Community Bancshares, Inc., Appellant, v. Secretary of State of Missouri, Respondent.

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court. Opinion Missouri Court of Appeals Western District Case Style: Community Bancshares, Inc., Appellant, v. Secretary of State of Missouri, Respondent. Case Number: WD58314 Handdown Date: 01/09/2001 Appeal From: Circuit Court of Cole County, Hon. Byron Kinder Counsel for Appellant: James Borthwick Counsel for Respondent: Keith Halcomb Opinion Summary: The Secretary of State denied corporation amendment of tax returns, citing a two-year statute of limitations. The circuit court granted the Secretary's motion to dismiss because of statute of limitations and because the corporation failed to exhaust administrative remedies. TRANSFERRED TO THE MISSOURI SUPREME COURT. Court holds: Construction of revenue laws is involved. Exclusive jurisdiction lies with the Supreme Court. Citation: Opinion Author: Harold L. Lowenstein, Judge Opinion Vote: TRANSFERRED TO THE MISSOURI SUPREME COURT. Holliger, P.J., and Newton, J., concur. Opinion: This appeal involves determining the applicable time allowed a corporation to file a claim for a refund of overpayment of the state franchise tax. The appellant, Community Bancshares (Bancshares), filed Missouri Corporation Franchise Tax returns with the respondent, the Secretary of State (Secretary), for the years 1994 through 1997. In 1998, after discovering it had

miscalculated on the high side the tax due on those returns, Bancshares filed with the Secretary an amended return for 1997 claiming a refund. The refund was granted. On May 2, 1998, Bancshares then filed an amended return seeking a refund for 1996, and later filed for refunds for 1994 and 1995. The Secretary did not allow the 1996 amendment and denied a refund for overpayment, stating that under section 136.035.3, RSMo. 1994,(FN1) any claim for a refund had to be filed within two years from March 17, 1996, the date of payment. Section 136.035 is located in the chapter concerning the Director or Revenue (Director) and addresses the Director's refund of taxes. Subsection 3 states that no refund shall be made by the Director "...unless a claim for refund has been filed with him within two years from the date of payment." The Secretary never formally denied the amended returns for the earlier years of 1994 and 1995. Chapter 147 contains the statutory provisions for imposing the franchise tax on corporations. Prior to 1987, the tax was collected by the Director of Revenue. In 1987 the statutes were changed to put the Secretary in charge of collection and refunds of this tax.(FN2) Effective January 1, 2000, the legislature changed the law, again removing the Secretary and returning the duties pertaining to the tax to the Director. During the time this dispute arose, however, section 147.040.6 read: In the event that the amount of tax is overstated on a corporation's franchise tax report, the secretary of state shall notify the corporation that the tax paid is more than the correct amount and credit such overpayment against any tax, interest, or penalties due from such corporation and refund the difference. Concerning the time for filing a refund for 1994 through 1996 for overpayment of franchise taxes, it should be noted that the franchise tax statutes, located in Chapter 147, contain no time limitation for filing for relief from an overpayment. There is nothing in Chapter 147 directing attention to section 136.035, nor has section 136.035 ever included the Secretary's name during the period of time the tax was collected by the Secretary. The Secretary's denial of 1996 relief was based in part on 15 CSR 30-150.240(FN3) and 15 CSR 30-150.250, rules promulgated in 1996 by the Secretary, which state that pursuant to section 136.035 a two-year time limitation is set for applications for refunds from the Secretary. Bancshares did not pursue administrative remedies. It instead filed a petition for mandamus and a motion for declaratory judgment in circuit court seeking a declaration that the above-mentioned rules were invalid and the two-year limitation contained in section 136.035 did not apply to these returns. The circuit court granted the Secretary's motion to dismiss, stating that the action is barred by the statute of limitations, and that Bancshares failed to exhaust its administrative remedies.

This court must first, sua sponte, determine whether it has jurisdiction over the issue of the limitation period for filing an amended franchise tax return for a refund. St. Louis Southwestern Ry. Co., v. State Tax Comm'n of Missouri, 706 S.W.2d 916, 917 (Mo. App. 1986). Article V section 3, of the Missouri Constitution grants the Supreme Court exclusive appellate jurisdiction of all cases involving "the construction of the revenue laws of this state." This portion of the constitution "speaks to the seriousness" of the subject of taxation and demonstrates an intention to place such questions before the highest court. Branson Scenic Ry. v. Director of Revenue, 3 S.W.3d 788, 789 (Mo. App. 1999). The term "construction" involves examination of a law that is directly involved in the appeal, is not a peripheral part of a case, and has not been the subject of a previous case construed by the Supreme Court. Robb v. Browns' Estate, 518 S.W.2d 729, 732-33 (Mo. App. 1974). "A 'revenue law' directly creates or alters an income stream to the government that imposes a tax or fee on ... an activity undertaken in that government's area of authority." Alumax Foils, Inc. v. City of St. Louis, 939 S.W.2d 907, 910 (Mo. banc 1997). A revenue law "'of the state' is a law adopted by the general assembly to impose ... a tax ... on all similarly-situated ... entities ... in this state, the proceeds of which are deposited in the state treasury." Id. The issue at the heart of this appeal calls for a determination of what period of limitation for refunds applied to a corporate franchise taxpayer during the period when responsibility for that tax was vested with the Secretary. Whether section 136.035.3, the three-year statute contained in section 516.130, or the five-year statute contained in section 516.120 applies has not been established by the Missouri Supreme Court. Following transfer of St. Louis Southwestern Ry., 706 S.W.2d 916, from this court to the Supreme Court because construction of a revenue law of the state was involved, the Court held it had exclusive jurisdiction. St. Louis Southwestern Ry. Co. v. State Tax Comm'n, 713 S.W.2d 830, 832 (Mo. banc 1986). The Court in construing amendments to the franchise tax in St. Louis Southwestern, was concerned with a factual scenario when Chapter 147 vested collection with the Director rather than the Secretary. Therefore, this case properly belongs under the constitutional provision establishing exclusive jurisdiction in the Missouri Supreme Court. Citizens Electric Corp. v. Campbell, 696 S.W.2d 844, 846 (Mo. App. 1985). The cause is transferred to the Missouri Supreme Court. All concur. Footnotes: FN1. All further statutory references are to RSMo. 1994 unless indicated otherwise. FN2. Pertinent to this appeal, the only changes in Chapter 147 have been merely to replace "Director of Revenue" with "Secretary of State," or vice versa. FN3. Effective January 1, 2000, the title, division, chapter and rule numbering changed with regard to corporation

franchise tax. It is now contained in 12 CSR 10-9.010-.290. Separate Opinion: None This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.