Opinion ID: 6534259
Heading Depth: 2
Heading Rank: 2

Heading: 449B Timeliness of Department's Assertion of Corporate Income Tax

Text: We begin first with taxpayer's argument that the department cannot rely on the corporate income tax as a basis for taxpayer's tax liability. The department did not assert that the banks were subject to the corporate income tax in its deficiency notices and did not raise the issue until it filed its cross-motion for partial summary judgment. Taxpayer contends that that is not timely, and so the Tax Court could not properly  consider whether the banks were subject to the corporate income tax. The Tax Court concluded that the department did timely raise the corporate income tax. In so holding, it relied on ORS 305.575. That statute provides, in part: In an appeal to the Oregon Tax Court from an assessment made under ORS 305.265, the tax court has jurisdiction to determine the correct amount of deficiency, even if the amount so determined is greater or less than the amount of the assessment determined by the Department of Revenue, and even if determined upon grounds other or different from those asserted by the department , provided that claim for such additional tax on other or different grounds is asserted by the department before or at the hearing or any rehearing of the case before the tax court. In the event such other or different grounds are asserted by the department, the opposing party shall be allowed additional time, not less than 10 days, within which to amend or otherwise plead thereto, which additional time, however, may be waived by stipulation of the parties. (Emphasis added.) The Tax Court concluded that the corporate income tax argument was grounds other or different from those asserted by the department and that the department had raised it before or at the hearing    of the case before the tax court. See 22 OTR at 330-31 . The court also found that taxpayer had not sought any additional time to respond. See 22 OTR at 331 . Taxpayer contends that the Tax Court's discussion of the text of ORS 305.575 failed to give appropriate weight to the statutory context. It notes that ORS 305.265 prescribes that any notice of deficiency must identify specifically the  statutory basis for the claimed deficiency. The text of that statute provides, in part: (2)    Except as provided in subsection (3) of this section, 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. Any notice of deficiency failing to meet the requirements of ORS 305.265 is invalid. See Preble v. Dept. of Rev. , 331 Or. 320 , 325, 14 P.3d 613 (2000) (a notice of deficiency is invalid if it does not include the reason or the authority for each adjustment as required by ORS 305.265(2)(a) and (b) ). For that reason, taxpayer asserts, the department cannot assert any new grounds for taxation that it did not include in its notice of deficiency. In taxpayer's view, ORS 305.575 allows the Tax Court to correct only the amount of tax, not to impose a different tax. We are not persuaded by taxpayer's argument based on ORS 305.265. That statute lists the minimum contents required for a valid notice of deficiency. Taxpayer does not assert that the notices of deficiency issued here lacked any element required by ORS 305.265(2). Indeed, they all stated a reason for the adjustment, a reference to the authority for the adjustment, and a certification of good faith. Accordingly, the notices of deficiency were not invalid. Moreover, ORS 305.265 does not purport to control what happens later during litigation over the deficiency. The process of reducing a deficiency to a judgment is expressly addressed in ORS 305.575. That statute specifically authorizes the Tax Court to impose the correct amount of the tax, even if determined upon grounds other or different from those asserted by the department, provided that there is adequate notice and opportunity to respond. Notably, ORS 305.575 expressly mentions ORS 305.265, and both ORS 305.265 and ORS 305.575 were created in the same act,  Or. Laws 1977, ch. 870, §§ 3, 21. Thus, it appears that the legislature directly contemplated the underlying notice of deficiency when it authorized a tax in the correct amount upon grounds other or different from those asserted by the department. Taxpayer's argument appears to leave no content to the phrase grounds other or different from those asserted by the department.  It would effectively strike the words out of ORS 305.575, a result that is generally prohibited. See State v. Cloutier , 351 Or. 68 , 98, 261 P.3d 1234 (2011) (if possible, we give a statute with multiple parts a construction that will give effect to all of those parts (internal quotation marks and citation omitted)); accord Crystal Communications, Inc. v. Dept. of Rev. , 353 Or. 300 , 311, 297 P.3d 1256 (2013) (As a general rule, we construe a statute in a manner that gives effect, if possible, to all its provisions.). We conclude that the department could raise the corporate income tax issue before the Tax Court, even though the notices of deficiency had only asserted the corporate excise tax. 5