⚡ Electrons, Engineers, and Evidence: Indiana Tax Court Draws the Line on Expert Testimony in NIPSCO Tax Case

Date: November 7, 2026
Category: Tax Litigation / Evidence / Expert Witnesses
Case: Northern Indiana Public Service Company, LLC v. Indiana Dept. of State Revenue (Case No. 24T-TA-00017, Ind. Tax Ct. Aug. 31, 2026)

When does an expert witness cross the line from providing valuable technical context to improperly practicing law or regulatory accounting?

A recent decision from the Indiana Tax Court, authored by Judge Justin L. McAdam, provides a masterclass in applying Indiana Evidence Rules 702 and 704. In a dispute involving Northern Indiana Public Service Company, LLC (NIPSCO) and the Indiana Department of State Revenue, the Court dissected the qualifications of the Department’s expert, John A. Williams, ultimately striking portions of his reports while allowing his core scientific and industry testimony to proceed.

For litigators, tax professionals, and expert witnesses, the August 31, 2026, opinion is a vital reminder that general expertise in a broad field does not automatically grant a blank check to opine on every specialized sub-topic within it.

The Underlying Dispute: Is Electricity “Public Transportation”?

At the heart of the case is a tax refund dispute. NIPSCO is seeking a refund for Indiana sales and use taxes paid on tangible personal property used to transport third-party electricity between 2015 and 2017. NIPSCO argues it qualifies for the “public transportation exemption” under Indiana Code § 6-2.5-5-27.

To counter NIPSCO’s claims, the Department of Revenue retained John A. Williams, a highly credentialed professional engineer with master’s and doctorate degrees in chemical and fuels engineering, and over 35 years of experience in power transmission and distribution systems. NIPSCO moved to exclude Williams’ testimony, arguing he lacked specific expertise in electric industry regulation, used unscientific reasoning, and offered inadmissible legal conclusions.

The Court’s Framework: “Two Buckets” of Testimony

To evaluate Williams’ qualifications under Indiana Evidence Rule 702(a), the Court organized his sprawling reports into two distinct “buckets”:

  1. Category 1: The General Nature of Electricity (Physical Science)
  2. Category 2: The Electric-Utility Industry (Design, Operation, and Regulation)

Bucket 1: The Physics of Electrons (Admissible)

The Court had no trouble qualifying Williams to testify about the fundamental physics of electricity. His academic background and licensure as a Professional Engineer in 27 states provided more than enough foundation to explain concepts like electromagnetic fields, electron drift, and the real-time balance of generation and load. The Court found these principles to be foundational, generally accepted, and scientifically reliable under Rule 702(b).

Bucket 2: Industry Operations vs. Regulatory Accounting (Partially Stricken)

Where the Department ran into trouble was in Bucket 2. The Court ruled that Williams’ decades of engineering and consulting experience easily qualified him to speak generally about how the grid operates, regional network coordination, and NIPSCO’s overarching business model.

However, the Court drew a hard line at regulatory filings. Williams’ reports attempted to interpret specific regulatory instruments, including FERC Form 1, EIA-861 and EIA-923 forms, NERC reliability standards, and IURC tariff schedules. The Court struck this testimony, noting a crucial distinction:

“Interpreting those instruments is not an exercise in engineering but in regulatory accounting: it requires specialized knowledge of the conventions by which utilities classify and report their activities under the regulatory scheme.”

Citing precedent like Cansler v. Mills (where a general auto mechanic was deemed unqualified to opine on the specific engineering of airbag deployment), the Court held that the Department failed to prove Williams had threshold competence in the specialized subfield of regulatory accounting.

Rule 704: Experts Cannot Tell the Judge How to Rule

NIPSCO also challenged Williams’ reports under Indiana Evidence Rule 704, arguing they were packed with inadmissible legal conclusions. The Court agreed in part.

While Indiana allows experts to embrace “ultimate issues of fact,” they are strictly prohibited from offering legal conclusions or telling the trier of fact how the case should be decided.

  • Stricken: Williams’ statements interpreting the plain language of Indiana Code § 6-2.5-5-27, his assertions that the Department’s denial of the exemption “should be upheld,” and his conclusions regarding NIPSCO’s compliance with statutory frameworks.
  • Retained: Williams’ factual opinions that “electricity operates according to physical principles that are fundamentally distinct from transportation systems” and that customers are buying an “energy service” rather than a “transported commodity.” The Court noted these are permissible opinions on ultimate facts, even if they incidentally brush up against statutory language.

Because this case is heading toward summary judgment (a bench trial equivalent), the Court noted it will simply disregard the legal conclusions rather than striking the entirety of the reports.

📌 Key Takeaways for Practitioners and Experts

  1. Subject-Matter Specificity is King: Under Rule 702, an expert’s competence in a general field (e.g., electrical engineering) does not automatically extend to every specialized subject it touches (e.g., federal utility regulatory accounting). Proponents must explicitly bridge the gap in their disclosures.
  2. Beware the “Regulatory Accounting” Trap: If your case hinges on the interpretation of FERC, IURC, or SEC filings, ensure your expert has specific, documented experience in the accounting and compliance conventions of those specific forms, not just general industry familiarity.
  3. Train Experts on Rule 704: Experts must be coached to avoid words like “complies with,” “violates,” or “the statute requires.” They should stick to describing the technical and factual realities of a situation, leaving the application of the law strictly to the judge.
  4. Weight vs. Admissibility: Once threshold competence is established, minor gaps in an expert’s knowledge go to the weight of the testimony, not its admissibility. However, a total lack of specialized training in a distinct sub-discipline will result in exclusion.

Disclaimer: This blog post is for informational purposes only and does not constitute legal or tax advice. Please consult with a qualified attorney regarding your specific legal situation.