Citation Numbers: 448 Mass. 441
Judges: Spina
Filed Date: 3/2/2007
Status: Precedential
Modified Date: 10/19/2024
In these appeals by the Commissioner of Revenue (commissioner) and now before us on his applications for direct appellate review, we consider how interest on tax refunds owed to the estate of Emile L. Fournier (Fournier estate) and to Fleet National Bank (Fleet)
1. Statutory framework. General Laws c. 62C, § 40, governs the refund of taxes, interest, or penalties when a taxpayer makes an overpayment to the Department of Revenue (department). Because the present dispute turns on our construction of § 40, we first set forth its relevant provisions.
Prior to July 1, 2003, G. L. c. 62C, § 40, stated:
“(a) If any refund of any tax, interest or penalties is made pursuant to [G. L. c. 62C, § 36], the state treasurer shall repay to the taxpayer the amount of such refund with interest thereon at the rate established under [G. L. c. 62C, § 32], except as hereinafter provided, from the date of overpayment to a date, to be determined by the commissioner, preceding the date of the refund check by not more than thirty days . . .” (emphasis added).
Pursuant to the department’s regulations, an overpayment of taxes occurred on “the due date of the applicable return without regard to extensions, or date of receipt of the overpayment, or the date of filing of the return, whichever [was] later, to a date no more than 30 days before the issuance of the refund.” 830 Code Mass. Regs. § 62C.33.1(7)(b) (2004). See Technical Information Release (TIR) 03-18 (Aug. 29, 2003), 5 Official MassTax Guide at 170 (West 2006). Interest on a refund of
In 2003, the Massachusetts Legislature enacted emergency legislation to make immediate appropriations for the fiscal year beginning July 1, 2003. See St. 2003, c. 26, preamble. As is pertinent here, the Legislature amended G. L. c. 62C, § 40, to add a second paragraph to subsection (a) (hereinafter referred to as the 2003 amendment), which provides:
“For purposes of this section, the term ‘date of overpayment’ shall mean the later of the date when the commissioner shall have received a properly completed return and full payment of the tax due thereon, or the date when the commissioner shall have received a completed and substantiated written application for abatement filed in accordance with this chapter, and any supplemental information requested by the department from the taxpayer in support of such application” (emphasis added).
G. L. c. 62C, § 40 (a), as amended through St. 2003, c. 26, § 197. See 830 Code Mass. Regs. § 62C.33.1(7)(c) (“For abatement claims filed on or after July 1, 2003, interest will be calculated on any tax, interest or penalty refunded from the date of receipt of a completed and fully substantiated abatement application”). See also TIR 03-18, supra. The 2003 amendment became effective on July 1, 2003. See St. 2003, c. 26, § 715. Interest on a refund of an overpayment was reduced to the Federal short-term rate, “plus 2 percentage points, computed as simple interest.” G. L. c. 62C, § 40 (a), as amended through St. 2003, c. 26, § 196. See 830 Code Mass. Regs. § 62C.33.1 (7)(a). In sum, the effect of the 2003 amendment to G. L. c. 62C, § 40 (a), with respect to the issuance of a tax refund for an overpayment was to change both the meaning of the “date of overpayment” and the applicable interest rate.
2. Factual and procedural background, a. Fournier estate. Emile L. Fournier, a Massachusetts resident, died on January 24, 2000. On October 24, 2000, the executors of the Fournier estate requested and received an extension on the filing of its
On June 25, 2004, the executors of the Fournier estate filed an abatement application with the department, seeking a refund of its $2,339,382.52 overpayment, plus statutory interest pursuant to G. L. c. 62C, § 40. The department issued a refund to the Fournier estate in the amount of $2,364,629.96, of which $2,339,382.52 was principal and $25,247.44 was interest. The interest was calculated from June 25, 2004, the date the execu
The executors of the Fournier estate proceeded to file with the Essex Division of the Probate and Family Court Department, pursuant to G. L. c. 62C, § 39, a petition to receive interest owed to the estate. They claimed that the statutory language of G. L. c. 62C, § 40, in effect on October 24, 2000, when the Fournier estate overpaid its estate taxes to the Commonwealth, was controlling, and that the estate was entitled to recoup a total of $663,366.51 in interest that had accrued since that date, rather than the mere $25,247.44 they had been paid. The executors then filed a motion for judgment on the pleadings. The commissioner filed a cross motion for judgment on the pleadings, asserting that the amended statutory language of G. L. c. 62C, § 40, effective July 1, 2003, was controlling, and that the Fournier estate only was entitled to interest from the date it filed its application for an abatement, namely June 25, 2004.
A judge in the Probate and Family Court ruled in favor of the Fournier estate and ordered the commissioner to pay the executors interest in the amount of $638,119.07, plus any additional interest that had accrued between the time of the filing of their petition and final payment. The judge concluded that the commissioner had erred in retroactively applying the 2003 amendment to the Fournier estate because the commissioner’s action infringed on the estate’s substantive right to the receipt of interest from the date of its tax overpayment. Moreover, the judge opined that the retroactive application of the 2003 amendment did not satisfy the test of “reasonableness,” thereby violating due process protections afforded by the Massachusetts Declaration of Rights and the United States Constitution.
On April 5, 2004, Fleet filed with the Appellate Tax Board (board) a petition pursuant to the formal procedure, see G. L. c. 58A, § 7, and G. L. c. 62C, § 39, challenging the commissioner’s refusal to pay additional interest on Fleet’s successful tax abatement. Fleet and the commissioner agreed that Fleet was entitled to interest on its overpayment from December 31,
The board ruled in favor of Fleet and ordered the commissioner to pay Fleet interest in the amount of $352,745.11, plus any additional interest that had accrued. The board first noted that the 2003 amendment to G. L. c. 62C, § 40, was silent on how it affected the computation of interest on tax payments made prior to its effective date of July 1, 2003. The board concluded that because the 2003 amendment affected Fleet’s substantive right to the interest that had accrued from the date of its overpayment on September 3, 1998, the 2003 amendment had to be applied prospectively, beginning on July 1, 2003. In the alternative, the board stated that, even if the 2003 amendment to G. L. c. 62C, § 40, was deemed to be a procedural change, rather than a substantive one, the 2003 amendment could not be applied retroactively where the procedural stage to which it related, namely the daily accrual of interest from the date of overpayment, had already passed. The board further concluded that the commissioner’s reliance on 830 Code Mass. Regs. § 62C.33.1(7)(c) was unavailing because the regulation was inconsistent with Massachusetts case law, which prohibits retroactive application of a statutory amendment affecting substantive rights. Accordingly, Fleet was entitled to judgment on the pleadings. The commissioner filed a notice of appeal.
3. Statutory retroactivity. We now consider how interest on the refunds paid to the taxpayers should have been calculated in light of the 2003 amendment to G. L. c. 62C, § 40. The thrust of the commissioner’s argument is that, contrary to the conclusions of the Probate and Family Court judge and the board, his interest calculations were not based on an unlawful retroactive application of the 2003 amendment. He points out that when the 2003 amendment became effective on July 1, 2003, the only action that had been taken by the taxpayers was the payment of
A fundamental and well-established principle of statutory interpretation “is that a statute must be interpreted according to the intent of the Legislature ascertained from all its words construed by the ordinary and approved usage of the language, considered in connection with the cause of its enactment, the mischief or imperfection to be remedied and the main object to be accomplished, to the end that the purpose of its framers may be effectuated.” Hanlon v. Rollins, 286 Mass. 444, 447 (1934). See Sullivan v. Brookline, 435 Mass. 353, 360 (2001). Courts must ascertain the intent of a statute from all its parts and from the subject matter to which it relates, and must interpret the statute so as to render the legislation effective, consonant with sound reason and common sense. See Champigny v. Commonwealth, 422 Mass. 249, 251 (1996); Pentucket Manor Chronic Hosp., Inc. v. Rate Setting Comm’n, 394 Mass. 233, 240 (1985); Tilton v. Haverhill, 311 Mass. 572, 577-578 (1942). Where the language of a statute is unambiguous, we simply give effect to the Legislature’s intent. See Smith v. Commissioner of Transitional Assistance, 431 Mass. 638, 646-647 (2000).
Whether a statutory enactment applies prospectively or retrospectively is a question of legislative intent. See Moakley v. Eastwick, 423 Mass. 52, 57 (1996). As a general matter, “all statutes are prospective in their operation, unless an intention that they shall be retrospective appears by necessary implication from their words, context or objects when considered in the light of the subject matter, the pre-existing state of the law and the effect upon existent rights, remedies and obligations. Doubt
While this rule about the retroactive application of a statute is easily enunciated, the distinction between legislation concerning “substantive rights,” and legislation concerning “only procedures and remedies” is more difficult to draw. City Council of Waltham v. Vinciullo, 364 Mass. 624, 626-627 (1974). “It appears from the context, and from a review of our prior decisions, that the term ‘remedies,’ as it was used in Hanscom v. Malden & Melrose Gas Light Co., supra, has only encompassed essentially procedural legislation which preserves a remedy that might otherwise be lost, or which creates a new enforcement mechanism for remedying the impairment of an existing legal right.” Fontaine v. Ebtec Corp., 415 Mass. 309, 319 (1993). See Child Support Enforcement Div. of Alaska v. Brenckle, 424 Mass. 214, 220 (1997) (stating that remedial statute, one not affecting substantive rights, should be applied retroactively); Gray
A statutory amendment that extinguishes a substantive right only operates prospectively, absent an explicit pronouncement from the Legislature to the contrary. See Austin v. Boston Univ. Hosp., supra at 657. Here, the Legislature made no such pronouncement to indicate that the 2003 amendment to G. L. c. 62C, § 40, was to have retroactive effect. The 2003 amendment does not state, for example, that its provisions govern any tax action that is “pending or was previously adjudicated.” Child Support Enforcement Div. of Alaska v. Brenckle, supra at 219 (concluding that express intention of Legislature was to apply Uniform Interstate Family Support Act retroactively). See Leibovich v. Antonellis, 410 Mass. 568, 576 (1991). Accordingly, we treat the 2003 amendment as operating prospectively. To do otherwise would impair the substantial right of all taxpayers who, prior to July 1, 2003, overpaid their taxes so as not to incur penalties for underpayment, see G. L. c. 62C, §§32 (a) and 33 (b), to receive a refund, with interest thereon, from the date such overpayment was made, in accordance with the clear language of G. L. c. 62C, § 40. Contrary to the commissioner’s argument, prior to the enactment of the 2003 amendment, the payment of taxes was the operative statute-triggering event that immediately conferred on a taxpayer the right to receive a refund and interest if it was determined, at some subsequent time, that the taxpayer made an overpayment. When the taxpayers here paid their respective estate and excise taxes, G. L. c. 62C, § 40, plainly provided that the State treasurer would repay the amount of the refund, with interest thereon, from the date of overpayment.
4. Conclusion. The judgment of the Probate and Family Court as to the Fournier estate is affirmed, and we remand that case for a recalculation of interest in accordance with this opinion.
So ordered.
Bank of America, N.A., is the successor by merger to Fleet National Bank. We refer throughout this opinion to Fleet because it was the entity that filed the application for an abatement with the Department of Revenue.
The Federal estate tax return for the Fournier estate has not been included in the record, and it is unclear precisely when it was filed.
At all times relevant to the present action, Massachusetts estate tax liability depended on the Federal government’s determination of the value of a particular estate. See G. L. c. 65C, § 2A (e), inserted by St. 1992, c. 33, § 419 (Massachusetts estate tax values “shall be as finally determined for [F]ederal estate tax purposes”). As applicable to the estates of Massachusetts residents dying on or after January 1, 1997, this estate tax was known as a “sponge tax.” The term would, at first blush, appear to be a misnomer because it was not a tax on sponges. See Ward v. Commissioner of Corps. & Taxation, 369 Mass. 3, 4 (1975) (commenting on origin of term by noting that “[s]uch a State estate tax has been characterized as a ‘sponge’ tax because it is designed to divert death taxes to the State which otherwise would go to the Federal government”). The sponge tax was imposed “on estates of decedents valued over the Federal exemption in the year of death. Under the sponge tax system, if any Federal estate tax was due, the Federal government directed a percentage of the Federal estate tax dollars to Massachusetts. If no Federal estate tax was due, then no Massachusetts estate tax was due.” Grassian v. Grassian, 445 Mass. 1012, 1013 (2005). For a discussion of the details of this sponge tax, see A.C. Bailey & W.G. Van Dorn, Taxation § 9:1 (4th ed. 2000 & 2006 Supp.). The sponge tax system was eliminated in Massachusetts as of January 1, 2003. See G. L. c. 65C, § 2A, as appearing in St. 2002, c. 364, §§ 10, 23, 24, and St. 2002, c. 186, §§ 28, 34. See also Grassian v. Grassian, supra.
“In evaluating the reasonableness of a retroactive statute, we have weighed three principle considerations: the nature of the public interest which motivated the Legislature to enact the retroactive statute; the nature of the rights affected retroactively; and the extent or scope of the statutory effect or impact.” Leibovich v. Antonellis, 410 Mass. 568, 577 (1991).
In his decision, the judge noted that TIR 03-18, issued by the commissioner on August 29, 2003, clarified the practical effect of the 2003 amendment to G. L. c. 62C, § 40. See TIR 03-18, 5 Official MassTax Guide at 166-
Fleet acknowledges in its brief that there is no evidence in the record of exactly when BayBank, N.A., paid its financial institution excise tax for the 1997 calendar year. The findings of fact by the Appellate Tax Board indicate that BayBank paid this tax at the same time it filed its return, on September 3, 1998.
It is well established that “issues of statutory interpretation should be resolved prior to reaching any constitutional issue.” 1010 Memorial Drive Tenants Corp. v. Fire Chief of Cambridge, 424 Mass. 661, 663 (1997). “We do not decide constitutional questions unless they must necessarily be reached.” Commonwealth v. Paasche, 391 Mass. 18, 21 (1984). Here, because our conclusions are based on our interpretation and application of G. L. c. 62C, § 40, and the 2003 amendment, it is unnecessary to consider whether the commissioner’s construction of these legislative enactments violated due process rights afforded to the taxpayers under the Massachusetts Declaration of Rights or the United States Constitution.
We are unable to discern from the judgment entered in the Probate and Family Court whether the $638,119.07 in interest awarded to the Fournier estate included or excluded interest for the period from July 1, 2003, to June 25, 2004. For the reasons set forth in this opinion, the Fournier estate was not entitled to interest during this time period.