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An attorney for Fort Lauderdale, Fla.-based Citrix Systems says the computer software manufacturer has decided to drop out of an unusual anti-tax lawsuit it filed against the Florida Department of Revenue last week. In an e-mail sent on Friday to the Miami Daily Business Review, Allen Libow, a partner at Libow & Muskat in Boca Raton who was Citrix’s outside tax lawyer, said the company withdrew from the suit because a Daily Business Review article portrayed the litigation as “a laugher.” Libow said he intends to continue the novel suit with a different plaintiff. Representatives of Citrix did not return calls for comment on Monday. Last week, Citrix filed suit against the Department of Revenue in Broward Circuit Court, demanding a refund of all corporate income and sales taxes it had paid during the last five years, amounting to about $5 million. The lawsuit invoked the unusual legal theory that the First Amendment to the U.S. Constitution bars the government from taxing purveyors of information and facilitators of communication, include newspapers, TV stations, telephone companies and computer companies. That, according to Citrix, includes the federal and state income taxes corporations pay and the state sales tax that customers pay every time they buy a newspaper, magazine or computer. The suit sought class action status. Libow said he hoped to involve all the company’s customers and vendors, as well as news organizations such as the Miami Herald, and Silicon Valley computer companies. In an article on the lawsuit, the Review reported that Revenue Department spokesman Dave Bruns laughed when asked about the suit, and that Nova Southeastern University law professor Robert Jarvis commented that the lawsuit “doesn’t even pass the laugh test.” Jarvis said such anti-tax lawsuits usually are filed by “crackpots” and that he was surprised that a large, publicly traded company like Citrix would bring such an action. Citrix, which sells software to many of the nation’s largest companies, posted $379 million in revenues for the nine months ended Sept. 30. The lawsuit grew out of a dispute between Citrix and the state tax agency that began several years ago when the Department of Revenue started auditing the company. Citrix sought a $90,000 refund because it felt it was entitled to an exemption for research and development costs. The tax agency disagreed. Citrix filed a protest and was denied. Deciding that the state was “dead wrong” in its decision, David Carls, manager of corporate taxes for Citrix, said the company started examining its entire tax liability. Carls and Libow decided that Citrix should pay no state or federal taxes, neither income nor sales taxes. On Dec. 9, with the approval of its top executives — but without a vote by the board of directors — Citrix sued the state tax agency. Citrix paid Libow between $40,000 and $60,000 to file the lawsuit. The rest of Libow’s payment was on a contingency basis. The reason purveyors of information are exempt from taxation, according to the suit, is that taxes have a chilling effect on the First Amendment right to free speech under the U.S. Constitution. “By assessing and collecting Florida income and emergency excise tax,” states the lawsuit, “the DOR is restricting the freedom to circulate this information, in direct violation of established United States and Florida constitutional principles, as said tax scheme is discriminatory on its face between not only similarly situated speakers, but to the recipients of such speech, as well.” In his e-mail to the Review on Friday, Libow said Citrix decided to drop its lawsuit “because your article put in all this garbage about the case being ‘a laugher.’ Though we got blessings from law professors … and renowned tech tax attorneys, in-house management decided not to go forward with the lawsuit at all — because of your article.” But in an interview on Monday, Libow said he is not withdrawing the lawsuit. He said he found a new name plaintiff for the case — “an ordinary taxpayer” who has paid state sales tax on newspapers and magazines. The original lawsuit had been assigned to Circuit Judge Robert Lance Andrews, an unpredictable jurist who has taken on the government in the past and has made controversial rulings. “I don’t want to lose that judge,” Libow said. Libow had been contacting newspapers and magazines around the country to solicit their participation. Two other media organizations, the Miami Herald and Boca Raton-based American Media, publishers of the tabloids The Globe and Star Magazine, said they were not interested in participating in the litigation. When informed that Citrix was dropping the lawsuit, the Revenue Department’s Bruns said, “We’re delighted to hear that the taxpayers are willing to come into compliance with the law.” Various groups over the years have tried to claim that the government has no constitutional right to levy taxes. Last year, the We the People Foundation, a tax-exempt educational charity based in Queensbury, N.Y., launched an advertising campaign to make its case that the 16th Amendment, allowing income taxes, was fraudulently adopted. The courts repeatedly have rejected such theories.

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