The opinion of the court was delivered by: Kahn
This litigation involves the corporation business tax (CBT), and this court's review of a determination of the Director of the Division of Taxation denying a request by plaintiff to offset its overpayments thereunder against CBT obligations of two related corporations which ultimately merged into plaintiff. Based upon undisputed facts, the issue was crystallized by cross motions for summary judgment.
The original corporate structure of the relevant companies was as follows. Sea-Land Service, Inc. (Plaintiff), was a wholly-owned subsidiary of Sea-Land Corporation (Parent). In addition, plaintiff was the parent company of a wholly owned subsidiary called Reynolds Leasing Corporation (RLC). All three of these were incorporated under Delaware law. On December 8, 1986, RLC was merged into plaintiff, leaving plaintiff as a wholly-owned subsidiary of parent. On April 3, 1989, parent was also merged into plaintiff, leaving only plaintiff.
Defendant, Director of the Division of Taxation, found that the CBT liability of parent with interest for the years 1984 through 1988 totaled $362,301, and that the liability with interest of RLC for the years 1985 and 1986 totaled $262,384. Together, the total CBT liability of both companies equals $624,685. Because of the mergers, plaintiff became responsible for all of the liabilities and obligations of both merged companies. On January 13, 1994, plaintiff paid the tax deficiencies accrued by the merged companies.
During this same audit period, the director determined that plaintiff, before the mergers, overpaid its taxes in the years 1984, 1986, and 1987. This overpayment totaled $1,303,964. In addition, it was found that plaintiff underpaid by $324,780 for the years 1985 and 1989.
On May 19, 1994, plaintiff requested a refund of the overpayment determined by the director. The total refund requested was $1,585,278, a figure taken from director's estimate. Later, in September 1994, the overpayment was found to be, in actuality, $1,303,964, and on December 3, 1994, plaintiff filed a protest seeking this full refund.
On September 8, 1994, the director concluded the audit and issued a Notice of Assessment Related to Final Audit Determination, in which the director offset plaintiff's pre-merger underpayments of $324,780 against its total overpayments of $1,303,964, leaving nothing due from plaintiff. Plaintiff and defendant agree that plaintiff was left with a total pre-merger overpayment of $979,184. The correspondence involving the audit confirms this, but makes no provision for a refund of these monies.
Plaintiff protested these findings and sought a refund of the remaining $979,184 in overpayments determined by the director. A conference with regard to this matter was held on March 16, 1995. During this conference, a Discussion was also held as to whether the $624,685 liability paid by plaintiff on January 13, 1994, to cover the deficiencies of RLC and parent should have been offset against the $979,184 overpayment. The director's final determinations on August 25, 1995, and September 13, 1995, denied plaintiff's refund claim and found an offset as requested to be impermissible.
Director and plaintiff agree that plaintiff is out of time under N.J.S.A. 54:49-14 for a refund of overpayment. Director notes that although N.J.S.A. 54:49-14 was amended to extend the period for filing a claim for a refund where, as in this case, there has been an agreement extending the period for assessment, this amendment was intended to take effect on July 1, 1993.
Plaintiff argues that N.J.S.A. 54:49-16 is applicable in this case, and that this "Offset Statute" requires that plaintiff's tax liabilities be offset with its overpayments. The statute states:
Where no questions of fact or law are involved and it appears from the audit of any taxpayer that a State tax has been erroneously or illegally collected from such taxpayer, or has been paid by such taxpayer under a mistake of fact or law, the director may, within the time in which a deficiency assessment of that tax may be made, credit the erroneous overpayment of tax to the account of the taxpayer to offset the amount of a deficiency assessment; provided, however, that a credit shall only be applied to offset a liability for a period covered by the assessment period and shall only be granted with respect to a deficiency assessment made by the director under the same State tax as the erroneous overpayment.
Plaintiff asserts that it fits the requirements of the statute which would allow for an offset of its liabilities. These three requirements are that (1) an audit found an erroneous overpayment of a tax, (2) a deficiency was assessed against the taxpayer for the same audit period, and that (3) both the deficiency assessment and the overpayment arise under the same state tax. Plaintiff points out that it was assessed a net overpayment of $979,184 and a deficiency of $624,685, and that both the overpayment and the deficiency are of the New Jersey Corporation Business Tax.
In reading the plain language of the statute, plaintiff disputes the director's assertion that there can be no offset because the deficiencies arose from the other pre-merger companies, and the overpayment was made by plaintiff. Plaintiff asserts that because it is responsible for both the overpayment and paying the deficiencies, plaintiff is the taxpayer in both situations. The statute, according to plaintiff, does not allow for a tracing of the deficiencies to the parties originally liable.
Director concedes that plaintiff had the right to offset its deficient payments with its overpayments, but asserts that the offset was already made by deducting plaintiff's underpayment of $324,780 from its overpayment of $1,303,964. Director believes that plaintiff has only the right to offset its own deficiencies and claims that the deficiencies of the other pre-merger companies are not plaintiff's "own" for the purposes of the statute. Both parties agree that the court must use the plain meaning of the statute when it is unambiguous on its face. However, whereas plaintiff reads the plain meaning of the ...