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recognizing that "shall" denotes a mandatory directive
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Docket Nos. 146333 146335. Calendar Nos. 4 and 10.
2014-04-1
FRADCO, INC. v. DEPARTMENT OF TREASURY. SMK, LLC, v. Department of Treasury.
The Novis Law Firm, PLLC, Okemos (by James H. Novis), for Fradco, Inc., and SMK, LLC. Bill Schuette, Attorney General, Aaron D. Lindstrom, Solicitor General, and Scott L. Damich, Assistant Attorney General, for the Department of Treasury.
The Novis Law Firm, PLLC, Okemos (by James H. Novis), for Fradco, Inc., and SMK, LLC. Bill Schuette, Attorney General, Aaron D. Lindstrom, Solicitor General, and Scott L. Damich, Assistant Attorney General, for the Department of Treasury.
Dykema Gossett PLLC, Grand Rapids (by Wayne D. Roberts and Elisa J. Lintemuth), for amici curiae the Michigan Association of Certified Public Accountants.
Michele L. Halloran, East Lansing and Christina Thompson for amici curiae the Alvin L. Storrs Low–Income Taxpayer Clinic at Michigan State University College of Law.
YOUNG, C.J.
Michigan's revenue collection act provides that, when the Michigan Department of Treasury (the department) issues a final assessment of tax deficiency, a taxpayer has 35 days to appeal that adverse tax decision to the department or 90 days to appeal to the Court of Claims. The act also requires that the department provide a copy of a notice of the final assessment to the taxpayer's duly appointed representative, if one was appointed. These companion cases pose the same question: Does the time within which a taxpayer must appeal a final assessment of tax deficiency begin to run when the department issues the final assessment to the taxpayer as required, but fails to give the mandatory statutory notice to a taxpayer's official representative?
.MCL 205.1 et seq.
.MCL 205.8.
We hold that, if a taxpayer has appointed a representative, the department must issue notice to both the taxpayer and the taxpayer's official representative to trigger the running of the appeal period. Thus, the taxpayer's 35–day appeal period does not begin to run until the department issues notice to the representative, in addition to the taxpayer. Accordingly, we affirm in part and vacate in part the decisions of the Court of Appeals panels in each of these companion cases.
I. FACTS AND PROCEDURAL HISTORY
Appellees are Michigan corporations that operate convenience stores in Michigan. Petitioner Fradco, Inc. (Fradco) is located in Ada, and petitioner SMK, LLC (SMK) is located in Midland. The parties are unrelated to each other, but the legal issues presented in each appeal are identical.
A. FRADCO, INC.
In October 2004, Fradco retained the services of a certified public accountant (CPA) to handle its accounting and tax matters. On October 19, 2004, Fradco's resident agent executed a power of attorney authorization and provided copies thereof to respondent department, directing the department to provide the CPA “[a]ll [department] billings and payment notices” and allowing the CPA to “receive information and represent me (Fradco) in all [department] tax matters.” The power of attorney remained in effect at all times relevant to this case.
In May 2008, the department completed a sales tax audit of Fradco and disallowed a food deduction. Fradco's CPA appealed the audit determination at an informal conference, and provided the power of attorney authorization to the hearing referee. The department issued a preliminary decision and order of determination dated January 22, 2009, a copy of which was mailed to Fradco's CPA. The final assessment was dated September 17, 2009 and sent only to Fradco's place of business via certified mail.
See MCL 205.21(2)(b) through (d).
On April 19, 2010, Fradco's representative inquired about the final assessment. The representative was informed by letter dated April 21, 2010, that “a Final Assessment was issued September 17, 2009” and that “[n]o appeal was made with respect to this Final Assessment as provided by statute and the matter is now shown as subject to collection.” This letter did not provide a copy of the assessment. After several requests, Fradco and its CPA received a copy of the final assessment on July 20, 2010, ten months after the date printed on the face of the assessment. Fradco claims that this was the first and only copy received, by it or its representative.
Fradco filed its appeal with the Tax Tribunal on July 28, 2010—eight days after its representative received the final assessment. The department moved for summary disposition under MCR 2.116(C)(4), arguing that the Tax Tribunal lacked jurisdiction because the appeal was not filed within 35 days after issuance of the final assessment.
B. SMK, LLC
In April 2010, the department completed an audit of SMK and disallowed a food deduction. SMK hired Edward Kisscorni, a CPA. Through a power of attorney authorization form executed on March 26, 2010, and provided to the department shortly thereafter, SMK designated Kisscorni to represent it for the purposes of the sales tax audit and gave him limited authorization to “[i]nspect or receive confidential information,” “[r]epresent [SMK] and make oral or written presentation of fact or argument,” and “[r]eceive mail from Treasury ... (includ[ing] forms, billings, and notices).” On April 23, 2010, the department faxed Kisscorni a notice stating that the “audit package was submitted.” A final assessment dated June 15, 2010 was sent to SMK via certified mail. However, SMK claims that it did not receive the final assessment.
According to SMK's petition, Kisscorni made several phone calls to the department in July, inquiring whether a final assessment had been issued. He received no answers from the department. Thereafter, on July 23, 2010 (five days after the appeal period had allegedly run), the department sent SMK's representative the final assessment and a letter stating that the deadline for appeal had passed.
On July 29, 2010, SMK filed an appeal of the final assessment. As occurred in Fradco's case, rather than responding to the petition before the Tax Tribunal, the department filed a motion for summary disposition under MCR 2.116(C)(4), arguing that the Tax Tribunal lacked jurisdiction because the appeal was not filed within 35 days after issuance of the final assessment. Both Fradco and SMK opposed the respective motions on the ground that the appeal period had not been triggered because the department failed to give the statutory notice to their appointed representatives as required by MCL 205.8.
C. TAX TRIBUNAL AND COURT OF APPEALS DECISIONS
The Tax Tribunal denied the department's motion for summary disposition in both cases, holding that MCL 205.8 provides a parallel notice requirement when a taxpayer properly files a written request that notices be sent to a representative. Therefore, the Tax Tribunal reasoned, notice to the taxpayer alone was not sufficient to initiate the 35–day appeal period because notice to the taxpayer's representative was also required. Inasmuch as the final assessment was not issued to both the taxpayer and its representative, the Tax Tribunal retained jurisdiction over the petitioners' appeals. The Tax Tribunal then decided petitioners' appeals on the merits and in each case canceled the tax assessments.
Fradco Inc v. Dep't of Treasury, MTT Docket No. 409506 (Mich. Tax Jan. 20, 2011); SMK LLC v. Dep't of Treasury, MTT Docket No. 409504 (Mich. Tax Jan. 20, 2011).
Fradco Inc v. Dep't of Treasury, MTT Docket No. 409506, 2011 WL 5138705 (Mich. Tax Sept. 26, 2011); SMK LLC v. Dep't of Treasury, MTT Docket No. 409504, 2011 WL 4812075 (Mich. Tax Sept. 26, 2011).
The department appealed by right to the Court of Appeals, asserting that the 35–day appeal period under MCL 205.22(1) began from the “issuance date” printed on the face of a final assessment, which needed only to be sent to the individual taxpayer. The Court of Appeals affirmed the Tax Tribunal in separate opinions dated October 30, 2012. In both cases, the Court held that, reading the relevant sections of the revenue collection act in pari materia, MCL 205.8 (notice to the taxpayer representative) imposed on the department a notice obligation parallel to MCL 205.28(1)(a) (notice to the taxpayer), both of which must be satisfied before the appeal period may begin to run.
SMK, LLC v. Dep't of Treasury, 298 Mich.App. 302, 826 N.W.2d 186 (2012); Fradco, Inc v. Dep't of Treasury, 298 Mich.App. 292, 826 N.W.2d 181 (2012).
SMK, 298 Mich.App. at 308–310, 826 N.W.2d 186;Fradco, 298 Mich.App. at 299–301, 826 N.W.2d 181.
II. STANDARD OF REVIEW
Our review of the Tax Tribunal's decisions is limited. In the absence of fraud, we review a Tax Tribunal decision for a misapplication of the law or the adoption of a wrong principle. We consider the Tax Tribunal's factual findings conclusive if they are “supported by competent, material and substantial evidence on the whole record.”
Mich. Bell Tel. Co. v. Dep't of Treasury, 445 Mich. 470, 476, 518 N.W.2d 808 (1994), citing Const. 1963, art. 6, § 28.
.Const. 1963, art. 6, § 28; Klooster v. City of Charlevoix, 488 Mich. 289, 295, 795 N.W.2d 578 (2011).
Statutory interpretation is a question of law, which we review de novo. When interpreting a statute, courts must “ascertain the legislative intent that may reasonably be inferred from the words expressed in the statute.” This requires courts to consider “the plain meaning of the critical word or phrase as well as ‘its placement and purpose in the statutory scheme.’ ”
In re Investigation of March 1999 Riots in East Lansing, 463 Mich. 378, 383, 617 N.W.2d 310 (2000).
Koontz v. Ameritech Servs., Inc., 466 Mich. 304, 312, 645 N.W.2d 34 (2002).
Sun Valley Foods Co. v. Ward, 460 Mich. 230, 237, 596 N.W.2d 119 (1999), quoting Bailey v. United States, 516 U.S. 137, 145, 116 S.Ct. 501, 133 L.Ed.2d 472 (1995).
III. ANALYSIS
These cases involve appeals of sales tax deficiency assessments, which are administered pursuant to the General Sales Tax Act (GSTA). The GSTA directs the department to in part administer the sales tax pursuant to the revenue collection act. Under this act, when the department conducts an audit and ultimately issues a final assessment stating that a taxpayer owes sales tax, it potentially has two notice obligations: it must provide notice to the taxpayer and, if the taxpayer has appointed a representative, the department must provide the representative with copies of “letters and notices regarding a dispute” between the taxpayer and the department. MCL 205.8.
.MCL 205.51 et seq.
In administering taxes generally, the department must adhere to MCL 205.21 to 205.30, “[u]nless otherwise provided by specific authority in a taxing statute.” MCL 205.20. The GSTA is a taxing statute, and it dictates that the department follow the revenue collection act, MCL 205.1 to 205.31, in administering the sales tax. MCL 205.59(1).
MCL 205.28 establishes the department's notice obligations to the taxpayer:
(1) The following conditions apply to all taxes administered under this act unless otherwise provided for in the specific tax statute:
(a) Notice, if required, shall be given either by personal service or by certified mail addressed to the last known address of the taxpayer. Service upon the department may be made in the same manner.
MCL 205.8 establishes the department's notice obligations to the taxpayer's designated representative:
.MCL 205.28(1)(a) (emphasis added).
If a taxpayer files with the department a written request that copies of letters and notices regarding a dispute with that taxpayer be sent to the taxpayer's official representative, the department shall send the official representative, at the address designated by the taxpayer in the written request, a copy of each letter or notice sent to that taxpayer. A taxpayer shall not designate more than 1 official representative under this section for a single dispute.
The department argues that MCL 205.8 is a nonbinding obligation—a mere “courtesy” provision, of which the taxpayer is simply the beneficiary. Alternatively, the department argues that MCL 205.8 operates to protect department employees from liability that would otherwise befall them if they disclosed a taxpayer's information to the taxpayer's representative without permission.
.MCL 205.8 (emphasis added).
See MCL 205.28(1)(f).
It is not clear how either of these arguments obviates the department's obligation to provide the notice the statute requires, and the statutory text belies these claims. The Legislature's use of the word “shall” in both MCL 205.8 and MCL 205.28(1)(a) indicates a mandatory and imperative directive. The two notice provisions are, by their terms, both compulsory, as each states that the department “shall” provide the required notice. Further, the GSTA states that the department “shall” administer the sales tax—including its assessment of sales tax deficiencies—pursuant to the revenue collection act, which encompasses both notice statutes.
Browder v. Int'l Fidelity Ins. Co., 413 Mich. 603, 612, 321 N.W.2d 668 (1982).
We conclude that MCL 205.8 is mandatory notwithstanding the greater specificity of MCL 205.28(a)(1), which requires personal service or notice by certified mail, because that specificity has no bearing on the elements of the statute that impose a mandatory obligation to provide notice to a designated taxpayer representative. Similarly, it is irrelevant that MCL 205.8 requires that “copies” of notices and letters be provided to a taxpayer's representative. Applying the plain meaning of “shall,” there can be no doubt that MCL 205.8 unambiguously directs the department to furnish a taxpayer's representative with these documents whenever the taxpayer is entitled to receive the same.
Reading the notice statutes in pari materia with MCL 205.22 confirms the notice statutes' parity. Statutes that relate to the same subject matter or share a common purpose must be read together as constituting one law, even if they contain no reference to one another and were enacted on different dates. Conflicting provisions of such statutes must be read together to produce a harmonious whole and to reconcile any inconsistencies wherever possible. The purpose of this interpretive rule is to give effect to the legislative purpose as found in statutes on a particular subject.
Jennings v. Southwood, 446 Mich. 125, 136, 521 N.W.2d 230 (1994); Crawford Co. v. Secretary of State, 160 Mich.App. 88, 95, 408 N.W.2d 112 (1987).
World Book, Inc. v. Dep't of Treasury, 459 Mich. 403, 416, 590 N.W.2d 293 (1999).
Jennings, 446 Mich. at 137, 521 N.W.2d 230.
MCL 205.22, which dictates procedures surrounding a taxpayer's appeal, does not refer to either MCL 205.8 or MCL 205.28(1)(a). MCL 205.22 merely states that the appeal period begins to run upon “issuance of the assessment, decision, or order.” Just as MCL 205.22 does not refer to either notice requirement, neither of the notice-requirement statutes refers to MCL 205.22. Accordingly, there is no statutory indication suggesting that we hold MCL 205.8's taxpayer representative notice requirement in lower esteem than the MCL 205.28(1)(a) taxpayer notice requirement. When notice is required, the department must notify the taxpayer and any representative duly appointed by the taxpayer.
.MCL 205.22(5). Specifically, MCL 205.22(5) states that “[a]n assessment is final, conclusive, and not subject to further challenge after 90 days after the issuance of the assessment, decision, or order....” This reflects the outer bound of an appeal's timeliness, as MCL 205.22(1) permits an appeal to the Tax Tribunal within 35 days after the assessment or to the Court of Claims within 90 days after the assessment. In reading MCL 205.22 as a whole, it is apparent that both appeal periods begin to run upon “issuance” of the assessment.
Having determined that the Legislature intended MCL 205.8 to apply to the department coextensively with MCL 205.28(1)(a), we turn to the relationship between notice and issuance of the assessment. By statute, the appeal period cannot begin to run until “issuance of the assessment” occurs. The department concedes that if it fails to comply with MCL 205.28(1)(a), issuance does not occur. Because the two notice statutes stand on equal footing, the department's concession compels the same consequence for its failure to comply with MCL 205.8, namely, that issuance does not occur.
At oral argument, counsel for the department conceded that if the department does not comply with MCL 205.28(1)(a), it does not provide notice, and the consequence of not providing notice is that an assessment was never issued.
Furthermore, MCL 205.21(2)(f) provides a textual link between issuance of the final assessment and provision of the required notices. Under that section, a final assessment of a tax deficiency “is final and subject to appeal as provided in [ MCL 205.22]. The final notice of assessment shall include a statement advising the person of a right to appeal.” The statute equates “final assessment” with “final notice of assessment” by using the terms inter changeably. The notice and the assessment are one and the same. It follows that the assessment cannot issue if the notices do not issue. Given its plain meaning, “issuance” requires actual distribution; the root word, “issue,” is defined as “the act of sending out or putting forth; promulgation; distribution.” Thus, in addition to our determination that the two statutory notice requirements apply to the department with equal force, we further conclude that satisfaction of both notice requirements is required before issuance of the assessment is deemed to have occurred, starting the appeal period. Because the department delayed issuing the notices of assessment to the taxpayers' representatives in both cases before us, the running of the appeal periods were also delayed. The taxpayers' appeals were therefore timely, and the Tax Tribunal retained jurisdiction.
.MCL 205.21(2)(f) reads in full:
If the taxpayer does not protest the notice of intent to assess within the time provided in subdivision (c), the department may assess the tax and the interest and penalty on the tax that the department believes are due and payable. An assessment under this subdivision or subdivision (e) is final and subject to appeal as provided in section 22. The final notice of assessment shall include a statement advising the person of a right to appeal. [Emphasis added.]
Id.
Indeed, “[i]t was previously the practice of [the department] to use the phrasing ‘notice of assessment’ when it issued assessments.” Fradco, 298 Mich.App. at 300, 826 N.W.2d 181.
Random House Webster's College Dictionary (1997).
Although it did not preserve this issue in the Court of Appeals below, the department here challenges the validity of the power of attorney forms in both cases. In Fradco, the department argues that the authorization form was invalid because it did not identify a specific dispute, as MCL 205.8 allegedly requires. However, MCL 205.8 only states that a taxpayer may not designate more than one representative for a single dispute. Here, Fradco had only one designated representative throughout the dispute. In SMK, the department argues that the form designating Edward Kisscorni as a representative was not valid because it was the third authorization form on file. While it is true that SMK had three authorization forms on file, the third form gave Kisscorni limited authorization to represent SMK in this tax matter specifically. Thus, SMK only specifically designated one representative for this dispute.
IV. CONCLUSION
The Tax Tribunal and Court of Appeals correctly interpreted MCL 205.8 as imposing upon the department an obligation to notify a taxpayer's official representative before the time to appeal a final assessment may begin to run. In both force and effect, this obligation applies to the department coextensively with MCL 205.28(1)(a).
The running of the appeal period is triggered by “issuance of the assessment,” and while issuance is not explicitly defined, MCL 205.21(2)(f) demonstrates that notice of the assessment is equivalent to the assessment itself. Thus, the running of the appeal period is triggered by issuance of statutory notice. Further, compliance with MCL 205.28(1)(a) is undisputedly a prerequisite to issuance. Because MCL 205.8 operates in tandem with MCL 205.28(1)(a), we hold that compliance with the department's statutory obligation to notify a taxpayer's official representative is likewise a prerequisite to issuance. However, because MCL 205.28(1)(a) and MCL 205.8 do not require the department to show that the taxpayer or its representative actually received the notice, we vacate the portions of the Court of Appeals opinions that read, “Because Petitioner filed its appeal within 35 days after its representative received notice from respondent, the Tax Tribunal had jurisdiction to hear petitioner's appeal.” To the extent that this can be read to mean the appeal period begins when a taxpayer's representative receives notice, we conclude it is erroneous. Instead, the appeal period begins when the department complies with MCL 205.28(1)(a) by giving the taxpayer notice of the final assessment through personal service or certified mail and MCL 205.8 by sending a copy of the notice of the final assessment to the representative's address provided by the taxpayer in its written request. In all other respects, we affirm the rulings of the Court of Appeals.
See note 26 of this opinion.
Fradco, 298 Mich.App. at 301, 826 N.W.2d 181;SMK, 298 Mich.App. at 310, 826 N.W.2d 186.