Stephens v. Vermont Dept. of Taxes, 141-75

• Citation: 134 Vt. 178,353 A.2d 355
• Decision Date: 04 February 1976
• Docket Number: No. 141-75,141-75
• Parties: David M. STEPHENS and Mary L. Stephens v. VERMONT DEPARTMENT OF TAXES.
• Court: United States State Supreme Court of Vermont

Page 355

353 A.2d 355

134 Vt. 178

David M. STEPHENS and Mary L. Stephens v. VERMONT DEPARTMENT OF TAXES.

No. 141-75.

Supreme Court of Vermont.

Feb. 4, 1976.

Frederick M. Reed, Williston, for plaintiffs.

M. Jerome Diamond, Atty. Gen., and Georgiana O. Miranda and Richard Johnston King, Asst. Attys. Gen., Montpelier, for defendant.

Before BARNEY, C. J., and SMITH, DALEY, LARROW and BILLINGS, JJ.

SMITH, Justice.

This is an appeal from the Washington Superior Court which, in May, 1975, sustained a prior determination by the Vermont Commissioner of Taxes. The facts found below were those to which the parties stipulated.

Appellants, the Stephens, are, and were at all times material hereto, residents of Vermont. During the academic year, 1972, they resided temporarily in Coeymans, New York. Mr. Stephens attended nearby Albany College of Pharmacy, and Mrs. Stephens taught at Albany High School. Her gross salary from the Albany School Department was $8,351.67, from which $277.28 was withheld for New York State income tax. Since appellants had incurred a New York State income tax liability of only $175.00, they claimed and received a refund of $101.00.

The Vermont Tax Department has consistently maintained, and the Tax Commissioner and the Washington Superior Court both held, that appellants were not entitled to claim credit on their Vermont State income tax return, pursuant to 32 V.S.A. § 5825, for the entire $277.28 that New York State withheld from Mrs. Stephens in 1972. Rather, it was determined below that they were entitled to a credit against their Vermont income tax liability only for the amount of the withholdings less the refund, i. e. the $175.00.

The crux of this appeal involves an interpretation of 32 V.S.A. § 5825:

A taxpayer of this state who was a resident individual . . . during any portion of a taxable year shall receive credit against the tax imposed, for that taxable year, by Section 5822 . . . for taxes imposed by, and paid to, another state . . . upon his income derived from sources within that state . . . during that portion of that taxable year (emphasis added).

Should the phrase 'taxes imposed by, and paid to, another state' extend to the entire withholdings, or only to the final amount retained by the state?

While there has been no Vermont case involving credits toward state income tax, other tribunals have decided that statutes granting credits must be stictly construed against the taxpayer and in favor of the taxing authority. 71 Am.Jur.2d State and Local Taxation § 549; Keyes v. Chambers, 209 Or. 640, 307 P.2d 498, 501 (1957). Strict construction has also been the rule in Vermont regarding exemptions from income tax liability. McClure Newspapers, Inc. v. Dept. of Taxes, 132 Vt. 169, 174, 315 A.2d 452 (1974); English Language Center, Inc. v. Town of Wallingford, 132 Vt. 327, 329, 318 A.2d 180 (1974); Pizzagalli Construction Co. v. Dept. of Taxes, 132 Vt. 496, 499, 321 A.2d 437 (1974). Strict interpretation of 32 V.S.A. § 5825 in favor of the Vermont Tax Department and against the taxpayers would indicate a credit only for the amount finally retained as income tax by the New York...