Forgotten papers could cost state $20 million: Officials missed deadline to appeal a ruling that gave refunds to coal companies

Papers stuffed into a drawer and forgotten could end up costingWest Virginia $20 million in lost tax revenue, state officials fear.

A lawyer for the Department of Revenue has asked the state SupremeCourt to consider waiving a rule that sets a 60-day deadline forcontesting rulings by the state's Office of Tax Appeals.

State revenue officials want to appeal the office's December 2003order that granted refunds requested by several coal companies. Withinterest, the refunds would total around $20 million.

But state officials missed the February 2004 deadline. The reason:a state Tax Division lawyer misfiled the adverse ruling when it wasfirst received.

"He put something in a file cabinet and he forgot about it,"Managing Deputy Attorney General Barbara Allen told the justicesTuesday.

Allen did not name the lawyer, but said he had been a 30-yeardivision employee who has since left state government.

"As far as I know it was the only mistake he made," Allen said."This was once-in-a-lifetime negligence."

The state Tax Division did not realize it had missed the deadlineuntil a lawyer for one of the coal companies phoned, 10 days after ithad expired, asking about the case.

Allen argued that such neglect by a lawyer for the state can befound excusable. Prior rulings have shown flexibility regarding suchthings as missed deadlines when the negligent lawyer's client was anindividual or business, she said.

"Here, there's no fail-safe mechanism, and I believe that probablyhas constitutional implications," Allen said. "It could have far-reaching effects on the public fisc."

Lawyers for the coal companies want the deadline upheld. A KanawhaCircuit judge ruled against the Tax Division in March, prompting theSupreme Court appeal.

But as the justices consider the division's appeal, a pendingSupreme Court case could render it moot. The refunds involve stateseverance taxes, which a group of coal companies have challenged asan illegal intrusion on interstate commerce. A ruling on thatchallenge is expected by year's end.