State Tax Com'n v. Iverson

• Court: Utah Supreme Court
• Writing for the Court: HALL; HOWE; STEWART
• Citation: State Tax Com'n v. Iverson, 782 P.2d 519 (Utah 1989)
• Decision Date: 02 November 1989
• Docket Number: 860329,Nos. 20965,s. 20965
• Parties: STATE TAX COMMISSION of Utah, Plaintiff and Appellee, v. Clay K. IVERSON, Defendant and Appellant.

Page 519

782 P.2d 519

STATE TAX COMMISSION of Utah, Plaintiff and Appellee, v. Clay K. IVERSON, Defendant and Appellant.

Nos. 20965, 860329.

Supreme Court of Utah.

Nov. 2, 1989.

David L. Wilkinson, Stephen G. Schwendiman, and Maxwell A. Miller, Salt Lake City, for plaintiff and appellee.

Clay K. Iverson, Garrison, pro se.

HALL, Chief Justice:

Clay K. Iverson appeals two decisions by the Tax Court Division of the Third District Court issuing a writ of mandate compelling him to file income tax returns and judging him to be in contempt of court for failing to comply with a subpoena duces tecum issued by the Utah State Tax Commission ("the commission"). On appeal, Iverson challenges the tax court's jurisdiction, the sufficiency of the evidence to justify issuance of the writ of mandate, the commission's jurisdiction, the effect of the commission's acts on his constitutional rights, and the validity of the administrative subpoena. The cases were consolidated for purposes of appeal.

Case No. 20965

In May 1985, Iverson was served with a verified petition for writ of mandate pursuant to Utah Code Ann. § 59-31-7 (Cum.Supp.1986) (amended 1987). ¹ The petition in part alleged that Iverson was a resident of the state of Utah "gainfully employed and/or earn[ing] commission income" during the years 1979-82, in amounts sufficient to require Iverson to file federal, and thus state, income tax returns for those taxable years. The petition also alleged that Iverson failed to file Utah individual income tax returns for that period.

In response, Iverson denied the commission's allegations and challenged the jurisdiction of the tax division of the district court. These and other contentions were raised during a hearing on the commission's petition wherein the commission unsuccessfully attempted to introduce into evidence what was purported to be a federal internal revenue audit of Iverson's financial affairs. The hearing was continued at the commission's request for additional discovery time.

In a subsequent hearing, the commission called Iverson as a witness in order to confirm the allegations of its petition. After several general questions were asked and answered, the court intervened and declared that it would issue the writ of mandate. The commission then requested that the court take judicial notice of the fact that Iverson's services, exchanged for property or substance, were comparable to at least the minimum wage.

While Iverson raises several points on appeal, his claim regarding the sufficiency of the evidence is dispositive here. Utah Code Ann. § 59-31-7 (Cum.Supp.1986) (amended 1987) states:

(1) If a taxpayer fails to file any return required pursuant to Title 59 within 60 days of the time prescribed, the state tax commission may petition for a writ of mandate to compel the taxpayer to file the return. The petition may be filed, in the discretion of the tax commission, in the tax court of the third judicial district or in the district court for the county in which the taxpayer resides or has his principal place of business. In the case of a nonresident taxpayer the petition shall be filed in the third district court.

The court shall grant a hearing on the petition for a writ of mandate within 20 days after the filing of the petition or as soon thereafter as the court may determine, having regard for the rights of the parties and the necessity of a speedy determination of the petition.

Upon a finding of failure to file a return within 60 days of the time prescribed pursuant to Title 59, the court shall issue a writ of mandate requiring the taxpayer to file a return. The order of the court shall include an award of attorneys' fees, court costs, witness fees and all other costs in favor of the prevailing party.

(2) Nothing in this section shall limit the remedies otherwise available to the state tax commission under Title 59 or other laws of this state.

Utah Code Ann. § 59-14A-48 (1974) (amended 1987) provides:

Persons required to file returns.--An income tax return with respect to the tax imposed by this act shall be filed by:

(a) Every resident individual, estate or trust required to file a federal income tax return for the taxable year;

(b) Every nonresident individual, estate or trust having federal gross income derived from sources within the state for the taxable year and required to file a federal income tax return for such taxable year.

The Internal Revenue Code outlines the requirements and amounts for individuals obligated to file federal income tax returns. The commission contends that the writ of mandate was appropriately entered inasmuch as Iverson's pleadings and his conduct at the final hearing support the conclusion that under the above statute and tax provisions, he received income in amounts "well over the minimum level of income at which everyone must file a tax return."

In his response to the commission's petition, Iverson stated in part:

I do not work by way of privilege but as a matter of right and lay claim to this right as one of my God given Inalienable Rights guaranteed by the United States Constitution and protected by the Utah Constitution. In this capacity, I do not effect or affect a public interest in that I do not engage in public trade, commerce, business or industry but work as a matter of private contract....

... I am a FREEMAN, and work at the COMMON LAW, I exchange property for property and do not engage in PUBLIC CREDIT. I do not use Banks to conduct my private business for I deal on a cash basis. My labor is my property and is mine and mine only for the enjoyment thereof and I do not voluntarily share this enjoyment with the State of Utah through contract agreement. I am a FREEMAN, A MERCHANT AT LAW, dealing on a cash basis and I do not owe a reporting to the State of Utah for some contract agreement placing me under privilege, incorporation or franchise.

Apart from those general comments, Iverson specifically denied that he received "income" for the period in question and stated that to the best of his knowledge, he had no filing requirement as to federal taxes. Even in the light most favorable to the commission, these statements in no way give rise to the conclusion that for the period in question, Iverson received income actually amounting to the specific sum required by law before an individual must file a federal and thus, under the applicable statutes, a state income tax return.

After the commission was unable to introduce into evidence what was purported to be a federal internal revenue audit of Iverson's financial affairs, the commission questioned him in order to substantiate the allegations in its petition:

Q [by the commission's counsel] Mr. Iverson, will you please give us your full name and address?

A Clay Iverson, 4361 West 11000 North, Highland, Utah.

Q How long have you resided at that address?

A Six years.

Q You have been a citizen and resident of the State of Utah since 1979?

A I have been domiciled in the State of Utah since 1979.

Q Have you filed any tax return with the State Tax Commission since 1979?

A No.

Q What is your occupation?

A Creator.

Q What is a creator?

A Many things.

Q Give me some specifics. What do you create?

A I don't see that has any relevance to--

THE COURT: Answer his question.

THE WITNESS: Create, I guess.

Q [by the commission's counsel] What?

A Objects.

Q Like what?

A (No response.)

Q Mr. Iverson, do you remember an informal conference that you and I had on June 20th at the Salt Lake County Library?

A I remember a conference.

Q Do you remember telling me that some of the things that you created were welding, raising goats, performing odd jobs and maintenance services for other people? Do you recall that?

A I have created those things, but not for other people always.

Q Who do you do them for?

A For me. For God.

Q Do you receive substance in return for those services?

A No.

Q Do you recall saying to me at that time that you received substance in return for those services?

A I don't recall.

Q You don't recall that? Okay, let's go through--let's get this straight. Do you do any welding?

A I know how to weld.

Q Did you do any masonry--and I'm talking about the period of 1979 to 1982. Have you done any welding for anyone?

A (No response.)

Q You don't recall?

THE COURT: Mr. Iverson, I'm going to compel you to file a meaningful tax return within 15 days, giving the reasonable value in U.S. dollars of goods and services you received in the form of materials, services, during that period of time. And if it's not filed within 15 days, I'll deem your conduct to be in contempt of the order of the Court, and I'll sentence you to 30 days in the Salt Lake County jail. Do you understand that?

[The commission's counsel]: Thank you, your Honor.

MR. IVERSON: I think I understand you, your Honor.

THE COURT: All right. It's apparent that you have got store bought clothes and you're getting by reasonably well, and we'll simply require the return.

This examination was likewise insufficient to support a determination that Iverson received income actually amounting to the minimum sum triggering the tax return requirement for each of the years in question. Additionally, although the commission claims that his conduct at the hearing "obstructed justice" and substantiated the court's decision, it ignores the fact that much of the limited exchange the court considered in making its decision (and that the commission now relies upon to impute Iverson's conduct) centered on unsworn statements regarding past conversations between Iverson and the commission's counsel--the substance of which Iverson testified he could not recall.

Further, the commission offers absolutely no evidence, and no relevant authority in lieu thereof, supporting the appropriateness of the court's taking judicial notice that Iverson's services could be equated to federal minimum wage levels and, even assuming otherwise, of the...