Woods v. TRW, Inc.

• Decision Date: 31 October 1977
• Citation: 557 S.W.2d 274
• Parties: Jayne Ann WOODS, Commissioner of Revenue, Appellant-Defendant, v. TRW, INC., Appellee-Plaintiff. 557 S.W.2d 274
• Court: Tennessee Supreme Court

Page 274

557 S.W.2d 274

Jayne Ann WOODS, Commissioner of Revenue, Appellant-Defendant, v. TRW, INC., Appellee-Plaintiff.

557 S.W.2d 274

Supreme Court of Tennessee.

Oct. 31, 1977.

Jim G. Creecy, Asst. Atty. Gen., Nashville, for appellant-defendant; Brooks McLemore, Jr., Atty. Gen., Nashville, of counsel.

Michel G. Kaplan, Nashville, for appellee-plaintiff.

OPINION

HARBISON, Justice.

The question in this case is whether certain amendments to the delinquent tax statutes should be applied retroactively. These amendments were adopted in 1973 and 1974. At issue is their application to a 1971 excise and franchise tax return. One of the amendments shortened the period for instituting collection proceedings, and the Chancellor held that the assessment involved here was barred thereunder.

The facts of the case were stipulated. On February 25, 1972 the taxpayer paid its estimated franchise and excise taxes for the calendar year 1971. It obtained an extension for filing its final return and on September 1, 1972 filed the return together with additional estimated taxes.

At that time T.C.A. § 67-1323 required the Department of Revenue to institute proceedings to collect taxes "within six (6) years from the first of January of the year for which such taxes accrued." Under this provision, the Department of Revenue had until January 1, 1977 to commence such proceedings.

Beginning on September 16, 1974 a series of letters passed between the taxpayer and the Department, in which the latter requested additional information in order to make a final audit. There was a substantial delay between January 1975 and October 1975 during which the taxpayer failed to supply the requested information or even to acknowledge receipt of the Department's letters. Finally, on January 23, 1976, the taxpayer did file the information, and the Department, on March 19, 1976, made an assessment for additional 1971 taxes. The taxpayer declined to pay, contending that a 1973 amendment to T.C.A. § 67-1323 had shortened the period of limitations to three years, and that the assessment was barred by operation of the new statute. The Department refused to acquiesce in that position. The taxpayer thereafter paid the additional taxes under protest and timely filed the present suit to recover them, raising no objection to the assessment other than the statute of limitations.

The Chancellor sustained the contention of the taxpayer and allowed recovery. He held that the legislature had authority to make a statute of limitations retroactive to existing cases, provided a reasonable period of time remained for the filing of an action, citing such cases as Bradley v. LaPenna, 490 S.W.2d 500 (Tenn.1973).

Both the taxpayer and the Chancellor have viewed the issue as one of legislative power or authority to make a statute retroactive. It seems to us, however, that the issue is primarily one of legislative intent. An examination of Chapter 368 of the Public Acts of 1973, which contained the basic amendment in question, persuades us that the act was intended to operate prospectively, rather than retroactively.

This chapter of the 1973 Public Acts amended several statutes dealing with administration of the Department of Revenue, and also the gift, inheritance and estate tax laws. It was by no means confined to an amendment of the period of limitations. In the first section, new procedures were authorized, providing for formal hearings before the Commissioner in certain types of cases. The second section of the chapter prescribed new professional qualifications for internal auditors. The fourth section contained a number of penal provisions, creating new felonies and misdemeanors for interference with revenue officials and the obstruction of tax collections, and prescribing punishment therefor. In the third section are found the provisions at issue here, changing the period of time during which assessment and collection proceedings must be commenced. Insofar as pertinent here, this amendment provided that levies and other collection procedures must be commenced within three years from December 31 of the year in which a tax became due and payable.

If the 1973 amendment applied to the taxpayer's 1971 return, the Department would have had to make its final assessment and institute collection proceedings no later than December 31, 1975, since the taxes were...