If you are not a lawyer and you work in the state tax field, over time, after reading court case after court case, you begin to learn what different legal terms mean. If you have read any articles or statutes and regulations regarding the burden of proof taxpayers or departments of revenue must meet when proposing alternative apportionment, you have probably read the terms:
- Preponderance of Evidence
- Clear and Convincing (or Cogent) Evidence
But what do these terms mean?
Preponderance of Evidence
The preponderance of evidence standard is met if the proposition is more likely to be true than not true. Effectively, the standard is satisfied if there is greater than 50 percent chance that the proposition is true.
For example, in Mississippi, starting January 1, 2015, the commissioner may require a taxable corporation that is affiliated with one or more corporations that are not taxable to file a combined return with the affiliated corporation or corporations if he establishes by preponderance of the evidence that the intercompany transactions of the taxable corporation have resulted in the shifting of taxable income from itself to another member or members of its affiliated group not subject to tax. The commissioner may also require a taxable group of affiliated corporations to file a combined return if he establishes by preponderance of the evidence that the intercompany transactions of the corporations have resulted in the shifting of taxable income between members of the affiliated group (Miss Code Ann Sec. 27-7-37(2)(a)(ii)).
Clear and Convincing Evidence
Clear and convincing evidence is a higher level of burden of persuasion than "preponderance of the evidence."
Clear and convincing proof means that the evidence presented by a party during the trial must be highly and substantially more probable to be true than not and the trier of fact must have a firm belief or conviction in its factuality. In this standard, a greater degree of believability must be met than the common standard of proof in civil actions, which only requires that the facts as a threshold be more likely than not to prove the issue for which they are asserted.
This standard is also known as "clear, convincing, and satisfactory evidence"; "clear, cognizant, and convincing evidence"; and "clear, unequivocal, satisfactory, and convincing evidence"; and is applied in cases or situations involving an equitable remedy or where a presumptive civil liberty interest exists.
For your reference, the following is a sample list of cases that have discussed the level of evidence necessary to meet the burden of proof:
- Equifax, Inc. v. Mississippi Dep’t of Revenue, No. 2010-CT-01857-SCT (Miss. 2013)
- CarMax Auto Superstores West Coast, Inc. v. South Carolina Department of Revenue, Docket No. 4953 (S.C. Ct. App. 2012)
- Microsoft v. Franchise Tax Board, 139 P.3d 1169 (Cal. 2006)
- British Land (Maryland) Inc. v. N.Y. Tax App. Trib., 85 N.Y.2d 139, 147-48 (N.Y. Ct. App. 1995)
Note: the definitions above were obtained from "legal burden of proof" - Wikipedia. Other sources provide similar definitions.
