SC Administrative Law Court Decisions

This matter comes before this tribunal pursuant to S.C. Code Ann. §§ 1-23-600 et seq. and S.C. Code Ann. § 12-4-30 (Supp. 1997). 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 assessed a $5,000 penalty against Respondent because of its failure to remit timely sixteen and one-half percent of the total face value of bingo cards for which Respondent made application. Respondent admits that it untimely remitted the amount owed, but contends that the penalty is excessive given the extenuating circumstances in this case. After timely notice to the parties, a hearing was conducted on January 21, 1999, at the Administrative Law Judge Division in Columbia. Based on the testimony and evidence presented, I find that $100 is an appropriate penalty for the violation.

Having carefully considered all testimony, exhibits, and arguments presented at the hearing of this matter, and taking into account the credibility and accuracy of the evidence, I make the following Findings of Fact by a preponderance of the evidence.

On December 23, 1997, Ziad Saad, in his capacity as promoter, applied to the Department for bingo cards in the name of the Order of AHEPA, a licensed non-profit organization. As a result, the Department issued Mr. Saad a bingo card purchase voucher on the date of application in the amount of $61,082. In turn, Respondent was responsible for remitting sixteen and one half percent of the total purchase amount ($10,078.53) to the Department on or before January 7, 1998. However, Respondent did not remit the payment until January 12, 1998.

Respondent does not contest that it failed to timely pay the taxes due. Rather, Respondent argues that it is entitled to a waiver of the penalty because extenuating circumstances contributed to its untimely payment of the taxes. Respondent's bookkeeping or accounting is handled by Theodore Accounting. Mr. Charles Theodore, of the accounting firm, is a past president and current member of the Order of AHEPA. Mr. Theodore was the only person authorized to write checks on behalf of the non-profit organization.

Mr. Theodore was diagnosed with colon cancer in May of 1997. He underwent related surgery in August of 1997. Also, as part of his medical treatment, Mr. Theodore began precautionary chemotherapy and radiation the week following his surgery. He continued chemotherapy through January 8, 1998. In fact, because of severe pain associated with the cancer, his chemotherapy was intensified in December of 1997 and he was placed on a regimen of several dozen medications weekly. As a result of his cancer and the attendant physical, emotional, and mental consequences and the rigors of the medical treatment, Mr. Theodore was incapacitated for much of the period from August of 1997 through January of 1998. Consequently, he neglected his accounting responsibilities on behalf of the Respondent. Respondent contends that because of Mr. Theodore's incapacity, the penalty imposed in this case should be waived pursuant to the Department's penalty waiver policy under S.C. Revenue Procedure #98-3. Further, Respondent has taken the remedial measure of authorizing an additional person to issue checks on its behalf.

Section 12-21-4270 pertains to the application to obtain bingo cards and provides:

Each licensed nonprofit organization or promoter, in the name of a licensed organization, may obtain bingo cards approved by the department by making application and remitting sixteen and one-half percent of the total face value of the cards to be purchased. Payment to the State for the issuance of bingo cards must be made by certified check within fifteen days of receipt of the application.

In the case at bar, it is undisputed that Respondent failed to remit sixteen and one-half percent of the total face value of the bingo cards within fifteen days of its application. Accordingly, Respondent is subject to a penalty of up to $5,000 and revocation of its license. S.C. Code Ann. § 12-21-4140 (Supp. 1997). Further, Respondent and its promoter are jointly and severally liable for any penalty imposed. S.C. Code Ann. § 12-21-3960 (Supp. 1997). However, in this case, the promoter did not challenge the penalty.

Nevertheless, Respondent contends that the penalty is excessive under the circumstances of its case and that the penalty should be waived. Inherent in and fundamental to the quasi-judicial powers of this tribunal, as the trier of fact in contested cases under the Administrative Procedures Act, S.C. Code Ann. §§ 1-23-310 et seq. (1986 & Supp. 1997), is the power to determine the appropriate penalty under the facts presented. Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633 (1991).⁽¹⁾

This tribunal does find mitigating facts present in the case at bar to warrant a reduction of the penalty imposed by the Department.

The penalty provision, S.C. Code Ann. § 12-21-4140, provides that "[a] penalty of up to five thousand dollars and revocation of the license at the discretion of the department may be imposed for a violation of this article. Each violation and each day in violation of a provision of this article constitutes a separate offense." (Emphasis added). It is evident from § 12-21-4140 that the legislature made a range of penalties permissible under the law, and in doing so, the legislature implicitly made the imposition of the penalty dependent upon the circumstances of each case. Hence, any penalty so imposed within the established range is statutorily appropriate. Further, the Department's own revenue procedure, #98-3, recognizes this fact. Revenue Procedure 98-3 states that waiver of a penalty partially or completely is appropriate when the taxpayer's failure to comply with the law is "due to reasonable cause" or because of the taxpayer's serious or incapacitating illness or that of its tax preparer. See Rev. Procedure 98-3, p. 6, paragraph B. Under the facts of this case, Mr. Theodore was incapacitated during the time Respondent's bingo payment became due. Consequently, as the sole person authorized to make the payment, the payment was not timely made. As it relates to the monetary portion of the penalty, the law contemplates a penalty from $1 to $5,000. The Department recognizes through its policy that life sometimes intrudes upon the noblest duty of man to timely pay taxes. This tribunal, as the trier of fact, does as well. Further, Respondent has taken the remedial measure of authorizing an additional person to issue checks on its behalf. Accordingly, under the circumstances, a reduced penalty is warranted.

1. It is a generally recognized principle of administrative law that the fact finder has the authority to impose an administrative penalty after the parties have had an opportunity to be heard on the issues. See Ohio Real Estate Comm'n v. Aqua Sun Investments, 655 N.E.2d 266 (Ohio App. 2 Dist. 1995); Shadow Lake of Noel, Inc. v. Supervisor of Liquor Control, 893 S.W.2d 835 (Mo.App. S.D. 1995); Matter of Henry Youth Hockey Ass'n, 511 N.W.2d 452 (Minn.App. 1994); Vermont Agency of Natural Resources v. Duranleau, 617 A.2d 143 (Vt. 1992); City of Louisville v. Milligan, 798 S.W.2d 454 (Ky. 1990); Com., Department. of Transp. v. Slipp, 550 A.2d 838 (Pa.Cmwlth. 1988); Department. of Transp. v. Miller, 528 A.2d 1030 (Pa.Cmwlth. 1987); State Police v. Cantina Gloria's, 639 A.2d 14 (Pa. 1994).

Prior to governmental restructuring (i.e., 1993 Act No. 181, eff. July 1, 1994), a commission sitting in its adjudicatory capacity imposed penalties for violations of statutory provisions its agency administered. Acting as fact-finder, it was the commission's prerogative "to impose the appropriate penalty based on the facts presented." Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633, 634 (1991). It is uncontroverted that the former Tax Commission exercised that authority in bingo cases. The ALJ, as the current fact-finder, must also impose a penalty based on the facts presented at the contested case hearing. As parties are entitled to present evidence on all issues arising out of the contested agency action, it follows logically that the tribunal responsible for conducting the proceedings must have the authority to decide those issues.