Purethane, Inc. v. Iowa State Bd. of Tax Review

• Decision Date: 21 April 1993
• Docket Number: No. 91-1654,91-1654
• Citation: 498 N.W.2d 706
• Parties: PURETHANE, INC., Appellee, v. IOWA STATE BOARD OF TAX REVIEW, Appellant.
• Court: Iowa Supreme Court

Page 706

498 N.W.2d 706

PURETHANE, INC., Appellee, v. IOWA STATE BOARD OF TAX REVIEW, Appellant.

No. 91-1654.

Supreme Court of Iowa.

April 21, 1993.

Bonnie J. Campbell, Atty. Gen., Harry M. Griger, Sp. Asst. Atty. Gen., and Lucille M. Hardy, Asst. Atty. Gen., for appellant.

Gary A. Robinson and Ronald L. Mountsier of Smith, Schneider, Stiles, Mumford, Schrage, Zurek, Wimer & Hudson, P.C., Des Moines, for appellee.

Considered by McGIVERIN, C.J., and SCHULTZ, CARTER, NEUMAN, and SNELL, JJ.

SNELL, Justice.

Appellant, Iowa State Board of Tax Review, challenges a district court ruling that reinstated an untimely protest that had been dismissed by the board. The court found that appellee Purethane, Inc. had established the failure to timely file the protest was excusable for "good cause," a ground to reinstate the protest under Iowa Department of Revenue and Finance guidelines. Also raised on appeal is Purethane's failure to file its petition for judicial review in district court within the thirty-day appeal period, based on the board's delayed notification of its final decision to Purethane. We find that the board's delayed notification to Purethane of its decision provides a basis for district court jurisdiction, but reverse the district court on the good cause determination.

I. Background facts and proceedings.

On July 21, 1988, the Iowa Department of Revenue and Finance notified Purethane, Inc. of the results of a department field audit. The audit concluded that Purethane owed Iowa sales and use taxes totaling over $30,000, including penalty and interest, for July 1982 through December 1987. This notice of tax due stated that it was not a "Notice of Assessment" for which a protest could be filed within the applicable limitation period. The notice specified that if the amount remained unpaid for twenty days, a formal notice of assessment would follow. The tax was not paid within the twenty-day period, and a "Notice of Assessment for Sales/Use Tax" was sent to Purethane on August 18, 1988.

The notice stated on its face, "This assessment will become irrevocable unless you appeal to the Director of Revenue and Finance within the statutory appeal period (see reverse)." The reverse side of the notice advised Purethane that the appeal period for filing a protest from a sales and use tax assessment was thirty days from the date of the assessment notice, pursuant to Iowa Code section 422.54 (1987).

Purethane intended to file a protest of the assessment. Tom Goedken, controller for Purethane, immediately sent a fax copy of the front page of the notice of assessment to Purethane's attorney but did not send a copy of the reverse side. Without the benefit of the notice's reverse side, Purethane's attorney erroneously determined the appeal period to be sixty days, the appeal period for corporate income tax assessment in Iowa Code section 422.28. The attorney placed the sixty-day limitation on the firm's "tickler" system and set the due date at October 17, 1988, rather than the correct date, September 19.

Purethane's attorney drafted a protest, which he sent to Goedken for review. The attorney also requested a complete copy of the notice of assessment to be attached as an exhibit to the protest. When Goedken sent the protest and copies of the notice back to the attorney, the attorney realized his error. The protest was filed that day, September 26, 1988.

The department dismissed the protest as untimely. Purethane applied for reinstatement of the protest, arguing it failed to timely protest for "good cause" under department regulations. The application was denied by an administrative law judge in the Iowa Department of Inspections and Appeals. These findings were adopted as the department's final decision.

Purethane appealed to the Iowa State Board of Tax Review. Following a hearing, the board determined that Purethane had failed to establish good cause for its failure to timely protest and upheld the dismissal of its protest.

The board's decision was dated November 28, 1990. However, the board did not mail its decision to Purethane until December 11, 1990, by certified mail. Purethane thereafter appealed the board's decision to district court, pursuant to Iowa Code section 17A.19. Purethane filed its petition on January 10, 1991, outside the thirty-day limitation period from the date the board decision was dated, but within thirty days of its December 11 notice. We ordered the parties to address whether the district court had jurisdiction to entertain the petition.

The district court heard the appeal and found that Purethane had established good cause under our case law. The board appeals.

II. District court jurisdiction for judicial review.

The Iowa Administrative Procedure Act, chapter 17A, provides that a party in an administrative contested case who does not file an application for rehearing must file a petition for judicial review of final agency action "within thirty days after the issuance of the agency's final decision." Iowa Code § 17A.19(3). For judicial review of agency action other than a decision in a contested case, the petition "may be filed at any time petitioner is aggrieved or adversely affected by that action." Id. If the board's decision regarding reinstatement of the protest of assessment is "other agency action," there is no express statutory time limitation for filing a petition. If, on the other hand, the board's decision to deny reinstatement is a final decision in a contested case, Purethane would have thirty days from issuance of the decision to petition for judicial review. While we hold that this controversy is a contested case, the board's argument that Purethane failed to petition for judicial review within thirty days of issuance of the board's decision must fail.

A "contested case" is defined as a proceeding in which "the legal rights, duties or privileges of a party are required by Constitution or statute to be determined by an agency after an opportunity for an evidentiary hearing." Iowa Code § 17A.2(2); 701 I.A.C. § 7.1(17A). This evidentiary hearing is " 'an oral proceeding whose purpose is to determine disputed facts of particular applicability known as adjudicative facts--the who, what, when, where, and why of particular individuals in specified circumstances.' " Allegre v. Iowa State Bd. of Regents, 349 N.W.2d 112, 114 (Iowa 1984) (quoting Bonfield, The Definition of Formal Agency Adjudication Under the Iowa Administrative Procedure Act, 63 Iowa L.Rev. 285, 294 (1977)). If a hearing is not required, or the hearing required is not an evidentiary hearing, the adjudication will be categorized as "other agency action." Id.; Polk County v. Iowa State Appeal Bd., 330 N.W.2d 267, 277 (Iowa 1983).

Our legislature has delegated to the director of the department of revenue and finance the power to establish rules necessary to carry out the agency's duties, including rules for practice and procedure before the department. Iowa Code § 421.14. 701 Iowa Administrative Code section 7.11(2) outlines the department's rules for petition for reinstatement of a dismissed protest. This section provides:

The review unit shall review the application [which sets forth the facts upon which the protester seeks reinstatement] and notify the protester whether the application is granted or denied. If the review unit denies the application to reinstate the protest, the protester has thirty days from the date the application for reinstatement was denied in which to request, in writing, a formal hearing before the administrative law judge on the dismissal. When a written request is received, the issue of the contested case proceeding shall be limited to the question of whether the protest shall be dismissed or not. Thereafter, the rules of the department pertaining to contested case proceedings shall apply in all dismissal proceedings.

701 I.A.C. 7.11(2) (emphasis added). According to department of revenue and finance rules, a controversy regarding a dismissal of a protest of assessment is a "contested case" and a formal evidentiary hearing is provided. As a party to a contested case, Purethane is entitled to the procedural due process rights afforded in sections 17A.10-.17 and .19. Polk County, 330 N.W.2d at 276 ("[t]he importance of the distinction [between a contested case and other agency action] lies in the procedural due process which attaches to contested cases."); see also Citizens' Aide/Ombudsman v. Rolfes, 454 N.W.2d 815, 818 (Iowa 1990) (court holds agency investigation was not a contested case which entitled the individual investigated the procedural due process rights associated with formal agency adjudication); Farmers State Bank, Kanawha v. Bernau, 433 N.W.2d 734, 739 (Iowa 1988).

While Purethane is held to the thirty-day appeal limitation found in section 17A.19(3), we make note of the heightened procedural due process to which parties in contested case proceedings are entitled to determine whether Purethane filed its petition within thirty days after "issuance" of the agency's final decision.

The Iowa State Board of Tax Review does not have any agency rules regarding the form or timing of notice to a party of a board's decision in an appeal from the department of revenue and finance. The board has no rules for entering or filing final decisions. In the absence of rules, we scrutinize the board's notice procedure to determine whether it provided Purethane with adequate notice.

Iowa Code section 17A.16 provides minimal guidelines which administrative agencies must follow regarding a final decision or order in a contested case. This section requires that "[p]arties shall be promptly notified of each proposed or final decision or order by the delivery to them of a copy of such decision or order in the manner provided by section 17A.12, subsection 1." That subsection states, "In a contested case, all parties shall be afforded an opportunity for hearing after reasonable notice...