Castillo Retirement Residences

19-19

On December 21, 2017 the Department assessed the Taxpayer for compensating tax and withholding tax for $225,892.20. On March 21, 2018, Taxpayer filed formal protest of the assessment contesting the entire amount of the compensating tax which made up 99.5% of the assessment. On April 11, 2018, the Department concluded from its interpretation of statute that by failing to protest, pay, or enter in a payment plan for the $1,025.20 in withholding tax the protest should be denied. On July 3, 2018, the Taxpayer protested the Department’s denial of the protest for this reason. The Taxpayer’s motion for summary judgement was granted by the Hearing Officer as there was no dispute of the material facts in the case. The main issue to be resolved was whether the Department was correct to deny the Taxpayer’s protest request because of the failure to pay the unprotest portion of the assessment. The statute governing protests states that “a protest may be filed with or without payment of the assessed amount” but then later stipulates that “if only a portion of the assessment is in dispute, any unprotested amount of tax, interest, or penalty shall be paid.” The Hearing Officer found the language here somewhat ambiguous but it clearly does not state that the Department should automatically deny the protest if a portion of the assessment is not paid. Statute requires that the Department inform the Taxpayer of a problem with their protest if there is one, giving them the opportunity to correct the problem if they can do so as part of the guarantee of a right to formal review. However, in this case the protest was simply denied. Only when a protest is not timely filed does the statute state the protest should be automatically denied. If a portion of the tax is not paid, the remedy provided in statute to the Department, the Hearing Officer determined, is enforcing collection. Timeliness and substantive content are the two primary necessary requirements of a valid protest. This having been decided the Hearing Officer ordered that the Department accept Taxpayer’s underlying substantive protest and promptly submit a request for hearing to the Administrative Hearings Office.