SC Administrative Law Court Decisions

These matters come before the Administrative Law Judge Division (Division) pursuant to §§ 1-23-310 et seq. (Supp. 1997) and S.C. Code Ann. § 12-4-30 (Supp. 1997) on alleged administrative violations. Respondent was cited for violating S.C. Code Ann. § 12-21-4270 (Supp. 1997) of the Bingo Tax Act of 1996, S.C. Code Ann. §§ 12-21-3910 et seq. (Supp. 1997). The South Carolina Department of Revenue (Department) seeks a Five Thousand ($5,000.00) Dollar penalty and revocation of the Respondents' licenses because of failure to timely remit taxes in the amount of Sixteen and One-half (16½%) Percent of the total face value of bingo cards for which the Respondents had made application.

Having observed the witnesses and exhibits presented at the hearing and closely passed upon their credibility, considering the burden of persuasion by the parties, I make the following Findings of Fact by a preponderance of evidence:

1. The Respondents applied for and received a Bingo Card Purchase Voucher no later than October 30, 1998, for a total value of Sixty-Nine Thousand Five Hundred Seventy ($69,570.00) Dollars. However, the Respondents did not pay the Sixteen and One-half (16½%) Percent tax on the Sixty-Nine Thousand Five Hundred Seventy ($69,570.00) Dollars by the due date of November 16, 1998. Nevertheless, the Respondents belatedly paid the Sixteen and One-half (16½%) Percent tax eight days later on November 24, 1998. The amount paid on November 24 was Eleven Thousand Four Hundred Seventy-nine and 05/hundredths ($11,479.05) Dollars.

2. The Respondent's tax payment duties were handled by their accountant, Charles Theodore. Charles Theodore was the primary individual authorized to sign checks on behalf of Order of AHEPA. Unfortunately, Mr. Theodore was diagnosed with colon cancer in May 1997. Soon thereafter, he began treatment and subsequently died in December 1999.

3. While Mr. Theodore was undergoing treatment for colon cancer, he was unable to satisfactorily perform his duties. In fact, during the time period involved in this dispute, the Respondents failed to pay the "Card Purchase Voucher" tax within the required time frame on three separate occasions. The Department issued violation reports for each of the three late payments that occurred prior to the violation in this case. Therefore, the Respondents had notice of the repeated late tax payments before the November 1998 violation occurred.

4. A.J. Theodore was made the signatory to the Order of AHEPA account in November 1998. Since that time, there have been no other late tax payments.

Based upon the above Findings of Fact, I conclude the following as a matter of law:

1. S.C. Code Ann. § 1-23-600 (Supp. 1997) grants jurisdiction to the Administrative Law Judge Division to hear contested cases under the Administrative Procedures Act. Jurisdiction specifically over Department of Revenue contested cases is supplied by S.C. Code Ann. § 12-4-30(D) (Supp. 1997).

2. S.C. Code Ann. § 12-21-4270 (Supp. 1997) requires that the payment of a Sixteen and One-half (16½%) Percent tax on the purchase of bingo cards must be made within fifteen days of the Department's receipt of the purchase application. In this case, no dispute exists that the tax was not timely paid. Rather, the issue is what penalty is appropriate for failure to timely pay the tax.

3. S.C. Code Ann. § 12-21-4140 (Supp. 1997) provides for a penalty of up to Five Thousand ($5,000.00) Dollars and revocation of the license for a violation of the Bingo Tax Act of 1996. S.C. Code Ann. § 12- 21-3960 (Supp. 1997) sets forth that [t]he promoter and the nonprofit organization are jointly and severally liable for all taxes, penalties, interest, and fines imposed by this article and Chapter 54 of this title.

4. The Administrative Law Judge Division has the authority to establish the imposition of a penalty for a violation. Inherent in and fundamental to the quasi-judicial powers of an Administrative Law Judge, as the trier of fact in contested cases under the Administrative Procedures Act, is the authority to decide the appropriate sanction when such is disputed. Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E. 2d 633 (1991).

To that end, the Administrative Law Judge must consider relevant evidence presented in mitigation. Mitigation is defined as a lessening to any extent, great or small. It may be anything between the limits of complete remission on the one hand and a denial of any relief on the other. In a legal sense, it necessarily implies the exercise of the judgment of the court as to what is proper under the facts of the particular case. 58 C.J.S. Mitigation p. 834-835 (1948). A legitimate as well as a significant consideration is whether the alleged mitigating factor demonstrates reasonable cause to reduce the penalty. Kroger Co. v. Department of Revenue, 673 N.E. 2d 710 (Ill. 1996). Furthermore, the Department's Revenue Procedure 98-3 also recognizes this concept. Under the section entitled "Partial Waiver," S.C. Revenue Procedure 98-3 sets forth:

[t]he existence of significant mitigating factors may warrant the partial waiver of a penalty. The taxpayer's tax filing and payment history, the nature, frequency and materiality of the error, and the relationship of the penalty to the tax due must all be considered in making this determination.

(emphasis added). See Revenue Procedure 98-3, p. 8. In the present case, the Respondents do not dispute that the tax was untimely paid. Rather, the Respondents ask the court to consider the mitigating factor of the sickness of the member authorized to write the tax check. I find that such a circumstance to be a persuasive mitigating factor. While not binding in South Carolina, some jurisdictions consider whether late tax payments are due to serious illness. See, e.g., 56 Ill. Adm. Code § 2765.65(a) (where by regulation the existence of reasonable cause for a late payment and filing can be predicated upon the existence of a serious illness "of the person in the employer's organization responsible for the preparation and filing of the report or for making the payment.")

Here, Charles Theodore, who was the primary signatory on the Order of AHEPA's account, was diagnosed with and under treatment for cancer during a time frame relevant to the untimely payment. ⁽¹⁾ The cancer treatments rendered him temporarily unable to perform his normal duties. Thus, in this case, Mr. Theodore's medical condition significantly contributed to the late payment. Though I find that the Respondents should have rectified their accounting dilemma well before the violation in this case, I also find that the exceptional circumstances of this untimely payment do not warrant a penalty of Five Thousand ($5,000.00) Dollars. ⁽²⁾ Rather, taking into consideration the mitigating circumstances of this case, I find that a penalty of Two Thousand Five Hundred ($2,500.00) Dollars is proper and that no revocation of Saad's license or AHEPA's license is warranted.

Based upon the foregoing Findings of Fact and Conclusions of Law,

IT IS HEREBY ORDERED that the Respondents shall pay a fine to the Department in the amount of Two Thousand Five Hundred ($2,500.00) Dollars for the violation of S.C. Code Ann. § 12-21-4270 (1997).

AND IT IS SO ORDERED.

Ralph King Anderson, III

Administrative Law Judge

September 6, 2000

Columbia, South Carolina

1. Although testimony was presented that there was a second signatory on the account, it was unclear if that individual was a signatory at the time of the November 1998 violation.

2. Although the Department presented evidence that other violations had occurred for which this Division imposed fines upon the Respondents after contested case hearings, those violations were not tried until after this November 1998 violation. Therefore, the previous fines issued are not controlling in this decision. However, when applying the "Partial Waiver" paragraph found in Revenue Procedure 98-3, those violations do offset the Respondents' mitigating factors.