Court Opinion

ID: 3188583
Source: CourtListenerOpinion
Date Created: 2016-03-24 16:20:55.66501+00
Date Added: 2024-06-11T07:39:03.881353
License: Public Domain

No. 16	                         March 24, 2016	795

               IN THE SUPREME COURT OF THE
                     STATE OF OREGON

                          Leslie SCOTT,
                        Plaintiff-Appellant,
                                  v.
                   DEPARTMENT OF REVENUE,
                      Defendant-Respondent.
                      (TC 5192, SC S062085)

    On appeal from the Oregon Tax Court.*
    Submitted on the briefs and the record July 16, 2015.
    Orrin L. Grover, Woodburn, filed the briefs for appellant.
   Vanessa A. McDonald, Assistant Attorney General,
Salem, filed the brief for respondent. With her on the brief
was Ellen F. Rosenblum, Attorney General.
  Before Balmer, Chief Justice, and Kistler, Walters,
Landau, Brewer, and Baldwin, Justices, and Linder, Senior
Judge, Justice pro tempore.**
    BALMER, C. J.
    The judgment of the Tax Court is reversed, and the case
is remanded to the Tax Court for further proceedings.
     Case Summary: The Tax Court dismissed taxpayer’s complaint on the basis
that the taxpayer had not satisfied (as an alternative to the prerequisite in ORS
305.419(1) that the taxes assessed be paid on or before the filing of a complaint)
the requirement in ORS 305.419(3) to file “an affidavit alleging undue hardship
with the complaint,” which the court deemed jurisdictional. Held: (1) The filing
of an affidavit alleging undue hardship with the complaint, as ORS 305.419(3)
provides, is legally required but is not jurisdictional; (2) it is the failure to estab-
lish undue hardship, not the failure to file an affidavit with the complaint, that is
cause for dismissal; and (3) the Tax Court erred in dismissing taxpayer’s appeal
on the ground upon which it relied.
   The judgment of the Tax Court is reversed, and the case is remanded to the
Tax Court for further proceedings.

______________
	**  On appeal from the Oregon Tax Court, Henry C. Breithaupt, Judge. 21
Or. Tax 313 (2013)
	   **  Nakamoto, J., did not participate in the consideration or decision of this
case.
796	                                                 Scott v. Dept. of Rev.

	          BALMER, C. J.
	        Taxpayer appeals a judgment of the Regular
Division of the Tax Court that dismissed his appeal from
the Magistrate Division to the Regular Division for lack of
jurisdiction. For the reasons set out below, we reverse the
judgment of the Tax Court and remand to the Tax Court for
further proceedings.
	         The facts, which are undisputed in all respects
save one, are taken from the Tax Court decision and the
record. In 2012, the Department of Revenue issued notices
of deficiency assessments against taxpayer relating to his
personal income taxes for the tax years 2007 and 2008.
Taxpayer appealed, and the Magistrate Division of the Tax
Court determined that taxpayer had substantiated some
claimed deductions that the department had disputed, but
also that he had additional unreported income.1 Following
the proceedings in the Magistrate Division, the department
assessed additional income taxes for 2007 and 2008, and
issued notices of liability balances to that effect. Taxpayer
appealed to the Regular Division. The Tax Court received
taxpayer’s complaint, a declaration of mailing, a motion for
a stay of the requirement to pay the taxes owed, and the
filing fee for the complaint. The Tax Court did not, however,
receive from taxpayer an affidavit, with the complaint, alleg-
ing that payment of the disputed amounts pending appeal
would cause him undue hardship.
	       The department moved to dismiss taxpayer’s
complaint on the ground that the court lacked jurisdic-
tion over the subject matter because taxpayer had not
complied with the requirements of ORS 305.4192 and
	1
        Because of the procedural posture of this case, the Magistrate Division’s
decision is not relevant to any issue currently before us, and we do not discuss it
further.
	2
        Throughout this opinion, we cite and apply the 2011 version of the applica-
ble statutes and rules.
	    ORS 305.419 (2011) provides, in part:
     	 “(1)  Except as provided in subsection (3) of this section, in any appeal
     from an order, act, omission or determination of the Department of Revenue
     involving a deficiency of taxes imposed upon or measured by net income, the
     tax assessed, and all penalties and interest due, shall be paid to the depart-
     ment on or before the filing of a complaint with the regular division of the
Cite as 358 Or 795 (2016)	797

TCR 18 C.3 Those provisions generally require that, as a
precondition to appealing certain orders involving income
tax deficiencies, the taxpayer must pay the taxes assessed
and all penalties and interest due, or, alternatively, “file
an affidavit alleging undue hardship with the complaint.”
Taxpayer opposed the department’s motion and submit-
ted a declaration by his counsel that, according to coun-
sel’s recollection, he had printed and assembled a packet
for mailing to the Tax Court that included a complaint,
a declaration of mailing, a motion for a stay, a hardship
declaration, and a filing fee. Taxpayer’s counsel further
declared that the file origin data on his computer indi-
cated that the complaint, motion, and declaration were
all “last modified” within five minutes of each other on
August 23, 2013, the date that he mailed the package.
Counsel also submitted a copy of taxpayer’s hardship dec-
laration that he claimed he had included with the com-
plaint.4 The Tax Court held a telephonic hearing on the

    Oregon Tax Court under ORS 305.560 or before a complaint specially desig-
    nated for hearing in the regular division under ORS 305.501 is heard. The
    complaint shall be filed as a claim for refund.
    	   “* * * * *
 	    “(3)  Where payment of the tax, penalties and interest would be an undue
 hardship, plaintiff may file an affidavit alleging undue hardship with the
 complaint. If the tax court finds undue hardship, the tax court judge may
 stay all or any part of the payment of tax, penalty and interest required
 under subsection (1) of this section. If the tax court judge finds no undue
 hardship, the tax court judge may grant the plaintiff up to 30 days from the
 date of determination to pay the taxes, penalties and interest. Failure by the
 plaintiff to pay the taxes, penalties and interest or to establish undue hard-
 ship will be cause for dismissing the complaint.”
	3
     TCR 18 C (2011) provides, in part:
    	    “In all income tax cases where the plaintiff is the taxpayer, the complaint
    must allege that the assessed taxes, penalties, and interest have been paid,
    and the requested relief should be for a refund. If the taxes, penalties, and
    interest have not been paid because payment would be an undue hardship,
    the complaint should so allege and seek to have the assessment set aside.
    Complaints alleging undue hardship must be accompanied by (1) a motion
    for stay of payment and (2) an affidavit setting forth the specific facts and
    circumstances which establish undue hardship. See ORS 305.419.”
	4
       The hardship declaration that plaintiff ultimately filed was on the form
used by the Tax Court to determine whether a taxpayer is eligible to have the fil-
ing fee waived. Although that form generally provided the same information that
would be included in an affidavit of hardship under ORS 305.419(3), it is not, in
fact, an affidavit. The Tax Court noted that distinction, but did not rely upon it in
deciding this case, and we do not address the issue.
798	                                      Scott v. Dept. of Rev.

department’s motion, giving the parties an opportunity
to elaborate on the factual and legal arguments made in
their previously filed memoranda.

	        Ultimately, the Tax Court granted the department’s
motion. Scott v. Dept. of Rev., 21 Or. Tax 313, 315 (2013). The
court stated that, to satisfy the jurisdictional requirements
of the tax statutes, taxpayer was required to file an affi-
davit alleging undue hardship with the complaint. Id. at
314. It determined that, in context, the permissive “may”
in ORS 305.419(3) (“plaintiff may file an affidavit alleging
undue hardship with the complaint”) becomes a mandatory
requirement when the taxpayer does not pay the tax in full,
as required by ORS 305.419(1). Id. Turning to the factual
question of whether taxpayer had filed an affidavit with the
complaint, the Tax Court noted that it had received all of
the items taxpayer’s counsel claimed he had sent, except
for the hardship declaration. Id. The Tax Court observed
that counsel for taxpayer stated only that, to the best of his
recollection, he had included taxpayer’s hardship declara-
tion in the packet he mailed to the court. Id. at 315. The
Tax Court stressed that, at the hearing on the department’s
motion, counsel for taxpayer “stated that he did not know
why the court did not receive the declaration, but that he
may be mistaken about his best recollection that it was in
the packet sent to the court.” Id. at 314.

	        The Tax Court concluded that taxpayer had not pro-
vided evidence that, more probably than not, the hardship
declaration was sent but misplaced by the court. Id. at 315.
The Tax Court also rejected taxpayer’s legal argument that
his counsel’s action in signing the motion for stay of pay-
ment should be considered the affidavit of plaintiff because,
under TCR 17, an attorney’s signature certifies the accu-
racy of factual assertions contained in the motion—in this
case, the factual basis for plaintiff’s claim of hardship. Id. at
314-15. Taxpayer then filed a motion for reconsideration of
the order and judgment, which the Tax Court denied. The
Tax Court subsequently entered a judgment against tax-
payer dismissing his complaint and sustaining the depart-
ment’s notices of tax assessment and liability balance for the
2007 and 2008 tax years.
Cite as 358 Or 795 (2016)	799

	        Taxpayer now appeals the dismissal of his com-
plaint. Our review is “limited to errors or questions of law or
lack of substantial evidence in the record to support the tax
court’s decision or order.” ORS 305.445.
	        A party dissatisfied with a Magistrate Division
decision may appeal by filing a complaint in the Regular
Division of the Tax Court within 60 days after the date of
entry of the written decision. ORS 305.501(5)(a). See gen-
erally Village at Main Street Phase II v. Dept. of Rev., 356
Or 164, 167-68, 339 P3d 428 (2014) (explaining differences
between Magistrate Division and Regular Division). We first
consider whether the filing of an affidavit of hardship with
the complaint, as described in ORS 305.419(3), is a juris-
dictional requirement for an appeal to the Regular Division
of the Tax Court when a taxpayer challenges a department
order assessing an income tax deficiency, if the taxpayer
fails to pay the tax assessed on or before the date the com-
plaint is filed.5 Because we conclude that the filing of an affi-
davit of hardship with the complaint is not a jurisdictional
requirement, we need not consider taxpayer’s arguments
that he met that statutory requirement. Instead, we reverse
and remand for further proceedings before the Tax Court
consistent with this opinion.
	        Taxpayer suggests that the Tax Court wrongly
decided the case on which the department relies, Curtis I
v. Dept. of Rev., 19 Or. Tax 123 (2006), which held that fail-
ure to comply with the alternative requirements of ORS
305.419(3) is a jurisdictional defect that requires dismissal.
In turn, Curtis relied in part on this court’s decision in
Leffler Industries v. Dept of Rev., 299 Or 481, 704 P2d 97
(1985). In Leffler, this court held that the requirement in
	5
      We note that the statute at issue here was amended in 2015, and that
the situation in which taxpayer finds himself is unlikely to arise in the future.
Subsection (3) of ORS 305.419 now provides:
    	 “Where payment of the tax, penalty and interest would be an undue
    hardship, plaintiff may file an affidavit alleging undue hardship within the
    time described in subsection (1) of this section. A plaintiff’s failure to file
    an affidavit alleging hardship is not grounds for dismissal of the complaint,
    provided the plaintiff files the affidavit within 30 days after receiving notice
    of lack of an affidavit alleging undue hardship from the court.”
Or Laws 2015, ch 45, §1. The 2015 amendments took effect October 5, 2015 and
do not apply to taxpayer’s appeal in this case.
800	                                        Scott v. Dept. of Rev.

ORS 305.419(1)—to pay all taxes assessed, plus penalties
and interest, on or before the filing of a complaint with
the Tax Court—was a jurisdictional requirement. Leffler,
299 Or at 485-86. Following Leffler, the Tax Court held,
as noted, that the alternative to paying the tax owed—
establishing undue hardship by filing an affidavit to that
effect with the complaint, as provided in ORS 305.419(3)—
also is jurisdictional. Smith v. Dept. of Rev., 16 Or. Tax 44
(2002) (so holding); see also Curtis (same).
	        Taxpayer urges that “the underpinning of Curtis
must be carefully analyzed,” and stresses that Curtis does
not bind this court in determining whether or how Leffler
applies. Taypayer observes that ORS 305.419(1), which
requires that a taxpayer appealing an order involving
an income tax deficiency pay the amount owed, uses the
mandatory command “shall.” In contrast, ORS 305.419(3),
which provides the alternative of filing an affidavit of undue
hardship, uses the permissive term “may.” For that reason,
he suggests that Curtis was wrongly decided. Taxpayer
argues that he adequately complied with any jurisdictional
requirement in ORS 305.419 and that the Tax Court erred
by dismissing his complaint for failure to comply with that
statute.
	       Our task is to discern the legislature’s intent in
enacting ORS 305.419(3). ORS 174.020(1)(a). In inter-
preting a statute, we give primary weight to text and
context. State v. Gaines, 346 Or 160, 171, 206 P3d 1042
(2009). For convenience, we again set out the text of ORS
305.419(3):
   	 “Where payment of the tax, penalties and interest
   would be an undue hardship, plaintiff may file an affida-
   vit alleging undue hardship with the complaint. If the tax
   court finds undue hardship, the tax court judge may stay
   all or any part of the payment of tax, penalty and inter-
   est required under subsection (1) of this section. If the tax
   court judge finds no undue hardship, the tax court judge
   may grant the plaintiff up to 30 days from the date of deter-
   mination to pay the taxes, penalties and interest. Failure
   by the plaintiff to pay the taxes, penalties and interest or to
   establish undue hardship will be cause for dismissing the
   complaint.”
Cite as 358 Or 795 (2016)	801

	        Taxpayer makes no substantive argument as to how
the legislature intended ORS 305.419(3) to operate, beyond
noting the use of the permissive word “may” in the phrase
“may file an affidavit.” The department, for its part, relies
on the Tax Court’s decision in Curtis, arguing that the affi-
davit was required to have been filed “with” the complaint,
in a temporal sense, and that taxpayer’s failure to do so is a
jurisdictional defect fatal to his appeal.
	        This court is responsible for determining the cor-
rect meaning of a statutory provision, regardless of whether
that interpretation is asserted by the parties. Stull v. Hoke,
326 Or 72, 77, 948 P2d 722 (1997). In the past, we have dis-
tinguished between statutes that are mandatory and those
that are directory only. McFarlane v. Cornelius, 43 Or 513,
525-28, 73 P. 325 (1903) (statute requiring proof of service
of a summons by publication be made by affidavit of news-
paper printer within six months after last day of publica-
tion is directory only; upholding service even though affi-
davit was filed outside the six-month window). However, in
Anaconda Company v. Dept. of Rev., 278 Or 723, 727, 565
P2d 1084 (1977), we observed that the words “mandatory”
and “directory” are labels applied to conclusions about the
effect attached to noncompliance with statutory require-
ments. We pointed out that use of those labels can confuse
two distinct issues: first, the intended effect of a particular
statutory requirement; second, whether the failure to fol-
low a required procedure may nevertheless be excused. Id.
at 726-27. That compliance with a statutory requirement is
obligatory (i.e., legally required) says little about whether
a procedural failure is fatal. Id. at 727. That latter ques-
tion necessarily is based on the particular statutory enact-
ment and involves determining the legislature’s intent. Id.
at 727-28.
	        With that background, we first address whether tax-
payer was required to file “an affidavit alleging undue hard-
ship with the complaint.” ORS 305.419(3). Ordinarily, the
use of the word “may” in a statute is permissive; it denotes
permission, authority, or liberty to do something. See Nibler
v. Dept. of Transportation, 338 Or 19, 26-27, 105 P3d 360
(2005) (considering dictionary definitions of word “may”).
802	                                    Scott v. Dept. of Rev.

Thus, ORS 305.419(3), by itself, authorizes, but does not
require, the filing of an affidavit. But the choice of whether
to file an affidavit comes with consequences. In that regard,
ORS 305.419(1) provides context for ORS 305.419(3). The
former subsection requires the payment of the tax assessed,
along with penalties and interest, “on or before the filing of
a complaint.” ORS 305.419(1). The only exception to the pay-
ment requirement is “as provided in subsection (3) of this
section[.]” Id. Accordingly, to be relieved from the payment
requirement, a taxpayer must comply with the affidavit
requirement in ORS 305.419(3).
	        Stated another way, the filing of an affidavit is per-
missive in the sense that it is not required to be filed in all
circumstances; but it is legally required (in a sense, “manda-
tory”) in situations where a taxpayer wishes to be exempted
from the otherwise applicable obligation to pay the taxes
assessed in order for the Regular Division of the Tax Court
to have jurisdiction over the taxpayer’s appeal. In the latter
instance, the filing of an affidavit alleging undue hardship,
as permitted by ORS 305.419(3), is obligatory. See McCain
v. State Tax Com., 227 Or 486, 489, 360 P2d 778 (1961),
overruled on other grounds by Stroh v. SAIF, 261 Or 117,
120, 492 P2d 472 (1972). (“We think that the word ‘may’
in this context is permissive in the sense that it expresses
the grant of a remedy which, but for the statute, would not
have existed. But the means designated for making the
remedy available to the taxpayer are an integral part of the
grant.”).
	       Our conclusion that ORS 305.419(3) requires a tax-
payer to file an affidavit alleging undue hardship with his
complaint (as an alternative to paying the taxes owed) as a
condition of pursuing his appeal does not make such a filing
necessarily jurisdictional. Rather, for the reasons discussed
below, we conclude that the filing of an affidavit alleging
undue hardship with the complaint is not jurisdictional.
	        We return to the wording of the statute. The first
sentence provides that “[w]here payment of the tax * * *
would be an undue hardship, plaintiff may file an affida-
vit alleging undue hardship with the complaint.” That sen-
tence permits a taxpayer to file a hardship affidavit with the
Cite as 358 Or 795 (2016)	803

complaint “where” payment of the tax “would be an undue
hardship.” The sentence does not indicate who makes the
determination that payment of the tax “would be” an undue
hardship. However, because the statute authorizes the tax-
payer to take a specific action—to file an affidavit—the only
reasonable inference is that, at least in the first instance,
it is the taxpayer who does so, if the taxpayer asserts that
payment of the tax “would be an undue hardship.” The next
two sentences are directed at the Tax Court and make clear
that, the taxpayer’s claim of hardship notwithstanding, the
court renders the ultimate decision concerning whether pay-
ment of the tax would, in fact, be an undue hardship for
the taxpayer. If the Tax Court finds undue hardship, the
court “may stay all or any part of the payment of tax[.]”
Conversely, if the Tax Court does not find undue hardship,
the court “may grant the plaintiff up to 30 days from the
date of determination to pay the taxes[.]”
	        The fourth and final sentence specifies the conse-
quences of a taxpayer’s failure to take certain action. A tax-
payer’s failure to pay the taxes “or to establish undue hard-
ship will be cause for dismissing the complaint.” (Emphasis
added). From that sentence, we glean two things.
	        First, the alternative to not paying the taxes due
on or before filing the complaint is not merely the filing of
an affidavit; instead, the taxpayer must “establish” undue
hardship. To be sure, a taxpayer may seek to establish
undue hardship through the filing of an affidavit. But the
emphasis on a taxpayer’s need to “establish” undue hard-
ship suggests the necessity for a procedure that provides an
opportunity for the taxpayer to meet that requirement and
for the Tax Court to determine whether the taxpayer has
done so.
	       And, indeed, the Tax Court established just such a
procedure when it promulgated TCR 18 C. That rule requires
complaints alleging undue hardship to be accompanied by a
motion for stay of payment as well as an affidavit “setting
forth the specific facts and circumstances which establish
undue hardship.” The rule goes on to state:
   “In such cases, the following procedures shall apply:
804	                                       Scott v. Dept. of Rev.

   	 “C(1)  The defendant may file objections to the motion
   for stay of payment within 30 days following service of the
   motion. If the defendant objects to the motion and the court
   cannot determine from the plaintiff’s affidavit whether
   payment of the tax, penalty, and interest would be an
   undue hardship, the court may require the plaintiff to sub-
   mit further proof of hardship in writing or the court may
   schedule a hearing for that purpose. All hardship hearings
   shall be conducted by telephone and recorded, unless the
   court determines that the circumstances require the par-
   ties to appear personally.
   	 “C(2)  If the court finds undue hardship, an order
   will be entered staying payment of all or a portion of the
   assessed tax, penalty, and interest pending final judgment
   in the case. Defendant shall file a response to the complaint
   within 10 days following the date of the order staying
   payment.
   	 “C(3)  If the tax court finds no undue hardship, the
   court shall issue an order granting the plaintiff up to 30
   days from the date of the order to pay the tax, penalty, and
   interest. Failure of the plaintiff to pay the tax, penalty,
   and interest and to submit proof of payment within the
   time allowed by the court will be cause for dismissal of the
   complaint.”

Thus, TCR 18 C does three things: (1) It adds a requirement
not found in the statute (the filing of a motion for stay of
payment); (2) it fleshes out what the affidavit must contain
(the specific facts and circumstances which establish undue
hardship); and (3) it sets out a procedure that enables the
Tax Court to obtain additional information from which to
evaluate a taxpayer’s assertion of undue hardship (objec-
tions from the defendant; “further proof” from the taxpayer
in writing or at a hearing). Accordingly, the filing of an affi-
davit is not the sole determinant of whether a taxpayer has
complied with the alternative to the payment of taxes on or
before the filing of the complaint.
	        Second, the final sentence of ORS 305.419(3) iden-
tifies the consequences of noncompliance with the statute:
dismissal of the complaint. It is the failure to establish
undue hardship, however, not the failure to file an affidavit
with the complaint, that is cause for dismissal.
Cite as 358 Or 795 (2016)	805

	        Statutory requirements related to court procedures
are jurisdictional if the legislature intended them to be,
Frederick v. Douglas Co. et al., 176 Or 54, 63-64, 155 P2d
925 (1945), and we generally look at the purpose of a statute
to determine whether the legislature intended compliance
with a statutory provision to be a jurisdictional requirement.
See Hood River County v. Dabney, 246 Or 14, 22-23, 423 P2d
954 (1967) (in enacting tax foreclosure statutes, legislature
had two opposing interests to consider, interest of taxpayers
in receiving notice, and interests of counties and purchasers
at foreclosure sales in marketable title; concluding that all
defects in tax foreclosure proceedings are nonjurisdictional
unless taxpayer deprived of due process).
	         Returning to ORS 305.419, we note at the outset
that that statute does not authorize a taxpayer to appeal
anything. Compare State v. Nix, 356 Or 768, 773-74, 345
P3d 416 (2015) (statute providing that in any appeal appel-
late court may review claim that sentencing court failed to
comply with requirements of law does not authorize state
to appeal anything; instead, statute refers to issues that
may be reviewed in a case otherwise appealable). Rather,
it is ORS 305.501(5)(a) that authorizes a taxpayer’s appeal.
(“Any party dissatisfied with a written decision of a magis-
trate may appeal the decision to the judge of the tax court
by filing a complaint in the regular division of the tax court
within 60 days after the date of entry of the written deci-
sion.”).6 ORS 305.419(1) instead specifies a condition prece-
dent for the subset of Tax Court appeals that involve income
tax disputes: payment of the tax assessed, and all penalties
and interest due, on or before the filing of the complaint. And
ORS 305.419(3) then provides an alternative to that condi-
tion, if the taxpayer establishes that payment of the taxes
would be an undue hardship. The legislature intended to
provide a taxpayer the opportunity to obtain an exemption
from the otherwise applicable requirement of payment of the
assessed income taxes while the appeal is pursued—if the
taxpayer can establish undue hardship. We hesitate to deem

	6
       See also ORS 305.570(1)(a) (“Any person * * * aggrieved by and affected by
a written decision of a tax court magistrate issued under ORS 305.501 * * * may
appeal to the regular division of the Oregon Tax Court, and appeal shall be per-
fected in the manner provided in ORS 305.404 to 305.560.”).
806	                                    Scott v. Dept. of Rev.

as jurisdictional a statutory requirement that is designed to
allow someone without funds access to the courts to pursue
their statutory appeal rights. That is especially true when
nothing in the text of ORS 305.419(3) appears to reflect any
considered legislative intent to make the filing of an affida-
vit with the complaint jurisdictional. As noted earlier, what
makes the taxpayer’s complaint subject to dismissal is the
failure to establish undue hardship, not the failure to file an
affidavit with the complaint.
	        Our holding is limited to the question of whether,
under ORS 305.419(3), taxpayer’s failure to file an affidavit
of undue hardship with the complaint was a jurisdictional
defect. Because it was not, the Tax Court erred in dismiss-
ing taxpayer’s appeal on that ground. We express no opinion
as to any other procedural or substantive aspect of taxpay-
er’s appeal. We reverse and remand for further proceedings
consistent with this opinion.
	        The judgment of the Tax Court is reversed, and the
case is remanded to the Tax Court for further proceedings.