Some Things Never Change . . . Never

By Amy Clarise Ashworth

Vt. Golf Assoc. v. Vt. Dept. of Taxes, 2012 VT 68

Benjamin Franklin once said, “But in the world, nothing can be said to be certain, except death and taxes.”  Today’s case is no exception.

Here are the basics.  Plaintiff Association is in the business of sponsoring golf tournaments throughout the State of Vermont.  Would-be golfers pay the Association an entry fee for sponsored tournaments and Association then pays green fees to the hosting golf course.  It all seems relatively straightforward.  But the Tax Department put the Association in the rough when it audited the Association for tax years 2001 through 2008 and determined that the Association owed some green fees of its own—namely unpaid sales and use taxes on previously collected entry fees.  

Following the audit, the Association began collecting and remitting sales taxes, under protest, to the Tax Department.  The Association also requested a hearing to contest the Department’s conclusion that these taxes were due in the first place.  A hearing was subsequently held and the Commissioner of Taxes determined that the entry fees were indeed subject to taxation.  

No surprise here.  Death and taxes, people, those are the only two sure things.

The Association, still not convinced that the entry fees should be taxed, appealed to the trial court.  Not long after, the Department notified the Association that it was statutorily required to provide security on the back taxes it owed as a precondition to the appeal and, if the Association failed to do so, the Department could and would seek to dismiss the appeal.  In other words, the Department told the Association, “You’ve got to pay to play through.”  When the Association thereafter failed to provide appropriate security, the Department asked the trial court to dismiss.

The trial court agreed that the statute required the Association to putt up or shut up, but it nevertheless gave the Association a Mulligan to provide the requisite security.  The Association then offered to give the Department a security interest in its assets—the legal equivalent of Wimpy’s bargain.   The Department, like any good tax collector, rejected the offer and asked the trial court, once again, to dismiss the Association’s appeal.  This time, the trial court obliged, concluding that the Association’s offer was insufficient since the statute required it to provide security in one of three forms: (1) payment of the outstanding tax deficiency; (2) a deposit with the Commissioner of Taxes to cover any outstanding deficiency; or (3) filing a bond with the Commission of Taxes.  This appeal followed.

The crux of the Association’s argument on appeal is that the current version of 32 V.S.A. § 9817 does not condition an appellant’s right to appeal on providing security.  Rather, according to the Association, the Legislature’s 1998 amendments dropped the statute’s pay-to-play requirement.  Consequently, the Association argues, its failure to provide security pending appeal is not a fatal flaw, and cannot, therefore, compel dismissal of an appeal. 

The SCOV starts by stating the standard for interpreting statutory language.  The main goal is to give effect to lawmakers’ intentions.  Thus, if what the Legislature intended to do is clear from the statute’s express language, then there is nothing to construe and the statute is enforced according to its terms.  On the other hand, if a statute is ambiguous—subject to two or more plausible meanings—then the SCOV must discern the Legislature’s intent by reviewing the entire statute, including the statute’s subject matter, its overall effects, and the consequences.  The SCOV also notes that while ambiguous tax statutes are generally construed to favor taxpayers, the SCOV will uphold an agency’s statutory interpretation where the agency construing the statute is also charged with its execution. 

So far, this is a little like watching golf on television, no?  Lots of hushed voices discussing basic strategy and technique.  Please refrain from napping just yet, we are about to get some loft.

The SCOV finds that the express language of Section 9817 not only provides an aggrieved taxpayer with a right to appeal, but also requires the taxpayer to post security if there are taxes that remain unpaid.  According to the SCOV, despite the fact that the right to appeal and the obligation to post security now appear in two separate sentences—a change made in the 1998 amendment—the plain language of the statute nevertheless requires the posting of security to proceed with an appeal.  In short, the SCOV agrees with the trial court and the Department that aggrieved taxpayers must pay to play, and that failure to do so is a fatal defect.  

See, death and taxes just go together.  Failure to post security when appealing taxes isn’t just a life-threatening defect; it’s a “fatal” defect!  

If this conclusion seems somewhat harsh, the SCOV points out that many states have pay-to-play statutes, which require taxpayers to pay any outstanding taxes to proceed on appeal.  And before you say, in that teenage voice, “But that’s not fair,” the SCOV is pretty confident that requiring a taxpayer to pay-to-play does not violate due process, and is, therefore, fair.  If nothing else, it certainly discourages taxpayers from gaming the system by filing multiple challenges in the hope of reducing the overall bill through settlement.

Normally such a conclusion would mark the end of the case, and we would be heading to the next hole, but the SCOV is not satisfied with this limited analysis and goes on to address the Association’s claim that the legislature intended the1998 change to alter the dynamics of the statute’s pay-to-play standards. 

What follows might be called a good lawsuit spoiled. 

Despite, the plain language of Section 9817, the Association argued that the purpose of the 1998 amendment was to eliminate the pay-to-play security requirement. 

The SCOV disagrees with the Association and concludes that, despite some sentence restructuring, both the pre- and post-1998 statutes require the taxpayer to post security to perfect an appeal.  How the SCOV reaches that conclusion ultimately spurs a short concurrence.  Basically, the SCOV pulls out its legal wedge and chips to the legislative statement of purpose and the history of the 1998 amendment.  Both the purpose statement and legislative history expressly state that the amendment was intended to clarify the existing law, not to make substantive changes.  

The Association—wounded but not dead—argues that the post-1998 language is procedural rather than substantive, and that the Legislature did intend to eliminate the pay-to-play requirement from the statute.  Again, the SCOV disagrees, noting that such a change would not only be a significant departure from the original statute, but also from the Department’s longstanding statutory interpretation.  The SCOV simply cannot fathom that the Legislature would have intended such a substantial change without some meaningful discussion.  As such, it goes to great pains to unearth the relevant portions of the legislative history that demonstrate there was never any intent to eliminate the pay-to-play requirement.  Ultimately, the SCOV is certain that this is, indeed, the case.

The Association further claims that the amendments were designed to standardize the appeal process and that, under the general appellate rules, a failure to take any step–other than filing a timely notice of appeal–does not automatically invalidate an appeal.  The SCOV deals with this argument summarily, finding that the specific statutory obligations in Section 9817 are substantive in nature, and, therefore, take precedence over the procedural appellate rules the Association cites.

Still clinging to life, the Association argues that the security requirement in subsection (a) is inconsistent with subsection (c), which specifically addresses a situation where an appeal has been filed, but security has not been posted.  The SCOV first notes that the language in subsection (c) of the post-1998 statute is identical to the language in subsection (c) of the pre-1998 statute. 

If you haven’t taken that nap yet, this is the part where the Association’s arguments suffer a sucking chest wound.  The SCOV points out that the Association conceded in its brief that the pre-1998 statute contained a pay-to-play requirement.  The SCOV has demonstrated that the 1998 amendment simply clarified, rather than substantively changed, the law.  Thus, the SCOV concludes that the Association’s argument is belied both by subsection (a)’s plain language and the Legislature’s express statements that it did not intend to make any substantive changes in the law.

With its last breath, the Association argues that it should be allowed to proceed with its appeal since it has remitted taxes under protest since the 2008 audit.  The SCOV quickly disposes of this argument by citing the express language of subsection (c), which, as previously noted, sets forth the three different forms of security that satisfy the pay-to-play requirement.  The SCOV also points out that the statute defines the “deficiency” to which it is addressed as the deficiency the taxpayer is appealing.  Consequently, post-audit taxes are irrelevant and do not suffice.

Justice Robinson, joined by Chief Justice Reiber, concurs but writes separately to voice concern that the language in subsection (c) is inconsistent with subsection (a).  Specifically, the Concurrence sets forth the SCOV’s well-established rule that statutes should not be construed in a manner which would render portions of the statute irrelevant. 

Here, as the Concurrence notes, construing subsection (a) as a mandatory pay-to-play statute renders portions of subsection (c) surplusage in violation of the SCOV’s own rule.  As such, the concurrence expressly points out the ambiguity in the statute in the hope that it will spur a further revision. 

Hey, Legislators!  Grab your niblicks and your mashies, it looks like you have some work to do to clear up what appears to be a deceitfully simple fairway. 

Death and taxes, baby!  Some things never change.  Just ask Benjamin Franklin.  You may even have to pay taxes after you’re dead, but I digress.  Now, how about that nap?