Opinion ID: 1286291
Heading Depth: 1
Heading Rank: 5

Heading: Accounting Method

Text: The reason for this Court's reversal of the circuit court stems from the failure of both the ALJ and the circuit court to properly apply the provisions of West Virginia Code § 11-27-22(c). That statute requires accounting consistency in the methods of accounting used in calculating health care provider taxes and federal income taxes. Specifically, West Virginia Code § 11-27-22(c), provides, in relevant part, that [a] taxpayer's method of accounting under this article shall be the same as taxpayer's method of accounting for federal income tax purposes. Id. (emphasis added). Undisputedly, CAMC did not report the accounting entries reflecting the costs associated with the health care it provided to its covered employees through its self insurance program as gross receipts for federal income tax purposes. Thus, CAMC argues that by requiring it to report those costs in its gross receipts for purposes of the health care provider tax, the State Tax Commissioner, in effect, is requiring that CAMC use a different method of accounting than it uses for calculating its federal income tax, which directly contradicts the plain language of the statute. In considering this issue, the ALJ acknowledged in his decision that West Virginia Code § 11-27-22(c) requires consistency in the accounting methods. Yet, the ALJ refused to apply the clear statutory directive, finding it inconsistent with other aspects of the statute. The ALJ states in his decision, which was affirmed by the circuit court: [9] While it is true that W. Va.Code § 11-27-22(c) requires that health care providers follow the same method of accounting on their West Virginia returns as that adopted on their federal income tax returns, the provision does not permit the departure from yet another mandatory provision of the statute imposing the very tax. That provision, in each case, states that [T]he [sic] tax imposed in subsection (a) of this section shall be ... percent of the gross receipts derived by the taxpayer from furnishing (health care) services in this state. ... Obviously, the mandatory provisions imposing the tax measured by gross receipts should in all cases supersede any other provision, mandatory that it may be, setting forth the mere accounting method used as a starting point for determining taxable income. (internal citations omitted). In reviewing any statute, it is well-established in West Virginia that [a] statute should be so read and applied as to make it accord with the spirit, purposes and objects of the general system of law of which it is intended to form a part; it being presumed that the legislators who drafted and passed it were familiar with all existing law, applicable to the subject matter, whether constitutional, statutory or common, and intended the statute to harmonize completely with the same and aid in the effectuation of the general purpose and design thereof, if its terms are consistent therewith. Syllabus Point 5, State v. Snyder, 64 W.Va. 659, 63 S.E. 385 (1908). Syl. Pt. 3, Joslin v. Mitchell, 213 W.Va. 771, 777, 584 S.E.2d 913, 919 (2003). In deciding the meaning of a statutory provision, [w]e look first to the statute's language. If the text, given its plain meaning, answers the interpretive question, the language must prevail and further inquiry is foreclosed. Appalachian Power Co. v. State Tax Dep't, 195 W.Va. 573, 587, 466 S.E.2d 424, 438 (1995). See also Syl. pt. 2, Crockett v. Andrews, 153 W.Va. 714, 172 S.E.2d 384 (1970) ([w]here the language of a statute is free from ambiguity, its plain meaning is to be accepted and applied without resort to interpretation.); Syl. pt. 2, State v. Epperly, 135 W.Va. 877, 65 S.E.2d 488 (1951) ([a] statutory provision which is clear and unambiguous and plainly expresses the legislative intent will not be interpreted by the courts but will be given full force and effect.). Davis Mem'l Hosp. v. West Virginia State Tax Comm'r, 222 W.Va. 677, 682, 671 S.E.2d 682, 687 (2008). There has been no issue raised concerning any ambiguity found within the provisions of West Virginia Code § 11-27-22(c). Moreover, a plain reading of that statutory provision indicates that it clearly and unambiguously provides, in relevant part, that [a] taxpayer's method of accounting under this article shall be the same as taxpayer's method of accounting for federal income tax purposes. Id. (emphasis added). As this Court has previously held, [t]he word `shall,' in the absence of language in the statute showing a contrary intent on the part of the legislature, should be afforded a mandatory connotation. Syl. Pt. 2, Terry v. Sencindiver, 153 W.Va. 651, 171 S.E.2d 480 (1969); accord Clower v. West Virginia Dept. of Motor Vehicles, 223 W.Va. 535, 544, n. 8, 678 S.E.2d 41, 50 n. 8 (2009)(The Legislature's use of the word `shall' ... is given the mandatory meaning of that term.). Despite the mandatory meaning of the term shall in West Virginia Code § 11-27-22(c), the ALJ determined that the provisions of West Virginia Code § 11-27-4(b), which provides that [t]he tax imposed in subsection (a) of this section shall be one and three-fourths percent of the gross receipts derived by the taxpayer from furnishing ambulatory surgical center services in this state[,] [10] supersede[d] any other provision, including the mere accounting method set forth in West Virginia Code § 11-27-22(c). Let there be no mistake that absent from the Act is any express language by the Legislature that it intended anything other than the mandatory meaning set forth in West Virginia § 11-27-22(c), which clearly provides that a taxpayer's accounting method for the purposes of the health care provider tax  shall be the same as the taxpayer's method of accounting for federal income tax purposes. Id. (emphasis added). In other words, there is no indication that the other statutory provisions establishing the rate and measure of the tax imposed, which were relied upon by the ALJ, superceded, changed, or otherwise altered a taxpayer's accounting method. To the contrary, by mandating accounting consistency between state and federal taxes, the Legislature, in enacting West Virginia Code § 11-27-22(c), sought to assist taxpayers in maintaining consistency in their record keeping and, in so doing, prevent the significant burden on the taxpayer that having to keep multiple sets of books and to apply multiple accounting methods would impose. The ALJ, and ultimately the circuit court, however, simply ignored the clear and unambiguous statutory provision established in West Virginia Code § 11-27-22(c). Because of this action, the ALJ and ultimately the circuit court assessed additional health care provider taxes because of a decision mandating CAMC to deviate from the accounting method it uses for federal tax purposes. This is clear given that for federal tax purposes, CAMC did not include accounting entries associated with the self-insurance benefits in its gross receipts, while the ALJ required those same entries, which reflect non-cash items, to be included in gross receipts for the health care provider tax. This was erroneous and violated the provisions of West Virginia Code § 11-27-22(c).