Combs v. Dept. of Rev.

• Decision Date: 09 November 2000
• Citation: 14 P.3d 584,331 Or. 245
• Parties: Robert R. COMBS, Appellant, v. DEPARTMENT OF REVENUE, Respondent.
• Court: Oregon Supreme Court

14 P.3d 584

331 Or. 245

Robert R. COMBS, Appellant, v. DEPARTMENT OF REVENUE, Respondent.

(OTC 4398; SC S46958)

Supreme Court of Oregon, En Banc.

Submitted on the Record August 15, 2000.

Decided November 9, 2000.

Robert R. Combs, appellant pro se, filed the brief.

James C. Wallace, Assistant Attorney General, Salem, filed the brief for respondent. With him on the brief was Hardy Myers, Attorney General.

DURHAM, J.

Taxpayer appeals from a judgment of the Oregon Tax Court granting summary judgment to the Department of Revenue (department). Taxpayer did not file an Oregon personal income tax return for the year 1996, although he received $28,019 in wages and $2,408 in unemployment compensation during that year. A magistrate upheld the department's assessment of personal income taxes against taxpayer, and taxpayer appealed to the Tax Court. The Tax Court determined that taxpayer's position on appeal was groundless and lacked any objective reasonable basis, and awarded the department $1,200 in damages. ORS 305.437.¹ Taxpayer appealed to this court.

Taxpayer does not dispute that he received wages and unemployment compensation in 1996. He contends, however, that his wages are not subject to Oregon's personal income tax because only "gain or profit" is taxable as income under the Internal Revenue Code, and he did not gain or profit from his labor. Taxpayer explains the foregoing statement by arguing that, because he exchanged his labor for compensation equal to the value of that labor, he had no gain or profit and, therefore, no taxable income.

Taxpayer's argument is incorrect. Oregon income tax law incorporates the definition of "taxable income" stated in the federal Internal Revenue Code. See ORS 316.022(6) ("`Taxable income' means the taxable income as defined in * * * the Internal Revenue Code[.]"); ORS 316.012 ("Any term used in this chapter has the same meaning as when used in a comparable context in the laws of the United States relating to federal income taxes[.]"). When considering whether funds received by a taxpayer constitute state taxable income, this court applies pertinent administrative and judicial interpretation of the federal income tax law. Baisch v. Dept. of Rev., 316 Or. 203, 209-10, 850 P.2d 1109 (1993); see also ORS 316.007 ("It is the intent of the Legislative Assembly * * * to make the Oregon personal income tax law identical in effect to the provisions of the federal Internal Revenue Code relating to the measurement of taxable income[.]"); ORS 316.032(2) ("Insofar as is practicable * * *, the department shall apply and follow the administrative and judicial interpretations of the federal income tax law.").

Section 61(a)(1) of the Internal Revenue Code defines "gross income" to include "[c]ompensation for services." 26 USC § 61(a)(1) (1994). Federal courts repeatedly have rejected, as frivolous and without basis in the Code, the argument made here by taxpayer that wages are not taxable income. See, e.g., Sullivan v. United States, 788 F.2d 813, 815 (1st Cir.1986)

("Courts uniformly have rejected as frivolous the argument[ ] that money received in compensation for labor is not taxable income * * *."); Olson v. United States, 760 F.2d 1003, 1005 (9th Cir. 1985) (supporting similar rule); Connor v. C.I.R., 770 F.2d 17, 20 (2d Cir.1985) (same). We have discovered no federal administrative or judicial authority to the contrary.

We conclude that taxpayer's position has no objective reasonable basis in federal or state law. Therefore, his argument is frivolous, ORS 305.437(2), and groundless, see Detrick v. Dept. of Rev., 311 Or. 152, 157, 806 P.2d 682 (1991)

(defining "groundless," in the context of ORS 305.437, as "devoid of factual or legal support").

The Tax Court found that...