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Department of Revenue v. Smith

OPINION FILED DECEMBER 16, 1986.

THE DEPARTMENT OF REVENUE, PLAINTIFF-APPELLANT,

v.

THOMAS J. SMITH ET AL., DEFENDANTS-APPELLEES. — THOMAS J. SMITH, PLAINTIFF-APPELLANT,

v.

THE CIVIL SERVICE COMMISSION ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Sangamon County; the Hon. Richard E. Mann, Judge, presiding.

PRESIDING JUSTICE MCCULLOUGH DELIVERED THE OPINION OF THE COURT:

Rehearing denied January 17, 1987.

This is a consolidated appeal stemming from the Department of Revenue's (Department) decision to discharge Thomas Smith, respondent, an executive in its Compliance and Control Bureau. Respondent violated a written departmental policy requiring employees to file returns and pay taxes in a timely fashion. Respondent failed to file his 1982 and 1983 Illinois income tax returns in a timely fashion and failed to pay his 1982 Illinois taxes when due.

A hearing officer recommended that the discharge be approved by the Civil Service Commission (Commission). The Commission accepted the hearing officer's findings and conclusions, but it found respondent's actions warranted a suspension, not discharge. Both parties filed complaints for administrative review, and the circuit court affirmed the Commission's decision.

The Department appeals arguing the Commission's decision to impose a suspension should be reversed and remanded with directions for reinstatement of the discharge. Smith appeals arguing: (1) section 3 of the Illinois Tax Delinquency Amnesty Act (Amnesty Act) (1984 Ill. Laws 3012) afforded him exemption from any administrative action by the Department; (2) the Commission lacked jurisdiction to hear the charges; (3) the Commission's decision was contrary to the manifest weight of the evidence; and (4) the Commission's decision to suspend for 90 days in addition to the suspension pending discharge was too harsh a sanction.

If we were sitting as the trier of fact, we would probably have reached a different conclusion, but we are constrained by familiar principles to give great deference to administrative findings. Therefore, we affirm. The facts will be repeated only as necessary to an understanding of the disposition.

On January 2, 1985, the Department requested approval of its discharge of respondent. The director of Central Management Services approved the written charges on January 4, 1985, and served respondent with the notice on January 14, 1985. Respondent requested a hearing. Prior to the hearing, respondent moved to dismiss the charges because they were not signed by the director of the Department of Personnel (Ill. Rev. Stat. 1985, ch. 127, par. 63b111) but instead were signed by the director of Central Management Services (CMS).

A hearing on the charges began on May 22, 1985. Respondent was called by the Department. He stated that he started working for the Department in 1971 as an accountant. He was promoted and currently was an executive V in Compliance and Control. A part of his duties are to act as a liaison between the Department and the Internal Revenue Service (IRS), manage the compliance services department, perform staff functions, and audit sales tax. Respondent stated that he had never personally audited a taxpayer and was involved in only one collection. He had a surface knowledge of tax laws but relied upon his legal staff for tax questions. He was experienced in filling out tax forms and did his own taxes.

Respondent admitted seeing and reading the employee handbooks, knowing about the State's requirement for filing, and knowing that the Department had a policy of disciplining employees who did not file and pay taxes in a timely fashion. He filed his 1982 and 1983 State tax returns in November of 1984 because he wanted to use the amnesty provisions. Previously, he could not file because filing would have influenced the property distribution in his dissolution proceeding. He was served with a summons for dissolution of marriage in July in 1982. The dissolution action was finalized in mid-March 1984. He did not file in March because he was trying to persuade his ex-wife to file a joint return. He did not attempt to file an individual return and then later amend with a joint return. He knew about this option but avoided it because he thought it would complicate matters. Respondent stated that he had enough information to file an individual return in March 1984. He filed for six-month extensions in 1982 and 1983 and received them. His counsel advised him that his failure to file had to be wilful to subject him to any penalty. He did not believe that his failure to file was wilful because of the extenuating circumstances caused by the dissolution.

Respondent talked to Richard Dunn, director of internal investigations, in April of 1983, fall of 1983, in 1984, and in 1985. Dunn asked for an explanation of the nonfiling. Respondent told Dunn about the property division problem. He sent Dunn a letter confirming his explanation. A week later, Dunn stated that no file would be opened on respondent. Respondent was upset when he found out that Dunn had opened an investigation of the matter.

On cross-examination, respondent stated that in 1982 he owed the State $24 in individual income taxes. In 1983, he received a refund. After he was served with the dissolution pleadings, his assets were frozen. At the time of the dissolution decree, the tax issues had not been resolved. The tax question and property ownership questions were the principal issues in the dissolution. The status of approximately $200,000 to $250,000 worth of assets was disputed. Filing status of the property was an indicia of ownership. Respondent admitted that filing tax status was only one indicia of ownership.

William J. Smith, director of the Compliance and Control Bureau, stated that respondent is a second-level managerial employee with the Department and under Smith's direct supervision. Respondent has six areas of responsibility. They are: (1) processing travel vouchers; (2) field receipt control; (3) managing the audit selection group; (4) managing procedures and standards; (5) being a liaison with the IRS; and (6) performing miscellaneous budget, production, and special projects. Respondent needed a good working knowledge of the tax law, regulations, and procedures to perform his duties. In Smith's bureau of the Department, there is a policy that when an employee does not file or pay State taxes in a timely fashion, disciplinary action, including termination, is taken. Respondent knew about the policy. Smith recommended respondent's discharge for several reasons. First, other employees had been discharged for late filings. Second, respondent worked in enforcement. This meant that he collected late taxes from private citizens. Third, Smith believed that there should be no question about the tax integrity of persons in the compliance division. Smith was aware of respondent's dissolution, but unaware of the problems relating to it.

Smith talked to respondent about his tax status on December 7, 1984, the day of respondent's discharge. In the last week of October, he learned of respondent's late filing, but did not discuss it with respondent. Respondent knew about the amnesty program and conducted a training session for field employees.

On cross-examination, Smith stated that he did not notice whether respondent's late filing affected performance of his job duties. The Department had not discharged each employee who failed to file in a timely fashion. Smith admitted that some employees had been reinstated in his department and that one named employee had been reinstated.

Six months is the maximum automatic extension granted. Therefore, respondent's 1982 tax returns were filed 13 months late and his ...


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