Raytheon Co. & Subsidiaries v. Okla. Tax Comm'n (In re Income Tax Protest of Raytheon Co. & Subsidiaries)

• Decision Date: 05 April 2022
• Docket Number: Case No. 116,358
• Parties: In the MATTER OF the Income Tax PROTEST OF RAYTHEON COMPANY AND SUBSIDIARIES Raytheon Company and Subsidiaries, Protestant/Appellant, v. Oklahoma Tax Commission, Respondent/Appellee.
• Court: Oklahoma Supreme Court

512 P.3d 333

In the MATTER OF the Income Tax PROTEST OF RAYTHEON COMPANY AND SUBSIDIARIESRaytheon Company and Subsidiaries, Protestant/Appellant,

v.Oklahoma Tax Commission, Respondent/Appellee.

Case No. 116,358

Supreme Court of Oklahoma.

FILED APRIL 5, 2022

AS CORRECTED MAY 16, 2022

David Elder, Matthew Brockman, Kevin B. Ratliff, Hartzog, Conger, Cason & Neville, Oklahoma City, Oklahoma, Appellant Raytheon Company and Subsidiaries

Lee Pugh, Elizabeth Field, Sharon Sitzman, Oklahoma City, Oklahoma, Appellee State of Oklahoma ex rel. Oklahoma Tax Commission

PER CURIAM

Facts & Procedural History

¶1 Raytheon Company and Subsidiaries (Raytheon) is the principal reporting corporation for a group of affiliates doing business in Oklahoma. For tax year 2012, Raytheon made estimated tax payments totaling $626,965.00 to the Oklahoma Tax Commission (OTC).¹ Raytheon's tax return was originally due on March 15, 2013.² After properly securing an extension, and making a final quarterly payment of $152,000.00 in March of 2013, Raytheon timely filed its 2012 Oklahoma Corporation Income Tax Return on September 27, 2013. The Form 512-2012 noted an overpayment of $84,456.00, and requested OTC apply the amount to Raytheon's 2013 corporate income tax liability.

¶2 Raytheon subsequently discovered an accounting error which resulted in an overpayment of more than twice the amount of Oklahoma taxes actually owed. Raytheon's original tax return unintentionally included sales of property from Arizona, resulting in an inflated Oklahoma sales factor.³ On September 27, 2016, Raytheon filed its Oklahoma Amended Corporation Income Tax Return (Form 511-X) for 2012, claiming a tax overpayment of $321,444.00.

¶3 On October 5, 2016, the OTC issued a letter denying Raytheon's claim for a refund, maintaining that the amended return "was not filed within the allowed time of three years from the date the tax was paid."⁴ Raytheon submitted its tax protest on November 22, 2016. After the OTC and Raytheon submitted joint stipulations and independent legal briefs, the assigned administrative law judge issued factual findings and legal conclusions. Therein, the ALJ recommended denying the protest because the refund claim fell outside of the applicable three (3) year period set forth in 68 O.S.2011, § 2373. On August 14, 2017, the OTC issued an order adopting the recommendations of the ALJ. Raytheon filed the present appeal from the OTC decision. We retained the matter and now reverse.

Standard of Review

¶4 When the OTC acts in its adjudicative capacity, its orders will be affirmed on appeal if the record contains substantial evidence supporting the facts upon which the order is based and the order is free from legal error. Am. Airlines, Inc. v. State, ex rel. Okla. Tax Comm'n, 2014 OK 95, ¶ 25, 341 P.3d 56, 62. Whether Raytheon's refund claim was time-barred under 68 O.S.2011, § 2373 presents a question of statutory interpretation, and thus involves solely a legal issue which calls for de novo review. Id. Under the de novo standard of review, this Court possesses plenary, independent, and non-deferential authority to examine the issues presented. Matter of Estate of Foresee, 2020 OK 88, ¶ 8, 475 P.3d 862, 865.

Analysis

¶5 Both parties acknowledge that the sole question for this Court is how to interpret the following phrase in 68 O.S.2011, § 2373 : "portion of the tax paid during the three (3) years immediately preceding the filing of the claim." The parties fundamentally agree that estimated remittances were not "tax paid" within the meaning of the statute.⁵ Raytheon maintains the three-year period commenced when its original tax return was filed on September 27, 2013. The OTC contends that the three-year term started on March 15, 2013, when the company's tax return was initially due without an extension. To resolve the dispute in this case, we must determine when Raytheon's taxes were considered paid for purposes of § 2373. We begin our analysis with a closer examination of the entire statutory scheme involving corporate income tax in Oklahoma.

¶6 Corporations who do business in, or who derive income from sources within the state, are required to file a corporate income tax return. 68 O.S.2011, §§ 2355(D) and 2368(E). In 2012, corporate entities reporting income on a calendar year basis were required to file their returns by March 15 following the close of the taxable year. 68 O.S.2011, § 2368(G)(3). At the time of submitting an annual income tax return, a corporate taxpayer must simultaneously tender "the amount of tax due." 68 O.S.2011, § 2375(A). Failure to tender the estimated total tax liability causes the tax liability to become delinquent. Id. Nevertheless, taxpayers are statutorily authorized to request an extension for filing a return. 68 O.S. 2011, § 216. Section 216 also provides that "an extension shall not extend the date for payment of the state income or franchise tax due." Id.

¶7 Corporations and individuals who erroneously overpay taxes may seek a refund of the excess sums. 68 O.S.2011, § 2373. As noted, the central statutory provision in this dispute is § 2373, which reads:

If, upon any revision or adjustment, including overpayment or illegal payment on account of income derived from tax-exempt Indian land, any refund is found to be due any taxpayer, it shall be paid out of the "Income Tax Withholding Refund Account", created by Section 2385.16 of this title, in the same manner as refunds are paid pursuant to such section. The information filed, reflecting the revision or adjustment, shall constitute the claim for refund.

Except as provided in subsection H of Section 2375⁶of this title, the amount of the refund shall not exceed the portion of the tax paid during the three (3) years immediately preceding the filing of the claim, or, if no claim was filed, then during the three (3) years immediately preceding the allowance of the refund . However, this three-year limitation shall not apply to the amount of refunds payable upon claims filed by members of federally recognized Indian tribes or the United States on behalf of its Indian wards or former Indian wards, to recover taxes illegally collected from tax-exempt lands. In the case of any refund to a member of a federally recognized Indian tribe or to the United States on behalf of its Indian wards or former Indian wards, to recover taxes illegally collected on bonus payments from oil and gas leases located on tax-exempt Indian lands pursuant to this section, the Tax Commission shall pay interest on all refunds issued after January 1, 1996, at the rate of six percent (6%) per annum from the date of payment by the taxpayer to the date of the refund.

In cases where the Tax Commission and the taxpayer have signed a consent, as provided by law, extending the period during which the tax may be assessed, the period during which the taxpayer may file a claim for refund or during which an allowance for a refund may be made shall be automatically extended to the final date fixed by such consent plus thirty (30) days.

The Oklahoma Tax Commission may authorize the use of direct deposit in lieu of refund checks for electronically filed income tax returns.

(Emphasis added). Section § 2373 requires us to examine whether taxes were paid during the three-year period immediately preceding September 27, 2016—the day Raytheon submitted its amended return and claim for a refund. See 68 O.S.2011, § 2385.10 (submission of a return disclosing an overpayment is equivalent to a claim for a refund). To successfully recover an overpayment, Raytheon must have paid any excess taxes within three years of that date. This Court has previously held that the time limit in § 2373 operates as a statute of repose. Neer v. State ex rel. Okla. Tax Com'n, 1999 OK 41, ¶ 2, 982 P.2d 1071, 1073. A taxpayer's claim for refund is the triggering event, and the statute requires us to look back in time from that date. Any taxes paid outside of the three-year window are not recoverable. Id. However, neither § 2373 nor the remainder of the Oklahoma Tax Code prescribe when a tax is considered "paid."

¶8 A logical reading of the plain text in § 2373 supports a determination that taxes are deemed paid when actually tendered to the OTC, even as estimated sums. Yet, the OTC does not dispute Raytheon's claim that quarterly remittances were not actual tax payments, but instead should be regarded as deposits to be applied against a future liability. See 68 O.S.2011, § 2357(A) (providing that estimated taxes and withholdings are applied as a credit); Baral v. United States, 528 U.S. 431, 436-37, 120 S.Ct. 1006, 145 L.Ed.2d 949 (2000) (explaining that "[w]ithholding and estimated tax remittances are not taxes in their own right, but methods for collecting the income tax."); Rosenman v. United States, 323 U.S. 658, 662, 65 S.Ct. 536, 89 L.Ed. 535 (1945) (recognizing that estimated sums are held as a deposit in the nature of bond rather than as a payment of taxes); see also note 6 supra . Consequently, under § 2373, Raytheon's tax liability was deemed paid either (1) when the original return was filed in September 2013; or (2) when the return was originally due in March 2013. Because § 2373 is subject to more than one reasonable interpretation, we must engage in statutory construction.⁷

¶9 A statute is ambiguous when it is susceptible to more than one reasonable interpretation. Kohler v. Chambers, 2019 OK 2, ¶ 6, 435 P.3d 109, 111. When a statute is ambiguous, we will employ statutory canons of construction to determine its meaning. Estate of Foresee, ¶ 14, 475 P.3d at 867. Our primary goal is to ascertain and give effect to the legislative intent and purpose as expressed by the statutory language. Am. Airlines, Inc., ¶ 33, 341 P.3d at 64. Words in a statute are to be construed according to their plain and ordinary meaning unless it is clear the legislature intended a different meaning. Fanning v. Brown, 2004 OK 7, ¶ 10, 85 P.3d 841, 845-46.

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