(C) Iowa Capital Dispatch
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Two state agencies face off in court over business-tax dispute [1]
['Clark Kauffman', 'More From Author', '- February']
Date: 2023-02-21
Two state agencies are facing off against each other in court in a dispute over how a temp agency should be taxed in Iowa.
It’s somewhat unusual for two state agencies to settle their differences in court since taxpayers wind up footing the legal bills for both sides of the case, as well as paying for all of the court proceedings.
In this case, Iowa Workforce Development has filed a petition in Polk County District Court challenging a decision rendered by the Iowa Department of Inspections and Appeals late last year.
That decision involved Gillmann Services, a Virginia staffing company that primarily provides construction-industry companies with workers.
When Gillmann began operating in Iowa last summer, Iowa Workforce Development categorized the business as a construction firm, which has its own special tax rate. Gillmann appealed the decision, arguing that it was not a construction company and that every other state in which it operates recognizes that fact.
While Gillmann acknowledged it provides workers primarily for the construction trade, it claimed that it would also provide workers for other types of businesses as well.
In November, the matter went before Administrative Law Judge Joseph Ferrentino in DIA’s Administrative Hearings Division. He ruled in the company’s favor and said Gillmann should be categorized and taxed as a non-construction employer.
Doing so, Ferrentino ruled, would avoid the “absurd” result of turning a temp agency “into a construction business” – and of having all other temp agencies in Iowa recategorized as the businesses they primarily serve.
Iowa Workforce Development sought a rehearing on the matter, but the request was denied. Now the workforce agency is asking a district court judge to review DIA’s decision.
The workforce agency argues that decisions as to how to categorize employers are within its discretion, and that DIA’s decision in the Gillmann case is not supported by the evidence.
The standard for seeking judicial review in cases such as this requires Iowa Workforce Development to first show that DIA’s decision wasn’t merely questionable but that the process used to make the decision was based on an “irrational, illogical, or wholly unjustifiable interpretation of a provision of law.”
DIA has yet to file a response to the workforce agency’s petition.
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