Millward Brown, Inc. v. Commissioner of Revenue Services

• Decision Date: 26 November 2002
• Docket Number: (AC 22258)
• Citation: 73 Conn. App. 757,811 A.2d 717
• Court: Connecticut Court of Appeals
• Parties: MILLWARD BROWN, INC. v. COMMISSIONER OF REVENUE SERVICES.

73 Conn. App. 757

811 A.2d 717

MILLWARD BROWN, INC. v. COMMISSIONER OF REVENUE SERVICES.

(AC 22258)

Appellate Court of Connecticut

Argued September 12, 2002

Officially released November 26, 2002

Mihalakos, Bishop and Peters, Js. Jonathon L. Ensign, assistant attorney general, with whom, on the brief, were Richard Blumenthal, attorney general, and Edward F. Reynolds, Jr., assistant attorney general, for the appellant (defendant).

Ian E. Bjorkman, with whom were Kenneth D. Heath and, on the brief, Peter H. Gruen, for the appellee (plaintiff).

Opinion

PETERS, J.

General Statutes § 12-214¹ requires multistate corporations that do business in Connecticut to pay a Connecticut corporate business tax. To determine the amount of a multistate corporation's tax liability, the commissioner of revenue services apportions the corporation's income to Connecticut in accordance with one of the formulae stated in General Statutes § 12-218. The one factor formula contained in § 12-218 (a) applies to a corporation's income if that income is not "derived from ... the manufacture, sale or use of tangible personal or real property...." By contrast, if a taxpayer's income is so derived, the applicable formula is the three factor formula contained in § 12-218 (b).² In this case, the commissioner of revenue services determined the corporation's tax liability in accordance with subsection (a), while the trial court held that subsection (b) applied. We agree with the court and affirm its judgment in favor of the corporation.

The plaintiff, Millward Brown, Inc. (taxpayer), appealed to the trial court to contest the validity of a deficiency assessment³ resulting from the decision of the defendant commissioner of revenue services (commissioner) to use the one factor formula of § 12-218 (a) to measure its income for the tax periods between 1989 and 1991. The commissioner moved to dismiss the appeal as untimely under General Statutes § 12-237.⁴ After the court's denial of that motion, the commissioner reiterated its reliance on § 12-218 (a). The court concluded that the applicable statute was § 12-218 (b) and rendered judgment accordingly. The commissioner has appealed.

The commissioner renews the arguments that he raised before the trial court. Because each argument raises a question of statutory construction, a question of law, our review is plenary. See, e.g., State v. Russo, 259 Conn. 436, 447, 790 A.2d 1132, cert. denied, 537 U.S. 879, 123 S. Ct. 79, 154 L. Ed. 2d 134 (2002); Davis v. Norwich, 232 Conn. 311, 317, 654 A.2d 1221 (1995); Kindl v. Dept. of Social Services, 69 Conn. App. 563, 566, 795 A.2d 622 (2002). Well established principles describe the scope of our plenary review. "[I]t is axiomatic that the process of statutory interpretation involves a reasoned search for the intention of the legislature.... In seeking to discern that intent, we look to the words of the statute itself, to the legislative history and circumstances surrounding its enactment, to the legislative policy it was designed to implement, and to its relationship to existing legislation and common law principles governing the same general subject matter." (Internal quotation marks omitted.) Connelly v. Commissioner of Correction, 258 Conn. 394, 403, 780 A.2d 903 (2001); Willow Springs Condominium Assn., Inc. v. Seventh BRT Development Corp., 245 Conn. 1, 26, 717 A.2d 77 (1998).

I SUBJECT MATTER JURISDICTION

We consider first the merits of the commissioner's motion to dismiss this case on the ground that the taxpayer waited too long to take an appeal to the Superior Court. The time to file a tax appeal is set by § 12-237. Because the right to take a tax appeal is entirely statutory, if the commissioner's contention is correct, then the trial court lacked subject matter jurisdiction.⁵ Cf., e.g., Tolly v. Dept. of Human Resources, 225 Conn. 13, 27, 621 A.2d 719 (1993).

The parties stipulated to the following facts. At some undetermined time prior to April 28, 1997, the commissioner denied the taxpayer's request for reassessment of its tax liability under § 12-218. The commissioner notified the taxpayer of his decision in a letter sent by first class mail. The mailing occurred at some time prior to April 28, 1997. The taxpayer received the letter on April 28, 1997, and filed its tax appeal on May 28, 1997.

Under § 12-237,⁶ the commissioner was required to serve the taxpayer with notice of the denial of its reassessment claim. The statute did not define the manner in which the commissioner was obligated to make service. Once service had been made, the taxpayer had one month to appeal to the Superior Court.

In the commissioner's view, the taxpayer's appeal was untimely because it was not filed within one month of the date of service on the taxpayer. The commissioner maintains that he served notice on the taxpayer by mailing the notice by first class mail. The taxpayer argues, however, and the trial court held, that the appeal was timely because it had been filed within thirty days of the date of the taxpayer's receipt of notice from the commissioner. The commissioner takes issue with the holding of the trial court for three reasons. He argues that the undefined term "service" in § 12-237 should be construed to permit service to be made by first class mail because (1) the statute should be narrowly construed because it implicates the state's sovereign immunity, (2) the absence of a definition of service authorizes the commissioner to use any manner of service that is authorized by other tax statutes, and (3) the legislature has enacted General Statutes § 12-2f to clarify that service of process under § 12-237 could properly be made by first class mail. We disagree with each of these arguments.

A

Unless expressly waived, sovereign immunity protects the state from liability for private litigation that may interfere with the functioning of state government and may impose fiscal burdens on the state. Pamela B. v. Ment, 244 Conn. 296, 328, 709 A.2d 1089 (1998); Herzig v. Horrigan, 34 Conn. App. 816, 819, 644 A.2d 360 (1994). We agree with the taxpayer that this case does not infringe on the state's sovereign immunity. The commissioner has cited no precedents that invoke sovereign immunity to the construction of a statute that expressly grants a taxpayer the right to appeal from the decision of a governmental agent. We know of none.

B

The commissioner is on stronger footing when he reminds us that failure to comply with the statutory requirements for a tax appeal deprives a trial court of subject matter jurisdiction. This principle has regularly been applied to administrative appeals. Bittle v. Commissioner of Social Services, 249 Conn. 503, 504-505, 734 A.2d 551 (1999); Kindl v. Dept. of Social Services, supra, 69 Conn. App. 564-65. We recognize that tax appeals differ from other administrative appeals because only tax appeals are trials de novo. See, e.g., Jones v. Crystal, 242 Conn. 599, 602, 699 A.2d 961 (1997), overruled in part on other grounds, Lisee v. Commission on Human Rights & Opportunities, 258 Conn. 529, 542 n. 16, 782 A.2d 670 (2001); Texaco, Inc. v. Groppo, 215 Conn. 134, 137, 574 A.2d 1293 (1990). For jurisdictional purposes, however, we can see no distinction between tax appeals and other statutory appeals.

The jurisdictional issue in this case turns on the undefined term "service" in § 12-237. If, as the commissioner argues, § 12-237 permitted him to make service by first class mail, the taxpayer bore the risk of delay in the receipt of notice of an adverse decision by the commissioner. Such a delay, as in this case, usually will shorten the time to file a tax appeal in the Superior Court. To the contrary, if, as the taxpayer argues, § 12-237 contemplated service by a taxpayer's receipt of notice, the commissioner bore the risk of uncertainty about the date when notice had been received, with the consequence that the appeal period might be prolonged beyond the period contemplated by the statute.

Our construction of the term "service" in § 12-237 proceeds without the benefit of statutory guidance or appellate judicial gloss. Both parties rely on statutes that expressly do, or do not, authorize service by first class mail. Those statutes do not shed light on "service" as an undefined term. The judicial record is equally barren. Our research has not found any Connecticut appellate cases that allude to the meaning of the undefined term "service" in § 12-237.

The trial court concluded that § 12-237 should be construed in favor of the taxpayer because that construction was consistent with principles of fairness and due process. Without an express definition of "service," the court was understandably reluctant to ascribe to the legislature the intent to deem a taxpayer to have received notice when it had not actually received the notice. We agree with the court's conclusion.

The court's conclusion conforms to the established rule of statutory construction with respect to statutes that implicate the subject matter jurisdiction of the Superior Court. Whenever such a statute contains language that is ambiguous, or, as in this case, fails to define an essential term, the statute is construed in favor of subject matter jurisdiction. See, e.g., Williams v. Commission on Human Rights & Opportunities, 257 Conn. 258, 266, 777 A.2d 645 (2001); Banks v. Thomas, 241 Conn. 569, 582-83, 698 A.2d 268 (1997); Olympia Mortgage Corp. v. Klein, 61 Conn. App. 305, 307, 763 A.2d 1055 (2001).

Furthermore, the court's conclusion is consistent with the policy position that our Supreme Court has taken with regard to administrative appeals pursuant to General Statutes § 4-183 (c). In these appeals, our Supreme Court has construed requirements of service and notice so as to preserve the appellate rights of those aggrieved by governmental orders. See, e.g., Bittle v. Commissioner of Social Services, supra, 249 Conn. 505; Tolly v. Dept. of Human Resources, s...