ORDERS:
FINAL ORDER AND DECISION
STATEMENT OF THE CASE
This is a contested case brought by the Petitioners (Taxpayers) seeking a refund based upon their 1996
State Income Tax Return. Jurisdiction is granted to the Administrative Law Judge Division (ALJD) by
S.C. Code Ann. § 12-60-470(F) (Rev. 2000). This matter was heard on April 24, 2001. The issue
before this tribunal is whether Taxpayers filed a timely request for a refund based upon their 1996 State
Income Tax Return. Upon review of the evidence and testimony submitted, this tribunal concludes that
the Taxpayers' claim for a refund was untimely filed and is therefore denied.
FINDINGS OF FACT
1. The Taxpayers are husband and wife. Only the wife appeared at the hearing due to the husband's
medical condition. In 1996, the Taxpayers remitted $4,000 to the South Carolina Department of
Revenue (Department) to ensure that they had met their tax liability.
2. The Taxpayers did not file their 1996 State Income Tax Return by the due date, April 15, 1997.
3. Taxpayers filed their 1996 State Income Tax Return on May 4, 2000, claiming a refund of $3,531.
4. The Taxpayers filed a request for an extension until October 15, 1997. The Taxpayers did not file a
1996 tax return on or before their extension due date of October 15, 1997.
5. The Department notified the Taxpayers that their 1996 refund claim was denied by letter dated
September 20, 2000, because it was filed beyond the two-year period provided in S.C. Code Ann. § 12-54-85(F) (Rev. 2000).
6. The Taxpayers protested the Department's denial of the refund claim on October 6, 2000. The
Department issued a Final Agency Determination on January 26, 2001, that the Taxpayers' 1996 refund
claim must be rejected as untimely filed.
7. The Taxpayers contend they are entitled to the refund because any tardiness in filing the return was
due to severe health problems and the senior age of Petitioners. In essence, the Taxpayers do not
dispute that their claim for refund was not timely filed. Rather, the Taxpayers argue that there should be
an equitable exemption to the filing deadlines. Further, the Taxpayers recognize that they have no legal
basis for their request but asked the Department for leniency to help with accumulating medical
expenses.
8. The Taxpayers contend that the lateness of their filing should be excused based on ignorance of the
law. It is undisputed that the Taxpayers' late filing was not deliberate. The Taxpayers stated that the
law, specifically the two year limitation on claims for refund, seems to be unknown to the general
public, and they hope to bring it to the public's attention by filing this contested case.CONCLUSIONS OF LAW
1. In examining the Taxpayers' claim for a refund, the applicable statutory provision pertaining to the
time limitation for refund claims is S.C. Code Ann. § 12-60-470(A) (Rev. 2000). This statutory
provision provides:
A taxpayer may seek a refund of any state tax by filing a written claim for refund with the department.
A claim for refund is timely filed if filed within the period specified in Section 12-54-85. . . .
S.C. Code Ann. § 12-54-85(F)(1) (Rev. 2000) provides as follows:
Except as provided in subsection (D) above, claims for credit or refund must be filed within three years
of the time the timely filed return, including extensions, 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) (Rev. 2000). The Taxpayers have not met the requirements of S.C.
Code Ann. §12-54-85(F)(1) (Rev. 2000) that, to avail themselves of the three-year limitation period for
a claim for refund, the Taxpayers must have filed a timely return.
2. A similar proposition may be found in the language of the Internal Revenue Code § 6511(a), which is
almost identical to S.C. Code Ann. § 12-54-85(F)(1). There is substantial federal case law interpreting
section 6511(a), which is instructive in interpreting S.C. Code Ann. § 12-54-85(F)(1). In the case of
Arnzen v. I.R.S., 91-1 U.S.T.C. P50, 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).
3. In the instant case, the Taxpayers should have filed their refund claim by April 15, 1999, in order to
receive a refund of the amount claimed. That is, the two-year limitation of Section 12-54-85(F)(1)
would apply, rather than the three-year limitation. Since the Taxpayers failed to timely file their return
even by the extension date of October 15, 1997, they had two years from the date their taxes were
"paid" in which to file a refund claim. Inasmuch as their 1996 taxes were deemed paid on April 15,
1997, (1) the Taxpayers' refund claim had to be submitted no later than April 15, 1999. The Taxpayers'
return and refund request was not filed until May 4, 2000, over three years after it was due.
4. Any construction of section 12-54-85(F)(1) or IRC section 6511(a) contrary to the above would lead
to an absurd result. (2) The nature of the absurdity is best expressed in Miller v. U.S., 38 F.3d 473, 475-6
(9th Cir. 1994).
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 § 6511,
but also reward taxpayers for delaying the filing of their returns. . . .
5. When considering a refund statute, this tribunal is guided by settled rules of statutory construction. In
South Carolina, the right to recover improperly paid taxes is statutory in nature. C.W. Matthews v. S.C.
Tax Comm'n, 267 S.C. 548, 230 S.E.2d 223, 226 (1976). Accordingly, taxpayers claiming a refund of
taxes must do so pursuant to the statute authorizing the refund. Guar. Bank & Trust v. S.C. Tax
Comm'n, 254 S.C. 82, 173 S.E.2d 367, 370 (1970). In Asmer v. Livingston, 225 S.C. 341, 82 S.E.2d
465, 466 (1954), the court held that:
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. . . .
The Taxpayers have not met this burden and are not entitled to a refund pursuant to S.C. Code Ann. §
12-54-85(F)(1) (Rev. 2000).
6. While this tribunal is cognizant of the Taxpayers' medical problems, S.C. Code Ann. § 12-54-85
(Rev. 2000) does not provide for any equitable exceptions or special dispensations. This result is
clearly harsh and penalizes those who overpay, but the right to apply for a refund is purely statutory, and
it is incumbent upon those seeking relief to proceed according to the statute affording such relief.
Commonwealth of Va. v. Cross, 196 Va. 375, 83 S.E.2d 722 (1954).
7. The Taxpayers assert that the lateness of their claim for refund should be excused because they were
unaware of the time limits for filing refund claims.
It is a fundamental principle of law that everyone is charged with or deemed to have knowledge of the
law. The legal axiom that ignorance of the law is no excuse has long been the law of this nation and
state. 31A C.J.S. Evidence § 132(1) (1980); Benn v. Camel City Coach Co., 162 S.C. 44, 160 S.E. 135
(1931).
Gregory v. Gregory, 292 S.C. 587, 590, 358 S.E.2d 144, 146 (Ct. App. 1987). See also Barlow v. U.S.,
32 U.S. 404, 411 (1833). Smothers v. U.S. Fid. & Guar. Co., 322 S.C. 207, 210-11, 470 S.E.2d 858,
860 (Ct. App. 1996). The Taxpayers' position that they were unaware of the law is understandable but
legally untenable. The tax code provisions would prove impossible to administer if ignorance of the
time limits for filing claims for refund were a valid excuse.
8. Furthermore, this tribunal has no legislative powers. Its responsibility is to determine and give effect
to the intention of the legislature. "To do otherwise is to legislate, not interpret. The responsibility for
the justice or wisdom of legislation rests exclusively with the legislature, whether or not we agree with
the laws it enacts." Smith v. Wallace, 295 S.C. 448, 452, 369 S.E.2d 657, 659 (Ct. App. 1988)
(citations omitted). In enacting S.C. Code Ann. § 12-54-85 (Rev. 2000), the General Assembly
protected the rights of taxpayers against erroneous assessments. At the same time, in not providing
exceptions for untimely refund claims, the legislature ensured that the Department would not be
inundated with requests for refunds after the statutory period.
9. The U.S. Supreme Court has expressly recognized the administrative problem government would
encounter if there were equitable exceptions to statutorily mandated time limits for requesting refunds
of erroneously paid or assessed taxes. Writing for the unanimous Court, Justice Breyer stated:
Tax law, after all, is not normally characterized by case-specific exceptions reflecting individualized
equities. . . . [A]n "equitable tolling" exception. . . could create serious administrative problems by
forcing the IRS to respond to, and perhaps litigate, large numbers of late claims, accompanied by
requests for "equitable tolling" which, upon close inspection, might turn out to lack sufficient equitable
justification. . . . The nature and potential magnitude of the administrative problem suggest that
Congress decided to pay the price of occasional unfairness in individual cases (penalizing a taxpayer
whose claim is unavoidably delayed) in order to maintain a more workable tax enforcement system. At
the least it tells us that Congress would likely have wanted to decide explicitly whether, or just where
and when, to expand the statute's limitations periods, rather than delegate to the courts a generalized
power to do so wherever a court concludes that equity so requires.
U.S. v. Brockamp, 519 U.S. 347, 351, 117 Sup. Ct. 849, 852 (1997). While this situation is unfortunate
for the Taxpayers and this tribunal takes no joy in its decision, the State must be able to carry out its
duties and bring closure to these matters.
ORDER
For the forgoing reasons, IT IS HEREBY ORDERED that the Taxpayers' request for a refund of
$3,531 is denied.
AND IT IS SO ORDERED.
____________________________________
JOHN D. GEATHERS
Administrative Law Judge
May 1, 2001
Columbia, South Carolina
1. See S.C. Code Ann. § 12-54-85(F)(5)(a) (Rev. 2000) ("Payment of any portion of the tax made
before the last day prescribed for the payment of the tax is considered made on the last day. The last
day prescribed for filing the return or paying the tax must be determined without regard to any extension
of time.) (emphasis added).
2. 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). See also TNS Mills, Inc.
v. S.C. Dep't of Revenue, 331 S.C. 611, 503 S.E.2d 471 (1998). |