Vt. Yankee Nuclear Power Corp. v. Dep't Of Taxes

• Decision Date: 19 March 2010
• Docket Number: No. 08-447.,08-447.
• Citation: 2010 VT 24,996 A.2d 186
• Parties: VERMONT YANKEE NUCLEAR POWER CORPORATIONv.DEPARTMENT OF TAXES.
• Court: Vermont Supreme Court

996 A.2d 186
2010 VT 24

VERMONT YANKEE NUCLEAR POWER CORPORATION
v.
DEPARTMENT OF TAXES.

No. 08-447.

Supreme Court of Vermont.

March 19, 2010.

996 A.2d 187

COPYRIGHT MATERIAL OMITTED

996 A.2d 188

Christopher D. Roy and Wm. Roger Prescott of Downs Rachlin Martin PLLC, Burlington, for Plaintiff-Appellant.

William H. Sorrell, Attorney General, and Danforth Cardozo, III, Assistant Attorney General, Montpelier, for Defendant-Appellee.

Present: REIBER, C.J., DOOLEY, JOHNSON, SKOGLUND and BURGESS, JJ.

¶ 1. DOOLEY, J.

Taxpayer Vermont Yankee Nuclear Power Corporation appeals the denial by the Windham Superior Court of its claim for additional interest on an income tax refund paid to it. Taxpayer argues that 32 V.S.A. § 5884(c), which directs that interest on a tax refund be calculated from forty-five days after the date an amended return is filed, is inapplicable and that the interest computation should be based on a date over ten years earlier. We disagree and affirm.

¶ 2. In 1993, taxpayer filed a Vermont corporate income tax return for tax year 1992 showing $15,175,573 of federal taxable income, $16,406,449 of Vermont net-apportioned income, and tax due of $1,351,772. In September 1994, taxpayer filed an amended 1992 corporate income tax return, seeking a refund of $962,549 based on a decrease in its federal taxable income due to an increased deduction for fees paid to the United States Department of Energy for decontaminating and decommissioning nuclear fuel enrichment sites. The claimed additional deduction was $11,667,257 and, if accepted, greatly reduced taxpayer's taxable income.

¶ 3. By letter dated January 20, 1995, the Department of Taxes acknowledged receipt of the amended return and requested taxpayer to “provide information indicating that the United States Internal Revenue Service (IRS) has accepted the amended federal corporate return as filed and issued the refund requested.” In March 1995, a Department examiner spoke with a representative of taxpayer and learned that the IRS had not issued a refund based on the amended federal return and that the underlying issue likely would not be resolved until 1996. Taxpayer understood from this conversation that the 1994 amended state return had not been accepted by the Department, but would remain “open” pending the federal resolution. The Department did not issue taxpayer its requested refund, nor did it provide taxpayer with any written or verbal notification that the refund claim was denied. The Department did not schedule, and taxpayer did not request, a hearing on taxpayer's claim. See 32 V.S.A. § 5884(a). In May 1995, a Department representative contacted the IRS and was told that the federal amended return was filed, but that no action had been taken. Although the Vermont governing statute provides that failure to refund the amount requested within six months of the request is deemed a decision by the Commissioner, id., the parties here did not treat the passage of time as producing a refund denial, but instead both parties recognized that the refund request was to be held in abeyance pending an IRS decision on the refund request filed with it.

996 A.2d 189

¶ 4. In April 1996, taxpayer filed a second amended 1992 return. This amended return was based on changes to taxpayer's federal taxable income made by agreement with the IRS; these changes did not involve decontamination and decommissioning costs. This amendment increased the tax due by approximately $100,000 over that paid in 1993, and taxpayer paid the additional amount. A letter accompanying this amended return specifically stated, “[t]he amended return included in this package does not replace the amended return filed earlier for 1992.”

¶ 5. Over the next several years, the Department occasionally contacted taxpayer to inquire if it had resolved the decontamination and decommissioning deduction with the IRS. Taxpayer advised the Department that it would inform the Department when the IRS acted upon its amended federal return.

¶ 6. In 2000, taxpayer again amended its 1992 tax return based on federal changes to its taxable income. By accompanying letter, taxpayer advised the Department that this amendment reflected changes to “the tax treatment of [Department of Energy] Site Decontamination and Decommissioning fees.” Taxpayer did not mention whether this amended return was intended to replace the amended return filed in 1994, as it had done in 1996. This amended return also increased taxpayer's taxable income. Taxpayer enclosed payment consistent with this amended return.

¶ 7. In July 2005, taxpayer filed another amended tax return for 1992, based on the IRS redetermination of its taxable income reflecting the decontamination and decommissioning costs. On this return it noted that the amendment was made “per settlement in Vermont Yankee v. U.S. (DOE D & D).” Accounting for prior payments to the State, taxpayer requested a refund of $804,645 based on federal taxable income of $7,932,341. Included with this return was a letter from taxpayer and a copy of the settlement with the IRS dated May 5, 2005. Taxpayer made no mention of the 1994 amendment in this letter. In October 2005, the Department paid taxpayer the requested tax refund amount, as well as $7,402.74 in interest, calculated from forty-five days following the filing of the 2005 amended 1992 return.

¶ 8. In reaching its decision on the amount of interest, the Department relied upon 32 V.S.A. § 5884(c), as this subsection was added in 2003. The subsection provides, “in the case of a refund ... claimed on an amended return, the interest on the excess amount to be refunded by the commissioner to the taxpayer shall be computed from 45 days after the date the ... amended return is filed.” This subsection applies to interest on refunds granted on any amended returns filed after June 18, 2003. 2003, No. 68, § 87(24) (“Sec. 81, relating to interest on overpayments, shall apply to amended and late returns filed on or after the date of passage.”). Prior to that date, under § 5884(b) as it then existed, interest on refunds successfully claimed on an amended return ran from forty-five days after the time the original payment was made or due, whichever was later. 1983, No. 59, § 4 (amending 32 V.S.A. § 5884(b)).

¶ 9. Taxpayer appealed the Department's interest determination to the Commissioner, arguing that the 2003 subsection did not apply because of the 1994 amended return. After a hearing, the Commissioner found that the refund was granted on the amended return filed in 2005, rather than the amended return filed in 1994, and, therefore, applied the amended statute to conclude that interest would begin to run forty-five days after the 2005 filing. The Commissioner concluded that

996 A.2d 190

the plain meaning of the language of § 5884(c) applied and limited the period for which taxpayer could claim interest. The Commissioner rejected “taxpayer's claim that the parties agreed that the 1994 amended return would remain the operative return for an extended, indefinite period of time, and would necessarily control the calculation of interest accrued.” The Commissioner found instead that the parties shared only “a core understanding that the state refund would be dependent on the outcome of the federal determination.” Specifically, the Commissioner noted that this was not a case where the 1994 amended return was finally accepted by the IRS. Instead, taxpayer filed two new amended returns dealing with decontamination and decommissioning costs, “each constituting new transactions.” Finally, the Commissioner rejected taxpayer's claim that the State was estopped from denying taxpayer's interest claim. The Commissioner concluded that the Department made no representation regarding whether taxpayer would receive interest from the time of the filing of the 1994 amended return on which taxpayer could rely.

¶ 10. Pursuant to § 5885(b), taxpayer appealed this decision to the superior court, which affirmed the Commissioner's decision. The superior court concluded that “the [Commissioner's] ... finding that there was no agreement to hold the 1994 amended return open indefinitely is logical based on the evidence, and is certainly not clearly erroneous.” The court also relied upon the fact that the refund was given based on the 2005 amended return, and not based on the 1994 amended return. It noted that § 5884(c) gave controlling effect to the return on which the refund was given and not an earlier return raising the same or a similar issue. It also concluded that estoppel did not apply. This appeal followed.

¶ 11. We start with the statute governing interest on refunds, applying our usual presumption that its significance can be determined from the plain meaning of the language used. See Smith v. Desautels, 2008 VT 17, ¶ 17, 183 Vt. 255, 953 A.2d 620. As set out above, the relevant statute provides that with respect to a “refund ... claimed on an amended return,” the interest is computed from “45 days after the date the ... amended return is filed.” 32 V.S.A. § 5884(c). In this case, the refund was based on an amended return filed in 2005. Unless the term “amended return” means something different the second time it is used in the sentence from what it means in the first usage, the interest must also be based on the amended return filed in 2005. In fact, that interpretation seems necessary because the interest will be based on the amount of the refund specified in the 2005 amended return. Moreover, the statute's effective date makes the subsection applicable to interest on refunds granted on amended returns filed after June 18, 2003. ¹ 2003, No. 68, § 87(24). Thus, the plain meaning of the statutory language is that the interest starts to run forty-five days after the filing of the amended return on which the refund is...