Montana Attorney General Opinion 15-549

Opinion No. 549 Taxation-Income Ta.x-Refunds-Ap- propriations-Legislative Assembly. Hl<}LD: As a general rule, in order to secure a refund of taxes once they ha \'e found their way into the state 380 OPINIONS OF THE ATTOR~EY GEt~ERAL treasury and are suhject to allocation. two things mllst coincide, namely, leg-~ islation permitting it and an appro- priation by the legislature to meet the same. But the regulation adopted hy the Board of Equalization may be all right in so far as it, contemplates refunds of income taxes out of the suspense ac- count, if in fact it does, in the cases covered by sections 22 and 25 of Chap- ter 181, Laws of H)33. June 7, H)34. 'We have before us yom' request for opinion. and the regulation of the state hoard of equalization accompanying the same. In regular order they are as follows: "We are enclosing herewith a regu- lation adopted by the State Board of l~qualization in regard to refunds and cre,dits to taxpayers for any O\'erpay- ment of tax. or for anv tax en'one- ously or illegally collected. It is our opinion that this regulation is based on the authority granted to the Board in Section 29, Chapter 181, 1933 Reg-- Illar Session Laws, which provides: 'The Board is hereby authorized to make such rules and regulations and to require such facts and information to be reported as it mav deem neces· sa ry to enforce the pro~isions of this Act.' 'l'he regulation enclosed herein was adopted to properly enforce thc provisions of Section 22 and also the provisions of Sub-Section 4 of Section 25. "We are desirous of securing an opinion as to whether or not this reg- ulation is in sufficient compliance with the requirements of the law, or whether it is in conflict thereto." "IN THE l\fATTER OF ADOPTION OF OFFICIAL RULINGS PEn- TAIN1NG TO THE PHOPER AD- MINISTRATION OF THE 'l\W~­ TANA INCOME TAX LAW' Income Tax Ruling Number--- "Pursuant to Section 22 and Section 25 (4) of the Montana Income Tax Law, with reference to refunds and credits, the State Board of Equaliza- tion, after due consideration, hereIn· adopts the following . OFl!'ICIAL RULING (REFUNDS AND CREDITS FOR OVERPAYMENTS) Where there has heen an oyerpayment of any tax im- posed b~' this Act, Qr where IIny tax imposed by t.his Act has Ueen errone- ously or illegally collected, the amount. of such overpayment or the amount of tax erroneously or illegally col- lected shall be credited against an)' income tax, or installment thereof, then due from the .taxpayer, and any halance shall be refunded immediateh' to the taxpayer. . Claims by the taxpayer for t.he re- funding of any amount in o\'erpa~'­ ment of this tax, or for any amount of this tax erroneously or illegally collected, shall be made on the pre- scribed forms and should be filed with the State Board of Equalization. A separate claim on such forms shall he made for each taxable year or period. No such credit or refund shall he allowed Ol' made after two ~'ears from the time the tax was paid unless, before the expiration of such period, claim t.herefore is filed by the tax'payer. The claim must set forth in detail and under oath each ground upon which a refund is claimed, and facts sufficient to appraise the Board of the exact basis thereof. A claim which does not comply with this para- g-raph will not he considered for any purpose as a claim for refund. . Upon the approval of any such claim for refund the State Board of Equali- zation shall so certify to the State Treasurer and order the immediate payment of any amount due to the taxpayer because of overpayment or hecause of any tax erroneously or illegally collected, to be paid out of any moneys remaining in the suspense account from funds collected under the provisions of the :\10n ta na Per- sonal Income Tax Law. STATE BOARD OF EQUALIZATION C. J. Muri, John J. Greene Adopted May 18, 1934" Section 34, Article V, of the Constitu- tion, provides that "no money shall be paid out of the treasury except upon appropriations made by law, and 011 warrant drawn by the proper officer in pursuance thereof, except interest on the public debt," and section 10, Ar- ticle XII, of the Constitution, provides that "all taxes levied for state pur- poses shall be paid into the State Treasury, and no money shall ~e drawn OPIXIQXS OF THB ATTORNEY GENERAL 381 from the treasury but in the pursuance of specific appropriations made by law." In giving effect to these IH'O\'isions of the Constitution the supreme court in the case of First National Bank v. Randers Couuty, 85 Mont. 450, user! this language: "That portion of sec- tion 2222. Revised Codes 1!)21. which assumes to provide for a refunding to the county of the state's share of taxes returned to the taxpayer is inopera- tive." The Court further said that the state auditor could not lawfully follow the statutory direction in the a hsence of legis1a th'e appropriation. As a general rule, therefore, in or- der to secure a refund of taxes once they have found their way into the ;;tate treasury and are subject to allo- cation two things must coincide. namely, legislation permitting it and an appropriation hy the legislature to meet the same. (In re Baer's 'ViII. 266 X Y. S, 733; 61 C. ;J. 975). Section 22 of Chapter 181, Laws of 1!)33, provides: "If an application for reYision be filed with the Board b3~ a taxpayer within two years from the time of the filing of the return or if the tax of such taxpayer bas been recomput- ed, then from the time of such recom- putation, tbe Board shall grant. a hearing thereon, and if it is made to appear upon an~' such bearing by evi- dence submitted to it or otherwise. that any such computation includes taxes or other charges which could not have been lawfully demanded, or that payment. has been illegally made or exacted of any such amount so computed, the Board shall resettle the same according to law and the facts, and adjust the computation of taxes accordingly, and sball send notice of . its determination thereon to the tax- payer." Section 25 of the same Act provides that as soon as practicable after the return of the taxpa~'er is filed' with the state board of equalization it shall be examined and the tax computed, and if the amount of the tax as com- puted is less than the amount thereto- fore paid, the taxpayer is entitled to a refund of the excess. Section 192, Revised Codes of 1921, as amended by Section 1 of Chapter 157, Laws of 1931, is in part as follows: "The Stllte Treasurer is hereh,' designated the treasurer of ellch an;1 e\'ery state hoard, commission, bureau. department and state institution, now existing or hereafter to be created or established. All departments of the state government located at the capi, tol shall deposit with the State Treas- urer daily all moneys, credits, e\'i- dences of indebtedness and securities received. and the State Treasurer shall /pve such departments credit on their suspense accounts, which the State Treasurer is hereby directed to set up, and such deposits shall be subject to the final payment of all items, and the State Treasurer is directed to charge hack against such suspense accounts all items unpaid for an~' reason. * " * "On the fifteenth and tbe last day of each calendar month, every de- partment, state board, commission. bureau, state institution, and every ot.her employee or agent of the State of Montana shnll make report and settlement with the State Treasurer, and the State Treasurer shall issue bis official receipts to all departments, state boards. commissions, bureaus, sta.te institutions and other emplo)'ee or agent, reserving the right to hold in his possession such receipts sub- ject to cancellation until a II items covered in same shall have been fin- nlly paid; * * "." Our understanding is that the state treasurer has set up a suspense ac- count. as between himself and the state board of equalization, in accordance with the pro\'isions of sections 192, and that the board proposes to make re- funds of income taxes out of said ac- count wheneyer it deems it necessary or .proper . The regulation adopted by the board may he all right, tben, in so far as it contemplates refunds of income taxes out of the suspense account, if in fact it does, in the cases covered by sec- tions 22 and 25, notwithstanding the :.:eneral rule above stated. It goes without saying that in the absence of statute no executive or ad- ministrath'e officer has powel' to re- fund taxes, and if the power is given to him by law it must be substantially followed. (State \'. State Board of Equalization, (ii Mont. 340; (J1 C. J. 975).