               SUPREME COURT OF MISSOURI
                                            en banc



HARRY FISCHER,                                    )
                                                  )
                                 Appellant,       )
                                                  )
v.                                                )    No. SC95055
                                                  )
DIRECTOR OF REVENUE,                              )
                                                  )
                                 Respondent.      )


                  PETITION FOR REVIEW OF A DECISISON OF THE
                     ADMINISTRATIVE HEARING COMMSISION
                   The Honorable Nicole Colbert-Botchway, Commissioner

                                 Opinion issued March 15, 2016

         The Administrative Hearing Commission (“AHC”) affirmed the final

determination by the Director of Revenue (“Director”) regarding Mr. Harry Fischer’s

2007 income tax liability. Fischer now seeks judicial review of this decision on the

grounds that the AHC misinterpreted or misapplied section 143.741.1, 1 regarding the
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Director’s assessment of additions to tax, as well as section 143.731.7, regarding the

Director’s assessment of interest on the amounts Fischer owed. This Court rejects

Fischer’s arguments and affirms the AHC’s decision.


1
     Unless otherwise provided, statutory references are to the 2000 Revised Statutes of Missouri.
                                        Background

        This case involves only the Director’s decision regarding Fischer’s 2007 income

tax liability because that is the only decision to which Fischer filed a timely protest and it

is the only decision addressed by the AHC. However, because the Director’s assessment

of additions and interest to Fischer’s 2004, 2005 and 2006 income tax liabilities affected

the Director’s determination of Fischer’s 2007 liability, a description of those returns is

necessary to set the stage for 2007.

        On April 15, 2005, Fischer requested an extension of time to file his 2004 tax

return. Along with this request, he enclosed a payment of $2,000. An extension was

granted, and Fischer’s new deadline for filing his 2004 return was August 15, 2005. He

missed that deadline. Instead, he did not file his 2004 return until February 27, 2007.

According to his 2004 return, Fischer owed no income tax for that year. He entered the

previous payment of $2,000 as an overpayment to be applied to his 2005 income tax

liability.

        Fischer’s 2005 return was due on April 15, 2006, but he did not file that return

until March 31, 2009. On that same date, Fischer also filed his 2006 return, which had

been due on April 15, 2007. Because Fischer’s returns for 2005 and 2006 were both filed

late, the Director applied additions and interest to the taxes owed for each of those years.

For 2005, Fischer claimed he owed $11, to which the Director assessed an addition of

$2.75 and interest of $0.68. The Director subtracted those amounts from Fischer’s

$2,000 overpayment credit from 2004, leaving a 2005 overpayment credit of $1,985.57.
This credit was applied to Fischer’s 2006 tax liability on March 31, 2009, the date the

2005 return was filed.

       According to his 2006 return, Fischer owed income taxes in the amount of $1,125.

Because Fischer’s 2006 return was filed nearly two years late, the Director imposed an

addition of $281.25 and interest of $167.49. On March 31, 2009, the Director applied

Fischer’s 2005 overpayment credit of $1,985.57 to Fischer’s liability for 2006, giving

Fischer a 2006 overpayment credit of $411.83.

       Fischer’s 2007 return was due on April 15, 2008, well before March 31, 2009,

when he filed his late 2005 and 2006 returns. Fischer again failed to file his return on

time, however, and did not file his 2007 return until June 28, 2011. According to

Fischer’s 2007 return, he owed income taxes of $2,152. Because Fischer’s return was

more than three years late, the Director imposed an addition of $538, a penalty of $5, and

interest of $343.75. On March 31, 2009, when Fischer filed his 2006 return, the Director

was able to ascertain that Fischer had a 2006 overpayment credit of $411.83 and

immediately applied that credit to Fischer’s 2007 tax liability. On June 28, 2011, when

Fischer filed his 2007 return, the Director also applied the $1,293 payment Fischer had

tendered with the 2007 return.

       On August 3, 2011, the Director sent Fischer notice of the proposed changes to his

2007 return, including the assessment of an addition, penalty, and interest. On October

25, 2011, Fischer sent the director $626, which was less than half of the amount he still

owed. On October 26, 2011, the Director sent Fischer a final notice of deficiency stating




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that Fischer’s total liability for 2007 was $1,316.76, that more than half of this was still

owed, and that additional interest in the amount of $14.50 was being assessed.

       Fischer filed a timely protest on December 24, 2011. On February 22, 2013, the

Director issued a final decision regarding Fischer’s 2007 income tax liability. The

Director determined that, after additions, penalty, and interest, and after subtracting

Fischer’s 2006 overpayment credit of $411.83 on March 31, 2009, and Fischer’s June 28,

2011, and October 25, 2011, payments, Fischer continued to owe $703.64 plus interest.

       Fischer appealed this decision to the AHC under section 621.050. There, Fischer

filed a motion for summary decision in which he argued that the Director erred in

assessing additions and interest under sections 143.741.1 and 143.731.7, respectively, in

calculating Fischer’s tax liability for 2005, 2006, and 2007. The Director filed a response

and cross-motion for summary decision, which the AHC granted.

                                          Analysis

       Fischer now seeks judicial review of the AHC’s determination. Under section

621.193, this Court must affirm the AHC’s decision if:

       (1) it is authorized by law; (2) it is supported by competent and substantial
       evidence based on the whole record; (3) mandatory procedural safeguards
       are not violated; and (4) it is not clearly contrary to the reasonable
       expectations of the legislature.

Union Elec. Co. v. Dir. of Revenue, 425 S.W.3d 118, 121 (Mo. banc 2014). In

determining whether the decision is “authorized by law,” the AHC’s construction of a

revenue statute is reviewed de novo. Fred Weber, Inc. v. Dir. of Revenue, 452 S.W.3d

628, 629-30 (Mo. banc 2015).



                                              4
       In order to challenge the Director’s assessment of tax liability for a given year, the

taxpayer must file a timely protest under section 143.631. State ex rel. Fischer v. Brooks,

150 S.W.3d 284, 285 (Mo. banc 2004). Such a protest “is the exclusive remedy for

challenging the assessment.” Id. Fischer did not protest the Director’s assessment of

interest and additions for tax years 2005 or 2006. Accordingly, the AHC did not rule on

those decisions, and this Court will not review them here. 2  1F




       I. The Addition to Fischer’s 2007 Tax Liability Was Properly Assessed

       In his first point, Fischer argues that the AHC misconstrued or misapplied section

143.741.1, which authorizes the Director to assess an “addition to tax” when the taxpayer

fails to file a timely return. He claims that this addition – which is five percent per

month, with a cap of twenty-five percent, on the amount of the tax that should have been

shown on the return had it been timely – should be calculated only on the amount owed

after his 2006 overpayment credit was subtracted, even though the existence and amount

of Fischer’s 2006 overpayment credit was not ascertainable until more than five months

after Fischer’s 2007 return was due to be filed. He is incorrect.

       The statute provides:

       In case of failure to file any return required under sections 143.011 to
       143.996 on the date prescribed therefor (determined with regard to any
2
   Fischer claims that he was not given notice of the Director’s changes to his 2005 return and so
had no opportunity to challenge them in a timely fashion. This is immaterial given that, on July
30, 2013, the Director abated the $2.75 addition to tax for 2005 and credited that amount to his
2007 deficiency. More importantly, even though Fischer claims that he did not receive notice of
the Director’s changes to his 2006 return, the AHC found that Fischer was given notice of those
changes and failed to dispute them. Accordingly, Fischer cannot now challenge the Director’s
assessments regarding 2006 or the 2005 calculations on which they were based. In any event,
the Director’s assessment of interest and additions for 2006 were correct for the same reasons
explained herein with respect to the Director’s determinations for 2007.

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       extension of time for filing), unless it is shown that such failure is due to
       reasonable cause and not due to willful neglect, there shall be added to the
       amount required to be shown as tax on such return five percent of the
       amount of such tax if the failure is not for more than one month, with an
       additional five percent for each additional month or fraction thereof during
       which such failure continues, not exceeding twenty-five percent in the
       aggregate. For purposes of this section, the amount of tax required to be
       shown on the return shall be reduced by the amount of any part of the tax
       which is paid on or before the date prescribed for payment of the tax and
       by the amount of any credit against the tax which may be claimed upon the
       return.

§ 143.741.1 (emphasis added).

       The plain language of section 143.741.1 requires the Director to assess an addition

to tax whenever there is a failure, not due to reasonable cause, to file a timely return.

Fischer’s 2007 return was due on April 15, 2008, but he neglected to file that return for

more than three years. Fischer does not claim he had reasonable cause for this delay.

Accordingly, the Director was correct in assessing a five-percent-per-month addition,

capped at twenty-five percent (or $538), to Fischer’s 2007 income tax liability of $2,152

beginning on April 15, 2008, the date Fischer’s 2007 return was due.

       Fischer claims that the last sentence of section 143.741.1 requires that the Director

should have calculated Fischer’s twenty-five percent addition for 2007 only after

subtracting the $411.83 overpayment credit from Fischer’s 2006 return. This is incorrect.

The last sentence of section 143.741.1 speaks to the “amount of tax required to be shown

on the return” and the “credit against the tax which may be claimed upon the return,”

both of which address the return as it should have been filed on the due date. Fischer was

not entitled to an overpayment credit on April 15, 2008, when his 2007 return was due

because – on that date – the Director did not know whether Fischer would have a 2006


                                              6
overpayment credit (let alone the amount of that credit) because Fischer did not file his

2006 return until Mach 31, 2009. By the time Fischer’s 2006 and 2005 returns arrived on

March 31, 2009, Fischer’s 2007 return was more than five months late and the full

twenty-five percent addition properly had been assessed under section 143.741.1.

       Fischer does not provide any statute, regulation, or case law suggesting that an

overpayment from a previous tax year suspends the filing deadline for subsequent

returns, especially when the existence or amount of that overpayment was not

ascertainable on the filing deadline. Accordingly, this Court holds that the Director

properly applied section 143.741.1 by not crediting Fischer’s 2006 overpayment credit to

his 2007 tax until the amount of that credit became ascertainable on March 31, 2009,

when Fischer filed his 2006 return.

       II. Interest on Fischer’s 2007 Tax Liability Was Assessed Properly

       Fischer’s second point is based on the same faulty assertion that underlies his first

point. In his second point, Fischer argues that the AHC misconstrued or misapplied

section 143.731, which authorizes the Director to assess interest on all income taxes from

the date on which the return is due to be filed until the date on which the tax is paid. He

claims that this interest should be calculated only on the amount of taxes he owed for

2007 after his 2006 overpayment credit was subtracted, even though the existence and

amount of his 2006 overpayment credit was not known and could not have been

ascertained until well after the date on which Fischer’s 2007 return was due to be filed

and interest began to accrue. In other words, as above, Fischer claims that the Director

was bound to subtract Fischer’s 2006 overpayment credit of $411.83 before assessing


                                             7
interest on his 2007 tax liability beginning April 15, 2008, even though the amount of

Fischer’s 2006 overpayment credit (if any) was not ascertainable until March 31, 2009,

when Fischer filed his 2006 return. This, too, is incorrect.

       Subsections 1 and 7 of section 143.731 refute Fischer’s claim. The first

subsection provides, in pertinent part:

       If any amount of tax imposed by sections 143.011 to 143.996, including tax
       withheld by an employer, is not paid on or before the last date prescribed
       for payment, interest on such amount at the rate determined by section
       32.065, RSMo, shall be paid for the period from such last date to date paid.

§ 143.731.1. The latter subsection provides:

       If any portion of a tax is satisfied by credit of an overpayment, then no
       interest shall be imposed under this section on the portion of the tax so
       satisfied for any period during which, if the credit had not been made,
       interest would have been allowable with respect to such overpayment.

§ 143.731.7.

       Unlike section 143.741, which speaks in terms of what a timely return would have

shown, section 143.731 imposes interest on the amount Fischer actually owes from the

date the return was due to be filed until the tax is paid in full. Accordingly, the Director

properly assessed interest on the entire $2,152 in taxes Fischer owed for 2007 beginning

April 15, 2008, when those taxes were first owed. Fischer wants this principal amount

reduced by his 2006 overpayment credit of $411.83 before any interest is calculated, but

the Director did not know whether Fischer would have an overpayment credit from 2006

(let alone the amount of such credit) until March 31, 2009, when Fischer filed his 2006

return. As soon as Fischer filed his 2006 return and the Director was able to ascertain the

amount of Fischer’s 2006 overpayment credit (i.e., $411.83), it was applied to reduce the


                                              8
amount Fischer owed for 2007, and interest no longer accrued on that amount. Fischer

was not entitled to more.

       Fischer claims that federal tax law compels a contrary result and that Missouri tax

laws should be construed and applied in a similar manner. He fails to provide this Court

with any federal statute, regulation, or case law that suggests that an overpayment from a

previous tax year reduces the principal amount of tax owed for purposes of calculating

interest even though the amount of that overpayment was not known and could not be

ascertained on the date the later year’s tax was first owed. Far from proving this

assertion, Fischer merely asserts in an affidavit that, “[t]o the best of [Fischer’s]

knowledge, [the IRS] has never assessed additions to tax or interest on total tax

obligation without reducing that amount by the amount of the overpayment credit.”

Under section 621.050.2, the burden of proof with regard to this issue rests with the

taxpayer, and Fischer has not satisfied this burden of proof.

       Accordingly, this Court holds that the Director properly applied section 143.731

by assessing interest against the total amount of Fischer’s 2007 tax liability beginning on

April 15, 2008, and not crediting Fischer’s 2006 overpayment credit to reduce that

principal amount until March 31, 2009, when Fischer filed his 2006 return and the

amount his 2006 overpayment credit first became ascertainable.

                                         Conclusion

       This Court holds that Fischer’s 2006 overpayment credit could not be applied to

reduce the amount of the addition to Fischer’s 2007 tax liability under section 143.741 or

to reduce the amount of the principal on which interest was calculated and assessed under


                                               9
section 143.731, until March 31, 2009, when Fischer filed his 2006 return and the

existence and amount of his 2006 overpayment credit first became ascertainable.

Accordingly, the AHC’s decision is affirmed.



                                                     _____________________________
                                                     Paul C. Wilson, Judge


All concur.




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