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NOT FOR PUBLICATION WITHOUT THE APPROVAL
OF THE TAX COURT COMMITTEE ON OPINIONS
TAX COURT OF NEW JERSEY
DOCKET NO. 009585-93
CHARLES J. WIDDER, :
:
Plaintiff, :
:
v. :
:
DIRECTOR, DIVISION OF :
TAXATION, :
:
Defendant. :
DECIDED: August 15, 1994
Mr. Charles J. Widder, Pro Se
Kevin Marc Schatz for defendant
(Department of Law & Public Safety)
HAMILL, J.T.C.
In this state tax matter, plaintiff Charles J. Widder
asserts that he is entitled to the elimination of all interest
imposed with respect to his 1988, 1989, and 1990 gross income tax
returns because, in completing those returns, he relied on the
Division's instructions, which were erroneous. The Director
maintains that the instructions were not erroneous and that, in any
event, the court lacks jurisdiction to hear the matter because
plaintiff's complaint was untimely. The matter was submitted on
cross-motions for summary judgment. Since there are no material
facts in dispute, the matter may be resolved on that basis. R.
4:46-1; Judson v. Peoples Bank & Trust Co.,
17 N.J. 67, 74 (1954).
The controversy revolves around the Division's
instructions for computing the credit allowed to New Jersey
residents for taxes paid to other jurisdictions. N.J.S.A. 54A:4-1.
The provision allows a credit against the New Jersey tax for income
or wage tax paid to another jurisdiction with respect to income
that is also subject to tax in New Jersey. The purpose of the
resident credit is to prevent the double taxation of income.
Jenkins v. Taxation Div. Director,
4 N.J. Tax 127, 133 (Tax 1982).
Thus the credit is available only with respect to income that is
actually taxed by New Jersey and another jurisdiction. Nielsen v.
Taxation Div. Director,
4 N.J. Tax 438, 443 (Tax 1982). The
mechanism for so limiting the credit is achieved by applying a
fraction, the numerator of which is the "amount of the taxpayer's
income subject to tax by the other jurisdiction" and the
denominator of which is the taxpayer's "entire New Jersey income."
N.J.S.A. 54A:4-1(b). The fraction is applied against the tentative
New Jersey tax that would be due were it not for the credit. Ibid.
See also N.J.A.C. 18:35-1.12(a)(3).
Plaintiff maintains that the instructions to the New
Jersey return erroneously advised him to include in the numerator
of the fraction his modified federal adjusted gross income, which
included income from all sources. The Director maintains that the
instructions advised plaintiff to include only income that was
taxed by New York and that New York taxed only New York-source
income. Plaintiff does not contest the tax deficiency but only the
interest, maintaining that he should not be penalized for
reasonably relying on the return instructions.
Plaintiff timely filed his 1988, 1989, and 1990 gross
income tax returns. He subsequently received notices of assessment
for additional taxes amounting to:
Tax Interest Penalty Total
1988 $1,060 $684.12 $49.05 $1,793.17
1989 1,143 572.62 55.85 1,771.47
1990 11,494.81 202.11 44.89 11,741.81
The deficiencies were stated to be due to incorrect credits for
taxes paid to New York. Plaintiff paid the deficiencies but filed
a protest with the Division. Plaintiff ultimately agreed that he
owed the additional tax, and the Division agreed to waive the
penalty and abate interest to the statutory minimum. N.J.S.A.
54:49-11a. As a result, the amount at issue, consisting entirely
of interest, is $1054.
On April 20, 1993 the Division issued a final
determination. The letter indicated that plaintiff had 90 days to
appeal to the Tax Court in the event he disagreed with the final
determination. On July 2, 1993 the Tax Court received a letter
sent certified mail return receipt requested stating that plaintiff
"wish[ed] to appeal" a final determination of the Division of
Taxation, and that he was seeking a "total rescission of interest
imposed for tax years 1988/89/90 ...." The letter concluded with
the following sentence, "Kindly advise me of the date for this
appeal." On July 6, 1993, the Tax Court clerk sent plaintiff the
forms for filing a complaint. No letter accompanied the forms. On
August 19, 1993, plaintiff filed a complaint.
A complaint seeking review of an action of the Director,
Division of Taxation in a state tax matter must be filed within 90
days of the action sought to be reviewed, in this case the
Director's final determination dated April 20, 1993. N.J.S.A.
54:51A-14a. With the addition of three days for mailing allowed by
Rule 1:3-3, the time for filing plaintiff's complaint expired on
July 22, 1993. As plaintiff's formal complaint was not filed until
August 19, 1993, plaintiff's appeal was timely only if his letter
of June 29, received by the court on July 2, is deemed to be a
complaint.
Rule 8:3-4(a) requires that a Tax Court complaint "set
forth the claim for relief and a statement of the facts on which
the claim is based ...." Rule 8:3-5(b)(1) requires that in a state
tax case a case information statement shall be attached to the face
of the complaint. The requirement that a complaint include a claim
for relief and a statement of the facts on which the claim is based
is reiterated in Rule 4:5-2, applicable to actions filed in the
Superior Court. Rule 4:1 provides that the rules in Part IV apply
in the Tax Court except as otherwise specifically provided in the
Tax Court rules. Rule 4:5-7 provides in part that, "[a]ll
pleadings shall be liberally construed in the interest of justice."
Finally, Rule 1:1-2 provides in part that, unless otherwise
provided, any rule may be relaxed if adherence to the rule would
result in an injustice.
While defendant is technically correct that plaintiff's
letter of June 29 did not comply with the Rules in that it failed
to include a case information statement and did not include a
statement of facts on which the claim was based, the letter did
advise defendant generally of the claim, specifically a demand for
the "total rescission of interest imposed for tax years 1988/89/90
...." Moreover, the claim apprised the Director of the taxpayer's
name, address, social security number, and the fact that it was his
"1988/89/90 N.J. Gross Income Tax Returns" that were at issue.
Knowing these facts, the Director had sufficient information to
investigate the claim and prepare to meet it. Thus, while the
letter was technically deficient, liberally construed it was
sufficient to put the Director on notice of the claim she was
required to meet. This was particularly true because the letter
sufficiently identified the taxpayer to permit the Division to
locate its file and ascertain what had transpired during the
conference on April 14, 1993.
This is not a case where a taxpayer fails to respond to
a letter from the clerk's office advising that a nonconforming
complaint will be deemed timely filed if the taxpayer submits
conforming papers within a stated time period. Cf. R. 1:5-6(c).
Here, the clerk's office apparently sent no such letter. Nor is
this a case of relaxing the 90-day statute of limitations, which is
jurisdictional and may not be relaxed. F.M.C. Stores Co. v. Morris
Plains Bor.,
100 N.J. 418, 425 (1985). See also General Trading
Co. v. Taxation Div. Director,
83 N.J. 122, 127 (1980); Clairol,
Inc. v. Kingsley,
109 N.J. Super. 22, 25 (App. Div.), aff'd o.b.,
57 N.J. 199 (1970). Rather, the issue is one of the sufficiency of
plaintiff's pleading, and, as previously pointed out, pleadings are
to be liberally construed in the interest of justice. R. 4:5-7.
Moreover, there is nothing to prevent a relaxation of the rules
mandating the contents of a complaint and the attachment of a case
information statement under these circumstances. R. 1:1-2.
I therefore conclude that plaintiff's letter of June 29,
1993 should be deemed to be a complaint and consequently
plaintiff's complaint was timely filed.
Under N.J.S.A. 54:49-11, which applies to the gross
income tax by virtue of N.J.S.A. 54A:9-1, the Director is given
statutory authority to abate interest as follows:
a. If the failure to pay any such
tax when due is explained to the
satisfaction of the director, he may
remit or waive the payment of the
whole or any part of any penalty and
may remit or waive the payment of
any interest charge in excess of the
rate of three percentage points
above the prime rate including any
such penalty or interest with
respect to deficiency assessments
made pursuant to R.S. 54:49-6.
b. The director shall waive the
payment of any part of any penalty
or any part of any interest
attributable to the taxpayer's
reasonable reliance on erroneous
advice furnished to the taxpayer in
writing by an employee of the
Division of Taxation acting in the
employee's official capacity,
provided that the penalty or
interest did not result from a
failure of the taxpayer to provide
adequate or accurate information.
There is no dispute that the Director has abated interest to the
extent permitted by N.J.S.A. 54:49-11a. The only question is
whether the remaining interest should be abated because plaintiff's
failure to properly compute the resident credit was "attributable
to [his] reasonable reliance on erroneous advice" contained in the
instructions to the 1988, 1989, and 1990 gross income tax returns.
For the 1988 taxable year, the pertinent instructions for
the New Jersey gross income tax return provided:
LINE 1 - INCOME SUBJECT TO TAX BY
OTHER JURISDICTION(S)
Enter on this line the amount of
income received during the taxable
year which was subject to tax by
other jurisdiction(s). Income Sub
ject to Tax by Other Jurisdiction(s)
means those categories of income
which are taxed by another juris
diction before the allowance for
personal exemptions and standard
deductions which are also subject to
tax under the New Jersey Gross
Income Tax Act.
[emphasis added]
Plaintiff submitted no copy of the 1989 or 1990 return
instructions. By 1993 the first part of the instructions had been
amended to read: "Enter on Line 1 the amount of income you
received during the year which was actually taxed by the other
jurisdiction." (emphasis added).
Regardless of the change in wording that took place at
some point between 1988 and 1993, it is plain that the 1988 and
1993 instructions stated in no uncertain terms that the numerator
of the fraction should include only that income that was taxed by
the other jurisdiction. The amount of plaintiff's income that was
taxed by New York in each of the three years was his New York-source income. This is made clear by the New York Personal Income
Tax Law, which provides:
There is hereby imposed for each
taxable year on the taxable income
which is derived from sources in
this state of every nonresident ...
a tax which shall be equal to the
tax computed ... as if such
nonresident ... were a resident,
multiplied by a fraction, the
numerator of which is such
individual's ... New York source
income ... and the denominator of
which is such individual's ...
federal adjusted gross income for
the taxable year.
[N.Y. Tax Law § 601(e)(1)
(emphasis added)]
See Brady v. State,
576 N.Y.S.2d 896, 899 (App. Div. 1991), aff'd,
607 N.E.2d 1060,
592 N.Y.S.2d 955, cert. denied, U.S. ,
113 S.
Ct. 2998,
125 L. Ed.2d 692 (1993). As explained in Brady, the
fact that New York includes non-New York source income in
determining the graduated tax rate does not mean that the New York
tax is imposed on anything other than New York-source income
because the tentative tax is reduced by a fraction consisting of
New York-source income divided by total income. Brady, supra, 576
N.Y.S.
2d at 899.
Since the New Jersey return instructions plainly stated
that the numerator of the resident credit fraction was to include
income taxed by the other jurisdiction, the instructions were not
"erroneous" within the meaning of N.J.S.A. 54:49-11b. Plaintiff
simply misread those instructions to require the inclusion of his
federal adjusted gross income rather than his New York State
adjusted gross income. As the Division's instructions were not
erroneous and since plaintiff has obtained all the relief to which
he is entitled under N.J.S.A. 54:49-11a, see Camden v. Taxation
Div. Director,
4 N.J. Tax 458, 469 (Tax 1982), the Director's
assessment of interest at the statutory minimum is affirmed.
Judgment will therefore be entered granting defendant's motion for
summary judgment, denying plaintiff's cross-motion, and dismissing
the complaint.
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