25 Mass. App. Ct. 98 | Mass. App. Ct. | 1987
This is an appeal by Thomas R. and Rita Chirillo (taxpayers) from a decision of the Appellate Tax Board (board), after hearing, granting them a partial abatement of the Massachusetts income tax assessed against them for 1980. After certain procedural underbrush is removed, the question is whether, when a taxpayer fails to file a return, the Commissioner of Revenue (Commissioner) may, under G. L. c. 62C, § 28,
1. The procedural issue. At the outset, we must determine what, if any, issues are open for appellate review. After proceeding under the formal procedure, compare G. L. c. 58A, § 7A, the board issued its decision without findings of fact. The taxpayers’ request for findings of fact and a report, filed more than ten days after the board’s decision, was properly denied as untimely. G. L. c. 58A, § 13.
As the case had proceeded before the board under the formal procedure, we retain the authority to review questions of law which are sufficiently identified in the record and which were “raised in the proceedings before the board.” G. L. c. 58A, §13 (note 3, supra). The taxpayers adequately preserved at
2. The question of statutory interpretation. We recite the facts relevant to this issue, either as they were found by the board or were conceded in the Commissioner’s brief.
The taxpayers had income in 1980 in the amount of $30,310.
The board held a hearing and reached a decision in which it adopted the Commissioner’s figures and methodology and abated the tax by the amount of $2,310, the difference between the Commissioner’s original assessment of $4,574 and his later assessment of $2,264.
General Laws c. 62C, § 28, was applicable because the board found that the return was not filed within thirty days of notice from the Commissioner. The Commissioner, therefore, could “determine the tax due, according to his best information and belief, and . . . assess the same at not more than double the amount so determined . . . .” (emphasis supplied). G. L. c. 62C, § 28 (note 2, supra). The parties are at odds primarily over whether, under § 28, the income taxes withheld by the Commonwealth should have been subtracted from the income tax determined to be due on the taxpayers’ 1980 income, as revealed by their Federal income tax form, before the Commissioner doubled the tax determined to be due. In other words, the question is whether, in order to comply with the requirement that, in determining the tax due, the Commissioner should use his “best information and belief,” he is obliged to consult his own records about whether tax payments had been withheld.
The Commissioner’s reading of the statute, accepted by the board, would yield anomalous and grossly unfair results. According to the Commissioner’s interpretation, the penalty under G. L. c. 62C, § 28, for late filing would vary in proportion to the total tax payable on a year’s income, and not on the amount actually owed and unpaid. Such a penalty would bear no relationship to either the degree of the taxpayer’s fault or the harm done to the Commonwealth. Take, for example, a taxpayer who fails to file a timely tax return whose tax for a particular year is $10,000 and who has had $9,999 withheld by the Commonwealth. According to the Commissioner’s interpretation of the statute, the taxpayer should be assessed $10,001,
The Commissioner argues that such disproportionate remedies were authorized by G. L. c. 62C, § 38, as amended by St. 1978, c. 514, § 128,
The Commissioner also argues that such disproportionate penalties are required in order to insure that taxpayers who may not owe significant taxes have an incentive to prepare and file their returns. This argument is not persuasive. Those who fail to file tax returns are subject to penalties for their defaults even according to the interpretation of the statute we
The record in this case is insufficient to justify a ruling that the Commissioner should also have considered the effect, which would have been relatively minor, of the taxpayers’ FICA payments on the penalty.
The decision of the board is reversed, and the proceeding is remanded to the board so that the penalty may be recalculated consistent with this opinion (with such concessions to fairness as the Commissioner in equity and good conscience should recognize in the light of his present knowledge) and an abatement ordered in the appropriate amount.
So ordered.
General Laws c. 62C, § 28, inserted by St. 1976, c. 415, § 22, provides: “If a person who has been notified by the commissioner that he has failed to file a return or has filed an incorrect or insufficient return refuses or neglects within thirty days after the date of such notification to file a proper return, or if a person has filed a false or fraudulent return or has filed a return with a willful attempt in any manner to defeat or evade the tax, the commissioner may determine the tax due, according to his best information and belief, and may assess the same at not more than double the amount so determined, which additional tax shall be in addition to the other penalties provided by this chapter.”
General Laws c. 58A, § 13, as amended through St. 1985, c. 314, § 1, in part, provides: “The board shall make a decision in each case heard by
Rule 29 of the Appellate Tax Board provides: “Requests for findings of facts and rulings of law, if any are made, shall be filed under separate headings, and a copy given to the adverse party, prior to the argument or prior to the submission of the appeal without' argument, as the case may be, unless special leave to file later is given by the Board.”
The amounts referred to throughout the opinion are rounded to the nearest dollar.
The $10,000 figure would be doubled by the Commissioner to reach $20,000 and then the $9,999 would be deducted.
General Laws c. 62C, § 38, was amended by St. 1985, c. 593, § 20. In the amended statute, the words “he failed without good cause to file his return within the time prescribed by law ...” were deleted. The amendment does not affect this case. Both the relevant tax year and the year in which the tax was assessed under section 38 preceded the amendment.
Although section 38 no longer applies to abatements granted to taxpayers who failed to file tax returns, it still applies to abatements granted to a taxpayer who “filed a fraudulent return, or having filed an incorrect or insufficient return, has failed, after notice, to file a proper return.”
For example, G. L. c. 62C, § 73(c), as appearing in St. 1983, c. 233, § 41, provides: “Any person required under this chapter . . . to . . . make a return . . . or . . . who willfully fails to . . . make such return ... at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and shall be fined not more than twenty-five thousand dollars ... or b[e] imprison[ed] for not more than one year, or both, and shall be required to pay the costs of prosecution. . . .”
Contributions to FICA, or other governmental retirement funds, within certain limits, are deductible from income for State tax purposes. G. L. c. 62, § 3(B)(a)(3) & (4). See 26 U.S.C. §§ 3101, 3102 (1982). Based upon the information supplied by the taxpayers with their application for an abatement, the Commissioner determined that the taxpayers’ total tax burden for 1980 should be reduced by $79, the amount by which the total tax would have been reduced as a result of the FICA deduction. Since the penalty originally assessed by the Commissioner was double the amount he determined to be the total tax due, plus other interest and penalties, the issue before us now is whether the Commissioner should have subtracted the $79, before, as the taxpayers contend, or after he determined the penalty. As with the issue of State income taxes withheld, the question is whether the Commissioner’s initial determination of the penalty was made “according to his best information and belief.” G. L. c. 62C, § 28.
We do not rule on the extent, if any, to which the Commissioner must consider information on the Federal tax return.