Title: In the matter of the Income Tax Protest of Raytheon Company
Citation: 2022 OK 32
Docket Number: 
State: Oklahoma
Issuer: Oklahoma Supreme Court
Date: April 5, 2022

In the matter of the Income Tax Protest of Raytheon Company Annotate this Case Justia Opinion Summary Corporate taxpayer Raytheon Company's 2012 income tax return was due on March 15, 2013. Raytheon filed its return on September 27, 2013, after securing an authorized extension of the deadline. Raytheon later discovered that the return overstated the company's annual income based upon the inadvertent inclusion of Arizona property sales. The company filed an amended 2012 return on September 27, 2016, claiming a refund of $321,444.00. The Oklahoma Tax Commission denied the refund claim, reasoning taxpayer submitted its demand more than three years after paying the taxes. An administrative law judge found the claimed refund was time barred under 68 O.S.2011, section 2373, and the Commissioners affirmed this finding. The company appealed, and after review the Oklahoma Supreme Court reversed, finding the taxpayer timely brought the claim for refund, having paid taxes to the Oklahoma Tax Commission upon filing its amended original return with a proper extension. Read more Want to stay in the know about new opinions from the Oklahoma Supreme Court? Sign up for free summaries delivered directly to your inbox. Learn More › You already receive new opinion summaries from Oklahoma Supreme Court. Did you know we offer summary newsletters for even more practice areas and jurisdictions? Explore them here . IN THE MATTER OF THE INCOME TAX PROTEST OF RAYTHEON COMPANY 2022 OK 32 Case Number: 116358 Decided: 04/05/2022 THE SUPREME COURT OF THE STATE OF OKLAHOMA NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL. IN THE MATTER OF THE INCOME TAX PROTEST OF RAYTHEON COMPANY AND SUBSIDIARIES RAYTHEON COMPANY AND SUBSIDIARIES Protestant/Appellant, v. OKLAHOMA TAX COMMISSION, Respondent/Appellee. APPEAL FROM OKLAHOMA TAX COMMISSION ¶0 Corporate taxpayer's 2012 income tax return was due on March 15, 2013. Taxpayer filed its return on September 27, 2013, after securing a statutorily authorized extension of the deadline. Taxpayer later discovered that the return overstated the company's annual income based upon the inadvertent inclusion of Arizona property sales. The taxpayer filed an amended 2012 return on September 27, 2016, claiming a refund of $321,444.00. The Oklahoma Tax Commission denied the refund claim, reasoning taxpayer submitted its demand more than three years after paying the taxes. An administrative law judge found the claimed refund was time barred under 68 O.S.2011, § 2373, and the Commissioners affirmed this finding. Taxpayer appealed and we retained the matter. We now reverse, finding the taxpayer timely brought the claim for refund, having paid taxes to the Oklahoma Tax Commission upon filing its amended original return with a proper extension. OKLAHOMA TAX COMMISSION ORDER NO. 2016-003-24-04 IS REVERSED DAVID ELDER, MATTHEW BROCKMAN, KEVIN B. RATLIFF, Hartzog, Conger, Cason & Neville, Oklahoma City, Oklahoma, Appellant Raytheon Company and Subsidiaries LEE PUGH, ELIZABETH FIELD, SHARON SITZMAN, Oklahoma City, Oklahoma, Appellee State of Oklahoma ex rel. Oklahoma Tax Commission PER CURIAM Facts & Procedural History ¶1 Raytheon Company and Subsidiaries (Raytheon) is the principal reporting corporation for a group of affiliates doing business in Oklahoma. For tax year 2012, Raytheon made estimated tax payments totaling $626,965.00 to the Oklahoma Tax Commission (OTC).1 Raytheon's tax return was originally due on March 15, 2013.2 After properly securing an extension, and making a final quarterly payment of $152,000.00 in March of 2013, Raytheon timely filed its 2012 Oklahoma Corporation Income Tax Return on September 27, 2013. The Form 512-2012 noted an overpayment of $84,456.00, and requested OTC apply the amount to Raytheon's 2013 corporate income tax liability. ¶2 Raytheon subsequently discovered an accounting error which resulted in an overpayment of more than twice the amount of Oklahoma taxes actually owed. Raytheon's original tax return unintentionally included sales of property from Arizona, resulting in an inflated Oklahoma sales factor.3 On September 27, 2016, Raytheon filed its Oklahoma Amended Corporation Income Tax Return (Form 511-X) for 2012, claiming a tax overpayment of $321,444.00. ¶3 On October 5, 2016, the OTC issued a letter denying Raytheon's claim for a refund, maintaining that the amended return "was not filed within the allowed time of three years from the date the tax was paid."4 Raytheon submitted its tax protest on November 22, 2016. After the OTC and Raytheon submitted joint stipulations and independent legal briefs, the assigned administrative law judge issued factual findings and legal conclusions. Therein, the ALJ recommended denying the protest because the refund claim fell outside of the applicable three (3) year period set forth in 68 O.S.2011, § 2373. On August 14, 2017, the OTC issued an order adopting the recommendations of the ALJ. Raytheon filed the present appeal from the OTC decision. We retained the matter and now reverse. Standard of Review ¶4 When the OTC acts in its adjudicative capacity, its orders will be affirmed on appeal if the record contains substantial evidence supporting the facts upon which the order is based and the order is free from legal error. Am. Airlines, Inc. v. State, ex rel. Okla. Tax Comm'n, 2014 OK 95, ¶ 25, 341 P.3d 56, 62. Whether Raytheon's refund claim was time-barred under 68 O.S.2011, § 2373 presents a question of statutory interpretation, and thus involves solely a legal issue which calls for de novo review. Id. Under the de novo standard of review, this Court possesses plenary, independent, and non-deferential authority to examine the issues presented. Matter of Estate of Foresee, 2020 OK 88, ¶ 8, 475 P.3d 862, 865. Analysis ¶5 Both parties acknowledge that the sole question for this Court is how to interpret the following phrase in 68 O.S.2011, § 2373: "portion of the tax paid during the three (3) years immediately preceding the filing of the claim." The parties fundamentally agree that estimated remittances were not "tax paid" within the meaning of the statute.5 Raytheon maintains the three-year period commenced when its original tax return was filed on September 27, 2013. The OTC contends that the three-year term started on March 15, 2013, when the company's tax return was initially due without an extension. To resolve the dispute in this case, we must determine when Raytheon's taxes were considered paid for purposes of § 2373. We begin our analysis with a closer examination of the entire statutory scheme involving corporate income tax in Oklahoma. ¶6 Corporations who do business in, or who derive income from sources within the state, are required to file a corporate income tax return. 68 O.S.2011, §§ 2355(D) and 2368(E). In 2012, corporate entities reporting income on a calendar year basis were required to file their returns by March 15 following the close of the taxable year. 68 O.S.2011, § 2368(G)(3). At the time of submitting an annual income tax return, a corporate taxpayer must simultaneously tender "the amount of tax due." 68 O.S.2011, § 2375(A). Failure to tender the estimated total tax liability causes the tax liability to become delinquent. Id. Nevertheless, taxpayers are statutorily authorized to request an extension for filing a return. 68 O.S. 2011, § 216. Section 216 also provides that "an extension shall not extend the date for payment of the state income or franchise tax due." Id. ¶7 Corporations and individuals who erroneously overpay taxes may seek a refund of the excess sums. 68 O.S.2011, § 2373. As noted, the central statutory provision in this dispute is § 2373, which reads: If, upon any revision or adjustment, including overpayment or illegal payment on account of income derived from tax-exempt Indian land, any refund is found to be due any taxpayer, it shall be paid out of the "Income Tax Withholding Refund Account", created by Section 2385.16 of this title, in the same manner as refunds are paid pursuant to such section. The information filed, reflecting the revision or adjustment, shall constitute the claim for refund.Except as provided in subsection H of Section 23756 of this title, the amount of the refund shall not exceed the portion of the tax paid during the three (3) years immediately preceding the filing of the claim, or, if no claim was filed, then during the three (3) years immediately preceding the allowance of the refund. However, this three-year limitation shall not apply to the amount of refunds payable upon claims filed by members of federally recognized Indian tribes or the United States on behalf of its Indian wards or former Indian wards, to recover taxes illegally collected from tax-exempt lands. In the case of any refund to a member of a federally recognized Indian tribe or to the United States on behalf of its Indian wards or former Indian wards, to recover taxes illegally collected on bonus payments from oil and gas leases located on tax-exempt Indian lands pursuant to this section, the Tax Commission shall pay interest on all refunds issued after January 1, 1996, at the rate of six percent (6%) per annum from the date of payment by the taxpayer to the date of the refund.In cases where the Tax Commission and the taxpayer have signed a consent, as provided by law, extending the period during which the tax may be assessed, the period during which the taxpayer may file a claim for refund or during which an allowance for a refund may be made shall be automatically extended to the final date fixed by such consent plus thirty (30) days.The Oklahoma Tax Commission may authorize the use of direct deposit in lieu of refund checks for electronically filed income tax returns. (Emphasis added). Section § 2373 requires us to examine whether taxes were paid during the three-year period immediately preceding September 27, 2016--the day Raytheon submitted its amended return and claim for a refund. See 68 O.S.2011, § 2385.10 (submission of a return disclosing an overpayment is equivalent to a claim for a refund). To successfully recover an overpayment, Raytheon must have paid any excess taxes within three years of that date. This Court has previously held that the time limit in § 2373 operates as a statute of repose. Neer v. State ex rel. Okla. Tax Com'n, 1999 OK 41, ¶ 2, 982 P.2d 1071 , 1073. A taxpayer's claim for refund is the triggering event, and the statute requires us to look back in time from that date. Any taxes paid outside of the three-year window are not recoverable. Id. However, neither § 2373 nor the remainder of the Oklahoma Tax Code prescribe when a tax is considered "paid." ¶8 A logical reading of the plain text in § 2373 supports a determination that taxes are deemed paid when actually tendered to the OTC, even as estimated sums. Yet, the OTC does not dispute Raytheon's claim that quarterly remittances were not actual tax payments, but instead should be regarded as deposits to be applied against a future liability. See 68 O.S.2011, § 2357(A) (providing that estimated taxes and withholdings are applied as a credit); Baral v. United States, 528 U.S. 431 , 436-37, 120 S. Ct. 1006, 145 L. Ed. 2d 949 (2000) (explaining that "[w]ithholding and estimated tax remittances are not taxes in their own right, but methods for collecting the income tax."); Rosenman v. United States, 323 U.S. 658 , 662, 65 S. Ct. 536, 85 L. Ed. 535 (1945) (recognizing that estimated sums are held as a deposit in the nature of bond rather than as a payment of taxes); see also note 6 supra. Consequently, under § 2373, Raytheon's tax liability was deemed paid either (1) when the original return was filed in September 2013; or (2) when the return was originally due in March 2013. Because § 2373 is subject to more than one reasonable interpretation, we must engage in statutory construction.7 ¶9 A statute is ambiguous when it is susceptible to more than one reasonable interpretation. Kohler v. Chambers, 2019 OK 2, ¶ 6, 435 P.3d 109, 111. When a statute is ambiguous, we will employ statutory canons of construction to determine its meaning. Estate of Foresee, ¶ 14, 475 P.3d at 867. Our primary goal is to ascertain and give effect to the legislative intent and purpose as expressed by the statutory language. Am. Airlines, Inc., ¶ 33, 341 P.3d at 64. Words in a statute are to be construed according to their plain and ordinary meaning unless it is clear the legislature intended a different meaning. Fanning v. Brown, 2004 OK 7, ¶ 10, 85 P.3d 841 , 845-46. ¶10 According to the doctrine of in pari materia, statutes regarding the same subject matter are read together, in an effort to give the intended effect to each related provision. Shepard v. Okla. Dep't of Corr., 2015 OK 8, ¶ 15, 345 P.3d 377, 382. "Legislative intent will be ascertained from the whole act in light of its general purpose and objective considering relevant provisions together to give full force and effect to each." Am. Airlines, Inc., ¶ 33, 341 P.3d at 64-65. We are obligated to provide the statute in question a reasonable construction that will avoid absurd consequences. McIntosh v. Watkins, 2019 OK 6, ¶ 4, 441 P.3d 1094, 1096. ¶11 As originally enacted in 1935, Oklahoma's statutory refund provision did not include any time limitation. See O.S.Supp.1936, § 12498z2.8 The Oklahoma Legislature amended the refund statute in 1941, to limit the amount eligible to "the tax paid during the three (3) years immediately preceding the filing of the claim." 68 O.S.1941 § 899. This new verbiage was taken directly from IRC, 26 U.S.C. § 322(b)(2) (1934). The language in § 2373 placing time limits on Oklahoma income tax refunds remains largely unchanged;9 however, the federal refund provisions have been significantly modified.10 ¶12 A taxpayer is authorized to obtain an extension of the deadline to file an Oklahoma income tax return. 68 O.S.2011, § 216. Nevertheless, the OTC argues that 68 O.S.2011, § 216 requires payment of tax by the due date of the income tax return, in this case March 15. Section 216 reads as follows: The Tax Commission, whenever in its judgment good cause exists and pursuant to written request, may grant a reasonable extension for the filing of any return required under any state tax law. The Tax Commission shall keep a record of every extension granted with the reason therefor. Except in the case of corporation income or franchise tax returns, if franchise tax returns are filed at the same time as the corporate tax return, the time for filing any return may not extend in the aggregate later than one-half (1/2) the period of time for which any such return is filed under the particular state tax law involved nor may any such extension extend the date on which any payment of a state tax is due. An extension not to exceed seven (7) months for the filing of corporation income or franchise tax returns, if franchise tax returns are filed at the same time as the corporate income tax return, shall be allowed. Any extension granted for the corporate income tax return shall be deemed to cover the filing of a franchise tax return if a taxpayer elects to file the franchise tax return at the same time as the corporate income tax return. An extension shall not extend the date for payment of the state income or franchise tax due. In case an extension is granted, the taxpayer may file a tentative return on or before the date when the return is required by any state tax law showing the estimated amount of tax for the period covered by the return and may pay the estimated tax or the first installment thereof at the time of filing such tentative return and no interest or penalty shall attach or be payable on sums so paid in due course. The last clause of § 216 relieves the taxpayer from an obligation to pay penalties and interest on sums tendered in connection with an extension. We do not believe § 216 was intended to establish when taxes were deemed paid. Instead, § 216 was enacted to ensure taxpayers accurately calculate estimated taxes and tender the majority of their final expected liability to avoid imposition of interest and penalties. OTC regulations bolster our reading of § 216. Under OAC § 710:50-3-4 (2011), taxpayers are not obligated to tender one-hundred percent of their tax obligation at the time of securing an extension to file a return. This section reads: A valid extension of time in which to file a Federal Income Tax Return automatically extends the due date of the Oklahoma Income Tax Return, unless an Oklahoma liability is owed. A copy of the Federal extension must be attached to the Oklahoma Return. If the due date for filing the Federal Return is not extended or if an Oklahoma liability is owed, an extension of time to file the Oklahoma Return may be granted only by OTC Form 504. Ninety percent (90%) of the tax liability must be paid by the original due date for the return to avoid penalty charges for late payment. Interest will be charged from the original due date of the return. ¶13 The OTC also maintains that 68 O.S.2011, § 2375(A) mandates payment of all tax by the original due date of the return. In truth, we believe this section supports Raytheon's position. Section 2375(A) provides: At the time of transmitting the return required hereunder to the Oklahoma Tax Commission, the taxpayer shall remit therewith to the Tax Commission the amount of tax due under the applicable provisions of Section 2351 et seq. of this title. Failure to pay such tax on or before the date the return is due shall cause the tax to become delinquent. If the return is filed electronically, the amount of the tax due pursuant to the provisions of this article shall be due on or before the twentieth day of April following the close of the taxable year regardless of when the return is electronically filed. The tax shall be deemed delinquent if unpaid after the twentieth day of April if the return is electronically filed. Provided, if the Internal Revenue Code provides for a later due date for returns of individuals, the Tax Commission shall accept payments made with returns filed by individuals by such date and such payments shall be considered as timely paid. (Emphasis added). Thus, under § 2375(A), taxes are deemed due and paid when a return is filed. In this case, Raytheon paid all of the tax due, plus an additional $321,444.00 based on the error it later discovered. It is important to note that this overpayment was not due to any error in assessment made by the OTC. Raytheon's refund request is not based upon questionable tax liability or a dispute between the taxpayer and the OTC. The refund request is not based upon a change in law or a protest with the IRS. No payment was due because the amount of money in question from the sales of property in Arizona should not have been included in the Oklahoma calculation. OTC had no jurisdiction over the Arizona income and could not have attempted to assess liability for that income in the event Raytheon's return was filed without the error. ¶14 Examination of the federal income tax refund scheme is helpful in this case because Oklahoma's system is closely associated with the Internal Revenue Code. See e.g. 68 O.S.2011, § 2353. Title 26 U.S.C. § 6511 reads in relevant part: (a) Period of limitation on filing claim.--Claim for credit or refund of an overpayment of any tax imposed by this title in respect of which tax the taxpayer is required to file a return shall be filed by the taxpayer within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever of such periods expires the later, or if no return was filed by the taxpayer, within 2 years from the time the tax was paid. Claim for credit or refund of an overpayment of any tax imposed by this title which is required to be paid by means of a stamp shall be filed by the taxpayer within 3 years from the time the tax was paid.(b) Limitation on allowance of credits and refunds.--(1) Filing of claim within prescribed period.--No credit or refund shall be allowed or made after the expiration of the period of limitation prescribed in subsection (a) for the filing of a claim for credit or refund, unless a claim for credit or refund is filed by the taxpayer within such period.(2) If the claim was filed by the taxpayer during the 3-year period prescribed in subsection (a), the amount of the credit or refund shall not exceed the portion of the tax paid within the period, immediately preceding the filing of the claim, equal to 3 years plus the period of any extension of time for filing the return. (Emphasis added). Thus, under the IRC, the time for any authorized extension is included in the limitations period for refund claims brought within three years of the date the original return was filed. Notwithstanding, the OTC urges this Court to ignore § 6511 and follow only 26 U.S.C. § 6513(b)(2). This section provides that "[a]ny amount paid as estimated income tax for any taxable year shall be deemed to have been paid on the last day prescribed for filing the return under section 6012 for such taxable year (determined without regard to any extension of time for filing such return)" (emphasis added). Under this section of the IRC, Raytheon's federal taxes would be deemed paid on or about March 15, 2013. The OTC's contention that it should apply to this case ignores the fact that the Oklahoma Tax Code contains nothing similar. OTC's argument also fails because, under the IRC, Raytheon's refund claim would be punctual. It should be noted that the OTC is authorized to make assessments of additional taxes owed "(3) years from the date the return was required to be filed or the date the return was filed, whichever period expires the later." 68 O.S.2011, § 223.11 Hence, the OTC has three years from the date taxpayer files a return to determine if the math is correct. ¶15 Prior opinions dealing with § 2373 do not resolve the precise issue presented here: whether an income tax return filed with an extension affects the date tax is deemed paid. One such case urged by the OTC as support for its position on appeal is Neer v. State ex rel., Oklahoma Tax Commission, 1999 OK 41, 982 P.2d 1071 . In Neer, we were asked to examine § 2373 in connection with a refund sought by an Oklahoma taxpayer.12 At issue was whether the Neer's refund request was timely under § 2373. The Neers filed their tax return on its original due date, and admitted the tax was paid when the original return was filed. The Court determined § 2373 was designed to function as a statute of repose, "in the form of an outer time limit boundary--on a taxpayer's right or ability to recover a tax refund." Id. at ¶ 20, 982 P.2d at 1079. Additionally, the Court concluded that the three-year period in § 2373 commenced when the Neers' tax obligation was paid, and affirmed the OTC's denial of the refund. Id. at ¶ 24, 982 P.2d at 1080.13 Nothing in Neer helps us resolve the question we face in the present matter. ¶16 Further examination of our prior decisions reflects the uncertainty around the deemed-paid date. For example, in Manhattan Const. Co. v. Oklahoma Tax Commission, we explained that estimated payments are not taxes paid "but simply constituted a deposit to be applied on the tax after the close of the taxable year and upon the filing of a return." 1951 OK 14, ¶ 15, 233 P.2d 279 , 282. Thus, Manhattan Const. supports a finding that the deemed-paid date is the date of filing, not the original due date. In Oklahoma Tax Commission v. Oven, the Court concluded that "the [filed] return, tender, and acceptance" prior to the original due date, "constituted a payment." 1959 OK 79, ¶ 17, 338 P.2d 1095 , 1098; see also 68 O.S.2011, § 2375(A). ¶17 Raytheon contends that as a tax statute, § 2373 should be strictly construed against the State, citing Strelecki v. Okla. Tax Comm'n, 1993 OK 122, ¶ 20, 872 P.2d 910 , 920.14 Because were are able to ascertain legislative intent applying general canons of construction, we need not apply a presumption either in favor of or against the taxpayer. See TOMRA of N. Am., Inc. v. Dept. of Treasury, 952 N.W.2d 384, 389 (Mich. 2020) (quotation & footnote omitted) the Court explained: We take this opportunity to clarify that because the canon requiring strict construction of tax exemptions does not help reveal the semantic content of a statute, it is a canon of last resort. That is, courts should employ it only when an act's language, after analysis and subjection to the ordinary rules of interpretation, presents ambiguity. See also City and Cnty. of Denver v. Expedia, Inc., 405 P.3d 1128, (Colo. 2017) (concluding "policy preference regarding tax burdens was never intended to displace other canons designed to help resolve doubts, or ambiguity."); America, Inc. v. Department of Treasury, State v. Thonesavanh, 904 N.W.2d 432, 440 (Minn. 2017) (noting that the rule of lenity only applies after traditional canons of construction have been exhausted; also recognizing "[i]t is not. . . some sort of grand canon that towers over all the others and allows a defendant to prevail in every instance in which a criminal statute is ambiguous."). ¶18 There is no dispute that Raytheon substantially overpaid its income taxes. After examining our prior decisions, related state and federal statutes, and OTC regulations pertaining to tax refunds, we hold that Raytheon's taxes were deemed paid when it filed its 2012 return on September 27, 2013. Therefore, the claim for refund is timely. By resolving this dispute in favor of the taxpayer, we are best able to harmonize §§ 216, 2373 and 2375, and to carry out legislative objectives in the comprehensive statutory scheme. First, a taxpayer is statutorily authorized to request an extension to file the required income tax return. If we utilize the original due date for a tax return, without regard to an extension, we would impede a taxpayer's statutory right to extend the deadline. Second, by utilizing the filing date in this case Raytheon is better able to submit the most complete picture of the company's income and tax obligation. It makes little sense to consider the taxes paid prior to presentation of an income tax return.15 Our decision is also consistent with 68 O.S.2011, § 2375, which provides that payment is due when a return is filed. Third, under OTC regulations a taxpayer is not required to have tendered one-hundred percent of their tax obligation at the time an extension is sought. See OAC, § 710:50-3-4 (2011) (requiring payment of ninety percent (90%) of the total tax liability by the original due date to obtain an extension and to avoid penalties). This regulation is an acknowledgment that estimated payments are merely an approximation of a taxpayer's total liability. The statutes and regulations merely impose a due diligence requirement on a taxpayer to avoid underestimating their tax obligation. Finally, our conclusion is consistent with the federal refund scheme, which includes the period of any extension to file an income tax return. Conclusion ¶19 We hold Raytheon's corporate income tax liability was paid when the company filed its Oklahoma Corporation Income Tax Return on September 27, 2013. A timely claim for a refund was submitted on September 27, 2016, when Raytheon filed its Oklahoma Amended Corporation Income Tax Return. Therefore, Raytheon's claimed income tax refund was timely under 68 O.S. 2011, § 2373, and the Oklahoma Tax Commission erred when it determined Raytheon's refund claim time barred. OKLAHOMA TAX COMMISSION ORDER NO. 2016-003-24-04 IS REVERSED KANE, V.C.J., KAUGER (BY SEPARATE WRITING), EDMONDSON, COMBS, GURICH, ROWE, AND KUEHN, JJ., AND REIF, S.J., CONCUR; DARBY, C.J., CONCURS IN RESULT (BY SEPARATE WRITING); WINCHESTER, J., DISQUALIFIED. FOOT