CHARLESTON, W.Va. - After five years of legal challenges, the state Supreme Court is poised to finally settle a tax dispute between Kanawha County and the Bayer Corp. over nearly half a million dollars.

The proposed refund would have a big impact on several county agencies. Kanawha County Commission President Kent Carper worries this case could set a precedent for other businesses that wish to reduce their taxes after the fact.

"What they want to do is go back after years and get a corporate welfare check," Kanawha Commission President Kent Carper said. "I believe the facts, the evidence, and common sense are on the side of Kanawha County taxpayers."

Bayer maintains it paid $457,000 in taxes it didn't owe for the years 2001, 2002 and 2003 because of several minor mistakes on its returns. The errors happened after the international chemical giant bought the former Lyondell Co. property in South Charleston.

The county contends that Bayer's failure to double-check its taxes before filing them constitutes negligence, so the company should not be legally entitled to a refund.

Carper says it's unfair to give a large corporation the opportunity to revise its tax filings after the fact when individual taxpayers don't enjoy the same privilege.

If Bayer succeeds, Carper is concerned that taxpayers throughout the state will follow suit, which could have drastic consequences for local tax bases.

"It'll be a run on the bank. If [Bayer] can do this, anyone can do this," he said.

Ned Rose, who represents Bayer in the case, said his client is owed a refund.

"I think they've pursued this in the best of faith. I think they've pursued this on a principled basis," he said.

Last week, lawyers for both sides gave oral arguments at the state Supreme Court. The justices are expected to issue an opinion before the end of the high court's term in November.

Unasked questions

At the center of the disagreement is a November 2003 hearing in front of Kanawha County's three commissioners, sitting as the county's Board of Equalization and Review.

Over the course of several hours - the transcript of the hearing runs more than 200 pages - Bayer's attorneys presented evidence that some of its inventory taxed was not even in Kanawha County during the time period in question. Other items, it claimed, had been miscategorized or inventoried at the wrong time, causing Bayer to overpay its taxes for the three years in question.

At the end of the hearing, the commissioners voted 2-1 - with Carper casting the dissenting vote - to refund $457,000 to Bayer.

"There was enough evidence that we could have ruled either way," Commissioner Dave Hardy said at the time. "So I chose to rule in favor of the taxpayer [Bayer]."

But the Kanawha County Prosecuting Attorney's Office said it was not told about the hearing until after it already had happened.  Because prosecutors were not there to cross-examine Bayer's witnesses, all of Bayer's evidence was wrongly taken at face value, the state maintains.

Bayer claimed at the hearing that several barges full of inventory were wrongly reported as being in Kanawha County when they were actually traveling back and forth to the South Charleston plant.

The proposed refund would have a big impact on several county agencies. Kanawha County Commission President Kent Carper worries this case could set a precedent for other businesses that wish to reduce their taxes after the fact.

"What they want to do is go back after years and get a corporate welfare check," Kanawha Commission President Kent Carper said. "I believe the facts, the evidence, and common sense are on the side of Kanawha County taxpayers."

Bayer maintains it paid $457,000 in taxes it didn't owe for the years 2001, 2002 and 2003 because of several minor mistakes on its returns. The errors happened after the international chemical giant bought the former Lyondell Co. property in South Charleston.

The county contends that Bayer's failure to double-check its taxes before filing them constitutes negligence, so the company should not be legally entitled to a refund.

Carper says it's unfair to give a large corporation the opportunity to revise its tax filings after the fact when individual taxpayers don't enjoy the same privilege.

If Bayer succeeds, Carper is concerned that taxpayers throughout the state will follow suit, which could have drastic consequences for local tax bases.

"It'll be a run on the bank. If [Bayer] can do this, anyone can do this," he said.

Ned Rose, who represents Bayer in the case, said his client is owed a refund.

"I think they've pursued this in the best of faith. I think they've pursued this on a principled basis," he said.

Last week, lawyers for both sides gave oral arguments at the state Supreme Court. The justices are expected to issue an opinion before the end of the high court's term in November.

Unasked questions

At the center of the disagreement is a November 2003 hearing in front of Kanawha County's three commissioners, sitting as the county's Board of Equalization and Review.

Over the course of several hours - the transcript of the hearing runs more than 200 pages - Bayer's attorneys presented evidence that some of its inventory taxed was not even in Kanawha County during the time period in question. Other items, it claimed, had been miscategorized or inventoried at the wrong time, causing Bayer to overpay its taxes for the three years in question.

At the end of the hearing, the commissioners voted 2-1 - with Carper casting the dissenting vote - to refund $457,000 to Bayer.

"There was enough evidence that we could have ruled either way," Commissioner Dave Hardy said at the time. "So I chose to rule in favor of the taxpayer [Bayer]."

But the Kanawha County Prosecuting Attorney's Office said it was not told about the hearing until after it already had happened.  Because prosecutors were not there to cross-examine Bayer's witnesses, all of Bayer's evidence was wrongly taken at face value, the state maintains.

Bayer claimed at the hearing that several barges full of inventory were wrongly reported as being in Kanawha County when they were actually traveling back and forth to the South Charleston plant.

Kanawha County assistant prosecutor Rob Schulenberg said if he had been there, he would have pushed Bayer to back up its claims by asking questions such as: Which pushboat guided the barges? When did they clear certain locks?

But without providing more answers, Bayer never met its burden of proof, Schulenberg argued in the county's appeal.

"Based on that [hearing], nobody knows where the heck a lot of the assessed property was," Schulenberg said. "I'm not sure that Bayer knew where their stuff was located."

In 2007, Kanawha Circuit Judge Jennifer Bailey Walker overturned the Commission's decision to give Bayer a refund. Bayer's mistakes were not simple clerical errors, but happened because of Bayer's negligence or poor judgment, she ruled.

"If they'd done their internal due diligence, they wouldn't have had to go through this, because they'd have the right numbers on the books," Schulenberg said last week. "They didn't do what [average citizens] do when they file their tax return."

In its appeal, Bayer said that Walker didn't have the right to second-guess the Commission's finding that Bayer's mistakes were unintentional.

Bayer also questioned whether the Prosecuting Attorney's Office had the legal right to appeal the Commission's decision, since taxpayers already were represented at the 2003 hearing.

"The [state] tax commissioner was present through the director of [its] legal division," Rose said. "Certainly we were cross-examined by the president of the [Kanawha County] Commission."

Schulenberg says that wasn't enough.

"Basically, you had the state Tax Department rolling over and playing dead," Schulenberg said.

If the county has to return the money to Bayer, roughly 70 percent - or $320,000 - of the funds would come out of the Kanawha County Board of Education's budget, Schulenberg said.

The city of South Charleston stands to lose some of its property tax, and the Emergency Ambulance Authority and the Kanawha Valley Regional Transportation Authority will also face a shortfall, he said.

 "As a practical matter, it is odd that a corporation that depends so heavily on the resources of local government refuses to pay their fair share of taxes," Carper said.

"I don't want anybody to pay a penny more than they legally should have to pay," he said. "I'm ready to slash and cut our budget if that's what it takes."

But he remains concerned that a ruling in favor of Bayer would unfairly shift the tax burden onto the citizens of Kanawha County.

"This would be devastating to local government," he said, "and the average taxpayer will pay through the nose."

Reach Andrew Clevenger at acleven...@wvgazette.com or 348-1723.