S055458, Opinion — Dept. of Rev. v. Faris

OCR transcription for search; preserved printed pages are authoritative

Submitted on the record April 22, judgment of Tax Court affirmed July 17, 2008
DEPARTMENT OF REVENUE,
Plaintiff-Respondent,
v.
Denis J. FARIS
and Carolyn M. Faris,
Defendants-Appellants.
(TC 4755; SC S055458)
190 P3d 364

CJS, Taxation § 1103.

En Banc
On appeal from the Oregon Tax Court .*

Henry C. Breithaupt, Judge.

Denis J. Faris, and Carolyn M. Faris, appellants pro se,
filed the brief for defendants-appellants.

Melisse S. Cunningham, Assistant Attorney General,
Salem, filed the brief for plaintiff-respondent. With her on
the brief was Hardy Myers, Attorney General.

\* 19 OTR 357 (2007).

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WALTERS, J.

The judgment of the Tax Court is affirmed.

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# WALTERS, J.

In this appeal from a decision of the Oregon Tax
Court, taxpayers challenge a notice of deficiency issued by
the Department of Revenue (department) as failing to
comply with the statutory certification requirement of ORS
305.265(2). Taxpayers assert that the notice was not properly
certified because it did not include a hand signature attesting
that it was issued in good faith.

ORS 305.265(2) provides that the notice of deficiency
shall:

"(a) State the reason for each adjustment;

"(b) Give a reference to the statute, regulation or
department ruling upon which the adjustment is based;
and

"(c) Be certified by the department that the adjust-
ments are made in good faith and not for the purpose of
extending the period of assessment."

(Emphasis added.)

In this case, the department issued taxpayers a
notice of deficiency that states the reason that the depart-
ment adjusted taxpayers' personal income tax return and
contains references to the statutes supporting that adjust-
ment, as required by ORS 305.265(2)(a) and (b). The notice is
printed with the name of the department, and the first page
of the notice contains the following sentence: "All adjust-
ments have been made in good faith, and are not for the pur-
pose of extending the period during which the department
may assess additional taxes against you." Beneath that sen-
tence and a summary of the deficiency and the amounts due
are printed the name, title, location, and telephone number of
Larry Boyd, the department auditor who conducted the audit
and issued the notice of deficiency.

After issuing the notice of deficiency, the depart-
ment issued a notice of assessment to assess the deficiency.
Taxpayers appealed from the notice of assessment to the
Magistrate Division of the Tax Court, claiming that the
notice of deficiency did not comply with the certification
requirement of ORS 305.265(2)(c) because it did not contain

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the words "I certify" or "it is certified" or a handwritten sig-
nature. The magistrate issued a decision in favor of taxpay-
ers, and the department appealed that decision to the
Regular Division of the Oregon Tax Court. The parties filed
cross motions for summary judgment on the issue of whether
the notice of deficiency complied with the statutory certifica-
tion requirement. The tax court decided the issue in favor of
the department and granted its motion. The tax court then
determined the remaining issues and entered judgment
against taxpayers for the amount of the deficiency. Dept. of
Rev. v. Faris, 19 OTR 357 (2007). Taxpayers appealed, rais-
ing the issue of the department's compliance with the statu-
tory good faith certification requirement.1 We affirm the deci-
sion of the tax court.

We begin our analysis with Preble v. Dept. of Rev.,
331 Or 320, 14 P3d 613 (2000). In that case, the court held
that a notice of deficiency that does not include the certifica-
tion required by ORS 305.265(2)(c) cannot form the basis for
a department assessment. Under Preble, if ORS 305.265(2)(c)
requires a handwritten signature, the judgment against tax-
payers would be invalid. We therefore turn to the arguments
of the parties on that question of statutory interpretation.

The parties initially agree, correctly, that the phrase
"[b]e certified by the department" in ORS 305.265(2)(c)
requires the department to issue its notices of deficiency in
writing. This court has held that, when "used in legislative
enactments[,]" certification cannot be oral; it requires a writ-
ing as a record for future reliance. State ex rel Anderson v.
Paulus, 283 Or 241, 245-46, 583 P2d 531 (1978). Taxpayers
take their argument further, however, and contend that, to
be certified, a notice of deficiency must be hand signed. Tax-
payers assert that the issuance of a computer-generated doc-
ument with the name of the auditor printed on it is insuffi-
cient to meet the requirement of ORS 305.265(2)(c). The
department disagrees, grounding its argument, first and
foremost, in the definition of the word "certify."

1 Taxpayers raise a number of arguments in addition to the certification argu-
ment, but they are not well taken and do not merit discussion.

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The word "certify" is not statutorily defined. Thus,
we look to the dictionary. Webster's first definition of the verb
"certify" is the one that is relevant here:

"1: to attest esp. authoritatively or formally: a: CONFIRM

\* \* \* b: to present in formal communication, esp. in a docu-
ment under hand or seal * * * c: to confirm or attest often by
a document under hand or seal as being true, meeting a
standard, or being as represented * * * [.]"

Webster's Third New Int'l Dictionary 367 (unabridged ed
2002). The basic definitions in Black's are similar:

"1. To authenticate or certify in writing. 2. To attest as
being true or meeting certain criteria."

Black's Law Dictionary 241 (8th ed 2004).

Those definitions indicate that, to certify a state-
ment, the actor must take formal action that attests to the
truth of that statement. Those definitions also indicate that
such formal action "especially" or "often" occurs "under hand
or seal." Thus, the word "certify" can mean "hand signed," but
it does not necessarily carry that meaning. Perusal of some of
the thousands of statutes and rules in Oregon that use the
terms "certify," "certified," or "certification" demonstrates
that the legislature has used those terms in a variety of ways
without always mandating a hand signature. For example,
ORS 133.069 sets forth the required contents of a criminal
citation issued with a form of complaint, and provides, in
part, that the "peace officer must certify that the peace officer
has sufficient grounds to believe, and does believe, that the
person named in the complaint committed the offense * * *. "
ORS 133.069(1)(c)(C) (emphasis added). The legislature
apparently contemplated that the officer could accomplish
that certification by hand signing the criminal citation, but
did not necessarily impose that requirement. ORS 133.073(1)
permits an officer to electronically file a criminal citation
"without [his or her] actual signature," and provides that, by
doing so, the officer is deemed to "certify" the citation. Other
statutes or rules impliedly distinguish, rather than equate,
signature and certification. ORS 244.110(1), for example,
provides that certain statements of economic interest "shall
be signed and certified as true by the person required to file
[them] * * *. " (Emphasis added.)

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Although the legislature's intent is not immediately
obvious from its use of the word "certified" alone, the remain-
der of the text at issue in ORS 305.265(2)(c) provides helpful
context. That provision requires that the department, not an
individual departmental agent, certify that the adjustments
are made in good faith. The department is an entity that,
through its agents, can take effective action, but as an entity
it does not have the ability to hand sign a document. The leg-
islature's choice to charge an entity, rather than an individ-
ual, with the responsibility to certify notices of deficiency
lends support to the department's argument that the legisla-
ture did not intend to require certification by hand signature.

The department also points to the predecessor stat-
ute to ORS 305.265, former ORS 314.405(1) (1969), as an
indication that the legislature did not intend to require a
hand signature.2 See Carlson v. Myers, 327 Or 213, 223, 959
P2d 31 (1998) (first-level PGE analysis includes earlier ver-
sions of same statute as "context") (citing Krieger v. Just, 319
Or 328, 876 P2d 754 (1994)). The prior statute required that
a notice of deficiency be certified by the individual auditor
who audited the return:

"The notice [of deficiency] shall state the reason for each
proposed adjustment to the return and a reference to the
statute, regulation or department ruling upon which the
proposed adjustment is based. Each notice of deficiency and
proposed assessment shall be certified by the auditor who
audited the return that he has audited the return and that
the proposed adjustments to the return are made in good
faith and not for the purpose of extending the period of
assessment."

Former ORS 314.405(1) (1969) (emphasis added). The
department assumes that the prior statute required the audi-
tor's hand signature3 and contends that the change in the
statutory text was designed to eliminate that signature
requirement: By eliminating the requirement that the

2 In 1971, the legislature amended former ORS 314.405(1) (1969). The 1971
version of that statute is substantially similar, and identical in all relevant
respects, to the current version of ORS 305.265. ORS 305.265 itself, however, was
not adopted until 1977.

3 We do not decide that question and emphasize that the use of the word "cer-
tified" does not, alone, necessitate that conclusion.

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department's auditors sign notices of deficiency, the legisla-
ture effectively eliminated the department's obligation to
affix any signature whatsoever to those documents.

Taxpayers contend, to the contrary, that the text of
the predecessor statute supports their argument. Specifi-
cally, taxpayers argue that the prior text required that the
individual auditor sign the notice of deficiency to indicate
that he or she had made the adjustments reflected in the
notice in good faith. In taxpayers' view, the change to the
statute maintained the signature requirement, but broad-
ened the class of persons who could affix a signature to
the notice to satisfy that requirement. According to tax-
payers, departmental certification enables any "authorized
'certifier'" in the department to certify a notice of assess-
ment-eliminating not the hand signature requirement, but
the requirement that a particular auditor do that signing.

We conclude that the department's interpretation of
the amendment is the more persuasive, particularly given
the purpose of certification set forth in the statute. That pur-
pose is to give the taxpayer notice of the deficiency and of the
department's intention to make an assessment based on it.
See ORS 305.265(2) (requiring the department to give notice
of deficiency).4 The prior statute required the auditor who
conducted the audit and arrived at the deficiency determi-
nation to certify that he or she did so in good faith. The cur-
rent statute requires that the department attest to the good
faith of the auditor. The most logical conclusion is that, when
the legislature eliminated the requirement of certification
by the auditor, it did so to effect a meaningful change-
elimination of the signature requirement-not to mandate a
signature by a different departmental agent who would lack
the personal knowledge of the auditor.

^ ORS 305.265(2) provides, in part:

"As soon as practicable after a report or return is filed, the department
shall examine or audit it, if required by law or the department deems such
examination or audit practicable. If the department discovers from an exami-
nation or an audit of a report or return or otherwise that a deficiency exists, it
shall compute the tax and give notice to the person filing the return of the defi-
ciency and of the department's intention to assess the deficiency, plus interest
and any appropriate penalty."

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Taxpayers urge us to proceed beyond the statutory
text and context to the legislative history of ORS 305.265(2),
and they argue that we will find support for their position in
that examination. The Tax Court considered the statute's
legislative history and explained:

"At an April 14, 1971, hearing, the department proposed
that the entire certification requirement be removed
because it wished to facilitate the use of computers in issu-
ing assessments. See Tape Recording, Senate Committee on
Taxation, HB 1324, Apr 14, 1971, Tape 8, Side A (statement
of T. A. Lindstrom, Oregon Department of Revenue). The
department wanted to eliminate any handwritten signa-
ture requirement because it kept the department 'from
being able to utilize [its] computer in computing and send-
ing out * * * notices' due to the fact that the NODs had to be
returned 'to the auditor who made the audit' for signature.
Id.

"The bill later returned to committee amid concerns
about removing the entire certification requirement. See
Minutes, Senate Committee on Taxation, May 7, 1971, 1.
Assistant Attorney General Ted DeLooze and department
representative Mike McCormack testified that the depart-
ment did not object to having the department certify the
notices, but that they did 'want to eliminate the hand sign-
ing by the individual auditor.' Id. The 'bill was so amended

Dept. of Rev. v. Faris, 19 OTR 178, 183-84 (2006) (emphasis
added; ellipses in original).

Taxpayers concede that the stated purpose of the
amendment was to eliminate the inefficiency that inhered in
the requirement of a hand signature by the auditor. They
emphasize, however, that, at that 1971 hearing, the depart-
ment representative did not expressly state that the depart-
ment wanted to eliminate all hand signing, only that it
wanted to "eliminate the hand signing by the individual
auditor." Taxpayers argue that, by refusing to completely
eliminate the certification requirement, the legislature
intended to ensure that the department would have a real
person read over the document and, by hand signing it, take
responsibility for it. Without a hand signature, taxpayers
assert, the necessary manifestation of formality needed to

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turn a notice from a statement into a certification of good
faith is missing, and that a certification, not a mere state-
ment, is what the statute requires.

We conclude, from the text and context of ORS
305.265(2) alone, that the legislature did not intend to
require a hand signature in order to certify a notice of defi-
ciency. Taxpayers do not convince us that there is a need to
consult legislative history, or that, if we were to do so, our
conclusion would be different.

We hold that, by requiring that notices of deficiency
"be certified by the department," the legislature did not
impose a requirement that a departmental employee hand
sign those notices, but, instead, required that the department
assure taxpayers in writing, and with a degree of formality,
that the adjustments to their taxes were made in good faith.
We further hold that the notice that was issued in this case
met that requirement and therefore was "certified" as
required by ORS 305.265(2)(c).

The judgment of the Tax Court is affirmed.