N.Y. Frozen Foods, Inc. v. Bedford Heights Income Tax Bd. of Review
| Decision Date | 03 November 2016 |
| Docket Number | No. 2015–0575.,2015–0575. |
| Citation | 150 Ohio St.3d 386,82 N.E.3d 1105,2016 Ohio 7582 |
| Parties | NEW YORK FROZEN FOODS, INC., et al., Appellants and Cross–Appellees, v. BEDFORD HEIGHTS INCOME TAX BOARD OF REVIEW et al., Appellees and Cross–Appellants. |
| Court | Ohio Supreme Court |
150 Ohio St.3d 386
82 N.E.3d 1105
2016 Ohio 7582
NEW YORK FROZEN FOODS, INC., et al., Appellants and Cross–Appellees,
v.
BEDFORD HEIGHTS INCOME TAX BOARD OF REVIEW et al., Appellees and Cross–Appellants.
No. 2015–0575.
Supreme Court of Ohio.
Submitted Aug. 17, 2016.
Decided Nov. 3, 2016.
Zaino, Hall & Farrin, L.L.C., Stephen K. Hall, and Richard C. Farrin, for appellants and cross-appellees.
Calfee, Halter & Griswold, L.L.P., Anthony F. Stringer, Matthew A. Chiricosta, and Thomas R. O'Donnell, Cleveland, for appellees and cross-appellants.
Amy L. Arrighi, in support of appellees and cross-appellants for amicus curiae, Regional Income Tax Agency.
LANZINGER, J.
{¶ 1} This appeal involves the attempt to obtain a tax refund by a municipal income taxpayer, New York Frozen Foods, Inc. ("Frozen Foods"), which originally
filed its Bedford Heights income-tax returns on a separate-entity basis for tax years 2005, 2006, and 2007. In March 2010, Frozen Foods, together with its affiliates, filed consolidated amended returns for those years and claimed a refund of taxes it had previously paid based on its separate returns. The refund amount claimed was $698,294. Regional Income Tax Agency ("RITA") denied the refund in its capacity as the city's tax administrator. This result was sustained by the Bedford Heights Income Tax Board of Review and affirmed by the Board of Tax Appeals ("BTA").
{¶ 2} Now, on appeal, Frozen Foods presents several reasons why the BTA erred in affirming the denial of its refund claim. Bedford Heights cross-appealed and maintains that the BTA erred by failing to deny the refund on an alternative ground.
{¶ 3} We hold that the BTA erred by failing to find that the change from filing a separate return to filing a consolidated return was a "change in method of accounting" prohibited by the city ordinance in pursuing a refund claim. We therefore affirm the BTA's denial of the refund claim on the alternate ground that the change constituted a change in the method of accounting prohibited by the city ordinance.
Factual Background
{¶ 4} Before us is a record certified by the Bedford Heights Income Tax Board of Review plus a set of stipulations advanced at the BTA covering the following basic facts:
• Frozen Foods timely filed separate-entity municipal income-tax returns for tax years 2005, 2006, and 2007.
• Frozen Foods filed amended returns on a consolidated basis on March 9, 2010.
• Frozen Foods filed federal income-tax returns with its affiliates on a consolidated basis for tax years 2005, 2006, and 2007.
{¶ 5} RITA, Bedford Heights' tax administrator, denied the amended returns and refund claims, and Frozen Foods appealed to the review board, which issued a decision on November 9, 2011. The decision cites Bedford Heights Codified Ordinances 173.15(a) and 173.32, as well as section 5:06(A) of RITA's rules and regulations,1 and states that these provisions, taken together, are "identical in effect." None of them, according to the board of review, "permits a taxpayer to change the method of accounting or the apportionment of net profits nor the method of filing after the due date for filing the original return." (Emphasis deleted.) The board affirmed the denial of refunds, and the taxpayer appealed to the BTA.
{¶ 6} At the BTA, the parties filed stipulations and briefs. The BTA issued its decision on March 9, 2015, in response to which Frozen Foods filed a motion for reconsideration. The BTA issued a second decision on March 20, denying the motion for reconsideration, vacating the March 9 decision, and substituting the March 20 decision. In doing so, the March 20 decision corrected a typographical error in the original opinion.2
{¶ 7} On the merits, the BTA agreed with Frozen Foods' assertion that filing an amended consolidated return did not involve a prohibited change in the method of accounting or apportionment. BTA No. 2012–55, 2015 Ohio Tax LEXIS 1659, 5 (Mar. 20, 2015). The BTA agreed that the amended returns were
improper and affirmed the board's denial of the refund claims. Next, the BTA looked at a rule promulgated by RITA that addressed the filing of refund claims. The language of the rule strongly paralleled that of the city ordinance, but in 2009, RITA amended the rule to explicitly prohibit a change to consolidated filing on an amended return. The BTA held that the 2009 amendment to the RITA rule did apply, observing that it had no authority to address Frozen Foods' constitutional objections to applying the amended rule. Accordingly, the BTA affirmed the review board's denial of the refund claim.
Standard of Review
{¶ 8} In reviewing a decision of the BTA, we do not sit as "a super BTA or a trier of fact de novo." EOP–BP Tower, L.L.C. v. Cuyahoga Cty. Bd. of Revision, 106 Ohio St.3d 1, 2005-Ohio-3096, 829 N.E.2d 686, ¶ 17, citing Youngstown Sheet & Tube Co. v. Mahoning Cty. Bd. of Revision, 66 Ohio St.2d 398, 400, 422 N.E.2d 846 (1981). On the other hand, we have held that issues of statutory construction constitute legal issues that we decide de novo on appeal. Akron Centre Plaza, L.L.C. v. Summit Cty. Bd. of Revision, 128 Ohio St.3d 145, 2010-Ohio-5035, 942 N.E.2d 1054, ¶ 10. Because this appeal calls for us to determine the proper construction of statutes and ordinances, we review the BTA's decision without according it deference.
Analysis
An entity's amended return changing from separate filing to consolidated filing constitutes a change in a method of accounting prohibited by the city ordinance
{¶ 9} Usually the issues presented by an appeal would be considered before those presented by a cross-appeal. We reverse that order here because there is no need to consider issues raised by Frozen Foods' appeal if the Bedford Heights ordinances precluded a claim for a refund based only upon filing a consolidated, rather than a separate, return.
{¶ 10} The BTA found that Frozen Foods' change from a separate return to a consolidated return did not constitute a change in the method of accounting, which is barred by the amended-returns provision of Bedford Heights Codified Ordinance 173.15(a). The ordinance allowing consolidated returns reads as follows:
Filing of consolidated returns may be permitted or required in accordance with rules and regulations prescribed by the Tax Administrator. Any affiliated group which files a consolidated return for federal income tax purposes pursuant to section 1501 of the Internal Revenue Code may file a consolidated return with the City of Bedford Heights. However,
once the affiliated group has elected to file a consolidated return or a separate return with the City, the affiliated group may not change their method of filing in any subsequent tax year without written approval from the Administrator.
(Italics added to show 2004 amendment.) Bedford Heights Codified Ordinances 173.14.
{¶ 11} The ordinance providing for amended returns and refunds reads as follows:
Where necessary an amended return must be filed in order to report additional income and pay additional tax due, or claim a refund of tax overpaid, subject to the requirements, limitations, or both, contained in Sections 173.30 through 173.35. Such amended return shall be on a form obtainable on request from the Tax Administrator. A taxpayer may not change the method of accounting or apportionment of net profits after the due date for filing the original return.
Bedford Heights Codified Ordinances 173.15(a).
{¶ 12} The RITA rule reads as follows, with language that was added in 2009 italicized:
Where necessary, an amended return must be filed in order to report additional income and pay additional tax due or claim a refund of tax overpaid subject to the requirements or limitations contained in the Ordinance. Such return shall be clearly marked "Amended." A taxpayer may not change the method of accounting or apportionment of net profits, nor the method of filing (i.e., single or consolidated), after the due date for filing the original return. Amended returns cannot be filed after three (3) years from the original filing date.
{¶ 13} In deciding whether an entity's change from filing a separate return to filing a consolidated return was prohibited, the BTA noted that Frozen Foods argued that "a change in the ‘method of accounting’ encompasses only cash versus accrual accounting." 2015 Ohio Tax LEXIS 1659, * 5. The BTA reasoned that if changing a separate return to a consolidated return was a prohibited change in the method of accounting, then RITA would not have had to amend its rule in 2009 to specifically...
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