State v. Bies
| Decision Date | 16 May 1960 |
| Docket Number | No. 37884,37884 |
| Citation | 103 N.W.2d 228,258 Minn. 139 |
| Parties | STATE of Minnesota, Respondent, v. Theodore and Beatrice BIES, Appellants. |
| Court | Minnesota Supreme Court |
Syllabus by the Court
The state's claim for additional taxes expired by operation of two statutes of limitation, integral parts of the Income Tax Act, constituting an absolute bar to the assessment for additional tax and the right to bring a proceeding to collect thereon; the rule that there is no vested right in the defense of the statute of limitations has no application where the right to tax has been cut off and the remedy ceases to exist.
Briggs, Gilbert, Morton, Kyle & Macartney and B. C. Hart, St. Paul, for appellants.
Miles Lord, Atty. Gen., Fred C. Norton, Sp. Asst. Atty. Gen., for respondent.
Action involved on this appeal was brought by the State of Minnesota against Theodore and Beatrice Bies to collect additional personal income taxes, penalties, and interest. Defendants appeal from an order denying their motion for a new trial.
The undisputed facts are that Mr. and Mrs. Bies filed joint Minnesota income tax returns for the calendar years 1942, 1944, 1945, and 1946; that the returns for 1942, 1945, and 1946 were duly filed on or before March 15 in the years 1943, 1946, and 1947, respectively; that the return for 1944 was filed on April 16, 1945; and that at the time of filing the tax shown to be due on each return was paid. No waivers extending the time for assessment of additional income taxes for any of the years 1942, 1944, 1945, or 1946 have been executed or filed by the defendants. The additional taxes which the state seeks to recover were not assessed until November 14, 1955, more than 8 1/2 years after the defendants filed their 1946 income tax return and more than 12 1/2 years after they filed their 1942 income tax return. In other words, the state's claim for additional taxes in this action is based upon an assessment made more than 5 years after the statute of limitations for assessment had run on the latest year in question.
The tax assessment made by the state on November 14, 1955 was entitled an agreement as to final determination of tax liability, which agreement was entered into between the defendants and the state commissioner of revenue. This agreement dated August 22, 1959, read as follows:
"State of Minnesota
Department of Revenue
Agreement as to Final
Determination of
Tax Liability
'This Agreement, made in triplicate relating to income taxes, by and between, Theodore and Beatrice Bies Individuals residing at 480 West Wheelock Parkway, St. Paul 3, Minnesota, the taxpayers, and the Commissioner of Taxation
'Whereas, there has been at issue between the parties hereto the basis for determining Minnesota taxable net income for the taxable years 1942, 1944, 1945 and 1946.
'And after resolving the items at issue between the parties hereto it is hereby determined that the tax liability for the years 1942, 1944, 1945 and 1946 shall be as follows:
Total
Tax Corrected Additional Additional
Previously Tax Tax Tax and
"Year Assessed Liability Liability Interest Interest
1942 $ 1.02 $ 817.84 $ 816.82 $404.51 $1,221.33
1944 -0- 1,187.27 1,187.27 492.73 1,680.00
1945 323.82 1,187.49 863.67 324.09 1,187.76
1946 -0- 1,276.09 1,276.09 427.61 1,703.70
----------
Total Liability ................................................ $5,792.79
'Provided, the total liability as shown above is paid within thirty (30) days from the execution of this agreement, no further interest shall accrue.
'This Agreement is executed and filed without prejudice to the rights of either party as to the basis for determining Minnesota taxable income in any subsequent taxable year.
'This Agreement is made pursuant to the provisions of Minnesota Statutes 1949, Section 290.51 and shal be final and conclusive as provided therein.
'In Witness Whereof, the above parties have subscribed their names to these presents in triplicate.
'Signed this 22 day of August, 1955.
'Theodore Bies
By Theodore Bies
'Beatrice Bies
By Beatrice Bies
'Department of Revenue
Commissioner of Revenue' The applicable statute of limitations on assessments (M.S.A. § 290.49, subd. 1) required the state to make an assessment for any additional taxes within 3 1/2 years from the date the return was filed, and subds. 7 and 9 of the same section required the state to commence collection proceedings within 21 months after expiration of the period for assessment. Said subd. 1 also provides when such taxes shall be deemed to have been assessed within the meaning of this section, including the requirement that notice be given to the taxpayer if the assessment exceeds the amount declared on the return.
The above-quoted agreement recites no waiver, no consent to assessment and collection, and no promise to pay. There was no abatement, credit, or refund recited or given to the taxpayers and no compromise referred to.
This action was commenced on March 24, 1958--nearly 6 years after the statute of limitations had run on the state's right to collect any tax that might have been assessed upon the basis of defendants' latest return filed in 1947. The taxpayers admit that the state has made demand for payment of the additional taxes, penalties, and interest claimed in its complaint and that they have refused to pay the amount claimed.
L.1941, c. 550, § 17, provided:
'(g) Where the assessment of any tax is hereafter made within the period of limitation properly applicable thereto, such tax may be collected by a proceeding in court, but only if begun
'(1) within four years after the return was filed, or
'(2) within six months after the expiration of the period agreed upon by the commissioner and the taxpayer, pursuant to the provisions of subsection (h) hereof.'
This section was amended by L.1943, c. 656, § 15, by adding thereto the following: 'or (3) within two months after final disposition of any appeal from the order of assessment.' Section 15 was amended by L.1945, c. 604, § 12, by substituting the word 'six' for the word 'two.' Thereafter L.1941, c. 550, § 17, as amended, was further amended by L.1947, c. 635, § 14, and L.1951, c. 649, § 3, so that the present statutory provisions, M.S.A. § 290.49, subds. 7 and 9, read as follows:
'Subd. 7. Where the assessment of any tax is hereafter made within the period of limitation properly applicable thereto, such tax may be collected by a proceeding in court, but only if begun
'(1) within nine months after the expiration of the period for the assessment of the tax, or
'(2) within nine months after the expiration of the period agreed upon by the commissioner and the taxpayer, pursuant to the provisions of subdivision 8, or
'(3) within nine months after final disposition of any appeal from the order of assessment.'
The defendant taxpayers contend that no period has been agreed upon by the commissioner and the taxpayers pursuant to § 290.49, subd. 8, which provides in part as follows:
'Where before the expiration of the time prescribed in subdivisions (1) and (2) of this section for the assessment of the tax, the commissioner and the taxpayer consent in writing to an extension of time for the assessment of the tax, the tax may be assessed at any time prior to the expiration of the period agreed upon,'
and that no appeal was or could have been taken from the order of assessment. They therefore contend that, by reason of the aforesaid statutory provisions of the Income Tax Act and the undisputed facts, the statute of limitations had run on the assessment of additional income taxes for all the years in issue long before the agreement was executed and that the state is prohibited from bringing the action.
The legal issues here involved are limited to the following questions: (1) Was the closing-agreement statute, § 290.51, intended by the legislature as a device for reviving tax claims barred by the limitations placed in the Income Tax Act as an integral part thereof? (2) Was the agreement between the defendants and the commissioner of taxation sufficient to renew a tax liability extinguished by the statute of limitations contained within the Income Tax Act itself? (3) Was the state's claim for taxes again barred by failure to commence suit for collection within the time required by statute?
The defendants contend that the state's claim is barred not by just one but by two separate statutes of limitations, the first limitation barring the state from making any assessment of taxes more than 3 1/2 years after a tax return is filed and the second preventing the state from commencing any action to collect taxes more than 1 year and 9 months after the time for making an assessment expires.
There is no provision which excepts a tax assessed pursuant to a closing agreement from § 290.49, subd. 1. Neither is it excepted from § 290.49, subds. 7 and 9. Nor is it excepted from § 290.49, subd 8. On the contrary, the section on closing agreements (§ 290.51) contemplates an assessment by providing in part that if such agreement is approved by the commissioner, 'such agreement, or any * * * assessment * * * made in accordance therewith, shall not be annulled, modified, set aside, or disregarded.'
The Minnesota Board of Tax Appeals in Valentine v. Com'r of Taxation, Docket No....
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Carlton v. State, No. A10–2061.
...such that failure to comply with the time limit will deprive the court of jurisdiction to hear the claim. State v. Bies, 258 Minn. 139, 147, 103 N.W.2d 228, 235 (1960) (citation omitted). Unlike purely statutorily-created causes of action, Minn.Stat. ch. 590 did not create an entirely new c......
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