ORDERS:
FINAL ORDER AND DECISION
STATEMENT OF THE CASE
This matter is before the Administrative Law Judge Division (ALJD) pursuant to the Petitioners' (Taxpayers) request for a
contested case hearing under S.C. Code Ann. § 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' 1996 income tax
refund claim because their claim was untimely submitted. A hearing on this matter was held at the offices of the ALJD on
October 11, 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 1996 they remitted income tax payments to the Department based upon their
taxable income. The Taxpayers, however, did not file a 1996 South Carolina income tax return concerning those remitted
income tax payments on or before April 15, 1997.
3. The Taxpayers testified they filed other state and federal tax returns in the same manner as their 1996 state return and
received refunds. The Taxpayers also testified that they had a letter from the Department which stated they had three years
in which to file a refund claim and that their tax preparer was aware of no other time limitation.
4. The Taxpayers filed their 1995 state tax return on September 2, 1997, which was within the time limitation for refunds.
However, the Taxpayers did not file their 1996 state income tax return seeking a refund of $1,528.00 until April 14, 2000.
I find, therefore, 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 ALJD 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 the claims are submitted within the time limitations of S.C. Code Ann.
§ 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.
Section 12-54-85(F)(1) (Supp. 1995) (eff. Aug. 1, 1995), amended by Section 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 meet the requirements of Section 12-54-85(F)(1).
Additionally, the language of I.R.C. Section 6511(a) is almost identical to Section 12-54-85(F)(1). Consequently, the
federal case law interpreting Section 6511(a) is persuasive in interpreting Section 12-54-85(F)(1). In Arnzen v. I.R.S.,
1990 WL 260539, 91-1 USTC, paragraph 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. (citations omitted) (emphasis added).
Moreover, any construction of Section 12-54-85(F)(1) or I.R.C. Section 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' 1996 tax return was due April 15, 1997. See S.C. Code Ann. § 12-6-4970(A) (2000). However, the
return was not filed until April 14, 2000. Since the Taxpayers' return was not filed timely, the three-year limitation of
Section 12-54-85(F)(1) cannot be applied to the Taxpayers' refund request. When taxpayers fail to file a timely return, the
resulting date to file a refund claim is two years from the date their taxes were paid. As noted above, since the Taxpayers'
1996 taxes were deemed paid on April 15, 1997, pursuant to Section 12-54-85(F)(5)(a), their refund claim had to be
submitted no later than April 15, 1999. The Taxpayers, however, did not file their claim by this required date. Instead, the
claim was filed on April 14, 2000. Accordingly, I conclude that the Taxpayers failed to come within the two-year time
limitation of Section 12-54-85(F)(1).
5. The Taxpayers argue that the federal courts have rejected the timely filed requirement of Section 6511(a), and since
South Carolina's intent is to follow federal law, state courts should also reject that requirement. This argument lacks merit.
In fact, the federal courts have not rejected the timely filed return requirement. Neither Miller v. U.S. nor other similar
cases have been overturned. Moreover, S.C. Code Ann. § 12-6-50 (2000), which sets forth the Internal Revenue Code
sections not adopted by South Carolina, specifically excludes Section 6511(a) from adoption. Therefore, the South
Carolina General Assembly clearly expressed its intent in Section 12-6-50 not to follow federal law in this area.
6. The Taxpayers also argue they filed both state and federal returns for previous tax years in the same manner as their 1996
return and still received refunds. Based on those refunds, they claim they should also be allowed a state refund for the 1996
tax year. However, the Taxpayers filed their 1995 state return on September 2, 1997. While that return was after April 15,
1996, it was still within the two-year requirement of Section 12-54-85(F)(1). Therefore, any refund received for 1995
would have been proper. Furthermore, the refund procedure for the tax years prior to 1995 was pursuant to a different
statutory provision that has since been repealed. See, e.g., S.C. Code Ann. § 12-47-440 (Supp. 1994) (repealed 1995).
Consequently, those procedures are irrelevant to the Taxpayers' 1996 return.
Additionally, the Taxpayers' argument also lacks merit with regard to previous federal returns. The application of Section
12-54-85(F)(1) is not dependent upon the actions of the Internal Revenue Service.
7. The Taxpayers argue the lateness of their claim should be excused because their tax preparer was not aware of the time
limitation in Section 12-54-85(F)(1). This argument lacks merit. It is an old maxim that "ignorance of the law is no
excuse." Barlow v. United States, 32 U.S. 404 (1833); Smothers v. U.S. Fidelity and Guar. Co., 322 S.C. 207, 470 S.E.2d
858 (1996). The application of that maxim in clear in this case because it would be impossible to administer the tax laws if
a taxpayer could simply argue as a defense that they were ignorant of its provisions. See Utermehle v. Norment, 197 U.S.
40 (1905).
8. The Taxpayers argue their claim is timely because they have a letter from the Department, written in 1993, that states the
time limitation for refunds is three years regardless of whether a return was timely filed. This argument lacks merit. The
refund statute for tax years prior to 1995 was Section 12-47-440. That section did provide as the Taxpayers claim.
However, it was repealed in 1995 by Act No. 69, 1995 S.C. Acts, Section 41. Accordingly, neither Section 12-47-440 nor
the Taxpayers' letter is relevant to the 1996 tax year.
ORDER
Based upon the foregoing Findings of Fact and Conclusion of Law:
IT IS HEREBY ORDERED that the Department properly denied the Taxpayers' claim for a refund for the 1996 income
tax year.
AND IT IS SO ORDERED.
Ralph King Anderson, III
Administrative Law Judge
February 13, 2002
Columbia, South Carolina
1. It is a well accepted rule that statutes should not be construed so as to result in absurd or meaningless legislation. State ex rel. McLeod v.
Montgomery, 244 S.C. 308, 136 S.E.2d 778 (1964); TNS Mills, Inc. v. South Carolina Department of Revenue, 331 S.C. 611, 503 S.E.2d 471
(1998). |