NESTLE R&D CENTER, INC., APPELLANT, v. LEVIN, TAX COMMR., APPELLEE.
No. 2008-1285
Supreme Court of Ohio
April 30, 2009
122 Ohio St.3d 22, 2009-Ohio-1929
Means, Bichimer, Burkholder & Baker Co., L.P.A., Nicole M. Donovsky, and Richard W. Ross, urging affirmance for amicus curiae Ohio School Boards Association.
Submitted April 21, 2009
Per Curiam.
{¶1} This case presents a statute-of-limitations question. When a corporate franchise taxpayer claims a tax credit for creating new jobs in Ohio, it does so by filing a refund claim under
{¶2} We hold that the three-year limitations period commences to run when the Department of Development issues the certificate. We therefore reverse the BTA‘s decision and remand for further proceedings.
I. Facts
A. Procedural history
{¶3} Appellant Nestle R&D Center, Inc. (“Nestle“) initiated the present proceedings by filing an application for a refund of corporation franchise tax for tax year 2001. The substantive basis for the claim lies in the refundable credit for Ohio job creation provided by
{¶4} The Tax Commissioner found that Nestle had filed its application after the three-year limitations period provided by
{¶5} Before this court, Nestle renews its contention that the three-year statute of limitations set forth in
B. The job-creation tax credit
{¶6} Enacted in 1992, Sub.S.B. No. 363 provided tax breaks designed to encourage job creation by businesses in Ohio. 144 Ohio Laws, Part II, 2642. The act originally provided a credit against the corporation franchise tax and the personal income tax. The enabling provisions are codified at
{¶7} The credit becomes available through a formal agreement between the taxpayer and the Ohio Tax Credit Authority, a panel chaired by the Director of Development that consists of four other members selected by the governor and legislative leaders.
{¶8} It is significant that the job-creation tax credit is refundable in nature.
C. The grounds for dismissal by the Tax Commissioner and the BTA
{¶9} The record is not extensively developed in this case, but it does contain four Ohio Tax Credit Authority certificates that pertain to taxable years 2000 through 2003. Each of the certificates refers to the underlying agreement between Nestle and the authority: the agreement was entered into on April 20, 2004, and extended from January 1995 to December 2004. For each year in the record, the certificate allowed a credit in the amount of 60 percent of the income-tax withholding attributable to newly created jobs during the taxable year.1
{¶10}
{¶11} The commissioner predicated his dismissal on the timing of the “payment” under
{¶12} On December 6, 2004, the Department of Development issued the certificate verifying the amount of credit for the 2000 taxable year, i.e., for franchise tax year 2001. That agency computed the 2001 credit to be $43,696.80, which is 60 percent of the new-employee withholding. Nestle thereafter filed its application for refund on January 6, 2005, asking for a refund in the amount of $43,697.
{¶13} The commissioner ruled that the application was untimely because it was filed more than three years after October 15, 2001, and he dismissed the application. For its part, Nestle argued that it had timely filed its application because the certificate that authorized the credit for the 2001 tax year was issued by the Department of Development on December 6, 2004, and in Nestle‘s view, that event triggered the running of the three-year limitations period.
{¶14} On appeal, the BTA rejected Nestle‘s argument, and adopted the Tax Commissioner‘s position that the three-year limitations period began when the tax payments as to 2001 were deemed to have been made: October 15, 2001. As a result, Nestle filed its application too late, and the BTA accordingly affirmed the commissioner‘s dismissal.
{¶15} In its appeal to the court, Nestle renews the arguments that it asserted below.
II. Analysis
A. The accrual of the refund claim started the running of R.C. 5733.12(B) ‘s limitations period
{¶16} Under our cases, “[t]he BTA is responsible for determining factual issues and, if the record contains reliable and probative support,” the court will affirm. Satullo v. Wilkins, 111 Ohio St.3d 399, 2006-Ohio-5856, 856 N.E.2d 954, ¶ 14, quoting Am. Natl. Can Co. v. Tracy (1995), 72 Ohio St.3d 150, 152, 648 N.E.2d 483. On the other hand, the court “‘will not hesitate to reverse a BTA decision that is based on an incorrect legal conclusion.‘” Satullo, id., quoting Gahanna-Jefferson Local School Dist. Bd. of Edn. v. Zaino (2001), 93 Ohio St.3d 231, 232, 754 N.E.2d 789. This appeal raises a question of law: with respect to the job-creation tax credit at issue, did the three-year limitation period prescribed by
{¶17}
{¶18} “[A]n application to refund * * * the amount of taxes * * * that are overpaid, paid illegally or erroneously, or paid on any illegal, erroneous, or excessive assessment * * * shall be filed with the tax commissioner, on the form prescribed by the commissioner, within three years from the date of the illegal, erroneous, or excessive payment of the tax * * *. For purposes of division (B) of this section, any payment that the applicant made before the due date or extended due date for filing the report to which the payment relates shall be deemed to have been made on the due date or extended due date.”
{¶19} According to the commissioner, the statute‘s plain language starts the running of the three-year period at the time the payment is made (or, as in the present case, was deemed to have been made). Nestle argues that when the payments in this case were deemed to be made, they were not yet illegal or excessive; they became illegal and excessive retroactively when the Department of Development issued the certificate for taxable year 2000, which verifies the amount of credit for tax year 2001. Alternatively, by verifying the credit for tax year 2001, the certificate allowed the taxpayer and the state to ascertain the entitlement to the credit for the first time in December 2004.
{¶20} In sum, Nestle contends in various ways that the refund claim accrued on December 6, 2004, and that the limitations period began running on that date. Under this interpretation, the filing of Nestle‘s application for refund the following month fell well within the three-year period.
{¶21} We agree with Nestle.
{¶22} In Ohio Bell, we addressed a claim that public-utility excise taxes already paid should be abated. Several years after the tax payments at issue, the Public Utilities Commission ruled that the rates Ohio Bell charged during those earlier years had been excessive, and the commission ordered Ohio Bell to make restitution to customers. Because Ohio Bell had paid excise taxes on the amount it was being ordered to refund to its customers, the company sought an abatement of those taxes. Ohio Bell pursued that claim through a provision of the former General Code that is now codified at
{¶23}
{¶24} In rejecting the commissioner‘s position, we noted that “[t]here was nothing illegal or erroneous about the payment of taxes when originally made,” and that payment “became illegal or erroneous only when the Public Utilities Commission made its order of refund.” Id., 142 Ohio St. at 258, 51 N.E.2d 718. We concluded that “the overpayment took place on that date [i.e., the date of the PUCO order] and came within the time fixed by law.” Id.
{¶25} To be sure, in Coca-Cola, 54 Ohio St.2d 1, 8 O.O.3d 1, 374 N.E.2d 400, we distinguished Ohio Bell by observing that unlike the statute at issue in Ohio Bell,
{¶26} Applying the reasoning of Ohio Bell to this case requires us to consider when the payments at issue became illegal and excessive under
{¶27} In fact, the language of the statutes supports Nestle‘s argument. As discussed,
{¶28}
{¶30} We conclude that just as the PUCO order retroactively established that the excise-tax payments in Ohio Bell had been illegal and excessive, the issuance on December 6, 2004, of the certificate for taxable year 2000 retroactively established the illegal and excessive character of payments attributable to the tax year 2001 up to the amount of the credit (and also that the taxpayer would be entitled to collect the excess of credit over payments, if any). At that point, the refund claim accrued for purposes of the limitations period, and as a result, the filing of the refund claim in January 2005 was timely.
B. The cases the Tax Commissioner relies on are not apposite
{¶31} The Tax Commissioner argues that Coca-Cola, 54 Ohio St.2d at 5, 8 O.O.3d 1, 374 N.E.2d 400, controls the present case. According to the commissioner, Coca-Cola establishes that refund claims under
{¶32} As already discussed, entitlement to a refund under
{¶33} Coca-Cola itself falls into this usual category. In that case, the corporate taxpayers had paid for the tax year 1972 under the income method for computing franchise-tax liability, which the legislature had newly enacted during 1971. In 1975, this court decided that imposing the income method in tax year 1972 on taxpayers whose accounting year had already ended before the income method became law violated the Ohio Constitution. Lakengren, Inc. v. Kosydar (1975), 44 Ohio St.2d 199, 73 O.O.2d 502, 339 N.E.2d 814. In response to Lakengren, the taxpayers in Coca-Cola filed refund claims, but this court held that the refund claims were barred by the three-year limitation set forth in
{¶34} Given these underlying facts, Coca-Cola does not resolve the issue presented by Nestle in this case because the taxpayers in Coca-Cola paid the tax in compliance with a law that was, at the very time the payments were made, unconstitutional. Thus, illegality clearly coincided with the payments in Coca-Cola, and as a result, Coca-Cola does not on its face foreclose Nestle‘s argument in this case.
{¶35} Moreover, Coca-Cola did not involve a taxpayer seeking the benefit of a refundable credit. To the extent that such a credit exceeds the amount of actual payments that have been made, there has been no “payment,” and as a result, there is no absolute point of reference to tell the taxpayer when to file its refund claim. Coca-Cola‘s iron link between the running of the three-year limitations period and an actual past payment does not provide direct authority for deciding the present case.
{¶36} The commissioner also places heavy reliance on SCM Chems., Inc. v. Wilkins, 106 Ohio St.3d 43, 2005-Ohio-3676, 831 N.E.2d 417, but that case does not advance his claim. Quite simply, the issue the court confronted in SCM Chems. differed from the one presented in this case. In the present case, Nestle and the Tax Commissioner dispute when the three-year limitations period under
{¶37} In SCM Chems., the taxpayer pointed to a provision in the substantive law of pollution-control certificates that made those certificates effective retroactively. The taxpayer then argued that when a pollution-control certificate was issued after the two-year period for amending property tax assessments had expired pursuant to
C. Ohio Adm.Code 122:7-1-06(E) does not alter the outcome
{¶38} Although neither party has cited it, Ohio Adm.Code 122:7-1-06(E) potentially applies to this case. Subsection (E) was added in 2003 and became
{¶39} We recognize that this provision views the limitations period as running from some time before the verification certificate has been issued. But concern for the viability of the rule cannot distract us from our duty to construe and apply the statutes that were in force when this case arose.
{¶40} To be sure,
{¶41} For all the foregoing reasons, the BTA erred when it affirmed the commissioner‘s dismissal of Nestle‘s refund claim. We therefore reverse and remand for further proceedings.
Decision reversed and cause remanded.
MOYER, C.J., and PFEIFER, LUNDBERG STRATTON, O‘CONNOR, O‘DONNELL, LANZINGER, and CUPP, JJ., concur.
Vorys, Sater, Seymour & Pease, L.L.P., Raymond D. Anderson, and David A. Froling, for appellant.
Richard Cordray, Attorney General, and Sherry Maxfield and Alan P. Schwepe, Assistant Attorneys General, for appellee.