Opinion
No. 107,091.
2012-07-27
DIRECTOR OF TAXATION, State of Kansas, Appellee, v. Jeffery LUOMA, Appellant.
Appeal from Reno District Court; Timothy J. Chambers, Judge. Jeffery Luoma, appellant pro se. Jennifer E. Bazin, of Kansas Department of Revenue, of Topeka, for appellee.
Appeal from Reno District Court; Timothy J. Chambers, Judge.
Jeffery Luoma, appellant pro se. Jennifer E. Bazin, of Kansas Department of Revenue, of Topeka, for appellee.
Before GREENE, C.J., MALONE and ATCHESON, JJ.
MEMORANDUM OPINION
PER CURIAM.
Jeffery Luoma appeals the district court's denial of his Motion to Quash Tax Warrant and Set Aside Tax Assessment, arguing that—contrary to the district court's holding that any challenge to the assessment was untimely—the district court had jurisdiction to rule on the merits of his motion. Concluding both that Luoma failed to exhaust his applicable administrative remedies and that his challenge to the warrant was without merit, we affirm the district court.
Factual and Procedural Background
On January 16, 2009, the Kansas Department of Revenue (KDR) found Luoma was in possession of 213 grams of a controlled substance without having paid the required drug tax. The KDR assessed a drug tax of $42,600 and a civil penalty of 100% of the tax for a total tax liability of $85,200. See K.S.A. 79–5202(a)(4); K.S.A. 79–5208. The notice of assessment specified that if Luoma believed the tax was incorrect or wished to appeal that he “must make a written request for an informal conference with the Secretary or the Secretary's designee WITHIN FIFTEEN (15) DAYS from the date of mailing or personal service of this notice.” The notice further warned that failure to pay the tax immediately could result in a tax warrant being issued and seizure of all of Luoma's property, both real and personal. Luoma made no request for an informal conference, nor did he otherwise attempt to challenge the assessment when issued. A tax warrant was subsequently issued and filed with the Reno County District Court on January 20, 2009.
More than 2 years later on July 6, 2011, Luoma filed his Motion to Quash Tax Warrant and Set Aside Tax Assessment. In his motion, Luoma claimed the tax assessment and warrant were based on charges in a related criminal case, No. 08 CR 975, but that case was dismissed on August 25, 2010. As a result, Luoma maintained the tax assessment was unlawful and requested that it be set aside and all money paid to the KDR be returned. According to Luoma, he had been making biweekly payments on the assessment since May 2010.
In response, the KDR argued the district court had no jurisdiction to rule on the validity of the drug tax assessment because Luoma failed to appeal as provided in the notice of assessment. Regardless, the KDR asserted the disposition of Luoma's criminal case—a dismissal without prejudice—did not control the issuance of the drug tax assessment. See K.S.A.2011 Supp. 79–5205(c) (the director of taxation is not bound by a judicial determination made in any criminal case).
In August 2011, the district court held a hearing on the matter. The court denied the motion, concluding Luoma failed to exercise his statutory right to appeal the drug tax assessment within the time period specified in K.S.A.2011 Supp. 79–5205(d) and, consequently, the court had no jurisdiction to rule on the validity of the assessment. Notwithstanding this conclusion, the district court also found there is a presumption the drug tax assessment is valid, and the burden is on the taxpayer to show the tax is invalid or incorrect. See K.S.A.2011 Supp. 79–5205(b). Further, under K.S .A.2011 Supp. 79–5205(c), the court agreed with the KDR that the director of taxation is not bound by a judicial determination made in any criminal case.
Luoma timely appeals from the district court's decision. Did the District Court Err in Denying Luoma's Motion?
Luoma asserts on appeal that the district court had jurisdiction to address the merits of his challenge to the tax warrant and that the underlying assessment was invalid. Whether jurisdiction exists is a question of law over which this court's scope of review is unlimited. Shipe v. Public Wholesale Water Supply Dist. No. 25, 289 Kan. 160, 165, 210 P.3d 105 (2009). Whether a party has failed to exhaust administrative remedies is a question of law for which we also have unlimited review. Miller v. Kansas Dept. of S.R.S., 275 Kan. 349, 353, 64 P.3d 395 (2003). Interpretation of the statutory provision for taxation of marijuana and controlled substances, K.S.A. 79–5201 et seq. , also warrants our unlimited review. See In re Tax Appeals of Genesis Health Clubs, 42 Kan.App.2d 239, 242, 210 P.3d 663 (2009), rev. denied 290 Kan. 1094 (2010).
We note at the outset that although Luoma maintains he is challenging the tax warrant, the only challenge noted and argued on appeal is to the assessment itself. Luoma's right to challenge the drug assessment is specified in K.S.A.2011 Supp. 79–5205(d). Under that statute, the KDR was required to provide Luoma with notice of the assessment and 15 days to request an informal conference to review and reconsider the facts and issues underlying the assessment. If the taxpayer requests an informal conference, the Secretary of Revenue (or designee) is required to issue a written final determination within 270 days, or later, if the parties agree to an extension. Upon receipt of the Secretary's final written decision or, if no decision is forthcoming and there is no agreement for an extension, within 30 days after the expiration of the 270–day period, the taxpayer can appeal to the Kansas Court of Tax Appeals. An appeal to the Court of Tax Appeals stays the sale of real or personal property but does not stay collection of the assessment. K.S.A.2011 Supp. 79–5205(d).
Luoma does not provide any relevant authority to suggest he should have been allowed to challenge the tax warrant after he neglected to challenge the underlying assessment. We have previously held that failure to pursue an administrative appeal of a tax assessment deprives the district court of jurisdiction to consider a later challenge to a tax warrant issued on that tax assessment because administrative remedies have not been exhausted. See Pattison v. Kansas Dept. of Revenue, No. 95,739, 2007 WL 316821 (Kan.App.2007) (unpublished opinion), rev. denied 284 Kan. 946 (2007).
Luoma suggests that his challenge was appropriate, however, citing Copeland v. Robinson, 25 Kan.App.2d 717, 970 P.2d 69 (1998), rev. denied 266 Kan. 1107 (1999), where our court held that the tax warrants could be challenged despite no objection to the underlying assessment. The distinction, however, is that in Copeland, the appellant did not receive notice of the assessment and, therefore, had been deprived of her due process. See 24 Kan.App.2d 717, Syl. ¶ 3. This is not the case here. Moreover, the court in Copeland acknowledged the general rule that “where a full and adequate administrative remedy is provided in tax matters by statute, such remedy must ordinarily be exhausted before a litigant may resort to the courts.” 25 Kan.App.2d at 720, 970 P.2d 69.
Luoma appears to argue, at least in part, that he can bypass the remedies set out in K.S.A.2011 Supp. 79–5205(d) because he is challenging the constitutionality of the notice of assessment. But Luoma should have followed the statutory procedures to challenge the drug tax assessment in order to preserve any issues, both constitutional and otherwise, before the agency and district court. See State v. Ortega–Cadelan, 287 Kan. 157, 159, 194 P.3d 1195 (2008); Stinemetz v. Kansas Health Policy Authority, 45 Kan.App.2d 818, 825–26, 252 P.3d 141 (2011). Furthermore, Luoma merely raises the constitutional issue in passing. See Cooke v. Gillespie, 285 Kan. 748, 758, 176 P.3d 144 (2008) (issue raised incidentally in a brief and not argued is deemed abandoned).
Finally, contrary to Luoma's assertion, the district court addressed the merits of his motion to quash. The district court noted that under K.S.A.2011 Supp. 79–5205(b), a drug tax assessment is presumed to be valid and correctly determined; the burden is on the taxpayer to show the incorrectness or invalidity of the assessment. The only evidence Luoma provided to the district court to contest the validity of the drug tax assessment was a journal entry of dismissal in No. 08 CR 975. That order stated the case was being dismissed without prejudice “for the reason that the defendant has filed a motion to compel the State to present an expert regarding the financial dealings of the defendant. Therefore, the State is dismissing this case for the purpose of conducting a forensic financial investigation.” Apparently as a result of this dismissal, Luoma argued the drug tax assessment was not supportable because it was not shown that he was a dealer. See K.S.A.2011 Supp. 79–5201(c) (defining a “dealer” as any person who possesses more than 28 grams of marijuana or more than 1 gram of any controlled substance); K.S.A.2011 Supp. 79–5205(a) (allowing the director of taxation to assess the drug tax on a dealer). The district court correctly held that the outcome of Luoma's criminal case had no bearing on whether the director of taxation could issue a drug tax assessment against Luoma. See K.S.A.2011 Supp. 79–5205(c) (in making the assessment, the director of taxation can consider but is not bound by a plea agreement or judicial determination in a criminal case). Although not argued by the KDR below or on appeal, we note that Luoma's challenge to the assessment was also barred by acquiescence. See Almack v. Steeley, 43 Kan.App.2d 764, Syl. ¶¶ 2–3, 230 P.3d 452 (2010).
Luoma's failure to request an informal conference to challenge the drug tax assessment prohibits his attempt to now challenge the tax warrant. Because the drug tax assessment was valid and was not timely challenged, the tax warrant was also valid. The district court did not err either in finding a lack of jurisdiction or in suggesting that the challenge to the assessment was without merit in any event.
Affirmed.