Helton v. Reed

• Decision Date: 13 June 2006
• Docket Number: No. 32891.,32891.
• Citation: 638 S.E.2d 160
• Parties: Virgil T. HELTON, State Tax Commissioner of the State of West Virginia, Petitioner Below, Appellant v. R. Michael REED, Chief Administrative Law Judge, West Virginia Office of Tax Appeals and Elk Run Coal Co., Inc., Respondents Below, Appellees.
• Court: West Virginia Supreme Court

638 S.E.2d 160

Virgil T. HELTON, State Tax Commissioner of the State of West Virginia, Petitioner Below, Appellant v. R. Michael REED, Chief Administrative Law Judge, West Virginia Office of Tax Appeals and Elk Run Coal Co., Inc., Respondents Below, Appellees.

No. 32891.

Supreme Court of Appeals of West Virginia.

Submitted March 14, 2006.

Decided June 13, 2006.

Concurring Opinion of Justice Benjamin June 15, 2006.

Dissenting Opinion of Justice Maynard June 30, 2006.

Darrell V. McGraw, Jr., Attorney General, Stephen Stockton, Senior Assistant Attorney General, Charleston, for Appellant.

Herschel H. Rose, III, Steven R. Broadwater, Rose Law Office, Charleston, for Appellee Elk Run Coal Co., Inc.

STARCHER, J.:

In this case a taxpayer improperly filed a petition for a tax refund. We conclude that the taxpayer is not entitled to be included in a case where the West Virginia Tax Commissioner was required to refund certain coal production severance taxes.

I. Facts & Background

On November 18, 2002, the appellee Elk Run Coal Co., Inc. ("Elk Run") made a request for a refund to the appellant Virgil T. Helton, State Tax Commissioner of the State of West Virginia ("the Commissioner"), relating to certain taxes arising from Elk Run's 1999 fiscal year. Elk Run asserted that the imposition of approximately $5.5 million dollars in coal production severance taxes on coal that Elk Run exported to other countries in 1999 violated the United States Constitution's Import-Export Clause, art. I, sec. 10, cl. 2.

In December of 2005, this Court decided the substantive issue raised in Elk Run's request for a refund, holding that

[t]he coal production severance taxes contained in current and earlier versions of W.Va.Code, 11-12B-3 [2000]; 11-13A-3 [2002]; 11-13A-6 [1997]; 22-3-11 [2005]; and 22-3-32 [1994] do not offend the Import-Export Clause of the United States Constitution, art. I, sec. 10, cl. 2.

Syllabus Point 2, U.S. Steel Mining Co., LLC v. Helton, No. 32528, 219 W.Va. 1, 631 S.E.2d 559, 2005 WL 3272114 (2005) ("U.S. Steel I") cert. den. ___ U.S. ___, 126 S.Ct. 2355, 165 L.Ed.2d 279, 2006 WL 868275, 74 USLW 3572 (2006). (Elk Run was a party to U.S. Steel I, but earlier tax years were involved in that case.)¹

With respect to the taxes at issue in the instant case, by letter dated January 8, 2003, the Commissioner denied Elk Run's request for a refund of severance taxes paid for fiscal year 1999.

After receiving notice of the Commissioner's January 8, 2003 action, pursuant to W.Va.Code, 11-10-14(d)(1) [2003] and 11-10A-9(b) [2002], Elk Run had sixty days from the receipt of the Tax Commissioner's letter to file a petition for refund with the newly-created Office of Tax Appeals ("OTA"), which acquired jurisdiction over such petitions on January 1, 2003.

On January 24, 2003, Elk Run filed a Petition for Refund—not with the OTA, however, but with the Commissioner. The Commissioner did not forward Elk Run's petition for refund to the OTA, and the OTA did not receive the petition in a timely fashion.²

Meanwhile, also in January 2003, a number of other coal companies filed petitions for refund similar to the one filed by Elk Run with the Commissioner, also asserting the unconstitutionality of coal production severance taxes that these companies had paid. These petitions were timely received by the OTA, were consolidated for decision by the OTA, and are known collectively as "U.S. Steel II."

In the U.S. Steel II cases, the OTA denied the Commissioner's request to hold a decision in abeyance pending the final results of U.S. Steel I. On December 11, 2003, the OTA ruled in U.S. Steel II (erroneously, as ultimately determined by this Court in U.S. Steel I) that the coal production severance taxes in question were unconstitutional and should be refunded. The OTA's written decision in U.S. Steel II did not include a ruling on Elk Run's petition or refer to any docket number associated with Elk Run.

The Tax Commissioner appealed the OTA's decision in U.S. Steel II to the Circuit Court of Kanawha County. On May 27, 2004, the circuit court affirmed the ruling of the OTA in U.S. Steel II—but on procedural grounds, and not on substantive grounds.

Those procedural grounds were as follows: due to a clerical error, the Tax Commissioner had filed his response to the taxpayers' petitions in U.S. Steel II ten days late in the circuit court. The circuit court ruled that the filing deadline in question was jurisdictional, and that the taxpayers in U.S. Steel II were therefore entitled to refunds, without regard to the substantive merit of the Commissioner's appeal of the OTA decision. (Again, Elk Run was not included in the circuit court's final order in U.S. Steel II.)³

On June 16, 2005, the Commissioner filed a petition for appeal of the circuit court's decision in U.S. Steel II with this Court. This Court, agreeing that the deadline that the Commissioner had missed by ten days was jurisdictional, refused the petition for appeal on November 3, 2005.

Meanwhile, at some point Elk Run's counsel realized that Elk Run's petition for refund regarding fiscal year 1999 was not included in the OTA's files, and had not been addressed by the OTA or the circuit court in U.S. Steel II.

In February of 2005, Elk Run filed a motion with the OTA, asking that the OTA rule that Elk Run's Petition for Refund be deemed to have been timely filed with the OTA on January 24, 2003; and the OTA so ruled in an order entered on March 7, 2005. In addition, the OTA ruled that Elk Run's petition for refund should be deemed to have been included, and decided in Elk Run's favor, in the OTA's decision in U.S. Steel II.

In response to the OTA's ruling, the Commissioner filed a petition in the Circuit Court of Kanawha County, challenging the OTA's ruling. By order dated July 12, 2005, the circuit court upheld the OTA's March 7, 2005 ruling, concluding that Elk Run's petition for a refund should be treated as if it had been timely filed with and ruled upon by the OTA, and the circuit court, in Elk Run's favor, in U.S. Steel II.

In other words, Elk Run, under the circuit court's ruling that is at issue in the instant case, would be entitled to the same coal severance tax refunds that the other companies were entitled to receive as a result of the Tax Commissioner's procedural default in U.S. Steel II.

The Commissioner has appealed the circuit court's decision to this Court.⁴

II. Standard of Review

The issue presented for our consideration by this appeal is whether the OTA and circuit court properly relieved Elk Run from the consequences of failure to file a timely petition for tax refund before the correct tribunal, as required by the applicable statutes. "Interpreting a statute or regulation presents a purely legal question subject to de novo review." Syllabus Point 1, Appalachian Power Co. v. State Tax Dep't of W. Va., 195 W.Va. 573, 466 S.E.2d 424 (1995). Additionally, we review the application of equitable principles by the circuit court under an abuse of discretion standard. See, e.g., Syllabus Point 1, Burnside v. Burnside, 194 W.Va. 263, 460 S.E.2d 264 (1995) (equitable distribution rulings reviewed under abuse of discretion standard).⁵

III. Discussion

The foregoing series of events is admittedly convoluted, but the core facts of the instant case are fairly simple.

Elk Run was required by law to file its appeal with the Office of Tax Appeals. Elk Run did not do so. Because Elk Run misfiled its petition, Elk Run was not a party in U.S. Steel II. Subsequently, asserting that it should be deemed to have been a party in U.S. Steel II, Elk Run sought and obtained rulings by the OTA and circuit court making Elk Run, post hoc and nunc pro tunc, a party to U.S. Steel II.

Before this Court, Elk Run argues that "the Tax Commissioner must be estopped" from claiming that Elk Run's petition was untimely. In support of that argument, Elk Run states (and the circuit court and OTA held) that the Tax Department did not object to the manner in which Elk Run filed its petition, and never indicated that it would not be forwarded to the OTA; that the Commissioner "understood" Elk Run's petition to be included in U.S. Steel II; that the Commissioner forwarded other petitions to the OTA, and that those petitions were treated by the OTA as timely filed; and that the OTA believed that it was ruling on all of the refund petitions pending at the time, no matter where they had been filed.

While these assertions and arguments by Elk Run have some equitable force, two basic considerations militate against giving them dispositive weight in the instant case.

The first consideration is the principle that filing requirements established by statute, like the ones involved in the instant case are not readily susceptible to equitable modification or tempering. See, e.g., Concept Mining, Inc. v. Helton, 217 W.Va. 298, 617 S.E.2d 845 (2005) (Tax Commissioner's intent was irrelevant and procedural error prohibited consideration of Commissioner's appeal); State ex rel. Clark v. Blue Cross Blue Shield of W. Va., Inc., 195 W.Va. 537, 466 S.E.2d 388 (1995) (strict deadlines in insurance insolvency cases); Solution One Mortg., LLC v. Helton, 216 W.Va. 740, 613 S.E.2d 601 (2005) (tax statutes which require the giving of bond as a prerequisite to the prosecution of an appeal are strictly construed and their requirements are mandatory and jurisdictional). See also Elk Run Coal Company v. Babbitt, 930 F.Supp. 239 (S.D.W.Va.1996) (government could not appeal due to missed deadline); Bradley v. Williams, 195 W.Va. 180, 465 S.E.2d 180 (1995) (taxpayer's failure to abide by the express procedures established for challenging a decision of the West Virginia State Tax Commissioner precludes the taxpayer's claim for refund or credit); Webb v. U.S., 66 F.3d 691 (4th Cir.1995) (no equitable tolling of tax filing deadlines); see generally Note, "The Problem of Equitable Tolling in Tax Refund Claims," 72...