Tuesday, January 24, 2006

Tax Commission misapplied equitable tolling doctrine

Beaver County v. Property Tax Division and Pacificorp, 2006 UT 6

The supreme court refused to toll the five-year lookback period for escaped property taxes under Utah Code Ann. s 59-2-217(1). If you don't know what that means, you should only read on if you are really interested in equitable tolling.

Pacificorp paid a $2.6 billion property tax assessment in 1997. In 2000, the PropertyTax Division of the Utah Tax Commission ("Division") and Utah's counties discovered an error in Pacificorp's annual report for 1997 that might have caused some Pacificorp property to be undervalued. The counties urged the Division to issue an escaped property tax assessment for 1997.

The Division failed to take any action until 2002. On August 29, 2002, five years and a few months after the 1997 assessment, the Division issued an escaped property tax assessment. Although the assessment was outside the lookback period, the Tax Commission determined that the period should be equitably tolled because "it would be unfair to subject the Counties---which had put forth every effort toward the timely issuance of the escaped property assessments---to the consequences of the Division's inertia in doing so." Pacificorp filed a petition for redetermination against the Division, and the counties intervened.

The supreme court disagreed with the Tax Commission's application of equitable tolling. It noted that no Utah case had ever applied equitable tolling where the party seeking tolling could not properly invoke the discovery rule (i.e., excusable delay in discovering the claim before the limitations period expired). The Division knew about the 1997 claim well in advance of the end of the lookback period, so it could not invoke the discovery rule.

The court then held that there were no extraordinary circumstances to justify equitable tolling without satisfying the discovery rule. The court did not explain what would constitute extraordinary circumstances. It stated only that prejudice to a third party intervenor "does not constitute an irrational or unjust application of the limitations period."

Chief Justice Durham concurred in the result. She argued that equitable tolling of the lookback period should not rest solely on the discovery rule. Instead, she argued that the lookback period should be tolled where "the taxpayer itself is responsible for causing the lookback to expire before the Division makes an escaped property determination."


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