



                        IN THE SUPREME COURT OF IOWA


                               No. 2 / 04-1298

                           Filed February 24, 2006


RANDALL LANGE and SHERRI LANGE,

      Appellees,

vs.

IOWA DEPARTMENT OF REVENUE,

      Appellant.



      Appeal from the Iowa  District  Court  for  Polk  County,  Michael  D.
Huppert, Judge.

      Department appeals district court’s judicial review decision reversing
department’s denial of taxpayers’ refund request.  REVERSED AND REMANDED.

      Thomas J. Miller, Attorney General, and  James  D.  Miller,  Assistant
Attorney General, for appellant.

      Kenneth L. Butters of Brick, Gentry, Bowers, Swartz, Stoltze, Schuling
& Levis, P.C., Des Moines, for appellees.

TERNUS, Justice.
      The appellant, Iowa  Department  of  Revenue,  refused  to  credit  an
overpayment of 1996 income taxes to the 1997 tax obligation of the  appellee
taxpayers, Randall and Sherri Lange, due to the late filing  of  their  1996
tax return.  The Langes claimed they mailed their 1996  return  by  the  due
date in 1997, and therefore, pursuant to Iowa Code section  622.105  (2001),
their return should be deemed filed as of the date of mailing,  even  though
it was not  received  by  the  department  at  that  time.   The  department
director held the taxpayers had not met  their  burden  to  prove  they  had
actually  mailed  their  1996  return  in  1997.   Therefore,  the  director
concluded the filing date of their return was  the  actual  filing  date  of
June 17, 2001 when the department was provided a duplicate of the  1996  tax
return.  Because this date was beyond the three-year period for  claiming  a
credit, see Iowa Code  §  422.73(2),  the  director  denied  the  taxpayers’
claim.
      On judicial review, the district court held the agency had  failed  to
take into account “the presumption of mailing created by evidence of  office
custom,” as well as whether this presumption had been  adequately  rebutted.
The  court  reversed  the  agency’s  decision  and  remanded  the  case  for
reconsideration by the director in light of these principles of law.
      The department has appealed.  We conclude (1) the agency did  not  err
in failing to apply the common law presumption  discussed  by  the  district
court, and (2)  there  is  substantial  evidence  to  support  the  agency’s
factual finding that the Langes’ 1996  return  was  not  filed  until  2001.
Therefore, the department correctly ruled the Langes’  claim  for  a  credit
was untimely.  Accordingly, we  reverse  the  district  court  judgment  and
affirm the agency’s ruling.
      I.  Background Facts and Proceedings.
      The Langes’ 1996 federal and state income tax returns were prepared by
CPA Robert McGowen in September 1997.  The state return  showed  the  Langes
were entitled to a refund of $7685, which they indicated should  be  applied
to their 1997 tax obligation.
      Because the Langes had paid more than ninety  percent  of  their  1996
taxes, the due date for their state return had been  automatically  extended
to  October  31,  1997.   See  Iowa  Admin.  Code  r.  701—39.2(4).   It  is
undisputed, however, that their return was not  actually  filed  until  June
17, 2001.  On that date, the Langes, having learned the State did  not  have
their 1996 return, sent a duplicate to the department.   After  the  Langes’
1996 return was filed in 2001, the department denied the Langes’ request  to
apply their overpayment of 1996 taxes to their  1997  tax  obligation.   The
department relied on Iowa Code section 422.73,  which  states  in  pertinent
part:  “A claim for refund or credit  that  has  not  been  filed  with  the
department within three years after  the  return  upon  which  a  refund  or
credit claimed became due . . . shall  not  be  allowed  by  the  director.”
Iowa Code § 422.73(2).  Since the Langes’ return  was  due  on  October  31,
1997, the filing date of June  17,  2001  was  well  beyond  the  three-year
limitations period.
      The Langes protested the denial, claiming there was competent evidence
they had mailed their tax return on or before the due date,  and  therefore,
it should be deemed filed on the date  of  mailing  pursuant  to  Iowa  Code
section 622.105.  This statute provides:


            Any  report,  claim,  tax  return,  statement,  or  any  payment
      required or authorized to be filed or made to the state . . . which is
      transmitted through the United States mail or mailed but not  received
      by the state . . . , shall be deemed filed or made and received on the
      date it was mailed if the sender  establishes  by  competent  evidence
      that the . . . tax return . . . was deposited  in  the  United  States
      mail on or before the date for filing or paying. . . .
            For the purposes of  this  section  “competent  evidence”  means
      evidence, in addition to the testimony of the  sender,  sufficient  or
      adequate to prove that the document was mailed  on  a  specified  date
      which evidence is credible and of such a nature to reasonably  support
      the determination that the letter was mailed on a specified date.

Iowa Code § 622.105 (emphasis added).
      At a subsequent hearing on their  protest,  the  Langes  attempted  to
establish through McGowen’s  testimony  that  their  1996  return  had  been
deposited in the United States mail on September 18 or  19,  1997.   Because
McGowen had no personal recollection of the firm’s work on the Langes’  1996
return, he testified to his firm’s general office procedure  for  processing
tax returns.  Basically, a return is prepared, reviewed, assembled,  signed,
and mailed.  This process is tracked on an office form that shows  what  was
done, by whom, and when.  The processing  checklist  for  the  Langes’  1996
federal and state returns showed the returns  were  completed  on  September
11,  1997  by  an  accountant  in  McGowen’s  office.   The   returns   were
subsequently reviewed by McGowen on September  17,  1997.   This  form  also
showed that on the following day, McGowen personally delivered the forms  to
the Langes for signing.  He testified his typical practice would  have  been
to take the returns back to his office for  mailing.   Billing  records  for
September 1997 showed the Langes were charged $1.70 for  postage.   Although
the bill does not state the purpose of the postage,  McGowen  said  the  tax
returns would have been the only items his firm would have  mailed  for  the
Langes that month.
      McGowen testified he did  not  personally  deposit  the  Langes’  1996
returns in the mail.   The  normal  office  procedure  is  for  one  of  the
administrative assistants to carry a box of outgoing mail to the lobby  area
of their office building.  There, the mail would have  been  placed  into  a
designated postal slot, or depending upon the size and amount of  mail,  the
box would have been left in the lobby  where  postal  employees  would  have
picked it up between 5:30 p.m. and 5:45 p.m.[1]
      IRS records showed the Langes’ 1996 federal tax  return,  prepared  at
the same time as the state return, was  not  filed  until  April  11,  1998,
almost seven months  after  its  alleged  mailing.   McGowen  recalled  that
sometime during the period from 1996  to  2002  he  was  notified  that  the
federal government had not received one of the Langes’ federal returns,  and
he then sent a copy to the IRS.  He  could  not  remember,  though,  whether
this incident involved the Langes’ 1996 federal return.
      Finally, evidence was admitted that the Langes’ 1998 Iowa tax  return,
which was processed under the same procedure as the 1996  return,  was  also
not received by the department upon its initial mailing.  After  the  Langes
learned the department did not have their 1998 return, a copy  was  sent  on
June 17, 2001.
      Based on this record, the administrative law  judge  (ALJ)  found  the
taxpayers’ 1996 return had been prepared, signed, and  readied  for  mailing
in September 1997. The ALJ also found, however, that the Langes  had  failed
to meet their burden under section 622.105 to establish that the return  had
been deposited in the United States mail on or before its  due  date.   Upon
the Langes’  appeal  of  the  proposed  decision,  the  department  director
adopted the ALJ’s decision, concluding “the evidence that was  submitted  by
the [taxpayers] to indicate that the return was  actually  mailed  does  not
meet the burden of proof as required [under section 622.105].”
      The Langes sought judicial review.   The  district  court  focused  on
“whether under the circumstances presented, the taxpayers are  afforded  the
benefit of Iowa Code §  622.105,  [pertaining]  to  the  effective  date  of
filing a tax return.”  The court examined the record and noted “[t]here  was
no proof that anyone connected to either the taxpayers or  McGowen  actually
deposited or placed the envelope containing the return in  the  mail.”   The
court concluded, however, proof of compliance with office  procedures  would
create a presumption of  mailing,  and  this  presumption  would  constitute
“competent evidence” under section  622.105.   Because  the  department  had
failed to consider this presumption, the court held the agency decision  was
in error and should be reversed.  Nonetheless, the court did not  order  the
agency to enter a  decision  allowing  the  requested  credit.   Noting  the
presumption of mailing could be defeated  by  proof  to  the  contrary,  the
court remanded the case to permit the department to  determine  whether  the
presumption of mailing  created  by  proof  of  office  procedure  had  been
dispelled by other evidence.  The department filed this appeal.
      II.  Scope of Review.
       Our  review  is  governed  by  the  standards  set  forth  in  Iowa’s
Administrative Procedure Act, chapter 17A.  See Dubuque Casino  Belle,  Inc.
v. Bair, 562 N.W.2d 605, 606 (Iowa  1997).   We  may  grant  relief  if  the
taxpayers’ “substantial rights have been  prejudiced  because  the  agency’s
action meets any one of several statutory  criteria.”   Midwest  Auto.  III,
LLC v. Iowa Dep’t  of  Transp.,  646  N.W.2d  417,  421  (Iowa  2002).   The
criteria implicated here include agency action


            c.  Based upon an erroneous interpretation of a provision of law
      whose interpretation has not clearly been vested by a provision of law
      in the discretion of the agency.
            . . . .
            f.  Based upon a determination  of  fact  clearly  vested  by  a
      provision of law in the discretion of the agency that is not supported
      by substantial evidence in the  record  before  the  court  when  that
      record is viewed as a whole.
Iowa Code § 17A.19(10)(c), (f).  For purposes of our review,


      “[s]ubstantial evidence” means the quantity and  quality  of  evidence
      that would be deemed sufficient by a neutral, detached, and reasonable
      person, to establish the fact at issue when the consequences resulting
      from the establishment of that fact are understood to be  serious  and
      of great importance.

Iowa Code § 17A.19(10)(f)(1).  In  assessing  evidentiary  support  for  the
agency’s factual determinations, we consider  evidence  that  detracts  from
the agency’s findings, as  well  as  evidence  that  supports  them,  giving
deference to the credibility determinations of the presiding  officer.   See
Iowa Code § 17A.19(10)(f)(3).
      III.  Interpretation of Section 622.105.
      Iowa Code section 622.105 is  a  statutory  rule  of  evidence  having
general applicability to documents filed with the State.  See Iowa Code  ch.
622 (setting forth rules governing evidence and related  matters).   Because
there is no provision of law giving the department of  revenue  and  finance
the discretion to interpret this statute, we do not give  any  deference  to
the  agency’s  interpretation  of  this  provision.    See   Iowa   Code   §
17A.19(11)(b).
      Our  rules  for  interpreting  statutes  are  well  established.   The
primary goal is to give effect to the legislature’s intent, as expressed  by
the language used in the statute.  See Gen. Elec. Co. v. Iowa State  Bd.  of
Tax Review, 702 N.W.2d 485, 489 (Iowa 2005).  We give words their usual  and
ordinary meaning, and we try to avoid impractical or absurd results.  Id.
      The taxpayers, in an argument adopted by the district  court,  contend
the requirement of “competent evidence” under section 622.105  is  satisfied
by evidence sufficient to  give  rise  to  the  common  law  presumption  of
delivery upon proof that a document was  properly  mailed.   See  Montgomery
Ward, Inc. v. Davis,  398  N.W.2d  869,  870  (Iowa  1987)  (“Proof  that  a
document was properly mailed raises a presumption that it  was  received.”).
The Langes further assert that proof of proper mailing  can  be  established
by evidence complying with the requirements set forth in our cases  applying
the common law presumption.[2]  See id. at 870-71; Cent. Trust Co.  v.  City
of Des Moines, 205 Iowa 742, 746, 218 N.W. 580, 582-83  (1928).   Under  our
case law, “testimony of office custom may provide sufficient  foundation  to
raise a presumption that mailed notices were in fact received.”   Montgomery
Ward, 398 N.W.2d at 871.
      We think application of the common law presumption and  its  ancillary
rules of proof would be directly contrary to the rule  of  evidence  adopted
by the legislature for filings with the State.  Section 622.105  sets  forth
the manner in which proof of mailing may establish the required filing.  The
sender must prove by “competent evidence that the . . . tax  return  .  .  .
was deposited in the United States mail” on or before the  due  date.   Iowa
Code § 622.105.  Significantly, the term “competent evidence” is defined  as
“evidence, in addition  to  the  testimony  of  the  sender,  sufficient  or
adequate to prove that the document was mailed on a  specified  date.”   Id.
(emphasis added).  This statutory evidentiary requirement  is  clearly  more
stringent than the common law proof requirement, which can be  satisfied  by
“testimony of office custom.”  See  Montgomery  Ward,  398  N.W.2d  at  871.
Therefore, the  department  did  not  base  its  decision  on  an  erroneous
interpretation of section 622.105 when it failed to employ  the  common  law
presumption  and  its  related  rules  in  determining  whether  the   proof
requirements of that statute had been  met.   See  Dattilo  v.  Urbach,  645
N.Y.S.2d 352, 353 (Sup. Ct. App. Div. 1996) (refusing to apply  “traditional
‘mailbox’ rule, which creates a  rebuttable  presumption  of  delivery  upon
proof of mailing” when  legislature  had  adopted  statutory  mailing  rules
governing taxpayer filings).  The district court  erred  in  ruling  to  the
contrary.
      IV.  Substantial Evidence to Support Agency’s Finding.
      Having determined the  agency  used  the  correct  legal  standard  in
deciding  the  taxpayers’  protest,  we  now  consider  whether   there   is
substantial evidence to support the department’s factual  finding  that  the
taxpayers failed to prove  their  claim  for  credit  was  “filed  with  the
department within three years after  the  return  upon  which  [the]  credit
claimed became due.”   Iowa  Code  §  422.73(2)  (emphasis  added).   Having
reviewed and considered the entire  record,  we  conclude  the  department’s
finding is clearly supported by substantial evidence.
      We begin with the statutory rule that  deems  a  document  filed  upon
proof of mailing—section 622.105.  The only evidence that the  Langes’  1996
state income tax return was deposited  in  the  United  States  mail  on  or
before its due date was the testimony of McGowen,  the  sender,  that  under
normal office practice, the return, having  been  signed  on  September  18,
1997, would have been deposited in the United States mail on  that  date  or
the following day.  Although there  is  credible  evidence  in  addition  to
McGowen’s testimony that a document was readied  for  mailing  in  September
1997 on the Langes’ behalf  (the  office  record  showing  the  Langes  were
billed $1.70 for postage in September 1997), there is no  record  indicating
the document was deposited in the United States  mail.[3]   That  final  and
necessary step is shown only through the sender’s testimony.  Therefore,  we
think the director properly concluded the taxpayers  were  not  entitled  to
rely on section 622.105 to establish they had filed their  1996  income  tax
return on time.
      It is undisputed the department did not receive the Langes’  1996  tax
return  until  a  duplicate  return  was  provided  in  2001.    This   fact
constitutes substantial evidence to support the agency’s  finding  that  the
taxpayers did not file their claim for a credit until more than three  years
after the due date of the tax return upon which  the  claim  was  based,  as
required by section 422.73(2).  Accordingly, the department properly  denied
their claim as untimely.
      V.  Conclusion and Disposition.
      We have found no basis to reverse the agency’s decision  to  deny  the
taxpayers’ request for a credit based on their overpayment  of  1996  income
taxes.   The  district  court  erred  in  reversing   the   agency   ruling.
Therefore, we reverse the decision of the district  court  and  remand  this
case for entry of an order affirming the department’s decision.
      REVERSED AND REMANDED.

-----------------------
      [1] The parties dispute whether leaving the mail in a postal  box  for
pickup by the  United  States  Postal  Service  constitutes  depositing  the
return in the United States mail.  We do not answer  this  question  because
we resolve this appeal on a ground that is unaffected by the  resolution  of
this issue.
      [2] A sender is entitled to the presumption  of  delivery  upon  proof
(1) of the contents and execution of the document at issue, (2) that it  was
prepared for mailing, (3)  that  the  sender  had  the  recipient’s  correct
address, (4) that the mailing wrapper was correctly addressed, (5) that  the
wrapper had the proper  postage  affixed,  and  (6)  that  the  article  was
deposited in the mail.  Montgomery Ward, 398 N.W.2d at 870-71;  Cent.  Trust
Co. v. City of Des Moines, 205 Iowa 742, 746, 218 N.W. 580, 582-83 (1928).
      [3] In  contrast,  the  processing  checklist  for  the  Langes’  1998
returns contains a notation that the  returns  were  mailed  by  McGowen  on
October 14, 1998.

