Kunza v. Commissioner of Revenue
| Decision Date | 08 January 2021 |
| Docket Number | 9412-R |
| Court | Tax Court of Minnesota |
| Parties | Mikel & Tanya Kunza, Appellants, v. Commissioner of Revenue, Appellee. |
This matter came before The Honorable Jane N. Bowman, Judge of the Minnesota Tax Court, on November 5, 2020.
Appellants Mikel and Tanya Kunza are self-represented.
John M. O'Mahoney, Assistant Minnesota Attorney General represents appellee Commissioner of Revenue.
The Commissioner of Revenue moves to dismiss the above-captioned action for failure to state a claim upon which relief can be granted. The Commissioner argues the appellants' basis for appeal-that the statute of limitations prevented the Commissioner's adjustments to the appellants' individual income tax liability and property tax refund-is without merit. The court, upon all the files, records, and proceedings herein, now makes the following:
ORDER1. The Commissioner's motion to dismiss is granted. The Commissioner's Notice of Determination on Appeal, with a notice date of February 20, 2020, is affirmed.
2. Mikel and Tanya Kunza's tax appeal is dismissed.
IT IS SO ORDERED. THIS IS A FINAL ORDER. LET JUDGMENT BE ENTERED ACCORDINGLY.
After appellants Mikel and Tanya Kunza filed their 2015 Minnesota individual income tax return and property tax refund claim, the Commissioner received a report from the Internal Revenue Service, Form CP 2000, dated September 11, 2017, which adjusted appellants' federal income upward by $15, 299 for the 2015 tax year.[1] Appellants did not report this change to the Commissioner.[2]
The federal adjustment resulted in a corresponding adjustment to appellants' Minnesota income tax and property tax refund claim for 2015.[3] With a September 24, 2019 notice date, the Commissioner issued a Tax Order assessing appellants $3, 394 in tax, penalty, and interest.[4]Appellants administratively appealed the Tax Order; upon review, the Commissioner abated a 10% penalty, but otherwise affirmed the underlying tax and interest in a February 20, 2020 Notice of Determination on Appeal.[5] Appellants timely filed a notice of appeal with this court, alleging the assessment in the Notice of Determination on Appeal was barred by a statute of limitations.[6]
The Commissioner originally scheduled the current motion for August 25, 2020.[7] Upon request, the court postponed the hearing until September 25, 2020, to allow appellants the opportunity to retain an attorney.[8] The day before the rescheduled hearing, Mr. Kunza emailed the Commissioner and the court with several arguments against the motion, and also noted he would do his best to attend the hearing, but it would be difficult with his children home as a result of distance learning.[9] The court again postponed the hearing "to allow Mr. Kunza a final opportunity to file a response with documentation." [10] On October 1 and 5, 2020, the court received written submissions from Mr. Kunza and an "IRS transcript for 2015," respectively.[11]After confirming the Commissioner was not filing a reply, the court scheduled the motion hearing for November 5, 2020.[12] Appellants did not appear.[13]
The Commissioner moves to dismiss the present action for failing to state a claim for which relief can be granted.[14] Specifically, the Commissioner argues appellants' purported defense- that the Commissioner's assessment was untimely-is without merit.[15]
A. Principals Governing the Commissioner's Motion
Orders of the Commissioner are prima facie valid. Minn. Stat. § 271.06, subd. 6 (2020); Minn. Stat. § 270C.33, subd. 6 (2020). "[A] prima facie case simply means one that prevails in the absence of evidence invalidating it." Tousignant v. St. Louis Cty., 615 N.W.2d 53, 59 (Minn. 2000) (quoting Trudeau v. Sina Contracting Co., 241 Minn. 79, 87, 62 N.W.2d 492, 498 (1954)). Because the Commissioner's order is presumptively valid, appellants bear "the burden of going forward with the evidence to rebut or meet the presumption." Conga Corp. v. Comm'r of Revenue, 868 N.W.2d 41, 53 (Minn. 2015) (citation omitted).
A party may move to dismiss an action for failure to state a claim upon which relief can be granted. See Minn. R. Civ. P. 12.02(e). "If, on a motion asserting the defense that the pleading fails to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment …." Minn. R. Civ. P. 12.02. "The court shall grant summary judgment if the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law." Minn. R. Civ. P. 56.01. "When a motion for summary judgment is made and supported, the nonmoving party must present specific facts showing that there is a genuine issue for trial." DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997) (internal quotation marks omitted). "A genuine issue of material fact exists when there is sufficient evidence regarding an essential element … to permit reasonable persons to draw different conclusions." St. Paul Park Ref. Co. v. Domeier, 950 N.W.2d 547, 549 (Minn. 2020) (citation and internal quotation marks omitted).
Chapter 289A (2020) concerns the administration and compliance with Minnesota's taxing statutes. See Minn. Stat. § 289A.01 (). Section 289A.38 specifies the time limitations within which the Commissioner must make assessments. Generally, "the amount of taxes assessable must be assessed within 3-1/2 years after the date the return is filed." Id., subd. 1. Relevant to this case, the statute extends the statute of limitations in two instances. First, the limitation is extended by 6-1/2 years after the due date of the return or the date the return was filed, whichever is later, when a taxpayer "omits from gross income an amount properly includable in it that is in excess of 25 percent of the amount of gross income stated in the return[.]" Id., subd. 6(1). Second, if a taxpayer fails to file amended income tax and property tax refund returns after the Internal Revenue Service changed or corrected a federal return, "the commissioner may recompute the tax … within six years after the [amended returns] should have been filed …." Id., subds. 7-8.
B. Analysis
The Commissioner was within the statutory time limitation to adjust appellants' 2015 Minnesota income and to issue the contested assessment. After appellants timely filed their 2015 Minnesota individual income tax return and property tax refund claim, showing adjusted gross income of $30, 915, [16] the Internal Revenue Service notified the Minnesota Department of Revenue on September 11, 2017, that appellants' federal income had been adjusted upward by $15, 299, [17] which was 49% of what appellants originally reported.[18] Appellants did not report this change to the Commissioner.[19] First, the Commissioner issued a Tax Order dated September 24, 2019, changing appellants' Minnesota individual income tax liability and adjusting their property tax refund claim.[20] See Minn. Stat. § 270C.33, subd. 4(a)(1), (3) (2020) (). The Commissioner then issued an updated Notice of Determination on Appeal dated February 20, 2020, substantially affirming the prior Tax Order.[21] See Minn. Stat. § 270C.35 (2020) ().
Here, because appellants both underreported their income by more than 25%, see Minn. Stat. § 289A.38, subd. 6(1), and failed to file amended returns with the Commissioner, see id., subd. 8, [22] the Commissioner is allowed 6-1/2 years from the 2015 filing deadline to assess appellants using the updated federal information. The statute of limitations for the Commissioner to assess appellants for tax year 2015 will run on October 18, 2022.[23] Issuing the Tax Order, and then removing the penalty with the February 20, 2020 Notice of Determination on Appeal, but otherwise affirming the outstanding tax and interest, was within the Commissioner's authority.[24]
Although appellants did not appear for the Commissioner's motion, Mr. Kunza reiterated his statute of limitations argument in pre-hearing emails.[25] Mr. Kunza argues his federal return was not changed until January 2020, so any amended filing would not be due until June 2020.[26]In support, Mr. Kunza attached an Internal Revenue Service Account Transcript for "tax period" December 31, 2015.27[] This two-page document lists several transactions on appellants' federal tax account, such as "Credit to your account," or "Refund issued." 28[] According to the transcript, the only action that occurred in January 2020 was "Removed bankruptcy or other legal action." 29[]The transcript does not support Mr. Kunza's assertion that appellants' federal return was changed in January 2020. In any event, even if the Internal Revenue Service changed or corrected appellants' federal return in January 2020 (or February 2020, as potentially indicated by the transcript), then a new statute of limitations would apply. See Minn. Stat. § 289A.38, subds. 7-9.
The Commissioner demonstrated the February 20, 2020 Notice of Determination on Appeal was within the allowable statutory timeframe. Appellants failed to point to any material fact to overcome the prima facie validity of the Notice of Determination on Appeal. S...
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