South Carolina: Deadline to Protest Not Tied to Actual Notice

A South Carolina Administrative Law Court Judge recently held that a taxpayer’s protest of an assessment was untimely and that the taxpayer failed to establish good cause for failing to respond to the Department of Revenue. The taxpayer, a patient information management company, had claimed South Carolina job development withholding tax credits on its income tax returns. On January 24, 2018, the Department of Revenue mailed the taxpayer a notice that it was being audited with respect to the jobs tax credits in conjunction with the Department of Commerce. After receiving no response, the auditor attempted to contact the taxpayer via email in February and March before finalizing the audit. In the course of the audit, the Department concluded that the taxpayer had computed its credits incorrectly, which resulted in a proposed assessment that was emailed and mailed to the taxpayer on March 28, 2018.  After 90 days, the proposed assessment became final. On August 22, 2018, the Collection Revenue Officer emailed the taxpayer in an attempt to collect the outstanding balance. On September 24, 2018, one of the taxpayer’s representatives first responded to the August email and subsequently, on December 5, 2018, the taxpayer formally protested the March 28 assessment.  

Under South Carolina law, the Department “may send by first class mail or deliver … the proposed assessment to the taxpayer.” Prior to seeking a hearing before the Administrative Law Court, the taxpayer must exhaust its prehearing remedies, which includes filing a protest within 90 days of the date of the proposed assessment. Under South Carolina law, a proposed assessment is considered effective “if mailed to the taxpayer's last known address even if the taxpayer refuses or fails to take delivery.” However, a court may remove an assessment and remand a matter if good cause is shown. The taxpayer first argued that the 90-day statutory deadline commenced when it received actual notice or possession of the proposed assessment, which was the date its representative received the August 28^th email. The ALJ disagreed, holding that nothing in South Carolina law or guidance supported the taxpayer’s argument that it was actual receipt of the proposed assessment that started the 90-day response period, and even if it did, the protest at issue was still untimely filed. The December 2018 protest was filed more than 90 days after the August 28^th email.  The taxpayer next argued that its consistent challenges receiving mail delivered by the postal service and overly restrictive spam filters resulted in its failure to respond in a timely manner and therefore there was good cause to remove the assessment. The ALJ again disagreed, noting that the burden was on the taxpayer to ensure the Department had the means— including a good address—to communicate with the taxpayer and to mail official correspondence. Further, in the ALJ’s view the taxpayer had failed to make meaningful attempts to remedy the post office and email issues. Finally, the ALJ observed that the taxpayer, upon receipt of the August 28 email, had waited almost a month to respond to the Department of Revenue and its attempts to solve the assessment through the Department of Commerce after the August 28 email were misplaced. Thus, the assessment was upheld. For more information on Intelichart LLC v. S.C. Dep’t of Rev., please contact Jeana Parker at 919-664-7143.