Counsel for the Appellee Assistant Attorney General (Counsel of … Abdul Hafiz, pledged as...

IN THE SUPREME COURT OF OHIO

Case No.: 07- 2450

APPELLANTS' BRIEF ON THE MERITS

IN RE THE NOTICE OF APPEALFROM THE OHIO BOARD OF TAX APPEALS

DECISION AND ORDERENTERED ON NOVEMBER 30TH 2007

ON CASE NO.: 2005-T-1627, (PERSONAL INCOME TAX)

Abdul and Rawnaq A. HafizAPPELLANTS

VS.TAX COMMISIONER OF OHIO

WILLIAM W. WILKiNS [RICHARD A. LEVIN]APPELLEE

Ishraq A. Hafiz, J.D.,Sup. Ct. Reg. No.: 0012466

12525 Akron-Canfield Rd.,North Jackson, OH 44451Ph.: 330-547-2442 or 330-398-3239Fax: 330-547-7333Counsel for the Appellants

F

1

MARC DANN (0039425)Attorney General of OhioDAMION M. CLIFFORD (0077777)(Counsel of Record)Assistant Attorney General30 East Broad Street, 25`h FloorColumbus, OH 43215-3428Ph: 614-466-5967Fax: [email protected] for the Appellee

[L [ 7r=̂: 1 L J

hFS 19 2008

CI..ERK OF COURTSUPREIUIE .'UUR; JF OHIO

TABLE OF CONTENTS

TABLE OF CITATIONS AND AUTHORITIES 3

STATEMENT OF THE ASSIGNMENT OF ERRORS 4

STATEMENT OF THE CASE 7

ARGUMENT

Assignment of Error Number 1 13



CONCLUSION 24

CERTIFICATE OF SERVICE 25

2

Table of Citations and Authorities

Statutes:

ORC Sec. 5747.13(A) 4, 23

ORC section 5703.58 4,5,12, 13,14, 15 16, 17, 19

ORC Sec.5717.011 and 5717.02 4, 13

ORC sections 5739, or 5474 5, 19

ORC Section 5733.11, ORC Section 5751.09, ORC Section 5703.50 6, 19

ORC Section 5747.13(B) 11

ORC Sections 2305.07 and 2305.08 22

ORC Sec. 718.12 22

Cases:

1. Ohio Court of Appeals for the 6h Appellate district, for Fulton county Ohio

Department of Taxation v. Kunkle, 205-Ohio-2092, 04/29/2005, 14

2. Gibson v. Limbach, (1991), 94 Ohio App. 3d 498 20, 22

3. McDonald v. Humeniuk (2005) Ohio App, 11'h District, Trnunbull County, Not

Reported in N.E. 2d 2005 WL 737413, 20, 21

3

ASSIGNMENT OF ERRORS

Appellants make the following complaints of error in the Board of Tax Appeals Decision

and Order:

1. The Board of Tax Appeals erred by stating that the Taxpayers did not state a

specific error for the Board to consider while reviewing the Tax Commissioner's

September 2005 Assessment. The timely filed Notice of Appeal, [a copy of

which should be part of the record herein, dated November 23, 2005], in fact,

cites the Commissioner's incorrect application of statute of limitations under ORC

Sec. 5747.13(A) (and later, in the interim, as replaced by ORC section 5703.58,

effective September 28, 2006) as the error of law to be reviewed. The Notice of

Appeal requires The Board of Tax Appeals to make a finding whether the Tax

Commissioner's decision was legal [emphasis added] and proper, according to

ORC Sec.5717.011 and 5717.02 The Taxpayers did not ask for equitable relief,

they asked for statutory relief.

2. The Taxpayers state that it is reversible error for both the Board of Tax Appeals

and the Tax Commissioner to ignore the record that the taxpayers communicated

to the Department of Taxation Agent, Einon H. Plummer II, in writing in

September 2004 that the State's August 2004 effort to collect any assessment for

taxes it claimed was due for 1989, 1990 and 1991 was barred by the 10 year

statute of limitations, or alternatively the 4 year statute of limitations that was in

force at the time. The Ohio Department of Taxation was provided written

4

infonnation by the IRS in January 1994 about the Appellants' tax years in

question, yet it did not initiate any assessment activity until August 2004.

The Board of Tax Appeals, as an issue of substantive law, erred in its application of

ORC section 5703.58, effective September 28, 2006, which states that "the tax

commissioner shall not make or issue an assessment for any tax payable to the state

that is administered by the tax commissioner, or any penalty, interest, or additional

charge on such tax, after the expiration of ten years, including any extension, from the

date the tax return or report was due when such amount was not reported and paid,

provided that the ten-year period shall be extended by the period of any lawful stay to

such assessment."

3. The Board of Tax Appeals as an issue of substantive law, erred in its application

of ORC section 5703.58 because nothing in the statute requires the tolling of ten

years it prescribes to be dependant on the tax being reported or paid in the case of

personal income taxes, although it does specify that the section does not apply to

taxes assessed against vendors or sellers under ORC sections 5739, or 5474, and

to persons who fraudulently attempt to avoid such tax, and the Appellants are not

of those classes of persons. Further, while the term "assessment" has specific

meanings and sometimes-specific earlier (4 year) statutes of limitations in some

areas of taxation, like corporate tax (ORC Section 5733.11) or commercial

activity tax (ORC Section 5751.09) where specific directions exist that no bar to

assessments applies under ORC Section 5703.50 if a return was not filed. All of

these specific circumstances of taxation are distinguishable from the

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circumstances of Appellants' personal income tax. The Board of Tax Appeals

errs by ruling, essentially, that the statute of limitations is only applicable if

invoked by a timely petition for re-assessment, instead of ab initio.

6

STATEMENT OF THE CASE

Introduction and History

Now come Abdul and Rawnaq A. Hafiz, hereafter referred to as the "Taxpayers"

or the "Petitioners," now residents of Florida, through counsel, Ishraq A. Hafiz, J. D., to

respectfully provide arguments to this honorable tribunal for the Appeal they have made

against the actions of the current Tax Commissioner for the State of Ohio and the Board

of Tax Appeals.

The taxpayers were full-time residents of Ohio from 1962 to 2003 and still

currently file tax returns in the State of Ohio, and have so throughout the period of time

covered by this case. They had the same address in Ohio from 1978 to 2003.

The taxpayer, Abdul Hafiz, had engaged in joint business ventures with several of

his blood relatives to own and operate franchised motels from about 1975 to 1995, first

under "Partnership" business forms, then later, to limit liability, under a "Sub-Chapter S

Corporation," because taxpayer was also in active practice as a medical doctor. He has

since retired from that profession, being now 78 years old.

Taxpayer, Rawnaq A. Hafiz, now 74 years old, is a retired medical doctor, now a

homemaker, and was never a participant in these motel ventures, and never owned shares

in the business, so is an innocent spouse, but she joins in the matter here, because her

name is also on the assessment in controversy here.

To obtain bank loans to aid in funding these motel business ventures Taxpayer

Abdul Hafiz, pledged as collateral all of his (and Rawnaq A. Hafiz') own properties, and

assets of every kind, including, but not limited to bank accounts, insurance policies, and

all properties of all types, and his share of the motel business assets, to the bank (then

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BANK ONE, NA, now Chase, NA, hereafter referred to as "the bank"),. These were

pledged as both collateral and cross collateral for the loans and further, taxpayer made

direct loan re-payments to the bank, personally, if the motel's business income could not

cover the business loan re-payments. The bank even required any and all obligations of

the motel business to any and all of the shareholders to be subrogated and subordinate to

the bank's mortgage-loan secured by collateral status, so that the Bank's claims were

superior to every other claim.

The Corporation name was Family Motels, Inc. and in was duly incorporated in

Ohio in 1985 and was dissolved in 1995. Taxpayer Abdul Hafiz was the 90%

shareholder.

The "Sub-Chapter S" corporate form, at the time, allowed for the pass thru of the

business' gains and losses to the shareholders, personally, share by share, in a similar

fashion as the "Partnership" business form, limited to the amounts at risk. The gains

were supposed to be counted as direct income to the shareholders and the losses were

supposed to be direct business deductions.

The taxpayer's businesses generally did well from 1975 to 1988, but as is

commonly known history, the general US economy suffered a"recession" starting in

1989, and further, the taxpayer's business' sole motel, at the time, had a huge accidental

loss due to a large fire in mid-1990. In those years, 1989, 1990 and a short portion of

1991 the motel business' Sub-Chapter-S K-1's included substantial losses that the

taxpayers included in their federal personal income tax returns. Despite the pledge of all

the taxpayers' personal assets as collateral for the bank's loan, the IRS disallowed these

losses for tax years 1989, 1990, and 1991, in 1992 after an audit, saying that the

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taxpayers were third-party guarantors, and not at primary risk on the motel business'

loans. The losses were not lost however, because they were allowed to be allocated to

later tax years, once the business became profitable again.

The first comment made, in 1992, by the IRS auditor, Charles Ryder, was to ask

why "do you Indians [a reference to the taxpayers' ethnicity, from the Indian

Subcontinent in South Asia, even though they had been US citizens since 1976] always

buy motels?" He went on to explain that over 53% (in 1992) of the motels in the US

were owned by people of Indian descent. He seemed disturbed by this statistic and was

hostile throughout the audit, much of which was overturned by the IRS administrative

appeal of it by the taxpayers in late 1993.

This counsel attended the initial audit meeting and was shocked to hear this focus

by the IRS agent, but decided to ignore the remarks, instead explaining that people from

India are not even allowed to immigrate to the United States without first having an

education and a job, or without first investing in the United States by buying a business,

like a motel, or a convenience store, to support themselves after their arrival, unlike other

immigrants.

As stated above, the taxpayer's motel business recovered itself by 1992 and the

Sub-Chapter S Corporation's K-ls had gains for the shareholders to report until the

business was closed, in 1995. The IRS abruptly stopped its audit as of 1992, once the K-

1's showed profits again, as they had been from 1975 thru 1988, because it didn't serve

their prejudiced audit to show that the business had profits to credit against any losses.

The IRS made its administrative fmdings disallowing taxpayers' loss deductions

for 1989, 1990 and 1991, in 1994 and the gave the Taxpayers a letter, dated in January

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31, 1994, from Robert T. Johnson, District Director which was introduced at the

Board of Tax Appeals hearing on this matter [a copy of which is part of the transcript

record herein], which stated plainly, in writing, that its findings were being shared

with the State of Ohio, at that time, so the taxpayers quite reasonably relied on that

declaration, because it was made by such an important official, that the tax matter had

already been referred to the state of Ohio as well at the time.

As stated above, the main controversy the taxpayers had was the "at risk" amount

from which loss deductions could be taken; the IRS would not count the Taxpayers'

personal stake pledged for the business loans as part of the amounts at risk, so it

disallowed their loss deductions for those years and assessed tax deficiencies upon the

taxpayers.

The Taxpayers litigated the IRS audit of the tax years 1989-1991 from 1994

through 2001 after making a tax deposit of approximately $57,000.00 to cover the alleged

deficiencies, in 1994, to specifically stop the running of interest and penalties as of 1994.

They eventually settled in 2001 for an additional amount of $87,000.00 that reflected no

fault, and a substantial reduction in interest, and no penalties. No amended returns were

filed.

This was all done by 2001, within the 10-year time limit for collection on the IRS

(federal) level for those tax years, 1989, 1990 and 1991. The taxpayers had filed their

federal and state returns for each of the tax years 1989, 1990, and 1991 in a timely

fashion in 1990, 1991 and 1992, respectively, in what they still truly believe to be in a

tnie, legal and accurate manner.

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What is pertinent to the appeal made here is that throughout this time, from 1992

to 2001, no State of Ohio tax agent made any contact with taxpayers. The first contact

was made in August of 2004 [a copy of that initial contact letter was admitted at the

hearing and is part of the record herein].

The taxpayers replied to the tax agent's letter (no signature was provided on the

tax agent's letter, but the letter had reference initials of "NVQ/dc" and "Ref # 1874,"

along with contact phone numbers, as identifiers), with the information that the collection

action was 13 years late, on or about September 2004 [a copy of taxpayer's reply was

admitted at the hearing and is part of the record herein].

An Ohio tax agent, Einon H. Plummer II, a Problem Resolution Officer replied,

on or about December 2004 [a copy of this reply was admitted at the hearing, and is part

of the record herein] ignoring the lateness issue, except to say that some adjustment could

be made on the penalties, but not the interest.

The Tax commissioner assessed the taxpayers in March of 2005, and due to a

miscalculation of the 60 day limit for the Petition for Reassessment form, (the form as

issued by the taxing authority under RC 5747.13(B)) filed on behalf of the taxpayers, the

Commissioner denied the Petition because it was filed late, by one day, but he did so

callously ignoring the fact that the issue of the lateness of the assessment had already

been communicated in writing to the State of Ohio Taxation Department, prior to

the assessment, albeit not on the same Petition form as provided by the Tax

Commission, but still earlier than the 60 day limit.

The lateness issue had been raised with the initiating tax agent and the problem

resolution officer, in the taxpayer's letter of September 2004 [and which is part of the

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record herein]; nevertheless, the Tax Commissioner made a fmal assessment from which

an appeal was then made to the Board of Tax Appeals, again claiming the assessment was

made beyond the statutory time limit for such assessments.

This lengthy history introduces the short argument that the Tax Commissioner

through his own agent had knowledge of the taxpayers' contention that the assessment

was out of the statutory time Iimit for such assessments, ab initio. Since the Tax

Commissioner relied on the IRS' findings and audit, the legwork for the assessment had

already been done since 1994, so there was no reason for the delay of action on the

State's part.

More importantly, new law was recently passed to make all assessments have a

10-year statute of limitation, with certain exceptions which do not apply here, effective

09/28/06 for all matters before, on and after the effective date of the Act, specifically,

even those where the taxpayer does not file modified returns, from the date the return was

due to be filed, unless an earlier limit has been set by existing law [ORC Section

5703.58].

The taxpayers are substantially harmed by the lack of due diligence by the state

taxing authority, both due to the horrendous amounts of interest the Commissioner now

desires to charge and also due to the change of circumstances the taxpayers have suffered

in health, occupation and age over these long years, due to the natural passage of time.

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ARGUIVIENT

Assignment of Error number 1:

The Board of Tax Appeals erred by stating that the Taxpayers did not state a

specific error for the Board to consider while reviewing the Tax Connnissioner's

September 2005 Assessment. The timely filed Notice of Appeal, under ORC Section

5717.011 [a copy of which should be part of the record herein, and also, a copy is

attached below], in fact, cites the Commissioner's error in his incorrect application of

statute of limitations under ORC Sec. 5747.13(A) (and later, in the interim, as revised by

ORC section 5703.58, effective September 28, 2006) as the error of law to be reviewed.

The Taxpayers did not ask for equitable relief, they asked for statutory relief.

This can be seen from the Notice Of Appeal in the record itself, filed November 23,

2005. The taxpayers will be greatly harmed without this statutory relief and they clearly

stated their grounds for Appeal on the notice itself. How more clearly could they have

stated their prayer to the Board of Appeals?

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Assignment of Error Number 2:

The Board of Tax Appeals and the Tax Commissioner both ignored the record that the

taxpayers communicated to the Department of Taxation Agent in writing in September

2004 that the State's August 2004 effort to collect any assessment for taxes it claimed

was due for 1989, 1990 and 1991 was barred by the 10 year statute of limitations, or

alternatively, the 4 year statute of limitations that was in force at the time. The Ohio

Department of Taxation was provided written information by the IRS in January 1994

about the Appellants' tax years in question, yet it did not initiate any assessment activity

until August 2004.

The Board of Tax Appeals, as an issue of substantive law, erred in its application

of ORC section 5703.58, effective September 28, 2006, which states that "the tax

commissioner shall not make or issue an assessment for any tax payable to the state that

is administered by the tax commissioner, or any penalty, interest, or additional charge on

such tax, after the expiration of ten years, including any extension, from the date the tax

return or report was due when such amount was not reported and paid, provided that the

ten-year period shall be extended by the period of any lawful stay to such assessment."

As part of the record of these proceedings below, the honorable counsel for the

Attorney General's office cited as precedent, a case from the Ohio Court of Appeals for

the 6`" Appellate district, for Fulton county Ohio Denartment of Taxation v. Kunkle, 205-

Ohio-2092, 04/29/2005, which can be distinguished from the case at bar.

Unlike the taxpayers here, the taxpayer in the Kunkle case had not challenged the

initial tax assessment to the administrative taxing body, so such challenge was not in his

case's record for review, after it had been adjudicated at the trial court.

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Here, the taxpayers complained of the Tax assessments lateness in writing, from

the very first contact by the administrative taxing body.

The taxpayers here argue their case is governed by not only the 4-year time limit

for the Commissioner to make or issue an assessment, but also the new law, [a copy of

which is attached below] which states that in cases like the taxpayers, where there has

been no modification of their tax returns, the Conunissioner has ten (10) years from the

date the return was due to make the assessment; to quote it in part:

R C Sec. 5703.58. (A) Subject to division (C) of this section, the tax

commissioner shall not make or issue an assessment for any tax payable to the

state that is administered by the tax commissioner, or any penalty, interest, or

additional charge on such tax, after the expiration of ten years, including any

extension, from the date the tax return or report was due when such amount

was not reported and paid, provided that the ten-year period shall be

extended by the period of any lawful stay to such assessment. As used in this

section, "assessment" has the same meaning as in section 5703.50 of the Revised

Code.

(B) This section does not apply to either of the following:

(1) ALiy amount collected for the state by a vendor or seller under Chapter 5739 . or

5741. of the Revised Code or withheld by an employer under Chapter 5747. of the

Revised Code.

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(2) Any person who fraudulently attempts to avoid such tax.

(C) This section does not authorize the assessment or collection of a tax for which

the annlicable eriod of limitation rescribed bv law has exnired and for which no

valid assessment has been made and served as prescribed by law.

The time limitation applies to all taxes payable to the state and administered by

the Tax Commissioner, which include the following from the Ohio Legislative Service

Commission from its bill analysis, which is attached below, that further explains the new

time limit, the new limit affects the following tax areas:

Income tax

Corporation franchise tax

Motor fuel tax

Public utility excise tax

Municipal electric company tax

Kilowatt-hour tax

Horse racing tax

Pass-through entity withholding tax

Time limit on assessments

Commercial activity tax

Sales and use taxes

School income tax

Cigarette and tobacco taxes

Alcoholic beverage taxes

Natural gas distribution tax

Severance tax

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(R.C. 5703.58)

The act places a ten-year time limit within which the Tax Commissioner must issue

an assessment for any alleged unpaid tax liability when no shorter time limit applies

under continuing law. The time limit begins on the date the tax return or report

was due when the liability was not reported and paid, including any filing extensions

allowed. The ten-year period is extended for the duration of any lawful stay of the

assessment.

The ten-year time limit on assessments does not apply in cases where a person

fraudulently attempts to avoid the tax, where sales or use tax is collected by a

vendor or seller but not remitted to the state, or where income tax is withheld by an

employer from employees but not remitted to the state.

The time limit on assessments applies to all taxes payable to the state and

administered by the Tax Commissioner (listed above).

Under continuing law, there are shorter time limits within which assessments for

most taxes must be issued, except in cases where a return has not been filed, a

return is fraudulent, or the tax has been collected but not remitted to the state. The

time limit is four years for the income tax, the sales and use taxes, the commercial

activity tax, the pass-through entity withholding tax, the motor fuel tax, the

kilowatt-hour tax, the natural gas distribution tax, and the severance tax. The time

limit is three years for the corporation franchise tax, the municipal electric company

tax, alcoholic beverage taxes, and cigarette and tobacco taxes. The time limits begin

17

to run when the tax return is due or when it is filed, whichever is later. These time

limits are not affected by the act. [This comment is quoted from the Ohio Legislative

ServiceJ:

Here, the taxpayers have not done anything to fraudulently avoid any tax, and in

fact would have paid the assessment if it had been made in a timely manner in 1994, to

stop the running of interest and penalties, as they did at the federal IRS level. They have

not, at any time, allowed the extension of the collection period, either. No other

exception to the 1 0-year limit even applies to their circumstance. They lived at the same

address as listed on their duly filed tax returns from 1978 to 2003, doing nothing to avoid

any tax or taxing authority. In fact, to repeat, they actively in 1994 paid what the IRS

required to stop the running of interest and penalties while they contested the IRS actions

and would have done so with the state taxes as well if the state had required it then.

If the 10 years starts at the date of the filing of the returns, the last one, in 1991,

would have timed out by October 2002, but the first collection efforts made by the State

of Ohio was in August 2004. Even the IRS isn't as lax and unfair as that.

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Assignment of Error number 3:

The Board of Tax Appeals as an issue of substantive law, erred in its application




taxes assessed against vendors or sellers under ORC sections 5739, or 5474, and to

persons who fraudulently attempt to avoid such tax, and the Appellants are not of

those classes of persons.

Further, while the term "assessment" has specific meanings and sometimes-

specific earlier (4 year) statutes of limitations in some areas of taxation, like corporate

tax (ORC Section 5733.11) or commercial activity tax (ORC Section 5751.09) where

specific directions exist that no bar to assessments applies under ORC Section

5703.50 if a return was not filed. All of these specific circumstances of taxation are

distinguishable from the circumstances of Appellants' personal income tax. The

Board of Tax Appeals errs by ruling, essentially, that the statute of limitations is only

applicable if invoked by a timely petition for re-assessment, instead of ab initio.

The Ohio Legislature has seen fit to revise the tax laws to include statutes to limit

the time the tax administrative agencies have to diligently carry out their collection

actions. To ignore these limits hurts the public as well as the taxpayers here.

The taxpayers had filed their returns for tax years 1989, 1990, and 1991 in a

timely fashion, in what they still truly believe to be in a true, legal and accurate manner.

The IRS, in its action, was timely, even if it was not honest. The Ohio Tax

Commissioner's action, if it was based on the IRS action, was not timely, to allow it

19

would cause grossly huge and irreparable harm to the taxpayers, harm that could have

been mitigated if the State's matter had been pursued at the same time as the federal one.

The taxpayers cannot help their ethnicity, nor their age, nor their health and they

have always paid all obligations, however unfair, but the action of the Connnissioner here

is not only unfair, it is illegal, so the taxpayers humbly pray they will be granted such

relief as this Appellate Forum deems proper, legal and equitable.

Statutory time limit laws are enacted for a reason. To be precise, they have been

enacted for many reasons. These are precisely the same reasons why the Taxpayers here

need them.

The previous time limit laws had been whittled away by years of misinterpretation

to have become effectively meaningless. Many of the cases cited by the Appellee's

counsel are exactly the problematic ones. Compare the formerly leading case on the

issue of time limits, as cited below by opposing counsel, Gibson v. Limbach, (1991), 94

Ohio App. 3d 498 (which can also be distinguished on other grounds), to McDonald v.

Humeniuk. (2005) Ohio App, 11`h District, Trumbull County, Not Reported in N.E. 2d

2005 WL 737413, which had entirely opposite holdings.

The new laws force the Tax Commissioner and his or her agents or officers to

perform their duties in a diligent way, so if the IRS, informs the Ohio Tax Commission in

January of 1994, that there are changes proposed to a Taxpayer's duly filed returns, they

can't just ignore the information until August of 2004. .

To hold otherwise would be to give effect to a new Commission crafted

regulation that modifies and limits the express terms of the new Statute of Limitation,

duly passed by the legislature, and signed into law, to the Taxpayer's detriment.

20

The Taxpayers had lived in the same place from 1978 thru 2005; and had lived in

Ohio, for the most part, since 1962. They filed their tax returns, paid in full, for all of the

years they lived and worked in Ohio and the United States, and continue to do so. The

State's taxing authorities would have had no trouble finding them to give them notices

and/or assessments; they had all the sufficient information they needed directly from the

IRS to do such notices and assessments and nothing the Taxpayers did or have ever done

have jeopardized the govermnent's interests. The Taxpayers have not even challenged

the issue of the service of the assessment here having not been made to them, but instead,

to their daughter (Appellee's exhibit).

Even the IRS, although it's motives were sinister, to inquire why most of the

hotels and motels in the United States were own by Indian hnmigrants, did its deeds in a

timely way. It made its assessment in 1994 and stopped collection activities in 2001,

within 10 years from the date of the filings of the Taxpayers' 1991 return.

The Humeniuk case cited above involved a taxpayer who made payments and co-

operated with one taxing authority she thought was in concert the others, like the

Taxpayers here had co-operated with the IRS, which the Taxpayers reasonably believed

to be in concertwith the State of Ohio, until the statute of limitations expired.

In the Humeniuk case, the Niles taxing authorities pursued the taxpayer for

deficiencies, which she paid, and she litigated against another taxing authority which

tried, much later, to collect on the same deficiencies, but well past the statutory time

limit. And the just Court held the other taxing authority, McDonald Village's lack of

diligence, in starting its collection activities within the same time frame, barred it from

21

further efforts; the learned Appellate Court agreed. The taxing authority was not above

the law.

Humeniuk also references ORC Sections 2305.07 and 2305.08, each which limits

the time to file suit for statutory liabilities, other than for forfeitures or penalties, to 6

years, and for the prosecution of criminal tax evasion, limited by ORC Sec. 718.12, also

to 6 years. So the outside limit for even criminal tax evasion is 6years, in Ohio.

The Gibson case cited above can be distinguished, from the instant case here, by

the fact that the taxpayers in that case were given deficiency notices by the State's taxing

authority within the 3 year statute, even if they weren't given any assessment within that

time, and all State actions were done simultaneously with the IRS actions against the

taxpayers therein, not many years afterwards, as in the taxpayers' case here.

. The State taxing authorities had all the information they needed, sufficient to

initiate collection actions, since January 1994.

Further, to repeat this point, the Taxpayer, Abdul Hafiz, raised the issue of the

State's tardiness in his September 2004 reply to the State's tax agent's initial August

2004 notice of deficiency letter, saying that it was 13 years late. Under the law, ORC

Section 5747.13 as quoted by the Appellee's counsel specifies that additional objections

may be "raised in writing if received prior to the date shown on the fmal determination by

the conunissioner..." This lateness issue was raised in writing and the exhibits, as

evidence of this, were provided at the hearing on this matter.

The matter again was raised in the one-day late Petition for Re-Assessment form,

in May of 2005.

22

The cases cited in the record below in the Appellee's brief about the lack of

jurisdiction of the Commission to consider Petitions filed later than the statutory date are

distinguished from the one here, because the issue was raised by the taxpayer well prior

to the assessment, along with the fact that the notice itself was predicated, ab initio, on a

matter the IRS itself had no further time to collect, its time having expired and been

extinguished in 2001. The new statute of limitation law, which by its specific terms

applies to all income tax issues past, pending and future, also applies herein.

23

CONCLUSION

The Board of Tax Appeals errs in its decision that it had no legal question to

review in the Taxpayers' Appeal against the Tax Commissioner. Through the

Commissioner's own agent, the Commissioner had knowledge of the taxpayers'

contention that the assessment was out of the statutory time limit for such assessments, ab

initio, from September 2004. Since the Tax Commissioner relied on the IRS' findings

and audit, the legwork for the assessment had already been done since 1994, so there was

no reason for the delay of action on the State's part.

The taxpayers are substantially harmed by the lack of due diligence by the state

taxing authority, and by the Board of Tax Appeal's attempt to shirk its duty to uphold the

law. The delay by the state has unnecessarily and unfairly accrued horrendous amounts

of interest the Commissioner now desires to charge the taxpayers. The Taxpayers

humbly pray that this just Supreme Court will uphold the law, will vacate the decision of

the Board of Tax Appeal, and reverse the assessment of the Tax Commissioner for being

in contravention of the Statute of Limitations and provide them with relief

RESPECTFULLY SUBMITT,ED

ISIIRAQ A. HAFIZ, J.D.ATTORNEY FOR APPELLANTS/TAXPAYERSABDUL AND RAWNAQ A. HAFIZSupreme Ct. #001246612525 Akron-Canfield Rd.North Jackson, OH 44451Ph.: 330-398-3239 or 330-547-2442Fax: 330-547-73-33

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CERTIFICATE OF SERVICE

A TIME-STAMPED COPY of this Brief with all attachments was hand delivered

on February 19, 2008 to:

MARC DANN (0039425)Attorney General of OhioC/ODAMION M. CLIFFORD (0077777)(Counsel of Record)Assistant Attorney General30 East Broad Street, 25`h FloorColumbus, OH 43215-3428Counsel for the Appellee

25


Case No.: 07 --- 2450

NOTICE OF APPEAL

FROM THE OHIO BOARD OF TAX APPEALS

DECISION AND ORDER

ENTERED ON NOVEMBER 30TH 2007


Abdul and Rawnaq A. Hafiz

APPELLANTS

VS.

TAX COMMISIONER OF OHIOWILLIAM W. WILKINS

APPELLEE

Ishraq A. Hafiz, J.D.,Attorney for Appellants,Sup. Ct. Reg. No.: 001246612525 Akron-Canfield Rd.,North Jackson, OH 44451Ph.: 330-547-2442 or 330-398-3239Fax: 330-547-7333Appears for the Appellants

i;Lt.RK OF I;DURTs6'REN1L COURI OF OHIO

NOTICE OF APPEAL

NOW COME THE APPELLANTS, ABDUL AND RAWNAQ A. HAFIZ,

now residents of the State of Florida, through counsel, to respectfully request that this

Just Supreme Court accept their prayer for an appeal on the decision of the Board of Tax

Appeals for the State of Ohio, CASE NUMBER 2005-T-1627, entered on November

30`h, 2007, a copy of which is attached.

The Appellants, through counsel, make this prayer AS AN APPEAL OF

RIGHT, under ORC Section 5717.04.

Respectfully submitted,

Ishraq A. Hafiz, J.D.,

Attorney for Appellants,

Sup. Ct. Reg. No.: 0012466

12525 Akron-Canfield Rd.,

North Jackson, OH 44451

Ph.: 330-547-2442 or 330-398-3239

Fax:330-547-7333


Case No.:

MEMORANDUM OF JURISDICTIONWITH DOCKETING STATEMENT

IN RE THE NOTICE OF APPEALFROM THE OHIO BOARD OF TAX APPEALS

DECISION AND ORDERENTERED ON NOVEMBER 30TH 2007


Abdul and Rawnaq A. Hafiz

APPELLANTS

VS.

TAX COMMISIONER OF OHIOWILLIAM W. WILKINS

APPELLEE

Ishraq A. Hafiz, J.D.,Attorney for Appellants,Sup. Ct. Reg. No.: 001246612525 Akron-Canfield Rd.,North Jackson, OH 44451Ph.: 330-547-2442 or 330-398-3239Fax: 330-547-7333Appears for the Appellants

MEMORANDUM OF JURISDICTION

The Appellants are natural persons, formerly of Ohio, who now reside in the State of

Florida and they have so since 2003. They have no county of residence in Ohio and there

are no property tax issues in their case.

They make their prayers for an appeal for the reversal, vacation or modification of the

Decision and Order of the Ohio Board of Tax Appeals, entered on their case, 2005-T-

1627, on November 30th, 2007, to the Ohio Supreme Court under the direction of ORC

Section 5717.04 entitled Appeal from decision of board of tax appeals to

supreme court - parties who appeal - certification.

ORC section 5717.04 states: "The proceeding to obtain the reversal, vacation, or

modification of a decision of the board of tax appeals shall be made to the supreme

court or the court of appeals for the county in which the property taxed is situate or

in which the taxpayer resides."

This Appeal is requested within the 30 days of the Board of Tax Appeals' Decision and

Order, as prescribed by law and the board has been provided a copy of this Notice of

Appeal and its attachments.

Respectfully submitte ,

^

Ishraq A^afiz, J.D.,Attorney for Appellants,Sup. Ct. Reg. No.: 001246612525 Akron-Canfield Rd.,North Jackson, OH 44451Ph.: 330-547-2442 or 330-398-3239Fax: 330-547-7333

a^3'

CASE INFORMATION DOCKETING STATEMENT

To provide case information for docketing purposes and doing so to not in any way limit

their ability to add to the following, the Appellants make the following complaints of

error in the Board of Tax Appeals Decision and Order:

1. The Board of Tax Appeals and the Tax Commissioner both ignored the record

that the taxpayers conununicated to the Department of Taxation Agent in writing

in September 2004 that the State's August 2004 effort to collect any assessment

for taxes it claimed was due for 1989, 1990 and 1991 was barred by the 10 year

statute of limitations. The Ohio Department of Taxation was provided written

information by the IRS in January 1994 about the Appellants' tax years in

question, yet it did not initiate any assessment activity until August 2004.

2. The Board of Tax Appeals, as an issue of substantive law, erred in its application

of ORC section 5703.58, effective September 28,2006, which states that "the tax

commissioner shall not make or issue an assessment for any tax payable to the

state that is administered by the tax commissioner, or any penalty, interest, or

additional charge on such tax, after the expiration of ten years, including any

extension, from the date the tax return or report was due when such amount was

not reported and paid, provided that the ten-year period shall be extended by the

period of any lawful stay to such assessment" No lawful stays were asked or

granted.

,^ j ,4'

3. The Board of Tax Appeals as an issue of substantive law, erred in its application




taxes assessed against vendors or sellers under ORC sections 5739. or 5474. and

to persons who fraudulently attempt to avoid such tax, and the Appellants are not

of those classes of persons. Further, while the term °assessment" has specific

meanings and sometimes-specific earlier (4 year) statutes of limitations in some

areas of taxation, or in special tax areas, like corporate tax (ORC Section 5733.11)

or commercial activity tax (ORC Section 5751.09) where specific directions

exists that no bar to assessments applies under ORC Section 5703.50 if a retum

was not filed, all of these specific circumstances of taxation are distinguishable

from the Appellants' personal income tax circumstances. If the statute of

limitations is only applicable if invoked by a timely petition for re-assessment,

instead ofab initio, the Board of Tax Appeals should have made that finding.

ResRect(ully submitte

Ishraq A. IUfiz, J.D.,Attorney for Appellants,Sup. Ct. Reg. No.: 001246612525 Akron-Canfield Rd.,North Jackson, OH 44451Ph.: 330-547-2442 or 330-398-3239Fax:330-547-7333

75 ( ^5-

OHIO BOARD OF TAX APPEALS

Abdul and Rawnaq Hafiz,

Appellants,

vs.

William W. Wilkins, TaxCommissioner of Ohio,

Appellee.

CASE NO. 2005-T-1627

(PERSONAL INCOME TAX)

DECISION AND ORDER

APPEARANCES:

For the Appellants - Ishraq A. HafizAttomey at Law12525 Akron-Canfield RoadNorth Jackson, Ohio 44451

Copy to - Ishraq A. HafizAttomey at Law1709 S.E. 44's Terrace

- -Cape Coral, Pforida 33904

For the Appellee - Marc DannAttorney General of OhioDuane M. WhiteAssistant Attomey GeneralTaxation SectionState Office Tower, 25th Floor30 East Broad StreetColumbus, Ohio 43215-3248

Entered NOV 3 0 2007Ms. Margulies, Mr. Eberhart, and Mr. Dunlap concur.

Abdul and Rawnaq Hafiz appeal from a final determination of the Tax

Commissioner, in which the commissioner dismissed the Hafizs' petition for

reassessment, which challenged that commissioner's assessment of personal income

tax for tax years 1989, 1990, and 1991. The Tax Commissioner determined that he did

not have jurisdiction to.consider the petition because Mr. and Mrs. Hafiz had failed to

31^

file their petition for reassessment within the sixty-day period required by R.C.

5747.13(B). We now review this matter pursuant to the appellants' notice of appeal.

Prior to proceeding to the merits, however, we note that the Hafizs do

tzot specify as error in their notice of appeal that the cornmissioner's dismissal of the

petition for reassessment is in error. Instead, they assert that the commissioner erred in

issuing the underlying personal income tax assessment because it was issued after the

expiration of the statute of limitations contained in R.C. 5747.13(A). Pursuant to R.C.

5717.02, the jurisdiction of the Board of Tax Appeals is restricted to consider only

those errors specified in a notice of appeal. See Moraine Hts. Baptist Church v. Kinney

(1984), 12 Ohio St.3d 134. Cf. CNG Development Co. v. Limbach (1992), 63 Ohio

St.3d 28. "[A] notice of appeal does not confer jurisdiction upon the Board of Tax

Appeals to resolve an issue, unless that issue is clearly specified in the notice of

appeal." Cleveland Elec. Illum. Co. v. Lindley (1982), 69 Ohio St.2d 71, 75. See,

also, Kern v. Tracy (1995), 72 Ohio St.3d 347, and Cousino Constr. Co. v. Wilkins,

108 Ohio St.3d 90, 206-Ohio-162, at 136. In Queen City Valves, Inc. v. Peck (1954),

161 Ohio St. 579, the court determined that the term "specify" means to "`mention

specifically, to state in full and explicit terms."' Id. at 583.

Not only is the BTA's jurisdiction defined by an appellant's notice of

appeal, but the jurisdiction of the BTA is also limited to those issues considered by the

Tax Commissioner in his final deternvnation. Schroeder Paper Specialty Co. v. Tracy

(Sept. 20, 1996), BTA No. 1996-T-31, unreported; Sun in Aquarius v. Tracy (Aug. 2,

1996), BTA No. 1995-T-1336, unreported. See, also, Key Services Corp. v. Tracy

(Oct. 15, 1999), BTA No. 1998-K-553, et seq., unreported; and, Mandel v. Limbach

i3

(June 11, 1993), BTA No. 1990-M-462, unreported, affirmed on other grounds (1994),

69 Ohio St.3d 617. Here, the only issue addressed by the commissioner was his lack of

j.urisdiction over the petition for reassessment. Our jurisdiction is likewise limited to a

review of that issue.

In resolving questions regarding the effectiveness of a notice of appeal,

we have never been disposed to deny a review based upon a hypertechnical reading of

the notice of appeal. See, generally, Buckeye Internatl., Inc. v. Limbach (1992), 64

Ohio St.3d 264; USAIR, Inc. v. Tracy (1997), 80 Ohio St.3d 411. However, even

reading the notice of appeal with preference toward the appellants, we are constrained

to conclude that the issues raised in the notice of appeal do not refer to the

commissioner's dismissal of the petition for reassessment. Accordingly, we are

required by the record before us to dismiss this matter for a failure to specify error.

Stepleton & Ruble Steel, Inc. v. Wilkins (June 24, 2005), BTA No. 2004-R-484,

unreported.

Nevertheless, even if we had jurisdiction, we would be compelled to

affirm the commissioner's determination. Pursuant to R.C. 5747.13(B), a taxpayer's

ability to challenge a personal income tax assessment is specifically dependent upon

the petition for reassessment being filed in a timely manner:

"Unless the party assessed fiiles with the tax commissionerwithin sixty days after service of the notice of assessment,either personally or by certified mail, a written petition forreassessment, *** the assessment becomes final, and theamount of the assessment is due and payable from theparty assessed to the commissioner with remittance madepayable to the treasurer of state. (Emphasis added)

;1 ^,3

The record before us establishes that the notice of assessment was mailed

to the appellants by certified mail on March 16, 2005. S.T. at 25. According to the

certified mail receipt contained in the record, Mr. and Mrs. Hafiz received service of

the notice of assessment on March 24, 2005. S.T. at 28. The appellants' petition for

reassessment was sent to the coinmissioner by certified mail on May 24, 2005, sixty-

one days after service of the notice of assessment. Appellee's Ex. A. Mr. and Mrs.

Hafiz have not challenged the accuracy of these dates. See H.R. at 53.

"Where a statute confers the right of appeal, adherence to the conditions

thereby imposed is essential to the enjoyment of the right conferred." The American

Restaurant and Lunch Company v. Glander (1946), 147 Ohio St. 147, at paragraph

one of the syllabus. Thus, when a petition for reassessment is filed beyond the time

mandated by R.C. 5747.13(B), the commissioner lacks jurisdiction over that petition.

Murray v. Zaino (Mar. 7,2003), BTA No. 2002-V-663, unreported; The StartingLine,

Inc. v. Wilkins (May 25, 2007), BTA Nos. 2007-R-145, 146, unreported. See, also,

Akron Standard Division of Eagle-Picher Industries, Inc. v. Lindley (1984), 11 Ohio

St.3d 10, 11, at footnote 2 (finding no appreciable difference between appeals and

reassessment petitions in terms of "procedural context").

While such a result may appear harsh, we could not ignore the fact that

the Department of Taxation, like this board, is a creature of statute. Neither body

possesses equitable powers, but instead may exercise only those powers conferred

upon it by the legislature. Turner Constr. Co. v. Lindley (1980), 61 Ohio St. 124;

Michelin Tire Corp. v. Kosydar (1975), 45 Ohio App. 2d 107. Thus, had we

jurisdiction, we would be compelled to find that appellants' petition for reassessment

^3 Ar

was filed after expiration of the deadline established by R.C. 5747.13(B). As a result,

we would have determined that the conunissioner lacked jurisdiction to consider the

subject petition for reassessment, and the assessment became fmal, due, and payable

by operation of law.'

In conclusion, we find that Mr. and Mrs. Hafiz failed to specify any error

in their notice of appeal that would invoke the jurisdiction of the Board of Tax

Appeals. Accordingly, we dismiss BTA No. 2005-T- 1627.

I hereby certify the foregoing to be a true andcomplete copy of the action taken by theBoard of Tax Appeals of the State of Ohio andentered upon its journal this day, with respectto the captioned matter.

` Even if we were to find that the petition had been filed timely, we note that the right to contest anassessment under R.C. 5747.13 specifically depends upon payment of the assessment at the time thepetition for reassessment is filed. See YV.T. Grant Co. v. Lindley (1977), 50 Ohio St.2d 7, 8; Niemeyerv. Collins (1976), 45 Ohio St.2d 63, 64-65; and, Pre-Fab Transit Co. v. Bowers (1964), 176 Ohio St.163. Here, the appellants failed to make any payment upon the filing of their petition_ Moreover,even if we had jurisdiction over the issues apeaified in the notice of appeal, we would be constrainedto find that, because the appellants had failed to file amended tax returns, the assessment was notbarred by the statute.of limitations contained in R.C. 5747.13(A). See Gibson v. Limbach (1991), 74Ohio App.3d 498, motion to certify overruled (1991), 62 Ohio St. 3d 1445; Waring v. Wilkins (Aug.23, 2005), BTA No. 2004-V-626, unreported.

3k^'

ORDER FOR TRANSMISSION OF RECORD AND TRANSCRIPT

Now come the Appellants to humbly request that the Board of Tax Appeals and the Tax

Commissioner transmit or cause to be transmitted their records and transcripts of the

proceedings below in BTA 2005-T-1627, for review herein, with costs for the transcripts,

as charged by the Court Reporter, to be paid as necessary by the Appellants.

Respectfully submitted,n ^

Ishraq A. Ha , J.D. ,Attorney for Appellants,Sup. Ct. Reg. No.: 001246612525 Akron-Canfield Rd.,North Jackson, OH 44451Ph.: 330-547-2442 or 330-398-3239Fax:330-547-7333

So Ordered:

HONORABLE JUSTICE/DEPUTY/CLERK

Date:

CERTIFICATE OF SERVICE

The forgoing Notice of Appeal along with its attachments, Memorandum of Jurisdiction

and Case Information Docketing Statement, and Order for Transmission of Records and

Transcripts were served this 315` day of December 2007 to the Board of Tax Appeals and

the Ohio Tax Commissioner, at their offices in Columbus Ohio, in person and by certified

mail.

Respectfully submitted, /,1

Ishraq A. Hafiz, J.D.,Attorney for Appellants,Sup. Ct. Reg. No.: 001246612525 Akron-Canfield Rd.,North Jackson, OH 44451Ph.: 330-547-2442 or 330-398-3239Fax:330-547-7333

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