Citibank, N.A. v. South Dakota Department of Revenue
2015 SD 67
| S.D. | 2015Background
- Citibank timely filed federal and South Dakota bank franchise tax returns for 1999–2002; an IRS audit and Citibank’s change in accounting caused double-reporting of certain fees.
- Citibank and the IRS agreed in 2012 to reduce Citibank’s federal taxable income for 1999–2002; Citibank filed amended South Dakota bank franchise returns on March 16, 2012 requesting refunds totaling about $29.9 million (plus interest).
- The South Dakota Department of Revenue denied the refund as untimely under the three-year statute of limitations in SDCL 10-59-19; Citibank sought administrative review before the Office of Hearing Examiners (OHE).
- OHE dismissed for lack of jurisdiction because the refund claim was filed after the three-year limitations period; the circuit court affirmed and Citibank appealed to the South Dakota Supreme Court.
- Citibank argued that ARSD 64:26:02:06 (procedural rule allowing supplementary returns after federal adjustments) permitted a timely supplementary return or otherwise tolled the limitations period; it also urged equitable tolling and constitutional due process arguments.
- The Supreme Court held the three-year limitation (SDCL 10-59-19) applies to bank franchise tax refunds, ARSD 64:26:02:06 merely implements that statute (not an exception), and the limitations period is jurisdictional so equitable tolling is unavailable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SDCL 10-59-19 bars Citibank’s refund | Citibank: ARSD 64:26:02:06 allows supplementary returns after federal adjustments (so the March 2012 amended return was timely or preserved) | Dept.: SDCL 10-59-19’s three-year bar applies to bank franchise taxes and precludes Citibank’s late claim | Held: SDCL 10-59-19 applies; Citibank’s March 2012 claim was time-barred |
| Whether ARSD 64:26:02:06 creates an exception to the 3-year bar | Citibank: the regulation permits filing when a decrease “occurs,” so supplementary return may follow a federal adjustment outside three years | Dept.: the rule implements procedural aspects of SDCL 10-59-19 and does not override or expand it | Held: The regulation implements (does not supersede) the statute and contains no exception to the 3-year limit |
| Whether equitable tolling applies | Citibank: audit timing and practical impossibility of final federal adjustments within 3 years justify tolling; recent Dept. conduct supports remand | Dept.: statutory scheme (SDCL 10-59-17) and jurisdictional bar preclude tolling; remand would be futile | Held: SDCL 10-59-17 makes the limitations period jurisdictional; equitable tolling unavailable |
| Whether denial violated due process or other doctrines | Citibank: enforcement of the limit denies meaningful opportunity for refund given long federal audits | Dept.: taxpayers can preserve rights by filing supplementary returns within 3 years; limitations protect State’s fiscal interests | Held: No constitutional violation; taxpayer could have preserved claim within the statutory period and limitations serve legitimate state interests |
Key Cases Cited
- Rushmore Shadows, LLC v. Pennington County Bd. of Equalization, 838 N.W.2d 814 (S.D. 2013) (standard of review and tax statute interpretation principles)
- Jorgensen Farms, Inc. v. Country Pride Corp., 824 N.W.2d 410 (S.D. 2012) (strict compliance with statutes of limitation)
- Dakota Truck Underwriters v. S.D. Subsequent Injury Fund, 689 N.W.2d 196 (S.D. 2004) (jurisdictional effect of timely-filing requirements and limits on equitable defenses)
- Ernst & Young v. S.D. Dep’t of Revenue, 689 N.W.2d 449 (S.D. 2004) (application of SDCL chapter relating to tax refunds and fiscal interests underlying time limits)
- United States v. Kwai Fun Wong, 135 S. Ct. 1625 (U.S. 2015) (framework for presumption of equitable tolling against government and when a time bar is jurisdictional)
- McKesson Corp. v. Div. of Alcoholic Beverages & Tobacco, 496 U.S. 18 (U.S. 1990) (recognition of short statutes of limitations for tax refund claims given government interests)