Magma Copper Co. v. Arizona State Tax Commission, 4950

• Decision Date: 15 March 1948
• Docket Number: 4950
• Citation: 67 Ariz. 77,191 P.2d 169
• Parties: MAGMA COPPER CO. v. ARIZONA STATE TAX COMMISSION
• Court: Arizona Supreme Court

191 P.2d 169

67 Ariz. 77

MAGMA COPPER CO. v. ARIZONA STATE TAX COMMISSION

No. 4950

Supreme Court of Arizona

March 15, 1948

Appeal from Superior Court, Pinal County; Benjamin Blake, Judge.

Proceeding by the Magma Copper Company against the Arizona State Tax Commission, by way of appeal to the superior court from an order entered by the Commission in an income tax matter. From an order dismissing attempted appeal to the superior court for lack of jurisdiction, the Magma Copper Company appeals.

Affirmed.

Edward W. Rice, of Globe, and Roy C. Bonebrake, of New York City for appellant.

John L Sullivan, Atty. Gen., and Burr Sutter, Asst. Atty. Gen., for appellee.

Phelps Superior Judge. La Prade and Udall, JJ., concur. Stanford, C. J., being ill, the Honorable M. T. Phelps, Judge of the Superior Court of Maricopa County, was called to sit in his stead.

OPINION

Phelps, Superior Judge.

This is an appeal relative to an income tax matter by the Magma Copper Company, a corporation (appellant), from an order of the trial court dismissing for lack of jurisdiction its attempted appeal to the Superior Court from an order of the Arizona State Tax Commission (appellee).

The material facts in this case are, in substance, as follows: On September 15, 1941, the Arizona State Tax Commission, (hereinafter referred to as the Commission) pursuant to provisions of law relating to the collection of income tax, by its Order No. 178 -- 1941 -- 9, levied additional assessments of income taxes on appellant for the years 1939 and 1940.

Appellant promptly protested such assessments and requested a hearing before the Commission, setting forth the grounds on which said request was made. A hearing was held before the Commission on April 22, 1942. Thereafter, on December 29, 1942, the Commission, by its Order No. 216 denied said protest and affirmed said assessment.

No appeal was taken from said order but on January 7, 1943, appellant requested a rehearing on the order of the Commission affirming said assessments in order that further evidence and proposals for an equitable settlement thereof might be presented.

On January 13, 1943, the Commission entered its Order No. 2 -- 1943 -- 1 rescinding Order No. 216 dated December 29, 1942, and stated in said order that said recision was made in order that appellant might present additional evidence for the consideration of the Commission and set January 16, 1943, as the date for rehearing.

The matter came on for hearing as scheduled and evidence presented at the original hearing was discussed but no new evidence of any nature was presented.

Decision on the matter was still pending in March, 1945, when appellant filed with the Commission objections to additional income assessments for the years 1939 and 1940 and request for further hearing supported by the affidavit of one J. R. Mays, Chief Clerk and Auditor of the appellant company.

On October 11, 1945, the Commission by its Order No. 49 -- 1945 -- 10 denied further hearing and confirmed its original assessments with some minor reductions.

Within the statutory period, appellant appealed to the Superior Court of Pinal County from said order.

The parties entered into a stipulation of facts and briefs were filed by both appellant and the Commission on the merits of the case. In addition thereto the Commission filed a motion to dismiss said appeal on the ground that the court lacked jurisdiction of the subject matter.

It was the contention of the Attorney General, representing the Commission, both before the trial court and here, that the latter had exhausted its jurisdiction in the matter when it entered its Order No. 216 on December 29, 1942, and that all action taken by it thereafter was null and void, and that the order from which the appellant was attempting to appeal was null and void and therefore the Superior Court was without jurisdiction to entertain said appeal.

On October 2, 1946, the Superior Court granted said motion to dismiss, leaving undecided the merits of the case. This appeal followed.

Appellant contends here, as it did in the Superior Court, that the Commission has broad and continuing jurisdiction under the law, to estimate the correct tax to be assessed and collected under the Arizona income tax law; that its jurisdiction is not exhausted by holding one hearing or making one order on a tax assessment but includes the power to reconsider and change its own assessments and orders with or without rehearing and that the rule laid down by the courts (that certain bodies with limited judicial functions have no jurisdiction to reconsider, set aside or modify their judgments without separate statutory authority) has no application in the instant case.

The sole question presented to this court is: Did the Commission have jurisdiction to enter its order on October 11, 1945? If it did, the trial court erred in dismissing the proceedings before it by its order and judgment of October 2, 1946. If the Commission exhausted its jurisdiction in said cause by entering its Order No. 216 of December 29, 1942, the action of the trial court must be sustained.

If the Commission in entering said order was performing merely a ministerial act, such action was not necessarily final. If, on the other hand, in entering said order it was exercising a judicial function, the authorities uniformly hold that such action exhausts its jurisdiction unless the statutes by separate grant authorize further action. (See authorities hereinafter cited.)

The answer to the question presented must be found in the language of the statute defining the powers, duties and limitations of the Commission relating to income taxes.

The Income Tax Act of 1933, Art. 15, Chap. 73, A.C.A.1939, specifically defines the powers and duties of the Commission in the administration and enforcement of said law and is the measure of such powers and duties. This being true, it becomes necessary to examine said act and glean from the provisions thereof what the powers and duties of the Commission are and whether its functions are judicial or ministerial or whether it performs both ministerial and judicial functions.

Section 73-1505, A.C.A.1939, provides in part as follows:

"(c) For the purpose of ascertaining the correctness of any report of income, or making an estimate of the taxable income of any taxpayer, the commission shall have power to examine or cause to be examined by any agent or representative, any books, papers, records, or memoranda, bearing upon the matters required to be included in the report, including a copy of the taxpayer's current income tax return to the United States government, and all amendments to said return, whether arrived at by compromise or adjudication, after hearing and final determination by the federal government, and to require the attendance of the taxpayer or of any other person having knowledge in the premises, administer oaths, take testimony and require proof material for its information, by the same means and in the same manner as allowed to courts of record. If any person summoned to appear to testify or to produce books, papers, records, or other data, shall refuse to do so, the superior court for the county in which such person resides shall have jurisdiction by appropriate process to compel such attendance, testimony, or production of books, papers, records, or other data.

* * *

"(f) The commission shall have power to appoint and employ such agents, specialists and clerks, within the limits of appropriations and compensation prescribed by law, as it may deem necessary to fully effectuate the purposes of this act."

Sections 73-1506 to 73-1533, A.C.A.1939, inclusive, set forth in detail methods of computing the tax to be paid, classifying taxpayers; fixing rates to be used in each classification in computing said tax; providing for deductions and exemptions; fixing the time for filing income tax reports with the Commission; providing penalties for failure to file return and apportioning the income derived from within and without the state, etc., etc.

Section 73-1534 to Section 73-1539, A.C.A.1939 inclusive, provide as follows:

"73-1534. Office audit -- Correction. -- (a) As soon as practicable the commission shall audit each report of income filed, and compute the tax, and the amount so computed shall be the tax. If it shall be found that any person has been over or underassessed, or that no assessment has been made when one should have been, the proper correction or assessment shall be made. If the tax found due shall be greater than the amount theretofore paid, the deficiency shall be paid to the commission within twenty [20] days after notice to and demand upon the taxpayer.

"(b) If the report was made in good faith and the deficiency of the tax is not due to any fault of the taxpayer, there shall be no penalty or additional tax added because of such deficiency, but interest shall be added to the amount of the same from the date the tax was originally due until paid, at the rate of six [6] per cent per annum.

"(c) If the tax found due shall be less than the amount theretofore paid, the commission shall certify such overpayment to the auditor, for refund, and the auditor shall draw his warrant for the amount, on the 'income tax suspense fund,' in the favor of the taxpayer.

"(d) Any correction or assessment made as a result of such office audit shall be presumed to be the result of an audit of the report of income only, and shall not be deemed a verification of any item in the report nor preclude the commission from making field audits of the books and records of the taxpayer and from making further correction or assessment.

"73-1535. Field investigation. -- Whenever it is deemed advisable to verify...