PITTSBURG — A Kansas district court judge issued a ruling Tuesday night in a high-profile tax case requiring the state of Kansas to pay $48 million to a Florida entrepreneur in a legal dispute initiated when officials incorrectly declared the businessman a Kansas resident at the time his company was sold.
Gene Bicknell, who made a fortune as a Pizza Hut franchisee and operated a business empire in the southeast Kansas city of Pittsburg, said evidence of his Florida residency was overwhelming. All he required, he said, was an impartial reviewer of the facts.
“I have always believed, that if I would be given a fair hearing free of political implications, I would prevail,” he said after the court ruling.
It’s the type of court decision capable of shaking the Kansas Legislature as it returned Wednesday to continue work in the 2019 session, because lawmakers just had a $48 million bite taken out of the treasury. The state could appeal the district court’s decision.
Kansas Department of Revenue Spokesman Zach Fletcher declined comment, saying KDOR does not comment on “pending or previous litigation.”
Kansas State Senator Richard Hilderbrand (R-Baxter Springs) said fortunately the state has the money.
“Thankfully we have a projected $905 million ending balance,” Hilderbrand said, adding that Bicknell has been “a great Kansan.”
“All things he’s done for Southeast Kansas, it’s a shame he had to go through this.”
Bicknell was hit in 2010 with a massive Kansas income tax assessment — $42.5 million — by the Kansas Department of Revenue on the premise he was a Kansas resident in 2005 and 2006. The agency asserted he was a Kansas resident at the time his company, NPC International, was sold in 2006.
Bicknell challenged the tax assessment, but the Kansas Court of Tax Appeals, or COTA, ruled he was a Kansas resident when the sale transpired.
In 2016, the Kansas Legislature approved a bill granting taxpayers, such as Bicknell, opportunity to challenge tax decisions in district court. Gov. Sam Brownback vetoed the bill, but the Republican-led House and Senate voted to override his veto. The Legislature was serious about the reform, given a Senate vote of 39-1 and the House vote of 120-0.
Bicknell pivoted the case into Crawford County District Court. After an eight-day trial in 2018, the judge declared evidence revealed Bicknell to have been a resident of Florida for state income tax purposes during the period in question.
On Tuesday night, Senior Judge Richard Smith issued a 54-page decision ordering the state to return income tax, interest and penalties totaling $48 million to Bicknell. Smith was appointed to hear the case by the Kansas Supreme Court.
Dan Boulware, Bicknell’s lead counsel with the Polsinelli law firm, said district court action setting aside the Kansas tax assessment was proper. He said Bicknell had been a resident of Florida since 2003.
“This was a tax that should never have been assessed. Judge Smith’s ruling, in light of the overwhelming evidence presented at trial, will be upheld if challenged by the state,” Boulware said.
Kansas officials argued Bicknell didn’t abandon his Kansas residency and pointed to his ownership of property in Kansas and his ongoing financial support of Pittsburg State University, his former church and other charities in Pittsburg.
Bicknell maintained the income tax case was motivated by political considerations, including the Kansas government’s dire financial condition during the Brownback administration.
“This ruling obviously has implications for others like me who have moved their legal residence but still have affection for the state and want to help the people, schools and charities,” Bicknell said. “We should not want a law that negates that.”
In the latest ruling, the judge questioned integrity of the Court of Tax Appeals, or COTA, and the Board of Tax Appeals, or BOTA, in what could be the largest individual tax controversy in Kansas history. During the long dispute involving Bicknell, Kansas replaced COTA with BOTA.
The judge said there was no “logical alternative” to the conclusion both boards served as rubberstamp for the Department of Revenue in the Bicknell case.
In addition, the judge said the case didn’t reveal evidence supporting “a design or plan on the part of Gene to purposefully deprive the state of Kansas of revenue to which they were rightfully entitled.”
Bicknell had a colorful business and political career and had an interest in the movie industry. His company, National Pizza Co., became the world’s large Pizza Hut franchise with hundreds of restaurants. He ran twice for Kansas governor as a Republican, in 1986 and 1994. He also acted in movies, including “Gypsy Angels,” with celebrity Vanna White.