ARNOLD et al. v. OKLAHOMA TAX COMMISSION

Jun 23, 2026

123451

Versions:2026 OK CIV APP 26

IN THE MATTER OF THE INCOME TAX PROTEST OF RODNEY B. AND DEBORAH S. ARNOLD, RODNEY B. ARNOLD AND DEBORAH S. ARNOLD, Protestants/Appellants, vs. OKLAHOMA TAX COMMISSION, Respondent/Appellee.

PROCEEDING TO REVIEW AN ORDER OF A THREE-JUDGE PANEL OF THE OKLAHOMA TAX COMMISSION

REVERSED

Sherri Carver, CARVER LAW OFFICE PLLC, Oklahoma City, Oklahoma, For Protestants/Appellants,

Elizabeth Field, Daron Southerland, Jessica Haney, OKLAHOMA TAX COMMISSION, Oklahoma City, Oklahoma, For Respondent/Appellee.

THOMAS E. PRINCE, VICE-CHIEF JUDGE:

¶1 Rodney and Deborah Arnold (Protestants/Appellants) appeal the Oklahoma Tax Commission‘s (Respondent/Appellee) Order denying the Arnolds’ Income Tax Protests for the 2016 and 2017 tax years. The Arnolds protested the Commission‘s denial of their tax refunds for the 2016 and 2017 tax years after the Commission determined the Arnolds’ requested refunds were filed outside of the three (3) year limitation period imposed by 68 O.S. § 2373 and OAC § 710:50-9-2. The Arnolds maintain on appeal, however, that their claims for refunds were timely, contending that the applicable limitation period was not triggered on the date their taxes were originally due but, instead, on the extended filing date following a valid federal filing extension. Based upon our review, we find the Commission erred, as a matter of law, concerning the application of the holding in Matter of Protest of Raytheon Co. & Subsidiaries, 2022 OK 32, 512 P.3d 333, and that the holding therein applies to individual taxpayers and corporate taxpayers alike. Thus, we hold that, as a matter of law, the § 2373 deadline begins to run on the extended filing deadline when the taxpayer obtains a valid filing extension for a particular tax year. We also find that the Commission‘s holding that the refund request for the 2016 tax year was untimely because the Arnolds failed to file Form 504-I along with proof of their federal extension was erroneous as well. Therefore, we reverse the August 26, 2025, Order of the Commission‘s three (3) judge panel that adopted the ALJ‘s Findings, Conclusions, and Recommendations.

BACKGROUND

¶2 The Arnolds initiated the underlying administrative action upon their protest of the Commission‘s denial of the Arnolds’ refunds from the 2016 and 2017 tax years. The administrative record reflects, in relevant part, that the Arnolds made estimated tax payments through the course of the 2016 and 2017 tax years which resulted in substantial overpayment of both years’ tax liabilities. The Arnolds’ estimated payments generated an overpayment of $188,071.00 for the 2016 tax year and $244,482.00 for the 2017 tax year. Although the Arnolds made incremental payments during the 2016 and 2017 tax years, the Arnolds did not file their 2016 and 2017 Form 511 Oklahoma Tax Returns until October 15, 2020, and October 15, 2021, respectively. Upon the Arnolds’ belated filing of their 2016 and 2017 tax returns, the Arnolds opted to have both years’ refunds carried forward to be applied to the following tax year (i.e. $188,071.00 to be applied to the 2017 tax year and $244,071.00 applied to the 2018 tax year). One of the legal issues here is whether the three (3) year time period to claim a refund begins on the final date of the extended filing deadline, which the Arnolds automatically received by virtue of their valid federal filing extensions.

¶3 The administrative record contains evidence that the Arnolds received valid extensions from the IRS to file both their 2016 and 2017 tax returns. An Account Transcript from the IRS reflected an extended deadline of October 15, 2017 for the 2016 tax return. Although the record contains no equivalent document from the IRS concerning the Arnolds’ 2017 tax return, the record includes a Form 504-I Application for Extension of Time to File an Oklahoma Income Tax Return.¹

¶4 Following the Arnolds’ filing of their 2016 tax return on October 15, 2020 (wherein the Arnolds elected to have their refund of $188,071.00 carried over to the 2017 tax year), the Commission notified the Arnolds on November 20, 2020 that $94,011.00 of their 2016 refund was barred by statute because it had been filed outside the applicable three (3) year limitation period. On October 17, 2024, the Commission notified the Arnolds that $188,071.00 of their 2016 refund was now barred by statute, which the Arnolds timely protested via letter on November 8, 2024. After the Arnolds’ filing of their 2017 tax return on October 15, 2021 (wherein the Arnolds elected to have their refund of $244,482.00 carried over to the 2018 tax year), the Commission informed the Arnolds on October 29, 2021 that their claimed refund of $244,482.00 from the 2017 tax year had been adjusted to $56,411.00 because they filed their 2017 Return outside the three (3) year limitation period. On November 15, 2021, the Commission notified the Arnolds that $56,411.00 of their 2017 refund was barred by statute. The Arnolds timely protested the Commission‘s denial of their 2017 refund via letter on January 13, 2022.

¶5 The Office of Administrative Law Judges received the Arnolds’ protests on August 23, 2023, and, thereafter, assigned the case to Administrative Law Judge Megan Holden. The Arnolds’ 2016 and 2017 protests were, subsequently, consolidated into a single case following a Joint Motion to Consolidate on January 6, 2023. Following pre-trial briefing, a hearing on the Arnolds’ protests proceeded on July 17, 2025. Witness testimony included, in relevant part, a detailed breakdown of the Arnolds’ tax payment timeline by Jolly Kurien, a Senior Case Management Specialist at the Commission. Throughout her testimony, Ms. Kurian reiterated that the three (3) year limitation period in 68 O.S. § 2373 began to run on the date the Arnolds’ taxes were due rather than on the extended dates. The Arnolds’ CPA, James A. Moyers, testified to the Arnolds’ tax payment timeline, maintaining that he prepared both the Arnolds’ 2016 and 2017 Returns and secured extensions for both tax years from the IRS. Although there was no federal filing extension attached to the Arnolds’ 2016 Return, Mr. Moyers maintained that the federal attachment “automatically [went] with the state income tax return” and further cited to the Arnolds’ IRS Account Transcript identifying an extended filing deadline of October 15, 2017 for the Arnolds’ 2016 tax returns. Mr. Moyers added that, not only did he not “recall removing proof of such extension from [the Arnolds‘] . . . 2016 For 511 when filing it with the OTC . . . [,] he does not recall ever removing such documentation from any clients’ state returns.” Although it was established in the administrative proceeding below that there was no federal filing extension attached to the version of the Arnolds’ 2016 Return that was admitted into evidence, Mr. Moyers testified during his direct testimony that “[a]ll necessary federal attachments would -- goes with the State of Oklahoma return . . .” . Although he stated that he did not have a specific recollection of the return, he stated that “the federal attachment automatically goes with the state income tax return.” Mr. Moyers further testified that he has prepared tax returns for the Arnolds “since 1990‘s” and that he is “very thorough in [his] . . . work.” During the cross-examination phase of Mr. Moyers’ testimony, OTC‘s counsel ineffectively attempted to establish or clarify that “a copy of the extension wasn‘t mailed in, . . . just a verification that it [had] happened?” The specific on-the-record exchange on that point was as follows:

Q. (BY MS. LANFAIR) All right. So -- so a copy of the extension wasn‘t mailed in, just a copy -- just a verification that it [had] happened?

A. Verification --

Q. That it had been filed --

A. -- yes.

Q. -- with the federal --

A. And -- and -- and, of course it solved [sic] the internal revenue acknowledged [sic] --

Q. O, yeah. No, I just -- again, I -- I -- I thought I was missing a page.

A. Yes.

Q. And so I just wanted to, like, clarify before I let everyone go.

MS. LANFAIR: Okay. That‘s -- that is my only question. I‘m sorry. Thank you.

Mr. Moyers’ Office Manager, James Mark Pulley, testified to his role in the preparation of returns and their standard office procedures regarding the submission of the federal extension request along with state returns.

¶6 The ALJ issued her Findings, Conclusions, and Recommendations on August 1, 2025, wherein she determined the Arnolds’ 2016 and 2017 returns were filed outside of the three (3) year statute of limitations imposed by 68 O.S. § 2373 and OAC § 710:50-9-2, thus rendering their claims for refunds untimely. As to the Arnolds’ tax filing timeline, the ALJ detailed the following:

[The Arnolds] filed their original 2016 Return on or about October 15, 2020, more than three years after years after the original due date of April 18, 2017. [The Arnolds] filed their original 2017 Return on October 15, 2021, also more than three years after the original due date of April 17, 2018. Additionally, [the Arnolds] had a tax liability for each year in question, and were required to file Form 504-I along with their Form 511 and proof of federal extension. [The Arnolds] provided this form with their 2017 Form 511, but not their 2016 Form 511. [The Arnolds] therefore did not have a valid Oklahoma extension for tax year 2016.

(emphasis added). The ALJ concluded by recommending that the Arnolds’ protests be denied. The Commission‘s three (3) judge panel adopted the ALJ‘s Findings, Conclusions, and Recommendations and entered its Order denying the Arnolds’ protests on August 26, 2025. The Arnolds, thereafter, initiated this timely appeal.

STANDARD OF REVIEW

¶7 When the Commission acts in its adjudicative capacity, its orders will be affirmed on appeal if the record contains substantial evidence supporting the facts upon which the order is based and the order is free from legal error. Matter of Protest of Hare, 2017 OK 60, ¶ 9, 398 P.3d 317, 319 (citing Am. Airlines, Inc. v. State, ex rel. Oklahoma Tax Comm‘n, 2014 OK 95, ¶ 25, 341 P.3d 56, 62). “Searching a record for substantial evidence supporting the order appealed does not entail a comparison of the parties’ evidence to determine that which is most convincing but only that the evidence supportive of the order be considered to determine whether it implies a quality of proof inducing a conviction that the evidence furnished a substantial basis of facts from which the issue could be reasonably resolved. (citation omitted). Substantial evidence has been additionally outlined as something more than a scintilla . . .“. Union Texas Petroleum, A Div. of Allied Chem. Corp. v. Corp. Comm‘n of State of Okl., 1981 OK 86, ¶ 31, 651 P.2d 652, 662.

¶8 The Commission‘s legal rulings are reviewed de novo and subject to this court‘s plenary, independent and non-deferential re-examination. Grasso v. Oklahoma Tax Comm‘n, 2011 OK CIV APP 37, ¶ 2, 249 P.3d 1258, 1259 (citing Blitz U.S.A., Inc. v. Oklahoma Tax Commission, 2003 OK 50, ¶ 6, 75 P.3d 883, 885). Our review of the Commission‘s Order also involves issues of statutory interpretation which also presents a question of law and is, similarly, subject to de novo review. Blitz U.S.A., Inc. v. Oklahoma Tax Comm‘n, 2003 OK 50, ¶ 6, 75 P.3d 883, 885, as corrected (May 22, 2003).

ANALYSIS

¶9 The Arnolds asserted three (3) issues on appeal in their Pet.-in-Error,² from which we have gleaned the following two (2) allegations of error: (1) whether the Supreme Court‘s interpretation of 68 O.S. § 2373, in Matter of Protest of Raytheon Co. & Subsidiaries, 2022 OK 32, 512 P.3d 333, applies to the Arnolds as individual taxpayers; and (2) if the phrase “tax paid” in 68 O.S. § 2373 includes the extended filing deadline per Raytheon, whether the Arnolds complied with the requisite filing extension procedure imposed by 68 O.S. § 216. We conclude, as a matter of law, that the Supreme Court‘s holding in Matter of Protest of Raytheon Co. & Subsidiaries applies to individual taxpayers and corporate taxpayers alike. By virtue of our application of Raytheon to individual taxpayers, we find the Commission erred in utilizing the Arnolds’ original due dates of April 18, 2017 and April 17, 2018 as the date the Arnolds “paid” their taxes because they received valid extensions for both tax years. In summary, the Arnolds’ claim for their refund of $188,071.00 for the 2016 tax year, as well as their refund of $56,411.00 for the 2017 tax year were timely raised within three (3) years of the Arnolds’ extended filing deadline. The Commission‘s August 26, 2025 Order is, accordingly, reversed.

A. Application of Matter of Protest of Raytheon Co. & Subsidiaries to Individual Taxpayers

¶10 The Arnolds contend the Commission erred as a matter of law when it declined to extend the Supreme Court‘s interpretation of 68 O.S. § 2373 in Matter of Protest of Raytheon Co. & Subsidiaries, 2022 OK 32, 512 P.3d 333, as corrected (May 16, 2022), to this case. We agree. Title 68 O.S. § 2373³ provides, in relevant part:

Except as provided in subsection H of Section 2375 of this title, the amount of the refund shall not exceed the portion of the tax paid during the three (3) years immediately preceding the filing of the claim, or, if no claim was filed, then during the three (3) years immediately preceding the allowance of the refund.

68 O.S. § 2373 (amended 2023) (emphasis added). The Supreme Court has described § 2373 to function as a statute of repose which “plac[es] a substantive limitation--in the form of an outer time limit boundary--on a taxpayer‘s right or ability to recover a tax refund.” Neer v. State ex rel. Oklahoma Tax Comm‘n, 1999 OK 41, ¶ 20, 982 P.2d 1071, 1079, as corrected (June 4, 1999). Consequently, “when three years elapsed from the date of taxpayers’ payment of Oklahoma income tax [for a particular tax year] without the filing of a refund claim, any claim to a refund was destroyed or extinguished.” Id. at ¶ 24. Prior to Raytheon, the date of a taxpayer‘s “payment” of income taxes (and, consequently, the start of § 2373‘s three (3) year limitation period) had been interpreted as the date taxes were initially due. See, e.g., Strelecki v. Oklahoma Tax Comm‘n, 1993 OK 122, ¶ 4, 872 P.2d 910, 924, as clarified on reh‘g (Mar. 23, 1994); see also, e.g., Neer v. State ex rel. Oklahoma Tax Comm‘n, 1999 OK 41 at ¶ 2, 982 P.2d at 1073; see also, e.g., Matlock v. State ex rel. Okl. Tax Comm‘n, 2001 OK CIV APP 104, ¶ 3, 29 P.3d 614, 615. The Supreme Court‘s holding in Raytheon, however, revisited the meaning of the phrase “tax paid” where a taxpayer obtains a valid extension to file a particular year‘s tax return. Matter of Protest of Raytheon Co. & Subsidiaries, 2022 OK 32, ¶ 1, 512 P.3d 333, 335, as corrected (May 16, 2022).

¶11 In Raytheon, following the overpayment of its taxes for the 2012 tax year (timely filed on September 27, 2013 after receiving a valid filing extension), Raytheon -- a corporate taxpayer -- filed an Amended Tax Return for the 2012 tax year on September 27, 2016, wherein it sought a refund for its prior overpayment. Id. The Commission denied Raytheon‘s refund claim, concluding it was asserted more three (3) years after its original filing deadline of March 15, 2023, while Raytheon maintained its claim was raised within three (3) years of its extended filing deadline of September 27, 2013. Id., at ¶¶ 1-3. In reviewing the plain language of 68 O.S. § 2373, the Supreme Court found the phrase “portion of the tax paid during the three (3) years immediately preceding the filing of the claim” to be ambiguous, explaining the phrase could mean either (1) when the original return was actually filed (on the extended filing deadline of September 27, 2013); or (2) when the return was originally due (on March 15, 2013). Id. at ¶ 8. Upon engaging in the tenants of statutory construction, the Supreme Court concluded that, because Raytheon received a valid extension to file its taxes and did so within the extended timeframe, Raytheon‘s taxes were “deemed paid” when it filed its tax return on September 27, 2013.⁴ Id. at ¶ 18. Consequently, the Supreme Court held that Raytheon‘s claim for a refund for the 2012 tax year had been timely filed within the three (3) year period imposed by 68 O.S. § 2373. Id.

¶12 The Supreme Court‘s holding in Raytheon was, however, limited in application, as the Supreme Court included a footnote distinguishing Raytheon from an earlier case from a separate division of this Court -- Matlock v. State ex rel. Okl. Tax Comm‘n, 2001 OK CIV APP 104, 29 P.3d 614. The Matlock Court similarly considered 68 O.S. § 2373 as well as OAC § 710:50-9-2⁵ as applied to individual taxpayers whose claim for a refund was untimely because it was filed more than three (3) years after their original due date. The Supreme Court in Raytheon differentiated its analysis from that of the Matlock Court by limiting its application of § 710:50-9-2 to the specific facts presented, explaining the following:

Matlock is inapposite [to Raytheon] because (1) the taxpayers in [Matlock] failed to timely file a return when originally due and did not request an extension; and (2) taxpayers were individuals and not corporations. Thus § 710:50-9-2 specifically applied to the facts presented.

Matter of Protest of Raytheon Co. & Subsidiaries, 2022 OK at ¶ 15 n. 13, 512 P.3d at 340. The Arnolds, the Commission, and the ALJ each acknowledge, however, that the Supreme Court misapplied the facts of Matlock in its Raytheon footnote, as the Matlock taxpayers did receive a valid extension to file their return for the tax year at issue. See Matlock v. State ex rel. Okl. Tax Comm‘n, 2001 OK CIV APP 104 at ¶ 1, 29 P.3d at 615 (“[t]he Matlocks filed and received an extension of time to file their 1993 federal income tax return which then became due on October 15, 1994. This extension extended the 1993 state income tax return date to October 15, 1994.“). In light of this misapplication of fact, we read Raytheon to have effectively overruled Matlock.

¶13 We recognize the Supreme Court also distinguished Raytheon from Matlock because Raytheon dealt with a corporate taxpayer while Matlock dealt with individual taxpayers. Matter of Protest of Raytheon Co. & Subsidiaries, at ¶ 15 n. 13. Nevertheless, the Supreme Court did not cite any case law or engage in any statutory analysis to show that the statutory period in § 2373 should be interpreted differently based upon the status of the taxpayer. See 68 O.S. § 1352(24) (defining the “person” as used in the tax statutes as meaning “any individual, company, partnership, ... limited liability company, corporation ...“); see also First Nat. Bank of Stillwater v. State ex rel. Oklahoma Tax Comm‘n, 1970 OK 33, ¶¶ 8-10, 466 P.2d 644, 646-47 (finding the use of the term “taxpayer” as “any person owing or liable to pay any State tax“, thereby applying to individuals and corporations, alike). We find no reason that the Supreme Court‘s holding in Raytheon should not be extended to individual taxpayers who receive a valid filing extension from the Commission.

B. Interplay Between the Date Taxes are Deemed “Paid” in 68 O.S. § 2373 & Filing Extension Procedure in 68 O.S. § 216

¶14 The Arnolds further contend that our application of Raytheon to individual taxpayers renders their claims for refunds for both the 2016 and 2017 tax years timely. As noted in our analysis supra., 68 O.S § 2373 functions as a three (3) year statute of repose which begins to run on the date a taxpayer‘s taxes are “paid“. Neer v. State ex rel. Oklahoma Tax Comm‘n, 1999 OK at ¶ 20, 982 P.2d at 1079. Like the parties in Raytheon, the Arnolds and the Commission present differing interpretations of the phrase “tax paid” as it is used in 68 O.S. § 2373 to trigger the statutory period to seek a refund following overpayment of taxes. Matter of Protest of Raytheon Co. & Subsidiaries, 2022 OK 32, ¶ 16, 512 P.3d 333, 340. Consequently, the timeliness of the Arnolds’ refund claims hinges upon whether the limitation period imposed by § 2373 is triggered either by: (1) the date the tax return was initially due; or (2) if the taxpayer received a valid extension to file their tax return, the extended due date. In applying Raytheon to individuals, we must, necessarily, interpret § 2373‘s three (3) year period to begin running on the extended filing deadline where the taxpayer receives a valid filing extension for a particular tax year. Nevertheless, for the Arnolds to have received the benefit of the extended filing deadline (and, consequently, a belated start to § 2373‘s three (3) year limitation period), the Arnolds must have obtained valid filing extension for the 2016 and 2017 tax years.

¶15 It is undisputed that the Arnolds obtained valid federal extensions to file their 2016 and 2017 Returns. The Commission‘s Order, however, found that the Arnolds failed to comply with the requisite procedure to obtain valid Oklahoma filing extensions. Title 68 O.S. § 216 accords the Commission with authority to “grant a reasonable extension for the filing of any return required under any state law” when, in the Commission‘s judgment “good cause exists and pursuant to written request“.⁶ The crux of § 216‘s extension procedure, accordingly, requires only (1) a determination by the Commission that good cause exists; and (2) the taxpayer‘s submission of a written request to the Commission. The Commission‘s Administrative Rules,⁷ however, impose additional requirements upon a taxpayer seeking a state extension, providing, in relevant part:

(a) A valid extension of time in which to file a Federal Income Tax Return automatically extends the due date of the Oklahoma Income Tax Return, unless Oklahoma liability is owed. A copy of the Federal extension must be attached to the Oklahoma Return. If the due date for filing the Federal Return is not extended or if an Oklahoma liability is owed, an extension of time to file the Oklahoma Return may be granted only by OTC Form 504. Ninety percent (90%) of the tax liability must be paid by the original due date for the return to avoid penalty charges for late payment.

OAC § 710:50-3-4(a) (amended 2017).⁸ Put more simply, where a taxpayer receives a federal filing extension from the IRS, the Commission designates two (2) different procedures to receive a state filing extension contingent upon whether the taxpayer owes an “Oklahoma liability“: (1) if no Oklahoma liability is owed, a taxpayer‘s receipt of a federal extension automatically extends their state filing deadline so long as the taxpayer attaches their Federal extension to their Oklahoma Return; or (2) if an Oklahoma liability is owed, the taxpayer must submit a Form 504-I to the Commission.

¶16 We find the use of the phrase “Oklahoma liability owed” in § 710:50-3-4(a) to be ambiguous, especially when applied to the facts of this case. See YDF, Inc. v. Schlumar, Inc., 2006 OK 32, ¶ 6, 136 P.3d 656, 658 (“[t]he test for ambiguity in a statute is whether the statutory language is susceptible to more than one reasonable interpretation.“); See, e.g., Cox v. State ex rel. Oklahoma Dep‘t of Human Servs., 2004 OK 17, ¶ 22, 87 P.3d 607, 616 (applying principles of statutory interpretation to ambiguous Administrative Rules). It is undisputed that the Arnolds made quarterly payments to the Commission during the 2016 and 2017 tax years based upon their estimated tax liability, resulting in substantial overpayments for both tax years. Because the Arnolds made consistent payments in excess of their ultimate liability for the 2016 and 2017 tax years, the Arnolds did not “owe” any additional state tax payments at the time their returns were due. Nevertheless, the Commission concluded (per the ALJ‘s recommendations) that the Arnolds, indeed, “had a tax liability for each year in question, and were required to file Form 504-I along with their Form 511 and proof of federal extension,” but failed to provide any further detail as to what constitutes a “tax liability owed“.

¶17 Because we find Commission‘s use of the phrase “Oklahoma liability owed” in OAC § 710:50-3-4(a) to be ambiguous where taxpayers preemptively made estimated payments in excess of their ultimate liability for a particular tax year, we must employ the rules of statutory interpretation to ascertain legislative intent. Rickard v. Coulimore, 2022 OK 9, ¶ 5, 505 P.3d 920, 923 (“[o]nly when the legislative intent cannot be determined from the statutory language due to ambiguity or conflict should rules of statutory construction be employed.“); Dolese Bros. v. State ex rel. Oklahoma Tax Comm‘n, 2003 OK 4, ¶ 9, 64 P.3d 1093, 1098 (“[t]he same rules of construction apply to administrative rules and regulations as to statutes.“). In reviewing ambiguous language contained in the Commission‘s administrative procedure, we must “look to the various provisions of the relevant legislative scheme to ascertain and give effect to the legislative intent and the public policy underlying that intent.” YDF, Inc. v. Schlumar, Inc., 2006 OK 32, ¶ 6, 136 P.3d 656, 658.

¶18 As stated supra., 68 O.S. § 216 provides the statutory underpinning of the Commission‘s extension procedure in § 710:50-3-4(a). Notably, § 216 makes no distinction in extension procedures for taxpayers who owe an Oklahoma liability, nor does § 216 or any other provision of the Uniform Tax Procedure (68 O.S. §§ 201-95) define what constitutes an “Oklahoma liability owed.” See McIntosh v. Watkins, 2019 OK 6, ¶ 4, 441 P.3d 1094, 1096 (“[i]n ascertaining legislative intent, the language of an entire act should be construed with a reasonable and sensible construction.“). Although the Commission‘s Administrative Code, similarly, fails to define an “Oklahoma liability owed“, OAC § 710:50-3-4(a) does contain additional direction to taxpayers who “owe” an “Oklahoma liability“, providing the following:

Ninety percent (90%) of the tax liability must be paid by the original due date for the return to avoid penalty charges for late payment.

By adding this additional provision related to a taxpayer‘s extended payment timeline, the Commission‘s rule implies that taxpayers who “owe an Oklahoma liability” have not yet tendered full payment of their taxes for a particular year. Finally, § 710:50-3-4 embraces different terminology when referring to a taxpayer‘s total “tax liability” for a particular year, the “liability paid“, and the “liability owed“. In light of our view that the language used in OAC § 710:50-3-4(a) is ambiguous and that the Arnolds had made timely and excessive quarterly estimated tax payments during 2016 and 2017, we conclude the Arnolds did not “owe” an Oklahoma liability for the 2016 and 2017 tax years. Because it is undisputed the Arnolds received valid federal filing extensions for the 2016 and 2017 tax years, the Arnolds filing deadlines with the Commission were “automatically extend[ed]” pursuant to § 710:50-3-4(a) so long as the Arnolds attached a copy of their Federal Extension to 2016 and 2017 State Returns.

¶19 In the underlying administrative record, it is undisputed that the Arnolds filed an OTC Form 504-I for the 2017 tax year, thus satisfying the Commission‘s extension procedure of § 710:50-3-4(a) regardless of our interpretation of the phrase “Oklahoma liability owed.” Thus, the Commission erred in finding that the Arnolds did not receive valid extensions for the 2017 tax year. Regarding the 2016 tax year, J. Moyers, CPA, testified to the Arnolds’ tax payment timeline, maintaining that he prepared both the Arnolds’ 2016 and 2017 Returns and requested extensions for both tax years from the IRS. Although it was established in the administrative proceeding below that a copy of the Arnolds’ federal filing extension was not attached to the version of the Arnolds’ 2016 Return that was admitted into evidence, the Arnolds’ CPA, Mr. Moyers testified during his direct testimony that “[a]ll necessary federal attachments would -- goes with the State of Oklahoma return . . .” . Although he stated that he did not have a specific recollection of the return, he stated that “the federal attachment automatically goes with the state income tax return.” OTC‘s counsel ineffectively attempted during the cross-examination phase of Mr. Moyers’ testimony to establish or clarify that “a copy of the extension wasn‘t mailed in, . . . just a verification that it [had] happened?” The on-the-record exchange between OTC‘s counsel and Mr. Moyers on that point (as quoted in Background section, supra.) was, at best, unclear. Their on-the-record exchange is not viewed by this Court as having established or clarified any fact in controversy. While we acknowledge the fundamental role of the fact finder in administrative proceedings, the cross-examination of Mr. Moyers, when viewed in context of his overall testimony, only represented conjecture and inference on the point OTC‘s counsel attempted to establish: i.e,, to call into question Mr. Moyers’ testimony that “the federal attachment automatically goes with the state income tax return.“. It is well-established that findings of fact by an administrative agency which are based merely on conjecture and inference may not be sustained.⁹ Stipe v. State ex rel. Bd. of Trs. of Oklahoma Pub. Emps. Ret. Sys., 2008 OK 52, ¶ 16, 188 P.3d 120, 124 (“[t]he Board‘s “Findings in Support of Conclusions of Law” reveal that the Board‘s conclusion was based on conjecture and inferences based on Stipe‘s status as a state senator rather than upon evidentiary matter.“). See In re Protest of Freymiller, Inc., 2005 OK CIV APP 94, ¶ 6, 127 P.3d 615, 616 (“[i]n reviewing an order of the Tax Commission, we will examine the entire record to determine whether the findings and conclusions set forth in the order are supported by substantial evidence. We will affirm the order if it is supported by substantial evidence and is otherwise free of error. (citation omitted).“). In this case, the cross-examination of Mr. Moyers, did not rebut, discount, or discredit his direct testimony. In the absence of anything more than conjecture and inference to call into question the veracity of J. Moyers’ testimony -- to the effect that “the federal attachment automatically goes with the state income tax return” -- it stands unrebutted. Consequently, the finding that the Arnolds “did not have a valid Oklahoma extension for tax year 2016” was not supported by substantial evidence.

¶20 Because the evidence in the record shows that the Arnolds received valid extensions to file both their 2016 and 2017 Returns, we find the Commission erred in denying the Arnolds’ claims for refunds. In applying Raytheon to individual taxpayers, we conclude that, where a taxpayer receives a valid filing extension, 68 O.S. § 2373‘s three (3) year limitation period is triggered on the taxpayer‘s extended filing deadline rather than the initial due date. As such, the Arnolds raised their claims for refunds within the applicable three (3) year limitation period. The Commission, therefore, erred in denying the Arnolds’ refund claims for the 2016 and 2017 tax years.

CONCLUSION

¶21 Based upon the foregoing analysis, the Commission‘s Order is, therefore, reversed.

DOWNING, P.J., and MITCHELL, J., concur.

Notes

The record shows that the Arnolds submitted a Form 504-I Application (concerning the 2017 tax year), but wrote therein a request for an extended deadline of September 18, 2018, noting that they had requested an extension to file their federal return for the 2017 tax year, but only requested an extended deadline of September 14, 2018 to file their state taxes. Neither party referenced or made an issue of the date requested in the 2017 extension request or that it only requested an extension until September 14, 2018.

The Arnolds asserted the following issues in their Pet.-in-Error:

1. Whether the Arnolds’ 2016 and 2017 Form 511 taxes were deemed due and paid on the dates that their 511 returns were filed and their tax liabilities were thereby ascertained under 68 O.S. § 2373 and Matter of Protest of Raytheon Company and Subsidiaries, 512 P.3d 333 (2022).

2. Whether the Arnolds’ claims for refund filed via their 2016 and 2017 Form 511 Oklahoma Resident Income Tax Returns were made within three (3) years from the date the taxes were paid; thus, not time barred by 68 O.S. § 2373; and

3. Whether OAC § 710:50-9-2 is inapplicable to the Arnolds due to the conditional clause set forth in the first eight words of the provision, “When an original return has not been filed,” since the Arnolds filed original 511 returns for both 2016 and 2017.

Tax liability is governed by the law in effect when the taxpayer‘s income is received. . Consequently, the Arnolds’ claims for refunds from their 2016 and 2017 returns are subject to the previous version of 68 O.S. § 2373, which was amended in 2023. The applicable sections of the Administrative Code have, similarly, been amended following the 2016 and 2017 tax years and are identified accordingly infra.

The Supreme Court described its statutory interpretation in Raytheon as “harmoniz[ing] [68 O.S.] §§ 216, 2373 and 2375” so to “carry out legislative objectives in the comprehensive statutory scheme“, explaining its rationale as follows:

First, a taxpayer is statutorily authorized to request an extension to file the required income tax return. If we utilize the original due date for a tax return, without regard to an extension, we would impede a taxpayer‘s statutory right to extend the deadline. Second, by utilizing the filing date in this case Raytheon is better able to submit the most complete picture of the company‘s income and tax obligation. It makes little sense to consider the taxes paid prior to presentation of an income tax return. Our decision is also consistent with 68 O.S.2011, § 2375, which provides that payment is due when a return is filed. Third, under OTC regulations a taxpayer is not required to have tendered one-hundred percent of their tax obligation at the time an extension is sought. See OAC, § 710:50-3-4 (2011) (requiring payment of ninety percent (90%) of the total tax liability by the original due date to obtain an extension and to avoid penalties). This regulation is an acknowledgment that estimated payments are merely an approximation of a taxpayer‘s total liability. The statutes and regulations merely impose a due diligence requirement on a taxpayer to avoid underestimating their tax obligation. Finally, our conclusion is consistent with the federal refund scheme, which includes the period of any extension to file an income tax return.

(emphasis in original).

The Commission‘s Administrative Code in effect during the 2016 and 2017 tax years (see FN 2, supra.) reiterates the applicable statute of limitations for a tax refund claim imposed by 68 O.S. § 2373, providing the following:

When an original return has not been filed, the Commission will not issue a refund on an original income tax return filed 3 years after the original due date of the return. A refund that is “barred by statute” cannot be used as payment on any delinquent account or applied to estimated tax. Exceptions to the statute of limitations set out in 710:50-5-13 also apply to certain refund situations.

OAC § 710:50-9-2 (emphasis added).

In addition to their arguments concerning 68 O.S. § 2373, the Arnolds also contend on appeal that OAC § 710:50-9-2 applies only to taxpayers who had not filed any tax return due to the conditional phrase “[w]hen an original return has not been filed“. Because the Arnolds, ultimately, filed their 2016 and 2017 Returns (albeit several years after their initial filing deadline), the Arnolds maintain that this version of § 710:50-9-2 is inapplicable to their refund claims.

We, however, find the limitation period imposed by 68 O.S. § 2373, alone, to be dispositive in evaluating of the timeliness of the Arnolds’ refund claims. If this version of OAC § 710:50-9-2, as the Arnolds argue, only applies to parties who have failed to file their tax return, then we, necessarily, would need to look to other statutory or administrative authority to determine the applicable limitation period for taxpayer‘s refund claim. Because the three (3) year limitation period articulated in § 2373 provides a sufficient basis to evaluate the timeliness of the Arnolds’ refund claims regardless of the applicability OAC § 710:50-9-2, we need not engage in any detailed analysis of the language used in § 710:50-9-2 (which has since been amended in both 2018 and 2024 to clarify this exact ambiguity).

Title 68 O.S. § 216, states, in part, that:

The Tax Commission, whenever in its judgment good cause exists and pursuant to written request, may grant a reasonable extension for the filing of any return required under any state tax law. The Tax Commission shall keep a record of every extension granted with the reason therefor. . . . An extension shall not extend the date for payment of the state income or franchise tax due. In case an extension is granted, the taxpayer may file a tentative return on or before the date when the return is required by any state tax law showing the estimated amount of tax for the period covered by the return and may pay the estimated tax or the first installment thereof at the time of filing such tentative return and no interest or penalty shall attach or be payable on sums so paid in due course.

We note that administrative rules, like statutes, are considered “valid expressions of lawmaking powers having the force and effect of law” which must be given “a sensible construction bearing in mind the evils intended to be avoided.” . C.f., (Winchester, J., dissent) (“the majority opinion concludes that because administrative agencies create rules that are binding ”similar to” statutes, and because those rules are authorized and approved by the Oklahoma Legislature, then these are somehow equivalent to statutory law. That reasoning is faulty.“). We further note, however, unlike statutes, which are direct manifestations of Legislative intent, administrative rules are formed subject to the Legislature‘s delegation of rulemaking authority to agencies, boards, and commissions so to “facilitate the administration of legislative policy.” (consideration of the Legislature‘s “manifest intention” in statutory construction); (citing 75 O.S. § 250.2). While administrative rules are, generally, drafted so to “carry out and effectuate the Legislature‘s expressed Will“, the Legislature‘s delegation of rule-making authority to administrative agencies “is not a self-generating or bootstrapping procedure for increasing the agency‘s statutory power and authority.” (where the Supreme Court held, in part, that the statutory authority bestowed on the Department of Education to exercise “general supervisory role in education matters” did not justify the agency‘s actions there in the face of the “the Legislature‘s long-held public policy.“).

The Legislature has bestowed the Commission with authority “to promulgate and enforce any reasonable rules” concerning the state‘s tax procedures and remedies. 68 O.S. §§ 201 & 203. However, there is no specific statement of legislative intent or statutory underpinning in 68 O.S., § 216 or otherwise to support the “must” language in OAC § 710:50-3-4(a) (i.e., that “[a] copy of the Federal extension must be attached to the Oklahoma Return“). A valid issue may be raised with respect to whether the “must” language of OAC § 710:50-3-4(a) is directory or mandatory. See Woods Dev. Co. v. Meurer Abstract & Title Co., 1985 OK 106, ¶ 11, 712 P.2d 30, 33 (where the Supreme Court referenced that the shall may be given a “directory construction rather than mandatory . . . upon a finding of strongly persuasive contrary legislative intent.“). On the other hand, we have not resolved that issue here because we find, infra., that the OTC‘s factual finding with respect to 2016 federal filing extension, specifically inferring that a copy of the federal extension was not attached to the 2016 state return was not supported by substantial evidence.

See FN 2, supra. Although OAC § 710:50-3-4 was amended on September 11, 2017, the applicable portion of the Commission‘s filing extension procedure contains identical language to its pre-Amendment counterpart.

See (“[s]ince the findings of the Commission . . . leave too much to speculation and conjecture as to what precisely the Commission purported to find and its reasons therefor, the cause must be remanded to the Commission for findings and certification . . .“.); (“[w]hile the Commission did admit evidence pertaining to reproduction cost, its failure to make any reference to such evidence or the weight afforded it in making its findings and conclusions leaves this Court only to conjecture and speculation as a basis for appellate review.“).