In the Missouri Court of Appeals Western District VENTAS, INC., ) ) Appellant, ) ) WD87288 v. ) ) OPINION FILED: CITY OF KANSAS CITY, MISSOURI, ) FINANCE DEPARTMENT, ) JUNE 3, 2025 REVENUE DIVISION, ) ) Respondent. )
Appeal from the Circuit Court of Jackson County, Missouri The Honorable Justine E. Del Muro, Judge
Before Division Four: Anthony Rex Gabbert, Chief Judge, Presiding, Janet Sutton, Judge, James Edward Welsh, Special Judge
Ventas, Inc. (“Ventas”) appeals the circuit court’s Judgment and Order granting the
City of Kansas City, Missouri, Finance Department, Revenue Division’s (“the City”)
Motion for Summary Judgment on Ventas’s “Petition for Recovery of Amounts Paid
Under Protest.” On appeal, Ventas contends the circuit court, 1) misinterpreted Kansas
City Regulation 1.382(e)(4) to incorrectly conclude that Ventas’s receipt of rental income
from real estate held as investments as a real estate investment trust (“REIT”) is a
business activity subject to Kansas City’s earnings tax; 2) misinterpreted Kansas City
Ordinance § 68-381 to incorrectly conclude that Ventas’s federally required dividend paid deductions are not deductible expenses in calculating Kansas City’s earnings tax; 3) erred
in upholding the assessed interest and penalties. We affirm in part and reverse in part.
Background and Procedural Information
On May 26, 2023, Ventas filed a “Petition for Recovery of Amounts Paid Under
Protest.” Therein, Ventas sought recovery of earnings and profits tax paid to the City for
the 2017, 2018, 2019, 2020, and 2021 tax years (“Tax Periods”) assessed under Notice of
Assessment Letter ID L342049536 and paid under protest pursuant to Section
139.031(1).1
Ventas alleged that, for the Tax Periods, the City erroneously imposed earnings
and profits tax on rental income from investment properties, which is not earned from
activity conducted by Ventas in Kansas City; therefore, the income is not subject to the
City’s tax under Kansas City Ordinance Section 68-382. Further, that if such income is
deemed “earned” by the court, in calculating Ventas’s net earnings for tax purposes, the
City erroneously failed to consider the dividends paid deduction as a necessary expense
to Ventas’s operations as a healthcare REIT. Ventas sought $91,789.96 paid under protest
for assessed taxes, interest, and penalties.
During the Tax Periods, Ventas qualified as and elected to be taxed as a REIT.
Ventas owns over 1,200 real estate investment assets, with four medical office buildings
in Kansas City. As to the four medical office buildings in Kansas City, Ventas does not
1 All statutory references are to the Revised Statutes of Missouri, as updated through 2021, unless otherwise noted.
2 manage the properties; rather, they are managed by employees of a REIT affiliate. As a
REIT, Ventas’s income is generated by real estate that Ventas owns as a passive investor,
including the four real estate investment assets located in Kansas City. To maintain its
status as a REIT, Ventas is required by law to pay at least 90% of its taxable income as
dividends to distribute its real estate investment income, and thus takes the federal
dividends paid deduction against its federal taxable income, resulting in its federal
taxable net income being zero (or close to zero).
Ventas timely filed its Form RD-80 profits return with the City for the 2017 tax
year on October 11, 2018, showing an overpayment and requesting a refund. Over four
years later, on January 13, 2023, Ventas received Notice of Incomplete Return, Profits
Tax Refund Request, Letter ID L0400491264, from the City which stated that the “other
business deductions” on the Kansas City profits tax return appear to include a deduction
for dividends paid to partners/owners. Further, under Kansas City Earnings and Profits
Tax Regulation § 1.382(e)(5)(G), expenses that are for the benefit of the owners of the
company are not considered necessary business expenses and are therefore not
deductible.
On February 3, 2023, Ventas responded that, rent, capital gains, dividends, and
interest income are unearned income, and in any event are not earned from activity
conducted by Ventas in Kansas City. Further, to the extent that such could be considered
“earned” income, the dividends paid deduction is a necessary expense to the operations of
3 Ventas as a REIT and must be considered in calculating Ventas’s earnings for Kansas
City tax purposes.
On February 23, 2023, Ventas also received a Notice of Assessment Letter
assessing tax, interest, and penalties, with the balance totaling $90,622.24. On March 1,
2023, Ventas submitted a Notice of Protest and Dispute of Proposed Assessment,
requesting a hearing and disputing the entire tax liability, including interest, penalties,
and/or fees for the Tax Periods.
On March 20, 2023, Ventas received notice that its protest was denied, with the
City determining that “the profit generated by Ventas to be earned income for purposes of
the Earnings & Profits tax, and the dividends paid deduction on the return has been
disallowed.” The City issued a Statement of Collection on March 21, 2023, assessing
additional interest from the February 3, 2023, Assessment Letter, increasing the total
balance due to $91,789.96. On March 29, 2023, Ventas submitted payment, under protest
pursuant to Section 139.031, for the full amount.
On May 26, 2023, Ventas filed its “Petition for Recovery of Amounts Paid Under
Protest.” Ventas alleged in Count I that the City had erroneously imposed earnings and
profits tax on income not earned from activity conducted by Ventas in Kansas City, and
Kansas City Ordinance Section 68-382 was inapplicable. Ventas alleged in Count II that,
to the extent REIT income is determined to be “earned,” the City erroneously failed to
consider the dividends paid deduction as a necessary expense to Ventas’s operations as a
REIT in calculating Ventas’s earnings for Kansas City tax purposes. In Count III, Ventas
4 argued that, because no tax is due, no penalties should have been assessed. Further,
assuming taxes are due, Ventas had reasonable cause for failure to timely pay the taxes.
On November 17, 2023, Ventas moved for summary judgment on its petition. On
January 19, 2024, the City filed suggestions in opposition to Ventas’s motion, along with
a cross motion for summary judgment. Ventas filed a reply memorandum February 16,
2024.
On May 14, 2024, the circuit court entered its Judgment and Order denying
Ventas’s motion for summary judgment, granting the City’s cross motion for summary
judgment, and entering judgment in favor of the City and against Ventas on Ventas’s
petition. The court concluded that Ventas’s rental income from real estate is a business
activity, earned income, and subject to the earnings tax pursuant to Reg. § 1.382(e)(4).
Further, that Ventas is not entitled to a deduction for dividends paid, finding “they are
simply not expenses” but, rather, “clearly distributions of profit.” The court upheld the
City’s assessment for unpaid taxes, interest, and penalties.
This appeal follows.
Standard of Review
The standard of review for an appeal challenging the grant of a motion for
summary judgment is de novo. Weeks v. St. Louis County, 696 S.W.3d 333, 338 (Mo.
banc 2024). We give no deference to the circuit court’s decision, and use the same
criteria the circuit court should have employed in determining whether summary
judgment was proper. Id. We review the record in the light most favorable to the party
5 against whom judgment was entered, and give that party the benefit of all inferences
which may reasonably be drawn from the record. Id. Summary judgment is proper
where the moving party demonstrates there is no genuine dispute as to the material facts,
and a right to judgment as a matter of law. Id. “A genuine issue exists when the record
contains competent materials that evidence two plausible, but contradictory, accounts of
the essential facts.” Doe 122 v. Marianist Province of the United States, 620 S.W.3d 73,
76 (Mo. banc 2021).
A ‘defending party may establish a right to summary judgment by showing: (1) facts negating any one of the claimant’s elements; (2) that the party opposing the motion has presented insufficient evidence to allow the finding of the existence of any one of the claimant’s elements; or (3) that there is no genuine dispute as to the existence of each of the facts necessary to support a properly pleaded affirmative defense.
Ameristar Jet Charter, Inc. v. Dodson Intern. Parts, Inc., 155 S.W.3d 50, 58-59 (Mo. banc
2005).
Point I – Kansas City Regulation 1.382(e)(4)
In its first point on appeal, Ventas contends the circuit court misinterpreted Kansas
City Regulation 1.382(e)(4) when it concluded that Ventas’s receipt of rental income
from real estate held as investments as a REIT is a business activity subject to the Kansas
City earnings tax, arguing that a proper interpretation and application of the regulation
shows that Ventas’s rental income from real estate is not “earned income” from an
“activity” in Kansas City and, therefore, not subject to the Kansas City earnings and
profits tax.
6 Pursuant to the Missouri Constitution, Mo. Const. Art. VI, § 19(a), and Section
92.111.1 of the Missouri Revised Statutes, the City may impose an earnings tax. As
relevant to corporations, under Section 92.111.2(5), “earnings tax” means a tax on the
“net profits earned by all corporations as the result of work done or services performed
and business or other activities.” Under Section 92.150, “The net profits or earnings of
associations, businesses or other activities, and corporations shall be ascertained and
determined by deducting the necessary expenses of operation from the gross profits or
earnings.”
Under Sec. 68-382(a)(5) of the City’s Code of Ordinances, a tax of 1.0 percent per
year is imposed on the net profits “of all corporations earned as a result of work done or
services performed or rendered or business or other activities conducted in the city.” Sec.
68-381 defines “Business” as “any enterprise, activity, profession, trade or undertaking of
any nature, that generates gross receipts.”2
Tracking Section 92.150 of Missouri’s statutes, under Kansas City Regulation
§1.381(s), “Net profits shall be determined by deducting the necessary expenses of
operation from the gross profits or earnings.” Under § 1.382(e)(4),
Net profits from interest, dividends, rent or royalties shall generally be treated as unearned, but if after review of the facts the Commissioner finds that the interest, dividends, rent, or royalties were received for work done, services performed or rendered, or business or other activities conducted by
2 Under the City’s Earnings and Profits Tax Regulations, “Business” is likewise defined as “any enterprise, activity, profession, trade or undertaking of any nature that generates gross receipts.” §1.381(b).
7 the taxpayer, the Commissioner may determine that the net profits derived therefrom were earned.
The parties filed a joint stipulation as to the relevant facts. The parties agree that
Ventas qualifies and has elected to be taxed for federal purposes as a REIT under 26
U.S.C. § 857. Ventas leases roughly 80% of its REIT properties to tenants or independent
third-party managers under “net” leases which obligate the tenants to pay all property-
related expenses. These REIT properties are health care facilities under 26 U.S.C. §
856(e)(6)(D)(ii). The remaining 20% of REIT properties are medical service buildings
that Ventas leases. As to the four medical office buildings in Kansas City, Ventas itself
does not manage these properties; rather, they are managed by employees of a REIT
affiliate.
Ventas’s income on the whole is rents (80% of which is from net leases), capital
gains, dividends, and interest. As a REIT, Ventas’s income is generated by real estate that
Ventas owns as investments, including four real estate investment assets located in
Kansas City.
In State ex rel. Agard v. Riederer, 448 S.W.2d 577, 581 (Mo. banc 1969), the
Missouri Supreme Court addressed whether “Kansas City [could] levy an income tax on
the net profits (regardless of the source) of associations, businesses or other activities
conducted by residents.” The Court concluded that the clear legislative intent was “to
limit the taxing power delegated to a tax on earnings irrespective of whether the recipient
be an individual, unincorporated group or a corporation.” Id. The Court acknowledged
8 that “it is difficult, in certain instances, to distinguish between ‘earned’ income and
‘unearned’ income,” stating that unearned income “may become earned income if
received for work done, services performed or rendered, or business or other activities
conducted by the taxpayer.” Id. at 582. The Court concluded that, “[s]uch a
determination can be resolved only after consideration is given to all available facts and
information pertinent to the particular individual taxpayer.” Id.
The question in Bachman v. City of St. Louis, 868 S.W.2d 199, 201 (Mo. App.
1994), was whether the taxpayer was in the real estate business, or whether rental of
inherited and purchased property rose to the level of business activities within the
meaning of the St. Louis earnings tax ordinance. The court concluded that there was no
evidence the taxpayer was engaged in a real estate leasing business. Id. at 202. The
evidence showed that the property plaintiffs acquired by inheritance and purchase was
rented to family-owned businesses, and acquired in furtherance of their family-owned
machine company operations. Id. As such, the property owners were not required to pay
earnings taxes on the net profits they received from rents paid on that property as it was
not deemed “earned” income subject to taxation. Id. at 203.
Here, Ventas does not dispute that it is a business that owns and rents various
Kansas City properties that generate gross receipts in the City.3 The parties stipulated
that Ventas’s income is generated by real estate that Ventas owns as investments,
3 The parties stipulated that Ventas is a Delaware corporation with its principal place of business in Louisville, Kentucky.
9 including four real estate investment assets located in Kansas City. Further, that rents,
capital gains, dividends, and interest from its four medical office buildings in Kansas City
comprise the entirety of Ventas’s locally sourced income. Ventas argues, however, that
“Ventas is not in the real estate business, but rather Ventas is a REIT that invests in real
estate and generates income from its investments.”
It is clear from the record that the business Ventas operates in Kansas City is a real
estate business. While Ventas may choose to structure its business to meet REIT’s
qualification criteria for tax purposes, a failure to meet REIT criteria would not divest
Ventas of title to its real estate, or cause the rent from that real estate to no longer be
collectible. An election by a business to be treated as a REIT for federal tax purposes
may be revoked or terminated, and may never come to fruition if REIT qualifications are
unmet. Without REIT status, Ventas would still be a business with income generated by
real estate that Ventas owns as investments.4
4 “Section 92.130 is an exemption statute which lists the entities which are not subject to an earnings tax. The language of this exemption statute presupposes that income must first be taxable under § 92.110 before it is necessary to consider whether or not the income is exempt under § 92.130.” Bachman v. City of St. Louis, 868 S.W.2d 199, 202-203 (Mo. App. 1994). The City has incorporated the Section 92.130 exemptions into its Code at Sec. 68-385(a).
Section 92.130.1(12) exempts a “Corporation or association organized for the exclusive purpose of holding title to property, collecting income therefrom, and turning over the entire amount thereof, less expenses, to an organization which itself is exempt from the tax imposed by chapter 143.” This exemption would be superfluous if all corporations holding title to property and collecting income therefrom were exempt from the earnings tax.
10 The circuit court did not misinterpret Kansas City Regulation 1.382(e)(4) in
concluding that rental income from Ventas’s Kansas City REIT properties is a business
activity generating earned income and subject to the Kansas City earnings tax.
Point I is denied.
Point II – Dividend Tax Deductions
In its second point on appeal, Ventas contends the circuit court erred in
interpreting Kansas City Ordinance § 68-381 to conclude that Ventas’s federally required
dividend paid deductions are not deductible expenses in calculating Kansas City earnings
tax. Ventas argues that a proper interpretation and application of Kansas City Ordinance
§ 68-381 and Kansas City Regulation 1.382(e)(5) shows that Ventas’s federally required
dividends paid deductions are necessary expenses of Ventas’s operation as a REIT and
thus properly deductible in calculating Kansas City earnings and profits tax.
Under the City’s regulations, “Only the necessary expenses of operation shall be
deducted to determine the net profits subject to the earnings tax. Deductions allowed for
determining federal taxable income shall not be used to calculate net profits for purposes
of the earnings tax unless those federal tax deductions are necessary expenses of
operation.” Reg. § 1.382(e)(5); see also § 92.150, RSMo (“The net profits or earnings of
associations, businesses or other activities, and corporations shall be ascertained and
determined by deducting the necessary expenses of operation from the gross profits or
earnings.”); Kansas City Ordinance § 68-381 (“Net profits shall be determined by
deducting the necessary expenses of operation from the gross profits or earnings.”)
11 To maintain its status as a REIT, Ventas is required by federal law to pay at least
90% of its taxable income as dividends to distribute its real estate investment income.
Ventas applies the federal dividends paid deduction against its federal taxable income,
resulting in its federal taxable net income being zero (or close to zero) under 26 U.S.C. §
857(a)(1).
Under 26 USC § 856(a)(3), a REIT is a corporation, trust, or association that, but
for REIT qualification and compliance, “would be taxable as a domestic corporation.”
Under 26 USC § 857, the tax deduction for dividends applies only if, among other things,
the deduction for dividends paid during the taxable year equals or exceeds 90% of the
REIT taxable income for the taxable year.
Ventas is a business entity that structures itself to qualify as a REIT for federal
taxation purposes. Ventas does not generate its gross profits at the four medical buildings
in Kansas City from being a REIT, but from the rental income of its real estate business.
The 90% dividend payment requirement is to maintain REIT status. It is not an expense
necessary to operate the real estate business and generate the taxable income which is
converted to dividends and paid out to investors.
The circuit court did not err in interpreting Kansas City Ordinance § 68-381 to
conclude that Ventas’s federally required REIT dividend paid deductions are not
deductible expenses in calculating Kansas City earnings tax.
Point II is denied.
12 Point III – Interest and Penalties
In its third point on appeal, Ventas contends the circuit court erred in upholding the
assessed interest and penalties, arguing the assessed interest and penalties must be
canceled and refunded because no tax is due or, alternatively, because there is reasonable
cause for penalty abatement. We affirm the circuit court’s ruling regarding interest, but
reverse and remand the court’s ruling as to penalties.
Background
Ventas timely filed its Form RD-108 profits return with the City for the 2017 tax
year on October 11, 2018, showing an overpayment of $14,796.00 and requesting a
refund. Over four years later, on January 13, 2023, Ventas received the City’s response, a
“Notice of Incomplete Return, Profits Tax Refund Request.” The notice stated that the
City was in receipt of Ventas’s 2017 profits tax refund request, and in order to process the
claim, additional information was needed. The notice stated that the tax return appeared
to include a deduction for dividends paid to partners/owners, which was disallowed under
Regulation §1.382(e)(5)(G), as “expenses that are for the benefit of the owners of the
company are not considered necessary business expenses and are therefore not
deductible.” The notice asked Ventas to provide a description of the nature of the
“Dividends paid deduction” shown on the return if it was not for the benefit of the
owners.
Ventas responded on February 3, 2023, that it was Ventas’s position that its rent,
capital gains, dividends, and interest income are unearned income and not otherwise
13 earned from activity conducted by Ventas in Kansas City. Therefore, it is not subject to
the Kansas City Earnings tax. Further, to the extent the income could be considered
“earned,” as a REIT, the dividends paid deduction is a necessary expense to the
operations of Ventas as a REIT and must be considered in calculating Ventas’s earnings
for earnings tax purposes. Within that response, Ventas cited case law for its position as
well as various City ordinances and regulations, including Regulation § 1.382(3)(4)
which states, in part, that, “Net profits from interest, dividends, rent or royalties shall
generally be treated as unearned.”
That same day, on February 3, 2023, Ventas received a “Notice of Assessment” for
the Tax Periods. The Notice stated that, based on information provided by Ventas, the
rent income earned by the corporation was received for business activities conducted by
the company; the Commissioner determined the income to be “earned” as allowed under
the Code of Ordinances and Regulations. The Notice stated that Ventas’s returns for the
Tax Periods had been adjusted to disallow deductions the City determined were not
allowed as business expenses. The dividends paid deduction for each return was
removed, and the net profit was adjusted accordingly. The “Notice of Assessment”
further stated that, if the taxpayer was in disagreement “with the tax liabilities calculated
for any reason…you may dispute this notice within 30 days of the assessment date by
providing a full written explanation of your differences and documentation to support
your position.”
14 On March 1, 2023, Ventas submitted to the City a “Notice of Protest and Dispute
of Proposed Assessment” and requested a hearing. Ventas argued its previous positions
and additionally stated that, assuming a penalty could be assessed, there was “reasonable
cause” to abate the penalty.
On March 20, 2023, the City sent Ventas notice that its letter had been received,
reviewed by the Commissioner, and that “the tax assessment issued has not been
changed.” The correspondence stated that Ventas had been “assessed the tax due and any
penalty and interest due in accordance with the City Code of Ordinances and the Earnings
and Profits Tax regulations.”
On March 21, 2023, the City issued Ventas a “Statement of Collection” which
detailed the $91,789.96 the City determined Ventas owed, which included additional
interest from the February 3, 2023, Assessment Letter. $15,050.16 of the $91,789.96 was
for penalties. The Statement included the same “HOW TO DISPUTE THE TAX
AMOUNT” as was in the Notice of Assessment, which stated that, “If you disagree with
the tax liabilities calculated for any reason…you may dispute this notice within 30 days
of the assessment date by providing a full written explanation of your differences, and
documentation to support your position.”
On March 29, 2023, Ventas submitted payment under protest pursuant to Section
139.031 for the full amount assessed under the Statement of Collection. On May 26,
2023, Ventas filed a petition for recovery of the full amount paid under protest. In Count
III of that petition, Ventas alleged that under Kansas City Ordinance § 68-395(8) the
15 City’s director of finance was authorized to waive all or any portion of the penalties if the
nonpayment was due to reasonable cause, there was reasonable cause to abate the
penalties, and the City Ordinances support Ventas’s position such that Ventas’s failure to
pay was not wanton or unreasonable. Further, Ventas consistently took the position on its
City tax returns that no tax was due, which the City accepted, so Ventas reasonably
believed its position was accepted until it received the Notice of Assessment.
Ventas made the same arguments as to the penalties in its motion for summary
judgment. The City responded that Ventas’s argument was “fallacious” because the City
imposes mandatory penalties and interest in line with a taxpayer’s failure to remit at the
time of the return. Further, the fact “the City did not audit or discover Ventas’s
insufficient returns until 2023 (within the statutory period for assessment) is irrelevant in
deciding whether to abate Ventas’s tax penalty. See Code § 68-390(1)[.]” The director
may only waive penalties in light of special circumstances, and “disagreements about the
nature of taxable earnings and deductibility of dividends paid do not establish special or
extenuating circumstances to abate the assessed penalties.”
In ruling on the parties’ competing motions for summary judgment, the circuit
court found the City’s “assessment for unpaid taxes, interest and penalties against
[Ventas] is upheld.”
Analysis
As Ventas only argues that the court erred in awarding interest if no tax is due, and
we find that Ventas owed the assessed taxes, we affirm the circuit court’s ruling that
16 Ventas owes the interest accrued under Ordinance 68-394(a) on the unpaid taxes. As to
penalties, Section 68-394(a) states:
All taxes imposed by this article and remaining unpaid after they have become due shall be subject to a penalty of five percent per month from the date payment was due up to a maximum of 25 percent, plus interest at the rate of 12 percent per annum from the due date to date of payment.
Section 68-395(8) provides:
Waive penalties. The director may waive all or any portion of penalties imposed under this article as a result of nonpayment of tax where the taxpayer shows the nonpayment was due to reasonable cause. This authority may be exercised solely at the discretion of the director under special circumstances. The director may also waive penalties under this article by entering into voluntary disclosure agreements with taxpayers under criteria established by the director. This authority shall in no way be construed so as to authorize the waiver of interest by the director.
We discussed in City of Kansas City, Missouri v. Garnett, 482 S.W.3d 829, 832 (Mo.
App. 2016), that this ordinance includes “language that expresses the City Council’s
intent that imposition of this penalty be discretionary.” As such, although the City in
Garnett argued that penalties were mandatory pursuant to Section 68-394(a), we upheld
the circuit court’s waiver of penalties in that case upon finding the taxpayer’s failure to
pay was not unreasonable under Section 68-395(8). Id.
The summary judgment record is unclear as to whether the director of finance
considered waiving penalties here. The City argues that the director may only waive
penalties in special circumstances, and “no additional facts in the record suggest that
Ventas experienced any special circumstances entitling it to waiver.” Ventas disagrees
17 and argues that both special circumstances and reasonable cause exist. “Special
circumstances” for nonpayment and “reasonable cause” for nonpayment are inherently
fact-based inquiries. This disagreement alone evidences material facts in dispute as to the
issue of penalties.5
Viewing the record in the light most favorable to Ventas, Ventas always
maintained that Regulation § 1.382(e)(4), which states that “net profits from interest,
dividends, rent or royalties shall generally be treated as unearned…,” justified its
nonpayment of the earnings tax. A reasonable factfinder could conclude that this
regulation gave Ventas reasonable cause to believe that rents collected on its REIT
properties were not subject to the tax. The Regulation goes on to state that, if after
review of the facts the Commissioner finds the rents were received for business or other
activities conducted by the taxpayer, the Commissioner may determine that the net profits
derived therefrom were earned. Id. Where an ultimate determination as to the taxation of
5 The City argues for the first time on appeal that, even if special circumstances exist, the director had sole discretion to apply a waiver. In the summary judgment filings, the City simply argued that Ventas presented no special circumstances for waiver. As this new argument was not presented to the trial court, we will not consider it. Osage Mobile Home Park, LLC v. Jones, 571 S.W.3d 623, 624 (Mo. App. 2019). Similarly, the City contends that Ventas’s reliance on Garnett (in arguing the City may waive penalties for reasonable cause) is misplaced because Garnett was decided prior to amendment of § 68-395(8), and the amendment added language requiring the director of finance to use discretion only under special circumstances. The contents of municipal ordinances may not be judicially noted. City of Kansas City v. Powell, 451 S.W.3d 724, 740 n.15 (Mo. App. 2014). The prior ordinance was not included in the summary judgment record (or on appeal) for comparison, which precludes our review of this argument. Nevertheless, while the City focuses only on the “special circumstances” language of § 68-395(8), we presume the City Council was aware of Garnett when revising § 68-395(8). As the waiver of penalties for reasonable cause provision remains in the ordinance, without more, we cannot dismiss Garnett as wholly inapplicable.
18 interest, dividends, rents or royalties is contingent upon the Commissioner’s review of the
facts, a reasonable fact-finder could conclude that the Commissioner’s four-year delay in
reviewing the facts (after Ventas clearly took the position that no taxes were due and a
refund was requested in 2017) could provide reasonable cause or special circumstances to
warrant waiver of penalties.6
Moreover, the record reveals material facts in dispute as to whether Ventas had
reasonable cause to conclude that income received from rental of its Kansas City REIT
properties was “earned” income, whether Ventas had reasonable cause to believe the
federal dividends deduction was deductible under the Kansas City earnings tax, whether
Ventas had reasonable cause to believe the City accepted its tax position, and whether
special circumstances caused Ventas’s failure to pay the proper amount of tax due. As
such, the circuit court erred in granting summary judgment in the City’s favor on the
issue of penalties.
Point III is denied as to the issue of interest, but granted as to the issue of
penalties.
6 The City argues Ventas could have had no expectation of an earlier audit because the audit occurred within the statute of limitations per Section 68-390(1). Section 68-390(1), titled “Limitations,” states that, “No assessments shall be made…[o]f any tax found to be due after five years from the due date of the return.” While this ordinance speaks to the date after which a taxpayer can expect to be free from audit, it does not speak to when a taxpayer might reasonably expect to have a timely filing reviewed, or whether the taxpayer can expect to accrue penalties if they can prove reasonable cause to believe no tax was due or special circumstances for failure to pay.
19 Conclusion
We conclude that the circuit court did not misinterpret Kansas City Regulation
1.382(e)(4) when it concluded that rental income from Ventas’s Kansas City REIT
properties is a business activity generating earned income and subject to the Kansas City
earnings tax. Further, the circuit court did not err in interpreting Kansas City Ordinance §
68-381 to conclude that Ventas’s federally required REIT dividend paid deductions are
not deductible expenses in calculating Kansas City earnings tax. The circuit court erred,
however, in granting summary judgment to the City on the issue of assessed penalties, as
material facts remain in dispute as to whether there is reasonable cause and special
circumstances for penalty waiver.
The circuit court’s judgment is affirmed in part, reversed in part, and remanded for
further proceedings consistent with this opinion.
_______________________ Anthony Rex Gabbert Chief Judge
All concur.