ORDERS:
FINAL ORDER AND DECISION
STATEMENT OF THE CASE
This is a contested case brought by Petitioners (Taxpayers) claiming 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). After timely notice to the parties, this matter was heard on
June 20, 2001. The issue is whether Taxpayers filed a timely request for a refund. Upon review of the
evidence and testimony submitted, this tribunal concludes that the Taxpayers' claim for a refund was
untimely filed and therefore must be denied.
FINDINGS OF FACT
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 evidence:
1. The Taxpayers are husband and wife. In 1996, the Taxpayers had taxable income, part of which was
withheld for income tax purposes and remitted to the South Carolina Department of Revenue
(Department).
2. The Taxpayers did not file their 1996 State Income Tax Return by the due date, April 15, 1997. On
April 19, 2000, the Taxpayers filed their 1996 State Income Tax Return, claiming a refund of $888. (1)
3. The Department denied the Taxpayers'1996 refund claim on August 9, 2000, because it was filed
beyond the two-year period provided in S.C. Code Ann. § 12-54-85(F) (Supp. 1996).
4. The Taxpayers protested the Department's denial of the refund claim on September 11, 2000. The
Department issued a Final Agency Determination on January 26, 2001, that the Taxpayers' 1996 refund
claim must be rejected as untimely filed.
5. The Taxpayers contend they are entitled to the refund based on their interpretation of the instructions
contained in the 1996 booklet prepared by the Department, which they contend allowed them three years
to file their tax return.CONCLUSIONS OF LAW
Based upon the above Findings of Fact, I conclude the following as a matter 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) (Supp. 1996) 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 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.
S.C. Code Ann. § 12-54-85(F)(1) (Supp. 1996). (2)
The Taxpayers have not met the requirements of S.C.
Code Ann. §12-54-85(F)(1) (Supp. 1996). To avail themselves of the three-year limitation period for a
claim for refund, the Taxpayers must have filed a timely return. Thus, the three-year limitation period
applies only to amended returns, not to delinquent returns.
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) (Supp. 1996). There is substantial federal case law
interpreting section 6511(a), which is instructive in interpreting S.C. Code Ann. § 12-54-85(F)(1)
(Supp. 1996). 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
initially, they had two years from the date their taxes were "paid" in which to file a refund claim. S.C.
Code Ann. § 12-54-85(F)(5)(a) (Supp. 1996) provides that:
[p]ayment 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.
Inasmuch as their 1996 taxes were deemed paid on April 15, 1997, the Taxpayers' refund claim had to
be submitted no later than April 15, 1999. The Taxpayers' return and refund request was not filed until
April 19, 2000. (3)4. 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 South Carolina Supreme 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) (Supp. 1996). S.C. Code Ann. § 12-54-85 (Supp. 1996) does not provide for any
exceptions for individuals. (4) This result may be harsh, 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).
5. The Taxpayers' reliance on the information contained in the 1996 booklet prepared by the
Department is understandable but misplaced. The booklet is not the law. 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. See S.C. 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 & Accident Insurance Co. v. S.C. Tax Comm'n., 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).
This tribunal does not find the instructions misleading; rather, the information was general and not
necessarily applicable to every specific situation. Nonetheless, even if the information provided by the
Department in the booklet was misleading, this fact would not excuse the Taxpayers from complying
with the time limitations of § 12-54-85 or give the Department authority to exceed the refund powers
granted it by the General Assembly.
Likewise, other jurisdictions have held that misleading instructions are an insufficient basis to support a
claim for refund. "Such an argument is not sufficient to overcome the statutory requirements for timely
filing of refund claims." (5) Where a tax form published in subsequent years was revised to explain the
disputed provision, the Ninth Circuit refused to find that:
the IRS should be estopped from denying the provisions of the admittedly inadequate form. However,
as was noted in Adler v. United States [64-1 USTC P 9388], 330 F.2d 91 (9th Cir. 1964), "[n]or can the
interpretation by taxpayers of the language used in government pamphlets act as an estoppel against the
government, nor change the meaning of the taxing statutes. . ." Id., at 93. This is especially true where
the Code itself is clear on the prerequisites. . . .
Pants Rack, Inc. v. U.S., 81-1 USTC P 9345 (E.D.N.C. 1980). Likewise, courts have consistently held
that taxpayers ultimately bear the responsibility for ensuring that claims are timely filed. "The
legislature is responsible for enacting a statutory scheme of taxation but each taxpayer has certain
definite responsibilities, also. Taxpayer responsibility is stressed in court decisions as well as in
statutes." (6) The statutory requirements cannot be waived by the Department or this tribunal. "[T]he
jurisdictional requirement of a timely claim for refund stands paramount. The I.R.S. may not not waive
this requirement." (7)
6. Furthermore, this tribunal and the reviewing courts have no legislative powers. A court's
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 virtually ensured that
the Department would not be inundated with requests for refunds after the statutory period to create a
workable tax administration.
7. 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. There are no exceptions to the filing deadlines for individual
tax returns or legal basis to grant the Taxpayers' request for a refund.
ORDER
For the forgoing reasons, IT IS HEREBY ORDERED that the Taxpayers' request for a refund of $888
is denied.
AND IT IS SO ORDERED.
____________________________________
JOHN D. GEATHERS
Administrative Law Judge
June 29, 2001
Columbia, South Carolina
1. At the hearing, Petitioner (husband) raised the issue of subsequent claims for refund for the 1997 and
1998 tax years, which he stated have also been filed after the due date and hence will raise the same
issue. Because those returns are not before me, it would be improper to address them at this time.
2. The statute was later revised in 1997 to clarify that the return must be timely filed. S.C. Code Ann. §
12-54-85(F)(1) (Rev. 2000) states:
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.
3. Petitioners argued that the refund request would be timely filed under a three-year statute of
limitations. Since April 15, 2000, fell on a Saturday, the due date became April 17, 2000, pursuant to
S.C. Code Ann. § 12-60-50 (Rev. 2000). Petitioners stated that the return was mailed on April 17,
2000, during the midnight rush. The return was postmarked April 19, 2000. While a postmarked date is
not dispositive where timely service by mail is at issue, it is nonetheless, the most compelling evidence
in this case. See Green v. Green, 320 S.C. 347, 465 S.E.2d 130 (Ct. App. 1995). Because the refund
request is subject to the two-year rather than the three-year statute of limitations, this disparity need not
be resolved to determine the timeliness of the claim for refund.
4. The statute does provide an exception for corporations in certain situations, which is inapplicable to
the instant case.
5. Getchell v. Smith, 71 A.F.T.R.2d 93-2025, 93-1 USTC P 50, 362 (D. Colo. 1993) (citing Republic
Petroleum Corp. v. U.S., 613 F.2d 518, 527 (5th Cir. 1980) (holding that equitable principles may not
override statutory requirements); Joseph v. IRS, 637 F.Supp. 1219, 1220 (D.Mass. 1983)).
6. Stineff v. Dep't of Revenue, 8 Or. Tax 456 (1980).
7. Bryan v. U.S., 566 F.2d 1190 (Ct. Cl. 1977) (unpublished opinion) (citing U.S. v. Garbutt Oil Co.,
302 U.S. 528, 534, 535 (1938) (officer of the government has no power to waive statute of limitations
and Commissioner cannot consider untimely filed claims)). |