Carpenter v. Dept. of Rev.

DECISION TC-MD 160288G 1
IN THE OREGON TAX COURT
MAGISTRATE DIVISION
Income Tax
ROBERT L. CARPENTER
and ALICIA J. CARPENTER,
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Plaintiffs, TC-MD 160288G
v.
DEPARTMENT OF REVENUE,
State of Oregon,
FINAL DECISION1
Defendant.
Plaintiffs appealed Defendant’s Notice of Refund Offset, dated May 19, 2016, for the
2015 tax year. Defendant filed a motion for summary judgment and Plaintiffs filed a response
yielding to the judgment of the court.
I. STATEMENT OF FACTS
Plaintiffs’ response stated that they did not dispute the facts set forth by Defendant,
which are replicated below:
“The plaintiff, Robert Carpenter, and his spouse, Alicia Carpenter, filed a
2015 joint Oregon personal income tax return, claiming a joint overpayment of
$1,597. (Cridge Decl. ¶ 3, Ex. B). The Department of Revenue has not audited or
adjusted the taxpayers’ 2015 return. (Cridge Decl. ¶ 4). The Department of
Revenue remitted the Carpenters’ 2015 overpayment to the federal government to
offset a federal tax debt and federal student loan debt owed by Ms. Carpenter.
(Ex. B). The Department of Revenue notified the taxpayers of its action by letter
dated May 19, 2016, wherein it also informed the taxpayers that it could not
“divide your refund if the refund was used to pay * * * an Internal Revenue
Service Levy, or a Federal Debt.” (Ex. B). The plaintiff appealed the Department
of Revenue’s action to the Oregon Tax Court.”
(Mot Summ J at 1.)
1 This Final Decision incorporates without change the court’s Decision, entered January 30, 2017. The
court did not receive a statement of costs and disbursements within 14 days after its Decision was entered. See Tax
Court Rule–Magistrate Division (TCR–MD) 16 C(1).

DECISION TC-MD 160288G 2
Defendant’s Notice of Refund Offset reported that Plaintiffs’ refund had been
distributed to two payees: “U.S. Department of Education” and “State Income Tax Levy
Program (IRS).” (Compl at 5.) Plaintiffs each earned income in 2015. (Id. at 4.)
Plaintiffs submitted a request for refund apportionment to Defendant that was denied.
(Id. at 7.)
Plaintiffs request that the refund claimed on their return be allocated between
them. Defendant requests that Plaintiffs’ appeal be denied.
II. ANALYSIS
The issue in this case is whether Plaintiffs are entitled to have their refund allocated
between them to prevent one spouse’s tax overpayment from being applied to the other spouse’s
federal debt. Defendant also raises an issue of jurisdiction. The issues in this case are similar to
those resolved by Xuejun J. Smith v. Department of Revenue, TC–MD 160196N.
As demonstrated in Smith, the court has jurisdiction over cases arising out of Defendant’s
obligation under ORS 314.415(1) to refund excess tax paid.2 Furthermore, as shown in Smith,
jointly filing taxpayers each have a separate property interest in their tax refund. Defendant
owes each joint filer a refund of his or her excess tax paid, although it is the responsibility of
taxpayers to request separate refunds under ORS 314.415(7).
Two additional facts in this case, not present in Smith, bear attention. First, the presence
of federal tax debt raises the possibility that liability for that debt is joint and several between
Plaintiffs. See IRC § 6013(d)(3). Defendant’s statement of facts is ambiguous on the point of
whether liability for the federal tax debt is shared by Robert L. Carpenter, although the tax debt
account is identified on the offset notice by the same social security number as the account for
2 The court’s references to the Oregon Revised Statutes (ORS) are to 2015.

DECISION TC-MD 160288G 3
the student loan debt, which admittedly belongs to Alicia Carpenter. The second fact is that
Plaintiffs both earned income in 2015.
Neither fact presents a problem for the application of Smith here. The principle is that
each spouse owns his or her overpayment. Once separate refunds have been timely requested,
Defendant may not take Plaintiff Robert L. Carpenter’s overpayment to satisfy a debt for which
he is not liable. If he is not liable for either debt, Defendant must refund Robert L. Carpenter his
entire overpayment. If he is liable for one of the debts, Defendant may offset his refund to pay
that debt only. Likewise, Defendant may offset Alicia J. Carpenter’s overpayment to pay her
debts.
III. CONCLUSION
A portion of the refund claimed on Plaintiffs’ return belonged to Plaintiff Robert L.
Carpenter. Defendant was authorized under ORS 314.415(7) to separate Plaintiffs’ refunds when
timely requested. Defendant was required by ORS 314.415(1) to use that authority to issue a
separate refund to Robert L. Carpenter to the extent he was not liable for an offsetable debt.
Robert L. Carpenter was not liable for Plaintiff Alicia J. Carpenter’s debt to the United States
Department of Education. Now, therefore,
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DECISION TC-MD 160288G 4
IT IS THE DECISION OF THIS COURT that Plaintiffs’ appeal is granted. Defendant
shall divide Plaintiffs’ refunds and refund to Plaintiff Robert L. Carpenter the amount of his
overpayment. Robert L. Carpenter’s refund may be offset only to any extent he is liable for the
federal tax debt.
Dated this day of February, 2017.
POUL F. LUNDGREN
MAGISTRATE
If you want to appeal this Final Decision, file a complaint in the Regular
Division of the Oregon Tax Court, by mailing to: 1163 State Street, Salem, OR
97301-2563; or by hand delivery to: Fourth Floor, 1241 State Street, Salem, OR.
Your complaint must be submitted within 60 days after the date of the Final
Decision or this Final Decision cannot be changed. TCR-MD 19 B.
This document was filed and entered on February 24, 2017.