NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued December 19, 2012
On appeal from the Tax Court of New Jersey, Docket No. 010503-2007.
Robert W. Lynch argued the cause for appellant (Lynch, Karcich & Yellin, LLP, attorneys; Mr. Lynch, on the brief).
Michael J. Duffy, Deputy Attorney General, argued the cause for respondent (Jeffrey S. Chiesa, Attorney General, attorney; Lewis A. Scheindlin, Assistant Attorney General, of counsel; Mr. Duffy, on the brief).
Before Judges Grall, Simonelli and Koblitz.
Shree Ram Investments, Inc. (SRI) appeals from an order of the Tax Court denying its motion for summary judgment and granting summary judgment to the Director of the Division of Taxation (respectively, Director and Division). The judgment was entered on SRI's complaint challenging the Director's denial of its claim for a refund of corporate business tax paid by SRI in response to the Division's notice of deficiency and demand.
In reviewing a motion for summary judgment, the question for this court is whether the prevailing party was entitled to judgment as a matter of law. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). For reasons other than those set forth in the Tax Court's letter opinion of August 22, 2011, we affirm.
The deficiency assessment that SRI sought to recover by refund was based on the Division's determination that SRI paid taxes in 2003 and 2004 at the rate appropriate for an S corporation, without filing the requisite election to be taxed as an S corporation. See N.J.S.A. 54:10A-5.22 (setting forth the procedure for New Jersey S corporation election); N.J.S.A. 54:10A-4(p) (defining "New Jersey S corporation" to mean "a corporation that is an S corporation; which has made a valid election pursuant to [N.J.S.A. 54:10A-5.22]"); N.J.S.A. 54:10A-4(o) (defining "S corporation" to mean "a corporation included in the definition of an 'S corporation' pursuant to section 1361 of the federal Internal Revenue Code of 1986, 26 U.S.C. § 1361"); N.J.S.A. 54:10A-5(c)(1) & (c)(2) (respectively setting forth corporate business and S-corporation tax rates).
The material facts are not in dispute. SRI's brief provides a statement of facts that recites the facts set forth in the judge's letter opinion, adding nothing other than citations to the record. We summarize and, where noted, supplement the record set forth in the letter opinion with additional undisputed facts.
In 1996, SRI, a Delaware corporation, filed an election with the Internal Revenue Service to be taxed as an S corporation. Between 1996 and March 2001, SRI did business in Delaware, but since April 2001 SRI has done business in New Jersey. On May 3, 2001, SRI filed an election to be treated as an S corporation under the New Jersey Corporation Business Tax Act, N.J.S.A. 54:10A-1 to -41. The Division did not, however, accept SRI's S corporation election form because SRI had not yet received a certificate of authority to do business in New Jersey. It returned the form with a letter of May 30, 2001, explaining that there was no record of SRI's registration as either a "New Jersey corporation or foreign corporation authorized to do business in New Jersey." The May 30 letter further advised that SRI could "apply for S-Corporation status" once it had registered. While SRI's president denies recalling receipt of that letter, he admits that it was found in SRI's files subsequent to the issuance of the deficiency assessment.
Despite the letter, SRI did not re-file the S corporation election form once it received its requisite certificate of authority to do business in New Jersey. Nevertheless, SRI submitted federal and state returns as an S corporation for years 2001 through 2005. The Division accepted the state returns as filed until receipt of the 2005 return. During the same years, SRI's shareholders filed New Jersey Gross Income Tax resident returns reporting S corporation income (or loss) from SRI.
On March 22, 2006, the Director issued SRI a notice of deficiency, penalty and interest for 2003 and 2004. Subsequently, on May 2, 2006, SRI filed an S corporation election. With that form SRI submitted a certification asserting that
[t]he taxpayer thought the original [S corporation election form] was filed. Upon searching through his files it was discovered that the original copies were in a file and were signed and clipped to an envelope ready for mailing. The taxpayer had thought the forms were mailed when in fact it appears they were not. Based upon the above explanation, the taxpayer requests that the S-election be accepted under Rev Proc 2003-43[, 2003-1 C.B. 998, which is a federal tax rule providing a method for taxpayers to request relief for late filing of S corporation elections.]
By letter of May 5, 2006, the Division advised SRI that its S corporation election had been accepted as effective January 1, 2006. And by letter of May 10, 2006, the Director explained that SRI's request for a retroactive New Jersey S corporation election had been rejected. The letter explained:
Be advised that unlike the Federal government New Jersey law does not have a retroactive S-Corporation election procedure. An election must be submitted by the 15th day of the fourth month of the year for which the election is requested to be effective.
Records of the Division of Revenue does [sic] not reflect that a timely election was received. Unless you can demonstrate that the election was submitted your request for a retroactive election cannot be granted.
Your New Jersey S-Corporation election will remain effective as of January 1, 2006.
Corporation Business Tax Returns should have been filed on form CBT-100 [corporate tax form] and not CBT-100S [S-corporation form]. The 2005 return should be filed on form CBT-100.
The individual personal income tax returns of the shareholders, if filed, may need to be amended to exclude the net pro rata share of S-Corporation income and ...