Opinion ID: 1151195
Heading Depth: 1
Heading Rank: 1

Heading: relief afforded by state law

Text: The taxpayer asserts that Davis v. Michigan Department of Treasury, supra , applies retroactively and that she is entitled to a refund for each tax year from 1970 through 1988. The Department asserts that even if Davis applies retroactively, ORS 305.765 to 305.785 preclude the taxpayer's refund claims for the tax years at issue and create a valid remedial limitation consistent with federal due process guarantees. We agree with the Department that ORS 305.765 to 305.785 apply to this case and create a remedial limit consistent with federal due process, but we disagree with the Department about how those statutes apply to the taxpayer's claims. Further, because we read ORS 305.765 to 305.785 to require a measure of retroactivity regardless of any theory of retroactivity of Davis under federal law, [1] see pages 976-977, below, we need not decide the federal retroactivity question. [2] ORS 305.765 provides: Whenever, in a proceeding involving the validity of any law whereby taxes assessed or imposed have been collected and received by the state, acting through any department or agency thereof, and paid into the State Treasury, if the court of last resort holds the law or any part thereof invalid, and the time limited for any further proceeding to sustain the validity of the law, or the part thereof affected, has expired, and if there is no other statute authorizing refund thereof, all taxes collected and paid under the law or part thereof invalidated, in or after the year in which the action attacking the validity of the same was instituted, shall be refunded and repaid in the manner provided in ORS 305.770 to 305.785. [3] (Emphasis added.) ORS 305.765 authorizes (and, in fact, mandates) refunds only for taxes collected and paid in or after the year in which the action resulting in the invalidation of the tax law was instituted. The limitation of ORS 305.765 in part is restated in ORS 305.780, which provides: Nothing contained in ORS 305.770 to 305.785 authorizes the refunding of any tax collected and paid under an invalidated tax law, or invalidated part thereof, where the tax as provided in such law became due and payable in any year prior to the year in which the suit or action seeking the invalidation of the law or part thereof was instituted. Hence, even taxes collected or paid in or after the year the action resulting in invalidation of the tax law was instituted cannot be refunded if those taxes had become due and payable prior to the year in which the action was instituted. The Department argues that, because the taxpayer has claimed refunds for taxes collected and paid prior to 1990, the year in which she filed her tax court complaint, [4] the Department has no authority to pay the refunds requested by the taxpayer. The taxpayer argues that ORS 305.765, by its own terms, applies only if there is no other statute authorizing refund of the taxes collected pursuant to the invalidated statute and that there is another statute authorizing refund of the taxes at issue here. Specifically, the taxpayer claims that ORS 305.270(1) [5] and 314.415(1)(a), [6] the general refund statutes, authorize the refunds that she has requested. ORS 305.270 and 314.415 create a mechanism for the refund of tax paid or collected in excess of that which is properly due. The taxpayer contends that she paid excess tax for the years 1970 through 1988 because of the improper inclusion of her federal retirement income in her state taxable income and that she is entitled to a refund subject to the limitations contained in ORS 305.270 and 314.415. Because ORS 305.765 apparently is triggered only if there is no other statute authorizing refund thereof, the court must discern what the legislature intended by the quoted phrase and, specifically, whether the legislature intended that the general refund statutes would authorize refunds of all taxes collected pursuant to laws later held invalid. ORS 305.765 was enacted in 1931 following the invalidation of a 1929 state law taxing gross income from intangibles that applied to individuals but not corporations. See Redfield v. Fisher, 135 Or. 180, 204, 292 P. 813 (1930) (invalidating Oregon Laws 1929, chapter 429). The 1931 Legislative Assembly appropriated nearly $900,000 to pay refunds to individuals who had paid taxes under the invalidated statute. Or. Laws 1931, ch 338. At the same time, the legislature enacted Oregon Laws 1931, chapter 337, which is now codified at ORS 305.765 to 305.785. In the same session of the Legislative Assembly, the precursor to the current refund statutes, ORS 305.270 and 314.415, was enacted to create a general tax refund mechanism. Or. Laws 1931, ch. 229. These enactments apparently were an attempt to respond to the concerns raised by two opinions of the Attorney General regarding the refunding of taxes unlawfully exacted and, specifically, regarding the taxes at issue in Redfield. See 15 Op Att'y Gen 34 (Or 1930-32) (advising that refunds of taxes collected pursuant to the unconstitutional intangibles tax could only be made if the legislature specifically appropriated the funds necessary for that purpose); 15 Op Att'y Gen 37 (Or 1930-32) (advising that taxes paid pursuant to a subsequently invalidated law could not be refunded without express statutory authority). [7] If the general refund provision created by Oregon Laws 1931, chapter 229, was intended to authorize refunds of taxes collected pursuant to invalidated laws, it would have been unnecessary to enact what is now ORS 305.765. [8] Such an interpretation of the general refund statute would render ORS 305.765 meaningless because, by definition, the general refund statute would always prevent the obligations created by ORS 305.765 from becoming operative. In attempting to discern the intent of the legislature, this court will not read a general statute so broadly as to nullify a more specific statute enacted at the same legislative session. See Daly v. Horsefly Irrigation District, 143 Or. 441, 446, 21 P.2d 787 (1933) (statutes on the same subject whether passed at the same or different sessions of the legislature, but particularly if passed at the same session, should receive a construction, if possible, which will give effect to each of them). Consequently, we read the phrase in ORS 305.765, and there is no other statute authorizing refund thereof, as making application of the statute's mandatory refund provision and shorter limitation period depend on the absence of another statute that specifically authorizes the refunding of taxes collected pursuant to laws later invalidated. We are not rewriting the statute, but rather are interpreting it in a manner that permits its implementation. Daly v. Horsefly Irrigation District, supra, 143 Or. at 446, 21 P.2d 787. Because no other statute authorizes refunds of taxes collected pursuant to invalidated laws, ORS 305.765 applies. Having determined that ORS 305.765 applies, we next turn to how it applies to the present case. ORS 305.765 requires the Department to refund all taxes collected and paid under the law or part thereof invalidated, in or after the year in which the action attacking the validity of the same was instituted. (Emphasis added.) The Department asserts that the statute's use of the word action refers only to an action in court and not to the taxpayer's filing of a claim for refund. Because no court action was instituted by the taxpayer until she filed her complaint in the tax court in June 1990, and because the taxpayer seeks refunds for taxes paid or collected only in years prior to 1990, the Department asserts that ORS 305.765 requires denial of her refund claims. One difficulty with the Department's interpretation is that it hinges the limitation period on events outside the taxpayer's control and within the control of the Department. [9] The taxpayer's claim for refund based on the unconstitutionality of the taxes imposed upon her was a claim arising under the revenue and tax laws that she was required to pursue through the administrative procedures of the Department. Nutbrown v. Munn, 311 Or. 328, 811 P.2d 131 (1991), petition for cert filed, (U.S. Sept 17, 1991) (No. 91-457); ORS 305.275(4). In Nutbrown, this court held that the plaintiffs' claims that state taxes had been unconstitutionally imposed on their federal pension income arose under Oregon's revenue and tax laws and that the plaintiffs were required to exhaust their administrative remedies through the Department before suing in state court. 311 Or. at 342-43, 811 P.2d 131. In the present case, the taxpayer pursued her administrative remedies by filing her refund claims in April 1989. The filing of her refund claims initiated the proceedings that have resulted in this court's invalidating the discriminatory portions of the state tax laws. Her tax court action could not have been instituted until those administrative proceedings were completed. Like the question of timeliness under the statute of limitations for a refund claim, which turns on when the claim is filed, we read the limitations period in ORS 305.765 to turn on the year in which the taxpayer initiated the administrative proceedings, as she was required to do under ORS 305.275, which resulted in the invalidation of the statute. In the present case, the taxpayer's refund claims included a claim for a refund for tax year 1988. The taxpayer's 1988 return was due and was filed on or before April 15, 1989. [10] The taxpayer's taxes for 1988 were due and payable on the due date for filing the return, April 15, 1989. See ORS 314.395(1) (1991) (The tax shall be paid to the department at the time fixed by ORS 314.385 for filing the return without regard to extensions.). [11] Likewise, when ORS 305.765 to 305.785 were enacted as Oregon Laws 1931, chapter 337, income taxes generally were due and payable in the year following the calendar year in which the income was received. 3 Oregon Code Annotated (1930) § 69.1502.3 (tax year generally was the calendar year), § 69.1516 (return due 90 days after expiration of tax year), § 69.1520 (first installment, one-half of total tax, payable by due date for return; the remainder due within six months thereafter). The taxpayer's refund claim for tax year 1988 was filed on April 25, 1989. Because 1989 was the year in which the action attacking the validity    was instituted, ORS 305.765, and because her taxes for tax year 1988 became due and payable in 1989, the taxpayer is entitled to a refund of $2,518, the excess tax paid by her resulting from the inclusion of her federal pension income in her state taxable income for 1988. The taxpayer also is entitled to a refund of any excess tax paid due to the inclusion of federal retirement income in her state taxable income for any year subsequent to 1988 in which state retirement income was completely exempt from taxation. However, the taxpayer's refund claims for tax years 1970 through 1987 are barred by ORS 305.765 and 305.780, because the taxes for those years became due and payable in years prior to 1989, the year in which the taxpayer instituted these proceedings.