BEFORE THE STATE BOARD OF EQUALIZATION
FOR THE STATE OF WYOMING
IN THE MATTER OF THE APPEAL OF )
BP AMERICA PRODUCTION COMPANY )
FROM A REJECTION OF AMENDED ) Docket No. 2005-05
RETURNS DECISION BY THE MINERAL )
TAX DIVISION OF THE DEPARTMENT )
OF REVENUE (Painter 1999 Prod. Yr.) )
FINDINGS OF FACT, CONCLUSIONS OF LAW, DECISION AND ORDER
Robert A. Swiech and Nicole Crighton, of Oreck, Bradley, Crighton, Adams & Chase, for Petitioner, BP America Production Company (BP).
Martin L. Hardscog, Senior Assistant Attorney General, Ryan Schelhaas, Assistant Attorney General, for the Wyoming Department of Revenue (Department).
The Board shall review final decisions of the Department on application of any interested person adversely affected, including boards of county commissioners. Wyo. Stat. Ann. § 39-11-102.1(c). Taxpayers are specifically authorized to appeal final decisions of the Department. Wyo. Stat. Ann. § 39-14-209(b). The taxpayer’s appeal must be filed with the Board within thirty days of the Department’s final decision. Wyo. Stat. Ann. § 39-14-209(b); Rules, Wyoming State Board of Equalization, Chapter 2, § 5(a). BP timely appealed the final decision of the Department.
STATEMENT OF THE CASE
This appeal concerns processed natural gas produced from the Painter and East Painter Fields in Uinta County, Wyoming, between January 1, 1999, and December 31, 1999 (Production Year 1999). The Department, following completion of an audit of the properties by the Department of Audit (DOA), issued a Final Determination Letter on August 6, 2004, assessing additional severance tax in the sum of $1,293,083.62; interest through September 5, 2004, in the sum of $766,666; and increasing the ad valorem taxable value of the properties by $22,161,916. BP did not appeal this final determination within 30 days as required by statute and Rule, and voluntarily paid the additional severance tax as well as recalculated interest.
BP thereafter, on December 28, 2004, filed with the Department a Claim for Refund - Severance Tax, supported by amended severance tax returns for production year 1999. The Department, by letter dated January 10, 2005, rejected the amended returns, and thus denied the request for refund. BP appealed the refund denial to the State Board of Equalization (Board) effective January 25, 2005. The Board, Alan B. Minier, Chairman, Thomas R. Satterfield, Vice Chairman, and Thomas D. Roberts, Board Member, held a hearing October 24 and 25, 2005.
We affirm denial of the request for refund of severance tax.
CONTENTIONS AND ISSUES
The notice of appeal by BP, in support of its challenge to the Department’s denial of its refund request, asserts as erroneous four audit findings which formed the basis, in part, of the Department’s August 6, 2004, assessment. Two of the alleged errors deal with processing expenses, and two deal with production expenses. The Department and BP have resolved the disputed processing expenses. The two remaining issues deal with a production expense denominated Processing Fee Expense - Intracompany (Account 661006), and whether production taxes and royalties were properly included as direct costs of producing in the direct cost ratio of the proportionate profits method. Wyo. Stat. Ann. § 39-14-203(b)(vi)(D).
The Department urges this appeal is procedurally defective, asserting BP is not entitled to rely upon a severance tax refund request to appeal an audit assessment which it failed to timely appeal as required by Wyo. Stat. Ann. § 39-14-209(b)(i), and (b)(iv), and the Rules of the Wyoming State Board of Equalization, Chapter 2, § 5(e). The Department contends the Board should affirm denial of the refund request without addressing the two remaining audit issues raised by BP on appeal.
BP, in its post-hearing brief and proposed findings, presented argument on three distinct issues: (a) the denial by the Department of BP’s claim for refund; (b) inclusion of Account 661006 as a cost in the direct cost ratio of the proportionate profits methodology; and (c) inclusion of production taxes and royalties as direct costs in the direct cost ratio of the proportionate profits methodology.
In summary, BP asserts its refund claim was presented timely, having been filed within the five-year time limit set by Wyo. Stat. Ann. § 39-14-209(c)(ii). It supports this assertion with argument setting forth its view of the relevant statutes; its interpretation of Wyodak v. Department of Revenue, 2002 WY 181, 60 P.3d 129 (Wyo. 2002); and its review of the legislative history of certain mineral tax, audit, and refund statutes. BP also presents a rather lengthy argument on why it believes the time period for appealing the Department’s August 6, 2004, audit assessment has not yet commenced. BP asserts the use of a postage meter does not equate to a postmark which is the starting point for determining whether an appeal from a Department assessment is timely. This issue was not raised in any prior pleading filed herein by BP; there was no evidence on the issue presented at the hearing; and it was only mentioned briefly by counsel for BP during his closing rebuttal argument. [Transcript Vol. II, p. 394]. The question of whether a postage meter imprint is a postmark is not relevant in this appeal, and in fact has been previously decided against BP by this Board. “Order Dismissing Appeal of Notice of Valuation,” BP America Production Company, Docket No. 2004-89, August 17, 2004 (Wyo. St. Bd. Eq.).
BP also asserts Account 661006 is an intra-company “processing” expense which is not actually incurred by BP, but rather is a “management memo entry type of account used for budgeting purposes.” [Petitioner’s Brief and Proposed Findings, p. 63]. According to BP, any actual incurred costs (expenses) indicated by this account have already, as appropriate, been captured in other direct costs, thus inclusion of Account 661006 results in duplication of expenses.
Finally, with regard to production taxes and royalties, BP once again asserts such costs are not direct costs, and as such should not be included in the direct cost ratio of the proportionate profits methodology. Each of the arguments raised by BP has been previously discussed by the Board in rulings which have affirmed inclusion of production taxes and royalties as direct costs. See, Amoco Production Company, Docket No. 96-216, June 29, 2001, 2001 WL 770800, (Wyo. St. Bd. Eq.); Amoco Production Company, Docket No. 96-216, Order on Reconsideration, September 24, 2001, 2001 WL 1150220 (Wyo. St. Bd. Eq.) (hereafter Amoco 96-216), reversed on other grounds, Amoco Production Company v. Department of Revenue et. al., 2004 WY 89, 94 P.3d 430 (2004); Fremont County Board of County Commissioners, Docket No. 2000-203, April 30, 2003, 2003 WL 21774604 (Wyo. St. Bd. Eq.); RME Petroleum Company, Docket No. 2002-52, November 20, 2003, 2003 WL 22814612 (Wyo. St. Bd. Eq.); Amoco Production Company, Docket No. 2001-56, December 30, 2003, 2003 WL 23164222 (Wyo. St. Bd. Eq.); Burlington Resources Oil and Gas Co., Docket Nos. 2002-49 et. al., May 10, 2004, 2004 WL 1174649 (Wyo. St. Bd. Eq.); BP America Production Company, Docket No. 2003-102, March 5, 2005, 2005 WL 558991 (Wyo. St. Bd. Eq.); BP America Production Company, Docket No. 2003-114, March 17, 2005, 2005 WL 676580 (Wyo. St. Bd. Eq.); Marathon Oil Company, Docket No. 2004-08, March 29, 2005, 2005 WL 794788 (Wyo. St. Bd. Eq.); Chevron U.S.A. Inc., Docket No. 2003-153, May 12, 2005, 2005 WL 1177542 (Wyo. St. Bd. Eq.); Burlington Resources/LL&E, Docket No. 2004-24, August 25, 2005, 2005 WL 2100264 (Wyo. St. Bd. Eq.); BP America Production Company, Docket No. 2004-130, November 10, 2005, 2005 WL 3072921 (Wyo. St. Bd. Eq.); BP America Production Company, Docket No. 2004-129, November 18, 2005, 2005 WL 3126198 (Wyo. St. Bd. Eq.).
The Department, in its post-hearing brief, urges the Board to affirm its denial of the December, 2004, refund request by BP as being well beyond the time frame allowed for such a request. The Department asserts the fifth-year limitation in Wyo. Stat. Ann. § 39-14-209(c)(ii) is in conflict and inconsistent with Wyo. Stat. Ann. § 39-14-208(b)(iii) as amended by the Wyoming Legislature reducing the time allowed for filing amended severance tax returns from five years to three years. The Department argues refund requests must be accompanied by amended returns, thus by implication the limitation period for any severance tax refund must be the same three-year period as amended returns. The Department thus asserts Wyo. Stat. Ann. § 39-14-209(c)(ii) has by implication been amended to reduce the period for filing a refund claim from five years to three years, consistent with Wyo Stat. Ann. § 39-14-208(b)(iii). The Department alleges to allow refunds over a five-year period but require amended returns be filed within three years “produces an absurd and nonsensical result.”
The Department further argues, should the Board decide to address the audit issues, Account 661006 and inclusion of production taxes and royalties, the Department audit findings on those two issues should be affirmed. The Department argues, as it has on numerous prior occasions, production taxes and royalties are direct costs of producing by both statute and Rule, and thus must be included in the direct cost ratio of the proportionate profits methodology. With regard to Account 661006, the Department asserts its treatment of the expenses in said account as being correctly reported and booked as expenses by BP is presumed correct, and BP, in both the audit and the appeal process, has failed to present any evidence to fulfill its burden of proof to show such expenses should not be included in the direct cost ratio.
We agree the severance tax refund request by BP was properly denied by the Department, although we so conclude for reasons other than the limitation-period argument asserted by the Department. It is thus not necessary to discuss in any detail, beyond what has been set forth above, the audit issues of Account 661006 and production taxes and royalties.
FINDINGS OF FACT
1. BP and the Department have stipulated to the following facts:
a. BP filed its tax returns for the Painter, East Painter Fields (“Fields”) utilizing and was audited under the proportionate profits methodology for production year 1999 (“Tax Period”).
b. BP paid all severance taxes which were assessed by the Department after audit for the Fields for the Tax Period.
c. BP paid all interest assessed by the Department after audit on the severance taxes for the Fields for the Tax Period.
d. BP filed a claim for refund for the Fields for the Tax Period with the Department on December 28, 2004.
e. The Department rejected BP’s claim for refund for the Fields for the Tax Period on January 10, 2005.
f. BP filed its Notice of Appeal herein on January 25, 2005.
[Stipulated Summary of Uncontroverted Facts].
2. BP filed severance tax and gross products returns for the 1999 production at issue as required in 1999, and the spring of 2000, under the proportionate profits methodology without including production taxes and royalties as direct costs of production. The Department policy at that time was to exclude production taxes and royalties as direct costs. [Transcript Vol. I, pp. 27, 131-132, 136; Exhibits 110, 113].
3. This Board, in Docket No. 96-216, determined in September, 2001, that production taxes and royalties must be included as direct costs of producing in the direct cost ratio of the proportionate profits methodology. Amoco 96-216, reversed on other grounds, Amoco Production Company v. Department of Revenue et. al., 2004 WY 89, 94 P.3d 430 (2004).
4. The Department, on February 8, 2002, issued a memo to all producers using the proportionate profits method requiring production taxes and royalties be included as direct costs of producing in the direct cost ratio. The memo indicated the requirement applied to amended returns filed for any approved proportionate profits properties for any year within the (then) five-year statute of limitations. The memo thus noted the 1996 production year was the earliest year that could be amended. [Transcript, Vol. I, pp. 65-66; Exhibit 105].
5. The Department, following completion of an audit of the 1999 production at issue by the DOA, issued a Final Determination Letter on August 6, 2004, assessing, based in part on inclusion of production taxes and royalties as direct costs of producing, additional severance tax in the sum of $1,293,083.62; interest through September 5, 2004, in the sum of $766,666; and increasing the ad valorem taxable value of the properties by $22,161,916. [Transcript Vol. I, pp. 29, 131-132; Exhibit 100].
6. An appeal from a final determination by the Department must be filed with the Board within 30-days of the final decision. Wyo. Stat. Ann. § 39-14-209(b)(i), and (iv), and Rules, Wyoming State Board of Equalization, Chapter 2, § 5(e).
7. BP, through its representative, Paul Syring, acknowledges all appeals from a decision of the Department must be filed with the State Board within 30 days. [Transcript Vol. I, p. 68].
8. BP, through Syring, acknowledges it missed the 30-day appeal deadline for the August 6, 2004, Final Determination Letter. [Transcript Vol. I, pp. 30, 75-76, 80, 93; Vol. II, p. 270].
9. Syring explained the Department’s final decision was lost among other papers in his office during the period around Labor Day:
And when I got back to the office after Labor Day, I realized that Painter was sent out earlier, and that I had missed some communications between Miss Ford and myself. So I just – it was my responsibility as far as being on top of those. Nobody went through my mail. We didn’t have a procedure in place for people to go through my mail, so I missed the deadline.
[Transcript Vol. I, p. 76].
10. Syring fully appreciated the fact that BP’s taxes were then due and owing in the amount established by the audit results:
I missed the appeal deadline so I had no choice but to pay, and in that regard when I discovered that, I called counsel and was talking to them about what – you know, we are exposed here as far as no recourse and found that the statute was open as far as refund claims. The first thing we have to do though, is obviously pay something so that you can claim a refund.
[Transcript Vol. I, p. 93]. Through Syring, BP could not and did not question the payment of taxes and interest determined by audit. BP instead turned its attention to a refund strategy.
11. BP voluntarily paid in full, not under protest, not under escrow, the August 6, 2004, audit severance tax assessment on December 8, 2004, and the recalculated interest on December 21, 2004. [Transcript Vol. I, pp. 30, 74-75, 81, 93].
12. BP thereafter, on December 28, 2004, filed with the Department a refund request, including amended returns for the 1999 production at issue. The request stated it was filed pursuant to Wyo. Stat. Ann. § 39-14-209(c)(ii), and Rules, Wyoming Department of Revenue, Chapter 6 § 15(a). The request claimed an overpayment of severance tax and interest as a result of errors in the Department’s August 6, 2004, Final Determination Letter. Two of the alleged errors deal with processing expenses, and two deal with production expenses. [Transcript Vol. I, pp. 31-32, 77-79; Vol. II, pp. 266-268; Exhibit 101].
13. BP, on December 30, 2004, filed a Notice of Appeal with the Board, specifically challenging the Department’s August 6, 2004, Final Determination Letter. The appeal cited as erroneous the same four audit findings as were alleged in the December 28, 2004, refund request. [Transcript Vol. I, pp. 70, 77-79; Vol. II, p. 268; Exhibit 516 - Notice of Appeal, SBOE Docket No. 2004-150].
14. The Department rejected BP’s refund request by letter dated January 10, 2005. [Transcript Vol. I, pp. 32-33; Exhibit 102].
15. BP, on January 25, 2005, filed a Notice of Appeal with the Board challenging the denial of the refund request. This appeal cited as erroneous the same four audit findings from the Department’s August 6, 2004, assessment as were alleged in the December 30, 2004, Notice of Appeal by BP specifically challenging the Department’s August 6, 2004, Final Determination Letter. [Notice of Appeal].
16. The Board, on February 2, 2005, dismissed as untimely the December 30, 2004, Notice of Appeal which challenged the Department’s August 6, 2004 Final Determination Letter. [Transcript Vol. I, p. 75].
17. The Department and BP agreed to adopt into the hearing record, and the Board agreed to consider, the prior testimony of Ralph Eguren in Board Docket No. 2003-102 [Transcript Vol. III]; Paul Syring in Board Docket No. 2003-102 [Transcript Vol. IV]; Craig Grenvik in Board Docket No. 2003-102 [Transcript Vol. V]; Ms. Johnnie Burton in Board Docket No. 2003-153 [Transcript Vol. VI]; and Craig Grenvik in Board Docket No. 2003-153 [Transcript Vol. VII], as the factual testimony in this matter. [Transcript Vol. I, pp. 158-159]. The Department and BP also agreed to submission of an affidavit by Craig Grenvik and Exhibit 600 amending his calculations in Board Docket No. 2003-102 to provide calculations specific to BP in this matter. Consideration of the adopted testimony and Grenvik affidavit are not necessary in light of our conclusions and order herein.
18. Any portion of the Statement of the Case or Contentions and Issues set forth above, or any portion of the Conclusions of Law - Principles of Law or the Conclusions of Law - Application of Principles of Law set forth below which includes a finding of fact, may also be considered a Finding of Fact and, therefore, is incorporated herein by reference.
CONCLUSIONS OF LAW - PRINCIPLES OF LAW
19. The role of this Board is strictly adjudicatory:
It is only by either approving the determination of the Department, or by disapproving the determination and remanding the matter to the Department, that the issues brought before the Board for review can be resolved successfully without invading the statutory prerogatives of the Department.
Amoco Production Company v. Wyoming State Board of Equalization, 12 P.3d 668, 674 (Wyo. 2000). The Board’s duty is to adjudicate the dispute between taxpayers and the Department.
20. The Board is required to “[d]ecide all questions that may arise with reference to the construction of any statute affecting the assessment, levy and collection of taxes, in accordance with the rules, regulations, orders and instructions prescribed by the Department." Wyo. Stat. Ann. § 39-11-102.1(c)(iv).
21. “The burden of proof is on the party asserting an improper valuation.” Amoco Production Company v. Wyoming State Board of Equalization, 899 P. 2d 855, 858 (Wyo. 1995); Teton Valley Ranch v. State Board of Equalization, 735 P. 2d 107, 113 (Wyo. 1987). The Board’s Rules provide that:
[T]he petitioner shall have the burden of going forward and the ultimate burden of persuasion, which burden shall be met by a preponderance of the evidence. If petitioner provides sufficient evidence to suggest the Department determination is incorrect, the burden shifts to the Department to defend its action....
Rules, Wyoming State Board of Equalization, Chapter 2, § 20.
22. The Board, in interpreting a statute, follows the same guidelines as a court.
We read the text of the statute and pay attention to its internal structure and the functional relationship between the parts and the whole. We make the determination as to meaning, that is, whether the statute’s meaning is subject to varying interpretations. If we determine that the meaning is not subject to varying interpretations, that may end the exercise, although we may resort to extrinsic aids to interpretation, such as legislative history if available and rules of construction, to confirm the determination. On the other hand, if we determine the meaning is subject to varying interpretations, we must resort to available extrinsic aids.
General Chemical v. Unemployment Ins. Comm’n, 902 P.2d 716, 718 (Wyo. 1995).
23. “‘Determining the lawmakers’ intent is our primary focus when we interpret statutes. Initially, we make an inquiry respecting the ordinary and obvious meaning of the words employed according to their arrangement and connection. We construe together all parts of the statute in pari materia, giving effect to each word, clause, and sentence so that no part will be inoperative or superfluous. We will not construe statutes in a manner which renders any portion meaningless or produces absurd results.’ In re WJH, 2001 WY 54, ¶ 7, 24 P.3d 1147, ¶ 7 (Wyo. 2001).” TPJ v. State, 2003 WY 49, ¶ 11, 66 P.3d 710, 713 (Wyo. 2003).
24. The Board considers the omission of certain words intentional on the part of the Legislature, and we may not add omitted words. "[O]mission of words from a statute is considered to be an intentional act by the legislature, and this court will not read words into a statute when the legislature has chosen not to include them." BP America Production Co. v. Department of Revenue, 2005 WY 60 ¶ 22, 112 P.3d 596, 607 (Wyo. 2005), quoting Merrill v. Jansma, 2004 WY 26, ¶ 29, 86 P.3d 270, 285 ¶ 29 (Wyo. 2004). See also Parker v. Artery, 889 P.2d 520 (Wyo. 1995); Fullmer v. Wyoming Employment Security Comm’n., 858 P.2d 1122 (Wyo. 1993). The language which appears in one section of a statute but not another, will not be read into the section where it is absent. Matter of Adoption of Voss, 550 P.2d 481 (Wyo. 1976).
25. It is an elementary rule of statutory interpretation that all portions of an act must be read in pari materia, and every word, clause and sentence of it must be considered so that no
part will be inoperative or superfluous. Also applicable is the oft-repeated rule it must be presumed the Legislature did not intend futile things. Hamlin v. Transcon Lines, 701 P.2d 1139 (Wyo. 1985); Fall v. State, 963 P.2d 981 (Wyo. 1998).
26. Statutes, regulations, ordinances, and legal theories in derogation of the common law are to be strictly construed. Wooster v. Carbon County School District No. 1, 2005 WY 47, ¶15, 109 P.3d 893, 898 (Wyo. 2005). See also Hede v. Gilstrap, 2005 WY 24, 107 P.3d 158 (Wyo. 2005); Board of County Commissioners of Teton County v. Crow, 2003 WY 40, 65 P.3d 729 (Wyo. 2003); Coones v. F. D. I. C., 894 P.2d 613 (Wyo. 1995).
27. Agency rules and regulations adopted pursuant to statutory authority have the force and effect of law, and courts will defer to an agency’s construction of its own rules unless such construction is clearly erroneous or inconsistent with the plain meaning of the rules. Doidge v. State Board of Charities and Reform, 789 P.2d 880, 883-884 (Wyo. 1990); Swift v. Sublette County Board of County Commissioners, 2002 WY 32, ¶10, 40 P.3d 1235, 1238 (2002).
28. The Wyoming Supreme Court recently set out the process used to value mineral production:
The process of “valuing” mineral production for tax purposes is lengthy, involving these steps:
1. The taxpayer files monthly severance tax returns. Wyo. Stat. Ann. §39-14-207(a)(v) (LexisNexis 2001).
2. The taxpayer files an ad valorem tax return by February 25 in the year following production, and certifies its accuracy under oath. Wyo. Stat. Ann. §39-14-207(a)(i) (LexisNexis 2001).
3. The Department of Revenue values the production at its fair market value based on the taxpayer’s ad valorem return. Wyo. Stat. Ann. §39-14-202(a)(ii) (LexisNexis 2001).
4. The Department of Revenue then certifies the valuation to the county assessor of the county the minerals were produced in to be entered on the assessment rolls of the county. Wyo. Stat. Ann. §39-14-202(a)(iii) (LexisNexis 2001).
5. The taxpayer then has one year to file an amended ad valorem return requesting a refund. Wyo. Stat. Ann. §39-14-209(c)(i) (LexisNexis 2001).
6. The Department of Audit has five years from the date the return is filed to begin an audit, and must complete the audit within two years. Wyo. Stat. Ann. §39-14-208(b)(iii), (v)(D), (vii) (LexisNexis 2001).
7. Any assessment resulting from the audit must be issued within one year after the audit is complete. Wyo. Stat. Ann. §39-14-208(b)(v)(E) (LexisNexis 2001).
Board of County Commissioners of Sublette County v. Exxon Mobil Corporation, 2002 WY 151, ¶11, 55 P.3d 714 (Wyo. 2002). (Commencing January 1, 2003, the time frame for audits was reduced. See Wyo. Stat. Ann. § 39-14-208(b)(vii).)
29. The Department is required to annually value oil and gas at fair market value. Wyo. Stat. Ann. § 39-14-202(a)(i). The Department may also rely on final audit findings, taxpayer amended returns, or Department reviews of value in valuing oil and gas production. Wyo. Stat. Ann. § 39-14-208(b)(iii).
30. The Wyoming Supreme Court has stated:
In Amoco Production Co. v. State Bd. of Equalization, 7 P.3d 900 (Wyo. 2000), we held that a letter sent to a taxpayer after an audit constituted a final decision. At that point in time the DOR could do nothing more, and a final decision existed. That is the essential definition of a final administrative decision. It is “one ending the proceedings, leaving nothing further to be accomplished.” MGTC, Inc. v. Public Serv. Comm'n, 735 P.2d 103, 106 (Wyo. 1987).
The annual value certification for ad valorem tax is not a final decision. Much remains to be accomplished in the tax process at that time. It is only after the time for an audit has expired, or an audit is complete, and the DOR has assessed on the basis of the audit (Wyo. Stat. Ann. § 39-14-208(b)(v)(E)) that there is nothing more to be accomplished. . ..
Board of County Commissioners v. Exxon Mobil Corp., 2002 WY 151, ¶¶ 35, 36, 55 P.3d 714, 723-724 (Wyo. 2002).
31. Procedural due process is satisfied “if a person is afforded adequate notice and an opportunity to be heard at a meaningful time and in a meaningful manner.” Robbins v. South Cheyenne Water and Sewage Dist., 792 P.2d 1380, 1385 (Wyo. 1990) (citing Higgins v. State ex. rel. Workers’s Compensation Div., 739 P.2d 129 (Wyo. 1987), cert. den. 484 U. S. 988 (1987).
32. A taxpayer “aggrieved by any final administrative decision of the Department may appeal to the state board of equalization.” Wyo. Stat. Ann. § 39-14-209(b)(i), and (vi). Oil and gas taxpayers are entitled to this remedy:
Following [the Department’s] determination of the fair market value of... natural gas production the Department shall notify the taxpayer by mail of the assessed value. The person assessed may file written objections to the assessment with the state board of equalization within thirty (30) days of the date of postmark and appear before the board at a time specified by the board...
Wyo. Stat. Ann. § 39-14-209(b)(iv).
33. The general rule of common law is that taxes voluntarily paid without protest, and not under duress, cannot be recovered by the taxpayer absent a statute authorizing a refund. Maricopa County v. Arizona Citrus Land Co., 55 Ariz. 234, 100 P.2d 587 (1940); R. B. Raybern & Co. v. Indiana Employment Sec. Bd, 232 N.E.2d 891 (Ind. App. 1 Div., 1968); Hammerstrom v. Toy Nat. Bank of Sioux City, Iowa, 81 F.2d 628 (C.A.8, Iowa, 1936); Barrow v. Prince Edward County, 92 S.E. 910 (Va. 1917); Slimmer v. Chickasaw County, 118 N.W. 779 (Iowa, 1908); Hotel Casey Co. v. Ross, 23 A.2d 737 (Pa. 1942); Elzea v. Perry, 12 S.W. 3d 213 (Ark. 2000).
34. Other courts, while not specifically citing common law, have also concluded a voluntary tax payment, even if of an illegal tax, can not be recovered absent statutory authorization:
Where, as here, a taxpayer has paid a tax voluntarily, he normally may not recover that payment even if the taxing body assessed or imposed the taxes illegally. Voluntary tax payments can only be recovered if such recovery is authorized by statute.
Wexler v. Wirtz Corporation, 809 N.E.2d 1240, 1244 (Ill. 2004).
Furthermore, “[t]hough it shocks the equitable conscience, the general rule is well-settled that the sovereign need not refund taxes voluntarily paid, but illegally collected.” Ring v. Metro. St. Louis Sewer Dist., 969 S.W.2d 716, 718 (Mo. banc 1998).
Quaker Oats Company v. Stanton, 96 S.W.3d 133, 143 (Mo. 2003). See also, Sullivan v. Board of Com’rs of Oak Lawn Park Dist., 743 N.E. 2d 1075 (Ill. App. 1. Dist. 2001); American Can Co. v. Gill, 4 N.E. 2d 370 (Ill. 1936); Neama v. Town of Babylon, 796 N.Y.S.2d 644 (Supreme Court, N.Y. 2005); William B. Smith and Mary Ann Smith v. Director, Division of Taxation, 22 N.J. Tax 23 (2005).
35. The Wyoming statute for refund of overpaid severance tax is Wyo. Stat. Ann. § 39-14-209(c)(ii).
Wyo. Stat. Ann. §39-14-209. Taxpayer remedies
* * *
c) Refunds. The following shall apply:
* * *
(ii) If a taxpayer has reason to believe that severance taxes imposed by this article have been overpaid, a request for refund shall be filed with the department on forms it prescribes prior to the end of the fifth calendar year following the calendar year which included the month for which overpayment was made. Refunds of two thousand dollars ($2,000.00), or less may be applied to subsequent payments for severance taxes imposed by this article. Requests for refunds exceeding two thousand dollars ($2,000.00) shall be approved in writing by the department prior to the taxpayer receiving credit. All refunds granted are subject to modification or revocation upon audit.
CONCLUSIONS OF LAW - APPLICATION OF PRINCIPLES OF LAW
36. The severance tax refund statute relied upon by BP contains at least three requirements:
(1) The taxpayer must have reason to believe its severance taxes were overpaid;
(2) A request for refund must be filed prior to the end of the fifth calendar year following the calendar year which included the month for which overpayment was made;
(3) There was in fact an overpayment.
Wyo. Stat. Ann. § 39-14-209(c)(ii). Conclusions, ¶ 35. The second requirement, concerning the deadline by which a request must be made, was met in this case. We conclude that BP did not satisfy the other two requirements.
37. By December 28, 2004, when BP filed the refund request which is the genesis of these proceedings, it had no reason to believe its severance taxes were overpaid. The facts in this case established both that (1) BP did not file a timely appeal of its audit, and (2) its representative was aware that BP thereafter had “no recourse” but to pay the taxes as determined by the audit. Facts, ¶¶ 7-11. This is not a case in which unforeseen issues had come to light subsequent to the audit. In support of its refund request and related appeals, BP relied exclusively upon four audit issues it had failed to appeal. Facts, ¶¶ 12, 13, 15. Those identical audit issues had become fully and finally resolved once BP missed the audit appeal deadline. Conclusions, ¶ 30.
38. BP would have us conclude that a taxpayer’s continuing disagreement with the results of an audit would satisfy the first requirement of Wyo. Stat. Ann. § 39-14-209(c)(ii), even when the audit has been concluded and challenges to the audit are time-barred. To so conclude would render the first requirement meaningless, contrary to settled principles of statutory construction. Conclusions, ¶¶ 23, 25. We decline to do so.
39. In reaching this conclusion, we also conclude BP’s reliance on Wyodak Resources Development Corp. v. Wyoming Department of Revenue, 2002 WY 181, 60 P.3d 129 (Wyo. 2002), is mistaken. In Wyodak, the taxpayer allowed the Department to determine value of its coal production without appeal, then at a later date filed a refund request. The Wyoming Supreme Court held that the Department was obliged to consider the request, without prejudging the outcome of the Department’s determination. Wyodak, 2002 WY 181, ¶¶ 28-29, 60 P.3d at 140- 141. Nothing in Wyodak is analogous to the facts in this case, in which we have found the taxpayer had no reason to believe its severance taxes were overpaid at the time the request for refund was made.
40. The Department argues that there are irreconcilable conflicts between the five-year deadline of Wyo. Stat. Ann. § 39-14-209(c)(ii) and the different deadlines for filing amended returns, Wyo. Stat. Ann. § 39-14-208(b)(iii), and the commencement of audits, Wyo. Stat. Ann. § 39-14-208(b)(vii). [Wyoming Department of Revenue’s Closing Brief, pp. 20-24]. We conclude there is no such conflict in this case. From our review of the statutes read together, the Legislature provided a refund request deadline that could extend beyond the conclusion of audit proceedings, to allow for refunds based upon unforeseen developments arising after the final conclusion of such audit proceedings. This general approach may, on occasion, be subject to the doctrine of res judicata. Wyodak, 2002 WY 181, ¶¶ 11-13, 60 P. 3d at 135-136. While the Department has raised reasonable policy concerns that would support a revision of the five year deadline in Wyo. Stat. Ann. § 39-14-209(c)(ii), that is a matter for the Legislature and not for us.
41. We also conclude there was no overpayment.
42. Wyoming, by statute, has adopted the common law of England.
The common law of England as modified by judicial decisions, so far as the same is of a general nature and not inapplicable, and all declaratory or remedial acts or statutes made in aid of, or to supply the defects of the common law prior to the fourth year of James the First (excepting the second section of the sixth chapter of forty-third Elizabeth, the eighth chapter of thirteenth Elizabeth and ninth chapter of thirty-seventh Henry Eighth) and which are of a general nature and not local to England, are the rule of decision in this state when not inconsistent with the laws thereof, and are considered as of full force until repealed by legislative authority.
Wyo. Stat. Ann. §8-1-101.
43. The generally accepted common law rule states that taxes voluntarily paid without protest, and not under duress, cannot be recovered by a taxpayer absent an authorizing statute. Conclusions, ¶¶ 33-34. The record herein indicates neither a protest nor any duress associated with BP’s payment in December, 2004, of the additional severance taxes and interest assessed pursuant to the August 6, 2004, Final Determination Letter. BP voluntarily made full payment after the 30-day period to appeal the August 6, 2004, assessment had expired. Findings, ¶¶ 7-11. Therefore, under common law, BP would not be entitled to the refund it seeks.
44. The Wyoming Legislature has, however, abrogated or derogated common law to allow refunds under defined criteria through adoption of the relevant statute herein, Wyo. Stat. Ann. § 39-14-209(c)(ii). Statutes in derogation of common law are, however, not favored, and are to be strictly construed. While the Wyoming Legislature has thus provided a statutory procedure for seeking severance tax refunds, such statute must be strictly construed. Mahaney v. Hunter Enterprises, Inc., 426 P.2d 442 (Wyo. 1967 )(Statutes in derogation of common law will be strictly construed). See also Wooster v. Carbon County School District No. 1, 2005 WY 47, ¶15, 109 P.3d 893, 898 (Wyo. 2005); Hede v. Gilstrap, 2005 WY 24, 107 P.3d 158 (Wyo. 2005); Board of County Commissioners of Teton County v. Crow, 2003 WY 40, 65 P.3d 729 (Wyo. 2003); Coones v. F. D. I. C., 894 P.2d 613 (Wyo. 1995).
45. A narrow, strict construction of a tax refund statute is also particularly important for public policy purposes:
Quaker Oats argues that “[i]t would ... be fundamentally unfair, a denial of due process and a violation of the constitutional mandate that taxes shall be assessed in a fair and equitable manner, to prohibit recovery of [Quaker Oats'] overpayment on nonexistent property that was assessed as a result of a clerical error.” To the contrary, a narrow construction of the relief available in subsection 5 of section 139.031 is necessary, considering that there needs to be certainty for taxpaying entities and the ability of the collector to disburse the taxes. The Supreme Court has recognized that “public policy discourag[es] suits for the refund of taxes erroneously paid or illegally collected and favor[s] certainty in the collection of revenue.” Crest Communications, 754 S.W.2d at 567.
Quaker Oats Company v. Stanton, 96 S.W.3d 133, 142-143 (Mo. 2003).
46. The severance tax refund statute requires taxes have been overpaid, and thus an overpayment. The Legislature having provided no contrary indication, and in compliance with the strict construction mandate, we conclude the Legislature “intended to convey the ordinary meaning which is attached to the language [it] used.” Jones v. Liberty Glass Co., 332 U.S. 524, 531, 68 S.Ct 229, 233 (1947), rehearing denied 333 U.S. 850 (1948). We thus read “the word ‘overpayment’ in its usual sense, as meaning any payment in excess of that which is properly due.” Id. The question is thus narrowed to this, under the described appropriate interpretation of Wyo. Stat. Ann. § 39-14-209(c)(ii) and the terms overpaid and overpayment, has BP made a “payment in excess of that which is properly due.”
47. BP reported and paid severance tax on its 1999 production during 1999 and early 2000 using, as allowed by the then Department policy, the proportionate profits methodology excluding production taxes and royalties from the direct cost ratio. Findings, ¶ 2. The severance tax payments by BP during 1999, and any reconciliation severance tax payments which might have been paid in the spring of 2000, were thus clearly not payments “in excess of that which is properly due.” Such payments met the standard of what was due to the State of Wyoming under the Department’s interpretation of the proportionate profits methodology at the time the payments were made. Findings, ¶ 3.
48. The amount of severance tax “properly due” increased as a result of the DOA audit and the Department’s August 6, 2004, assessment letter. [Exhibit 100]. The audit and assessment resulted in an increase in the amount of severance tax due in accord with this Board’s decision in Amoco, 96-216, and the Department’s memorandum of February 8, 2002, requiring producers using the proportionate profits methodology to include production taxes and royalties as direct costs of producing in the direct cost ratio. Findings, ¶¶ 3-4, [Exhibits 110, 113]. This additional tax and recalculated interest were paid by BP without an appeal or protest. Findings, ¶ 11. The additional payment by BP is thus also not an “overpayment” as once again the payment is not “in excess of that which is properly due.” The payment was based on the August 6, 2004, assessment which is the final valuation determination by the Department for the 1999 production at issue. Board of County Commissioners of Sublette County v. Exxon Mobil Corporation, 2002 WY 151, ¶ 35, 55 P.3d 714, 723 (Wyo. 2002). See also Amoco Production Co. v. State Bd. of Equalization, 7 P.3d 900 (Wyo. 2000). BP did not timely challenge or appeal this assessment, thus it was the amount properly due for the 1999 production at issue. BP, in paying the additional severance tax and interest without protest or appeal, recognized the payment was “that which is properly due.”
49. Neither the original severance tax payments by BP during 1999 and early 2000, nor payment of the additional August 6, 2004, assessment are “overpayments” as anticipated by a strict construction of Wyo. Stat. Ann. § 39-14-209(c)(ii).
IT IS THEREFORE HEREBY ORDERED the denial by the Department of the December 28, 2004, refund request by BP for 1999 production from the Painter and East Painter Fields is affirmed.
Pursuant to Wyo. Stat. Ann. § 16-3-114 and Rule 12, Wyoming Rules of Appellate Procedure, any person aggrieved or adversely affected in fact by this decision may seek judicial review in the appropriate district court by filing a petition for review within 30 days of the date of this decision.
DATED this day of January, 2006.
STATE BOARD OF EQUALIZATION
Alan B. Minier, Chairman
Thomas R. Satterfield, Vice-Chairman
Thomas D. Roberts, Board Member
Wendy J. Soto, Executive Secretary