SC Administrative Law Court Decisions

This matter is before the Administrative Law Judge Division (Division) pursuant to the request of the Respondents for a contested case hearing, pursuant to S.C. Code Ann. § 12-60-460 (Supp. 1999). The Respondents challenge a Final Agency Determination issued by the Petitioner, South Carolina Department of Revenue (Department), dated March 20, 2000, in which the Department determined that the Respondents had not timely protested income tax assessments for the tax years 1994 through 1998. After notice to the parties, a contested case hearing was held on November 1, 2000, at the offices of the Division in Columbia, South Carolina.

Any issues raised in the proceedings but not addressed in this Final Order and Decision are deemed denied. ALJD Rule 29(C).

After consideration and review of all the evidence and testimony and having judged the credibility of the witnesses, by a preponderance of the evidence, I make the following findings of fact:

1. Notice of the date, time, place and subject matter of the hearing was timely given to the parties.

2. The Respondents are husband and wife. They reside in Sumter, South Carolina, and have so resided since 1972.

3. The Respondents submitted income tax returns to the Department for the 1994, 1995, and 1996 tax years. See Petitioner's Exhibits 2, 3, and 4. Each return stated that the Respondents had zero taxable income and that they were entitled to a refund of all previously withheld taxes. Attached to some of these returns was a statement signed by the Respondents which asserted, inter alia, that they were filing a return in order to "prevent . . . illegal prosecution for allegedly failing to file an income tax return. . . .", and that they had "zero income" according to the Supreme Court's definition of income. One of the statements also asserted that the Respondents were "non-resident aliens [Americans] in relationship to United States income tax laws. . . ." The Department inadvertently refunded the withheld taxes to the Respondents for these tax years, but subsequently recalculated the Respondents' tax liability based upon the W-2 and 1099R forms which were attached to the returns.

4. For the 1997 tax year, the Respondents submitted a return which also claimed zero taxable income and which sought a refund of all taxes withheld. See Petitioner's Exhibit 5. The Department denied the refund and recalculated the amount of tax due based upon the Respondents' W-2 and 1099R forms which were attached to the return. Attached to the Respondents' 1997 tax return was a statement which raised similar arguments to those asserted in the attachments to the earlier tax returns.

5. The Respondents failed to file an income tax return for the 1998 tax year. The Department, pursuant to S.C. Code Ann. § 12-60-430, estimated the amount of taxes due based upon the best evidence available to it.

6. In March of 1999, the Department received a letter from Gene Bridges, a tax consultant, requesting refunds for the tax years 1996 and 1997 on behalf of the Respondents. See Petitioner's Exhibit 1. As a result of that letter, the Department examined the tax returns filed by the Respondents for 1994 through 1997, and discovered that the Respondents had filed returns claiming that they had zero taxable income for those years. Furthermore, the Department discovered that the Respondents had not filed an income tax return for the tax year 1998. The Department's investigation also revealed that in 1997 the Department had previously issued proposed assessments and a Final Agency Determination with regard to the Respondents' 1994 and 1995 taxes, but that no final assessment had ever been issued for those tax years. Accordingly, in July of 1999, the Department issued proposed assessments to the Respondents for the tax years 1994 through 1998. The proposed assessments for 1994, 1995, 1997, and 1998 are dated July 16, 1999, and the proposed assessment for 1996 is dated July 20, 1999. See

Petitioner's Exhibits 6, 7, 8, 9, and 10. The proposed assessments were sent to the Respondents via certified mail and were received by them on July 24, 1999. See Petitioner's Exhibit 12.

7. The Proposed Assessments issued to the Respondents were all issued on the Department's standard form. That form contains language on its reverse side which sets forth the procedure for appealing the proposed assessment, and which specifically provides that an appeal may be made by sending a written protest to the Department within thirty (30) days of the date on the proposed assessment. The thirty day period for protesting the proposed assessments issued to the Respondents expired on August 15, 1999, for all the proposed assessments except the 1996 assessment, and on August 19, 1999, for the 1996 assessment.

8. By letter postmarked September 3, 1999, the Respondents, through their tax consultant Gene Bridges, protested the proposed assessments for 1994 through 1998. See Petitioner's Exhibit 13.

9. On September 7, 1999, the Department denied the Respondents' protest on the grounds that it was not timely filed. See Petitioner's Exhibit 14.

10. In October of 1999, the Department issued Final Assessments to the Respondents for the tax years 1994 through 1998. All of these assessments were dated October 15, 1999, except the assessment for 1996, which was dated October 20, 1999. The Department submitted certified copies of these assessments from its records, which were admitted into evidence as Petitioner's Exhibits 15 through 19. The amounts of the assessments are as follows:

11. All of the Final Assessments issued to the Respondents were issued on the Department's standard forms. These standard, pre-printed forms contain language on the reverse side which sets forth the "Taxpayers' Bill of Rights." There is no mention on these standard forms of any rights to appeal the final assessment nor of any procedures for appealing such an assessment. Petitioner's Exhibits 15 through 19, which are certified copies from the Department's records of the Final Assessments sent to the Respondents, all depict only the "Taxpayers' Bill of Rights" on their reverse sides.

12. The Respondents submitted an affidavit, dated July 20, 2000, which was made part of the record in this case. Attached to the affidavit are a number of exhibits. The front sides of Exhibits 3, 4, 5, 6 and 8 to the Respondents' affidavit are identical to the front sides of Petitioner's Exhibits 15 through 19, the Final Assessments issued to the Respondents for tax years 1994 through 1998. However, the reverse sides of Exhibits 3, 4, 5, 6, and 8 as submitted to the Court contain language from the Department's standard "Proposed Assessment" form, which includes appeal rights and procedures. The Department's representative testified that all proposed assessments and final assessments issued by the Department are issued on standard, pre-printed forms, and that no final assessment is ever issued on a form such as the ones submitted by the Respondents with their affidavit. Respondents assert that Exhibits 3, 4, 5, 6, and 8 to their affidavit, which are photocopies, are copies of the forms they received from the Department. However, the Respondents did not produce the original Final Assessment documents in order to prove that those documents indeed contained language stating that the final assessments could be appealed. I therefore find that Petitioner's Exhibits 15 through 19 are accurate representations of the Final Assessments issued to the Respondents by the Department.

13. By letter dated November 10, 1999, the Respondents, through their tax consultant, filed a protest of the Final Assessments issued by the Department.

14. In January of 2000, the Department sent the Respondents Notices of Tax Lien and Seizure for the tax years 1994 through 1998. After receiving letters from the Respondents' tax consultant dated February 29, 2000, the Department determined that the notices had erroneously been sent prior to the issuance of a Final Agency Determination. Accordingly, the Department withdrew the tax liens pending the issuance of a Final Agency Determination on the Respondents' protest of the proposed assessments issued in July, 1999.

15. On March 20, 2000, the Department issued its Final Agency Determination denying the Respondents' protest of the proposed assessments on the grounds of untimeliness. Thereafter, the Respondents filed a request for a contested case hearing before the Division.

Based upon the foregoing Findings of Fact, I conclude, as a matter of law, the following:

1. S.C. Code Ann. § 12-60-460 (Supp. 1999) authorizes the South Carolina Administrative Law Judge Division to hear contested cases pursuant to Chapter 23 of Title 1 of the 1976 Code, as amended.

2. S.C. Code Ann. § 12-60-420 (Supp. 1999) provides that, if a division of the Department determines that there is a deficiency in any state tax, it may send a proposed assessment to the taxpayer. The Department may not assess a deficiency against a taxpayer, however, until thirty days after sending the proposed assessment as provided in Section 12-60-420, or, if the taxpayer files a timely written protest with the Department, until the taxpayer's appeal is finally decided. S.C. Code Ann. § 12-60-440 (Supp. 1999).

3. S.C. Code Ann. § 12-60-430 (Supp. 1999) provides that if a taxpayer fails or refuses to make any report or file a return required to be filed with the Department, the Department may make an estimate of the tax liability from the best information available and may issue a proposed assessment for the taxes, including any penalties and interest.

4. S.C. Code Ann. § 12-60-450 (A) (Supp. 1999) provides in pertinent part: "A taxpayer can appeal a proposed assessment by filing a written protest with the department within thirty days of the date of the proposed assessment." (Emphasis added). In this case, the proposed assessments sent to the Respondents for tax years 1994 through 1998 were dated July 16, 1999, and July 20, 1999. Therefore, the latest date by which the Respondents could have filed a timely written protest with the Department was August 19, 1999. However, the Respondents failed to file a written protest within the statutorily mandated period. Accordingly, their protest, which was postmarked September 3, 1999, was untimely.

5. Notwithstanding the fact that they failed to file a timely written protest of the proposed assessments, the Respondents contend that they had the right to appeal the Department's final assessments for tax years 1994 through 1998, which were dated October 15, 1999, and October 20, 1999. This argument is based upon the Respondents' assertion that the final assessment forms they received from the Department stated that they had the right to appeal the final assessments, and that their purported appeal of the final assessments, which was dated November 10, 1999, was timely. However, as discussed above in the Findings of Fact, the Respondents failed to produce the original Notices of Final Assessment to support their assertion that those documents contained appeal rights provisions. Having found that the Petitioner's Exhibits 15 through 19 accurately depict the Notices of Final Assessment sent to the Respondents and that those documents contain no language regarding appeal rights, I conclude that the Respondents' argument is without merit. Even if the Department had erroneously sent the Respondents Final Assessment forms with the appeal rights language from a Proposed Assessment form on the reverse, such an error could not create the right to appeal where none exists pursuant to statute. Section 12-60-450(A), which sets forth the appeal procedure whenever a deficiency in state taxes is asserted by the Department, provides that a taxpayer can appeal a proposed assessment by filing a written protest with the Department within thirty days of the date of the proposed assessment. The South Carolina Revenue Procedures Act, S.C. Code Ann. § 12-60-10 et seq. (Supp. 1999) provides the exclusive remedy in any case involving the "illegal or wrongful collection of taxes, or attempt to collect taxes." S.C. Code Ann. § 12-60-80 (Supp. 1999). There is simply no provision in the Revenue Procedures Act which allows an appeal of a final assessment such as those issued to the Respondents in October of 1999. Therefore, even if the Department had sent the Respondents forms indicating that they had the right to appeal from a final assessment, it had no power to entertain such an appeal. See Bazzle v. Huff, 319 S.C. 443, 462 S.E.2d 273 (1995) (administrative agencies have only such powers as have been conferred by law and must act within the authority granted for that purpose).

Furthermore, the Respondents' argument that they should be allowed to appeal the final assessments is in the nature of estoppel. In effect, Respondents are arguing that the Department should be estopped from enforcing the tax liability because it gave them erroneous advice. However, the doctrine of estoppel may not be applied to deprive the government of the due exercise of its police power, or to frustrate the purpose of its laws or thwart its public policy. Carman v. S.C. Alcoholic Beverage Control Comm'n, 315 S.C. 320, 433 S.E.2d 885 (Ct. App. 1993). Moreover, the government cannot be estopped by erroneous conduct or statements of its officers or agents which have been relied upon by a third party to his detriment. Goodwine v. Dorchester Dept. of Social Services, 336 S.C. 413, 519 S.E.2d 116 (Ct. App. 1999). Thus, even if someone at the Department furnished the Respondents with the wrong forms indicating that they had the right to appeal the final assessments, this fact would not excuse Respondents from complying with the time limitations of § 12-60-450(A) or give the Department authority to exceed the powers granted it by the General Assembly. Respondents' argument, therefore, must fail.

6. Time limits for appeals are considered jurisdictional limitations and a failure to meet the required deadline divests the hearing body of jurisdiction to hear the appeal. Mears v. Mears, 287 S.C. 168, 337 S.E.2d 206 (1985); Burnett v. S.C. State Hwy. Dep't, 252 S.C. 568, 167 S.E.2d 571 (1969). Furthermore, no language in any of the applicable statutes allows the Administrative Law Judge to exercise discretion to consider any mitigating circumstances. The authority of reviewing officers is strictly confined to the limits set by the statutory provisions that give them their existence and any actions which exceed their jurisdiction are void. S.C. Tax Comm'n v. S.C. Tax Bd. of Review, 278 S.C. 556, 299 S.E.2d 489 (1983). Since the Respondents failed to file a written protest of the proposed assessments with the Department within the statutorily prescribed time period, this Division has no jurisdiction to hear their appeal and this matter must be dismissed.

Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby ORDERED that this matter be dismissed.

IT IS FURTHER ORDERED that the Respondents are liable to the Department for the tax liabilities as set forth in Finding of Fact Number 10 above, and the Department may proceed accordingly.

AND IT IS SO ORDERED.

_________________________________

Marvin F. Kittrell

Chief Judge

November 8, 2000

Columbia, South Carolina