Opinion ID: 2821931
Heading Depth: 1
Heading Rank: 1

Heading: facts

Text: [¶2.] Citibank 1 timely filed United States federal income tax returns with the Internal Revenue Service (the “IRS”) on behalf of itself and its consolidated group for each of the following taxable years: 1999, 2000, 2001, and 2002 (the “Federal Tax Returns”). Citibank also timely filed bank franchise tax returns with the South Dakota Department of Revenue (the “Department”) for the same years. The IRS subsequently conducted an audit of the Federal Tax Returns. During the course of the audit, Citibank requested a reduction in its taxable income for the taxable years 1999 and 2000. Citibank made this request because it changed its 1. At all relevant times, Citigroup, Inc. (“Citigroup”) was the common parent of Citibank and Citibank (of South Dakota) National Association (“CBSD”). On July 1, 2011, CBSD merged with and into Citibank. Citibank brought the underlying claim as a successor in interest to CBSD. For purposes of this opinion, we refer to Citigroup, CBSD, and Citibank collectively as “Citibank.” -1- #26933 method of accounting beginning with the 2001 tax year. 2 Citibank’s application of the new accounting method resulted in the double reporting of interchange fees that were previously reported on its 1999 and 2000 tax returns. The IRS and Citibank agreed to extend the federal statutory period of limitations for auditing the Federal Tax Returns to June 30, 2012, for assessments, and December 31, 2012, for claims for refunds. As part of a settlement with Citibank, the IRS agreed in 2012 to reduce Citibank’s taxable income for the taxable years 1999, 2000, 2001, and 2002 by the respective amounts of $789,426,457; $120,873,512; $10,357,119; and $14,054,954. [¶3.] The parties to this action stipulated that the State of South Dakota did not have “personal knowledge” of the Federal Tax Returns until March 2012. On March 16, 2012, and within 60 days of the IRS’s final decision, Citibank filed amended bank franchise tax returns with the Department reflecting its reduced taxable income for tax years 1999 and 2000 and requested a refund of the bank franchise taxes on returns that were due and paid in 2000, 2001, 2002, and 2003, for taxable years 1999 through 2002. 3 The refund request filed with the Department totaled $29,945,132, excluding interest. 4 The circuit court noted that 2. For the taxable years 1999 and 2000, Citibank accounted for interchange fees using the “Immediate Recognition Method.” Beginning with the 2001 taxable year, Citibank accounted for interchange fees using the “Deferral Method.” 3. In addition to not notifying the Department of the audit until March 2012, Citibank did not notify the State that it had obtained extensions from the IRS for the Federal Tax Returns because of the audit until September 24, 2012, even though Citibank collaborated with the IRS regarding the extensions within the three-year limitation period under SDCL 10-59-19. 4. On March 16, 2012, Citibank filed an amended franchise tax return. The tax return requested a refund of $29,002,648 for the taxable year 1999; $897,255 (continued . . .) -2- #26933 at the time of its decision, the approximate total accrued interest on the refund claim was $21,500,000. [¶4.] The Department denied Citibank’s request for a refund of bank franchise taxes on April 9, 2012. The Department concluded that the refund claim was filed after the three-year statute of limitations had expired pursuant to SDCL 10-59-19. Citibank requested an administrative hearing before OHE, contending that it had timely filed its refund claim in compliance with ARSD 64:26:02:06. Citibank and the Department stipulated to all material facts and evidence and filed cross motions for summary judgment. The Department also filed a motion to dismiss for lack of jurisdiction. [¶5.] On March 15, 2013, OHE granted the Department’s motion to dismiss for lack of jurisdiction. OHE rejected Citibank’s argument that ARSD 64:26:02:06 allowed it to file a refund claim after the expiration of the three-year statute of limitations. OHE concluded that it did “not have jurisdiction” because “Citibank failed to file its request for refund within the three year limitations period contained in SDCL 10-59-19.” Citibank appealed to the circuit court. The circuit court affirmed OHE’s decision on November 22, 2013. Citibank raises the following issues for our review: 1. Whether OHE correctly granted the Department’s motion to dismiss for lack of jurisdiction because Citibank failed to comply with procedural requirements in SDCL chapter 10-59 when filing its tax refund request. _______________________________________ (. . . continued) for the taxable year 2000; $25,544 for the taxable year 2001; and $19,685 for the taxable year 2002. -3- #26933 2. Whether the circuit court erred as a matter of law in rejecting Citibank’s equitable tolling argument. 3. Whether the circuit court erred as a matter of law in affirming the denial of Citibank’s motion for summary judgment.