Court Opinion

ID: 4711490
Source: CourtListenerOpinion
Date Created: 2021-08-12 00:36:58.237588+00
Date Added: 2024-06-11T08:05:47.677123
License: Public Domain

Talmadge, J.
(dissenting) — In enacting RCW 82.32.050 (assessments against taxpayers), and RCW 82.32.060 (refunds for taxpayers), the Legislature intended to establish an ironclad four-year, no-claim period for taxes due to the State of Washington. Because the majority erroneously determines the point at which the four-year time period begins and potentially undercuts the no-claim period, I respectfully dissent.
For the period from 1977 to 1981, PACCAR paid business and occupation (B&O) taxes on interest income from its subsidiaries. In 1982, the Department of Revenue (DOR) audited PACCAR’s tax payments and issued an assessment in December of that year indicating PACCAR had substantially underpaid taxes, primarily use taxes. In February 1983, PACCAR paid the deficiency and then appealed to DOR for a refund arguing no B&O tax was due on its subsidiary interest income. DOR denied the appeal and no further appeal by PACCAR was taken from that decision. In December 1985, PACCAR sued DOR in the Thurston County Superior Court. Then, in December 1994, some nine years after the filing of the original action, PACCAR filed a motion for summary judgment, which the trial court granted holding PACCAR had no obligation to pay B&O taxes on its subsidiaries’ interest income. The trial court, in effect, allowed PACCAR at least a partial refund for B&O taxes on interest income of its subsidiaries for the period from 1977 to 1980.
The Court of Appeals reversed the trial court decision, holding the 1979 amendments to RCW 82.32.050 and .060 *323did not provide for the type of offset that would allow PAC-CAR to obtain a refund. The Court of Appeals ruled PAC-CAR’s claim for a refund of B&O taxes during the period for 1977 to 1980 had lapsed.
DOR asserts PACCAR made no petition for a refund of its 1977-1980 overpayments within the four-year, no-claim period. The Court of Appeals agreed: “Paccar did not submit a refund application for the 1977-80 period until it received the 1985 assessment.” PACCAR, Inc. v. Department of Revenue, 85 Wn. App. 48, 49, 930 P.2d 954 (1997).50 Both are incorrect. PACCAR, in its February 13, 1983 letter to DOR, formally petitioned for a refund of the B&O taxes it paid on subsidiary interest income for 1977 through 1981. The central issue in this case is, what years come within the purview of the no-claim statute for purposes of a refund for overpayments.
The pertinent part of the no-claim statute, RCW 82.32.060(1), reads as follows: “Except as provided in subsections (2) and (3) of this section, no refund or credit shall be made for taxes, penalties, or interest paid more than four years prior to the beginning of the calendar year in which the refund application is made or examination of records is completed.” Because PACCAR made its refund application on February 13, 1983, no refund could be made to PACCAR for any taxes it paid more than four years prior to the beginning of 1983. Thus, PACCAR could have received refunds for any overpayments it made in 1982, 1981, 1980, and 1979, but not for overpayments it made in 1978 and 1977, as the latter two dates are more than four years prior to the beginning of 1983.
After a formal hearing, DOR rejected PACCAR’s administrative appeal in a Determination dated December 23,1983. The administrative law judge did not discuss the operation of the no-claim statute on PACCAR’s request for refunds extending back through 1977, but denied the entire claim *324anyway. PACCAR was entitled to appeal this determination pursuant to RCW 82.03.190, but did not do so. Thereafter, as each succeeding year went by, the no-claim statute cut off another year from PACCAR’s right to receive a refund for overpayment of B&O taxes.
On December 30, 1985, PACCAR filed the underlying complaint in this case, alleging it was entitled to a refund for B&O tax payments it made from 1981 through 1985.51 This claim was clearly within the four-year, no-claim window. PACCAR also alleged, however, it was entitled to a refund of B&O tax payments it had made from 1977 through 1980. These years are plainly outside the four-year, no-claim window. To survive dismissal of its late claim, PACCAR has concocted a creative argument.
PACCAR argues that during the 1982 DOR audit, DOR should have recognized the B&O tax PACCAR paid on interest income from 1977 to 1981 was refundable. PAC-CAR argues DOR’s failure to award PACCAR a refund during the 1982 audit for those years is equivalent to, and should be treated as, an assessment. Thus, PACCAR argues, DOR “assessed” PACCAR in 1982, and the subsequent lawsuit in 1985 protesting that “assessment” is therefore within the four-year, no-claim window.
This is a highly strained and logically insupportable version of the facts. Failure to recognize entitlement to a refund is not an assessment in either logic or law. PACCAR has not cited any case anywhere for such a proposition, and I can find none.52 DOR did not “assess” PACCAR for the 1977 through 1980 payments. In the sense a tax return may be considered a seZ/-assessment, Matter of Carlson, *325580 F.2d 1365, 1368 (10th Cir. 1978), PACCAR assessed itself for the overpayments it made during those years: it made those payments voluntarily under the ultimately mistaken belief the law required it to do so. DOR’s 1982 audit was not an “assessment.”
Moreover, PACCAR had its day in court as to its claimed entitlement to a refund. It chose to abandon that quest by not appealing the adverse administrative Determination to the Board of Tax Appeals, as it was entitled to do. There is no injustice to dismissing PACCAR’s identical claim in the present case.53
Our decision in Puget Sound Power & Light Co. v. State, 70 Wn.2d 493, 424 P.2d 634 (1967), upon which the majority relies, was decided under the 1961 versions of the refund and assessment statutes. Those statutes provided for the type of offset that was allowed by the trial court in this instance. The version of RCW 82.32.050 and .060 enacted by the Legislature in 1979, and in effect at all pertinent times in this case, made clear any tax assessments or refunds were unavailable if more than four years had expired from the time the tax had been paid. As RCW 82.32.060 (the refund statute) explicitly states:
[N]o refund or credit shall be made for taxes, penalties, or interest paid more than four years prior to the beginning of the calendar year in which the refund application is made or examination of records is completed.
Similar language appears in the assessment statute as well. The unambiguous intent of the Legislature was to provide a four-year, no-claim period for taxes, either refunds or assessments by DOR. Insofar as PACCAR waited in this case to file its action in 1985 with respect to taxes owed during the time period from 1977 to 1981, it lost the right to seek *326a refund with respect to B&O taxes on its subsidiaries’ interest income it had erroneously paid.54
I would affirm the decision of the Court of Appeals.
Durham, C.J., and Dolliver, J., concur with Talmadge, J.
Reconsideration denied August 14, 1998.

The Court of Appeals was mistaken in referring to a 1985 assessment. The relevant assessment in this case was the December 21,1982 audit report by DOR assessing excise taxes against PACCAR.

This lawsuit was not an appeal from the adverse DOR determination of December 23, 1983, but was instead an original action for a refund.

«An ‘assessment’ of taxes is a formal, discrete act with specific legal consequences.” In re Heritage Village Church & Missionary Fellowship, Inc., 87 B.R. 401, 403 (D.S.C.), aff'd, 851 F.2d 104 (4th Cir. 1988); see also In re King, 122 B.R. 383, 385 (9th Cir. BAP (Cal.) 1991) (“ ‘to assess’ refers to a formal act of fixing of tax liability, and that this act comes after the calculation is completed”), affd, 961 F.2d 1423 (9th Cir. 1992). Here, the only relevant assessment was the deficiency assessment DOR presented to PACCAR on December 21, 1982. DOR’s failure to grant PACCAR a refund for overpayment of B&O taxes in the calculation *325of PACCAR’s total tax deficiency in 1982 does not mean DOR assessed those overpayments against PACCAR.

I note PACCAR’s claim is precisely the same as the one it made in the administrative proceeding in 1983, and the parties are the same. DOR has made no argument this suit should be barred either by res judicata or failure to exhaust administrative remedies.

In this case, it is a fortuity that a taxpayer is seeking a refund after an audit by DOR. The majority enlarges the time period for this taxpayer to seek a refund, in effect, starting the clock on the four-year time period from the completion of the DOR audit. A significant problem with such an analysis is that the language of the assessment statute parallels that of the refund statute. The majority opens the door to DOR to conduct audits and assess taxpayers for back taxes from time periods formerly believed to have been closed. If DOR conducts an audit, DOR can seek assessments under ROW 82.32.060 for time periods predating the four-year tax period and require the taxpayer to pay additional taxes based on the audit results. This was not the intent of the Legislature in adopting the 1979 changes to the tax assessment and tax refund statutes.