DR-87-001-BC
2-2700-738-2
STATE OF MINNESOTA
OFFICE OF ADMINISTRATIVE HEARINGS
FOR THE MINNESOTA DEPARTMENT OF REVENUE
In the Matter of a Denial of a
Tax Clearance Certificate of FINDINGS OF FACT,
Walter Koepsell, 1625 Yuma CONCLUSIONS AND
Lane, Plymouth, MN 55447, RECOMMENDATION
MN. ID #390-44-4558
The above-entitled matter came on for hearing before Administrative Law
judge Bruce D. Campbell from the Minnesota Office of Administrative Hearings
at 9:00 a.m, on July 22, 1986, in Minneapolis, Minnesota.
Appearances: Patrick J. Finnegan, Attorney, Minnesota Department of
Revenue, Centennial Office Building, P.O. Box 64451, St. Paul, Minnesota
55164, appeared on behalf of the Minnesota Department of Revenue (Department);
and Walter Koepsell (Taxpayer or Respondent), 1625 Yuma Lane, Plymouth,
Minnesota 55447, appeared on his own behalf without assistance of counsel.
The record herein closed on July 22, 1986, at the close of the hearing.
Notice is hereby given that, pursuant to Minn. Stat. 14.61 the final
decision of the Commissioner of Revenue shall not be made until this Report
has been made available to the parties to the proceeding for at least ter
days, and an opportunity has been afforded to each party adversely affected to
file exceptions and present argument to the Commissioner. Exceptions to this
Report, if any, shall be filed with T.J. Triplett, Commissioner, Department of
Revenue, Centennial Office Building, P.O. Box 64451, St. Paul, Minnesota 55164.
STATEMENT OF ISSUE
The issue to be determined in this proceeding is whether the Commissioner
of Revenue should refuse to grant a tax clearance certificate to Walter
Koepsell as a consequence of delinquent taxes owing the State of Minnesota
pursuant to Minn. Stat. A 60A.17 (1984), as amended, 1986 First Special
Session Laws Ch.1; Art. 7, a 3
Based upon all of the proceedings herein, the Administrative Law judge
makes the following:
FINDINGS OF FACT
1. Walter Koepsell has an insurance agent's license issued by the
Minnesota Department of Commerce. That license is currently due for renewal.
2. On March 19, 1985, Respondent was notified of a change in taxes owing
for the calendar year 1981 by the federal government. DR Ex.2. The tax
liability resulted from a inclusion of approximately $9,000 in additional
gross income for the taxable year 1981. While the Respondent received notice
of the action by the federal government, he did not request an appeal of the
assessment as authorized in the communication from the Internal Revenue
Service.
3. As a consequence of the action by the IRS regarding the Respondent's
federal tax liability for 1981, Mr. Koepsell's Minnesota tax liability for
that year was adjusted by the Department by including approximately $9,000 in
taxable income for that tax year. The Notice of Additional Assessment was
issued by the Minnesota Department of Revenue-Income Tax Division on June 20,
1985. DR Ex. 2.
4. With the Notice of Additional Assessment, Mr. Koepsell received a form
on which he could file a protest of the additional tax assessed. That form
indicated his right to protest within the Department and his right to appeal
any adverse decision by the Department regarding his protest to the Minnesota
Tax Court within 60 days of the Department's final adverse determination. DR
Ex . 2.
S. On August 1, 1985, Mr. Koepsell filed his protest with the Department
and that protest began an internal administrative proceeding in which the tax
was contested by the Respondent.
6. By letter dated December 31, 1985, the Department denied the
Respondent's protest and that letter terminated the internal administrative
proceeding. DR Ex. 3. The letter statement was sent to Mr. Koepsell at his
last known address and Respondent received mail at that address sent
subsequent to December 31, 1985. In its letter, the Tax Examiner stated the
position of the Department that the Respondent's tax liability would not be
adjusted until the IRS changed its audit report.
7. The letter notification by the Department did not contain a statement
that it was a final determination of the administrative proceeding which
commenced the period for appeal to the Tax Court. TR Ex. 2.
8. The period for filing an appeal with the Tax Court without payment of
taxes owing, without the special permission of the Tax Court, is 60 days from
the date of the final determination.
9. Although Mr. Koepsell denies having received the letter determination
by the Department and the letter notification does not contain a statement
that the determination therein contained commences the running of the appeal
period to the Tax Court, Mr. Koepsell had actual notice of the position of the
Department regarding the final disposition of his administrative protest more
than 60 days prior to the date of the hearing herein.
2 -
10. No administrative or judicial proceeding is currently pending
regarding Mr Koepsell's liability for the taxes herein.
11, As a consequence of Findings 9 & 10, supra, the appeal period for
contesting the taxes without payment has run.
12, Mr. Koepsell currently has delinquent taxes with interest and penalty
projected to the date of the hearing in the amount of $1,507.63. DR Ex. 1.
Based upon the foregoing Findings of Fact, the Administrative Law Judge
makes the following:
CONCLUSIONS
1. The Commissioner of Revenue and the Administrative Law Judge have
jurisdiction in this matter pursuant to Minn. Stat. 60A.17 (1984), as
amended, 1986 First Special Session Laws Ch.1, Art, 7, 3.
2, The Department gave proper notice of the hearing in this matter and
has fulfilled all relevant substantive and procedural requirements of law or
rule.
3. The Respondent possesses an insurance agent's license which is
currently subject to renewal.
4. As a consequence of Minn. Stat. sec. 60A.17 (1984), as amended, 1986
First Special Session Laws Ch 1, Art. 7, 3, the Commissioner may not issue a
tax clearance certificate to an individual who has assessed against Vim
delinquent taxes, as statutorily defined.
5. The Department has assessed against the taxpayer delinquent taxes in
an amount exceedinng $500.
6. Although the Respondent contests his liability for the taxable amourt,
the delinquent taxes are not the subject of a pending administrative or court
action contesting the amount or validity of the liability, the appeal period
to contest the tax liability without payment has expired and the Respondent
has not entered into a payment agreement with the Department.
7. As a consequence of Conclusions 5 & 6, supra, the Commissioner of
Revenue may not issue a tax clearance certificate to the Respondent. Minn.
Stat. 60A.17 (1984), as amended, 1986 First Special Session Laws Ch.1, Art.
7 , 3.
Based upon the foregoing Conclusions, the Administrative Law Judge makes
the following:
RECOMMENDATION
IT IS HEREBY RECOMMENDED that the Commissioner of Revenue not issue a tax
clearance certificate to Walter Koepsell and that he inform the Commissioner
- 3-
of Commerce that the Respondent owes the state delinquent taxes in an amount
in excess of $500.
Dated this 24th day of July, 1986.
BRUCE D. CAMPBELL
Administrative Law Judge
NOTICE
Pursuant to Minn. Stat. 14.62, subd. 1, the agency is required to serve
its final decision upon each party and the Administrative Law Judge by first
class mail.
Reported: Tape Recorded
MEMORANDUM
The Respondent in this proceeding initially wished to contest his
liability for the taxes owed. The Administrative Law judge ruled at the
hearing at the Respondent's liability for the taxes was not on issue in this
proceeding. To contest the validity of the tax assessment the taxpayer would
have been reauired to appeal the Department's adverse acministrative
determination regarding his tax liability to the Tax Court. He did not do so
and, as a consequence, there is currently pending no administrative or
judicial proceeding in which the tax assessment is contested.
It could be argued that the period for filing an appeal with the Tax Court
has not run since the letter notification of the Department to the taxpayer
did not contain a statement that it was a final administrative determination
which commenced the running of the appeal period previously brought to his
attention. It could be argued that considerations of due process require the
Department to inform the taxpayer of his appeal rights, including the time
when the appeal period begins to run. A more restricted position would
require the Department to make a statement in what it considers to be its
final administrative determination of a protest that it is, in fact, the final
resolution of the matter. Absent some such statement by the Department, a
taxpayer is virtually unable to perfect a timely appeal.
The Administrative Law Judge, however, finds that consideration of this
issue is not required in this proceeding since the taxpayer admitted on the
record that he had actual notice of the final position of the Department more
than 60 days prior to the hearing herein. Hence, even under the most liberal
construction of the law, the 60 day appeal period has expired.
-4-
Although the Administrative Law Judge does not find that Respondent's due
process rights have been violated, it would be appropriate for the Department
either to use a form notice for a final resolution of an administrative
protest in which the appeal rights of the taxpayer are set forth or, at least,
to include a statement in the determination that it is the final action by the
Department which commences the time for appeal to the Tax Court. The Supreme
Court of Wisconsin, in Sunnyview Village v. State Department of
Administration, 104 Wis.2d 396, 311 N.W.2d 632, 640 (1981), well stated the
applicable concerns:
We acknowledge, as did those courts, that it is important
that citizens not be defeated in their redress of
grievances by the maze of governmental entities. A person
aggrieved by an administrative decision should not have to
guess which governmental entity to name and serve as a
respondent in proceedings for a Judicial review. We
recommend that government entities adopt the practice of
providing with their administrative decisions information
on how to process proceedings for review, including which
governmental entity to be named and served as respondent.
The circuit court wisely commented as follows:
The problem is that persons outside the
government have great difficulty finding their
way through the governmental Maze to locate the
proper agency, division or bureau.
This Court believes that it would be a proper and
fair public policy to require every state agency
issuing an order or decision to include in that
order or finding a summary of the time to appeal
and identification of the proper party to the
appeal.
. . . This Court believes that access to
judicial review of administrative policies should
be made as easy as possible for the people
involved and that the governmental agencies
involved should aid and assist in giving the
average citizen the necessary information so a
timely review is easil available.
As discussed at the hearing, the taxpayer, however, has not lost his right
to appeal the determination of the Department regarding his tax liability. He
may pay the tax under protest, seek a refund, and appeal the denial of,that
refund to the Tax Court. Under that circumstance, he would be entitled to a
tax clearance certificate since the tax would be the subject of a court action
contesting the amount or validity of the liability. Absent such an action by
the taxpayer, the law is clear. He has been assessed delinquent taxes, as
statutorily defined, which are not the subject of an administrative or court
action contesting their validity. This hearing, authorized under Minn. Stat.
60A.17 (1984), as amended, 1986 First Special Session Laws Ch.1, Art. 7,
3, is not the appropriate forum for contesting that liability.
B.D.C.
- 5-