13 Or. Tax 65 | Or. T.C. | 1994
This matter is before the court on cross-motions for summary judgment. There is no dispute of material fact.1 The motions raise issues with regard to the effect of Harper v. VirginiaDept. of Taxation,
A brief review of the case law will be helpful in understanding the issues raised in this appeal.
Based on Davis, Oregon taxpayers who had paid state income tax on their federal retirement income filed written claims for refunds under ORS
"Whenever, in a proceeding involving the validity of any law whereby taxes assessed or imposed have been collected and received by the state, acting through any department or agency thereof, and paid into the State Treasury, if the court of last resort holds the law or any part thereof invalid, and the time limited for any further proceeding to sustain the validity of the law, or the part thereof affected, has expired, and if there is no other statute authorizing refund thereof, all *68 taxes collected and paid under the law or part thereof invalidated, in or after the year in which the action attacking the validity of the same was instituted, shall be refunded and repaid in the manner provided in ORS
305.770 to ORS305.785 ." (Emphasis added.)
Separate and apart from the issue of retroactivity is the issue of remedies. The Ragsdale court decided that ORS
"When this Court applies a rule of federal law to the parties before it, that rule is the controlling interpretation of federal law and must be given full retroactive effect in all cases still open on direct review and as to all events, regardless of whether such events predate or postdate our announcement of the rule."
113 S. Ct. at 2517 ,125 L.Ed.2d at 86.
This pronouncement alone does not entitle plaintiffs to a refund. Although a federal ruling may be given retroactive effect, the remedies provided to taxpayers are a matter of state choice.7 The only limitations imposed upon a state's *69 choice of remedies is that the states must comply with federal requirements for due process.
The fundamental requirement of predeprivation due process is that the person being deprived of property must be given "the opportunity to be heard."8 Grannis v. Ordean,
"It is an opportunity which must be granted at a meaningful time and in a meaningful manner." Armstrong v. Manzo,
380 U.S. 545 ,552 ,85 S. Ct. 1187 ,14 L.Ed.2d 62 (1965).
2. In the area of taxation the taxpayer must have "a meaningful opportunity to withhold payment and to obtain a predeprivation determination of the assessment's validity." McKesson
3. Under Oregon's statutory scheme, taxpayers who wish to contest an income tax assessment need not pay the tax before appealing to the Department of Revenue. If a taxpayer *70
appeals to the Department of Revenue, the department then conducts an administrative hearing. At the hearing, the taxpayer is given an opportunity to argue, to submit proof, to be represented by counsel, and to cross-examine witnesses. This administrative adjudication is conducted by a hearings officer who makes written findings of fact and recommended conclusions. The director of the department makes the ultimate decision.9 ORS
Even if the administrative hearing does not constitute a predeprivation hearing, Oregon statutes provide a clear and backward-looking remedy for taxpayers appealing an assessment of a tax. The appeal statutes preserve the taxpayer's right to a refund. ORS
4. Davis declared laws like Oregon's in violation of the federal constitution. Harper makes it clear that the Davis
ruling is to be given full retroactive effect. That is, once Oregon's scheme became invalid under the federal constitution, defendant may not continue to assess or collect taxes under that scheme. Consequently, Harper makes defendant's 1992 *71
assessment invalid. Plaintiffs timely appealed that assessment in accordance with statutory procedures. Those procedures assure plaintiffs that, if they prevail, they are entitled to a refund of the taxes paid under the assessment. ORS
5. The second portion of plaintiffs' claim is governed byRagsdale. When the taxpayers filed their 1987 income tax return, they self-assessed and paid the tax on one-half of their federal retirement income. After Davis declared tax schemes like Oregon's invalid, plaintiffs filed a claim for refund under ORS
The court finds plaintiffs are entitled to a refund of only those amounts paid in response to the 1992 assessment made by defendant. The self-assessed taxes paid under their original 1987 income tax return may not be refunded. Now, therefore,
IT IS HEREBY ORDERED that the cross motions for summary judgment are granted in part and denied in part in accordance with the above decision. Plaintiffs to recover costs and disbursements.
"[I]f the amount of the tax shown as due on a report or return * * * is less than the amount theretofore paid, or if a person files a claim for refund * * * any excess tax paid shall be refunded by the department with interest * * *.
"The claim shall be made on a form prescribed by the department, except that an amended report or return showing a refund due * * * shall constitute a claim for refund." ORS
305.270 (1) and (2)."No refund shall be allowed or made after three years from the time the return was filed, or two years from the time the tax or a portion thereof was paid, whichever period expires the later, unless before the expiration of such period a claim for refund is filed * * * in compliance with ORS
305.270 , * * *." ORS314.415 (1)(b).
"[W]e reverse the judgment below. We do not enter judgment for petitioners, however, because federal law does not necessarily entitle them to a refund." Harper, 125 L.Ed.2d at 88.
"The requirement of due process is that after such notice as may be appropriate the taxpayer have opportunity to be heard as to the amount of the tax by giving him the right to appeal for that purpose at some stage of the proceedings before the tax becomes irrevocably fixed." McGregor v. Hogan,
263 U.S. 234 ,237 ,44 S. Ct. 50 ,68 L.Ed. 282 (1923) (citations omitted).