TiNY Report for November 14, 2019 (reporting on DTA cases issued November 7)

There’s a Decision this week that suggests that we often think the same way as the Tribunal. This is rewarding in many respects. First, it suggests that we can empathize with the Tribunal and the decisions it offers and thereby give our readers and clients better insight. It also suggests that the Tribunal members sometimes think like we think. Good times!

DECISION

Matter of Globe Wholesale Tobacco Distributors, Inc.; Division’s Rep.: Brian Evans; Petitioner’s Reps.: Stephen Solomon, Kenneth Moore and Roger Blane; Article 20.

Petitioner purports to be seeking a refund of tobacco products taxes paid in certain years. However, the petition did not challenge a refund claim denial, but, instead, it challenged the additional tax liability shown on a Notice for some later years.

Here’s what I wrote about the ALJ determination:

There is a lot going on here, and a proper analysis of the case would be aided greatly by a multi-year calendar. And there were extenuating circumstances, including a taxpayer-friendly policy change part-way through the period at issue. But what it boils down to is this: The Division started an audit of Petitioner and found additional tobacco tax due (as well as some off-setting credits). Toward the end of the audit, Petitioner hired a new representative who figured out that Petitioner had been significantly overpaying its taxes for years. Petitioner filed refund claims, many of which were granted, but some of which were not on the basis that they were filed after the statute of limitations had run. Petitioner argued that the time for filing the refunds had been extended as the result of waivers for the time to assess that Petitioner had filed with the Division. But the Judge found that the period within which to file a refund would be extended by waiver only if the waivers had been submitted prior to two years after the taxes had been paid (two years from payment is the general refund limitations period).

Petitioner also argued that the period for filing refund claims should have been extended under a Taxpayer Bill of Rights provision requiring the Division to disclose any overpayment the Division discovers during an audit (while the refund period is still open), and then extends the period within which the taxpayer must file its refund claim to 120 days after the Division discloses to the taxpayer that it discovered the overpayment. But, in this case, “[t]he auditor testified that during the audit, the Division was not provided with any information from petitioner’s representatives or third parties that would lead the auditor to believe petitioner had overpaid its tobacco products tax.” So the Judge found some of Petitioner’s refund claims were late and sustained the Division’s denial of them.

While I was writing-up the determination, I wondered why the ALJ was entertaining questions about the refund claims when the Petition was challenging a Notice asserting additional tax. And, as it turns out, I was right to wonder. Here are some quotes from the Tribunal’s decision that the DTA did not have the jurisdiction to entertain Petitioner’s arguments that it was owed refunds:

The petition in the present matter, dated November 7, 2014, was filed in protest of the July 5, 2013 notice of determination. The amounts asserted as due in the notice of determination were reduced to zero by the Division and the notice was canceled by the Administrative Law Judge. Hence, the notice of determination is no longer in dispute.

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[G]iven the general rule that a petition must protest a written statutory notice and the absence of any exception to that rule applicable here, we find that the petition in the present matter, filed almost 11 months before the refund claim determination notice, does not confer jurisdiction upon the Division of Tax Appeals with respect to the refund claim (citations and references omitted).

So the Tribunal found that, under the circumstances, the DTA did not have the jurisdiction to entertain Petitioner’s entitlement to a refund claim. And that’s consistent with my thinking when I had reviewed the ALJ determination.

DETERMINATION

Matter of Drummond; Judge: Maloney; Division’s Rep.: Charles Fishbaum; Petitioner’s Rep.: pro se; Article 22.

Petitioner claimed child and dependent care exemptions for her two grandchildren for 2013 and 2014.  In 2013 and 2014, she claimed child and dependent care credits of $1,485 and $1779, respectively. In two separate desk examinations, the Division denied those credits. At the hearing, the Division alleged that Petitioner failed to satisfy her burden of proving the amounts she had paid for child care expenses.

This pro se Petitioner did a nice job. She did not receive the full refund she sought from the ALJ, but she is going to get most of it. Judge Maloney found that Petitioner’s testimony was “extremely credible,” and corroborated by documentary evidence from two schools and a couple of after school programs. In addition, a neighbor testified by affidavit that he received $50 cash per week from Petitioner to watch one of the children during those periods in which Petitioner was not home, the child was not in school, and the child was not in a formal program. This last finding was notwithstanding that the neighbor did not file any tax return declaring the income he earned from Petitioner. And in that regard, here is a quote from the determination: “At the hearing, [the Division’s witness] acknowledged that if [the neighbor’s] income in each of the years 2013 and 2014 was comprised only of the amounts he received from petitioner for babysitting [the children], [the Neighbor’s] income in each of those years would have been below the threshold for filing a personal income tax return for such year.” If this pro se Petitioner had the foresight to elicit this concession at the hearing, good for her. If the ALJ coaxed this testimony, even better.

Comment