Government Contests Fitzgerald Gliders' $83 Million Court Win
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In July, a civil jury found in favor of former Tennessee-based glider manufacturer Fitzgerald in an $83 million federal tax dispute with the IRS. But despite the Fitzgerald win, federal attorneys haven’t given up on the outcome of the trial.
In a revised brief filed Sept. 6, the government asked the judge in the case to grant a new trial or, in effect, void the jury verdict by ruling that “a reasonable jury would not have a legally sufficient evidentiary basis” to find in favor of Fitzgerald.
The trial jury found that Fitzgerald had proven that the cost of repair of the glider tractors it assembled and sold from 2012-2017 did not exceed 75% of the retail price of a comparable new highway tractor — making it not subject to the 12% excise tax.
The IRS legal court maneuver is known as a “Rule 50” motion.
Such Rule 50 motions are often filed in court battles but rarely granted by judges, said Adam Smedstad, an attorney with the Indianapolis-based transportation law firm of Scopelitis, Garvin, Light, Hanson & Feary.
“What it has to be is that there’s no evidence to support the jury’s verdict,” Smedstad said. “But it’s so rare that it happens, if you wanted to call it a Hail Mary, you certainly could.”
The issue at stake in the federal lawsuit has been whether Fitzgerald should pay millions of dollars in back taxes to the IRS for not adding a 12% federal excise tax to the cost of glider trucks the company sold from 2012-2017, as identified in IRS audits.
The civil lawsuit, which was first filed by Fitzgerald in February 2019, was tried in federal court in late July. Before the jury trial, attorneys for both sides were trading written court pleadings over whether Fitzgerald had skirted paying taxes. Despite being the largest manufacturer of gliders for many years, the bottom fell out of the market for Fitzgerald and the rest of the glider industry due to more strict emissions regulations implemented in 2018.
Trucks with glider kits installed. Kits consisting of new tractor parts, including items such as the cab, frame, sheet metal, mounting brackets and steering gear(Fitzgerald Glider Kits)
When Fitzgerald filed the lawsuit against the IRS, the tax bill was only listed as $23 million. But after all the legal haggling, the government eventually increased Fitzgerald’s bill for back taxes to $83 million.
“Plaintiff was required to prove for each glider tractor sold that: (a) the cost of repair did not exceed 75% of the retail price of a comparable new tractor; and (b) the tractor it claimed to have repaired was taxable when new,” federal attorneys wrote in their motion.
“While Plaintiff’s witnesses repeatedly testified that it had millions of documents to prove its case, the trial record contains no documents for 2015-2017, and it introduced just a single document concerning tractor sales for 2012-2014,” government attorneys said. “The record contains only generalized testimony about Plaintiff’s operations and glider tractor sales.”
A glider truck is built from a kit. Glider kits consisting of new tractor parts, including such items as the cab, frame, sheet metal, mounting brackets and steering gear, are produced by original equipment manufacturers, such as Peterbilt, Kenworth, Freightliner and Western Star. Powertrains and other necessary parts are then added, and the glider trucks are offered for sale, usually at a price that is significantly less than the cost of a new truck.
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Popular for decades, the heyday for the glider has all but vanished, hastened when environmental officials put a cap on glider kits from 2017-2019.
“The government’s motion for judgment as a matter of law and new trial is as meritless as its bizarre and unprecedented accusation that the court committed libel when excluding one of its experts,” Fitzgerald wrote in an opposition response to the government’s call for a new trial. “Further, the government’s motion for a new trial plainly lacks merit. The government takes the kitchen sink approach, raising arguments that range from frivolous to absurd.
“The IRS never contested that Fitzgerald met the 75% test and that the original highway tractors were taxable during the 2012 to 2014 and 2015 to 2017 audits and only turned to that argument after its parts and pieces test was rejected by this Court.”
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