Administrative Hearing Commission

Richard Maseles, Esquire

Director of Revenue’s obligation to examine tax returns only extends to return itself, not documents filed separately by other entities, which might have showed errors in the return. The Seymour Bank v. Director of Revenue, No. 13-1606 RF (Mo. AHC, April 8, 2014), Nelson, C.

The Seymour Bank (“the Bank”) was the sole subsidiary of its parent corporation, Cottonrudy Investment Co., and it was located in Webster County. It was responsible for paying an annual franchise tax, as set out by § 148.030, of seven percent of its net income for the income period (“the 7% tax”). It was allowed to take other taxes it paid to the state during the income period as credits against the 7% tax, but did not do so in its initial returns for 2010-12. The Director sent the 7% tax proceeds, less a 2% he retained for collection, to Webster County, which distributed the funds to local political subdivisions. The Bank learned of its error, filed amended returns reflecting the credits, and claimed a refund. The Director denied the claim, and the Bank brought this action.

The Bank was not entitled to a refund, because there were no funds from which to pay it. 12 CSR 10-10.145(6) provided that the Director only had to pay a refund of 7% tax if funds were available from the political subdivision(s) where the bank was located. By the time the refund request was filed, there were no such funds available. The Bank was entitled to a credit of the amount against future obligations. The Bank argued that the Director had an obligation to not only examine the 7% return, but examine it in context with Cottonrudy’s income tax return which, the Bank argued, would have shown the Bank’s error without the need for an amended return. The Commission disagreed, holding that the Director’s statutory obligation to examine returns under § 148.060.1 only obligated him to examine the 7% return itself, not examine other documents, filed independently of the return, that might uncover errors in the return.