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Harter v. Director of Revenue

Supreme Court of Missouri, En Banc

January 31, 2017

CHARLES AND MARY HARTER, Appellants,
v.
DIRECTOR OF REVENUE, Respondent.

         PETITION FOR REVIEW OF A DECISION OF THE ADMINISTRATIVE HEARING COMMISSION, The Honorable Brett W. Berri, Commissioner.

          Breckenridge, C.J., Fischer, Stith, Draper and Russell, JJ.

          PAUL C. WILSON, JUDGE.

         The Administrative Hearing Commission ("Commission") determined that Charles and Mary Harter (the "Harters") improperly calculated their income eligibility for purposes of the Property Tax Credit ("PTC") under sections 135.010 to 135.035.[1]The Commission found that the entire amount of Mr. Harter's social security and annuity payments should be included in their "income" for PTC purposes under section 135.010(5). As a result, the Commission found that the Harters were eligible only for a reduced PTC for the 2010 tax year under section 135.030.2 and that they were not eligible for any PTC for the years 2011-13 because their income exceeded the "maximum upper limit" of income eligibility under section 135.030.1(1). The Harters seek judicial review of the Commission's decision. This Court has jurisdiction under article V, section 3, of the Missouri Constitution, and the Commission's decision is affirmed.

         Background

         Mr. Harter is a former attorney with the Missouri Department of Revenue (the "Department"), and Mrs. Harter is a retired schoolteacher who was adjudged disabled by the Missouri Public School Retirement System (the "MPSRS"). Since 2009, the Harters have been claiming the PTC on their Missouri tax returns. The Director of the Department (the "Director") initially disputed the Harters' eligibility for the PTC based upon a lack of proof of disability.[2] Mr. Harter contacted the Director's legal counsel about this issue and explained that, because Mrs. Harter had been a schoolteacher, she had no involvement with the Social Security Administration and had been determined disabled by the MPSRS instead.

         In a 2010 letter to Mr. Harter, the Director's legal counsel stated that she would place a note in the Harters' file indicating that the determination by the MPSRS was sufficient to prove Mrs. Harter meets the disability criterion for eligibility for the PTC under section 135.010(2). In this same letter, however, counsel indicated that the Harters' 2009 "income" for PTC purposes - as defined by section 135.010(5) - exceeded the "minimum base" income under section 135.030.1(2) and, accordingly, they were entitled only to a reduced or prorated PTC under section 135.030.2. The Harters did not challenge this determination.

         On August 11, 2014, the Director issued final decisions about the Harters' income tax liability for the years 2010-13. As part of these decisions, the Director determined the Harters' eligibility for the PTC for those years. For 2010, like 2009, the Director determined that the Harters were entitled only to a reduced or prorated PTC under section 135.030.2 because - under section 135.010(5) - their 2010 "income" for PTC purposes exceeded the "minimum base" income under section 135.030.1(2). For 2011-13, the Director determined that the Harters were not eligible for any PTC under section 135.030.2 because their "income" for PTC purposes in those years exceeded the "maximum upper limit" under section 135.030.1(1).

         The Harters timely filed a petition before the Commission claiming the Director improperly applied the definition of "income" for PTC purposes under section 135.010(5) and, as a result, they were entitled to a PTC, without reduction, for each of the years 2010-13.[3] The Commission calculated the Harters' "income" for PTC purposes under section 135.010(5) and determined that the Harters were entitled only to a prorated PTC for 2010 under section 135.030.2 and were not income eligible for any PTC for the years 2011-13 under section 135.030.1(1). The Harters appeal this determination.

         Analysis

         At the outset, it appears the Harters misperceive the nature of the Commission's role and, as a consequence, both the nature of the Commission's actions and this Court's review. Each of their four points relied on begins: "The Administrative Hearing Commission erred in dismissing appellants' case by …." But the Commission did not "dismiss" the Harters' case. Instead, it determined - as if in the first instance - the Harters' "income" for PTC purposes under section 135.010(5) for each of the years in question. In J.C. Nichols Co. v. Dir. of Revenue, 796 S.W.2d 16, 20 (Mo. banc 1990), this Court explained:

[T]he Commission is simply a hearing officer who exercises the same role as any administrative hearing officer authorized to hear contested cases within an agency .... It simply determines, on evidence heard, the administrative decision of the agency involved. The ... Commission decision becomes the administrative action of the Department. The legislature intended for the Commission to render the agency's decision. This is the import of the language of Section 621.050.2, requiring adherence to the procedures of Chapter 536 in appeals from the Director to the Commission.

Id. at 20 (emphasis added) (quotation marks and citation omitted).

         As the Commission sagely explained in the present case, "we do not review the Director's actions, we remake them." Commission's Amended Decision, at p. 25. This Court, in turn, reviews the decision of the Commission, not the Director. Where, as here, the taxpayers' petition raises no genuine issues of material fact and the Commission's decision decides only questions of law, this Court's review of the Commission's decision is de novo. Eilian v. Dir. of Revenue, 402 S.W.3d 566, 568 (Mo. banc 2013).

         I. The Commission Properly Determined the Harters' PTC

         In their petition under section 621.050.1, RSMo 2000, the Harters did not contest the Director's determination of their Missouri Adjusted Gross Income ("MAGI") for the years 2010-13 or the income taxes due upon those amounts. Instead, the Harters only challenged the Director's determination regarding their eligibility for - and the proper amount of - the PTC in those years. Accordingly, that is the only issue the Commission addressed and it is the only issue before this Court. Fischer, 483 S.W.3d at 860-61.

         Sections 135.010 through 135.035 establish the PTC as a form of tax relief for low-income taxpayers who are elderly or disabled.

The senior citizen property tax relief provisions offer an individual … [an income] tax credit … for [either the amount of] property taxes paid on the home and up to five acres surrounding it or for … [a percentage] of rent payments if the taxpayer is a renter. To qualify the taxpayer must be over 65 years of age or disabled and meet the income eligibility guidelines. The credit is "refundable;" that is, if the credit exceeds the taxpayer's tax liability, the director of revenue will treat the unused portion of the credit as an overpayment of income tax and will send the taxpayer a refund.

Missouri Merchs. & Mfrs. Ass'n v. State, 42 S.W.3d 628, 634-35 (Mo. banc 2001) (footnote omitted) (emphasis added) (referred to herein as ...


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