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Meadows v. Oklahoma Tax Commission

Court of Appeals of Oklahoma, Division II

April 5, 2017

JERRY D. MEADOWS, Petitioner,
OKLAHOMA TAX COMMISSION, an Agency of the State of Oklahoma, Respondent.

          Mandate Issued: 05/11/2017


          Jerry D. Meadows, Tulsa, Oklahoma, Pro Se Appellant

          Marjorie L. Welch, Interim General Counsel, Linda Samuel-Jaha, Assistant General Counsel, OKLAHOMA TAX COMMISSION, Oklahoma City, Oklahoma, for Appellee


         ¶1 Jerry D. Meadows appeals the dismissal by the Oklahoma Tax Commission of his April 23, 2014 Application for Hearing. In that document, Meadows argued the Commission erred when it failed to enforce state income tax withholding law concerning a distribution from his employer-sponsored retirement account. The administrative law judge assigned to the matter treated Meadows' Application as an attempt to appeal the denial of two previous settlement proposals and determined that he did not have jurisdiction to hear the matter. The judge recommended that the Commission's Compliance Division's response to Meadows' Application be treated as a motion to dismiss for lack of jurisdiction and be granted. The Commission adopted the administrative law judge's recommendation and dismissed Meadows' Application for Hearing. Because Meadows has abandoned any review of the denial of his settlement proposals, we vacate the Commission's order and remand this case for a hearing on Meadows' claim that the Commission failed to enforce Oklahoma withholding law. [1]


         ¶2 The relevant facts have been stipulated to by the parties or otherwise are not in dispute. In 2002, Meadows pled guilty to federal criminal charges of embezzling money from his former employer, Explorer Pipeline Company. He was ordered to make restitution to Explorer of $4, 715, 359. On November 6, 2009, a federal magistrate judge issued a writ of garnishment to Wilmington Trust Retirement and Institutional Services Company, the trustee of Explorer's retirement plan. The writ directed Wilmington to pay any funds held for Meadows' benefit to the clerk of the federal court. Wilmington did so, transferring $199, 835.29 from Meadows' retirement account after withholding an amount for federal income taxes. Wilmington did not withhold any amount for Oklahoma income taxes. Explorer received the $199, 835.29 in partial satisfaction of the amount due from Meadows.

         ¶3 On June 30, 2010, Meadows filed an amended Oklahoma tax return reflecting the $199, 835.29 distribution from his retirement account, his principal source of income for the 2009 tax year. The amended return stated that Meadows owed tax for the year 2009 in the amount of $10, 991. The Commission began collection efforts. On October 19, 2010, it issued a tax warrant for the unpaid tax for year 2009 plus interest and penalties, which was recorded by the Tulsa County clerk. Meadows telephoned the Commission on October 27, 2010, explaining the situation and asking why Explorer did not withhold the Oklahoma income taxes due on his retirement plan distribution. He was advised that withholding was not required because Explorer was offsetting the distribution with Meadows' restitution obligation. Meadows wrote to the Commission on October 29, 2010, asking again why the tax was being collected from him instead of his former employer "who failed to withhold any tax on the pension distribution." (Emphasis in original.) Meadows spoke with Commission personnel again on December 5, 2011, including an individual in the Commission's legal department, who requested an audit of Explorer. When it was determined that "the company is closed, " the Commission's legal staff concluded that Meadows still owed the tax and an audit was unnecessary.

         ¶4 The Commission treated Meadows' October 29, 2010 letter as a request for settlement. On July 30, 2012, Meadows tendered $50 in settlement of his 2009 tax liability. The Commission denied Meadows' settlement proposal at its August 21, 2012 meeting. The Commission notified Meadows of this action by letter dated September 4, 2012, but did not provide a reason for its decision. On September 30, 2012, Meadows filed an Application for Settlement of Tax Liability on Commission form OTC-600, offering to pay $100 in two monthly installments. As grounds for the settlement, Meadows checked the box indicating that his tax liability was uncollectible due to his insolvency and resulted from factors beyond his control. Meadows explained the circumstances regarding the retirement account distribution and the failure to withhold Oklahoma taxes. He stated that he did not receive any of the money distributed, and his tax liability was now equal to his $16, 000 annual income. Meadows concluded that if taxes had been withheld as required by Oklahoma law, he would have no tax liability. Meadows signed the application under penalty of perjury and completed and attached the Commission's Statement of Financial Condition for Individuals form in support of his position.

         ¶5 On July 3, 2013, Meadows filed a Request for Review of the Commission's August 21, 2011 decision. Meadows again asserted his inability to pay and pointed out that he had not received any of the money generating the tax, and that Oklahoma law required income tax due on the distribution to be withheld by the party making the distribution. Counsel for the Commission responded on July 8, 2013, stating that review was unavailable. That was because the Commission had considered his October 29, 2010 letter as a request to settle an admitted tax liability pursuant to 68 O.S.2011 § 219.1, rather than a request governed by 68 O.S.2011 § 221 (e), to abate taxes assessed by the Commission. The letter quoted paragraph "D" of section 219.1, which provides that a taxpayer has "no right of appeal to any court" from a Commission decision to deny a taxpayer's proposed settlement. Meadows also was informed that his second application for settlement was still pending but would be presented to the Commission. It is undisputed that the Commission denied Meadows' second application for settlement at its meeting on December 3, 2013. However, the Commission did not include the letter informing Meadows of that action in the appellate record.

         ¶6 During this time, Meadows also had filed two suits in the district court of Tulsa County. Both suits named Explorer as a defendant, and one of the suits also named the Commission as a defendant. Both suits alleged that Explorer and/or the Commission were liable for not withholding Oklahoma income tax from the 2009 retirement account distribution. Both suits were removed to the United States District Court for the Northern District of Oklahoma and on April 7, 2014, were dismissed on motion of the defendants. With respect to Meadows' suit against the Commission, the federal court found that Meadows had failed to exhaust administrative remedies to protest the collection of a tax because he had not sought a hearing before the Commission pursuant to 68 O.S.2011 § 221, or appealed to the Oklahoma Supreme Court pursuant to 68 O.S.2011 § 225, which in the court's view was the "legislatively mandated procedure." The federal court also denied Meadows' request for a writ of mandamus, finding that it lacked jurisdiction to compel the Commission to collect the tax from Explorer or abate collection of the tax from Meadows.

         ¶7 On April 23, 2014, Meadows filed the Application for Hearing which is the subject of this appeal. Meadows stated that the Commission had informed him he had not exhausted available administrative remedies, and his Application was "the next step in the administrative process." Meadows alleged that the Commission failed to enforce withholding provisions of Oklahoma tax law related to the 2009 retirement plan distribution, and Explorer was required to withhold and remit to the Commission the Oklahoma tax due on that distribution. Meadows' Application was referred to an administrative law judge for hearing. The Commission's Compliance Division filed a response in which it asserted as "undisputed" Meadows' receipt of the distribution from his retirement account and his responsibility for the tax due on that amount. [2] The Division conceded that Meadows was entitled to a hearing pursuant to 68 O.S.2011 § 207, but argued that there was no provision within state law or the OTC's Rules of Practice and Procedure requiring the OTC to collect state taxes not withheld, which were due as a result of a pension distribution, solely from the payor of the distribution. The Division requested a finding that the taxes, interest, fees and penalties "are in fact due and owing" from Meadows.

         ¶8 During a prehearing telephone conference, the administrative law judge determined that the parties agreed there were no disputed facts and 68 O.S.2011 § 221, governing written taxpayer protests, did not apply. The judge deemed the Division's response a motion to dismiss for lack of jurisdiction and set the matter for oral argument. The judge informed the parties that argument would be limited to the effect of section 219.1(D) on Meadows' right to appeal the Commission's August 2012 and December 2013 denials of his settlement proposals. At Meadows' request, the oral argument was cancelled and the matter submitted on briefs. In his Findings, Conclusions and Recommendations, the administrative law judge found that the Commission had denied two requests for settlement proposed by Meadows, and the language of section 219.1(D) was clear. The judge concluded that the Commission's decision to deny a request for settlement was final pursuant to section 219.1(D), which specifically provided that the aggrieved taxpayer had no right of appeal. The administrative law judge ...

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