Heard: June 3, 2019.
Appeals from decisions of the Appellate Tax Board.
Donald-Bruce Abrams (John S. Brown also present) for the
taxpayer.
Kirk
G. Hanson, Assistant Attorney General, & Pierce 0. Cray,
Assistant Attorney General, for Commissioner of Revenue.
Present: Green, C.J., Vuono, & Lemire, JJ.
GREEN,
C.J.
These
two related appeals raise questions concerning the timeliness
and scope of applications for abatement of excise taxes filed
by the Raytheon Company for the years 2007 and 2012,
respectively. In both cases, Raytheon timely filed its
return, but thereafter received notice of a deficiency
assessment from the Commissioner of Revenue (commissioner),
and filed an application for abatement challenging the
deficiency assessment. Raytheon timely appealed the
commissioner's denials of the abatement applications,
and, while the appeals were pending before the Appellate Tax
Board (board), subsequent events revealed in each instance
that Raytheon had in fact overpaid the taxes owed when it
filed its original returns. Although the commissioner abated
the deficiency assessments in full while the appeals to the
board were still pending, Raytheon argued that it was due
further abatements on the theories that (a) it had overstated
its income for 2007, and (b) it was entitled to recoup at
once (in the form of a tax refund) certain investment tax
credits, rather than carrying forward any credits remaining
after the full abatement of the 2012 deficiency assessment.
After abating the deficiency assessments, the commissioner
moved to dismiss Raytheon's appeals to the board, arguing
that the appeals were untimely as to any matter other than
the deficiency assessments. The board agreed and dismissed
Raytheon's appeals for want of jurisdiction over any
amounts other than the deficiency assessments. On appeal to
this court, Raytheon contends that the board's dismissal
was incorrect because the deficiency assessments necessarily
encompassed not only the amounts stated in the notices of
deficiency assessment but also the amounts by which Raytheon
had overpaid its taxes in its original returns. In its appeal
concerning its 2012 return, Raytheon makes an additional
argument: that its application for abatement, which
referenced only the deficiency assessment for that return,
was sufficient to preserve its rights to claim an abatement
of taxes reported in its filed return because the application
for abatement was filed within three years after Raytheon had
filed its return.[1] See G. L. c. 62C, § 37. We affirm the
decisions of the board in both cases.
1.
Factual Background. a. 2007 return.
Raytheon
filed a corporate excise tax return for the 2007 tax year,
reporting an excise tax liability of $7, 333,
762.[2]
On November 15, 2011, following an audit, the commissioner
issued a notice of assessment, notifying Raytheon that he had
assessed it an additional $650, 752 of corporate excise tax,
plus interest and penalties, for the 2007 tax
year.[3]
On
January 12, 2012, Raytheon filed an application for abatement
of the deficiency assessment. Raytheon did not, however, file
any application for abatement directed to its original 2007
tax return. The commissioner denied Raytheon's abatement
application in full on July 31, 2013. On September 20, 2013,
Raytheon filed with the board a timely appeal from the
commissioner's denial.
In
addition to challenging the nonincome measure of the excise
upon which the $650, 752 deficiency assessment for the 2007
tax year was based, Raytheon also raised for the first time
in its appeal to the board a claim that it had overstated its
sales factor in its original 2007 return, resulting in an
overstatement of the income component of its corporate excise
for that tax year on that return. As a result of the alleged
sales factor overstatement in its 2007 tax return, Raytheon
claimed it was entitled to an additional abatement of $5,
746, 575 for the 2007 tax year, to be refunded from the taxes
paid when it originally filed its return.
On
December 14, 2015, the commissioner filed a partial motion to
dismiss, moving to dismiss so much of Raytheon's appeal
to the board as sought an abatement of portions of the tax
paid when it filed its 2007 return. The commissioner agreed
that Raytheon could use the sales factor adjustment argument
as a new legal theory to dispute the commissioner's
tangible property deficiency assessment of $650, 752 for the
2007 tax year. However, he argued that, because Raytheon had
never applied for an abatement of the tax originally reported
on the 2007 return, any challenge to the original
self-assessment for 2007 was time barred. After the board
denied the commissioner's motion, the commissioner abated
the deficiency assessment in full, and filed a second motion
to dismiss what remained of Raytheon's appeal -- in other
words, its request for abatement of portions of the tax it
originally reported on, and paid with, its 2007 return. On
February 2, 2018, the board allowed the commissioner's
motion to dismiss, and Raytheon appealed.
b.
2012 return.
Raytheon
filed its 2012 corporate excise return on August 29, 2013,
reporting a tax due of $8, 574, 471. On July 25, 2016, the
commissioner sent to Raytheon a notice of assessment for 2012
in the amount of $2, 885, 572, plus interest and penalties,
based on the commissioner's denial of a research and
development credit that Raytheon had claimed. Raytheon
applied for an abatement of the deficiency assessment on
August 24, 2016. At thirty days after the deficiency
assessment, Raytheon's abatement application was filed
well within the two-year limit established by G. L. c. 62C,
§ 37, and also fell (by five days) within three years
after the date it had filed the return.
The
commissioner denied Raytheon's abatement application on
February 24, 2017. Raytheon then timely appealed to the board
from the commissioner's denial on March 24, 2017. On
November 15, 2017, before any board action on Raytheon's
abatement application, Raytheon and the commissioner reached
a settlement regarding Raytheon's corporate excise
liability for two previous years: 2008 and 2009. Two aspects
of that settlement had a significant collateral effect on
Raytheon's 2012 excise. First, the settlement altered the
calculation of the 2012 research and development credit at
issue in the commissioner's deficiency assessment,
leading him to reduce that assessment from $2, 885, 572 to
$119, 929. Second, the settlement also resulted in $2, 737,
091 worth of investment tax credit (ITC)
"carryforwards" from 2008 and 2009 available for
certain uses in later tax years, including 2012. The
commissioner applied $119, 929 of those carryforwards to 2012
as a credit against the remaining balance of the deficiency
assessment, thereby reducing that balance to zero. As a
result, the commissioner abated the deficiency assessment in
full on April 12, 2018. The next day, he moved to dismiss for
lack of jurisdiction Raytheon's appeal to the board from
his earlier denial of the company's application to abate
the deficiency assessment.
In
response, Raytheon asserted that it should be allowed to
apply the remaining $2, 617, 162 in unused ITC carryforwards
to the tax it had paid with its 2012 return, and receive a
refund in that amount. In furtherance of that claim, Raytheon
filed an amended and restated petition in which it sought
"to amend and restate in its entirety the petition that
Raytheon previously filed . . . and to assert Raytheon's
entitlement to an additional abatement and refund."
After hearing, the board issued a decision with findings,
dismissing Raytheon's appeal for lack of jurisdiction,
based on the fact that the commissioner had abated in full
the deficiency assessment that was the subject of
Raytheon's abatement application, and the time for filing
a new abatement application with the commissioner had long
since passed. This appeal followed, and was paired for
hearing with Raytheon's appeal from the board's
decision concerning the 2007 return.
2.
Statutory and regulatory background.
Assessment
of taxes is governed by G. L. c. 62C, § 26. Subparagraph
(a.) ...