Ainslie Corp. v. C.I.R.

• Decision Date: 06 April 1995
• Docket Number: No. 94-P-279,94-P-279
• Citation: Ainslie Corp. v. C.I.R., 647 N.E.2d 1221, 38 Mass.App.Ct. 360 (Mass. App. 1995)
• Parties: AINSLIE CORPORATION v. COMMISSIONER OF REVENUE.
• Court: Appeals Court of Massachusetts

Page 1221

647 N.E.2d 1221

38 Mass.App.Ct. 360

AINSLIE CORPORATION v.COMMISSIONER OF REVENUE.

No. 94-P-279.

Appeals Court of Massachusetts Suffolk.

Argued Feb. 7, 1995.

Decided April 6, 1995.

Ronald W. Keefe, Boston, for taxpayer.

Robert J. Munnelly, Jr., Asst. Atty. Gen., for C.I.R.

Before: BROWN, KASS and GREENBERG, JJ.

KASS, Justice.

In its fiscal 1984 and 1985 corporate excise tax returns, ¹Ainslie Corporation understated, and, consequently, underpaid its taxes.For neither of those tax years did Ainslie file a declaration of estimated tax although, as it turned out, for each of those tax years Ainslie owed excise taxes in excess of $1,000.A corporation is required to make payments of estimated tax if in any taxable year it can reasonably expect to owe an excise tax in excess of $1,000.G.L. c. 63B, § 2.²Should a corporation underpay its estimated tax, the estimated corporate tax statute(G.L. c. 63B) imposes an interest charge of eighteen percent per year on the amount of underpayment for the period of the underpayment.G.L. c. 63B, § 6.If that corporate taxpayer fails altogether to file a declaration of estimated tax, the Commissioner of Revenue shall assess a penalty of five percent of the tax imposed.G.L. c. 63B, § 8.³

As to Ainslie's 1985 return, the commissioner assessed interest and penalties adding up to $13,990.⁴Before the Appellate Tax Board, Ainslie argued that it could not reasonably have expected to owe excise tax for either of the tax years.The board ruled adversely, thus, declining to abate the attendant interest and penalty assessments.On appeal, Ainslie's principal contention is that the record does not sustain a finding that the taxpayer ought reasonably to have expected to pay an excise tax of more than $1,000 for the 1985 tax year and that, therefore, Ainslie should not be penalized for failing to declare and pay an estimated tax.We affirm the decision of the Appellate Tax Board.

1.Consequence of failure of taxpayer to ask for findings.When deciding cases, the Appellate Tax Board, under the governing statute, makes findings at its option.General Laws c. 58A, § 13, as amended through St.1985, c. 314, § 1, provides that the board "may make findings of fact and report thereon in writing."A party may, however, request the board to make findings and, in that event, "the board shall make such findings."G.L. c. 58A, § 13.Section 13 requires that a request for findings be made within ten days of a decision rendered without findings of fact."If no party requests such findings and report, all parties shall be deemed[ ] to have waived all rights of appeal to the [A]ppeals [C]ourt upon questions ... as to whether a finding was warranted by the evidence."Ibid. Palladino v. Assessors of Braintree, 373 Mass. 665, 668-669, 369 N.E.2d 993(1977).Chirillo v. Commissioner of Rev., 25 Mass.App.Ct. 98, 99-100, 515 N.E.2d 601(1987).

The board rendered its decision on January 14, 1994, without findings, announcing simply that, "The decision is for the [a]ppellee."The taxpayer did request findings of fact but not until February 1, 1994, eight days after the time for doing so had run out.The board notified the taxpayer that the request for findings of fact and report was untimely and solicitously reminded the taxpayer that it had until February 14, 1994, to claim an appeal to this court.On that day Ainslee did, indeed, file its notice of appeal.That appeal, however, cannot debate the question whether the evidence admits of a finding implicit in the board's decision, ⁵ that the taxpayer reasonably should have anticipated that it would owe more than $1,000 in corporate excise taxes on its 1985 return.This very argument, which the statute places beyond judicial review, is the primary argument pressed by the taxpayer on appeal from the board's decision.We may not consider it, seeAssessors of Needham v. E.J. Bleiler Equip. Co., 364 Mass. 834, 307 N.E.2d 1(1974), and proceed to consider whether the taxpayer has raised a question of law apparent on the record.SeeChirillo v. Commissioner of Rev., 25 Mass.App.Ct. at 100, 515 N.E.2d 601.

2.Reasonable predictability of tax due.It is possible to view the taxpayer's case as raising an alternative question: whether on the basis of certain undisputed facts, the taxpayer, as matter of law, was absolved from filing a declaration of estimated tax for the fiscal year ending July 31, 1986.

Ainslie's returns were prepared by a tax preparer, its accountant.The 1984 return (on Form 355A) showed computation of a tax of $3,226 ⁶ set off in its entirety by an investment credit.That, however, did not reduce the tax due to zero because G.L. c. 63, § 32(3)(b ), as amended through St.1975, c. 684, § 48, provides for a minimum excise of $200, ⁷ plus a fourteen percent surcharge, St.1969, c. 546, §§ 18, 21, for a total of $228.Nonetheless, the tax reported was less than $1,000.For purposes of determining whether it needed to file a declaration of estimated tax for the following tax year, the taxpayer assumed that once again it would be obliged to pay no more than the minimum tax.The 1984 return, however, was wrong insofar as it wiped out 100 percent of the tax computed to be due by set-off of the investment credit authorized by G.L. c. 63, § 31A.Under G.L. c. 63, § 32C, a taxpayer may not take credits in an amount more than fifty percent of the tax computed as due, before the application of credits.Had it been correctly filed, the 1984 return would have shown a tax payable of $1,613, an amount over $1,000 and, therefore, sufficient to trigger the duty to file a declaration of estimated tax.

As matters developed, the tax payable on the 1985 return was a great deal more, namely, $88,902.The far higher amount was the consequence of a sale of real estate by Ainslie which was concluded on June 27, 1986, eighteen days before the end of the fiscal year for which Ainslie later filed its 1985 return.Ainslie's position on appeal before us seems to be that, given the advice of its tax preparer on the 1984 return and the lateness in the fiscal year of the income producing event for the 1985-1986 period, the board could not rule that Ainslie had a reasonable expectation that it would owe more than $1,000 in taxes for the 1985-1986 year.

There are two flaws in that position.The first is that it presupposes the board should not impute to Ainslie the basic error of its tax preparer in connection with the 1984 return, causing the tax payable with that return to be understated.To the contrary, on standard agency principles, the taxpayer is chargeable with errors--and the consequences of those errors--of the preparer who made out the return on its behalf.Restatement (Second) of Agency§ 144(1958).Cf.Curran v. Commissioner of Rev., 23...