ORDERS:
FINAL ORDER AND DECISION
STATEMENT OF THE CASE
This matter is before the Administrative Law Division (Division) pursuant to the Petitioners' (Taxpayers)
request for a contested case hearing under S.C. Code Ann. Section 12-60-470(F) (2000). The issue presented
is whether the South Carolina Department of Revenue's (Department) Final Agency Determination properly
denied the Taxpayers' 1995 income tax refund claim because such claim was untimely submitted. In
accordance with the Taxpayers' request, a hearing on this matter was held at the offices of the Division on
February 15, 2001.
FINDINGS OF FACT
Having observed the witnesses and exhibits presented at the hearing and closely passed upon their
credibility, taking into consideration the burden of persuasion by the parties, I make the following Findings
of Fact by a preponderance of the evidence:
1. Notice of the time, date, place, and subject matter of the hearing was properly given to the Taxpayers and
the Department.
2. The Taxpayers are husband and wife. In 1995, they had taxable income, part of which was withheld and
remitted to the Department for income tax purposes. However, the Taxpayers did not file a 1995 South
Carolina income tax return on or before April 15, 1996.
3. At the hearing into this matter, the Taxpayers stated that they had talked to someone at the Department
who informed them that they had three years in which to file their 1995 tax return. However, the Taxpayers
could not identify this person nor were they certain when the conversation occurred.
4. The Taxpayers filed their 1995 state income tax return on October 16, 1998. That return claimed a refund
of $605.00. However, I find that the Taxpayers' refund claim request was untimely.
CONCLUSIONS OF LAW
Based upon the above Findings of Fact, I conclude the following as a matter of law:
1. The Administrative Law Judge Division has jurisdiction to hear this matter pursuant to S.C. Code Ann.
§12-60-470(F) (2000).
2. In South Carolina, the right to recover improperly paid taxes is statutory in nature. C.W. Matthews v.
S.C. Tax Com'n, 267 S.C. 548, 230 S.E.2d 223 (1976). Accordingly, anyone seeking a refund of taxes must
do so pursuant to the appropriate refund statute. Guaranty Bank & Trust v. South Carolina Tax
Commission, 254 S.C. 82, 173 S.E.2d 367 (1970). Furthermore, "a refund of taxes is solely a matter of
governmental grace, . . . and any person seeking such relief must bring himself clearly within the terms of
the statute authorizing the same. . . ." Asmer v. Livingston, 225 S.C. 341, 82 S.E.2d 465 (1954).
3. S.C. Code Ann. §12-60-470 (2000) sets forth the procedure for seeking state tax refunds in South
Carolina. It grants the Department the authority to issue refunds provided such claims are submitted within
the time limitations of S.C. Code Ann. Section 12-54-85(F)(1) (2000). During the tax year in question, this
statute provided as follows:
Except as provided in subsection (D) above, claims for credit or refund must be filed within three years of
the time the return was filed, or two years from the date of payment, whichever is later. If no return was
filed, a claim for refund must be filed within two years from the date of payment.
S.C. Code Ann. § 12-54-85(F)(1) (Supp. 1995) (eff. Aug. 1, 1995), amended by S. C. Code Ann. §
12-54-85(F)(1) (Supp. 1997) (substituting "timely filed return, including extensions," for "return," in the first
sentence of subsection (F)(1)). In other words, Section 12-54-85(F)(1) requires that the Taxpayers must
have filed their tax return timely in order to avail themselves of the three-year limitation period. Therefore,
the Taxpayers did not met the requirements of S.C. Code Ann. §12-54-85(F)(1).
Additionally, the language of the I.R.C. § 6511(a) is almost identical to S.C. Code Ann. § 12-54-85(F)(1).
Therefore, the federal case law interpreting Section 6511(a), is persuasive in interpreting S.C. Code Ann. §
12-54-85(F)(1). In Arnzen v. I.R.S., 1990 WL 260539, 91-1 USTC ¶50, 020, the taxpayers filed their 1984
federal income tax return in April 1988 requesting a refund of overpaid tax. The U.S. District Court held as
follows:
Section 6511(a) must be read to refer to a "timely" filed return. Thus, if the taxpayer files a timely return, he
has three years from the date the return was filed or two years from when the tax was paid in which to file a
claim for a refund. If no return is timely filed, the second part of the sentence applies and the taxpayer has
two years from the date the tax was paid to file a claim for refund. (emphasis added) (citations omitted).
Moreover, any construction of Section 12-54-85(F)(1) or I.R.C. § 6511(a) contrary to the above would lead
to an absurd result. (1) The nature of the absurdity is best expressed in Miller v. U.S., 38 F.3d 473 (9th Cir.
1994), where the court set forth:
Section 6511 has as its purpose foreclosing untimely claims. If the clock were to run only from the filing of
the return, no claim would ever be barred as long as the return was not filed. . . . To hold that any return no
matter how delinquent, starts the three-year period would not only nullify part of Section 6511, but also
reward taxpayers for delaying the filing of their returns. . . .
Miller at 475-476.
4. The Taxpayers' 1995 tax return was due April 15, 1996. See S.C. Code Ann. Section 12-6-4970(A)
(2000). Yet, the return was not filed until October 16, 1998. Clearly, this was not a timely filed return.
Thus, I conclude the three-year time limitation of Section 12-54-85(F)(1) cannot be applied to the Taxpayers'
refund claim.
Since the Taxpayers failed to file a timely return, they had two years from the date their taxes were paid in
which to file a refund claim. Inasmuch as the Taxpayers' 1995 taxes were deemed paid on April 15, 1996
pursuant to S.C. Code Ann. § 12-54-85(F)(5)(a) (2000), their refund claim had to be submitted no later than
April 15, 1998. The Taxpayers, however, did not file their claim by this required date. Instead, the claim
was filed on October 16, 1998. Accordingly, I conclude that the Taxpayers have failed to come within the
two-year time limitation of Section 12-54-85(F)(1).
5. The Taxpayers also argue the Department should be equitably estopped from applying the time limitations
of Section 12-54-85(F)(1) because someone at the Department informed them they had three years in which
to file their 1995 tax return. However, the burden of proof is upon the party who asserts estoppel. Davis v.
Sellers, 229 S.C. 81, 91 S.E.2d 885 (1956). In the instant matter, the Taxpayers have failed to establish the
essential elements of that doctrine as set forth in Frady v. Smith, 247 S.C. 353, 147 S.E.2d 412 (1966).
Indeed, the date, facts, circumstances, and context of the Taxpayers' telephone conversation are at best
vague. Moreover, even if the Taxpayers had established the essential elements for equitable estoppel, such
would not be applicable to the matter at hand. It is a well-established rule that the actions of an employee
cannot estop the Department from enforcing the state's revenue laws. Texaco, Inc. v. Wasson, 269 S.C. 255,
237 S.E.2d 75 (1977).
ORDER
Based upon the foregoing Findings of Fact and Conclusions of Law:
IT IS HEREBY ORDERED that the Department properly denied the Taxpayers' claim for refund for the
1995 income tax year.
AND IT IS SO ORDERED.
Ralph King Anderson, III
Administrative Law Judge
April 10, 2001
Columbia, South Carolina
1. It is well settled that statutes should not be construed so as to lead to an absurd or meaningless result.
State ex rel. McLeod v. Montgomery, 244 S.C. 308, 136 S.E.2d 778 (1964); TNS Mills, Inc. v. S.C.
Department of Revenue, 331 S.C. 611, 503 S.E.2d 471 (1998). |