N.C. Dep't of Revenue v. Bass

2017 NCBC 112
CourtNorth Carolina Business Court
DecidedDecember 14, 2017
Docket17-CVS-7688
StatusPublished

This text of 2017 NCBC 112 (N.C. Dep't of Revenue v. Bass) is published on Counsel Stack Legal Research, covering North Carolina Business Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
N.C. Dep't of Revenue v. Bass, 2017 NCBC 112 (N.C. Super. Ct. 2017).

Opinion

N.C. Dep’t of Revenue v. Bass, 2017 NCBC 112.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION WAKE COUNTY 17 CV 007688

N.C. DEPARTMENT OF REVENUE,

Petitioner,

v. ORDER AND OPINION ON PETITION FOR JUDICIAL REVIEW SAMUEL S. BASS,

Respondent.

1. THIS MATTER is before the Court on Petitioner North Carolina

Department of Revenue’s (the “DOR”) Petition for Judicial Review (the “Petition”) of

a Final Decision by the Office of Administrative Hearings (“OAH”) in a contested tax

case. For the reasons set forth below, the Court hereby REVERSES the Final

Decision of the OAH.

North Carolina Department of Justice, by Assistant Attorney General Ronald D. Williams, II for Petitioner.

Samuel S. Bass, pro se.

Robinson, Judge.

I. INTRODUCTION

2. This matter arises out of a dispute between the DOR and Respondent

Samuel S. Bass (“Bass”) regarding Bass’s 2012 North Carolina joint income tax

return. On April 15, 2013, Bass attempted to electronically file both his 2012 federal

income tax return and his 2012 North Carolina income tax return. Although Bass

successfully filed his federal return, Bass unintentionally failed to file his North Carolina return. Just over three years later, in July 2016, the DOR sent Bass a

document titled “Notice of Intent to Assess for Failure to File North Carolina Return”

regarding Bass’s failure to file his 2012 state tax return. In response, on August 4,

2016, Bass sent the DOR an original copy of his unfiled 2012 state return, which

reflected Bass’s contention that a refund was due. The DOR determined that Bass’s

request for a refund, in the form of his belatedly filed return, was barred by the

statute of limitations for obtaining a refund. As such, the DOR issued Bass a notice

of denial dated August 24, 2016. Thereafter, Bass filed with the OAH a petition for

a contested case hearing. The OAH ruled in favor of Bass, finding that Bass’s request

for a refund is not barred by the statute of limitations. The DOR then filed the

Petition seeking judicial review of the OAH’s decision.

II. PROCEDURAL HISTORY

3. The Court recites only those portions of the procedural history relevant to

its determination of the Petition.

4. On October 24, 2016, Bass timely filed a petition for a contested case with

the OAH. (R. at 13, ECF No. 18.)

5. On October 25, 2016, the Administrative Law Judge (“ALJ”) assigned to the

matter, J. Randolph Ward, issued an Order for Prehearing Statements directing the

DOR and Bass to each file and serve a prehearing statement within thirty days of the

date of the order. (R. at 17.)

6. On November 23, 2016, the DOR filed with the OAH a Motion to Dismiss

in Lieu of Prehearing Statement, (R. at 25), which was denied by order of the ALJ dated December 21, 2016, (R. at 32). Bass did not file a prehearing statement or any

other document in lieu thereof.

7. Following an evidentiary hearing on March 1, 2017, the ALJ issued a Final

Decision on May 26, 2017. (R. at 4.) The ALJ concluded that Bass’s claim for a refund

is not time barred. (R. at 9.) Further, as a result of the DOR’s failure to file a

prehearing statement, the ALJ sanctioned the DOR by deeming it proven, without

further evidence, that Bass and his spouse are entitled to be credited with not less

than $7,755.00 in withheld taxes—the amount shown on Bass’s 2012 state return—

in calculating their 2012 personal income tax liability. (R. at 6, 9.)

8. On June 26, 2017, the DOR timely filed its Petition pursuant to N.C. Gen.

Stat. §§ 150B-43, -45, and -46 in Wake County Superior Court seeking judicial review

of the ALJ’s Final Decision. (Pet. 1, ECF No. 3.)

9. This action was designated as a mandatory complex business case by order

of the Chief Justice of the Supreme Court of North Carolina dated June 28, 2017, and

assigned to the undersigned by order of Chief Business Court Judge James L. Gale

dated June 29, 2017.

10. On July 24, 2017, Bass filed with the Wake County Clerk of Superior Court

a Response to Petition for Judicial Review, which was electronically filed with this

Court on August 24, 2017.

11. The DOR timely submitted a brief in support of its Petition. Bass did not

file a response brief. 12. On December 4, 2017, the Court held a hearing at which Bass and counsel

for the DOR were present. This matter is now ripe for resolution.

III. STANDARD OF REVIEW

13. Pursuant to N.C. Gen. Stat. § 150B-51, this Court may reverse or modify a

final agency decision if the agency’s findings, inferences, conclusions, or decisions are:

(1) In violation of constitutional provisions;

(2) In excess of the statutory authority or jurisdiction of the agency or administrative law judge;

(3) Made upon unlawful procedure;

(4) Affected by other error of law;

(5) Unsupported by substantial evidence admissible under G.S. 150B- 29(a), 150B-30, or 150B-31 in view of the entire record as submitted; or

(6) Arbitrary, capricious, or an abuse of discretion.

N.C. Gen. Stat. § 150B-51(b). “The nature of the error asserted by the party seeking

review dictates the appropriate manner of review . . . .” Dillingham v. N.C. Dep’t of

Human Res., 132 N.C. App. 704, 708, 513 S.E.2d 823, 826 (1999). In addressing

asserted errors of law by the OAH and assertions that the OAH exceeded its statutory

authority or jurisdiction, the Court is to apply the de novo standard of review. N.C.

Gen. Stat. § 150B-51(c). “De novo review requires a court to consider a question anew,

as if not considered or decided by the [OAH] previously . . . .” Smith v. Richmond Cty.

Bd. of Educ., 150 N.C. App. 291, 295, 563 S.E.2d 258, 263 (2002). Under this standard

of review, the Court “freely substitutes its own judgment for the [OAH]’s.” N.C. Dep’t

of Env’t & Nat. Res. v. Carroll, 358 N.C. 649, 660, 599 S.E.2d 888, 895 (2004). 14. With regard to contentions that the ALJ’s findings or conclusions are

unsupported by substantial evidence or are arbitrary, capricious, or an abuse of

discretion, the Court is to apply the whole record standard of review. N.C. Gen. Stat.

§ 150B-51(c). Under the whole record standard of review, the Court may not

substitute its own judgment for the ALJ’s judgment. Davis v. Macon Cty. Bd. of

Educ., 178 N.C. App. 646, 654, 632 S.E.2d 590, 596 (2006). Instead, “[t]he whole

record test requires the reviewing court to examine all competent evidence in order

to determine whether the [OAH’s] decision is supported by substantial evidence.”

Friends of Hatteras Island Nat’l Historic Mar. Forest Land Tr. for Pres., Inc. v.

Coastal Res. Comm’n, 117 N.C. App. 556, 567, 452 S.E.2d 337, 345 (1995) (quotation

marks omitted). This standard requires the Court to examine all competent evidence

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