Farrell v. Dept. of Rev.

• Court: Oregon Tax Court
• Decided: June 16, 2025
• Docket: TC-MD 250143R
• Status: Unpublished

Opinion

IN THE OREGON TAX COURT MAGISTRATE DIVISION Income Tax

STACIE FARRELL ) and SEAN S. STORTZUM, ) ) Plaintiffs, ) TC-MD 250143R ) v. ) ) DEPARTMENT OF REVENUE, ) State of Oregon, ) ) Defendant. ) DECISION OF DISMISSAL

This matter is before the court on Defendant’s Motion to Dismiss (Motion) filed, April

24, 2025, requesting dismissal of Plaintiffs’ Complaint on the grounds that the court lacks

jurisdiction over discretionary penalty and interest waivers. Plaintiffs filed their response on

June 9, 2025. The matter is now ready for decision.

I. STATEMENT OF FACTS

Plaintiffs assert that they employed a tax professional to file their 2016 to 2022 tax

returns but that their California-based practitioner failed to advise them of their obligation to file

TriMet self-employment tax returns. (Ptfs’ Compl at 4.) Plaintiffs contend that in 2024, they

became aware of this obligation and filed the TriMet returns. (Id. at 2.) Thereafter, Defendant

assessed interest on the unpaid amounts and imposed a 100 percent penalty for each tax year.

Plaintiffs requested that Defendant waive the penalties and interest. On January 6, 2025,

Defendant issued to each Plaintiff a Notice of Penalty and Interest Waiver Determination

(Notice), which reduced the penalty from 100 percent to 30 percent but denied the request to

waive the accrued interest. (Ptfs’ Compl, Ex 6.)

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DECISION OF DISMISSAL TC-MD 250143R 1 Plaintiffs appealed to this court on April 16, 2025, challenging Defendant’s Notice.

Plaintiffs seek a waiver of all penalties and interest based on their voluntary late filing or, in the

alternative, an equitable remedy. (Ptfs’ Compl at 4.)

II. ANALYSIS

The issues in this case are whether Defendant correctly imposed penalties and interest for

the late filing of returns, and whether the court has the authority to modify interest and penalties

assessed by Defendant. The court will address each issue in turn.

A. Imposition of Penalties and Interest for Late Returns

ORS 305.992(1)1 provides for a 100 percent penalty when tax returns are “not filed for

three consecutive years by the due date.” Plaintiffs argue that this statute does not apply to their

situation because they filed before Defendant imposed the penalty.

The court agrees with Defendant; the statute plainly applies to the failure to timely file

returns regardless of when the returns were ultimately submitted. Oregon law indicates a process

for how statutes are to be interpreted, and the general rule for construing statutes prohibits judges

from adding words to statutes to support a particular meaning. ORS 174.010. Plaintiffs’

assertion would require the court to impermissibly add words to the statute for it to support their

interpretation. Instead, the court finds that penalties were properly imposed in these

circumstances.

Additionally, interest was assessed pursuant to ORS 305.220(1). Under OAR 150-305-

0066(1),2 the general policy of this state is that the Department of Revenue (department) will not

waive interest. The Oregon Supreme Court has affirmed that every deficiency arising under a

1 References to the Oregon Revised Statutes (ORS) are to the 2023 version. 2 Oregon Administrative Rules (OAR).

DECISION OF DISMISSAL TC-MD 250143R 2 tax imposed by the department shall bear simple interest. Thomas Creek Lumber and Log Co. v.

Dept. of Rev, 344 Or 131, 178 P3d 217 (2008). The court finds that imposition of interest was

authorized.

B. Exclusive, Unreviewable Authority for Discretionary Waiver of Penalties and Interest

Turning to Defendant’s denial of penalty and interest waivers, Defendant argues that the

“exclusive process for taxpayers seeking a waiver of interest or penalties is to request a

discretionary waiver from the department.” (Def’s Mot at 1.) Because the discretionary waiver

request process was completed, Defendant asserts that the court lacks jurisdiction to decide the

merits of this appeal. (Id.)

The court observes that ORS 305.145(4) provides that the department may establish by

rule “instances in which the department may, in its discretion, waive any part or all of penalties *

* * that are collected by the department.” The department promulgated OAR 150-305-0068 to

govern discretionary penalty waivers. OAR 150-305-0068(3)(a)(E) specifically includes

penalties assessed under ORS 305.992. Thus, penalties imposed under ORS 305.992 are subject

to discretionary waiver by Defendant.

Turning to the court’s own authority, the wording of ORS 305.560(1)(a) states an appeal

to the Oregon Tax Court cannot be taken from an order denying the discretionary waiver of

penalty or interest by the Department of Revenue. This statute limits the court’s review by

excluding discretionary waivers from becoming appealable acts.

OAR 150-305-0060(2) further clarifies that if the department denies a taxpayer’s request

for a discretionary waiver of interest or penalties, that decision is final and may not be appealed

to the Oregon Tax Court. This regulation reinforces the statutory limitation on the court’s

authority. Similarly, OAR 150-305-0192(2) states that a denial by the department of a

DECISION OF DISMISSAL TC-MD 250143R 3 discretionary waiver request is final and not subject to appeal to the Oregon Tax Court. This

reflects a deliberate regulatory framework that excludes the Tax Court from performing judicial

review of Defendant’s discretionary penalty waivers.

In Pelett v Department of Revenue, 11 OTR 364 (1990), this court noted that ORS

305.560(1)3 imposes limits on this court’s judicial review. The court understood that statute as

demonstrating the legislature’s intent to prohibit the court from reviewing Defendant’s discretion

in waiving penalties or interest. Id. at 366. The interpretation of ORS 305.560(1) found in Pelett

remains controlling precedent that this division of the court must follow.

III. CONCLUSION

Upon careful consideration, the court agrees with Defendant that the court lacks authority

to review Defendant’s denial of discretionary waivers of interest and penalties. Now, therefore,

IT IS THE DECISION OF THIS COURT that Defendant’s Motion to Dismiss is granted.

Plaintiffs’ appeal is dismissed.

RICHARD D. DAVIS MAGISTRATE

If you want to appeal this Decision, file a complaint in the Regular Division of the Oregon Tax Court, by mailing to: 1163 State Street, Salem, OR 97301-2563; or by hand delivery to: Fourth Floor, 1241 State Street, Salem, OR.

Your complaint must be submitted within 60 days after the date of this Decision or this Decision cannot be changed. TCR-MD 19 B.

This document was signed by Magistrate Richard D. Davis and entered on June 16, 2025.

3 It is unclear which edition of the Oregon Revised Statutes the court in Pelett was interpreting. Nevertheless, the operative phrasing of ORS 305.560(1) excepting orders for appeal “denying the discretionary waiver of penalty or interest” of the department has been included in the statute since the statute’s creation in 1977 despite the statute subsequently receiving additional subsections. Or laws 1977, ch 870, § 10.

DECISION OF DISMISSAL TC-MD 250143R 4