Lead Opinion
{¶ 1} This case presents an issue concerning the credit available under the commercial-activity tax (“CAT”), which permits taxpayers to realize some benefit from net operating losses (“NOLs”) now that Ohio’s corporate-franchise tax has been replaced by the CAT. As we explained in Navistar, Inc. v. Testa,
{¶ 2} A taxpayer’s first step in claiming the credit is filing a report to establish the total amount of credit that might be taken over a 10- to 20-year period. R.C. 5751.53(B) and (D). That report proposes the “amortizable amount,” which is then subject to tax-commissioner review. R.C. 5751.53(A)(9) and (D). Here, appellant, the tax commissioner, in a final determination journalized on June 8, 2010, reduced to $927,513 the almost $17 million amortizable amount that appellee, International Paper Company, had reported. However, the tax commissioner’s letter to International Paper memorializing this determination, dated June 8, 2010, was not mailed until July 12. International Paper opposed the reduction by appealing to the Board of Tax Appeals (“BTA”), which reinstated International Paper’s amortizable amount after concluding that the tax commissioner had violated R.C. 5751.53(D) by failing to notify International Paper of its assessment by the June 30, 2010 deadline. The tax commissioner now appeals that decision.
{¶ 3} On this appeal, we confront only procedural issues. One was dispositive before the BTA: whether the tax commissioner must not only enter his determination on the journal but also mail it to the taxpayer before the June 30, 2010 deadline. The second issue is raised by the tax сommissioner as a threshold to the deadline issue: whether the statutes in the first instance require the tax commissioner to issue a final determination to effect a reduction of the amortiza
{¶ 4} Because it is a threshold issue, we consider the second issue first. We hold that R.C. 5751.53(D) does require that a reduction in the amortizable amount be embodied in a timely issued final determination and that a failure to comply with that requirement means that the taxpayer is entitled to claim the NOL credit in accordance with its originally reported amortizable amount. As a result, the amortizable amount depends upon whether a final determination adjusted that amount by the June 30 deadline.
{¶ 5} Next, we consider whether the requirement that the tax commissioner’s determination be “issued” by the June 30 deadline means that the determination must be mailed as well as journalized by that date. We hold that R.C. 5751.53(D) requires that the determination be journalized by June 30 but that the determination need not be mailed by that date to be effective. As a result, the BTA erred by finding the tax commissioner’s final determination void and it should have considered International Paper’s substantive challenge to the tax commissioner’s determination.
{¶ 6} Before deciding to return this case to the BTA for review of the merits, however, we consider the tax commissioner’s procedural question. Did International Paper jurisdictiorially forfeit any right to a remand for consideration of its substantive claim because it failed to preserve that right by filing a protective cross-appeal? Our answer to this question is no. We hold that because International Paper was not seeking review of the merits issue by this court and becausе the BTA had not addressed the merits issue in its previous decision, the company was not required to file a protective cross-appeal. Accordingly, we reverse the decision of the BTA and remand for consideration of International Paper’s substantive challenge to the tax commissioner’s determination.
FACTUAL BACKGROUND
{¶ 7} International Paper timely filed its amortizable-amount report with the tax commissioner in 2006. The report was mailed on June 29, 2006, and received on July 3, 2006. The report computed an amortizable amount of $16,957,077. The tax commissioner conducted an audit that initially led to a reduction of that amount to zero. After consideration of new information, the tax commissioner’s agents adjusted the amortizable amount to $927,513 and formulated a final determination embodying that conclusion.
{¶ 9} International Paper appealed to the BTA, where discovery was conducted and a hearing held.
{¶ 10} The BTA issued its decision on August 19, 2014. In it, the BTA adhered to an earlier decision that the June 30, 2010 deadline stated in R.C. 5751.53(D) set a boundary for aсtion by the commissioner, just as the June 30, 2006 date stated in the statute set a deadline for submission of the amortizable-amount report by the taxpayer. BTA No. 2010-2230, 2014 Ohio Tax LEXIS 3869, *7 (Aug. 19, 2014). The BTA invoked its own “plain reading” of the statute to find that the issuance of the final determination was subject to the June 30 deadline and then relied on Carstab Corp. v. Limbach,
ANALYSIS
R.C. 5751.53(D) Requires the Tax Commissionеr to Issue a Final Determination in order to Reduce the Amortizable Amount
{¶ 11} The tax commissioner contends that issuing an “assessment or final determination” reflecting an adjustment of the amortizable amount is purely optional. The relevant sentence is:
Unless extended by mutual consent, the tax commissioner may, until June 30, 2010, audit the accuracy of the amortizable amount available to each taxpayer that will claim the credit, and adjust the amortizable amount or, if appropriate, issue any assessment or final determination, as applicable, necessary to correct any errors found upon audit.
R.C. 5751.53(D).
{¶ 12} This sentence falls short of the ideal оf good draftsmanship, and one difficulty with the statute is the first appearance of the conjunction “or.” The tax commissioner, reads the “or” as making the issuance of an assessment or final determination completely optional; his theory is that the audit process and any taxpayer communications in relation to the audit are sufficient to reduce the
{¶ 13} We reject the tax commissioner’s reading of the statute for several reasons. Foremost among them is that as a matter of plain language, the use of the word “necessary” in the quoted sentence strongly implies that the issuance of a final determination is required if the tax commissioner is going to reduce the amount of potential CAT credit. The necessity arises for two reasons: first, a need to definitively inform the taxpayer as to how much credit the commissioner concludes is available, and second, a need to afford the taxpayer an opportunity to contest any reduction by appealing the assessment or final determination to the BTA under R.C. 5717.02.
{¶ 14} We conclude that the inference that the commissioner draws from the conjunction “or” conflicts with the implication of the word “necessary” and so the statute is thereby rendered ambiguous. In determining the proper construction of the statute, we must presume that a “just and reasonable result is intended.” R.C. 1.47(C). Additionally, our determination that the statute is ambiguous sets the stage for our consideration of “[t]he object sought tо be attained” and “[t]he consequences of a particular construction.” R.C. 1.49(A) and (E).
{¶ 15} In considering the “object” of the statute, along with what would constitute “a just and reasonable result,” we conclude that the intent of the General Assembly was to require the tax commissioner to formalize his decision to reduce the amortizable amount, both in order to put the taxpayer on notice and to permit an immediate challenge to the reduction. Indeed, to allow the commissioner to contemplate a reduction but postpone a challenge for a decade or more contradicts an important purpose of the NOL credit, which is not only to allow the credit to be taken but to permit the taxpayer to account for the tax asset on its books going forward.
{¶ 16} That same reasoning leads us to reject the tax commissioner’s contention that “or” in R.C. 5751.53(D) severs the issuance of the final determination from the June 30, 2010 deadline. In particular, we are not convinced by the commissioner’s reliance on analysis offered by the Legislative Service Commission when the statute was passed by the General Assembly; that analysis does not clarify the statute but instead paraphrases it and reproduces its ambiguity. We hold that in order to effectuate the legislative purpose of finalizing the
{¶ 17} Finally, we also reject the tax commissioner’s invocation of the doctrine of longstanding administrative practice. Compare UBS Fin. Servs., Inc. v. Levin,
The June 30, 2010 Deadline Is Mandatory
{¶ 18} The tax commissioner argues in the alternative that the June 30 deadline is merely directory rather than mandatory and therefore late issuance of a final determination does not void the tax commissioner’s determination.
{¶ 19} In the taxation context, we recently addressed the directory-versus-mandatory issue in 2200 Carnegie, L.L.C. v. Cuyahoga Cty. Bd. of Revision,
{¶ 20} Under 2200 Carnegie, the core-of-procedural-efficiency test is crucial to determining the status of a requirement and a time limit as being mandatory or directory. Under the test as applied in that case, the requirements to give the notice ran to the core of procedural efficiency, while the time for giving notice did not. Id. at ¶ 24-26.
{¶ 21} Applying that analysis, we consider whether the issuance of the final determination of the amortizable amount by June 30, 2010, is procedurally essential. We conclude that the structure of R.C. 5751.53(D) indicates that it is. The statute contemplates a hard deadline for the taxpayer to file its report—June 30, 2006—and likewise contemplates finality in the determination of the potential CAT credit by June 30, 2010. 2010 is the year in which the credit may first be taken, and the legislative intent is that the amount of the potential credit be resolved “up front” through the filing and audit of the report. The statutory requirement of “mutual consent” to extend the deadline supports this conclusion, because the inference is clear that in the absence of the consent, the commissioner must comply with the deadline. Moreover, unlike in 2200 Carnegie, if the tax commissioner fails to comply with the deadline, construing it as mandatory inflicts the adverse consequence on the state itself and on no other party.
{¶ 22} In this regard, the present ease provides a stark contrast to our ruling in Hardy v. Delaware Cty. Bd. of Revision,
“Issue” Should Be Liberally Construed in Favor of Permitting the Tax Commissioner to Correct the Amortizable Amount
{¶ 23} We now turn to the central question resolved against the tax cоmmissioner by the BTA: was the final determination of the amortizable amount timely “issued”? We hold that it was.
{¶ 25} The BTA resolved this issue by citing a case from this court and a dictionary definition. The tax commissioner cites a few cases in which this court, in passing, appears to use “issue” to mean placing the final determination in the journal that the commissioner is required to maintain pursuant to R.C. 5703.05(L).
{¶ 26} We disagree with the BTA’s reliance on our decision in Carstab,
{¶ 27} But the tax commissioner’s objections to relying on Carstab are sound. First, the statement about the meaning of “issue” is obiter dictum, because we specifically identified the “sole question prеsented” as being “whether an assessment is barred [by the statute of limitations] if it is not received by a taxpayer within the time limits provided” by the statutes. Id. at 89. The only necessary determination in Carstab was whether receipt by the taxpayer was a necessary constituent of “issuing” the assessment; it was simply unnecessary to decide whether “issuance” was complete with journalization or mailing, because in Carstab, both events had clearly occurred within the statutory limitation period. We also find it telling in this regard that after neatly defining the three terms in Carstab, we disavowed the significance of our having done so by acknowledging that we were “not faced with [the] situation” of deciding between journalization or mailing. Id. at 90. Thus, the construing of “issuing” to be thе same as “mailing” in Carstab is dicta that is not binding here. Furthermore, R.C. 5751.53(D) is a commercial-activity-tax statute, not a sales-tax statute, and must be construed in light of its specific legislative purposes.
{¶ 28} The tax commissioner points to instances in which this court has used the word “issue” to refer to the journalization of a determination. Most prominently, in Navistar,
{¶ 29} The significance of these cases is not to furnish binding or persuasive authority, but to establish that the term “issue” in R.C. 5751.53(D) is ambiguous with regard to the issue presented. That being so, the important canon here is that of liberal construction of remedial statutes, which has been applied to construe procedural statutes in favor of the tax assessor’s ability to properly impose tаx obligations. See Heuck v. Cincinnati Model Homes Co.,
International Paper Did Not Need to File a Protective Cross-Appeal IN ORDER TO PRESERVE ITS MERITS ARGUMENT
{¶ 30} International Paper requests that if the court reverses and concludes that the tax commissioner’s final determination was validly issued, the court remand the cause to the BTA for consideration of International Paper’s substantive challenge to the determination. In opposition, the tax commissioner argues that if this court reverses the BTA’s ruling on the validity of the final determination, the case is over and the reduced amortizable amount determined by the tax commissioner is in force. That is so, according to the commissioner, because
{¶ 31} The tax commissioner’s argument rests on a body of case law dating back to the 1970s: the early cases are Lenart v. Lindley,
{¶ 32} In support of his position, the commissioner cites cases that follow Rowland and Lenart:
• Equity Dublin Assocs. v. Testa,142 Ohio St.3d 152 ,2014-Ohio-5243 ,28 N.E.3d 1206 , ¶ 23-25 (when tax commissioner and two boards of education appealed partial grant of exemption under one statutory provision, taxpayer’s failure to file protective cross-appeal with respect to BTA’s denial of a different statutory basis for exemption barred consideration of that claim on appeal);
• Polaris Amphitheater Concerts, Inc. v. Delaware Cty. Bd. of Revision,118 Ohio St.3d 330 ,2008-Ohio-2454 ,889 N.E.2d 103 , ¶ 12-15 (board of education could not call into question the total value assigned to proрerty in defending an appeal, when the owner/appellant had challenged only the land valuation and the board of education had filed no protective cross-appeal raising any issue as to the value assigned to the improvements);
• Dayton-Montgomery Cty. Port Auth. v. Montgomery Cty. Bd. of Revision,113 Ohio St.3d 281 ,2007-Ohio-1948 ,865 N.E.2d 22 , ¶ 33 (agreement of parties that a clerical error led to assignment of the wrong number as land value was not sufficient to empower the court to effect a change in that value or to remand for change, given that the notice of appeal placed only the value of improvements at issue and not the value of the land).
{¶ 34} Thus, the cited cases are not apposite. International Paper did not have to file a cross-appeal, because there was no ruling on its substantive issue from the BTA, so there is no need for us to exercise jurisdiction to decide the issue, in whole or in part. Nor does International Paper seek our pronouncement on the issue in the first instance. It follows that no cross-appeal was necessary.
CONCLUSION
{¶ 35} For the foregoing reasons, wе reverse the decision of the BTA and remand with instructions that the BTA consider International Paper’s substantive challenge to the tax commissioner’s determination.
Decision reversed and cause remanded.
Notes
. The tax commissioner also cites an information release from 2006, “CAT 2006-06,” which states: “The Tax Commissioner can audit and adjust the taxpayer’s amortizable amount until June 30, 2010. However, that date can be extended by agreement between the taxpayer and the Tax Commissioner. See R.C. 6751.63(B) and (D).” Contrary to the tax commissioner’s suggestion, we do not read the release as addressing the issue before the cоurt.
. We reject International Paper’s contention that this argument was not jurisdictionally preserved in the notice of appeal to the court as required by R.C. 6717.04. Although the tax commissioner did not use the words “directory” and “mandatory” in the notice of appeal to the court, the notice does identify what the commissioner believed the BTA’s error to be (“determining that the Commissioner’s final determination was not ‘properly issued’ ”), and does state how the commissioner believed the BTA should have handled this issue (“[t]he BTA should have determined that the Commissioner’s final determination was properly and validly issued under R.C. 5751.63(D)”). This language satisfies the criteria in WCI Steel, Inc. v. Testa,
. As indicated, in Lenart, the court has also enforced the requirement of filing a cross-appeal when an appellee might want to have the court consider an issue raised below but not addressed by the BTA in its decision. See Lenart,
Dissenting Opinion
dissenting.
{¶ 36} I respectfully dissent. I agree with the majority opinion that R.C. 5751.53(D) required the tax commissioner to issue a final determination by June 30, 2010, in order to reduce the amortizable amount claimed by appellеe, International Paper Company. In my view, however, the tax commissioner’s final determination was untimely.
{¶ 37} R.C. 5751.53 created a credit against the commercial-activity tax (“CAT”) in order to preserve part of the value of net operating losses (“NOLs”) that a corporate taxpayer had accumulated and was entitled to carry forward as a deduction against income under Ohio’s former corporate franchise tax. Navistar, Inc. v. Testa,
Unless extended by mutual consent, the tax commissioner may, until June 30, 2010, audit the accuracy of the amortizable amount available to each taxpayer that will claim the credit, and adjust the amortizable amount or, if appropriate, issue any assessment or final determination, as applicable, necessary to correct any errors found upon audit.
(Emphasis added.)
{¶ 38} R.C. 5703.05(L) requires the tax commissioner to maintain a journal of his final determinations that is “open to public inspection.” On June 8, 2010, the tax commissioner entered on his journal a final determination reducing International Paper’s amortizable amount from almost $17 million to $927,513. Although “open to public inspection,” the tax commissioner’s journal is not accessible through the Department of Taxation’s website, and here, the tax commissioner did not mail his final determination to International Paper until July 12, 2010. The question before this court, then, is whether the tax commissioner timely issued his final determination. If he issued that determination when he entered it on the journal, the answer is yes; if he issued it when he placed it in the mail, the answer is no. In my view, the tax commissioner issued his final determination when he mailed it on July 12, 2010, outside the statutory timeframe.
{¶ 39} The Board of Tax Appeals (“BTA”) concluded that the tax commissioner’s final determination was untimely. In doing so, it relied primarily on Carstab
{¶ 40} The majority dismisses the BTA’s reliance on Carstab because it contends that the only necessary determination in that case was whether the statutory phrase “made or issued” encompassed receipt by the taxpayer. But this cоurt could not resolve Carstab without determining the “pivotal” meaning of the phrase “made or issued.” Carstab at 90.
{¶ 41} In determining the meaning of “made or issued” in Carstab, we considered the phrase in light of the tax commissioner’s general powers and duties. These include the power to make assessments authorized by law, R.C. 5703.05(H), and the duty to maintain a public journal containing a record of her actions, R.C. 5703.05(L). Recognizing that “making” and “issuing” an assessment are different events, we held that the tax commissioner “ ‘makes’ an assessment when she journalizes it because this is the act that concludes her audit activity and by which she places the assessment on the public record.” Carstab at 90. But “the commissioner ‘issues’ notice of the assessment when she ‘gives’ notice to the assessee,” which in that case meant when she deposited it in the mail. Id. Ultimately, we concluded that neither “making” nor “issuing” incorporates a requirement of receipt by the taxpayer. Id. While I agree with the majority that Carstab is not binding authority, it is persuasive as to the meaning of “issue” in R.C. 5751.53(D).
{¶ 42} The General Assembly has twice amended R.C. 5739.16—the statute at issue in Carstab—since our 1988 decision. See 1993 Am.Sub.H.B. No. 327, 145 Ohio Laws, Part III, 5409, 5415, and 2005 Am.Sub.H.B. No. 66, 151 Ohio Laws, Part II, 2868, Part III, 4612. Nevertheless, the statute continues to state that “no assessment shall be made or issued” beyond the four-year timeframe, R.C. 5739.16(A), and the General Assembly has not statutorily defined the terms “made” and “issued” in response to Carstab. We must presume that the General Assembly “ha[s] in mind prior judicial constructions” of a statute when it enacts amendments. State ex rel. Huron Cty. Bd. of Edn. v. Howard,
{¶ 43} We should also assume that the General Assembly was aware of this court’s construction of the term “issue” when it enacted R.C. 5751.53—the statute
{¶ 44} In addition to dismissing the BTA’s reliance on Carstab, the majority concludes that R.C. 5751.53(D) is an ambiguous remedial statute that this court must liberally construe in favor of the tax commissioner. I agree that R.C. 5751.53 is a remedial statute and that we must construe remedial statutes liberally in order to promote their intended goal. R.C. 1.11; Robert V. Clapp Co. v. Fox,
{¶ 45} Here, as the majority opinion acknowledges, the legislative aim of the CAT credit was to “insulate taxpayers that had NOLs” under the corporate-franchise tax from losing the value of those NOLs under the new CAT. In Navistar,
{¶ 46} Because I would apply the established meaning of “issue” stated in Carstab to R.C. 5751.53(D) or would alternatively construe R.C. 5751.53(D) liberally in favor of the taxpayer, I conclude that the tax commissioner did not issue his final determination within the time prescribed by R.C. 5751.53(D). I
O’Donnell and Kennedy, JJ., concur in the foregoing opinion.