SC Administrative Law Court Decisions

This case is before this tribunal pursuant to S.C. Code Ann. § 1-23-310 et seq. In May of 1994, the South Carolina Department of Revenue withheld a portion of Petitioner's 1993 income tax refund to satisfy what it believed to be an unpaid 1990 tax liability. The Department subsequently discovered that Petitioner did not owe the taxes paid. However, Petitioner did not make written application for refund of the taxes until April 15, 1997. The Department contends that it is statutorily prohibited from issuing Petitioner a refund because her written request for refund was untimely filed. Petitioner contends that she is entitled to a refund because someone in the Department advised her that she had three years from the filing deadline for 1993 (April 15, 1994) to request the refund and because the taxes were erroneously assessed.

The parties stipulated to the following facts. On April 15, 1991, Petitioner filed her South Carolina income tax return for the 1990 tax year claiming a refund due of $1,048. The Department issued Petitioner an income tax refund of $1,048 on June 4, 1991. On March 29, 1993, the Internal Revenue Service determined that Petitioner's 1990 income was higher than actually reported and Petitioner, therefore, owed additional taxes for that tax year. The IRS provided the Department with information regarding its assessment of additional taxes. On April 15, 1993, Petitioner provided additional information to the IRS regarding the March 29, 1993, assessment, which caused the IRS to conclude that Petitioner did not owe additional taxes. However, the IRS did not advise the Department of this determination. Although Petitioner telephoned the Department to notify it of the change, she is unsure of the date of her telephone call or the name of the person with whom she spoke. Petitioner did not notify the Department in writing of the correction. On December 3, 1993, based on the information received from the IRS regarding the March 29, 1993 determination that Petitioner's 1990 taxable income was higher than actually reported, the Department assessed additional state taxes against Petitioner for the 1990 tax year. On May 17, 1994, the Department applied a portion of Petitioner's 1993 income tax refund in the amount of $640.99 to satisfy the December 3, 1993 assessment. By letter dated April 14, 1997, Petitioner applied for a refund of the $640.99 withheld from her 1993 income tax refund.

"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 same." Asmer v. Livingston, 225 S.C. 341, 82 S.E.2d 465 (1954) (citing Pacific Am. Fisheries, Inc. v. Mullaney, 108 F. Supp. 133 (D. Alaska 1952); New Consumers Bread Co. v. Commissioner of Internal Revenue, 115 F.2d 162 (3d Cir. 1940); 84 C.J.S. Taxation § 632).

S.C. Code Ann. § 12-47-440 (Supp. 1994)⁽¹⁾ was in effect at the time Petitioner filed her 1990 income tax return and at the time the Department levied on Petitioner's 1993 income tax refund. This section provided:

If it appears to a person that any tax or fee administered by the department has been erroneously, improperly, or illegally assessed, collected or otherwise paid over to the department, the person by whom or on whose behalf the tax or fee was paid, may apply to the department to abate or refund in whole or in part the tax or fee . . . . The provisions of this section . . . are only available where the application provided for here is made in writing to the department within three years from the date the tax or fee was due to have been paid, without regard to extensions of time for payment, or if a later date would result, within one year of payment where an additional tax or fee is assessed and paid.

S.C. Code Ann. § 12-47-440 (Supp. 1994) (emphasis added). Petitioner filed her 1990 income tax return on April 15, 1991. The Department collected additional taxes for the 1990 tax year on May 17, 1994. Thus, to meet the requirements of the statute, Petitioner had to make a written request for refund on or before May 17, 1995, which she did not do. Petitioner made a written request for refund on April 14, 1997, well outside the statutorily prescribed time limit.

Although Petitioner telephoned the Department to discuss this situation, she is unsure of the date of her telephone call or the name of the person with whom she spoke. Nevertheless, even if Petitioner had a record of this information, it would be of no consequence. It is a long established principal of law that a state agency cannot be estopped from the legitimate exercise of its police power because of an error of its agent that has been relied on by a third party to his detriment.⁽²⁾ See South Carolina Coastal Council v. Vogel, 292 S.C. 449, 357 S.E.2d 187 (1987); Texaco, Inc. v. Wasson, 269 S.C. 255, 237 S.E.2d 75 (1977); Colonial Life & Acc. Ins. Co. v. South Carolina Tax Comm., 248 S.C. 334, 149 S.E.2d 777 (1966); One Hundred Second Calvary Officers v. Heise, 201 S.C. 68, 21 S.E.2d 400 (1942). Thus, even if someone at the Department gave Petitioner erroneous information regarding the amount of time that she had to make her written request for refund, this fact would not excuse Petitioner from complying with the time limitations of § 12-47-440 or give the Department authority to exceed the refund powers granted it by the General Assembly.

In enacting § 12-47-440, 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 virtually ensured that the Department would not be inundated with thousands of requests for refunds after expiration of the time period. The United States Supreme Court has recognized the problem government would encounter if there were equitable exceptions to statutorily mandated time limits for requesting refunds of erroneously paid or assessed taxes:

An "equitable tolling" . . . 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.

United States v. Brockamp, 519 U.S. 347 (1997). While this situation is unfortunate for the taxpayer 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.

For the forgoing reasons, IT IS HEREBY ORDERED that Petitioner 's request for refund of $640.99 is denied.

AND IT IS SO ORDERED.

____________________________________

JOHN D. GEATHERS

Administrative Law Judge

December 15, 1998

Columbia, South Carolina

1. Section 12-54-85, pertaining to the time limitation for refund of claims, was enacted by 1995 Act No. 60 to replace § 12-47-440 and became effective August 1, 1995. S.C. Code Ann. § 12-54-85 may not be applied retroactively. The intent of the General Assembly determines whether a statute will have prospective or retrospective application. Kiawah Resort Assoc. v. South Carolina Tax Comm'n, 318 S.C. 502, 458 S.E.2d 542 (1995). Although this matter was not legally resolved prior to the August 1, 1995 repeal of § 12-47-440, there is no indication that the General Assembly intended § 12-54-85 (Supp. 1997) to apply retroactively. Further, even if § 12-54-85 were applicable, Petitioner's application for refund was still filed too late as § 12-54-85 gives a taxpayer two years after the date of payment to apply for a refund.

2. Note, however, that "[a] governmental body is not immune from the application of the doctrine of estoppel where its officers or agents act within the proper scope of their authority." Vogel, 292 S.C. at 453 (citing Oswald v. Aiken County, 281 S.C. 298, 315 S.E.2d 146 (Ct. App. 1984).