Mack v. Dept. of Rev.

No. 11 	November 8, 2022 	179
IN THE OREGON TAX COURT
REGULAR DIVISION
George E. MACK
and Anna H. Mack,
Plaintiffs,
v.
DEPARTMENT OF REVENUE,
State of Oregon,
Defendant.
(TC 5437)
On its motion for summary judgment under Tax Court Rule 47, Defendant
Department of Revenue argued for the dismissal of Plaintiffs’ complaint because
Plaintiffs did not pay “the tax assessed, and all penalties and interest due” before
filing their complaint in the Regular Division and therefore did not satisfy ORS
305.419(1). In response, Plaintiffs argued that the assessment for the tax year
at issue, 2016, was paid because Defendant held an overpayment, sufficient to
pay the 2016 assessment, made by Plaintiffs for a subsequent tax year. Plaintiffs
also argued that the overpayment had been “designated” for the 2016 assess-
ment and that Plaintiffs subjectively believed that the 2016 tax had been paid.
Granting Defendant’s motion, the court concluded that under OAR 150-314-
0248(2), Defendant could not apply an overpayment to satisfy a different year’s
tax assessment when that other year’s assessment was on appeal. Further, the
court found that Defendant’s correspondence to Plaintiffs created no reasonable
inference that the overpayment had been applied to the 2016 assessment, nor
does a taxpayer’s subjective belief satisfy the requirement under ORS 305.419(1).
Oral argument on Defendant’s motion for summary judg-
ment was held remotely on August 10, 2022.
Kevin P. O’Connell, Hagen O’Connell & Hval LLP,
Portland, filed a response and argued the cause for Plaintiffs.
Patrick L. Rieder, Assistant Attorney General, Department
of Justice, Salem, filed the motion and argued the cause for
Defendant.
Decision rendered November 8, 2022.
ROBERT T. MANICKE, Judge.
I. 	INTRODUCTION
This personal income tax case is before the court
on Defendant’s motion for summary judgment under Tax
Court Rule (TCR) 47. Plaintiffs oppose the motion but have

180 	Mack v. Dept. of Rev.
not cross-moved. Defendant argues that Plaintiffs failed to
pay “the tax assessed, and all penalties and interest due
* * * on or before the filing of [their] complaint with the regu-
lar division of the Oregon Tax Court * * *.” ORS 305.419(1).1
II. 	FACTS
Defendant has submitted declarations and exhibits,
together with the complaint, support the following factual
narrative.
A. 	Facts Related to Tax Year 2016
On 	or 	about 	October 	15, 	2017, 	Plaintiffs 	paid
Defendant by check $22,003, which was the amount shown
on their return for tax year 2016. On May 6, 2019, Defendant
sent Plaintiffs a letter stating that Defendant was commenc-
ing an audit of their return for tax year 2016.
1. 	March 9, 2020: Notice of Deficiency for Tax Year 2016
After the audit, Defendant issued a notice of defi-
ciency, on March 9, 2020, adjusting Plaintiff’s 2016 income
by denying certain business expense deductions they had
claimed, and determining a deficiency of $24,901 in tax to
pay, plus a 20-percent underpayment penalty of $4,980 and
interest. The notice of deficiency also stated: “If you do not
pay the balance within 30 days from the return’s due date
or the date of this notice, whichever is later, a 5 percent pen-
alty will be added.”
A statement of account that Defendant issued to
Plaintiffs the same day as the notice of deficiency includes a
table that shows the following:
Period
Ending
Tax 	Penal-
ties/Fees
Interest 	Refund/
Offset
Credit 	Balance
Dec 31,
2016
$44,868.00 	$5,978.35 	$4,931.00 	$0.00 	-$22,003.00 $33,774.35
The amount of $44,868 in the “Tax” column in the statement
of account corresponds with the “tax to pay” amount “per
audit” in the notice of deficiency, which apparently means
the total amount of tax due for the year, before applying
1 References to the Oregon Revised Statutes (ORS) and to the Oregon
Administrative Rules (OAR) are to the 2021 editions unless otherwise indicated.

Cite as 25 OTR 179 (2022) 	181
any payment already made. The amount of -$22,003 in the
“Credit” column corresponds with the amount Plaintiffs
paid when they filed their return.
2. 	September 10, 2020: Notice of Assessment for Tax
Year 2016
On September 10, 2020, Defendant issued its notice
of assessment for the total amount of $35,776.66. The notice
of assessment includes the following table:
Period
Ending
Tax 	Penalties/
Fees
Interest 	Refund/
Offset
Balance
Dec 31,
2016
$24,901 	$6,225.05 	$4,655.46 	$0.00 	$35,776.66
The amount of $24,901 in the “Tax” column in the notice of
assessment corresponds with the deficiency amount stated
in the March 9, 2020, notice of deficiency. However, the court
observes that the “Tax,” “Penalties/Fees” and “Interest”
amounts shown add up to $35,781.51, not the $35,776.66
amount shown.
A statement of account that Defendant issued to
Plaintiffs the same day as the notice of assessment includes
a table that shows the following:
Period
Ending
Tax 	Penal-
ties/Fees
Interest Refund/
Offset
Credit 	Balance
Dec 31,
2016
$44,868.00 	$7,223.40 	$5,688.26 	$0.00 	-$22,003.00 	$35,776.66
The above amounts add up; the balance of $35,776.66 is the
sum of the other amounts shown.
3. 	September 29, 2020: Appeal to Magistrate Division
for Tax Year 2016
On or about September 29, 2020, Plaintiffs appealed
the tax year 2016 assessment by filing a complaint in the
Magistrate Division. The magistrate issued a decision on
January 24, 2022. The decision upheld Defendant’s disal-
lowance of certain deductions Plaintiffs had claimed, but
the decision granted Plaintiffs’ appeal in part, ordering
Defendant to reduce the assessment to reflect the court’s
allowance of $115,600 of previously disallowed expense
deductions.

182 	Mack v. Dept. of Rev.
4. 	February 10, 2022: Appeal to Regular Division for
Tax Year 2016
On or about February 10, 2022, Plaintiffs filed their
complaint in this division of the court to appeal from the mag-
istrate’s decision. On March 23, 2022, counsel for Plaintiffs
sent a letter to Defendant’s counsel that, among other
things, asked for a computation of the “amount necessary to
have standing” for tax year 2016. On April 21, 2022, counsel
for Plaintiffs apparently sent another letter, suggesting set-
tlement. On May 26, 2022, counsel for the Department sent
Plaintiffs’ counsel an email stating, in part, that Defendant
had decided to not challenge the expenses that the magis-
trate had ordered the Department to allow as deductions.
In the same email, counsel for Defendant stated that the
“payoff amount” for tax year 2016 was $21,060.27.
5. 	June 7, 2022: Payment of Assessment for Tax Year
2016
Except for the $22,003 paid with their tax return,
Plaintiffs’ only payment for tax year 2016 was by check
dated June 7, 2022, in the amount of $35,910. Defendant
has not asserted that the amount paid was less than the full
amount of tax, penalty and interest assessed.
B. 	Facts Related to Tax Years 2019, 2020 and 2021
Between the March 9, 2020, notice of deficiency and
the June 7, 2022, payment for tax year 2016, the following
occurred.
1. 	January 20, 2021: Plaintiffs File Late and Overpay
($63,237) for Tax Year 2019
Plaintiffs filed their return for tax year 2019 on or
about January 20, 2021, several months after the extended
due date. They overpaid.
Plaintiffs initially sought to apply $63,237 of the
tax year 2019 overpayment to tax year 2020, entering the
amount of the overpayment on line 31 of their return for tax
year 2020. Defendant, however, treated Plaintiff’s request

Cite as 25 OTR 179 (2022) 	183
as a request to apply the refund to the next “open estimated
tax account.” See OAR 150-316-0480 (procedure for apply-
ing overpayments). By the time Plaintiffs filed their return
for tax year 2019, Defendant no longer considered tax year
2020 an “open estimated tax account.” Defendant, therefore,
instead applied the tax year 2019 overpayment (as reduced
for interest and late filing penalties) to the tax year 2021
estimated tax account, which apparently was still “open”
when Plaintiffs filed their 2019 return on January 20, 2021.
2. 	November 5, 2021: Defendant issues notice of pro-
posed refund adjustment and statement of account
for tax year 2020.
On November 5, 2021, Defendant informed Plaintiffs
of the change to the application of their tax year 2019 over-
payment by sending two documents. First, Defendant issued
a notice of proposed refund adjustment for tax year 2020,
as Plaintiffs had reported the overpayment as a credit or
payment on their tax year 2020 return. On page one of that
notice appears an “Explanation of Adjustments Made” that
consists of the following table, apparently organized accord-
ing to the lines on the Oregon personal income tax return
form:
Line 	Description 	Original 	Adjusted
31. 	Amount applied from your prior
year’s tax refund
$63,237.00 	$0.00
We adjusted the amount of any prior year’s refund you applied
to your 2020 estimated tax to reflect the amount we have on
record. If we adjusted your applied refund, you need to use the
adjusted amount. To view your estimated payments, register
for Revenue Online at www.oregon.gov/dor. (ORS 316.583)
The second document Defendant sent on November 5,
2021, was a statement of account. It purports to “provide
a summary of your accounts and any amounts owed and
includes penalties, fees and interest.” It states, however,
that “the amount [owed] doesn’t include balances you’ve
appealed.” Similarly, the following sentence appears on the
next page: “Debts you’ve appealed are shown on the state-
ment but aren’t included in the balance due.” The statement
includes a table that shows the following:

184 	Mack v. Dept. of Rev.
Period
Ending
Tax 	Penal-
ties/Fees
Inter-
est
Refund/
Offset
Credit 	Balance
Dec 31,
2016
$44,868.00 	$7,223.40 	$7,975.06 	$0.00 	-$22,003.00 	$0.00
You appealed this period’s financials. The balance won’t be displayed until
your appeal has been resolved.
Dec 31,
2020
$260,276.00 	$0.00 	$193.69 	$0.00 	-$250,000.00 	$10,469.69
$10,469.69
On November 23, 2021, while awaiting a decision
from the magistrate for tax year 2016, counsel for Plaintiffs
sent a letter to Defendant, stating:
“I am enclosing a copy of the Notice of Proposed Refund
Adjustment applying an overpayment made by the tax-
payers for the year ending December 31, 2020. The taxpay-
er’s Oregon liability for 2016 is pending in the Oregon Tax
Court. This matter was tried and no decision has yet been
entered by the Court. If any of the overpayment for the year
ending December 31, 2020, has been applied to the 2016
tax year, it has been done in error.”
3. 	Resolution of Tax Year 2020
On December 8, 2021, the Department issued a
notice of assessment for tax year 2020, along with a state-
ment of account that included the following:
Period
Ending
Tax 	Penal-
ties/Fees
Inter-
est
Refund/
Offset
Credit 	Balance
Dec 31,
2016
$44,868.00 	$7,223.40 	$8,155.17 	$0.00 	-$22,003.00 	$0.00
You appealed this period’s financials. The balance won’t be displayed until
your appeal has been resolved.
Dec 31,
2020
$260,276.00 	$513.80 	$230.86 	$0.00 	-$250,000.00 	$11,020.66
$11,020.66
On or about January 24, 2022, Plaintiffs appealed
in the Magistrate Division from the tax year 2020 assess-
ment. On February 17, 2022, Defendant issued a “written
objection determination” in reference to the November 23,
2021, letter from Plaintiffs’ counsel, stating that Defendant
had “moved” Plaintiffs’ tax year 2019 refund from tax year
2021 to tax year 2020, and that their tax year 2020 account

Cite as 25 OTR 179 (2022) 	185
“is paid in full.” On March 17, 2022, the magistrate presid-
ing over the tax year 2020 appeal held a case management
conference at which the parties confirmed the terms of an
agreement, and the magistrate issued a judgment of stipu-
lation the same day.
III. 	ISSUE
Must the court dismiss Plaintiffs’ complaint for lack
of jurisdiction pursuant to ORS 305.419?
IV. 	ANALYSIS
Despite the length of the factual narrative above,
the initial analysis in this case is straightforward. Subject to
exceptions not relevant here, ORS 305.419(1) requires that,
“in any appeal from an order, act, omission or determina-
tion of the Department of Revenue involving a deficiency
of taxes imposed upon or measured by net income, the tax
assessed, and all penalties and interest due, shall be paid
to the department on or before the filing of a complaint with
the regular division of the Oregon Tax Court * * *.”
(Emphasis added.) The Oregon Supreme Court has held that
the requirement to pay the assessment on or before the fil-
ing of the complaint is jurisdictional. Leffler Industries v.
Dept. of Rev., 299 Or 481, 485-86, 704 P2d 97 (1985); cf. Scott
v. Dept. of Rev., 358 Or 795, 806, 370 P3d 844 (2016) (fail-
ure to file hardship affidavit under former ORS 305.419(3)
(2011) not jurisdictional). The court must dismiss an appeal
if the requirement to pay is not satisfied.
In this case, Plaintiffs do not dispute that they
paid the tax year 2016 assessment on June 7, 2022. That
was nearly four months after they filed their complaint on
February 10, 2022. Plaintiffs failed to comply with the plain
requirement in ORS 305.419(1).
A. 	Parties’ Arguments
Plaintiffs assert the following as their written
response to Defendant’s motion:
“George Mack believed that the jurisdictional requirement
and the payment of the tax had been met when the Complaint
was filed with the Regular Division of the Oregon Tax

186 	Mack v. Dept. of Rev.
Court. The overpayment on the Plaintiff’s Oregon income
tax return for 2020 in the amount of $63,237.00 was still
held by the Department of Revenue. See correspondence of
November 5, 2021 attached.”
The sole attachment to Plaintiffs’ response is the November 5,
2021, notice of proposed refund adjustment.
At oral argument, Plaintiffs’ counsel added that the
approximately $63,000 overpayment was being “held by the
Department,” as indicated in the November 5, 2021, corre-
spondence from the Department.
1. 	Plaintiffs’ main argument: the 2016 assessment was
paid because Defendant held sufficient funds from
Plaintiffs to pay it.
The court understands Plaintiffs to argue primar-
ily that the fact that Defendant held an overpayment from
tax year 2019 suffices as proof that all amounts assessed for
tax year 2016 had been paid. The court rejects this argu-
ment as a matter of law. The tax year 2016 assessment has
been under appeal in a division of this court continuously
since September 29, 2020, a period that encompasses the
filing of Plaintiffs’ 2019 return (January 20, 2021) through
the date Defendant “moved” the tax year 2019 overpayment
from tax year 2021 to tax year 2020 (February 17, 2022).
As Defendant’s counsel has pointed out, ORS 305.565(1)
provides that “proceedings for the collection of any taxes,
interest or penalties resulting from an assessment of addi-
tional taxes imposed by ORS chapter 118, 310, 314, 316, 317,
318, 321 or this chapter shall be stayed by the taking or
pendency of any appeal to the tax court.” Interpreting this
statute, Defendant’s rule states: “The department will off-
set a refund to assessed accounts, unless the taxpayer has
a currently pending appeal of the assessment.” OAR 150-
314-0248(2) (emphasis added). Defendant states in its reply
brief: “the department would be prohibited from applying
any amount of overpayment from the 2019 tax year toward
the Macks’ tax year 2016 liability while their case was before
the Magistrate Division.”2 Accordingly, whatever authority
2 Defendant, as an executive agency with rulemaking authority, generally “is
bound to follow” its own rule. Realty Group v. Dept. of Rev., 299 Or 377, 382 n 3,
702 P2d 1075 (1985).

Cite as 25 OTR 179 (2022) 	187
Defendant might generally have to use an overpayment to
satisfy a different year’s assessment did not apply in this
case because the tax year 2016 assessment was under
appeal.
2. 	Plaintiffs’ argument that 2019 overpayment had been
“designated” for 2016 assessment.
At one point in oral argument, Plaintiffs’ counsel
stated that the $63,000 overpayment “had been designated
to apply specifically to the 2016 tax year.” Assuming that
Plaintiffs refer to a “designation” by Defendant, the court
concludes that “no objectively reasonable” finder of fact could
so determine based on the record before the court.3 See TCR
47 C.
The court starts with the November 5, 2021, notice
of 	proposed 	refund 	adjustment 	attached 	to 	Plaintiffs’
response. This document nowhere mentions tax year 2016.
The court again reprints the table from page one of the
notice, which appears under the overall heading “Period
ending: December 31, 2020”:
Line 	Description 	Original 	Adjusted
31. 	Amount applied from your prior
year’s tax refund
$63,237.00 	$0.00
We adjusted the amount of any prior year’s refund you applied
to your 2020 estimated tax to reflect the amount we have on
record. If we adjusted your applied refund, you need to use the
adjusted amount. To view your estimated payments, register
for Revenue Online at www.oregon.gov/dor. (ORS 316.583)
The court finds that the table shows that the amount of
$63,237.00 “original[ly]” had been “applied from your prior
year’s tax refund” and that Defendant now proposed to apply
“$0.00” of that amount to tax year 2020. It is true that noth-
ing in the notice informs the reader what Defendant intends
to do with the $63,237 overpayment from tax year 2019, but
3 The court finds nothing in the record suggesting that Plaintiffs had “desig-
nated” the overpayment to apply to tax year 2016. If anything, they specifically
directed the opposite, both on their return for tax year 2020 and on November 23,
2021, when their counsel wrote to Defendant: “If any of the overpayment for the
year ending December 31, 2020, has been applied to the 2016 tax year, it has been
done in error.”

188 	Mack v. Dept. of Rev.
the notice certainly does not “designate” the $63,237.00 to
apply to tax year 2016.
The court turns to the accompanying November 5,
2021, statement of account, which does mention 2016, in the
following table again reprinted here:
Period
Ending
Tax 	Penal-
ties/Fees
Inter-
est
Refund/
Offset
Credit 	Balance
Dec 31,
2016
$44,868.00 	$7,223.40 	$7,975.06 	$0.00 	-$22,003.00 	$0.00
You appealed this period’s financials. The balance won’t be displayed until
your appeal has been resolved.
Dec 31,
2020
$260,276.00 	$0.00 	$193.69 	$0.00 	-$250,000.00 	$10,469.69
$10,469.69
The table is not easy to follow. It refers to two periods (tax
year 2016 and tax year 2020). A notation, which appears
between the two, does not refer to either period by date,
but instead indicates that the taxpayer has filed an appeal
for “this period[ ].” The notation adds that “[t]he balance
won’t be displayed until your appeal has been resolved.” Yet
an amount with a dollar sign appears in each cell of the
“Balance” column—the “Balance” displayed for tax year
2016 is “$0.00.” The notation also refers to an “appeal” of
“financials,” a concept foreign to the court.4
However, read in the context of the facts in evidence,
as well as applicable law, the November 5, 2021, notice and
statement stop well short of any affirmative representation or
“designation” that Defendant had applied the tax year 2019
overpayment to tax year 2016. An objectively reasonable
factfinder would conclude that the reference to an “appeal” in
the table in the statement of account could refer only to tax
year 2016 because that was the only year for which Plaintiffs
had lodged any kind of dispute as of November 5, 2021. And
when read in awareness of ORS 305.565(1) and OAR 150-
314-0248(2), the zero “Balance” in the row for tax year 2016
reasonably refers to the requirement to stay collection for
4 Income taxpayers may appeal from an act or omission of Defendant, typi-
cally the issuance of a notice of assessment or other “order or determination.” See
ORS 305.275(1). An “appeal” of “financials” does not make sense.

Cite as 25 OTR 179 (2022) 	189
that year. This reading is further supported by the sentence
“Debts you’ve appealed are shown on the statement but
aren’t included in the balance due.” Finally, the first page
provides that the statement is “a summary of your accounts
and any amounts owed,” supporting the interpretation that
information for two tax years (2016 and 2020) appears by
coincidence, simply because those are the two years for which
Defendant claims an amount due from Plaintiffs. The court
finds nothing in the November 25, 2021, documents support-
ing a reasonable inference that the 2019 overpayment had
been applied to the tax year 2016 assessment.
B. 	Remaining Arguments
The court briefly addresses two final points.
Plaintiffs’ written response represents that “George
Mack believed that the jurisdictional requirement and the
payment of the tax had been met when the Complaint was
filed with the Regular Division of the Oregon Tax Court.”
Defendant correctly points out that this representation is
not supported by a declaration, affidavit or other evidence.
Defendant also argues that in any event the subjective belief
of either Plaintiff as to whether the tax had been paid is not
relevant. Defendant’s argument also is correct. The statute
imposing the payment requirement does not require that
the plaintiff subjectively believe that the tax has been paid.
It requires that the tax “shall be paid to the department on
or before the filing of a complaint with the regular division
of the Oregon Tax Court * * *.” ORS 305.419(1).
Finally, although Plaintiffs have not argued that
their June 7, 2022, payment of the 2016 tax year assessment
was timely under COVID-related extensions of deadlines,
Defendant correctly points out that the “suspended appeal
period” expired approximately one week before Plaintiffs
paid the assessment and thus cannot change the court’s
conclusion. Chief Justice Order No. 20-027, (July 21, 2020);
Executive Order No. 22-03 (Mar 17, 2022).)
V. 	CONCLUSION
The court will dismiss Plaintiffs’ complaint because
Plaintiffs failed to comply with the requirement under ORS

190 	Mack v. Dept. of Rev.
305.419(1) to ensure that “the tax assessed, and all penal-
ties and interest due, shall be paid to the department on or
before the filing of a complaint * * *.” Plaintiffs cite no author-
ity that would have allowed Defendant to offset the overpay-
ment from tax year 2019 to satisfy the assessment for tax
year 2016 while the latter year was under appeal. Nor would
the record allow an objectively reasonable factfinder to con-
clude that Defendant did so. The requirement under ORS
305.419(1) to ensure that the assessment is paid does not
depend on the filer’s subjective belief. Plaintiffs’ assumption
that their assessment had been or would be paid by offset
from a refund owed for another tax year was unwarranted.
In accordance with the foregoing, now, therefore,
IT 	IS 	ORDERED 	that 	Defendant’s 	Motion 	for
Summary Judgment is granted.