Loading...
HomeMy WebLinkAboutTracFone - Edwards Declaration1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 125110.0002/8537642.1 DECLARATION OF SCOTT EDWARDS IN OPPOSITION TO RENTON’S MOTION FOR RECONSIDERATION - 1 LANE POWELL PC 1420 FIFTH AVENUE, SUITE 4200 P.O. BOX 91302 SEATTLE, WA 98111-9402 206.223.7000 FAX: 206.223.7107 BEFORE THE HEARING EXAMINER OF THE CITY OF RENTON RE: TracFone Wireless, Inc. Administrative Appeal DECLARATION OF SCOTT M. EDWARDS IN OPPOSITION TO RENTON’S MOTION FOR RECONSIDERATION I, Scott Edwards, declare as follows: I am one of the attorneys for appellant TracFone Wireless, Inc.(“TracFone”), and make the following statements based upon my personal knowledge. Attached hereto as Exhibit 1 is a true and correct copy of an email string with the City regarding the computation of interest for additional refund due to TracFone in the event the Hearing Examiner ruled in the City’s favor regarding a retail margin adjustment. As reflected in Exhibit 1, following review by the City’s tax staff of draft computations, the City requested four specific revisions to the computation. TracFone agreed to three of the proposed revisions and disputed one (regarding the start date for computing refund interest), after which the City’s counsel (copying both the Tax Manager and the Fiscal Services Director) insisted on the fourth revision stating “we can agree to your proposed response to Examiner Olbrechts, provided that both spreadsheets are corrected to remove the interest calculation for 2019,” which was done. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 125110.0002/8537642.1 DECLARATION OF SCOTT EDWARDS IN OPPOSITION TO RENTON’S MOTION FOR RECONSIDERATION - 2 LANE POWELL PC 1420 FIFTH AVENUE, SUITE 4200 P.O. BOX 91302 SEATTLE, WA 98111-9402 206.223.7000 FAX: 206.223.7107 I declare under penalty of perjury under the laws of the United States and the laws of the State of Washington the foregoing is true and correct to the best of my knowledge. EXECUTED at Seattle, Washington, this 25th day of June, 2021. Scott M. Edwards 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 125110.0002/8537642.1 DECLARATION OF SCOTT EDWARDS IN OPPOSITION TO RENTON’S MOTION FOR RECONSIDERATION - 3 LANE POWELL PC 1420 FIFTH AVENUE, SUITE 4200 P.O. BOX 91302 SEATTLE, WA 98111-9402 206.223.7000 FAX: 206.223.7107 CERTIFICATE OF SERVICE I hereby certify under penalty of perjury of the laws of the State of Washington and the United States that, on the date listed below, I caused to be served a copy of the attached document to the following persons via electronic mail: Kari L. Sand Ogden Murphy Wallace P.L.L.C. 901 Fifth Avenue, Suite 3500 Seattle, WA 98164 ksand@omwlaw.com Cynthia Moya Renton City Clerk 1055 So. Grady Way Renton, WA 98057 cmoya@rentonwa.gov olbrechtslaw@gmail.com Executed on the 25th day of June, 2021, at Seattle, Washington. Angela Craig, Legal Assistant EXHIBIT 1 From:Kari L. Sand To:Edwards, Scott M.; Degginger, Grant Cc:Nate Malone; Kari Roller Subject:RE: TracFone v. Renton: *REVISED* Interest & Penalty Computation Date:Friday, June 4, 2021 1:55:17 PM CAUTION: This is an external email. Do NOT click links or open attachments unless you are certain the content is safe. Scott, Although only a difference of about $370, here is the RCW cite for interest credit calculation since the payment was not made timely on the returns: RCW 82.32.060 (5) Interest allowed on a credit notice or refund issued after December 31, 2003, must be computed as follows: (a) If all overpayments for each calendar year and all reporting periods ending with the final month included in a notice or refund were made on or before the due date of the final return for each calendar year or the final reporting period included in the notice or refund: (i) Interest must be computed from January 31st following each calendar year included in a notice or refund; (ii) Interest must be computed from the last day of the month following the final month included in a notice or refund; or (iii) For interest associated with annual tax reporting periods having a due date as prescribed in RCW 82.32.045(3), interest must be computed from the last day of April following each such annual reporting period included in a notice or refund. (b) If the taxpayer has not made all overpayments for each calendar year and all reporting periods ending with the final month included in a notice or refund on or before the dates specified by RCW 82.32.045 for the final return for each calendar year or the final month included in the notice or refund, interest must be computed from the last day of the month following the date on which payment in full of the liabilities was made for each calendar year included in a notice or refund, and the last day of the month following the date on which payment in full of the liabilities was made if the final month included in a notice or refund is not the end of a calendar year. (c) Interest included in a credit notice must accrue up to the date the taxpayer could reasonably be expected to use the credit notice, as defined by the department's rules. If a credit notice is converted to a refund, interest must be recomputed to the date the refund is issued, but not to exceed the amount of interest that would have been allowed with the credit notice. Same language is in WAC 458-20-229(8)(c)(ii). We can agree to your proposed response to Examiner Olbrechts, provided that both spreadsheets are corrected to remove the interest credit calculation for 2019 consistent with the above. Kari L. Sand | Attorney Ogden Murphy Wallace P.L.L.C. 901 Fifth Avenue, Suite 3500 Seattle, WA 98164 Direct: 206.447.2250 | Fax: 206.447.0215 ksand@omwlaw.com | www.omwlaw.com Take a look at Ogden Murphy Wallace’s new website! CONFIDENTIAL COMMUNICATION - This communication constitutes an electronic communication within the meaning of the Electronic Communications Privacy Act, 18 U.S.C. Section 2510, and its disclosure is strictly limited to the recipient intended by the sender. It may contain information that is proprietary, privileged, and/or confidential. If you are not the intended recipient, any disclosure, copying, distribution, or use of any of the contents is STRICTLY PROHIBITED. If you have received this message in error, please notify the sender immediately and destroy the original transmission and all copies. From: Edwards, Scott M. <EdwardsS@LanePowell.com> Sent: Friday, June 4, 2021 12:04 PM To: Kari L. Sand <ksand@omwlaw.com>; Degginger, Grant <DeggingerG@LanePowell.com> Cc: Nate Malone <NMalone@Rentonwa.gov>; Kari Roller <KRoller@Rentonwa.gov> Subject: RE: TracFone v. Renton: *REVISED* Interest & Penalty Computation Kari, With respect to your revised interest and penalty computations: 1. We agree that the interest rate for 2019 under RCW 82.32.050 was 4% rather than 3% 2. We agree that under RCW 82.32.090 penalties were 34% of tax due 3. We disagree that – in the context of a refund of amounts paid pursuant to an assessment – interest does not begin to run until the end of the year in which the assessment was paid. In my experience, when DOR refunds amounts paid pursuant to an assessment, DOR computes interest from the day the assessment was paid. Consequently, I attach two schedules: The first is an updated version of the schedule used at the hearing which updates the 2019 interest rate and the penalty rate. This is TracFone’s computation of the additional refund due in the event the Hearing Examiner agrees with TracFone’s argument that a retail margin adjustment is appropriate to compute tax on wholesale/indirect sales. TracFone Calculation of Renton Refund Due – 2019 Interest Rate Corrected 2021-06-04.xls The second computes the additional refund in the event that the Hearing Examiner agrees with Renton that no retail margin adjustment should be made. I note that this version uses the total tax reflected on TRS’s corrected schedule dated March 8, 2021 that was used for the refund recently paid. I note that the total tax in that schedule is $0.28 cents less than the schedule you submitted – a difference I anticipate is due to rounding. Like the first schedule, the 2019 interest rate has been corrected to 4% and the penalty has been revised to 34%. TracFone Calculation of Renton Refund Due – RCW interest and penalties only.xls. I believe that mechanically, the difference between the second attachment and your edits are (a) the $0.28 difference in tax and (b) beginning refund interest on November 5, 2019 (as Renton did for the refund already paid, consistent with how DOR computes refund interest for refunds of paid assessments) and beginning refund interest on January 1, 2020 – (interest for that period is about $370) -- applying interest the last date of the month following the payment, which would be 12/31/2019 in this case. I propose that we communicate to the hearing examiner that the parties are in agreement with the following figures: 1. IF the Hearing Examiner rules that a retail margin adjustment is appropriate, the additional refund due is $80,565.29 plus $6.27 per day from May 28 to the date of payment. 2. IF the Hearing Examiner rules that no retail margin adjustment should be made, the additional refund due is $66,918.76 plus $5.20 per day from May 28 to the date of payment. SCOTT M. EDWARDS Shareholder Bio | vCard edwardss@lanepowell.com D 206.223.7010 C 206.529.7030 LANEPOWELL.COM From: Kari L. Sand <ksand@omwlaw.com> Sent: Friday, June 4, 2021 9:28 AM To: Edwards, Scott M. <EdwardsS@LanePowell.com>; Degginger, Grant <DeggingerG@LanePowell.com> Cc: Nate Malone <NMalone@Rentonwa.gov>; Kari Roller <KRoller@Rentonwa.gov> Subject: RE: TracFone v. Renton: *REVISED* Interest & Penalty Computation CAUTION: This is an external email. Do NOT click links or open attachments unless you are certain the content is safe. Good morning, Scott & Grant— Following-up on the Examiner’s e-mail yesterday afternoon suggesting the parties attempt to resolve the computation of interest and penalties, please be advised that the City of Renton agrees with the mechanics of TracFone’s interest computation now with the new analysis we were provided during closing argument (Group Health case), minus the rate used for 2019. Attached is a *revised* version of the refund calculation spreadsheet, reflecting the following revisions: 1. Removed retail margin markdown from tax calculation (Renton disagrees with this). 2. Changed base 2019 interest rate from 3% to 4%. 3. Changed penalty rate to 34% (29% for late penalty and 5% for substantially underpaid per RCW 82.32.090) 4. Removed refund interest calculation for 2019 per provisions in RCW 82.32.060, applying interest the last date of the month following the payment, which would be 12/31/2019 in this case. 5. Updated refund credit interest calculation through 6/3/2021. Does TracFone agree with revisions #2 through 5 above? We understand that #1 – retail margin markdown – remains in dispute pending the Examiner’s ruling (T.B.D.). Please let us know TracFone’s position on the interest and penalty computation and whether the parties can agree or not. Thank you, Kari Kari L. Sand | Attorney Ogden Murphy Wallace P.L.L.C. 901 Fifth Avenue, Suite 3500 Seattle, WA 98164 Direct: 206.447.2250 | Fax: 206.447.0215 ksand@omwlaw.com | www.omwlaw.com Take a look at Ogden Murphy Wallace’s new website! CONFIDENTIAL COMMUNICATION - This communication constitutes an electronic communication within the meaning of the Electronic Communications Privacy Act, 18 U.S.C. Section 2510, and its disclosure is strictly limited to the recipient intended by the sender. It may contain information that is proprietary, privileged, and/or confidential. If you are not the intended recipient, any disclosure, copying, distribution, or use of any of the contents is STRICTLY PROHIBITED. If you have received this message in error, please notify the sender immediately and destroy the original transmission and all copies. From: Phil Olbrechts <olbrechtslaw@gmail.com> Sent: Thursday, June 3, 2021 2:50 PM To: Kari L. Sand <ksand@omwlaw.com> Cc: Cynthia Moya <CMoya@rentonwa.gov>; Edwards, Scott M. <EdwardsS@lanepowell.com>; Degginger, Grant <DeggingerG@lanepowell.com> Subject: Re: TracFone v. Renton: Tax administration rules adopted under RMC 5-26-20 Thank you Ms. Sand. Your reference to the last whereas clause in Ordinance 5756 was very helpful in resolving the conflict. Does Tracfone agree with the City's position? If so, can the parties take a stab at agreeing upon the interest and penalty due under the City's new position? I already have Tracfone's interest computation under their retail margin deduction position. On Thu, Jun 3, 2021 at 2:26 PM Kari L. Sand <ksand@omwlaw.com> wrote: Good afternoon, Examiner Olbrechts and TracFone counsel: Having conferred with Renton Tax & License Manager Nate Malone, I can confirm that the City of Renton has not adopted any administrative tax rules under RMC 5-26-20 to date, nor has Renton adopted any formal administrative interpretations of the City's tax regulations, particularly with regard to the computation of interest due on late tax payments. You are correct that a conflict exists between RMC 5-11-2(B), which imposed 12% yearly late payment interest for utility tax until November, 2019 when it was repealed by Ordinance No. 5944, and RMC 5-26-11(A), which imposed a much lower late payment interest rate consistent with RCW 82.32.050 for utility taxes, starting on January 1, 2016. This conflict in the RMC interest provisions was unintended, and as best as can be discerned now upon greater scrutiny, the City’s intent was to administer the tax codes consistently (see last “whereas” recital of Ordinance No. 5756) and to repeal any conflicting provisions, such as RMC 5-11-2(B), upon the passage of Ordinance No. 5756, passed 5-18-15 and effective 1-1-2016. Ordinance No. 5756 established a new Chapter 26, entitled “Tax Administrative Code,” of Title V (Finance and Business Regulations), of the Renton Municipal Code, providing administrative processes for administering City tax codes. The later repeal of RMC 5-11-2(B) by Ordinance No. 5944 appears to be “housekeeping” to clean up the code and eliminate the conflict between the two interest provisions. The unintended code conflict and careful review of Group Health Co-op. v. City of Seattle, 146 Wash. App. 180, 102-03, 189 P.3d 216 (2008), has prompted the City of Renton to change its position on the application of the statutes for the computation of interest and penalties from that taken at the hearing last week on May 27, 2021. Resolving the conflict in the RMC on the computation of interest, it appears the intend was that RMC 5-26-11(A) applied at the time of the City of Renton’s October 17, 2019 Final Assessment Affirming the City’s February 14, 2019 Telephone Utility Tax Assessment, and based on the Group Health case, interest should be computed on late utility tax payments consistent with RCW 82.32.050 for the entire audit period. Likewise, the penalty must also be computed consistent with RCW 82.32.090(1) and (2) and would increase from 25% (under the former RMC 5-11-2(A)) to 34% (29% + 5% for “substantially underpaid” taxes). I trust the foregoing answers your questions. Please let me know if you have any additional questions or require additional information. Sincerely, Kari L. Sand | Attorney Ogden Murphy Wallace P.L.L.C. 901 Fifth Avenue, Suite 3500 Seattle, WA 98164 Direct: 206.447.2250 | Fax: 206.447.0215 ksand@omwlaw.com | www.omwlaw.com Take a look at Ogden Murphy Wallace’s new website! CONFIDENTIAL COMMUNICATION - This communication constitutes an electronic communication within the meaning of the Electronic Communications Privacy Act, 18 U.S.C. Section 2510, and its disclosure is strictly limited to the recipient intended by the sender. It may contain information that is proprietary, privileged, and/or confidential. If you are not the intended recipient, any disclosure, copying, distribution, or use of any of the contents is STRICTLY PROHIBITED. If you have received this message in error, please notify the sender immediately and destroy the original transmission and all copies. From: Phil Olbrechts <olbrechtslaw@gmail.com> Sent: Tuesday, June 1, 2021 9:48 PM To: Kari L. Sand <ksand@omwlaw.com> Cc: Cynthia Moya <CMoya@rentonwa.gov>; Edwards, Scott M. <EdwardsS@lanepowell.com>; Degginger, Grant <DeggingerG@lanepowell.com> Subject: Re: TracFone v. Renton: Tax administration rules adopted under RMC 5-26-20 A point of clarification to my formal opinion request -- Ordinance No. 5756, which adopted Chapter 5-26 RMC, didn't repeal RMC 5-11-2, which at the time imposed a 12% yearly late payment interest rate for utility taxes only. The utility tax12% yearly interest rate was adopted by Ordinance No. 5367. which as best as I can tell wasn't repealed until replaced by a new 5-11-2 by Ordinance No. 5944 in November, 2019. On Tue, Jun 1, 2021 at 8:42 PM Phil Olbrechts <olbrechtslaw@gmail.com> wrote: Ms. Sand, Has the City adopted administrative tax rules under RMC 5-26-20 or adopted any formal administrative interpretations of the City's tax regulations? I was not able to find any such documents on-line and can take judicial notice of them for writing my decision. If the tax department does make administrative interpretations, I'm looking for anything that would clarify how to resolve the late payment interest conflict between RMC 5-11-2 (which imposed 12% yearly late payment interest for utility tax until November, 2019 when it was repealed by Ordinance 5944) and RMC 5-26-11, which as presented at the hearing imposed a much lower late payment interest rate for most if not all city taxes, includig utility taxes, starting in 2016. Tracfone is of course also invited to identify any formal administrative interpretations on the issue as well. On Thu, May 27, 2021 at 5:31 PM Kari L. Sand <ksand@omwlaw.com> wrote: Greetings, Examiner Olbrechts and everyone: Following today’s hearing, I would be remiss if I did not point out that if the Examiner decides that interest must be computed consistent with RCW 82.32.050, as TracFone argued, then the penalty must also be computed consistent with RCW 82.32.090(1) and (2) and would increase from 25% (under the former RMC 5-11-2(A)) to 34% (29% + 5%). My apologies for not pointing this out before today’s proceedings ended. To avoid any surprises later, in the event further corrections are warranted, it seemed important to also note the effect of the RCW on the computation of the penalty amount. Sincerely, Kari L. Sand | Attorney Ogden Murphy Wallace P.L.L.C. 901 Fifth Avenue, Suite 3500 Seattle, WA 98164 Direct: 206.447.2250 | Fax: 206.447.0215 ksand@omwlaw.com | www.omwlaw.com Take a look at Ogden Murphy Wallace’s new website! CONFIDENTIAL COMMUNICATION - This communication constitutes an electronic communication within the meaning of the Electronic Communications Privacy Act, 18 U.S.C. Section 2510, and its disclosure is strictly limited to the recipient intended by the sender. It may contain information that is proprietary, privileged, and/or confidential. If you are not the intended recipient, any disclosure, copying, distribution, or use of any of the contents is STRICTLY PROHIBITED. If you have received this message in error, please notify the sender immediately and destroy the original transmission and all copies. This message is private or privileged. If you are not the person for whom this message is intended, please delete it and notify me immediately, and please do not copy or send this message to anyone else.