Cerney v. Dep't of Revenue, TC-MD 220160N

CourtOregon Tax Court
Writing for the CourtALLISON R. BOOMER, PRESIDING MAGISTRATE
PartiesDALE G. CERNEY and ANGELA L. CERNEY, Plaintiffs, v. DEPARTMENT OF REVENUE, State of Oregon, Defendant.
Docket NumberTC-MD 220160N
Decision Date18 November 2022

DALE G. CERNEY and ANGELA L. CERNEY, Plaintiffs,
v.

DEPARTMENT OF REVENUE, State of Oregon, Defendant.

No. TC-MD 220160N

Tax Court of Oregon, Magistrate Division, Income Tax

November 18, 2022


ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

ALLISON R. BOOMER, PRESIDING MAGISTRATE

This matter came before the court on Defendant's Motion for Summary Judgment (Motion), filed August 8, 2022. Plaintiffs filed a Response to Motion for Summary Judgment (Response) on August 11, 2022. This matter is now ready for the court's determination.

I. STATEMENT OF FACTS

In 2015, Plaintiffs installed solar panels on their Portland, Oregon, home and received a Residential Energy Tax Credit (RETC) totaling $6,000. (Compl at 3.)[1] Plaintiffs' RETC application was approved via email on December 28, 2015. (Id. at 16.) The email stated it was Plaintiffs' "official tax credit certification" and listed the "total tax credit" of $6,000. (Id.) The email further listed a tax credit of $1,500 in each of the tax years 2015 through 2018. (Id.)

In 2016, Plaintiffs relocated to Washington, but kept their Oregon home as a rental property. (Compl at 3.) Plaintiffs filed Oregon income tax returns for 2015 and 2016. (Id.) On their 2015 return, Plaintiffs claimed $1,500 of RETC from their Schedule OR-ASC. (Id. at 116.) Plaintiffs' 2016 Schedule OR-ASC-NP showed $4,500 RETC from the prior year, $1,500 RETC awarded in 2016, and $1,500 RETC claimed in 2016. (Id. at 105; see also id. at 102.) Plaintiffs

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did not initially file Oregon returns for tax years 2017, 2018, and 2019 because they had no Oregon taxable income-each year resulted in a net loss. (Id. at 3.) In 2020, Plaintiffs sold their Oregon property. (Id.) On their 2020 Schedule OR-ASC-NP, Plaintiffs showed that they had $4,500 of RETC remaining from the prior year and that they were awarded an additional $1,500 of RETC in 2020.[2] (Id. at 24.) On their 2020 tax return, Plaintiffs claimed $2,081 in RETC. (Id. at 19.)

Defendant issued a Notice of Deficiency to Plaintiffs for the 2020 tax year, adjusting Plaintiffs' RETC to $0. (Compl at 5.) Plaintiffs filed a written objection with Defendant challenging that adjustment. (Id. at 9.) In its Written Objection Determination letter, Defendant upheld its denial of the credit claimed in 2020 stating that Plaintiffs must file returns for tax years 2017, 2018, and 2019 to be able to claim any RETC. (Id. at 11.) Defendant reasoned that, without those returns, it would be unable to verify Plaintiffs' Oregon tax liability or if they had any RETC from those years to carry forward to 2020. (Id.) In accordance with Defendant's letter, Plaintiffs filed returns for the 2017, 2018, and 2019 tax years. (Id. at 3.) On their Schedules OR-ASC-NP for each of the three years, Plaintiffs did not report any amount of RETC awarded or used in tax years 2017, 2018, or 2019, but rather listed an "amount from prior year" of $3,000 for each of the three years. (Id. at 46, 66, 85.) Defendant adjusted Plaintiffs' 2017 return "to correct the amount of Oregon surplus credit" but "did not change Plaintiffs' Oregon percentage for the year." (Def's Mot at 1.) Defendant accepted Plaintiffs' 2018 and 2019 returns as filed. (Id.)

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Plaintiffs also appealed Defendant's Written Objection Determination to this court. The parties stipulated to the following facts: (1) Plaintiffs were full year Oregon residents in 2015 with a tax liability of $10,034; (2) Plaintiffs were part-year residents in 2016 with an Oregon percentage and tax liability of 47.9 percent and $5,189, respectively; (3) Plaintiffs were nonresidents in each of the tax years 2017 through 2019 with an Oregon percentage of zero and tax liability of zero in each year; (4) and Plaintiffs were nonresidents in 2020 with an Oregon percentage of 5.5 percent and a tax liability $698.[3] (Stip Facts at 1.)

II. ANALYSIS

The issue presented is whether Plaintiffs may claim any RETC for the 2020 tax year under ORS 316.116 and ORS 316.117.[4]

The court shall grant a motion for summary judgment if all the documents on file "show that there is no genuine issue as to any material fact and that the moving party is entitled to prevail as a matter of law." Tax Court Rule (TCR) 47 C.[5] "No genuine issue as to a material fact exists if, based upon the record before the court viewed in a manner most favorable to the adverse party, no objectively reasonable juror could return a verdict for the adverse party * * *."[6]Id.

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A. RETC, Generally

ORS 316.116 allows a credit against taxes otherwise due "for costs paid or incurred for construction or installation of each of one or more alternative energy devices in or at a dwelling." ORS 316.116(1)(a). Various statutory caps apply to the credit amount based on the cost, category, and type of alternative energy device installed. See ORS 316.116(2). For a "category two alternative energy device that is a solar electric system" the credit is limited to $6,000. ORS 316.116(2)(d)(A). In any one tax year, the total credit amount allowed is the lesser of the taxpayer's tax liability or $1,500. ORS 316.116(3)(a), (7). "Unused credit amounts may be carried forward as provided in subsection (8) * * * but may not be carried forward to a tax year that is more than five tax years following the first tax year for which any credit was allowed * * *." ORS 316.116(3)(a). Subsection (8) provides that:

"Any tax credit otherwise allowable under this section that is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer's tax liability for the next succeeding tax year. Any credit remaining unused in the next succeeding tax year may be carried forward and used in the second succeeding tax year and likewise any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, and any credit not used in that third succeeding tax year may be carried forward and used in the fourth succeeding tax year, and any credit not used in that fourth succeeding tax year may be carried forward and used in the fifth succeeding tax year, but may not be carried forward for any tax year thereafter."

Although ORS 316.116 allows a RETC to residents, it also contains provisions pertaining to nonresidents and part-year residents. First, a nonresident taxpayer is "allowed [a RETC] in the proportion provided by ORS 316.117." ORS 316.116(9). Second, "[i]f a change in the status of a taxpayer from resident to nonresident or from nonresident to resident occurs, the credit allowed by this section shall be determined in a manner consistent with ORS 316.117." ORS 316.116(11). In turn, ORS 316.117(1) provides for the proration of certain deductions and credits of nonresidents and part-year residents by a ratio that equals "the federal adjusted gross

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income of the taxpayer from Oregon sources divided by the taxpayer's federal adjusted gross income from all sources."

B. Parties' Positions

Plaintiffs argue they "should be allowed to carryforward all of the unused credits" until the $6,000 credit amount is exhausted or until the five-year carryforward limit applies. (Ptfs' Resp to Def's Mot Summ J at 1.) Plaintiffs calculate that they had "$3,000 in usable credit for the tax year 2020." (Compl at 4.) In Defendant's view, Plaintiffs had no RETC remaining as of 2020, based on the following analysis: Plaintiffs received a $1,500 RETC in 2017, which was required to be multiplied by their Oregon percentage of 0, resulting in no credit allowed that year or carried forward. (Def's Mot at 3-4.) Plaintiffs received another $1,500 RETC in 2018, which was required to be multiplied by their Oregon percentage of 0, resulting in no credit allowed that year or carried forward. (Id.) In both 2019 and 2020, Plaintiffs received no new RETC credits and had no carryforward credits to use. (See id.)

In support of its position, Defendant relies on the nonresident proration requirement under ORS 316.116(9) and ORS 316.117, as well as the 2020 Instructions for Schedule OR-ASC-NP. (Def's Mot at 3.) The instructions give a five-step process for calculating carryforward credits and Defendant states that step 3 "instructs nonresidents to prorate the carryforward credits received in the year by their Oregon percentage to determine the amount awarded in 2020." (Id.) Step 3 of the instructions pertain to the "amount awarded this year" column of the form. Thus, the key question is whether Plaintiffs received or were awarded a RETC of $6,000 in 2015, subject to a $1,500 limit in each tax year, that they were permitted to carry forward for up to five years, or rather whether Plaintiffs received or were awarded a RETC of $1,500 in each of the years 2015 through 2018. This appears to be a question of first impression.

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C. Whether the RETC was Awarded in One Year or Over Four Years

Defendant's position assumes that, under ORS 316.116, Plaintiffs' $6,000 RETC was awarded in four annual increments of $1,500, rather than as a lump sum of $6,000 in 2015. (See Def's Mot at 4 (stating that Plaintiffs were...

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