Taxation_challenge to income tax assessment_failure to pay tax or file bond_no subject
matter jurisdiction
The trial court properly concluded that it lacked subject matter jurisdiction over a
challenge to an income tax assessment where plaintiff did not first pay the tax or file a bond, as
required by statute. N.C.G.S. § 105-241.3.
James Leslie Javurek, pro se, petitioner-appellant.
Attorney General Roy Cooper, by Assistant Attorney General
Michael D. Youth, for respondent-appellee.
GEER, Judge.
Petitioner James Leslie Javurek appeals from the trial court's
order denying his motion for summary judgment and dismissing his
action against respondent Tax Review Board. Because Javurek failed
to comply with the statutory requirements for a challenge of a tax
assessment, we hold that the trial court properly concluded it
lacked subject matter jurisdiction and affirm.
(c) Frivolous Petitions. _ Upon receipt
of a petition requesting administrative review
as provided in the preceding subsection, the
Tax Review Board shall examine the petition
and the records and other data transmitted by
the Secretary pertaining to the matter for
which review is sought, and if it appears from
the records and data that the petition is
frivolous or filed for the purpose of delay,
the Tax Review Board shall dismiss the
petition for review.
N.C. Gen. Stat. § 105-241.2.
Here, Javurek complied with the procedures for contesting his
assessment and for obtaining review by the Board as set out in N.C.
Gen. Stat. §§ 105-241.1 and 105-241.2. The Board, however,
determined that his petition for administrative review was
frivolous and dismissed it pursuant to N.C. Gen. Stat. §
105-241.2(c).
The statutory appeal procedure from a decision by the Board is
set out in N.C. Gen. Stat. § 105-241.3, incorrectly captioned
"Appeal without payment of tax from Tax Review Board decision[,]"
which provides:
(a) Any taxpayer aggrieved by the
decision of the Tax Review Board may, upon
payment of the tax, penalties and interest
asserted to be due or upon filing with the
Secretary a bond in such form as the Secretary
may prescribe in the amount of said taxes,
penalties and interest conditioned on payment
of any liability found to be due on an appeal,
appeal said decision to the superior court
under the provisions of Article 4 of Chapter
150B of the General Statutes . . . .
(b) When an appeal is taken under this
section from the Tax Review Board's dismissal
of a petition for administrative review under
the provisions of G.S. 105-241.2(c), the
question of appeal shall be limited to a
determination of whether the Tax Review Board
erred in its dismissal, and in the event that
the court finds error, the case shall be
remanded to the Tax Review Board to be heard.
N.C. Gen. Stat. § 105-241.3 (emphasis added). Thus, under the
statute, a taxpayer may appeal from the Board's decision to
superior court only after paying the amount due or filing a bond.
There is nothing in this record to indicate that Javurek paid thetax or filed a bond, as required by the statute. Javurek,
apparently relying on the incorrect caption, argues that he
complied with this procedure. However, "[t]he law is clear that
captions of a statute cannot control when the text is clear." In
re Appeal of Forsyth County, 285 N.C. 64, 71, 203 S.E.2d 51, 55
(1974). Under the plain language of the statute, Javurek failed to
comply with the statutory prerequisites for the superior court to
have jurisdiction to engage in a review of the Board's decision.
(See footnote 2)
Javurek was free to abandon his administrative proceeding in
favor of a civil action challenging the tax assessments. Our
General Statutes provide:
Any taxpayer who has obtained an
administrative review by the Tax Review Board
as provided by G.S. 105-241.2 and who is
aggrieved by the decision of the Board may, in
lieu of appealing pursuant to the provisions
of G.S. 105-241.3, within 30 days after
notification of the Board's decision with
respect to liability pay the tax and bring a
civil action for its recovery as provided in
G.S. 105-267.
N.C. Gen. Stat. § 105-241.4 (emphasis added). As our Supreme Court
has explained:
Having taken advantage of the opportunity
for a review by the Tax Review Board, the
person assessed may, if he so elects, abandon
the process of administrative review and seek
relief from the Superior Court under its
original jurisdiction. G.S. 105-241.4. Of
course, if he asks the Superior Court to
exercise its original jurisdiction he must, as
a condition precedent thereto, pay his taxunder protest and sue to recover as provided
by G.S. 105-267.
Duke, 247 N.C. at 240, 100 S.E.2d at 508-09.
N.C. Gen. Stat. § 105-267 in turn provides, in relevant part:
No court of this State shall entertain a
suit of any kind brought for the purpose of
preventing the collection of any tax imposed
in this Subchapter ["Levy of Taxes"].
Whenever a person has a valid defense to the
enforcement of the collection of a tax, the
person shall pay the tax to the proper
officer, and that payment shall be without
prejudice to any defense of rights the person
may have regarding the tax. At any time
within the applicable protest period, the
taxpayer may demand a refund of the tax paid
in writing from the Secretary and if the tax
is not refunded within 90 days thereafter, may
sue the Secretary in the courts of the State
for the amount demanded.
Our Supreme Court "has held that G.S. 105-267 . . . establish[es]
the general rule that there shall be no injunctive or declaratory
relief to prevent the collection of a tax, i.e., the taxpayer must
pay the tax and bring suit for a refund." Cedar Creek Enters.,
Inc. v. State of N. C. Dep't of Motor Vehicles, 290 N.C. 450, 455,
226 S.E.2d 336, 339 (1976). In this case, Javurek failed to comply
with the procedure set out in N.C. Gen. Stat. § 105-267, under
which he was required to first pay the tax and then sue the state
for a refund.
This is true even though Javurek has asserted violations of
the constitution. This Court has explained that the procedure
outlined in N.C. Gen. Stat. § 105-267 must be followed even where,
as here, the taxpayer is challenging the constitutionality of a
tax: Plaintiffs' due process claim rests on their
contention that the only avenue for contesting
a jeopardy tax assessment is under G.S.
105-267, which prevents a court from taking
jurisdiction over a contested tax assessment
suit unless the aggrieved taxpayer first pays
the tax and then seeks a refund from the North
Carolina Department of Revenue.
. . . .
. . . Even in cases where the taxpayer is
challenging the constitutionality of a tax,
failure to comply with the "State's statutory
postpayment refund demand procedure" set forth
in the statute bars the court from hearing the
taxpayer's claim.
Salas v. McGee, 125 N.C. App. 255, 257-58, 480 S.E.2d 714, 716,
disc. review denied, 345 N.C. 755, 485 S.E.2d 298 (1997). See also
Gulf Oil Corp. v. Clayton, 267 N.C. 15, 20, 147 S.E.2d 522, 526
(1966) (N.C. Gen. Stat. § 105-267, which "requires the taxpayer to
pay the amount of the disputed tax and sue the State for its
recovery . . . is [the] appropriate procedure for a taxpayer who
seeks to test the constitutionality of a statute or its application
to him."); 47th Street Photo, Inc. v. Powers, 100 N.C. App. 746,
749, 398 S.E.2d 52, 54 (1990) ("a constitutional defense to a tax
does not exempt a plaintiff from the mandatory procedure for
challenging the tax set out in § 105-267"), disc. review denied,
329 N.C. 268, 407 S.E.2d 835 (1991).
When construed liberally, in accordance with his pro se
status, Javurek's petition could be viewed as a request for an
order requiring the Board to act on his petition. His "Request for
Judicial Review, Writ of Prohibition and Order of Judgment" was
brought under a provision of the Administrative Procedure Act("APA"), which provides in part: "Unreasonable delay on the part
of any agency . . . in taking any required action shall be
justification for any person whose rights, duties, or privileges
are adversely affected by such delay to seek a court order
compelling action by the agency . . . ." N.C. Gen. Stat. § 150B-44
(2003). When, however, the Board issued its decision on his
administrative petition on 15 October 2002, the action became moot.
See In re Hatley, 291 N.C. 693, 694, 231 S.E.2d 633, 634 (1977)
(appeal is moot "[w]hen events occur during the pendency of [the]
appeal which cause the underlying controversy to cease to
exist[.]").
Moreover, Javurek did not merely seek an order compelling
action by the Board on his petition for review. Instead, he sought
an order divesting the Board of jurisdiction and prohibiting any
further action by the Secretary of Revenue regarding the
assessments. Such an action is expressly forbidden by N.C. Gen.
Stat. § 105-267 ("No court of this State shall entertain a suit of
any kind brought for the purpose of preventing the collection of
any tax imposed in this Subchapter ["Levy of Taxes"]."). Our
Supreme Court has held that "[s]ection 105-267 . . . bars courts
absolutely from entertaining suits of any kind brought for the
purpose of preventing the collection of any tax imposed in
Subchapter I ["Levy of Taxes"]." Bailey v. State, 330 N.C. 227,
242, 412 S.E.2d 295, 304 (1991), cert. denied, 504 U.S. 911, 118 L.
Ed. 2d 547, 112 S. Ct. 1942 (1992), overruled on other grounds by
Bailey v. State, 348 N.C. 130, 500 S.E.2d 54 (1998). Finally, Javurek also appears to argue that the statutory
procedures set out in N.C. Gen. Stat. § 105-241.1 et seq. and N.C.
Gen. Stat. § 105-267 are unconstitutional because they do not
provide for a hearing before the taxpayer must pay the tax. The
Supreme Court has already rejected this contention: "This statute
[N.C. Gen. Stat. § 105-267] permitting payment to be made under
protest with a right to bring an action to recover the monies so
paid is constitutional and accords the taxpayer due process."
Kirkpatrick v. Currie, 250 N.C. 213, 215, 108 S.E.2d 209, 210
(1959). The Supreme Court's reasoning compels the conclusion that
the procedures set out in N.C. Gen. Stat. § 105-241.1 et seq.,
which also require payment of the tax before filing suit, likewise
do not offend due process.
In conclusion, because Javurek did not comply with the
procedures prescribed by N.C. Gen. Stat. § 105-241.3, § 105-241.4,
or § 105-267, the superior court lacked subject matter jurisdiction
over the civil action. Therefore, we affirm the trial court's
order denying Javurek's motion for summary judgment and dismissing
the action. Our disposition of this case renders unnecessary any
consideration of Javurek's remaining assignments of error.
Affirmed.
Judges BRYANT and ELMORE concur.
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