25 OTR 369•Gua v. Dept. of Rev.
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No. 22 August 25, 2023 369 IN THE OREGON TAX COURT REGULAR DIVISION Cindy GUA, Plaintiff, v. DEPARTMENT OF REVENUE, State of Oregon, Defendant. (TC 5453) In this personal income tax case, Plaintiff (taxpayer) had failed to file returns, and Defendant had assessed taxpayer pursuant to ORS 305.365(10)(a) “according to the best of its information and belief,” including substantial penal- ties. On appeal to this division, taxpayer filed a motion for stay of payment under ORS 305.419(3), asserting undue hardship. After the court ordered taxpayer to substantiate her claim of undue hardship, taxpayer submitted documents to the court, including credit union statements, credit card statements, and federal income tax returns. The court found the evidence insufficient due to internal inconsistencies and omitted information. Taxpayer eventually filed the missing Oregon returns and requested abeyance to enable Defendant to review them. The court denied abeyance because ORS 205.265(10)(e) authorizes Defendant to request abeyance, Defendant had not done so, and there was no other basis for the court to act. The court denied taxpayer’s motion to stay payment. The court ordered taxpayer to pay the tax, penalty, and interest assessed within 30 days. Taxpayer subsequently failed to pay the tax, penalty, and interest and the court granted Defendant’s motion to dismiss. Submitted on Plaintiff’s motions and Defendant’s Motion to Dismiss. Cindy Gua, Plaintiff, filed the motions pro se. Daniel Paul, Senior Assistant Attorney General, Department of Justice, Salem, filed the responses and motion for Defendant. Decisions rendered August 25, 2023; December 8, 2023; and January 31, 2024, respectively. ROBERT T. MANICKE, Judge. This matter is before the court on Plaintiff’s “Initial Set of Responsive Documents and Plaintiff’s Request to Place Case on Hold Until September 18, 2023,” filed August 17, 2023, and Defendant’s response filed August 21, 2023.
370 Gua v. Dept. of Rev. Plaintiff’s August 17, 2023, filing comes as the court seeks to adjudicate her initial claim that paying the income tax, interest, and penalties assessed to her for tax years 2016 through 2019 would be an undue hardship under ORS 305.419.1 Plaintiff filed a Motion for Stay of Payment of Income Tax, and accompanying affidavit, on or about April 19, 2023; Defendant objected on or about May 22, 2023. On May 25, 2023, the court ordered Plaintiff to submit additional documents, on or before June 30, 2023, to substantiate her claim of financial hardship during the approximately five years preceding the filing of her complaint. On June 23, 2023, Plaintiff sought an extension, until July 30, 2023, to submit the substantiating documents, which the court granted. On July 27, 2023, Plaintiff requested a second extension, until August 30, 2023, representing that she had requested, but not yet received, copies of documents from banks, credit card companies, and other accounts. On August 9, 2023, the court granted that second extension request, ordering Plaintiff to file an initial set of documents on or before August 17, 2023, and ordering her to otherwise fully comply with the August 30, 2023, deadline. Plaintiff’s August 17 filing includes some 200 pages of credit card statements, for periods in 2020, 2021, 2022, and 2023, responsive to the court’s order to furnish docu- ments substantiating her claim of undue hardship. Despite that length, the documents respond to only one of the six types of substantiating documents that the court ordered. Documents remaining to be filed by the August 30, 2023, deadline include federal income tax returns and tax forms, a declaration of gifts, bank statements, and property tax statements. Plaintiff’s August 17 filing mentions nothing about the documents remaining to be filed. The remainder of Plaintiff’s August 17 filing asks the court to “place this case on hold until September 18, 2023.” To that extent, the court treats the August 17 filing as a motion to place the case in abeyance.2 Plaintiff represents that lack of information has prevented her from filing returns for the tax years at issue in this case, but that, over the last several months, she has been able to obtain the needed information 1 The court’s references to the Oregon Revised Statutes (ORS) are to the 2021 edition.
Cite as 25 OTR 369 (2023) 371 and has engaged an accountant to prepare the returns. The filing states that the returns “are now complete and ready to be submitted to the Oregon Department of Revenue,” and that they “are being mailed” to Defendant’s auditor. Plaintiff states that her intent in filing the returns is to cause the case to be placed on hold to allow Defendant to process the returns, making the “case a moot issue.” Defendant’s August 21 response objects to any abeyance of the case on the grounds that Defendant has not actually received any returns from Plaintiff. Defendant also refers to the availability of proceedings under ORS 305.265(10), in the event Defendant receives returns. Under that provision, Defendant may request an abeyance of this proceeding to review returns. See ORS 305.265(10)(e) (“If [a taxpayer] submits a report or return to the department and appeals the assessment to the tax court, the department may request a stay of action from the court pending review of the report or return.”) (Emphasis added). If Defendant accepts the returns for processing, the instant case may be dismissed as moot, and any such returns are subject to audit and adjustment. See ORS 305.265(IO)(f) (allowing depart- ment to examine and adjust the return). ANALYSIS The court has inherent discretionary authority to place a case in abeyance as a means of managing its docket. See Seneca Sustainable Energy v. Lane County Assessor, 23 OTR 1, 4 (2018) (stating that relevant factors include the interests of the parties, the convenience of the court and the efficiency of its processes, and the interests of nonlitigants and the public). In general, the introduction of new, relevant information, which upon review and conferral could enable the parties to reach a resolution that will make a case moot, is a factor that can favor holding a case in abeyance. In this case, however, the court agrees with Defendant that abey- ance would be premature because the Department has not yet received any tax returns for the subject years. To date, there is no new information to review. Now, therefore, IT IS ORDERED that Plaintiffs motion for abey- ance is denied. The August 30, 2023, deadline to comply with the court’s order of August 9, 2023, remains in effect.
372 Gua v. Dept. of Rev. ORDER OF DECEMBER 8, 2023 This matter is before the court on (1) Plaintiff’s April 21, 2023, Motion for Stay of Payment of Income Tax under ORS 305.419(3); (2) her letter to the court dated August 30, 2023, and subsequent filings, which the court treats collectively as a second motion for abeyance of these proceedings or as a motion to compel Defendant to process her recently filed Oregon personal income tax returns under ORS 305.265(10); and (3) Defendant’s Motion to Dismiss filed September 28, 2023.1 The court will deny Plaintiff’s motions and will act on Defendant’s motion after the 30-day period has elapsed for Plaintiff to pay the assessment in full. I. PLAINTIFF’S MOTION FOR STAY OF PAYMENT OF INCOME TAX On or about April 21, 2023, Plaintiff filed her complaint contesting a magistrate’s decision that upheld Defendant’s assessments of personal income tax for tax years 2016, 2017, 2018, and 2019. The cumulative amount of tax assessed, with interest and penalties computed as of August 27, 2021, is $869,979.87. 2 With her complaint, Plaintiff filed her Motion for Stay of Payment of Income Tax along with an affidavit on the court’s form that declared information about her income, expenses, assets, and liabilities. Plaintiff argues that immediate payment, as otherwise required under ORS 305.419(1), would impose an undue hardship. A. Plaintiff’s April 21, 2023, Affidavit The April 21 affidavit discloses a single source of monthly income, ranging from $5,000 to $8,000, from “share of profits as a member of an LLC.” As assets, Plaintiff lists modest amounts in one checking account and one savings account at a single credit union, plus an amount in cash sufficient to cover several months’ worth of listed expenses. 1 Unless otherwise specified, the court’s references to the Oregon Revised Statutes (ORS) are to the 2021 edition. 2 The total amounts of tax, penalties, and interest due for each tax year are as follows: 2016: $26,162.81 2017: $83,709.58 2018: $441,131.67 2019: $318,975.81
Cite as 25 OTR 369 (2023) 373 In response to a request to identify any real property, the affidavit states “N/A.” The affidavit lists a “trailer” worth $3,000, a motorcycle worth $5,500, and furniture and other personal effects of modest value. As to “money owed to you by others,” the affidavit states “N/A.” As to living expenses, the affidavit lists “—” for “rent/mortgage.” Her remaining living expenses total $4,995 of which the majority is “Credit card payment(s)” averaging $2,755 for personal expenses. The remaining listed living expenses are $130 for “utilities,” $1,065 for food, $500 for fuel, and a total of $545 for medical expenses, clothing, personal needs, beauty and cosmetics. B. Defendant’s May 22, 2023, Response In its May 22, 2023, response to Plaintiff’s motion, Defendant pointed out that Plaintiff’s April 21 affidavit is internally inconsistent because it lists income from profits of an unnamed limited liability company (LLC) but fails to list Plaintiff’s interest in the LLC as an asset, or to assign any value to that asset. Defendant also argued that additional facts call into question the reliability of the statements in Plaintiff’s April 21 affidavit. Defendant submitted an auditor’s decla- ration that included the following factual representations: • Plaintiff is a managing member of four LLCs engaged in producing and selling marijuana in Oregon, at least one of which (Weedbucks, LLC) filed Oregon sales tax returns during the subject years. • Plaintiff failed to file Oregon personal income tax returns for the subject years. 3 Defendant used the sales tax returns of Weedbucks, LLC, to estimate Plaintiff’s income and determine her personal income tax liability for the for the tax years at issue. • “Since 2019, when the Department first sent Ms. Gua a Notice of Deficiency for the tax years 2016 to 2019, Ms. Gua has refused to provide the Department with any business or personal financial information or to comply with any requests for documents substantially.” 3 Plaintiff later delivered a set of returns to Defendant in late August or early September 2023, as discussed below.
374 Gua v. Dept. of Rev. The auditor’s declaration attaches two orders by the magis- trate in the case from which Plaintiff now appeals. The con- cluding portion of the magistrate’s August 17, 2022, Order Denying Plaintiff’s Motion for Summary Judgment recites: “Plaintiff bears the burden of proving that the assess- ments are in error or should be modified. The court previ- ously gave Plaintiff time to send requested documents to Defendant, but she declined to do so. * * * Within 30 days, Plaintiff shall send requested documents to Defendant as agreed upon during the case management conference held March 18, 2022. Now, therefore, “IT IS ORDERED that Plaintiff’s motion for Summary Judgment is denied. “IT IS FURTHER ORDERED that, by September 16, 2022, Plaintiff will send requested documents to Defendant. Plaintiff’s failure to comply may result in dismissal of this case.” On February 6, 2023, the magistrate issued an Order of Dismissal, reciting in part: “The court set trial by order entered December 7, 2022, and sent separate hearing notices to the parties that same day. Plaintiff did not submit any exhibits by the exchange dead- line and failed to appear for trial as scheduled. The court has not received any further communication from Plaintiff. It is Plaintiff’s responsibility to prosecute this appeal, and under such circumstances, the court finds this appeal should be dismissed for lack of prosecution.” The February 6 order was followed by the magis- trate’s Decision of Dismissal dated February 27, 2023, from which Plaintiff timely appealed by filing her complaint in this division. C. Court’s May 25, 2023, Order to Provide Substantiating Documents and Plaintiff’s Response In an order dated May 25, 2023, the court concluded that it was unable to determine from Plaintiff’s April 21 affidavit whether payment of the tax, penalty, and interest would be an undue hardship. The court ordered Plaintiff to substantiate her affidavit by submitting further proof of hardship, as detailed in the table below.
Cite as 25 OTR 369 (2023) 375 On June 23, 2023, Plaintiff sought an extension, until July 30, 2023, to submit the substantiating documents, which the court granted on July 11, 2023. Gua v. Dept. of Rev., TC 5453 (Jul 11, 2023). On July 27, 2023, Plaintiff requested a second extension, until August 30, 2023, representing that she had requested, but not received, unspecified copies of documents from banks, credit card companies, and other accounts. On August 9, 2023, the court granted the second extension but ordered Plaintiff (1) to file those responsive documents already in her possession on or before August 17, 2023, and (2) otherwise to comply with the extended August 30, 2023, deadline. Gua v. Dept. of Rev., TC 5453 (Aug 9, 2023). On August 17, 2023, Plaintiff filed some 200 pages of documents, including a second affidavit also dated August 17, 2023.4 The court treated her filing, entitled “Initial Set of Responsive Documents and Plaintiff’s Request to Place Case on Hold Until September 18, 2023” as a first motion for abeyance. Plaintiff explained that for two years she had been trying to get information necessary for her returns and had been able to do so “[o]ver the last several months.” She had found a “competent tax accountant who specializes in the Cannabis business field,” and her returns were “now com- plete and ready to be submitted to the Oregon Department of Revenue.” As discussed below, Defendant objected that it had not yet received the returns, and on August 25, 2023, the court denied Plaintiff’s first motion for abeyance and ordered that the August 30, 2023, extended deadline to provide documents in response to the May 25, 2023, order remained in effect. Two months later, in response to Defendant’s Motion to Dismiss, Plaintiff also filed a declaration dated October 9, 2023, that addressed two items in the court’s May 25 order, along with copies of federal income tax returns for the years stated in the 4 The differences between Plaintiff’s affidavit filed August 17, 2023, and the Affidavit of Income, Assets, and Expenses in Support of Motion for Stay of Payment of Income Tax filed with her complaint on or about April 19, 2023, are limited to: (1) A reduction to the low end of the range of her estimated monthly average share of profits from an LLC from “5000-8000” to “4000-8000”; (2) the addition of a “2007 BMW 335” with a value of “5000”; and (3) the addition of “(VARIES FOR PERSONAL EXPENSES)” as a description of her credit card payments.
376 Gua v. Dept. of Rev. order. The table below summarizes all documents ordered to be provided to the court and Plaintiff’s responses: May 25, 2023, Order Documents Received 1 All tax returns of Plaintiff filed with the Internal Revenue Service for tax periods in 2018 through April 30, 2023 Copies for 2018 and 2019 provided to court Copies for 2020, 2021, and 2022 provided to court 2 All Internal Revenue Service Forms W-2, 1099 (of any kind), or K-1 directed to Plaintiff for tax periods in 2018 through April 30, 2023 None provided to court; not mentioned in Declaration of Gua 3 A declaration identifying all income or gifts, not reported under items 1 or 2 above, that Plaintiff realized or received from January 1, 2018, through April 30, 2023 “I have included all income and gifts in my State and Federal Tax Returns for years 2016 through 2022, meeting the declaration requirement that was ordered in #4 of the May 25, 2023, court order.” 4 Monthly statements for any bank, brokerage firm, or other financial institution with which Plaintiff held an account, including balances and monthly transac- tions, for January 1, 2020, through April 30, 2023 Checking and savings account statements from Rogue Credit Union for periods beginning March 1, 2022, and ending April 30, 2023 5 Monthly credit card state- ments for all credit cards, including balances and itemized transactions, for January 1, 2020, through April 30, 2023 Citi credit card statements for billing periods begin- ning December 27, 2019, and ending September 25, 2020 Bank of America credit card statements for billing periods beginning December 11, 2019, and ending May 10, 2023 6 Any property tax statement issued in 2018 through April 30, 2023, for property held by Plaintiff “There is no real property tax statement or real property that’s held by the plaintiff i.e. Cindy Gua.”
Cite as 25 OTR 369 (2023) 377 1. Review of Plaintiff’s Evidence The court reviews the foregoing evidence from Plaintiff, consisting of the above documents as well as Plaintiff’s April 21, 2023, and August 17, 2023, affidavits and her October 9, 2023, declaration, ignoring for the moment questions of timeliness. 5 Solely for purposes of this review, the court will assume that the unsigned, undated federal income tax returns attached to Plaintiff’s October 9, 2023, declaration are copies of returns that Plaintiff actually filed with the Internal Revenue Service during the period August through October 2023. Her most recent return, for 2022, reports gross income of $117,577, entirely from “Weedbucks, LLC,” a partnership, and taxable income of $104,627. (2022 Form 1040; 2022 Schedule E.) The returns for earlier years likewise show gross income entirely from Weedbucks, LLC: $330,228 (2021); $276,656 (2020); $124,519 (2019); and $129,885 (2018). The court turns to the monthly statements for Plaintiff’s credit cards and credit union, which Plaintiff provided on August 17, 2023. The court assumes that she intends the statements she furnished to be a complete set for the period specified in the May 25 order.6 The court focuses on the statements for Plaintiff’s Bank of America Visa and her credit union, because those statements overlap for approximately the last year: March 2022 through April 2023.7 Each monthly Bank of America credit card statement shows around 50 charges totaling 5 Plaintiff filed the October 9, 2023, declaration and copies of federal income tax returns well after the court’s August 30, 2023, deadline. 6 The court granted each extension Plaintiff requested and allowed her a total of more than three months to comply with the direction to provide monthly statements for “any” financial institution accounts and for “all” credit cards for the period inquired of. On July 27, 2023, when making her most recent request for an extension, Plaintiff represented that she had requested, but not yet received, all account documents. Three weeks later, on August 17, 2023, Plaintiff provided the statements listed above without requesting a further extension and without any explanation. 7 The Costco-branded Citi Visa statements Plaintiff provided for an earlier period (December 2019 through September 2020) show little activity, typically consisting of several transactions per month at a Costco store or gas station, with the balance paid off each month. However, the court notes that these older state- ments raise questions as well: Around one-half the payments on the account were made by “ONLINE PAYMENT.” Yet Plaintiff has not provided the court with
378 Gua v. Dept. of Rev. more than $10,000. 8 The total charges during this one-year period are $178,019. The transactions on the statements appear to consist of business transactions or a mix of busi- ness and personal transactions, although each statement for each account shows solely Plaintiff’s name as addressee, without the name of any business entity. Each statement shows that all charges were paid in full; no interest charges were incurred. Apart from what appear to be occasional merchant credits, the sources of the payments are listed as “BA ELECTRONIC PAYMENT,” “OR Banking Center pay- ment,” or “ATM PAYMENT,” typically made once or twice per month. By contrast, the credit union checking account state- ments show a low level of monthly activity, typically not more than a half-dozen debits totaling less than $1,000 and one or two credits. The monthly ending balance never exceeded $3,000. Only one payment, in the amount of $107, appears to have been made from Plaintiff’s credit union account to the Bank of America credit card. The savings account shows no activity apart from a one-time deposit of $5.00 on the first statement provided to the court (March 2022). 2. Whether Plaintiff’s Evidence and Declaration Substantiate Plaintiff’s Affidavits The court seeks to correlate these data with the information stated in Plaintiff’s affidavits. As to Plaintiff’s income, the $117,577 of gross income from Weedbucks, LLC, reported on her federal income tax return for 2022 is roughly consistent with the $5,000 to $8,000 in LLC “profits” that she reported on her affidavits. However, the court cannot verify Plaintiff’s income from the other documents provided. If the reported profit amounts are distributed to her in cash, there is no evidence that she deposits them into her credit union accounts. As to living expenses, the court cannot verify any amount of credit card payments from the information pro- vided, apart from the single payment of $107 noted above. account statements for any financial institution from which payments on the Citi Visa account were made. 8 The monthly statement balances for the Bank of America credit card averaged $15,071 for 2020, $19,308 for 2021, $13,901 for 2022, and $13,264 for January to May of 2023.
Cite as 25 OTR 369 (2023) 379 If the court assumes that Plaintiff uses cash distributed to her from Weedbucks, LLC, to make payments on her Bank of America Visa account, the Bank of America statements still do not substantiate that practice. Plaintiff’s affidavits state that she makes payments averaging $2,755, but each payment recorded on the Bank of America statements is invariably two to four times that amount. Plaintiff’s affidavits also report $130 “max” for “util- ities.” The court finds no entries on any monthly statements that clearly correspond to a utility bill. As for the remain- ing $2,110 total monthly expenses listed on Plaintiff’s affi- davits (food, medical expenses, clothing, personal care, and fuel), the court finds no corresponding amounts in the credit union statements, and the court is unable to segregate cor- responding amounts from among the many transactions on the Bank of America credit card statements. The court concludes that the evidence Plaintiff has provided is insufficient to substantiate the income and liv- ing expenses listed on Plaintiff’s affidavits. 3. Internal Inconsistencies in Plaintiff’s Evidence In addition to a lack of substantiation, the court finds that Plaintiff’s evidence, before considering any new facts proffered by Defendant, shows several inconsistencies. First, Plaintiff’s April 21, 2023, affidavit lists income from her “share of profits as a member of an LLC”; however, the April 21 affidavit does not name, or disclose the value of, any membership interest. 9 Defendant pointed this out in its May 22, 2023, response to Plaintiff’s motion for stay, and the court’s May 25, 2023, order directed her to provide cop- ies of all “Forms W-2, 1099 (of any kind), or K-1 directed to Plaintiff,” but Plaintiff’s second affidavit, dated August 17, 2023, nevertheless fails to list any interest in a busi- ness entity or the value of that interest, and she provided no copies of K-1s. Plaintiff later provided copies of federal 9 The court’s form of affidavit poses the question as follows: “ALL OTHER PROPERTY OR ASSETS (All other property or assets exceeding $200 in value; for example, furniture, stocks, bonds, boats, R.V.s, trailers, campers, guns, and jewelry).” (Affidavit of Income, Assets, and Expenses in Support of Mot Stay Payment Income Tax at page 2 of 3 (emphases added).) Beneath that heading are subheadings for “Description” and “Value,” which Plaintiff completed for her furniture, trailer, jewelry, motorcycle, and in her second affidavit, her car.
380 Gua v. Dept. of Rev. income tax returns for herself, on October 9, 2023, showing “Nonpassive income from Schedule K-1” from Weedbucks, LLC. (Emphasis added.) (2018 Schedule E at 2.) The court finds that these omissions—particularly the failure to pro- vide the value of her interest in Weedbucks, LLC—cast doubt on whether Plaintiff has disclosed all of her assets. Second, the evidence raises questions whether Plaintiff had access to additional accounts, beyond the credit union accounts, the Bank of America Visa, and the Costco- branded Visa. From January 2020 through October 2022, at least one payment from “BA ELECTRONIC PAYMENT” appears on each Bank of America Visa account statement. The description suggests that the source of the payment is some other financial institution account, as opposed to cash. Yet the court finds no corresponding records that would indicate that the source is either of Plaintiff’s credit union accounts. In addition, Plaintiff provided cop- ies of monthly statements for her Costco-branded Citi Visa account for December 27, 2019, through September 25, 2020, only. Yet much more recently, three of her credit union checking account statements show withdrawals totaling $ 1,043.77 that bear the description “CITI CARD ONLINE – PAYMENT.” This suggests that Plaintiff either has contin- ued to maintain the Costco-branded Visa account but failed to provide all the records called for in the May 25, 2023, order, or that she maintained a different Citi account for which she failed to provide any statements whatsoever.10 D. Legal Standard and Application to Plaintiff’s Evidence Under ORS 305.419(1), income taxpayers generally must pay the amounts assessed in order to pursue an appeal of the assessment in this court. A taxpayer seeking to defer that payment obligation in hopes of prevailing on appeal 10 The court notes that Plaintiff’s affidavits also raise a question about her access to gifts. Her affidavits show that she owns furniture and makes monthly utility payments, but the affidavits indicate that she owns no real property and pays no rent, including rent for a place to park the listed trailer with access to utility connections. Her federal income tax returns show no income from barter transactions. The statement in her declaration regarding gifts is ambiguous, as gifts are excluded from gross income and would not be reported on income tax returns. Because the court resolves Plaintiff’s motion on other grounds as dis- cussed below, the court sees no need to pursue these questions further.
Cite as 25 OTR 369 (2023) 381 and voiding the assessment must “establish undue hard- ship,” and failure to do so “will be cause for dismissing the complaint.” ORS 305.419(3).11 The burden is on the taxpayer to prove undue hardship by a preponderance of the evidence. See ORS 305.427; Picker v. Dept. of Rev., 370 Or 673, 679, 523 P3d 109 (2022). The amount of the assessment in this case would be substantial for most individual taxpayers. However, the “undue hardship” standard requires the court to consider the amount assessed in relation to the taxpayer’s particu- lar circumstances. This court has construed the standard to mean that the legislature “certainly intended the court to grant hardship relief where immediate payment of the tax would prevent a taxpayer from maintaining a minimal standard of living.” Peterson v. Dept. of Rev., 23 OTR 554, 561 (2019). In addition, “the legislature authorized the court to consider other potential factors, such as an excessive, per- manent loss that would be caused when a taxpayer would have to sell off property at a distress sale price.” Id. Finally, the court has observed: “Implicitly, by using the word ‘undue,’ the legislature also authorized the court to weigh the public policy of ensuring public access to an appeal against the public benefit of an immediate collection (and elimination of the corresponding risk of abuse by tax- payers seeking primarily to delay).” Id. In this case, Plaintiff’s affidavits, declaration, and documents omit important information specifically iden- tified in the court’s form of affidavit and in the May 25, 2023, order. Plaintiff has repeatedly failed to disclose, as requested on the court’s form of affidavit, the value of any interest in a business even though she claims that “profits” from an LLC are her sole source of support. She also has failed to provide copies of Schedule K-1s from any business entities, as the court ordered on May 25, 2023. The latter failure is significant because Weedbucks, LLC, is identi- fied on Plaintiff’s federal tax returns as a partnership. This means that Weedbucks, LLC, necessarily has at least one 11 The Oregon Supreme Court recently stated: “The required payment [under ORS 305.419(1)] is mandatory and jurisdictional unless the exception set out in subsection (3) applies.” Picker, 370 Or at 678 (2022).
382 Gua v. Dept. of Rev. owner other than Plaintiff. See Treas Reg § 301.7701-2(a) (2023) (“A business entity with two or more members is clas- sified for federal tax purposes as either a corporation or a partnership. A business entity with only one owner is classi- fied as a corporation or is disregarded[.]”); ORS 63.810 (“For purposes of [Oregon income tax] a limited liability company * * * shall be classified in the same manner as it is classi- fied for federal income tax purposes.”). Therefore, like Forms W-2 from employers or Forms 1099 from business customers, K-1s from Weedbucks, LLC, potentially would provide some measure of third-party verification, on a form filed with the Internal Revenue Service, of Plaintiff’s taxable income. Plaintiff’s banking and credit card statements fall short of substantiating her position of undue hardship. They suggest that Plaintiff commingles business and per- sonal expenses on the same credit card account and pays all of them primarily with cash rather than from her check- ing account. By themselves, these facts do not undermine Plaintiff’s position.12 However, they undoubtedly increase Plaintiff’s burden to prove undue hardship. Plaintiff, who has owned and managed a business the last five years, would have been aware that her financial institution records do not allow a reader to verify the amounts she earns and spends, but she took no steps to identify transactions on her credit card that substantiate her claimed personal expenses, nor did she ask the court for additional time to do so.13 Moreover, the records she did provide suggest that Plaintiff holds at least one credit card, from Citi, for which she failed to pro- vide statements, and that some electronic transfers to pay both her Citi Visa account and her Bank of America Visa account may have been made from an undisclosed account. Although the court can glean little from the docu- ments Plaintiff provided to the court regarding the extent of any hardship Plaintiff might suffer from paying the 12 Plaintiff describes her business as a “Cannabis business.” The court is aware that federal law restricts the access of certain cannabis businesses to certain banking services, such that the businesses largely use cash to operate. See Secure and Fair Enforcement Regulation Banking Act, S. 2860, 118th Cong. (2023) (bill proposing to overturn certain such restrictions). 13 Section 9 of the court’s form of affidavit, which Plaintiff filed twice, prompts a taxpayer to provide “other information the court should know.”
Cite as 25 OTR 369 (2023) 383 assessment immediately, the court finds some insight in the amount of time she has allowed her returns to go unfiled and her tax unpaid. Her Oregon returns delivered in August 2023 acknowledge that she owes tax for two of the years at issue: 2018 and 2019. Those returns were due four and three years ago, respectively. She is deemed to be aware that the law imposes substantial adverse consequences when a taxpayer fails to file a return. Dungey v. Fairview Farms, Inc., 205 Or 615, 621, 290 P2d 181 (1955) (“Every person is presumed to know the law[.]”). Interest has been accruing on the assessed tax. She has chosen to expend time and effort on appeals, but her extensive delay in filing the returns themselves, and paying the amount she owes, does not suggest the kind of urgency that the court ordinarily would associate with an “undue hardship” if she is required to pay the assessment. The court concludes that Plaintiff has failed to prove undue hardship, based solely on the information she has provided to the court on that subject, and without con- sidering additional evidence proffered by Defendant. Having reached that conclusion, the court now turns to the parties’ arguments under ORS 305.265(10) about the sufficiency of Oregon personal income tax returns Plaintiff sent to Defendant in August and September 2023 and Defendant’s actions with respect to those returns. II. PLAINTIFF’S MOTION UNDER ORS 305.265(1); MOTION TO DISMISS A. Parties’ Filings In her August 17, 2023, filing, shortly before her extended deadline to provide substantiating documents, Plaintiff included a first motion for abeyance of this case until September 18, 2023. She asserted that she had recently been able to locate the information needed to prepare her tax returns, as well as a tax accountant familiar with the can- nabis business, and that her tax returns for 2016 through 2019 were “complete and ready to be submitted to the Oregon Department of Revenue.” (Emphasis added.) On August 21, 2023, Defendant objected to abating proceedings because it had not actually received any of Plaintiff’s returns. On
384 Gua v. Dept. of Rev. August 25, 2023, the court denied Plaintiff’s first motion for abeyance and left the August 30, 2023, deadline in place. Gua v. Dept. of Rev., TC 5453 (Aug 25, 2023) (slip op at 3). Also on August 25, 2023, Plaintiff sent copies of her returns to Defendant, apparently by email. On August 29, 2023, Defendant sent the court a letter stating that it had received Plaintiff’s 2016 through 2019 Oregon tax returns but had rejected them because they “did not contain infor- mation that would allow [Defendant] to assess if the returns [were] substantially correct.” Defendant’s letter stated fur- ther that, “if the plaintiff wishes to continue her appeal of the income tax assessment for the tax years 2016 through 2019, she must comply with the court’s August 9, 2023, order to provide sufficient evidence by August 30, 2023, that the assessment would cause undue hardship.” On August 30, 2023, Plaintiff filed a letter with the court stating that she had resubmitted her 2016 through 2019 Oregon tax returns to Defendant, this time with copies of federal returns for those years. She stated that she had asked Defendant’s auditor to request a stay of proceedings in this matter as allowed under ORS 305.265(10). The court treats Plaintiff’s August 30 letter as a second motion for abeyance. On September 21, 2023, the court scheduled a case management conference to obtain current information about the parties’ positions, including whether Defendant had received and accepted the returns Plaintiff claimed to have resubmitted on August 30. On September 28, 2023, Defendant filed its Motion to Dismiss, arguing that dis- missal is proper because Plaintiff had failed to prove undue hardship and because the court lacks jurisdiction to review Defendant’s actions regarding Plaintiff’s recently filed returns. Having received Defendant’s motion, the court can- celed its case management conference. On October 9, 2023, Plaintiff objected to dismissal and requested a hearing regarding the processing of her returns. B. Analysis Under ORS 305.265(10) Both parties refer to ORS 305.265(10) in their brief- ings since August 27, 2023. That statute, dating materially to 1999, provides various procedures that apply when, as
Cite as 25 OTR 369 (2023) 385 here, a taxpayer fails to file returns.14 Paragraph (a) requires Defendant to “determine the tax according to the best of its infor- mation and belief, [and to] assess the tax plus appropriate pen- alty and interest * * *.” (Emphasis added.) Paragraphs (b) and (c) provide circumstances in which Defendant may accept or reject returns the taxpayer chooses to file after having been so assessed. Under paragraph (d), the taxpayer may appeal the rejection of a return “to the magistrate division of the Oregon Tax Court,” but “only if” the return was filed within 90 days of the assessment and the appeal is filed within 90 days after the notice of rejection. Paragraph (e) applies when, as here, the taxpayer has both appealed the assessment to the Tax Court and filed returns that Defendant has not yet accepted or rejected; that provision allows “the department” to request a stay of action from the court pending review of the returns. Assuming that Defendant does accept the late-filed returns, paragraphs (f) and (g) allow Defendant to reduce the assess- ment, and to issue refunds. The court finds nothing in ORS 305.265(10) that authorizes this division of the court to act with respect to Defendant’s processing or handling of the returns Plaintiff filed in this case. Paragraph (e) does not apply because that provision requires Defendant to have requested a stay, and it has not done so. As to paragraph (d), there is evidence that Defendant rejected the returns Plaintiff delivered August 25, 2023, but the statute expressly requires any appeal of that rejection to be filed in the Magistrate Division. Plaintiff argues that Defendant has not notified her whether it has accepted or rejected the set of returns she resubmitted on August 30, 2023. She urges the court to hold a hearing “to hear from the proper DOR employee who oversees receiving the tax returns of Plaintiff, to come before the court and give testimony under oath to determine whether the DOR has accepted the tax returns of Plaintiff or rejected them * * *.” However, an alleged failure to issue a notice of rejection is an “omission” that likewise must be heard in the Magistrate Division in the first instance. See ORS 305.275(1)(a), (b); ORS 305.501(1). The court concludes that there is no basis for the hearing Plaintiff seeks in this division. 14 See Or Laws 1999, ch 532 (SB 495).
386 Gua v. Dept. of Rev. III. CONCLUSIONS The court finds no undue hardship; therefore, Plaintiffs Motion for Stay of Payment of Income Tax is denied. As permitted by ORS 305.419(3), the court will allow Plaintiff until January 8, 2024, to pay the tax, penalty, and interest assessed in this case. Defendant is to notify the court and Plaintiff no later than January 17, 2024, whether Plaintiff has paid the amounts assessed. The court further concludes that ORS 305.265(10) does not authorize the court to grant Plaintiffs second motion for abeyance, and the court declines to grant abey- ance on any other ground. Plaintiffs second motion for abey- ance is denied. Accordingly, if Plaintiff fails to timely comply with the payment requirement above, the court will grant Defendant’s Motion to Dismiss. If Plaintiff timely complies with the payment requirement above, the court will deny Defendant’s Motion to Dismiss, and the case will proceed as provided in the court’s rules. Now, therefore, IT IS SO ORDERED. ORDER OF JANUARY 31, 2024 This personal income tax case is before the court on Defendant’s Motion to Dismiss dated September 28, 2023. The basis for Defendant’s motion is that Plaintiff has failed to pay the tax, penalty, and interest assessed to her, or to establish that doing so would be an undue hardship, as required by ORS 305.419(3). In a December 8, 2023, order on Plaintiff’s motion to stay the requirement to pay her assess- ment, the court: (1) Recited the proceedings and the parties’ arguments; (2) Found that Plaintiff had failed to establish that pay- ment of the assessed tax, penalty, and interest would be an undue hardship under ORS 305.419(3); (3) Denied Plaintiff’s motion to stay the requirement to pay the assessment; (4) Allowed Plaintiff until January 8, 2024, to pay the assessment; and
Cite as 25 OTR 369 (2023) 387 (5) Directed Defendant to report on or before January 17, 2024, whether Plaintiff had paid the amounts assessed. On January 17, 2024, Defendant filed its report, stating that Plaintiff had made payments totaling $4,000 for certain of the tax years at issue. The total amount assessed, not counting those payments, was $871,426.72. Defendant added: “Plaintiff does not have an agreed upon and accepted payment plan with the defendant regarding payment of the taxes, penalties, and interest assessed in this case.” Defendant urged the court to grant its motion to dismiss. On January 31, 2024, Plaintiff filed a “Motion to Vacate” the court’s December 8, 2023, order. The motion declares the proceedings to date to be a “substantive and procedural nullity,” fraudulent, and the result of a “conspir- acy” to violate provisions of the federal Internal Revenue Code. Nothing in the motion disputes Defendant’s report regarding the amount of Plaintiff’s payments or the non-ex- istence of an agreed payment plan. Based on the foregoing, the court finds that Plaintiff has failed to pay the tax, penalty, and interest assessed, to the extent of the difference between the total assessment ($871,426.72 including interest as of September 28, 2021), and the payments made ($4,000 as of January 17, 2024). Plaintiff having neither paid the assessment nor established hardship, now, therefore, IT IS ORDERED that Defendant’s Motion to Dismiss is granted; and IT IS FURTHER ORDERED that Plaintiff’s Motion to Vacate Order Denying Plaintiff’s Motion for Stay of Payment of Income Tax and Denying Plaintiff’s Second Motion for Abeyance is denied.
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