Taxpayer-funded legal dispute dates from 2010

The Iowa State Association of Counties is suing the state to avoid paying sales tax.

The dispute between the association and the state dates back 11 years, with state and county ratepayers footing the bill for legal fees incurred by both sides.

The Iowa State Association of Counties, or ISAC, was organized in 1964 to foster cooperation among counties and strengthen county government. The association is managed by an Executive Director hired by the ISAC Board of Directors. Board members are chosen by various private associations of county supervisors, sheriffs, treasurers, auditors, and other officials.

All of Iowa’s 99 counties pay annual dues to the association. With this and other revenue, ISAC lobbies state legislators and regularly hosts educational conferences and training sessions.

ISAC also operates several insurance programs for Iowa counties and has established self-funding insurance pools for health, property, and unemployment coverage. The organization also provides counties with mental health case management and has established a scholarship fund for the children of county employees.

In December 2010, ISAC sought a declaratory order from the Iowa Department of Revenue on whether it should be exempt from paying sales tax due to its claimed status as an instrument of government.

After initially deciding that Iowa counties did not have sufficient control over the association for it to be considered tax-exempt, the Department of Revenue said the issue would be best resolved by asking the ‘ISAC to pay the taxes and then claim a refund.

ISAC then filed the first in a series of claims seeking a refund of taxes paid from 2010 to early 2014. The department later denied those claims, concluding that ISAC was not exempt from the tax. .

ISAC appealed these decisions through a lengthy administrative process, arguing that it was controlled by county officials for the benefit of counties and was therefore an extension of county government.

The state argued otherwise, noting that counties themselves have no voting rights on ISAC, nor do they have the power to appoint people to the ISAC board. administration.

In January – 11 years after the case was first brought before the Department of Revenue – an administrative law judge, Kristine Dreckman, sided with the state, finding that counties in the Iowa do not exercise “physical control over the day-to-day operations of the organization.” .”

ISAC, she pointed out, was not created by county governments themselves, but was founded by several county officials and was not fully government owned. Dreckman admitted that some of ISAC’s functions — such as self-funding insurance pools and the mental health case management system — qualify as essential government services. But other activities, such as conferences and training and the scholarship fund for members’ children, are for the personal benefit or professional development of members, she ruled.

ISAC has now filed a petition in Polk County District Court, seeking judicial review and reversal of Dreckman’s decision. The state has yet to file a response.

Available court records give no indication of how much ISAC believes was overcharged in sales tax. ISAC officials did not return messages seeking comment on Friday.

This article first appeared in the Iowa Capital Dispatch.