Peterson, Justice.
The commissioner of taxation disallowed a deduction for certain net operating losses claimed by relator taxpayer for its taxable year ended February 24, 1962, and accordingly assessed additional tax with interest for that period. Upon appeal, the Tax Court sustained the commissioner’s order. We issued a writ of certiorari to review the order of the Tax Court.
All relevant facts have been stipulated. Relator, a Delaware corporation, has its general offices and commercial domicile in Minnesota, where throughout the relevant period of time it has published two daily newspapers. In January 1960 relator organized another Delaware corporation known as the San Fernando Valley Times Company, the stock of which was owned entirely by relator. This new company acquired and operated the Valley Times, a newspaper published daily in San Fernando, California. On July 31, 1961, all of the assets of the San Fernando Valley Times Company were distributed to relator in complete liquidation, and the stock was redeemed. As the successor corporation to the predecessor subsidiary, relator would succeed to the subsidiary’s net operating loss carryover by the terms of Minn. St. 290.138, subd. 1. During the period from acquisition to liquidation, the San Fernando Valley Times Company sustained net operating losses of $1,054,977. This sum constituted on July 31, 1961, a net operating loss carryover under Minn. St. 290.095, subd. 2(a)(2), and it was deducted in relator’s return for the taxable year ending February 24, 1962. The commissioner disallowed the deduction on the basis of § 290.095, subd. 4(d, h),
which puts in issue the proper construction of paragraphs (d) and (h).
A preliminary issue, likewise one of statutory construction, relates to the statutory limitation of time for making assessment of additional tax. Relator’s return for the taxable, year was filed November 15, 1962 (pursuant to extension of time duly granted by the commissioner). The commissioner issued an audit report on January 24, 1966, which, among other things, disallowed the above stated net operating loss deduction, with resultant increased tax assessment. Relator filed a written protest to the proposed tax assessment on February 4, 1966. Hearing on the protest was set for March 22, 1966, but upon relator’s repeated requests it was successively rescheduled. On May 12, 1966, incident to such rescheduling, a representative of the commissioner notified relator by telephone that the statutory time for assessment would expire on May 15, 1966, so that an agreement for extension of such time would have to be executed. On May 13, 1966, relator signed and delivered to a representative of the commissioner an extension agreement prepared and presented by the commissioner. It was not until May 20, 1966, however, that the commissioner, by machine stamp, also signed the extension form.
Minn. St. 290.49, subd. 8, provides:
“Where before the expiration of the time prescribed in subdivisions (1) and (2) for the assessment of the tax,
the commissioner and the taxpayer consent in writing
to an extension of time for the assessment of the tax, the tax may be assessed at any time prior to the expiration of the period agreed upon. The period so agreed upon may be extended by subsequent
agreements in writing
made before the expiration of the period previously agreed upon.” (Italics supplied.)
The usual form used by the commissioner to make the statute
functional, as executed in the instant case, is set out in the margin.
Relator contends that the consent in writing to extension of the statutory assessment period is not effective unless timely executed by
both
the commissioner and the taxpayer, which obviously was not done in this case. Quite similar provisions of Federal tax statutes have been construed in several cases, with varying results. Several, in agreement with relator, hold that the language of the statute is unambiguous, making signature by the commissioner mandatory and indispensable to the validity of the instrument.
Others, to the contrary, read the statutory language with greater regard to its practical purposes, concluding that provision for the signature by the commissioner is directory, not mandatory.
We think the latter construction is the more reasonable and realistic.
The statute uses the phrases, “consent in writing” and “agreements in writing,” interchangeably. The written instrument, however, is noncontractual in nature, being in essence a waiver by the taxpayer of a limitations period beneficial only to itself. In Florsheim Bros. Drygoods Co. v. United States, 280 U. S. 453, 50 S. Ct. 215, 74 L. ed. 542, the taxpayers argued that the “waivers” were binding contracts and that a law passed after the contracts were entered into, which in effect extended the time within
which the commissioner could assess, was an unconstitutional impairment of those contracts. The court, through Mr. Justice Brandéis, responded this way (280 U. S. 466, 50 S. Ct. 219, 74 L. ed. 550):
“* * * The waivers executed by the parties were not contracts binding the Commissioner not to make the assessments and collections after the periods specified. At the time when the waivers were executed, the Commissioner was without power under the statute to assess or collect the taxes after the statutory period, as extended by the waivers. A promise by the Commissioner not to do what by the statute he was precluded from doing, would have been of no significance. * * *
“Stress is laid on the use of the words ‘agree’ and ‘agreement’ in the Acts and Regulations. But these are ordinary words having no technical significance. It is also urged that, unless a contract was intended, there is no reason why the consent of the Commissioner should have been required. But an otherwise plain meaning should not be distorted merely for the sake of finding a purpose for this administrative requirement. If a reason must be found, it exists in the general desirability of the requirement as an administrative matter. It serves to keep the Commissioner in closer touch with the matters which he is charged to administer. It avoids claims of improvident execution of waivers and unauthorized exactions by subordinates of the Department for the purpose of curing their own delinquencies. And it provides a formal procedure which is generally desirable for the Commissioner, collectors, and subordinates in the Department.”
Interpreting the statutory requirement as directory does not deny the taxpayer any benefit intended by the legislature. The taxpayer desired a delay beyond the statutory assessment period in which to contest tax liability asserted against it. The taxpayer suffers no surprise by the state’s assertion of liability and is not confronted with the introduction of stale evidence against it, situations which statutes of limitations are designed to avoid.
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Peterson, Justice.
The commissioner of taxation disallowed a deduction for certain net operating losses claimed by relator taxpayer for its taxable year ended February 24, 1962, and accordingly assessed additional tax with interest for that period. Upon appeal, the Tax Court sustained the commissioner’s order. We issued a writ of certiorari to review the order of the Tax Court.
All relevant facts have been stipulated. Relator, a Delaware corporation, has its general offices and commercial domicile in Minnesota, where throughout the relevant period of time it has published two daily newspapers. In January 1960 relator organized another Delaware corporation known as the San Fernando Valley Times Company, the stock of which was owned entirely by relator. This new company acquired and operated the Valley Times, a newspaper published daily in San Fernando, California. On July 31, 1961, all of the assets of the San Fernando Valley Times Company were distributed to relator in complete liquidation, and the stock was redeemed. As the successor corporation to the predecessor subsidiary, relator would succeed to the subsidiary’s net operating loss carryover by the terms of Minn. St. 290.138, subd. 1. During the period from acquisition to liquidation, the San Fernando Valley Times Company sustained net operating losses of $1,054,977. This sum constituted on July 31, 1961, a net operating loss carryover under Minn. St. 290.095, subd. 2(a)(2), and it was deducted in relator’s return for the taxable year ending February 24, 1962. The commissioner disallowed the deduction on the basis of § 290.095, subd. 4(d, h),
which puts in issue the proper construction of paragraphs (d) and (h).
A preliminary issue, likewise one of statutory construction, relates to the statutory limitation of time for making assessment of additional tax. Relator’s return for the taxable, year was filed November 15, 1962 (pursuant to extension of time duly granted by the commissioner). The commissioner issued an audit report on January 24, 1966, which, among other things, disallowed the above stated net operating loss deduction, with resultant increased tax assessment. Relator filed a written protest to the proposed tax assessment on February 4, 1966. Hearing on the protest was set for March 22, 1966, but upon relator’s repeated requests it was successively rescheduled. On May 12, 1966, incident to such rescheduling, a representative of the commissioner notified relator by telephone that the statutory time for assessment would expire on May 15, 1966, so that an agreement for extension of such time would have to be executed. On May 13, 1966, relator signed and delivered to a representative of the commissioner an extension agreement prepared and presented by the commissioner. It was not until May 20, 1966, however, that the commissioner, by machine stamp, also signed the extension form.
Minn. St. 290.49, subd. 8, provides:
“Where before the expiration of the time prescribed in subdivisions (1) and (2) for the assessment of the tax,
the commissioner and the taxpayer consent in writing
to an extension of time for the assessment of the tax, the tax may be assessed at any time prior to the expiration of the period agreed upon. The period so agreed upon may be extended by subsequent
agreements in writing
made before the expiration of the period previously agreed upon.” (Italics supplied.)
The usual form used by the commissioner to make the statute
functional, as executed in the instant case, is set out in the margin.
Relator contends that the consent in writing to extension of the statutory assessment period is not effective unless timely executed by
both
the commissioner and the taxpayer, which obviously was not done in this case. Quite similar provisions of Federal tax statutes have been construed in several cases, with varying results. Several, in agreement with relator, hold that the language of the statute is unambiguous, making signature by the commissioner mandatory and indispensable to the validity of the instrument.
Others, to the contrary, read the statutory language with greater regard to its practical purposes, concluding that provision for the signature by the commissioner is directory, not mandatory.
We think the latter construction is the more reasonable and realistic.
The statute uses the phrases, “consent in writing” and “agreements in writing,” interchangeably. The written instrument, however, is noncontractual in nature, being in essence a waiver by the taxpayer of a limitations period beneficial only to itself. In Florsheim Bros. Drygoods Co. v. United States, 280 U. S. 453, 50 S. Ct. 215, 74 L. ed. 542, the taxpayers argued that the “waivers” were binding contracts and that a law passed after the contracts were entered into, which in effect extended the time within
which the commissioner could assess, was an unconstitutional impairment of those contracts. The court, through Mr. Justice Brandéis, responded this way (280 U. S. 466, 50 S. Ct. 219, 74 L. ed. 550):
“* * * The waivers executed by the parties were not contracts binding the Commissioner not to make the assessments and collections after the periods specified. At the time when the waivers were executed, the Commissioner was without power under the statute to assess or collect the taxes after the statutory period, as extended by the waivers. A promise by the Commissioner not to do what by the statute he was precluded from doing, would have been of no significance. * * *
“Stress is laid on the use of the words ‘agree’ and ‘agreement’ in the Acts and Regulations. But these are ordinary words having no technical significance. It is also urged that, unless a contract was intended, there is no reason why the consent of the Commissioner should have been required. But an otherwise plain meaning should not be distorted merely for the sake of finding a purpose for this administrative requirement. If a reason must be found, it exists in the general desirability of the requirement as an administrative matter. It serves to keep the Commissioner in closer touch with the matters which he is charged to administer. It avoids claims of improvident execution of waivers and unauthorized exactions by subordinates of the Department for the purpose of curing their own delinquencies. And it provides a formal procedure which is generally desirable for the Commissioner, collectors, and subordinates in the Department.”
Interpreting the statutory requirement as directory does not deny the taxpayer any benefit intended by the legislature. The taxpayer desired a delay beyond the statutory assessment period in which to contest tax liability asserted against it. The taxpayer suffers no surprise by the state’s assertion of liability and is not confronted with the introduction of stale evidence against it, situations which statutes of limitations are designed to avoid. There
is no realistic circumstance in which the commissioner would, in the absence of his own signature, undertake to deny or revoke an extension of the assessment period. The only realistic consequence of the strict construction urged by relator would be a loss of revenue owed the state and a windfall to the taxpayer at whose requests the delay was induced. The legislature, of course, would never intend any such result.
We hold, therefore, that the written consent for extension of the time in which to assess taxes prepared by the commissioner and delivered to relator, thereafter timely signed by relator and redelivered to the commissioner, was a sufficient compliance with the statute so as to extend the time in which the commissioner could make the challenged assessment of additional tax.
One of the two statutory provisions upon which the commissioner ordered disallowance of relator’s carryover net operating loss deduction — and the provision upon which the Tax Court sustained that order — is Minn. St. 290.095, subd. 4(d), hereafter referred to as paragraph (d):
“No taxpayer shall be allowed a net operating loss deduction for or with respect to losses connected with income producing activities if the income therefrom would not be required to be either assignable to this state or included in computing the taxpayer’s taxable net income.”
The language of the statute on its face speaks for the disallowance. The net operating losses, as stipulated, were sustained by relator’s subsidiary, San Fernando Valley Times Company, in connection with its out-of-state income-producing activities, income which was not assignable to this state and not included in computing relator’s taxable net income.
Relator, however, makes an impressive argument that the language of paragraph (d), read in relationship to other provisions of the same section, is by no means clear and unambiguous. It argues that the paragraph does not speak to the actual computation of the amount which is allowed as a deduction in computing
net income, a deduction which is defined in subd. 3 of § 290.095,
but is concerned only with the computation of the current (taxable year) net operating loss, which is defined in subd. I.
Close scrutiny of all the paragraphs of subd. 4,
the argument runs, will
reveal that all are aimed at the computation of current net operating loss, and that paragraph (d), consistent with the seven others, does not restrict the computation of the deduction. Nothing in subd. 4, relator concludes from this analysis, should preclude it from including the stipulated past net operating loss of the San Fernando Valley Times Company in the computation of the net operating loss deduction (except as it is relevant in computing current net income). A contrary construction of subd. 4, it adds, would be inequitable and defeat the purpose of § 290.138, subd. 1, which allows a successor corporation to succeed to the net operating loss carryover of the predecessor corporation.
We acknowledge, as we recently did in Reuben L. Anderson-Cherne, Inc. v. Hatfield, 279 Minn. 478, 158 N. W. (2d) 840, that the scope of subd. 4 is not altogether clear. However, here as
there, we are confronted with the firmly established rule that taxation is presumed and that the taxpayer must show by clear and express language that it is entitled to a deduction. Demonstration of ambiguity as to legislative intent does not itself fulfill the taxpayer’s burden of persuasion, for any ambiguity as to á deduction must be resolved against the taxpayer. It is not inequitable to give differential tax treatment to the net operating loss carryover of a predecessor corporation on the basis of geographical differences of income-producing operations. The legislature would have sound reason for refusing to allow a taxpayer to offset Minnesota income with losses sustained in activities the income from which would never have been subject to Minnesota tax.
We hold, therefore, that § 290.095, subd. 4(d), disallows deduction by a parent corporation of the carryover of a net operating loss sustained by a subsidiary corporation, to which the parent corporation succeeded under § 290.138, subd. 1, upon liquidation of the subsidiary, where the subsidiary’s income-producing activities causing the loss were not carried on in this state.
The other statutory provision upon which the commissioner based disallowance of relator’s net carryover loss deduction is paragraph (h) of § 290.095, subd. 4:
“Federal income and excess profits taxes shall not be allowed as a deduction in computing a net operating loss.”
Federal income tax paid by relator in the taxable year was $2,295,842, which, under our holding in Reuben L. Anderson-Cherne, Inc. v. Hatfield,
supra,
would in this case reduce the amount of the claimed deduction to zero. The Tax Court, however, sustained the order of the commissioner on the basis of
paragraph (d), stating that it was accordingly not necessary to consider the applicability of paragraph (h).
Affirmed.