Court Opinion

ID: 5164330
Source: CourtListenerOpinion
Date Created: 2022-01-02 03:18:29.673854+00
Date Added: 2024-06-11T08:25:39.556947
License: Public Domain

[20] While I agree with the majority that if method 2, see I.R.C. § 1341(a)(5), is used the Duggers are entitled to a refund, I must dissent in part for two reasons. First, there is sufficient evidence in the record to show that the Duggers used method 2 in their calculations of their 1987 federal income tax liability. Second, under either method, the Duggers should be allowed a refund.
[21] The record before this Court contains the Duggers' 1987 federal income return. Pages 141 and 142 of the record show that the Duggers would have a 1987 tax liability of zero under method 1,see I.R.C. § 1341(a)(4). Pages 142, 143, and 144 of the record show that, under method 2, the Duggers would have a negative tax liability of $125,878.00 for 1987. Therefore, the Duggers were required by section 1341 of the Internal Revenue Code to use method 2 because it resulted in the lesser amount of tax.
[22] Under method 2, the Duggers had a $153,900 credit on their 1987 taxes. The Duggers' 1987 federal income tax return was made a part of the record. On line 61, entitled "total payments" of that return, the Duggers entered $153,900 as a credit. There is no evidence in the record that this return was not accepted by the Internal Revenue Service. Further, the hearing officer found that the Duggers had received "the refund of taxes paid attributable to those gas royalties in the amount of $153,900.00." Therefore, the record supports a finding that the Duggers used method 2 in their calculations.
[23] No matter which method the Duggers used, they were entitled to a refund on their state taxes. The majority argues that, if a taxpayer's federal adjusted gross income is not recalculated because of the claim of right, then the taxpayer is not entitled to a refund of state income taxes. Oklahoma's state income tax is based on federal income taxes. Section 2353(13) of title 68 defines "Oklahoma adjusted gross income" as "`adjusted gross income' as reported . . . to the federal government" with any adjustments by the federal or state law. This provision does not require an amended federal return or a recalculation of the federal adjusted gross income for a given tax year. Further, the Oklahoma adjusted gross income is based on *Page 970 
the adjusted gross income reported to the federal government.
[24] On their 1984, 1985, and 1986 federal and state returns, the Duggers reported the payment of the excess royalties as part of their federal tax return. Then in 1987, they reported the return of those funds. Even though the federal government did not correct the 1984, 1985, and 1986 returns, the correct amount was reported to the federal government. The Internal Revenue Code (IRC) recognizes that, in a situation such as this, the adjusted gross income on the federal tax returns for year improper income was received was not an accurate reflection of the actual gross income and provides for adjustments under section 1341 of the IRC.
[25] Section 2353(13) bases state income tax on the adjusted gross income as reported to the federal government with adjustments made under the Internal Revenue Code. The IRC makes adjustments for a "claim of right" under section 1341. Based on section 2353(13), the adjustments should be recognized and a refund allowed.
[26] The primary goal in construing statutes is "to follow the intent of the legislature." Ledbetter v. Alcoholic Beverage LawsEnforcement Comm'n, 764 P.2d 172, 179 (Okla. 1988). Section 2353(13) is a clear statement that the legislature intended that, if the adjusted gross income tax reported to the federal government was incorrect and an adjustment was made, the state income tax should be based on this adjusted amount. The majority, by the construction placed on Oklahoma tax laws, frustrates this intent of the legislature.
[27] A second rule is "statutory construction that would lead to an absurdity must be avoided and a rational construction should be given to a statute if the language fairly permits." Id. The result reached by the majority ignores this rule. Under the majority opinion, the Duggers would not be allowed a refund of state income taxes if they used method 1 (computing the tax for the taxable year with a deduction for the "claim of right") but would be allowed a deduction if they used method 2 (computing the tax for the taxable year without a deduction for the "claim of right" and subtracting the decrease in tax based on the "claim of right" for the year that the amount was improperly paid). This reaches the inane result that, if a taxpayer is required to use method 1 rather than method 2, he is not entitled to a state tax refund. But if he is compelled to use method 2, he may receive a refund of state tax. Allowing a refund based on section 2353(13) under either method 1 or method 2 allows a rational result, rather than the absurd result reached by the majority.
[28] For the above reasons, I dissent.