Opinion ID: 2575852
Heading Depth: 1
Heading Rank: 3

Heading: The Certiorari Filings

Text: ¶ 8 In the certiorari filings, the OTC contends that the district court effectively declared OTC Rule 710:45-1-2 invalid. That agency rule defines gross value of production to mean gross proceeds received by the producer. The OTC asks this Court to send this case back to the district court with instructions to apply OTC Rule 710:45-1-2 to the facts and calculate the tax owing by Texaco. Texaco, on the other hand, urges us to affirm the district court's prevailing-price ruling. ¶ 9 The certiorari arguments frame a controversy as to whether Texaco underreported and underpaid gross production and petroleum excise taxes, issues routinely determined in the administrative assessment of taxes under 68 O.S.2001, § 221. Because OTC alleged jurisdiction under 68 O.S.2001, § 215, we directed the parties to file briefs on the application of § 215 in light of § 221. [1] ¶ 10 In its brief, the OTC concedes that 68 O.S.2001, § 221 places upon it the duty to assess underreported taxes, but contends that 68 O.S.2001, § 215 gives it a right to forego the administrative assessment process and sue for a judicial determination of taxes. The OTC argues that the legislative history of the Uniform Tax Procedure Code, 68 O.S.2001, §§ 201, et seq., supports such a construction of § 215. We disagree. ¶ 11 The precursor to 68 O.S.2001, § 215 was a part of the original State Tax Uniform Procedure Act. 1939 Okla.Sess.Laws, ch. 66, § 16. The 1939 version provided that in any action to collect taxes, substantial proof of facts underlying the OTC's computation of the tax shifted the burden of proof to the taxpayer. [2] That language certainly indicated a legislative intent that the OTC may file suit for a judicial determination of tax liability; however, that language was deleted in the 1965 Uniform Tax Procedure Code.1965 Okla.Sess.Laws, ch.414. The current version of § 215 does not contain any language from which we can divine an intent to authorize the OTC to forego the administrative assessment process and file suit for judicial determination of tax liability. [3] ¶ 12 The history of 68 O.S.2001, § 221 followed the same path, enacted in the original 1939 State Tax Uniform Procedure Act and the 1965 Uniform Tax Procedure Code. The 1965 measure amended § 221, adding the requirement that the OTC shall in writing propose the assessment of taxes or additional taxes, as the case may be, and shall mail a copy of the proposed assessment to the taxpayer when it determines the taxpayer underreported and underpaid the tax. The current version of § 221 outlines the administrative process for examining and correcting self-assessed tax reports and returns. It requires the OTC to examine a tax report or return filed with it, make necessary audits or investigations, and if additional taxes are due, issue a written proposed assessment of the additional taxes and mail a copy of the proposed assessment to the taxpayer. ¶ 13 The amendments in the 1965 legislative measure to §§ 215 and 221 demonstrate intent that the tax laws be enforced through the administrative process prior to suit in the court. Accordingly, we conclude that 68 O.S. 2001, § 215 does not authorize the OTC to forego the administrative assessment process required by 68 O.S.2001, § 221 and file suit for a judicial determination of taxes. This conclusion is consistent with the legislative history of Oklahoma's Uniform Tax Procedure Code and our decisions in taxpayer suits holding that OTC has primary jurisdiction, Cimarron Industries, Inc. v. Oklahoma Tax Commission, 1980 OK 190, 621 P.2d 539, and requiring a taxpayer to exhaust the administrative remedies before the courts may act. Request of Hamm Production Co., 1983 OK 92, 671 P.2d 50. ¶ 14 Subject matter jurisdiction is invoked by the pleadings filed with the court. State ex rel. Turpen v. A 1977 Chevrolet Pickup Truck, 1988 OK 38, ¶ 10, 753 P.2d 1356, 1359. Both the OTC and Texaco urge that OTC's allegations of intentional underreporting of gross production taxes for the purpose of evading taxes invoked the district court's jurisdiction under 68 O.S.2001, § 223. Title 68 O.S.2001, § 223(C) provides that [i]n the case of either a false or a fraudulent report or return ... a proceeding in court may be begun for the collection of such tax without assessment at any time. [4] Clearly, § 223(C) authorizes the OTC to forego the administrative assessment and file suit for a determination of tax liability in the district court based on false or fraudulent tax reporting. ¶ 15 Generally, allegations of fraud or circumstances constituting fraud must be stated with particularity. 12 O.S.2001, § 2009. Pleading fraud with particularity allows the opposing party to prepare responsive pleading and defenses. A-Plus Janitorial & Carpet Cleaning v. The Employers' Workers' Compensation Association, 1997 OK 37, ¶ 35, 936 P.2d 916, 931. However, a failure to plead fraud with particularity may be cured by motion to supply the necessary particulars. Id., 1997 OK 37, at ¶ 36, 936 P.2d at 931. ¶ 16 The OTC asserts that it effectively alleged that Texaco filed false reports when it alleged that Texaco reported taxes based on the price of its gas under its single-party contract rather than the price it actually received. Texaco agrees this is a false and fraudulent tax report case and does not complain of any disadvantage caused by the OTC's failure to specifically allege false or fraudulent tax reporting. We agree with the parties that the OTC's first amended petition filed in the district court, alleging intentional schemes to evade taxes and seeking to recover the penalty for fraud with intent to evade tax, invoked the subject matter jurisdiction of the court pursuant to 68 O.S.2001, § 223(C). [5] Although § 223(C) authorizes the OTC to commence a proceeding in court for the collection of a tax without assessment, the authority is very limited. It applies only to taxpayers who failed to file a report or return or filed a false or fraudulent report or return. ¶ 17 We note that 68 O.S.2001, § 223(C) does not expressly require the OTC to plead the statute, but neither the defending taxpayer nor the court should have to speculate as to the precise statutory authority for the suit. In future petitions to commence proceedings under § 223(C), the OTC should explicitly plead jurisdiction under § 223(C). This guidance is consistent with our strict construction of taxpayer remedies provided in the Uniform Tax Procedure Code. See, Ladd Petroleum Corp. v. Oklahoma Tax Commission, 1980 OK 159, 619 P.2d 602; Request of Hamm Production Co., 1983 OK 92, 671 P.2d 50; and, Ladd Petroleum Corp. v. Oklahoma Tax Commission, 1989 OK 5, 767 P.2d 879.