BUFFINGTON v. Miss. State TAX Comm'n

• Decision Date: 09 September 2010
• Docket Number: No. 2009-CA-01658-SCT.,2009-CA-01658-SCT.
• Citation: 43 So.3d 450
• Parties: A.D. BUFFINGTON and Ruth Buffington v. MISSISSIPPI STATE TAX COMMISSION.
• Court: Mississippi Supreme Court

43 So.3d 450

A.D. BUFFINGTON and Ruth Buffington v. MISSISSIPPI STATE TAX COMMISSION.

No. 2009-CA-01658-SCT.

Supreme Court of Mississippi.

September 9, 2010.

COPYRIGHT MATERIAL OMITTED.

Ashley White Pittman, J. Stephen Stubblefield, Jackson, attorneys for appellants.

Stephanie Rutland Jones, Heather Stamper Deaton, attorneys for appellee.

EN BANC.

GRAVES, Presiding Justice, for the Court:

¶ 1. The Buffingtons reached a settlement with the Internal Revenue Service (IRS) regarding additional tax liability assessed by the federal government for previously unreported income. The Mississippi State Tax Commission (MSTC), within three years of being notified by the IRS that the IRS had increased the Buffingtons' reported taxable income, issued an assessment to the Buffingtons for the additional amount the Buffingtons owed in state income taxes.

¶ 2. Mississippi Code Section 27-7-49 provides that, when the IRS increases a taxpayer's reported taxable income, the MSTC may issue an assessment for additional state income taxes, but may not issue such an assessment "after three (3) years from the date the Internal Revenue Service disposes of the tax liability in question." Miss.Code. Ann. § 27-7-49(3) (Rev. 2006). The Buffingtons argue that the IRS "disposes of the tax liability in question" on the date a written settlement between the IRS and the taxpayer is executed. The MSTC, on the other hand, argues that the IRS "disposes of the tax liability in question" on the date the MSTC receives notice from the IRS of the change in the taxpayer's reported taxable income. If the Buffingtons' interpretation stands, the MSTC issued its assessment after the expiration of the three-year statute of limitations. But if the MSTC's interpretation stands, the MSTC issued its assessment before the expiration of the statute of limitations.

¶ 3. Having considered the reasonableness of each party's proposed interpretation, the common meaning of "dispose of," and the standard of review affording deference to the agency's interpretation, we find that the MSTC's interpretation should stand and that the chancery court order granting summary judgment in favor of the MSTC should be affirmed.

FACTS AND PROCEDURAL HISTORY

¶ 4. In 2004, A.D. and Ruth Buffington reached a settlement with the IRS regarding additional tax liability assessed by the federal government based on previously unreported income in excess of $350,000 for tax year 2001. As evidence of that settlement, on March 23, 2004, A.D. Buffington and an IRS representative executed Form 4549, entitled Income Tax Examination Changes. On April 2, 2004, the Buffingtons submitted a check in the amount of $96,038.95 to the IRS for full payment of the agreed-upon liability. The check did not clear the bank that same day, and neither party knows when the check cleared.

¶ 5. Although Form 4549 explained to the Buffingtons that they should file the appropriate state form if the change in their reported taxable income would affect the amount of state income tax they owed, the Buffingtons admit that they did not file an amended 2001 Mississippi income tax return.

¶ 6. On June 24, 2004, the IRS mailed Form 3210 to the MSTC, advising the MSTC that the IRS had increased the Buffingtons' income for tax year 2001. The MSTC signed for receipt of Form 3210 on July 7, 2004. On June 22, 2007, the MSTC issued a $37,999 assessment to the Buffingtons for the additional state income tax they owed for tax year 2001.

¶ 7. Despite the Buffingtons' argument to the MSTC that the MSTC's assessment fell outside the three-year statute of limitations during which the MSTC is statutorily permitted to make assessments (see Miss. Code. Ann. § 27-7-49(3) (Rev.2006)), the MSTC continued to send the Buffingtons notices of assessment. The Buffingtons therefore requested a hearing before the MSTC's Review Board. The hearing took place on February 26, 2008, and on March 18, 2008, the Review Board issued Order No. 8814, upholding and affirming the MSTC's assessment of tax liability. The Buffingtons then appealed to the MSTC. The MSTC hearing took place on July 23, 2008, and on August 19, 2008, the MSTC issued an order upholding the order of the Review Board and affirming the assessment of tax liability.

¶ 8. Having exhausted their administrative remedies, on September 18, 2008, the Buffingtons filed their Petition for Appeal of Mississippi State Tax Commission Order in the Chancery Court of Hinds County.¹ There being no disputed fact in this case, the MSTC filed a Motion for Summary Judgment on June 12, 2009. The Buffingtons filed a Response to Defendant's Motion for Summary Judgment and Counter-Motion for Summary Judgment on June 30, 2009. The parties presented oral argument on July 28, 2009. On September 15, 2009, the chancery court affirmed the MSTC's order affirming the assessment against the Buffingtons and granted the MSTC's motion for summary judgment. A final judgment prepared in accordance with the order was filed on September 29, 2009. Aggrieved, the Buffingtons timely appealed to this Court administrative agency to make; or (4) violated the complaining party's statutory or constitutional right....

An agency's interpretation of a rule or statute governing the agency's operation is a matter of law that is reviewed de novo, but with great deference to the agency's interpretation. This duty of deference derives from our realization that the everyday experience of the administrative agency gives it familiarity with the particularities and nuances of the problems committed to its care which no court can hope to replicate. However, if an agency's interpretation is contrary to the unambiguous terms or best reading of a statute, no deference is due. An agency's interpretation will not be upheld if it is so plainly erroneous or so inconsistent with either the underlying regulation or statute as to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.

Miss. Methodist Hosp. and Rehab. Ctr., Inc. v. Miss. Div. of Medicaid, 21 So.3d 600, 606-07 (Miss.2009) (internal quotations and citations omitted).

¶ 13. In addition, this Court has established the following regarding statutory interpretation:

[We] will not engage in statutory interpretation if a statute is plain and unambiguous. However, statutory interpretation is appropriate if a statute is ambiguous or is silent on a specific issue.³ In either case, the ultimate goal of this Court is to discern the legislative intent. The best evidence of legislative intent is the text of the statute; the Court may also look to the statute's historical background, purpose, and objectives. If a statute is ambiguous, it is this Court's duty to carefully review statutory language and apply its most reasonable interpretation and meaning to the facts of a particular case.

Id. at 607-608 (internal quotations and citations omitted).

¶ 14. We find that the statute is ambiguous, and we agree with the chancery court that the MSTC's interpretation of the statute, which the MSTC historically has applied, is not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.

¶ 15. The MSTC's interpretation of the disputed statutory language—"the date the Internal Revenue Service disposes of the tax liability in question"—is reasonable, because the MSTC is not informed of the date the IRS and the taxpayer executed the written settlement changing the taxpayer's reported taxable income (Form 4549). The MSTC is not notified that there has been a change in the taxpayer's reported taxable income until the MSTC receives Form 3210 from the IRS. And Form 3210 does not inform the MSTC of the date the written settlement was executed, nor of the date the liability ultimately was paid.⁴ Therefore, the interpretation of the statute proposed by the Buffingtons is unreasonable because, although the MSTC would not be informed of the alleged date of disposition, it would nevertheless have three years from that date to issue an assessment for tax liability.

¶ 16. Furthermore, no existing authority interprets the meaning of "disposed of" as used in Section 27-7-49(3) (Miss.Code. Ann. § 27-7-49 (Rev.2006)), and in the absence of a statutory definition of a phrase, it must be given its common and ordinary meaning. Tower Loan of Miss., Inc. v. Miss. State Tax Comm'n, 662 So.2d 1077, 1083 (Miss.1995). Black's Law Dictionary defines "dispose of" as "... [t]o exercise finally, in any manner, one's power of control over; to pass into the control of someone else; to alienate, relinquish, part with, or get rid of; to put out of the way; to finish with; to bargain away...." Black's Law Dictionary 471 (6th ed.1990).⁵ Random House Webster's Unabridged Dictionary defines "dispose of" as "to deal with conclusively; settle.... to get rid of; discard.... to transfer or give away .... to do away with; destroy." Random House Webster's Unabridged Dictionary 568 (2d ed.2001).

¶ 17. The MSTC's interpretation of "disposed of" as the date the MSTC receives Form 3210 is consistent with these common and ordinary meanings of the phrase. The definitions of "dispose of" include "to finish with" and "to deal with conclusively," which the IRS has not done until it has fulfilled its agreement with the MSTC, explained on Form 4549, to exchange information with the MSTC regarding federal tax increases or decreases. While the execution of Form 4549 and the subsequent payment of the liability may have marked the disposition of the federal matter for the Buffingtons, it did not mark the disposition of the matter for the IRS. The definitions of "disposes of" also include "to transfer or give away" and "to pass into the control of someone else," which is arguably what occurred when the MSTC received Form 3210 from the IRS.

¶ 18. Additionally, the IRS could not have "disposed of" the tax liability before the Buffingtons had paid the IRS the...