Court Opinion

ID: 9404607
Source: CourtListenerOpinion
Date Created: 2023-06-23 16:05:04.467754+00
Date Added: 2024-06-11T17:20:15.768516
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

     WILLIAM DONATO and                 )
     ROSA DONATO,                       )
                                        )
              Appellants,               )
                                        )
              v.                        )      C.A. No. N22A-10-004 SKR
                                        )
     DIRECTOR OF REVENUE,               )
                                        )
              Appellee.                 )

                              Submitted: March 29, 2023
                               Decided: June 22, 2023

                                       ORDER

            Upon Consideration of an Appeal from the Tax Appeal Board:
                                   AFFIRMED.

        This 22nd day of June 2023, upon consideration of the parties’ briefs and

     submissions and the record below, it appears to the Court that:

        1. Pro se appellants William and Rosa Donato appealled the Delaware

           Tax Appeal Board’s (the “Board”) July 22, 2022 ruling that their 2018

           and 2019 wages constituted income subject to Delaware personal

           income tax.1 They also appealled the Board’s order that they reimburse

           the Division of Revenue (the “Division”) in the amount of $4,430.05,

1
    Appellants’ Notice of Appeal (Trans. ID. 68255113).
         which was erroneously refunded to them in 2019.2 In essence, the

         Donatos assert that the Board erred because it failed to recognize that

         the income they earned in Delaware was not subject to state income

         tax.3

      2. Initially, the Donatos filed their calendar year 2019 Delaware

         Individual Resident Income Tax Return (the “2019 Original Return”)

         in early 2020.4 Through the 2019 Original Return, the Donatos: (1)

         reported that they collectively earned $117,636.00 in wages; (2) paid

         state income tax in the amount of $4,322.00; and (3) claimed a refund

         of $469.00.5 The Division refunded the $469.00 to the Donatos as

         requested.6

      3. Then, on March 9, 2020, the Donatos filed an amended 2019 Delaware

         Individual Resident Income Tax Return (the “2019 Amended

         Return”).7 Through the 2019 Amended Return, the Donatos claimed a

         revised refund of $4,322.00 for their 2019 wages – or, in other words,

         the entire amount of state income tax that they paid through the 2019

2
  Appellants’ Op. Br. (Trans. ID. 68732422) at 1.
3
  See generally Appellants’ Notice of Appeal (Trans. ID. 68255113).
4
  July 22, 2022 Decision and Order of the Tax Appeal Board (“Board’s Decision and
Order”) at 2.
5
  Id.
6
  Id.
7
  Id.
                                        2
          Original Return.8 The Division (ostensibly in error) issued the refund

          to the Donatos with interest in the amount of $4,305.00.9

      4. Also on March 9, 2020, the Donatos filed an amended 2018 Delaware

          Individual Resident Income Tax Return (the “2018 Amended

          Return”).10 As with the 2019 Amended Return, the 2018 Amended

          Return claimed a refund for the total amount of income taxes paid for

          the 2018 calendar year.11

      5. On December 17, 2020, the Division notified the Donatos that it was

          rejecting their 2018 Amended Return and revising their 2019 Amended

          Return to reflect that they still owed income tax for their 2019 wages.12

          After sending the notice, the Director of Revenue issued a Notice of

          Proposed Assessment (“NOPA”) showing a balance due, inclusive of

          interest and penalties, in the amount of $4,835.24.13

      6. The Donatos filed an administrative protest of the NOPA, which the

          Division rejected through a Notice of Determination (“NOD”) on

8
  Id.
9
  Id. at 2-3.
10
   Id. at 3.
11
   Id.
12
   Id.
13
   R. on Appeal, Stipulation of Facts, Feb. 8, 2022 (“Stipulation”) at ¶ 7.
                                          3
         August 3, 2021.14 Thereafter, the Donatos appealed the NOD to the

         Board.15

      7. In a Decision and Order dated July 22, 2022, the Board upheld the NOD

         and found the wages reported by the Donatos’ employers on their W-2

         Forms to be taxable income pursuant to 30 Del. C. §§ 1101 and 1105.16

         Accordingly, the Board ordered the Donatos to “pay Delaware income

         tax on all of the 2019 wages . . . [and] return the $4,430.05 refund they

         received . . . .”17 The Board issued a Final Order setting forth the

         Donatos’ financial obligations on September 14, 2022,18 and the

         Donatos appealed the Board’s Decision to this Court on October 14,

         2022.19

      8. In reviewing a decision of the Board, the Court must take due account

         of the experience and specialized competence of the Board, and the

         purposes of the basic law under which the Board has acted.20 The

14
   Id.
15
   Id.
16
   Board’s Decision and Order at 4-8.
17
   Id. at 8.
18
   Sept. 14, 2022, Final Order of the Tax Appeal Board.
19
   See Notice of Appeal. Because the Board’s Decision and Order and Final Order
comprise the overall determination challenged in this appeal, the Court will refer to
both orders collectively as the “Decision.”
20
   Professional Staff Leasing Corp. v. Director of Revenue, 2005 WL 2158711, at *2
(Del. Super. July 7, 2005).
                                         4
         Court’s review is limited to a determination of whether the Board’s

         decision was supported by substantial evidence and correct as a matter

         of law.21

      9. Briefly, the Court notes that the Donatos’ Opening Brief raises, for the

         first time, the contention that “[i]ncome tax is an excise tax arising only

         upon the happening of distinguished taxable events.”22 Substantively

         meritless as this argument may be, it is also procedurally improper.23

         When the Superior Court acts in its appellate capacity, it “will not

         consider issues not raised before the [administrative] tribunal.”24

         Therefore, the Donatos cannot appropriately join the “excise tax” claim

         with the rest of their appeal, and the Court will not consider it.

      10.The remainder of the Donatos’ appeal amounts to a stream of

         consciousness complaint that the Delaware Tax Code’s use of the word

         “federal” in “federal adjusted gross income” renders all income not

         derived from the federal government and related entities untaxable.25

         For example, the Donatos offer:

21
   United Water Delaware, Inc. v. Public Service Com’n, 723 A.2d 1172, 1173 (Del.
1999).
22
   Op. Br. at 2.
23
   See Wilmington Trust Co. v. Conner, 415 A.2d 773, 781 (Del. 1980).
24
   Tatten Partners, L.P. v. New Castle Cnty. Bd. of Assessment Review, 642 A.2d
1251, 1262 (Del. Super. 1993).
25
   R. on Appeal, Appellants’ Basis for Appeal and Jurisdiction at 2.
                                          5
            . . . Under the “includes” rule the definition of employee
            at 3401(c) embraces any variety of federal worker-- even
            those not described (some of which may not even exist at
            the time the definition is written). All such, listed in the
            statutory definition or not, are within the general class
            defined and circumscribed by the illustrative examples
            that ARE listed or described. At the same time, this
            “indefiniteness” in the statutory definition is “calculated”
            in that it can’t be construed to embrace workers NOT
            having the characteristics of members of the class which
            are listed and by which the class’s nature is illustrated.
            This means that while any kind of federal worker can be
            deemed an “employee” (whose renumeration received as
            such qualifies as “wages”) NON-federal workers, being
            unrepresented in the illustrative list provided by Congress,
            cannot be deemed to be such “employees”, and the pay to
            such excluded workers cannot be deemed “wages”.26

      That continues for seventeen pages.

      11.Delaware law, however, makes plain that compensation for services

         constitutes taxable income.27 Title 30 Del. C. § 1105 states that taxable

         income shall be federal adjusted gross income with the modifications,

         and less the deductions and personal exemptions, provided in that

         subchapter.28 This interpretation tracks with the federal tax code, as

         “[a]ny term used in [the Delaware Tax Code] should have the same

         meaning as when used in [the federal tax code], unless a different

26
   Op. Br. at 10-11 (emphasis in original).
27
   Slater v. Director of Revenue, 1989 WL 16957, at *1 (Del. Super. Feb. 28, 1989).
28
   30 Del. C. § 1105.
                                         6
         meaning is clearly required.”29 The federal tax code defines “gross

         income” as “all income from whatever source derived,”30 and “adjusted

         gross income” as income minus certain enumerated deductions.31

      12.In other words, it is apparent that the amounts reflected by the Donatos’

         employers on their W-2 Forms are taxable as gross income.32 Any

         argument to the contrary is patently frivolous.33

29
   Id. § 1101.
30
   26 U.S.C. § 61.
31
   26 U.S.C. § 62.
32
   See Beard v. Comm’r of IRS, 82 T.C. 766, 773 (T.C. 1984) (“There is no doubt
that such amounts [reflected on the W-2 Form] are taxable as gross income.”).
33
   See United States v. Connor, 898 F.2d 942, 943 (3d Cir. 1990) (“[W]ages are
income within the meaning of the Sixteenth Amendment. Unless subsequent
Supreme Court decisions throw doubt on this conclusion, [the Court] will view
arguments to the contrary as frivolous . . . .”).
                                         7
           13.“Every court which has ever considered the issue has unequivocally

             rejected the argument that wages are not income.”34 The Decision of

             the Board is AFFIRMED. The Donatos are required to reimburse the

             Division the sum of $4,430.05 that was refunded in error pursuant to

             the 2019 Amended Return, as well as any applicable interest, fees, and

             penalties that may be assessed in accordance with Delaware law.

             IT IS SO ORDERED.

                                                      _____________________
                                                      Sheldon K. Rennie, Judge

      Original to Prothonotary

      Cc:    William Donato and Rosa Donato, Townsend, DE, 19743.
             Anthony Testa, Jr., Esq., Rebecca Song, Esq., Deputy Attorneys
             General, Wilmington, DE.

34
     Id.
                                            8