Opinion ID: 1253218
Heading Depth: 1
Heading Rank: 3

Heading: part iii. in unambiguous language, section 2373 limits the amount of a refund to the portion of oklahoma income tax paid during the three years immediately preceding the filing of the refund claim.

Text: ¶ 12 It is necessary to understand two main statutes to resolve this matter  §§ 2357(B)(1) and 2373. Section 2357(B)(1) provides: There shall be allowed as a credit against the tax imposed by Section 2355 of this title the amount of tax paid another state by a resident individual, as defined in Section 2353, paragraph 4, of this title, upon income received as compensation for personal services in such other state. The credit shall not exceed such proportion of the tax payable under Section 2355 of this title as the compensation for personal services subject to tax in the other state and also taxable under Section 2355 bears to the Oklahoma adjusted gross income as defined in Section 2353, paragraph 13, of this title. Section 2373 states: 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 2375 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) ¶ 13 Although taxpayers recognize the three year period specified by the emphasized portion of § 2373 generally begins to run when the Oklahoma income tax is paid, they assert that because § 2357(B)(1) would not allow a credit against their 1991 Oklahoma income tax liability until they actually paid tax to New York, no cause of action for an Oklahoma refund accrued until September 1995  the month they paid the New York tax  and the three year period specified in § 2373 did not start to run until then. The argument, therefore, is that § 2373 is a true statute of limitation, rather than a provision akin to a statute of repose. We disagree. ¶ 14 Initially, we recognize four matters not in dispute in this appeal. First, taxpayers do not dispute that the retirement income distributed to them in 1991 was income taxable by Oklahoma, nor do they assert any lack of authority  on constitutional (state or federal) or other grounds  on Oklahoma's part to tax the income. Second, they raise no issue concerning New York's power to tax the same income. [10] Third, taxpayers do not argue the applicability of any exception specified in § 2373. [11] They do not claim any Indian-based exception. Nor do they claim an exception under 68 O.S. Supp.1998, § 2375(H). [12] Fourth, as stated in PART II, FACTUAL AND PROCEDURAL BACKGROUND, supra, at no time during the three year period specified in § 2373 did taxpayers request from Oklahoma an extension of the refund limitation period concerning tax year 1991, i.e. OTC and these taxpayers did not at any time reach an agreement, as would have been allowed by § 2373's second to the last paragraph, to extend the tax assessment period which would have had the effect of also extending the three year period for refund claims. [13] With these recognitions, we turn to deciding the meaning of § 2373 and its interplay with § 2357(B)(1). ¶ 15 This Court is committed to the axiom that the determination of legislative intent controls statutory interpretation. Oklahoma Ass'n for Equitable Taxation v. City of Oklahoma City, 1995 OK 62, 901 P.2d 800, 803, cert. denied, 516 U.S. 1029, 116 S.Ct. 674, 133 L.Ed.2d 523 (1995). When reviewing tax statutes, just as with other statutes, a court's goal is to ascertain legislative intent and effectuate that intent. Wilson v. State of Oklahoma ex rel. Oklahoma Tax Com'n, 1979 OK 62, 594 P.2d 1210, 1212; Affiliated Management Corp. v. Oklahoma Tax Com'n, 1977 OK 183, 570 P.2d 335, 337. To ascertain intent, one should look to the language of the pertinent statute(s) and presume the legislative body intends what it expresses. Id. ¶ 16 A cardinal precept of statutory construction is that where a statute's language is plain and unambiguous, and the meaning clear and unmistakable, no justification exists for the use of interpretative devices to fabricate a different meaning. In re Guardianship of Campbell, 1966 OK 99, 450 P.2d 203, 205. Further, terms in a statute are given their plain and ordinary meaning, except when a contrary intention plainly appears [ Id. ] and the words of a statute should generally be assumed to be used by the law-making body as having the same meaning as that attributed in ordinary and usual parlance. Matter of Income Tax Protest of Ashland Exploration, Inc., 1988 OK 23, 751 P.2d 1070, 1073. Where neither ambiguity or doubt exists, even the rule that weight is to be given to an administrative construction is inapplicable  i.e. administrative construction cannot override plain statutory language. C.H. Leavell & Co. v. Oklahoma Tax Com'n, 1968 OK 127, 450 P.2d 211, 215. Finally, the rule that tax statutes are to be construed in favor of the taxpayer does not apply if the statute(s) at issue contain no inconsistent provisions, no ambiguities, and no uncertainties. Exxon Corp. v. Oklahoma Tax Com'n, 1993 OK CIV APP 178, 873 P.2d 306, 309. In our view, no inconsistency, ambiguity or uncertainty exists in either § 2357 or § 2373 in relation to the issue before us, and the meaning of these legislative enactments is clear and unmistakable. ¶ 17 Section 2357(B)(1) allows an Oklahoma resident taxpayer a tax credit against their Oklahoma income tax liability for the amount of tax paid another state (emphasis added) upon personal services income also subject to Oklahoma income tax. OTC has by rule interpreted personal services income to include retirement income. OTC Rule 710:50-15-72(b), Vol. 17 Oklahoma Administrative Code 205 (1996). Under the plain and unambiguous language of § 2357(B)(1) then, a tax credit is available only when a resident taxpayer pays tax to another state. We, therefore, agree with taxpayers, entitlement to a tax credit under the clear language of § 2357(B)(1) did not arise until they paid tax to New York in September 1995. ¶ 18 Our agreement that a credit is available under § 2357(B)(1) only when tax is actually paid to another state is not, however, equivalent to a recognition that, if the credit is not taken at the time of payment of Oklahoma income tax  because tax has not been paid to the other state at such time  the credit may be used to support a refund claim submitted to OTC more than three years after a taxpayer has paid Oklahoma income tax on the involved income. This is so because, contrary to taxpayers' view that § 2373 is a statute of limitation, the provision instead is analogous to a statute of repose and the Legislature, by unmistakable language, intended § 2373 to act as a substantive limitation on the right to recover any amount as a refund when the claim for refund is filed more than three years after the date on which Oklahoma income tax is paid. In short, the relevant terms of § 2373 clearly evidence a legislative intent to craft an outer limit time boundary beyond which a taxpayer's right or ability to recover a refund no longer exists. ¶ 19 A statute of limitation extinguishes a remedy for an existing right by penalizing a party who sleeps on that right. Reynolds v. Porter, 1988 OK 88, 760 P.2d 816, 820. A statute of repose sets an outer chronological time boundary beyond which no cause of action may arise for conduct that would otherwise have been actionable. St. Paul Fire & Marine Ins. Co. v. Getty Oil Co., 1989 OK 139, 782 P.2d 915, 919; Jaworsky v. Frolich, 1992 OK 157, 850 P.2d 1052, 1054-1055. As we stated in Reynolds v. Porter, supra, 760 P.2d at 820: Modern limitations and statutes of repose are similar because they both provide repose for the defendant. Yet, they are significantly different since a statute of limitation merely extinguishes the plaintiff's remedy while a statute of repose [may] bar[] a cause of action before it arises. In practical terms, a statute of repose marks the boundary of a substantive right whereas a statute of limitation interposes itself only procedurally to bar the remedy after a substantive right has vested. The time prescribed by a statute of repose runs from a specific . . . event regardless of when the harm or damage occurs. A limitation period runs from the time the elements of a cause of action arise. (Footnotes omitted) In essence, a statute of limitation is a procedural device and does not start to run until a cause of action accrues, i.e. at that point in time a plaintiff can successfully prove the elements of his/her claim. A statute of repose, in contrast, begins to run from a date certain, regardless of when a plaintiff may be able to bring a cause of action to successful conclusion. ¶ 20 Although previously we have generally referred to § 2373 as a statute of limitation [ See e.g. Redbird v. Oklahoma Tax Com'n, 1997 OK 126, 947 P.2d 525; Turner v. Oklahoma Tax Com'n, 1993 OK 77, 858 P.2d 433] this Court has not formerly been called upon to definitively decide whether the provision was intended by the Legislature to be a statute of limitation or, instead, to function like a statute of repose by placing a substantive limitation  in the form of an outer time limit boundary  on a taxpayer's right or ability to recover a tax refund. We believe the latter was the manifest intention. ¶ 21 First off, even though, as noted, we have referred to § 2373 as a statute of limitation, this Court has unmistakably foreshadowed an understanding that a taxpayer may use § 2373 to recover a refund only for taxes they have overpaid within three years preceding the date of the refund claim. Turner, supra, 858 P.2d at 434 fn. 1. Footnote 1 of Turner states in relevant part: [u]nder . . . § 2373 taxpayers may claim refunds only for taxes that they have overpaid within three years preceding the date of the claim for refund. . . . . Because [taxpayers] paid the tax more than three years before they sought the refund [§ 2373] bars their recovery. ¶ 22 Second, the relevant phrase of § 2373, 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, does not fit the mold of legislative language utilized in a true statute of limitation. For example, § 2373's language is quite unlike that found in the introductory paragraph of 12 O.S. Supp.1996, § 95, the general statute of limitation for many civil actions, which provides: [c]ivil actions other than for the recovery of real property can only be brought within the following periods, after the cause of action shall have accrued, and not afterwards[.] (emphasis added) Instead, the plain language of § 2373, reads much more like the language used in a statute of repose because the three year time period starts to run or commences from the date of payment of Oklahoma tax  a specific event  irrespective of whether or not all the elements of a viable refund claim are then existent. Surely, any ordinary reading of the language seems to clearly evidence a legislative intent to place a substantive limitation on a taxpayer's right to recover any amount as a refund, where the refund claim is filed more than three years after the date on which Oklahoma income tax is paid. ¶ 23 As we view it, the language of § 2373 is akin to that found in 12 O.S.1991, § 109, which provides in relevant part: [n]o action in tort to recover damages . . . arising from defective design, planning, supervision or observation of construction or from the construction of an improvement to real property shall be brought . . . more than ten (10) years after substantial completion of such an improvement. Section 109 has unequivocally been interpreted by this Court as a statute of repose that sets an outer boundary in time beyond which no cause of action may arise. Jaworsky v. Frolich, supra, 850 P.2d at 1054-1055. As can be seen, the time periods delineated in both § 109 and § 2373 expressly commence from specific events  § 109 from substantial completion of an improvement to real property and § 2373 from payment of Oklahoma income tax. In the case of § 109, the period commences whether or not all of the elements necessary to support a viable tort action then exist. In the case of § 2373, the clock starts running whether or not all the elements necessary to support a viable refund claim are then present. ¶ 24 As applicable here, the plain import of § 2373's structure points to the conclusion that, when three years elapsed from the date of taxpayers' payment of Oklahoma income tax in April 1992 without the filing of a refund claim, any claim to a refund was destroyed or extinguished. This was so notwithstanding the fact that under § 2357(B)(1) entitlement to a credit had not yet arisen by virtue of the failure to pay tax to New York prior to the expiration of such three year period. [14] ¶ 25 Third, the view that § 2373 is analogous to a statute of repose, or a legislatively crafted outer limit time boundary beyond which a taxpayer's right or ability to recover a refund no longer exists, is consistent with case law from other jurisdictions in the area of interpreting tax refund limitation periods. In United States v. Brockamp, 519 U.S. 347, 117 S.Ct. 849, 136 L.Ed.2d 818 (1997) the United States Supreme Court held that Congress did not intend the equitable tolling doctrine to apply to the statutory time, and related amount, limitations for filing federal tax refund claims. Part of the Supreme Court's rationale was the view that the amount-limitation time period of the federal statute, which is couched in similar language to the pertinent emphasized phrase of § 2373, imposed a substantive limitation on a taxpayer's ability to recover a refund. 117 S.Ct. at 851-852. Although the United States Supreme Court did not expressly state that the federal statute was akin or analogous to a statute of repose, federal Circuit court decisions that also rejected the equitable tolling doctrine and which were found by Brockamp to be correct in such regard, explicitly made the analogy. Amoco Production Co. v. Newton Sheep Co., 85 F.3d 1464, 1472 (10th Cir.1996); Webb v. United States, 66 F.3d 691, 700-701 (4th Cir.1995), cert. denied, 519 U.S. 1148, 117 S.Ct. 1079, 137 L.Ed.2d 215 (1997); See also Oropallo v. United States, 994 F.2d 25, 31 (1st Cir.1993), cert. denied, 510 U.S. 1050, 114 S.Ct. 705, 126 L.Ed.2d 671 (1994). ¶ 26 The Supreme Court of Colorado has also held that state's refund limitation statute, which extends the time for filing a claim for refund by one year over the federal limitation period, was more appropriately characterized as a statute of repose, rather than a statute of limitation. Kuhn v. Department of Revenue, 897 P.2d 792, 797 (Colo.1995). Further, in a comparable factual situation to that before us here, the Oregon Tax Court, although not referring to Oregon's tax refund limitation statute as being akin to a statute of repose, rejected a refund claim of taxpayers as untimely, where the three year period of the involved refund statute had expired prior to the filing of a refund claim. DeArmond v. Department of Revenue, 14 Or. Tax 112, 1997 WL 43195 (Or.Tax Ct.1997), aff'm, DeArmond v. Department of Revenue, 328 Or. 60, 968 P.2d 1280 (1998). The situation in DeArmond was comparable because it involved a claimed credit for tax paid to another state, Idaho, but no tax was actually paid by taxpayers to Idaho prior to the expiration of Oregon's applicable three year period  i.e. like here, entitlement to a tax credit did not arise until it was too late to obtain a refund. ¶ 27 Based on the above analysis, we conclude OTC was correct in denying taxpayers' refund claim as untimely under the command of § 2373. Were we to rule differently, i.e. that taxpayers' claim was timely, we would be doing nothing less than overriding the Legislature's judgment that such claims, when not subject to a specified statutory exception, are absolutely cut-off or barred if not filed within three years of the date on which a taxpayer's taxes are paid. This we decline to do because we must interpret the provision as written and it would be improper for us to invent some meaning not contemplated by the statutory language as expressed by the law-making body. [15]