Christensen v. Dep't of Revenue

CHARLES CHRISTENSEN, Plaintiff, v. DEPARTMENT OF REVENUE, State of Oregon, Defendant.

TC 5285

OREGON TAX COURT REGULAR DIVISION Personal Income Tax

September 7, 2018

ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

I. INTRODUCTION

This is the court's second order in a case of first impression under Oregon's Taxpayer Bill of Rights (the "TBOR"). The first order determined that a claim under the installment agreement provision of the TBOR, ORS 305.890(1), is within the court's jurisdiction.¹ See Christensen v. Dept. of Rev., 22 OTR 384 (2017) ("Christensen I"). The court then dismissed Plaintiff's ("Taxpayer's") original complaint for failure to state ultimate facts sufficient to constitute a claim, but granted leave to file an amended complaint pursuant to Tax Court Rule (TCR) 21 A.

Taxpayer thereafter amended his complaint to raise five claims, all now before the court on cross motions for summary judgment. The first three claims assert that Defendant Department of Revenue (the "Department") or its director failed to act in accordance withORS 305.890(1) when the Department's employees considered Taxpayer's application for an installment agreement. The fourth and fifth claims assert that the Department's written communications failed to notify Taxpayer of certain rights in compliance with other provisions of the TBOR, ORS 305.860 and 305.875.

II. FACTS

A. Statutes at Issue

The principal statutes at issue are three provisions of the TBOR, 305.860, 305.875, and 305.890, as well as a separate statute relating to persons who may exercise powers granted to the Department's director (ORS 305.057). All are reproduced below (all emphases added).

ORS 305.057

"Whenever a power is granted to the Director of the Department of Revenue, the power may be exercised by such officer or employee within the Department of Revenue as designated in writing by the director. Any such designation shall be filed in the office of the Secretary of State."

ORS 305.860

"(1) The Director of the Department of Revenue shall prepare a statement which sets forth in simple nontechnical terms:

"(a) The rights of a taxpayer and the obligations of the Department of Revenue during an audit;

"(b) The procedures by which a taxpayer may appeal any adverse decision of the department, including informal conferences and judicial appeals;

"(c) The procedures for filing and processing refund claims and filing of taxpayer complaints; and

"(d) The procedures which the department may use in enforcing the provisions of the laws of this state.

"(2) The statement prepared in accordance with subsection (1) of this section shall be distributed by the Director of the Department of Revenue to all taxpayers upon request. The director shall inform taxpayers of their rights in a brief explanatory statement included in all billing or collection notices, all notices of assessment or deficiency and all notices of refund adjustment or denial sent to the taxpayer."

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ORS 305.875

"In any meeting or communication with the Department of Revenue, including but not limited to audits, conferences, interviews and any other meeting or communication between the taxpayer and the department, the taxpayer shall have the following rights, unless waived by the taxpayer:

"(1) The right to an explanation, by an officer or employee of the department before or during the meeting of:

"(a) The audit, conference or meeting process and the taxpayer's rights under such process; and

"(b) The collection process and the taxpayer's rights under such process.

"(2) The right to make an audio recording of any meeting relating to the determination or collection of any tax with the department representative, using the taxpayer's own equipment, and at the taxpayer's own expense.

"(3) If the department makes an audio recording of the meeting, the taxpayer has the right to advance notice of the recording and a copy of the recording upon request. The taxpayer shall reimburse the department the reasonable cost of the copy.

"(4) The right to consult with an attorney, certified public accountant, enrolled agent, or an other person permitted to represent a taxpayer at any meeting before the department, if the taxpayer clearly states to the department representative at any time during any meeting, that the taxpayer wishes to consult with the person. This subsection does not apply to a meeting initiated by an administrative subpoena.

"(5) The right to be represented by anyone who is permitted to represent the taxpayer before the department, as provided under ORS 305.230 and 305.245.

"(6) The right not to be present, if represented, at the meeting unless subpoenaed by the department pursuant to ORS 305.190, or other laws of this state."

ORS 305.890

"(1) A taxpayer shall have the right to enter into a written agreement with the Department of Revenue to satisfy liability for payment of any tax in installment payments if the Director of the Department of Revenue determines that the agreement will facilitate collection of such liability.

"(2) Except as otherwise provided in this section, any agreement entered into by the director under this section shall remain in effect for the term of the agreement.

"(3) The director may terminate any agreement entered into by the director under this section if:

"(a) Any information that the taxpayer provided to the director prior to the date the agreement was entered into was inaccurate or incomplete; or

"(b) The director believes that collection of any tax to which an agreement under this section relates is in jeopardy.

"(4) If the director makes a determination that the financial condition of the taxpayer with whom the director has entered into an agreement under this section has significantly changed, the director may alter, modify or terminate the agreement. Action may be taken by the director under this subsection only if:

"(a) Notice of such determination is provided to the taxpayer within 30 days prior to the date of such action; and

"(b) Such notice includes the reasons why the director believes a significant change in the financial condition of the taxpayer has occurred.

"(5) The director may alter, modify or terminate an agreement entered into by the director under this section in the case of the failure of the taxpayer to:

"(a) Pay any installment at the time such installment payment is due under such agreement;

"(b) Pay any other tax liability at the time such liability is due; or

"(c) Provide a financial condition update as requested by the director."

B. Stipulated Facts

The parties stipulated to the following facts:

(1) "On March 17, 2015, following Plaintiff's failure to file tax returns, Defendant assessed tax, interest and penalties for tax years 2009 through 2012." (Stip Facts at 1, ¶ 1; Stip Ex A.)

(2) "After it issued the assessments, Defendant mailed various collection notices to Plaintiff, specifically: 1) Notices and Demands for Payment; 2) Distraint Warrants and 3) Notice of Intent to Offset Federal Tax Refund." (Stip Facts at 1,¶ 2; Stip Ex B.)

(3) "Each of Defendant's collection notices included a document called 'Your Rights as an Oregon Taxpayer.'" (Stip Facts at 1,-2, ¶ 3; Stip Ex C.)

(4) "On behalf of Plaintiff, Plaintiff's attorney submitted a financial statement to Defendant on August 14, 2015, proposing monthly payments of $25 towards his tax liabilities." (Stip Facts at 2, ¶ 4; Stip Ex D.)

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(5) "On August 17, 2015, Defendant proposed a monthly payment of $658 for 12 months. On August 27, 2015, Defendant proposed that Plaintiff make a monthly payment of $450. On September 2, 2015, Defendant mailed a document titled 'Payment Agreement' to Plaintiff for $450 per month for 12 months. Plaintiff did not enter into the agreement." (Stip Facts at 2, ¶ 5; Stip Ex E.)

(6) "The determination as to whether Plaintiff's requested installment agreement would facilitate collection was made by Department of Revenue employees. The Department's Director did not personally determine whether the requested agreement would facilitate collection." (Stip Facts at 2, ¶ 6.)

(7) "Prior to considering Plaintiff's request for an installment agreement, the Director of the Department did not have a written delegation² on file with the Secretary of State that explicitly referred to installment agreements under ORS 305.890." (Stip Facts at 2, ¶ 7.)

(8) "Defendant subsequently filed a written delegation with the Secretary of State on January 14, 2016 that refers to installment agreements under ORS 305.890." (Stip Facts at 2, ¶ 8; Stip Ex F ("Delegation of Director's Powers" dated November 5, 2013 stipulated to have been on file in August and September 2015 (the "2013 Delegation")); Stip Ex G ("Delegation of Director's Powers" dated January 2016) (the "2016 Delegation").)

(9) "Defendant has not promulgated regulations setting forth the criteria to be used in determining whether an installment agreement will facilitate collection." (Stip Facts at 2, ¶ 9.)

(10) "On October 9, 2015, Plaintiff appealed Defendant's 'Payment Agreement' to the Magistrate Division of the Oregon Tax Court. (Stip Facts at 3, ¶ 10; Stip Ex E (citation omitted).)

C. Proceedings in the Tax Court

In the Magistrate Division, the Department moved to dismiss Taxpayer's complaint for, among other reasons, lack of subject matter jurisdiction. (Ptf's Compl, Ex A) (copy of Final Decision of Dismissal in Christensen v. Dept. of Rev., TC-MD 150447C (Aug 2, 2016)). The magistrate agreed, concluding that the court lacked subject matter jurisdiction over collection matters, including requests for installment agreements under ORS 305.890. (Id. at 1, 9-10.)That conclusion was in accordance with prior Magistrate Division decisions. (Id. at 4-6.)

Taxpayer appealed the magistrate's decision by filing a complaint in the Regular Division. (Ptf's Compl at 1.) The Department then moved to dismiss Taxpayer's complaint for lack of subject matter jurisdiction and failure to state a claim. (Def's Mot to Dismiss at 1.) The court denied the Department's motion as to subject matter...