10 Or. Tax 458 | Or. T.C. | 1987
Decision for defendant rendered August 24, 1987. Plaintiffs appealed to the court for a determination of whether interest on an income tax refund should be computed from the date the deficiency was paid or from four months thereafter. The parties have stipulated to the facts. The merits of plaintiffs obtaining a refund is not being contested. The sole issue to be determined by this appeal is whether defendant's calculation of the interest due on the plaintiffs' refund is correct.
The facts show that plaintiffs, by reason of an extension, timely filed their tax return for 1983 showing zero tax due. The department issued a notice of proposed deficiency. Five days later, on March 26, 1985, plaintiffs paid the asserted deficiency, plus interest, and requested a conference. The conference officer affirmed the deficiency and assessed the tax. Plaintiffs appealed to the department. Prior to the hearing, *459 defendant conceded the issue and agreed to a refund "with appropriate interest." On February 5, 1986, a refund was made of the amount paid by the plaintiffs plus interest computed from July 27, 1985 (four months after the tax deficiency was paid).
Plaintiffs contend that defendant's application of the law is misplaced and that interest on the refund should be computed from the date of payment.
The defendant based its determination on ORS
"(1) If the amount of the tax shown as due on a report or return originally filed with the department with respect to a tax imposed under ORS chapter 118, 119, 308, 310, 314, 316, 317, 318, 321 or 477, or collected pursuant to ORS
305.620 , or as corrected by the department, is less than the amount theretofore paid, or if a person files a claim for refund of any tax paid to the department under such laws within the period specified in subsection (2) of this section, any excess tax paid shall be refunded by the department as provided in this section and ORS118.260 (6), 119.150, 314.415, 321.145(2) or 321.485(2)."
1. ORS
"(1)(a) If the department determines pursuant to ORS
305.270 that the amount of the tax due is less than the amount theretofore paid, the excess shall be refunded by the department with interest at the rate established under ORS305.220 , for each month or fraction of a month during a period beginning four months after the due date of the return or the date the tax was paid, whichever is the later, to the time the refund is made."
Plaintiffs contend that the above statutes relate only to situations where the defendant has reached a determination pursuant to ORS
An examination of the pertinent parts of ORS *460
The amount of tax shown as due on the plaintiffs' return was zero. As "corrected" by the department, a deficiency was found. The plaintiffs paid the proposed deficiency. After a conference was held and a department hearing was scheduled, an agreement was reached whereby the amount paid by the plaintiffs was to be refunded. In essence, "the amount of the tax due * * * as corrected by the department, is less than the amount theretofore paid, * * * [therefore] any excess tax shall be refunded * * * as provided by * * * ORS
2. The court finds that defendant's determination of the refund was pursuant to ORS
Section (1)(a) of this statute provides that the excess tax "shall be refunded * * * with interest * * * beginning four months after the due date of the return or the date the tax was paid, whichever is the later, to the time the refund is made."
The plaintiffs contend that the phrase "four months after" refers only to the due date of the return and not to the date the tax was paid. Plaintiffs' analysis supporting this contention (Plaintiffs' Reply Brief, at 3), is not persuasive because it requires omitting the phrases "four months after the due date of the return" and "whichever is the later."
The court is bound by ORS
ORS
As an alternative or additional argument, plaintiffs contend that their appeal to the Tax Court is for the recovery of principal (plus interest). Plaintiffs reason that the refund from the department should first be applied to interest as computed by plaintiffs, with the balance applied to the reduction of principal. Based on this reasoning, plaintiffs conclude that $562.54 of remaining tax overpayment, plus interest, is due them. Plaintiffs cite ORS
Plaintiffs' argument is ingenious but circuitous. It overlooks the stipulated issue presented to this Court:
"[I]s interest on the refund computed from the date the deficiency was paid, or four months thereafter?" (Stipulation of Facts, No. 9.)
The court finds that the defendant's application of ORS
Taxation — Income taxes — Refund of taxes
3. 1987 Or. Laws ch 647 1(f) added a new provision to ORS
3. This court previously issued its opinion dated August 24, 1987, interpreting ORS
"Except as provided in ORS
305.265 (12), if, pursuant to a notice of deficiency or assessment, the taxpayer pays the amount specified in the notice, or any part thereof, and if, upon appeal, the department, the Oregon Tax Court or the Oregon Supreme Court orders that all or any part of the deficiency amount specified in the notice and paid by the *462 taxpayer be refunded, the amount so ordered to be refunded shall bear interest at the rate established for refunds in ORS305.220 . Interest shall be computed from the date of payment to the department. Nothing in this paragraph shall require that interest be paid upon any amount for any period for which interest upon the same amount for the same period is required to be paid under ORS305.419 ."
Under this statute, plaintiffs would be entitled to interest from the date the tax was paid.
Although chapter 647 did not become effective until 90 days after the legislature adjourned, section 2(2) contains the following unusual provision:
"Notwithstanding that prior to the effective date of this Act, refund has been made or the time for filing a claim for refund has expired under ORS
314.415 , for tax years ending on or after December 31, 1983, interest on refunds shall be computed as if the amendments to ORS314.415 by section 1 of this Act creating a new paragraph (f) of subsection (1) of ORS314.415 were in effect and the department shall pay any interest due in addition to interest already paid if:"(a) Prior to the effective date of this section, the taxpayer has asserted a basis for refund in a claim or tax return filed with the department within the time prescribed for asserting the claim or filing the returns; and
"(b) The taxpayer files a claim for interest refund with the department on or before April 15, 1988.
"(3) The Department of Revenue shall make a reasonable effort to identify and notify any taxpayer to whom subsection (2) of this section applies."
Under these circumstances, if plaintiffs file a claim for interest refund with the department on or before April 15, 1988, plaintiffs will receive the interest which is the subject of this appeal. This appeal, having been rendered moot by the amendment of the law, should be dismissed. Judgment will be entered accordingly. Costs to neither party. *463