The Missouri Supreme Court held that RSMo §§ 32.068 and 32.069 were not in conflict with RSMo § 143.811 when calculating the rate of interest a taxpayer is entitled for overpaying income tax, because § 143.811 is relevant for determining interest prior to January 1, 2003, while §§ 32.068 and 32.069 are relevant for determining interest on and after that date.
As a result of the Missouri Supreme Court's ruling in Kidde America, Inc. v. Director of Revenue, 198 S.W.3d 153 (Mo. 2006) (en banc), Kidde America, Inc., (Kidde America) became entitled to an income tax refund in the amount of $5,792,993 plus interest.[2] Kidde America argued, pursuant to RSMo § 143.811.1 (Supp. 2005), which calculates interest at 6% per annum, that it was entitled to $1,840,744.14 in interest for the period between April 16, 2001 and August 2, 2006.[3] The director of revenue (director) agreed with Kidde America's calculation, but only with respect to the interest due Kidde America for the period between April 16, 2001 and December 31, 2002.[4] Specifically, the director argued that for the period between January 1, 2003 and August 2, 2006, Kidde America's reliance on RSMo § 143.811.1 was misplaced, and asserted that the relevant statutory sections for calculating interest due Kidde America for that period were RSMo §§ 32.068 and 32.069 (Supp. 2005).[5] The director argued that when §§ 32.068 and 32.069 became effective on January 1, 2003, they superseded § 143.811.1.[6] The director's reliance on §§ 32.068's and 32.069's lesser interest rate had the effect of reducing the interest due Kidde America to $1,223,260.51.[7] The director paid Kidde America the interest calculated under §§ 32.068 and 32.069, and Kidde America appealed to the Missouri Supreme Court.[8]
Kidde America relied on two rules of statutory construction to support its reliance on § 143.811.[9] First, Kidde America argued that because § 143.811 and §§ 32.068 and 32.069 conflict, well-settled rules of statutory construction require the more specific § 143.811 to prevail.[10] The Court acknowledged that § 143.811 was indeed the more specific statute; however, the Court explained that the statutes did not conflict.[11] The Court citied the "notwithstanding" language of § 32.069 and held that such language excluded the applicability of any other statute and eliminated any possibility of conflict.[12]
Next, Kidde America argued that because § 143.811 was reenacted essentially without change at the time §§ 32.068 and 32.069 were adopted, it must be presumed "that the Legislature intended the unamended and unchanged parts of § 143.811 "'to remain operative and effective, as before the amendatory act.'"[13] The Court rejected Kidde America's argument asserting that all sections must be read in pari materia, and that all sections must be upheld if any fair interpretation would make it possible to do so.[14] The Court explained that a fair interpretation was possible and held that § 143.811 was intended to be the operative statute for the period of time before §§ 32.068 and 32.069 became effective.[15] Thus, the Court upheld the director's determination of interest.
II. Legal Background
Prior to January 1, 2003, RSMo § 143.811 was the relevant statute to calculate the amount of interest due a taxpayer resulting from an overpayment of income tax when an amendment is filed after the last day to file a return.[16] Section 143.811 provided that interest due on such an overpayment was calculated at a rate of 6% per annum.[17]
In 2002, the General Assembly passed Senate Bill 1248.[18] S.B. 1248 contained a reenactment of §143.811 with essentially the same language. S.B. 1248 also enacted RSMo §§ 32.068 and 32.069.[19] These latter sections include language that provides for the calculation of interest due a taxpayer resulting from an overpayment of income tax when an amendment is filed after the last day prescribed for filing the return. Additionally, § 32.068 has language that provides for a rate of interest on such overpayments that is different than is provided in § 143.811. In pertinent part § 32.068 provides:
2. Each calendar quarter the state treasurer shall calculate the annual rate of interest. The rate of interest shall be equal to the previous twelve-month annualized average rate of return on all funds invested by the state treasurer, rounded to the nearest one-tenth of one percent. The state treasurer shall provide such calculated rate to the director of revenue not later than thirty days prior to the end of each calendar quarter. The director of revenue shall apply the calculated rate of interest to all applicable situations during the next calendar quarter after the release of the calculated rate of interest.[20]
III. Commentary
To reach its determination the Missouri Supreme Court applied well-settled rules of statutory construction. The Court's decision is short, concise, and to the point. The decision is likely to present little controversy. However, the Courts decision, as required by the RSMo § 32.068, will have the effect of more equitably affixing interest to overpayments of income tax by tying the interest rate to the actual rate of return received on investments by the state, rather than simply affixing a statutory figure of 6%.
- Michael S. Smith
[1] No. SC88482 (Mo. Jan. 15, 2008) (en banc), available at http://www.courts.mo.gov/file.jsp?id=26597. The West reporter citation is Kidde America, Inc. v. Director of Revenue, 242 S.W.3d 709 (Mo. 2008) (en banc).
[2] Id. at 710.
[3] Id. at 710-11.
[4] Id. at 711.
[5] Id.
[6] Id.
[7] Id.
[8] Id.
[9] Id. at 711-12.
[10] Id. at 711.
[11] Id. at 711-12.
[12] Id. at 712. "1. Notwithstanding any other provision of law to the contrary, interest shall be allowed and paid on any refund or overpayment at the rate determined by section 32.068 only if the overpayment is not refunded within one hundred twenty days from the latest of the following dates…." Mo. Rev. Stat. § 32.068 (Supp. 2005) (emphasis added).
[13] Kidde, 242 S.W. 3d at 712.
[14] Id.
[15] Id.
[16] Id.
[17] Mo. Rev. Stat. § 143.811.1 (Supp. 2005). In pertinent part § 143.811 states: "1. Under regulations prescribed by the director of revenue, interest shall be allowed as paid at the rate determined by section 32.065, RSMo, on any overpayment in respect of the tax imposed by sections 143.011 to 143.996; except that, where the overpayment resulted from the filing of an amendment of the tax by the taxpayer after the last day prescribed for the filing of the return, interest shall be allowed and paid at the rate of six percent per annum...Id.
[18] Kidde, 242 S.W. 3d at 712.
[19] Section § 32.069 states: 1. Notwithstanding any other provision of law to the contrary, interest shall be allowed and paid on any refund or overpayment at the rate determined by section 32.068 only if the overpayment is not refunded within one hundred twenty days from the latest of the following dates: (1) The last day prescribed for filing a tax return or refund claim, without regard to any extension of time granted; (2) The date the return, payment, or claim is field; or (3) The date the taxpayer files for a creditor or refund and provides accurate and complete documentation to support such a claim. Mo. Rev. Stat. § 32.069 (Supp. 2005).
[20] Mo. Rev. Stat. § 32.068 (Supp. 2005).
Research Sources on Topic:
· Kidde America, Inc. v. Director of Revenue, 198 S.W. 3d 153 (Mo. 2006) (en banc) (holding Kidde American entitled to file an amended income tax return).
· James D. Burlison, 11 Missouri Practice Statutory Forms § 143.841 (3rd ed. 2002) (Form to recover overpayment of income taxes).
