Raytheon Co. v. Commissioner of Revenue
AC 18-P-790
| Mass. App. Ct. | Sep 12, 2019Background
- Raytheon timely filed corporate excise returns for 2007 and 2012. Audits led the Commissioner to issue deficiency assessments for each year.
- Raytheon filed timely abatement applications challenging those deficiency assessments and then timely appealed the Commissioners' denials to the Appellate Tax Board.
- While the appeals were pending, facts or settlements revealed that Raytheon had actually overpaid the taxes reported on its original 2007 and 2012 returns.
- The Commissioner abated the deficiency assessments in full during the pendency of the appeals, and then moved to dismiss the appeals as to any amounts other than the amounts stated in the original notices of deficiency assessment.
- Raytheon argued the deficiency assessments necessarily encompassed the overpayments on the original returns (so its appeals should cover refunds) and, for 2012, that its abatement application (filed within three years of the return) preserved rights to seek abatement of the taxes paid with the return.
- The Appellate Tax Board dismissed Raytheon’s additional claims for lack of jurisdiction; the Appeals Court affirmed.
Issues
| Issue | Raytheon (Plaintiff) Argument | Commissioner (Defendant) Argument | Held |
|---|---|---|---|
| Whether a deficiency assessment directed to an audit adjustment also "encompasses" any overpayment reported on the original return, even if the taxpayer did not timely seek abatement of that original self-assessment | The deemed assessment when a return is filed equals the amount "properly due," so a later deficiency assessment must be measured against that properly due amount; thus an abatement of the deficiency includes correction/refund of any overpayment on the original return | The deemed assessment is the amount reported and paid on the return unless and until the taxpayer timely obtains an abatement or files a timely amended return; a deficiency assessment relates only to the amount stated in its notice | The court rejected Raytheon; deficiency assessments limited to amounts stated in the notices and do not reopen time-barred self-assessments on original returns |
| Whether an abatement application addressing a deficiency assessment filed within three years of the return preserves the taxpayer's right to seek abatement/refund of the taxes paid with that return (even though the application did not expressly seek that relief) | Because the abatement application was filed within three years of the return, it should preserve the taxpayer's ability to seek abatement of the return-paid taxes during the board proceeding | An appellant may assert new legal theories before the board but may not request abatement of a portion of an excise that was not involved in the application to the Commissioner | The court held Liberty Life controls: an appeal cannot request abatement of taxes not involved in the original application to the Commissioner; Raytheon failed to preserve the claim |
| Whether the Commissioner or the Board was required to permit Raytheon to amend its abatement application (with relation back) to include a time-barred claim for abatement of the return-paid taxes | Raytheon argued amendment or "relation back" should be allowed, especially where the initial application was timely as to the return-period | Commissioner and court: leave to amend is discretionary and relation-back cannot resurrect a time-barred claim for a different assessment; Raytheon offered no compelling basis to find abuse of discretion | The court refused to compel or treat an amendment as relating back to revive a time-barred claim; denying amendment was not an abuse of discretion |
Key Cases Cited
- RHI Holdings, Inc. v. Commissioner of Revenue, 51 Mass. App. Ct. 681 (2001) (abatement timely as to deficiency assessment but untimely as to earlier deemed self-assessment; deficiency does not reopen time-barred return assessment)
- Liberty Life Assurance Co. v. State Tax Commission, 374 Mass. 25 (1977) (taxpayer may not seek abatement at board of a portion of an excise that was not involved in the application to the Commissioner)
- Electronics Corp. of America v. Commissioner of Revenue, 402 Mass. 672 (1988) (tax limitations and regulation guard against using a timely abatement of postpayment tax to attack previously paid taxes after their abatement period expired)
- Supermarkets General Corp. v. Commissioner of Revenue, 402 Mass. 679 (1988) (confirming limitations period principles for abatement and appeal rights)
- Sears, Roebuck & Co. v. State Tax Commission, 370 Mass. 127 (1976) (procedure and limits on appeals to tax board relevant to scope of relief)
- Veolia Energy Boston, Inc. v. Assessors of Boston, 95 Mass. App. Ct. 26 (2019) (statutory jurisdictional limits cannot be displaced by equity or "good conscience")