Retired businessman, GOP activist sues over $48.4 million tax bill
Topeka ? Gene Bicknell, a retired Pizza Hut magnate from Pittsburg and one-time Republican candidate for governor, is asking a district court to reverse a ruling of the Kansas Court of Tax Appeals and order the state of Kansas to return $48.5 million in state income taxes that he has been disputing for more than a decade.
“Retirees like us should not be penalized by the State’s dire financial situation,” Bicknell said in a statement released to the media Thursday. “We vow to fight for our rights and on behalf of other former Kansas residents who are also facing the same outrageous and political manipulation. We believe it is both unconstitutional and illegal.”
Bicknell’s tax dispute dates back to 2006, when Bicknell sold his company, National Pizza Co., which operated dozens of Pizza Hut franchises around the country. By that time, Bicknell and his wife, Rita, had long since relocated to Florida.
According to his court petition, for tax years 2003, 2004 and 2005, Bicknell filed taxes as a Florida resident and as a Kansas nonresident. In 2006, he paid “tens of millions of dollars” in state and federal capital gains taxes on the proceeds from the sale of his company.
Then, in September 2007, according to the petition, the Department of Revenue, which had been silent about his nonresident status since 2003, audited his returns, resulting in an assessment in October 2009 of $42.5 million in taxes, plus interest and penalties, for tax years 2005 and 2006.
That added up to $48.4 million, which Bicknell paid to the department in order to secure his right to appeal.
The petition alleges that Bicknell was targeted by the department as part of its “nonresidency” program during the administration of then-Gov. Kathleen Sebelius, a Democrat, a program that he alleges “sought to identify high-income taxpayers who filed Kansas tax returns as non-residents.”
“The State actively and aggressively targeted a specific class of individuals as a new way to generate tax income,” the petition states. “Former Kansas residents, who elected to move their legal domicile/residence to another state for reasons including family, business or climate, became targets under this new ‘non-residency program’ and were ‘flagged’ for scrutiny and tax assessment.”
It continues: “Under the administration of Republican Governor Sam Brownback, the Department continued this outrageous program. The Department has leveraged its governmental resources and clout to impose taxes upon these former residents, as it has upon Mr. Bicknell for 10 years now, to force payment of the taxes or face the burden of prolonged and expensive proceedings to contest the taxes.”
The department’s current spokeswoman, Rachel Whitten, said the agency does not comment on pending litigation.
But Joan Wagnon, who served as revenue secretary throughout the Sebelius administration, denied that the agency did anything wrong.
“We did our job,” she said in a phone interview. “My job was to collect taxes and follow the law. Gene Bicknell didn’t. He had numerous opportunities to settle that case. He turned them all down.”
Wagnon said the agency stepped up efforts to collect unpaid taxes in the wake of the economic downturn in 2009 and 2010 and that the effort involved much more than targeting people who claimed to have moved out of state.
She said the agency made numerous offers to settle the case, during both the Sebelius and Brownback administrations, but that Bicknell had rejected all such offers.
Bicknell first appealed the assessment in October 2010 to the Kansas Court of Tax Appeals. After three years of proceedings, that court upheld the agency’s decision in a December 2013 ruling.
Bicknell then appealed to the Kansas Court of Appeals, which reversed the tax court’s decision and remanded the case back for further proceedings, saying the tax court had not provided a full explanation of why it considered Bicknell a Kansas resident and not a Florida resident.
Last month, the Court of Tax Appeals issued its final, written order. Bicknell is now asking the Crawford County District Court to reverse that order, declare that he is a Florida resident and order the state to repay the $48.4 million in taxes, interest and penalties that he paid in order to secure his right to appeal.