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IN THE OREGON TAX COURT MAGISTRATE DIVISION Property Tax TOO, INC., dba LIMITED TOO #125, Plaintiff, v. LANE COUNTY ASSESSOR, Defendant. ) ) ) ) ) ) ) ) )

TC-MD 050720E

DECISION

Plaintiff appeals Defendant's omitted property notice dated May 18, 2005. Defendant determined that Plaintiff had failed to file a personal property tax return for the 2004-05 tax return and assessed tax and penalty accordingly. Plaintiff agrees with the assessed tax but contends the assessed penalty should be canceled, claiming it timely filed a 2004-05 tax return. A telephone trial in the matter was held November 8, 2005.1 Kevin Schockling appeared on behalf of Plaintiff. Testifying for Plaintiff was James Petersen (Petersen). Carol Furlong appeared and testified on behalf of Defendant.2 I. STATEMENT OF FACTS Plaintiff owns personal property in Lane County.3 Smart and Associates, LLP, is an accounting firm that handles tax matters for Plaintiff. Smart and Associates is located in Illinois, and Plaintiff's headquarters are located in Ohio. For the 2004-05 tax year, Smart and Associates was responsible for filing the personal property tax return with Defendant.

The proceeding began as a case management conference but was converted to a trial after both parties represented to the court they were prepared to present their cases at that time.
2 On February 23, 2006, the court sent Plaintiff a letter stating that the exhibits submitted for the November 8, 2005, proceeding related to the 2005-06 tax year filing, rather than the 2004-05 tax year. The court allowed Plaintiff time to remedy the error. On March 16, 2006, Plaintiff provided similar exhibits that related to the 2004-05 tax year filing. 3

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The personal property is identified in Account 5587739.

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Petersen, the Senior Tax Manager for Smart and Associates, testified that Smart and Associates has established procedures it uses for filing returns. Those procedures, he testified, were developed over the years and involve various checks to ensure accuracy. The process begins with the preparation of returns. Once the returns are prepared, an "Assessed Value Summary Listing" is prepared and printed. That summary shows which stores had returns prepared, the property's cost and value, the assessor, and the site code (store number). The Assessed Value Summary Listing shows the date and time that it and the returns were printed. For the 2004-05 tax year, the summary shows the subject account had a return printed February 10, 2004. (See Ex I (E).) Petersen testified that, once the returns are prepared, they combine the information for each state onto an excel spreadsheet. Each county receives its own line and the accounts that had returns prepared are listed on the county's line. The subject property is listed on the 2004-05 tax year spreadsheet as an account for Lane County. (See Ex II (C).) Petersen testified that, after the spreadsheet is prepared, they perform a mail merge, which automatically creates a transmittal letter to each county. Contained within that letter is a listing of the various properties that had returns prepared for the county. (See Ex III.) An individual is then assigned the task of attaching the returns to the letter and, while doing so, checking that each return listed has been printed. The returns and letter are then transferred to another individual who verifies the information before placing the documents in an envelope for mailing. The transmittal letter to Lane County for the 2004-05 tax year is dated February 20, 2004, and it lists Plaintiff as one of the businesses having a return filed. (Id.) The transmittal letter requests that the assessor verify each return has been received, stating: "In order for us to complete our records, please review and sign this letter in the space

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provided indicating your receipt of the enclosed renditions * * * ." (Id.) Petersen testified that he would expect county personnel to review the letter and notify him if any returns that were listed as being filed were not included with the transmittal. Defendant did not notify Plaintiff that the subject return was missing, nor did Defendant sign and return the transmittal letter. Furlong testified that whether she returns such requests to taxpayers depends on how busy she is at the particular time. She testified that, rather than returning the letter, she kept a copy with each return. For the 2004-05 tax year, Plaintiff did not receive a tax statement for the subject property. An employee of Smart and Associates contacted Defendant to inquire about the statement. Defendant reviewed its records and concluded it had never received a return for the subject account. Defendant confirmed that it had received returns for the six other accounts listed on the transmittal letter. When informed that Defendant had not received the return, Smart and Associates sent a copy of the return, which showed a signature date of February 10, 2004. After receiving a copy of the return, Defendant determined it should issue an omitted property assessment for the 2004-05 tax year. The notice of assessment advised Plaintiff that, along with the tax, Defendant was assessing a 50 percent penalty for Plaintiff's failure to file a return. Plaintiff appealed Defendant's notice to this court, claiming the penalty should be canceled because Plaintiff timely filed its return with Defendant. Plaintiff contends Defendant misplaced the return upon receipt. II. ANALYSIS ORS 308.290(1)(a)4 requires every business owning taxable personal property to file a personal property tax return by March 1 of each year and provides that, if a party fails to file a

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All references to the Oregon Revised Statutes (ORS) are to 2003.

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return by the March 1 deadline, they "shall be * * * subject to the provisions of ORS 308.296." ORS 308.296(4) provides that any taxpayer who fails to file a return is subject to a "penalty equal to 50 percent of the tax[.]" Because Defendant concluded Plaintiff had not filed a return, it assessed a 50 percent penalty. Normally, when presented with penalty cases, the court's review is whether there is "good and sufficient cause" for waiving the penalty. See ORS 305.422. In those cases, the plaintiffs agree they failed to timely file their returns, but argue they have a good reason for not filing the return. In the subject case, Plaintiff claims it did file the return. Therefore, Plaintiff is not arguing it has a good reason for not filing the return but that, in fact, the penalty was not properly imposed because Plaintiff timely filed the return.5 ORS 305.427 provides that, in proceedings before the Tax Court, "[t]he burden of proof shall fall upon the party seeking affirmative relief." Because Plaintiff is seeking relief in this case, it has the burden of proof. That means Plaintiff must establish its claim "by a preponderance of the evidence, or the more convincing or greater weight of evidence." Schaefer v. Dept. of Rev., TC No 4530 (July 12, 2001) (citing Feves v. Dept. of Revenue, 4 OTR 302 (1971)). After reviewing the evidence and testimony presented, the court is persuaded that Plaintiff has established by a preponderance of the evidence that it filed its return. The documentary evidence supports Plaintiff's contention that a return was timely prepared and signed. Further, Smart and Associates has established procedures for ensuring returns are mailed

Typically, when a taxpayer claims it filed a return, and the county has no record of receiving it, the court reviews the matter under ORS 305.820. That statute relates to documents that are lost in mail. Here, Defendant received the envelope Plaintiff claims it used to file the return because Smart and Associates used one envelope to file several returns. The other returns were all received by Defendant. As a result, there is no claim that the return was lost in mail. Rather, the argument is that it was lost at Defendant's offices.

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to the appropriate jurisdiction. When printing the returns and letter of transmittal, an individual is responsible for making certain the returns attached to the letter match the properties listed on the letter. As an additional check, Smart and Associates requires another individual, who is given the task of placing the documents in the envelope, to once again verify that all returns listed on the letter are included. The subject letter of transmittal states that a return for the subject site was included and the records show that a return was prepared. It is doubtful that two employees would have overlooked the "missing" return. From the court's view, the better explanation is that it became misplaced once it arrived at Defendant's offices. As a result, the court finds the penalty should be canceled. III. CONCLUSION Plaintiff has the burden of establishing by a preponderance of the evidence that it timely filed its return. The court concludes Plaintiff has met its burden in this appeal. Therefore, the court finds the 50 percent penalty should be canceled. Now, therefore, IT IS THE DECISION OF THIS COURT that Defendant shall cancel the 50 percent penalty assessed to Account 5587739 for tax year 2004-05. Dated this _____ day of March 2006. ________________________________ COYREEN R. WEIDNER MAGISTRATE

If you want to appeal this decision, file a complaint in the Regular Division of the Oregon Tax Court, by mailing to: 1163 State Street, Salem, OR 97301-2563; or by hand delivery to: Fourth Floor, 1241 State Street, Salem, OR. Your complaint must be submitted within 60 days after the date of the decision or this decision becomes final and cannot be changed. This document was signed by Magistrate Coyreen R. Weidner March 29, 2006. The Court filed and entered this document March 29, 2006.
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