Case Title: Comptroller v. Kolzig

Citation: 375 Md. 562

Docket Number: 127/02

State: maryland

Court: Maryland Supreme Court

Date: 2003-06-16T00:00:00Z

Document:
Comptroller of the Treasury v. Kolzig
No. 127, September Term 2002
HEADNOTE:
INCOME TAX, STATUTORY CONSTRUCTION, PLAIN LANGUAGE,
LEGISLATIVE INTENT, STATUTE OF LIMITATIONS 
The limitations period prescribed in Maryland Code (1989, 1997 Repl. Vol.) § 13 - 1101 (a)
of the Tax General Article applies to an a amended income tax return as well as an original
income tax return.  
IN THE COURT OF APPEALS OF MARYLAND
No. 127
September Term, 2002
COMPTROLLER OF THE TREASURY
v.
OLAF A. KOLZIG
Bell, C.J.
Eldridge
Raker
Wilner
Cathell
Harrell
Battaglia,
JJ.
Opinion by Bell, C.J.
  
Filed:   June 16, 2003
1Unless otherwise indicated, future references will be to Maryland Code (1989,
1997 Repl. Vol.)  of the Tax General Article.
The issue this appeal presents is whether “return,” as used in Maryland Code (1989,
1997 Repl. Vol.) § 13 - 1101 of the Tax General Article1 includes, in addition to the original
income tax return, an amended income tax return filed in connection therewith, with the
result that the limitations period prescribed by that section applies to both.    The Maryland
Tax Court answered, “no.”  On judicial review initiated by the Comptroller of the Treasury,
the appellant, the Circuit Court for Anne Arundel County agreed.  We shall affirm the
judgment of the Circuit Court.
The facts, which are straightforward, are not in dispute.   Olaf A. Kolzig, the
appellee, a professional hockey player, filed for the tax years 1995 and 1996 income tax
returns, on which he acknowledged that he was a Maryland resident.    He subsequently filed
an amended income tax return for each of the tax years, on each then claiming non-resident
status and, as a result, a refund.   The amended returns were filed in April, 1998, prior to the
running of limitations as to either of the returns.   The appellant paid the appellee the refund.
After conducting an audit of the amended income tax returns and the appellee’s claim of
non-resident status, however, the appellant assessed the appellee the amount of the refunds
he had been paid.    That occurred on December 4, 2000, more than three years after both
of the original income tax returns had been filed.     The appellee appealed the assessment
to the Tax Court and moved to dismiss the assessment as untimely, arguing that it was
barred by the statute of limitations.    The Tax Court agreed with the appellee and, so,
2
granted the appellee’s motion.   Dissatisfied with that result, the appellant sought judicial
review in the Circuit Court for Anne Arundel County, which, as already indicated, affirmed
the judgment of the Tax Court.    Aggrieved, the appellant noted an appeal to the Court of
Special Appeals.  While the case was pending, but prior to any proceedings in that court,
this Court, on its own motion, issued the writ of certiorari.   Comptroller v. Kolzig, 2003
Md. LEXIS 95, 818 A. 2d 1105 (2003).   
Section 13 - 1101 provides:
“(a)  3-year limit.- Except as otherwise provided in this section, an assessment
of financial institution franchise tax or income tax may not be made after 3
years from the later of:  
“(1) the date that the return is filed; or  
“(2) the date that the return is due.  
“(b)  No limit.- An assessment of financial institution franchise tax or income
tax may be made at any time if:  
“(1) a false return is filed with the intent to evade the tax;  
“(2) a willful attempt is made to evade the tax;  
“(3) a return is not filed as required under Title 8 or 10 of this
article;  
“(4) an incomplete return is filed; or  
“(5) a report of federal adjustment is not filed within the period
required under § 13 - 409 of this title.  
“(c)  1-year limit.- If a report of federal adjustment is filed within the time
required under § 13 - 409 of this title, the tax collector shall assess the
financial institution franchise tax or income tax within 1 year after the date on
which the tax collector receives the report.”
Since none of the conditions addressed in subsections (b) and (c) are applicable to the facts
2
Senate Bill 102 was introduced, at the request of the Comptroller, as a
Departmental Bill, by the Chairman of the Budget and Taxation Committee to address the
issue that this case presents.   Its purpose, as stated in the legislation, was, inter alia, to
“provid[e] that the Comptroller shall make certain assessments within a certain period
following the date an amended income tax return is filed.”   As filed, the bill added a new
section (d), which provided:
“An assessment of income tax arising out of an amended return shall be
made within 3 years after the date that the amended return is filed.” 
It also provided for a prospective effective date of July 1, 2003.    
Senate Bill 102 was enacted, with amendments, see 2003 Md. Laws, ch. 7, and
signed by the Governor on April 8, 2003, effective July 1, 2003.   As enacted, it is 
applicable to all amended tax returns filed after June 30, 2003 and  provides:   
“(d)(1) Subject to the provisions of paragraph (2) of this subsection, an
assessment of income tax arising out of an amended return shall be made
within 3 years after the date that the amended return is filed. 
“(2) An assessment of income tax under paragraph (1) of this subsection
shall be related to changes made by the amended items in the return.” 
 
3
sub judice, only subsection (a) is at issue in this case.2   As to it, the question to be answered
is the reach of the limitations period it prescribes, whether, as the appellant argues, it is
applicable in the case of both original income tax returns and amended income tax returns,
running from the filing of whichever one produces the assessment at issue, or, as the
appellee argues, it applies only to an original income tax return.
Determining the meaning of § 13 - 1101 (a) involves statutory construction, the rules
for which are well-settled.  Toler v. Motor Vehicle Admin., 373 Md. 214, 221, 817 A. 2d
229, 233 (2003);   Gallegos v. Allstate Ins. Co., 372 Md. 748, 756, 816 A. 2d 102, 107
(2003); Dyer v. Otis Warren Real Estate Co., 371 Md. 576, 580 - 81, 810 A.2d 938, 941
(2002).   We approach the interpretation of a statute with the goal of determining the
4
intention of the Legislature in enacting it.  Dyer, 371 Md. at 580-81, 810 A. 2d at 941.     In
that regard, we begin our inquiry with the words of the statute and, when the words of the
statute are clear and unambiguous, according to their commonly understood meaning, we
ordinarily end our inquiry there also. Chesapeake and Potomac Tel. Co. v. Dir. of Fin. for
Mayor and City Council of Baltimore, 343 Md. 567, 578-79, 683 A.2d 512, 517 (1996).  “If,
and only if, it proves impossible to determine what the Legislature intended with respect to
the question before us from the language alone, we turn to other indicia that have proved
useful in discerning that intent.”  Gallegos, 372 Md. at 756,  816 A. 2d at 107.  See  Caffrey
v. Liquor Control, 370 Md. 272, 291-92, 805 A.2d 268, 279 (2002); Chen v. State, 370 Md.
99, 106, 803 A.2d 518, 521-22 (2002); Witte v. Azarian, 369 Md. 518, 525-26, 801 A.2d
160, 165 (2002).    Thus, when the language of a  statute is plain and unambiguous, a court
may neither add nor delete language so as to “reflect an intent not evidenced in that
language,” Condon v. State, 332 Md. 481, 491, 632 A.2d 753, 755 (1993), or construe the
statute with “‘forced or subtle interpretation’ that limit or extend its application.’ Id.
(quoting  Tucker v. Fireman's Fund Insurance Co., 308 Md. 69, 73, 517 A.2d 730, 732
(1986)).
Relying on the canons of statutory construction, emphasizing in particular, quoting,
respectively,   Holbrook v. State, 364 Md. 354, 364, 772 A. 2d 1240, 1246 (2001);  Brown
v. State, 285 Md. 469, 474, 403 A. 2d 788, 791 (1979); Graves v. State, 364 Md. 329, 346,
772 A. 2d 1225, 1235 (2001); Haupt v. State, 340 Md. 462, 471,667A. 2d 179, 183 (1995),
3Section 13-301 provides: “A tax collector may examine or audit a tax return filed
with the tax collector.”  
4Section 13-401 provides:
“(a)  In general.- Except as provided in subsection (b) of this section, if a
tax collector examines or audits a return and determines that the tax due
exceeds the amount shown on the return, the tax collector shall assess the
deficiency.  
“(b)  Credits.- A tax collector shall allow a credit against any sales and use
tax deficiency that would otherwise be assessed for any amount of sales and
use tax that the tax collector determines the person who filed the return
overpaid on or before the date the deficiency was due.”  
5
the admonition to courts to: give the words of a statute “their natural and usual meaning in
the context of the Legislature's purpose and objective in enacting the statute,” avoid
“resorting to subtle or forced interpretations for the purpose of extending or limiting [the
statute's] operation,” read statutes from a “commonsensical perspective to avoid a farfetched
interpretation,” so as to reconcile and harmonize all of its parts, as much as possible, and
interpret the language in context, the appellant maintains that the interpretation given § 13-
1101 (a) by the Tax Court and the Circuit Court “stands the statutory language on its head.”
(Appellant's brief, at 5).  He reasons: “[t]he natural and usual meaning of the word ‘return’
is tax return, and an amended return fits within this definition.  It is one type of ‘return’, and
use of the word ‘return’ by the statute does not inherently prefer one adjective
—‘original’—over another.”  Id.   For support, the appellant directs our attention to §§ 13-
3013 and 13 - 401,4 both permitting the Comptroller to audit tax returns, without
differentiating between an original return and an amended one.  The appellant also relies on
Comptroller v. Fairchild Indus., 303 Md. 280, 493 A. 2d 341 (1985).
6
The appellee sees the matter totally differently.    He maintains that  the interpretation
that the Maryland Tax Court and the Circuit Court gave § 13 - 1101 (a) is the only
reasonable interpretation.  Aside from urging that the language of the statute is clear and
unambiguous and, thus, by its very terms, excludes amended income tax returns, the
appellee relies on legislation introduced by the appellant during the 2003 Legislative
Session, now enacted, but not effective until July 1, 2003, see note 2, supra, which
specifically provided that assessments of income tax  “arising out of an amended return shall
be made within three years after the date that the amended return is filed” and the Senate
amendment limiting the assessments as a result of amended returns to “changes made by the
amended items in the return.”   
As we have seen, pursuant to § 13 - 1101 (a), “an assessment of ... income tax may
not be made after  three years from the later of: (1) the date that the return is filed; or (2) the
date that the return is due.”   Thus, limitations prescribed by that statute runs from the later
to occur of two dates, when the return is filed or when the return is due.   So phrased, the
statute is clear and not at all ambiguous and the Legislature’s intention, with regard to the
meaning of “return” is patent.    Only an original income tax return has a due date; an
amended return, because it changes one also filed and in some particular, presumably
discovered after the filing of the return being amended, does not, and, indeed, can not have
a due date.  Moreover, the words of the statute provide for but one filing date, one due date
and one return, expressly referring  only to “the return.”   Finally, by tying the running of
5Maryland Code (1957, 1980 Repl. Vol.), Article 81, § 310(c) provided that
interest shall be paid on income tax refunds “accounting from the date the return required
under this subtitle was due to be filed, but interest may not be paid on tax refunds now
pending or subsequently filed pursuant to this section if the tax originally paid was paid in
whole or in part by reason of a mistake or error on the part of the taxpayer and not
attributable to the State or any department or agency thereof.”
7
limitations to the latest to occur of  two dates relevant to the filing of an income tax return,
without providing that one of those two dates relates to a different return, the General
Assembly made clear that “the return” referred to in  paragraph (1) is the same “return”
referred to in paragraph (2).  
 Fairchild Industries is not to the contrary.   That case did not involve an
interpretation of § 13 - 1101 (a).   Rather, it was whether, under Maryland Code (1957, 1980
Repl. Vol.), Article 81, § 310(c),5 a corporate taxpayer was entitled to interest on a state
income tax refund paid in respect to a carryback of a net operating loss and, if so, the date
from which the interest was computed.  303 Md. at 282, 493 A. 2d at 342.    Fairchild filed
amended tax returns for the tax years 1975, 1976 and 1977, in which it claimed tax refunds
for those years based on losses incurred in 1978.   Although it filed the amended return in
September 1979, Fairchild sought interest computed from the date the original returns were
filed.  The comptroller paid the principal amount due, but refused to pay any interest.  Id.
at 282 - 83, 493 A.2d at 342.   This Court determined that interest was payable.  Section 310
(c) provided that interest was payable “from the date the return required under this subtitle
was due to be filed.”   Id.  at 287, 493 A.2d at 344.  The Comptroller argued that “return,”
8
as used  in § 310 (c) referred to the return generating the refund upon which the interest is
claimed.  Fairchild, on the other hand, relying on the plain meaning rule, argued that the
interest must be computed from the date of the original returns and that, to hold otherwise,
would be to rewrite the statute.  Id.  at 287 - 88, 493 A.2d at 344 - 45. Concluding from the
differing positions of the parties that “a doubt or ambiguity exists regarding the meaning and
application of the phrase in question, in the context of its usage in § 310 (c),” id.  at 287 -
88, 493 A.2d at 344 - 45, the Court opted for the construction urged by the Comptroller. 
It explained:
“As we see it, to interpret the statute to afford the taxpayer a right to
interest, commencing from the due date of the original return, rather than
from the date the amended return was filed, is inconsistent with common
sense and with the legislative purpose in authorizing interest on tax refunds.
The interest provisions contained in Article 81 of the Maryland Code are
designed to commence the running of interest from the time that the operative
fact arises which entitles a taxpayer or the State to the principal amount in
question and for the period that such amounts were held by or subject to the
use of the other party.
  
“The event which gave rise to the overpayment of Fairchild's 1975,
1976 and 1977 taxes was its net operating loss in 1978 -- a year subsequent
to the year in which the excess taxes were actually paid. Had there been no
net operating loss incurred in 1978, there would have been no net operating
loss carryback to the three previous years. Before Fairchild incurred net
operating losses in 1978, it had no basis for claiming a refund for
overpayment of taxes. From the extended due dates of the original returns
until the amended returns were filed, the State was legally entitled to the use
and possession of Fairchild's tax payments. The State had no obligation to pay
Fairchild a tax refund, let alone interest on the refund, until the later ensuing
net operating loss arose and the carryback was claimed. That the law permits
a taxpayer to subsequently carryback a net operating loss and to obtain a
refund in no way reflects a taxpayer's right to derive the benefits of the funds
during the intervening period. Plainly, the nature and context of a net
9
operating loss carryback supports the end result that where a refund for taxes
arises from a net operating loss carryback, interest should be computed from
the date the amended return claiming the net operating loss carryback is
filed.” 
Id.  at 288 - 89, 493 A.2d at 345 (footnote omitted).
Clearly, the total illogic of requiring the payment of interest computed for a period
prior to the refund being due was the basis of the Fairchild decision.     It was the context
of Fairchild that rendered the meaning of § 310 (c) ambiguous.   The circumstances of the
case sub judice are by no means comparable.  Certainly, the fact that §§ 13 - 301 and 13 -
401 may be interpreted inconsistently with § 13 - 1101 (a), without more, in particular, a
context similar to that in Fairchild, does not suffice.
We may confirm the meaning reached by reference to the words of the statute by
considering the purpose, goal or context of the statute, or other extraneous considerations
relevant to, and bearing on the statute’s meaning.  See Total Audio-Visual Sys. v. Dept. of
Labor, Licensing & Regulation, 360 Md. 387, 395, 758 A.2d 124, 128 (2000); Prince
George’s County v. Viera, 340 Md. 651, 658, 667 A. 2d 898, 901 (1995); State v.
Thompson, 332 Md. at 1, 7, 629 A.2d 731, 732.  See also Taylor v. Friedman, 344 Md. 572,
582, 689 A.2d 59, 63 (1997) (even when language of a statute is plain and unambiguous,
courts may look to a legislative purpose to support or confirm plain meaning).   Although
certainly not required, confirmation of the interpretation we give § 13-1101 (a) can be made
by reference to the interpretation given a similar statute by the federal courts.
Section 10 - 107 of the Tax-General Article requires, “[t]o the extent practicable, the
10
Comptroller [to] apply the administrative and judicial interpretations of the federal income
tax law to the administration of the income tax laws of this State.”    In Lyon v. Campbell,
324 Md. 178, 185, 596 A.2d 1012, 1015 (1991), despite rejecting its application in that case,
this Court explained that § 10 - 107 applies where the Maryland tax code is “‘inextricably
keyed’” to the federal tax code “by virtue of its adoption of the federal law, (quoting
Comptroller v. Chesapeake Corp., 54 Md. App. 208, 213 -14, 458 A.2d 459, 463 (1983)),
and, thus, is designed to avoid the “anomalous result” of a taxpayer having different result
regarding payment of his Maryland and federal tax, even though the Maryland tax provision
incorporates the federal tax provision.  See Comptroller v. Diebold, Inc., 279 Md. 401, 409,
369 A.2d 77, 82 (1977) (holding that where the Maryland tax code incorporates a provision
in the federal tax code, the interpretation of the Maryland and federal tax provisions should
be consistent).  More recently, in Comptroller v. Gannett Co., 356 Md. 699, 720, 741 A.2d
1130, 1141 (1999), we observed:
“Section 10 - 107 is not a direct authorization for appellant to incorporate into
the Maryland tax code whatever I.R.C. provisions it sees fit to apply; rather,
section 10 - 107 expresses a policy of comity that, when exercising any
legislatively-authorized powers that parallel an I.R.C. provision, appellant
must comply with the judicial and administrative interpretations of that federal
statute.”
The section of the Federal Tax Code comparable to §13 - 1101 (a), 26 U.S.C. § 6501
(a) provides:
“(a) General rule. Except as otherwise provided in this section, the amount of
any tax imposed by this title shall be assessed within 3 years after the return
was filed (whether or not such return was filed on or after the date prescribed)
11
or, if the tax is payable by stamp, at any time after such tax became due and
before the expiration of 3 years after the date on which any part of such tax was
paid, and no proceeding in court without assessment for the collection of such
tax shall be begun after the expiration of such period. For purposes of this
chapter, the term "return" means the return required to be filed by the taxpayer
(and does not include a return of any person from whom the taxpayer has
received an item of income, gain, loss, deduction, or credit).”
Moreover, also relevant is § 6501 (c), and, in particular, three of the exceptions it prescribes
to the limitations period.   Those exceptions provide:
“(1) False return. In the case of a false or fraudulent return with the intent to
evade tax, the tax may be assessed, or a proceeding in court for collection of
such tax may be begun without assessment, at any time. 
“(2) Willful attempt to evade tax. In case of a willful attempt in any manner to
defeat or evade tax imposed by this title (other than tax imposed by subtitle A
or B), the tax may be assessed, or a proceeding in court for the collection of
such tax may be begun without assessment, at any time. 
“(3) No return. In the case of failure to file a return, the tax may be assessed, or a
proceeding in court for the collection of such tax may be begun without assessment,
at any time.”
As the appellee points out, these three exceptions in the federal law are substantially identical
to § 13 - 1101 (b) (1) - (3).
In  Badaracco v. Commissioner of Internal Revenue, 464 U.S. 386, 388, 104 S. Ct.
756, 759,  78 L. Ed. 2d 549, 554 (1984), the Supreme Court of the United States observed,
as to this section, that it  “establishes a general 3-year period of limitations 'after the return
was filed' for the assessment of income and certain other federal taxes,” noting, however, that
“the filing of an amended return in a non-fraudulent situation does not serve to extend the
period within which the Commissioner may assess a deficiency.”  Id.  at 398, 104 S. Ct. at
12
762, 78 L.Ed.2d at 558.   For the latter proposition, it cited  Zellerbach Paper Co. v.
Helvering, 293 U.S. 172, 181,  55 S. Ct. 127, 131,  79 L. Ed. 264, 269 (1934), in which it had
earlier held that “a second return, reporting an additional tax, is an amendment or supplement
to a return already upon the files, and being effective by relation does not toll a limitation
which has once begun to run.”
The Circuit Court concluded, as the appellee argues, that “the Maryland provision
parallels the federal limitations provision” and that “it [is] practicable to apply the federal
interpretation and create continuity between the two tax systems.”   We agree.
JUDGMENT AFFIRMED, WITH COSTS.