Piney Ridge Lodge v. C.I.R., A05-2387.

• Decision Date: 27 July 2006
• Docket Number: No. A05-2387.,A05-2387.
• Parties: PINEY RIDGE LODGE, INC., Relator, v. COMMISSIONER OF REVENUE, Respondent.
• Court: Minnesota Supreme Court

Page 861

718 N.W.2d 861

PINEY RIDGE LODGE, INC., Relator, v. COMMISSIONER OF REVENUE, Respondent.

No. A05-2387.

Supreme Court of Minnesota.

July 27, 2006.

Michael C. Mahoney, Mahoney & Foster, Ltd., Wayzata, MN, for Appellant.

Mike Hatch, Attorney General, James W. Neher, Assistant Attorney General, St. Paul, MN, for Respondent.

Considered and decided by the court en banc without oral argument.

OPINION

GILDEA, Justice.

Piney Ridge Lodge challenges, by writ of certiorari, the tax court's dismissal of its appeal. Piney Ridge argues that its February 2005 appeal was timely because it had conversations with an audit supervisor in the Department of Revenue that preserved its right to formally appeal to the tax court. Because there is no evidence in the record indicating that Piney Ridge complied with the statutory procedures for formal or informal appeal, we hold that the tax court properly dismissed an appeal filed well after the 60-day appeal period.

Piney Ridge Lodge, a resort near Pine River, Minnesota, did not file corporate franchise tax returns for 1998, 1999, 2000, and 2001. Pursuant to statutory authority, the Commissioner of the Department of Revenue issued a Notice of Change in Tax to Piney Ridge on September 2, 2003 (Notice), assessing the past-due taxes. With penalties and accrued interest, the commissioner's assessment totaled $211,057. The Notice stated that it was "an official order of the Commissioner of Revenue determining [Piney Ridge's] corporate franchise tax liability for the tax periods" 1998, 1999, 2000, and 2001.

The Notice included information about how Piney Ridge could appeal the commissioner's decision. The Notice provided: "If you disagree with this notice, you have 60 days from the notice date to appeal informally to the Department of Revenue or formally to the Minnesota Tax Court." Regarding the option of an administrative appeal to the department, the Notice stated:

If you decide to appeal informally to the Department of Revenue, you must prepare a written appeal. Please include a copy of this notice. The appeal should include: your name, address and taxpayer ID number, taxable periods and the amount in question for each period; the items on the notice that you disagree with; a summary of the facts or law you are basing your appeal on; the date of your appeal and the signature of the person who prepared the appeal. Include any information or documentation to support your appeal, and mail it to the office and address listed below.

* * * *

If you appeal to the Department and your appeal is denied in whole or in part, you will have an additional 60 days to appeal that denial to the tax court.

Sometime after its receipt of the Notice (the record does not disclose precisely when), Piney Ridge entered into conversations with an audit supervisor in the department. On or about December 9, 2004, the department sent Piney Ridge a document titled "Final Notice and Demand for Payment." This document explained that the department was prepared to file a tax lien against Piney Ridge and to begin a collection action. It also encouraged Piney Ridge to explore an agreement regarding "payment terms" with the department.

On February 11, 2005, Piney Ridge filed a notice of appeal in the tax court. The commissioner moved to dismiss, arguing that because the appeal was filed after the end of the 60-day period for appeal, the tax court lacked jurisdiction to hear Piney Ridge's appeal. The tax court agreed and dismissed the appeal.¹

The parties do not dispute the facts that are the basis for the tax court's order dismissing Piney Ridge's appeal. Accordingly, our sole task is to determine whether the tax court correctly applied Minnesota law, and our review is de novo. See Minn.Stat. § 271.10, subd. 1 (2004); Gonzales v. Comm'r of Revenue, 706 N.W.2d 909, 910-11 (Minn.2005); Benigni v. County of St. Louis, 585 N.W.2d 51, 54 (Minn. 1998).

The tax system is entirely a statutory creation. State v. Bies, 258 Minn. 139, 149, 103 N.W.2d 228, 236 (1960). We have said that "[t]he legislature has * * * the power to fix the conditions under which [a] tax should be assessed and enforced, and therefore compliance with those conditions is essential if the remedy is not to be lost and the rights are not to cease to exist." Id. We seek to avoid a forfeiture of the right to appeal when construing a statute, but we have held that statutory time limitations on administrative appeals similar to this one are "strictly construed," and we have recognized that such time limits are "jurisdictional." Kearns v. Julette Originals Dress Co., 267 Minn. 278, 282, 126 N.W.2d 266, 269 (1964). We have upheld a tax court dismissal of a challenge to an assessment brought outside statutory time limits. See Benigni, 585 N.W.2d at 54 ("[T]he tax court correctly dismissed Benigni's claim contesting his 1995 assessments for lack of timeliness.").

Minnesota law gives taxpayers two avenues for appealing the commissioner's assessments.² Taxpayers may file an appeal with the tax court "within 60 days after notice of the making and filing of an order of the commissioner of revenue." Minn. Stat. § 271.06, subd. 2. Taxpayers also have the option of filing an administrative appeal with the department within 60 days. Minn.Stat. § 270C.35, subd. 4 (Supp. 2005).³ An administrative appeal results in a new order from the commissioner "determin[ing] the validity, if any, in whole or part of the appeal." Minn.Stat. § 270C.35, subds. 6, 8 (2004) (Supp.2005). Taxpayers have 60 days after the department issues an order resolving the administrative appeal to file an appeal with the tax court. Minn.Stat. § 270C.35, subd. 8 (noting that order issued in administrative appeal "is appealable to the Minnesota Tax Court under section 271.06").⁴

Piney Ridge filed its appeal with the tax court in February 2005 and it purported to appeal from the document it received from the department in December 2004. Appeals to the tax court, however, may be taken only "from any official order of the commissioner of revenue." Minn.Stat. § 271.06, subd. 1 (Supp.2005). The December 2004 document was not an order from the department that is subject to appeal. By its terms, it is merely a document informing Piney Ridge that the department is about to commence a collection action to recover the assessment the commissioner previously determined to be due.

The Notice, by contrast, tracks the language of the statute and specifically provides that it is an "official order of the Commissioner of Revenue." Moreover, the subject of the appeal, as set forth in Piney Ridge's "[e]xplanation of stated reasons for appeal," was the commissioner's assessment of delinquent corporate taxes for the years 1998, 1999, 2000 and 2001. This assessment is reflected in the Notice, which is dated September 2, 2003. Accordingly, under Minnesota law, Piney Ridge had 60 days after the Notice to either appeal the assessment to the tax court or file an administrative appeal with the department.

Piney Ridge makes no claim that it filed its appeal with the tax court within 60 days of its receipt of the Notice. Rather, Piney Ridge seems to argue that its discussions with an audit supervisor in the department and its submission of additional information to the department⁵ should be deemed to have tolled the time period for perfecting an appeal to the tax court. But the tax law does not provide that discussions or negotiations with the department suspend the appeal period. We note that the legislature has specifically provided for tolling during dispute resolution processes in other statutes. See, e.g., Minn.Stat. § 363A.28, subd. 3 (2004) ("The running of the one-year limitation period is suspended during the time a potential charging party and respondent are voluntarily engaged in a dispute resolution process * * *."). There is no such tolling provision for tax disputes.

Piney Ridge's conversations with the audit supervisor could be relevant to the question at hand if those conversations could be construed as an administrative appeal. But there is no merit...