a simple-sounding question of where businessman Gene Bicknell resided for tax purposes in 2005 and 2006.
Bicknell, who gained fame as a Pizza Hut magnate, Republican gubernatorial candidate and part-time movie actor, has fought to defeat the Kansas Department of Revenue in a case with more than $60 million in state taxes, interest and penalties hanging in the balance. The issue was whether Bicknell was a Kansas or Florida resident — for income tax purposes — when he sold a company that at one time was the world’s largest owner of Pizza Hut restaurants.
The bottom line of the case has always been money: Florida has no state income tax, but Kansas does. And, the Department of Revenue wanted a piece of Bicknell’s pie.
The Supreme Court, in a unanimous opinion written by Justice Keynen Wall, decided Bicknell’s residence was in Florida in the years the Department of Revenue sought to impose the extraordinary tax liability. The revenue department’s position was endorsed by the Kansas Board of Tax Appeals.
In overturning the Court of Appeals, the Supreme Court affirmed the Crawford County District Court’s decision that Bicknell wasn’t a resident of Kansas during the period in which he sold NPC International.
The justices concluded Bicknell met the burden of proving he had changed his residency from southeast Kansas to a home in Florida, despite his wife retaining Kansas residency.
“We conclude that the district court findings are supported by substantial competent evidence,” Wall said in the Supreme Court’s opinion. “In turn, these findings support its legal conclusion that Gene was domiciled in Florida in 2005 and 2006. We also reject KDOR’s claim that the district court ruling was otherwise contrary to established Kansas law.”
Bicknell: ‘Felt like extortion’
In a statement, Bicknell said the state Supreme Court said the decision wouldn’t have consumed the legal system for so many years had constitutionality issues been addressed earlier.
“The Department of Revenue’s approach has always felt like extortion, forcing me and my family to endure hundreds of interrogatories, depositions, three trials, three appeals, 15 years of attorney time and appearances before an agency board that was a kangaroo court,” Bicknell said. “It took 12 years to appear before a real judge, appointed by the Kansas Supreme Court, to hear and weigh the evidence in this case.”
He thanked District Court Judge Richard Smith for “seeing truth and for calling the former Court of Tax Appeals and the Board of Tax Appeals what it is — a rubber stamp for the Department of Revenue.”
He said his wife, Rita, died before the legal nightmare was ended by the state Supreme Court. The stress inflicted upon his family and friends by the Department of Revenue and its attorneys was regretful, he said.
“I am a Christian man and I hold no malice,” he said. “I wish the state of Kansas well. I am a Kansas supporter and will always love the people of Kansas. I hope today’s decision prevents others from having to endure torment I have endured from the Department of Revenue over the past 15 years. Praise the Lord for justice.”
Deference to Bicknell?
Justice Caleb Stegall recused himself from the case, because he worked as an attorney for Republican Gov. Sam Brownback during a period in which the Department of Revenue was actively claiming a portion of Bicknell’s millions.
Jay Heidrick, an attorney representing Bicknell, said during oral argument before the Supreme Court that Bicknell was a resident of Florida. He said there was no dispute his client voted in Florida, held a Florida driver’s license and changed estate documents to reflect his residency in Florida.
“Gene contends he took those actions to become a Florida resident,” Heidrick said. “The state contended Gene is a classic example of a seasonal resident trying to establish domicile on paper.”
Heidrick said Bicknell presented evidence to the trial court that he was a Florida resident during the tax assessment period. This claim was reinforced through testimony of Bicknell’s friends and family.
“The state produced no witnesses that contradicted this testimony,” Heidrick said.
James Oliver, representing the state Department of Revenue, said the mere intent of Bicknell to claim Florida residency wasn’t sufficient to resolve that question under Kansas law, regulation or court precedent. He said the state’s courts shouldn’t adopt a “deference-to-Gene” standard.
“Cases clearly say intent alone is never enough,” Oliver said. “The same laws that apply to every other Kansas resident should be applied to Gene with no exceptions to what he was oblivious to or what he thought the law was.”
Oliver argued the Court of Appeals was correct to declare the district court improperly shifted the burden to prove residency from Bicknell to the revenue department. Oliver also claimed the proper venue for the case was Shawnee County rather than Crawford County, where Bicknell was a prominent Pittsburg businessman and philanthropist.
In response, the Supreme Court declared Crawford County the proper venue because that’s where the Department of Revenue claimed Bicknell resided.
In 2017, Bicknell said he wrote a check to the state of Kansas for $48 million in the tax case. He declared that payment guaranteed his right to appeal through the court system.
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