Title: Dept. of Rev. v. Faris

State: oregon

Issuer: Oregon Supreme Court

Document:

FILED: July 17, 2008
IN THE SUPREME COURT OF THE STATE OF OREGON
DEPARTMENT OF REVENUE,
Plaintiff-Respondent,
v.
DENIS J. FARIS
and CAROLYN M. FARIS,
Defendants-Appellants.
(TC 4755; SC S055458)
En Banc
On appeal from the
Oregon Tax Court.*
Submitted on the
record April 22, 2008.
Denis J. Faris, and
Carolyn M. Faris, appellants pro se, filed the brief for defendants-appellants.
Melisse S. Cunningham,
Assistant Attorney General, Salem, filed the brief for plaintiff-respondent. 
With her on the brief was Hardy Myers, Attorney General.
WALTERS, J.
The judgment of the Tax Court is affirmed.
*19 OTR 357 (2007)
WALTERS, J.
In this appeal from a decision of the
Oregon Tax Court, taxpayers challenge a notice of deficiency issued by the
Department of Revenue (department) as failing to comply with the statutory
certification requirement of ORS 305.265(2).  Taxpayers assert that the notice
was not properly certified because it did not include a hand signature attesting
that it was issued in good faith.    
ORS 305.265(2) provides that the
notice of deficiency shall:
"(a) State the reason for each adjustment;
"(b) Give a reference to the statute, regulation
or department ruling upon which the adjustment is based; and
"(c) Be certified by the
department that the adjustments are made in good faith and not for the
purpose of extending the period of assessment."
(Emphasis added.)
 In this case, the department issued
taxpayers a notice of deficiency that states the reason that the department
adjusted taxpayers' personal income tax return and contains references to the
statutes supporting that adjustment, as required by ORS 305.265(2)(a) and (b). 
The notice is printed with the name of the department, and the first page of
the notice contains the following sentence:  "All adjustments have been
made in good faith, and are not for the purpose of extending the period during
which the department may assess additional taxes against you."  Beneath
that sentence and a summary of the deficiency and the amounts due are printed
the name, title, location, and telephone number of Larry Boyd, the department
auditor who conducted the audit and issued the notice of deficiency.  
After issuing the notice of deficiency,
the department issued a notice of assessment to assess the deficiency.  Taxpayers
appealed from the notice of assessment to the Magistrate Division of the Tax
Court, claiming that the notice of deficiency did not comply with the certification
requirement of ORS 305.265(2)(c) because it did not contain the words "I
certify" or "it is certified" or a handwritten signature.  The magistrate
issued a decision in favor of taxpayers, and the department appealed that
decision to the Regular Division of the Oregon Tax Court.  The parties filed
cross motions for summary judgment on the issue of whether the notice of
deficiency complied with the statutory certification requirement.  The tax court
decided the issue in favor of the department and granted its motion.  The tax
court then determined the remaining issues and entered judgment against
taxpayers for the amount of the deficiency.  Dept. of Rev. v. Faris, 19
OTR 357 (2007).  Taxpayers appealed, raising the issue of the department's
compliance with the statutory good faith certification requirement. (1)  We affirm
the decision of the tax court.  
We begin our analysis with 
Preble v. Dept. of Rev., 331 Or 320, 14 P3d 613 (2000).  In that case, the court
held that a notice of deficiency that does not include the certification
required by ORS 305.265(2)(c) cannot form the basis for a department
assessment.  Under Preble, if ORS 305.265(2)(c) requires a handwritten
signature, the judgment against taxpayers would be invalid.  We therefore turn to
the arguments of the parties on that question of statutory interpretation. 
The parties initially agree,
correctly, that the phrase "[b]e certified by the department" in ORS
305.265(2)(c) requires the department to issue its notices of deficiency in
writing.  This court has held that, when "used in legislative enactments[,]"
certification cannot be oral; it requires a writing as a record for future
reliance.  State ex rel Anderson v. Paulus, 283 Or 241, 245-46, 583 P2d
531 (1978).  Taxpayers take their argument further, however, and contend that,
to be certified, a notice of deficiency must be hand signed.  Taxpayers assert that
the issuance of a computer-generated document with the name of the auditor printed
on it is insufficient to meet the requirement of ORS 305.265(2)(c).  The
department disagrees, grounding its argument, first and foremost, in the
definition of the word "certify."
The word "certify" is not statutorily
defined.  Thus, we look to the dictionary.  Webster's first definition
of the verb "certify" is the one that is relevant here:
"1:  to attest esp. authoritatively or formally: a:  CONFIRM
* * * b:  to present in formal communication, esp. in a document under hand or
seal     * * * c:  to confirm or attest often by a document under hand or seal
as being true, meeting a standard, or being as represented * * *[.]"
Webster's Third New Int'l Dictionary 367 (unabridged
ed 2002).  The basic definitions in Black's are similar:
"1.  To authenticate or certify in writing.  2.  To
attest as being true or meeting certain criteria."
Black's Law Dictionary 241 (8th ed 2004).
Those definitions indicate that, to
certify a statement, the actor must take formal action that attests to the
truth of that statement.  Those definitions also indicate that such formal
action "especially" or "often" occurs "under hand or
seal."  Thus, the word "certify" can mean "hand signed,"
but it does not necessarily carry that meaning.  Perusal of some of the thousands
of statutes and rules in Oregon that use the terms "certify," "certified,"
or "certification" demonstrates that the legislature has used those
terms in a variety of ways without always mandating a hand signature.  For
example, ORS 133.069 sets forth the required contents of a criminal citation issued
with a form of complaint, and provides, in part, that the "peace officer
must certify that the peace officer has sufficient grounds to believe,
and does believe, that the person named in the complaint committed the offense
* * *."  ORS 133.069(1)(c)(C) (emphasis added).  The legislature
apparently contemplated that the officer could accomplish that certification by
hand signing the criminal citation, but did not necessarily impose that
requirement.  ORS 133.073(1) permits an officer to electronically file a
criminal citation "without [his or her] actual signature," and provides
that, by doing so, the officer is deemed to "certify" the citation.  Other
statutes or rules impliedly distinguish, rather than equate, signature and
certification.  ORS 244.110(1), for example, provides that certain statements
of economic interest "shall be signed and certified as true by the
person required to file [them] * * *."  (Emphasis added.)
Although the legislature's intent is not
immediately obvious from its use of the word "certified" alone, the remainder
of the text at issue in ORS 305.265(2)(c) provides helpful context.  That provision
requires that the department, not an individual departmental agent,
certify that the adjustments are made in good faith.  The department is an entity
that, through its agents, can take effective action, but as an entity it does
not have the ability to hand sign a document.  The legislature's choice to charge
an entity, rather than an individual, with the responsibility to certify notices
of deficiency lends support to the department's argument that the legislature
did not intend to require certification by hand signature.
The department also points to the predecessor
statute to ORS 305.265, former ORS 314.405(1) (1969), as an indication that
the legislature did not intend to require a hand signature. (2)  See 
Carlson v. Myers, 327 Or 213, 223, 959 P2d 31 (1998) (first-level PGE
analysis includes earlier versions of same statute as "context") (citing 
Krieger v. Just, 319 Or 328, 876 P2d 754 (1994)).  The prior statute required
that a notice of deficiency be certified by the individual auditor who audited
the return:
"The notice [of deficiency] shall state the reason for
each proposed adjustment to the return and a reference to the statute,
regulation or department ruling upon which the proposed adjustment is based. 
Each notice of deficiency and proposed assessment shall be certified by the
auditor who audited the return that he has audited the return and that the
proposed adjustments to the return are made in good faith and not for the
purpose of extending the period of assessment."
Former ORS 314.405(1) (1969) (emphasis added).  The
department assumes that the prior statute required the auditor's hand signature (3) and contends
that the change in the statutory text was designed to eliminate that signature
requirement:  By eliminating the requirement that the department's auditors sign
notices of deficiency, the legislature effectively eliminated the department's
obligation to affix any signature whatsoever to those documents.  
Taxpayers contend, to the contrary,
that the text of the predecessor statute supports their argument.  Specifically,
taxpayers argue that the prior text required that the individual auditor sign
the notice of deficiency to indicate that he or she had made the adjustments
reflected in the notice in good faith.  In taxpayers' view, the change to the
statute maintained the signature requirement, but broadened the class of
persons who could affix a signature to the notice to satisfy that requirement. 
According to taxpayers, departmental certification enables any "authorized
'certifier'" in the department to certify a notice of assessment -- eliminating
not the hand signature requirement, but the requirement that a particular
auditor do that signing.  
We conclude that the department's
interpretation of the amendment is the more persuasive, particularly given the
purpose of certification set forth in the statute.  That purpose is to give the
taxpayer notice of the deficiency and of the department's intention to make an
assessment based on it.  See ORS 305.265(2) (requiring the department to
give notice of deficiency). (4) The prior statute required the auditor who conducted the audit and
arrived at the deficiency determination to certify that he or she did so in
good faith.  The current statute requires that the department attest to the
good faith of the auditor.  The most logical conclusion is that, when the
legislature eliminated the requirement of certification by the auditor, it did
so to effect a meaningful change -- elimination of the signature requirement --
not to mandate a signature by a different departmental agent who would lack the
personal knowledge of the auditor.
Taxpayers urge us to proceed beyond
the statutory text and context to the legislative history of ORS 305.265(2), and
they argue that we will find support for their position in that examination.  The
Tax Court considered the statute's legislative history and explained:
"At an April 14, 1971, hearing, the
department proposed that the entire certification requirement be removed
because it wished to facilitate the use of computers in issuing assessments.  See
Tape Recording, Senate Committee on Taxation, HB 1324, Apr 14, 1971, Tape 8
Side A (statement of T. A. Lindstrom, Oregon Department of Revenue).  The
department wanted to eliminate any handwritten signature requirement because it
kept the department 'from being able to utilize [its] computer in computing and
sending out * * * notices' due to the fact that the NODs had to be returned 'to
the auditor who made the audit' for signature.  Id.  
"The bill later returned to committee amid
concerns about removing the entire certification requirement.  See
Minutes, Senate Committee on Taxation, May 7, 1971, 1.  Assistant Attorney
General Ted DeLooze and department representative Mike McCormack testified that
the department did not object to having the department certify the notices, but
that they did 'want to eliminate the hand signing by the individual auditor.' 
Id.  The 'bill was so amended * * *.'"
Dept. of Rev. v. Faris, 19 OTR 178, 183-84 (2006) (emphasis
added)(ellipses in original).
Taxpayers concede that the stated purpose
of the amendment was to eliminate the inefficiency that inhered in the
requirement of a hand signature by the auditor.  They emphasize, however, that,
at that 1971 hearing, the department representative did not expressly state
that the department wanted to eliminate all hand signing, only that it
wanted to "eliminate the hand signing by the individual auditor." 
Taxpayers argue that, by refusing to completely eliminate the certification
requirement, the legislature intended to ensure that the department would have
a real person read over the document and, by hand signing it, take
responsibility for it.  Without a hand signature, taxpayers assert, the necessary
manifestation of formality needed to turn a notice from a statement into a
certification of good faith is missing, and that a certification,
not a mere statement, is what the statute requires.
We conclude, from the text and context
of ORS 305.265(2) alone, that the legislature did not intend to require
a hand signature in order to certify a notice of deficiency.  Taxpayers
do not convince us that there is a need to consult legislative history, or that,
if we were to do so, our conclusion would be different.
We hold that, by requiring that notices
of deficiency "be certified by the department," the legislature did
not impose a requirement that a departmental employee hand sign those notices,
but, instead, required that the department assure taxpayers in writing, and
with a degree of formality, that the adjustments to their taxes were made in
good faith.  We further hold that the notice that was issued in this case met
that requirement and therefore was "certified" as required by ORS
305.265(2)(c).  
The judgment of the Tax Court is
affirmed.
1. Taxpayers
raise a number of arguments in addition to the certification argument, but they
are not well taken and do not merit discussion.
2. In 1971, the legislature amended former ORS 314.405(1)
(1969).  The 1971 version of that statute is substantially similar, and
identical in all relevant respects, to the current version of ORS 305.265.  ORS
305.265 itself, however, was not adopted until 1977.
3. We
do not decide that question and emphasize that the use of the word
"certified" does not, alone, necessitate that conclusion.
4. ORS 305.265(2) provides, in part:
"As soon as practicable after a report or
return is filed, the department shall examine or audit it, if required by law
or the department deems such examination or audit practicable.  If the
department discovers from an examination or an audit of a report or return or
otherwise that a deficiency exists, it shall compute the tax and give notice to
the person filing the return of the deficiency and of the department's
intention to assess the deficiency, plus interest and any appropriate penalty."