Justia Tax Law Opinion Summaries

Philip Morris USA, Inc. (Philip Morris) disputed with the North Carolina Department of Revenue (Department) over tax credits for manufacturing cigarettes for exportation (Export Credits). The issue was whether the "credit allowed" in N.C.G.S. § 105-130.45(b) (2003) limited the Export Credits such that they could not be carried forward to future years.The Department audited Philip Morris' tax returns for 2012-2014 and disallowed the Export Credits claimed, arguing that the statute capped the credits generated each year at six million dollars, thus no credits were available to carry forward. Philip Morris objected and requested a review, but the Department upheld the disallowance. Philip Morris then petitioned the Office of Administrative Hearings, where the administrative law judge granted summary judgment in favor of the Department. Philip Morris appealed to the Superior Court, which affirmed the ALJ's decision, stating that the statute limited credit generation to six million dollars per year.The Supreme Court of North Carolina reviewed the case and found the statute ambiguous. The Court held that the term "credit allowed" in subsection (b) should be interpreted as "credit generated," allowing any generated Export Credit in excess of the annual cap to be carried forward for the next ten years. The Court reversed the trial court's summary judgment in favor of the Department and remanded the case for further proceedings consistent with this opinion. View "Philip Morris USA, Inc. v. Department of Revenue" on Justia Law

The Supreme Court reversed the decision of the business court concluding that the sales of printed materials produced by Petitioner, which was based in Wisconsin, out of state and shipped to its North Carolina customers and their designees lacked a sufficient nexus to North Carolina for the imposition of state sales tax, holding that the business court erred.At issue on appeal was whether the Supreme Court of the United States' decision in McLeod v. J.E. Dilworth Co., 322 U.S. 327 (1944), remained controlling precedent or if subsequent Supreme Court decisions provided an alternative method for determining the constitutionality of North Carolina's sales tax regime. The Supreme Court held (1) the formalism doctrine established in Dilworth did not survive the decisions of the United States Supreme Court in Complete Auto Transit Inc. v. Brady, 430 U.S. 274 (1977) and South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018) so as to render the sales tax regime of North Carolina in violation of the Commerce Clause and Due Process Clause; and (2) North Carolina's imposition of sales tax on the transactions at issue was constitutional under Complete Auto. View "Quad Graphics, Inc. v. N.C. Dep't of Revenue" on Justia Law

The Supreme Court affirmed the decision of the court of appeals ruling that an assessment that Mecklenburg County made of the business personal property owned by Harris Teeter, LLC at six grocery stores reflected the "true value" of that property, as required by N.C. Gen. Stat. 105-283, holding that none of Harris Teeter's challenges to the order of the North Carolina Property Tax Commission had merit.In rejecting Harris Teeter's challenge to the Commission's order, the court of appeals held that the Commission's findings had sufficient evidentiary support and that those findings had satisfied the County's obligation to prove that the methods it used in valuing Harris Teeter's property produced the true value of that property. The Supreme Court affirmed, holding that the manner in which the Commission resolved the issues in this case had ample record support. View "In re Harris Teeter, LLC" on Justia Law

In this tax dispute, the Supreme Court reversed the final decision of the Office of Administrative Hearings (OAH) entering summary judgment in favor of Graybar Electric Company, Inc., holding that dividends deducted on a corporation's federal corporate income tax return under the dividends-received deduction (DRD) of section 243 of the Internal Revenue Code do constitute "income not taxable" for purposes of calculating the corporation's net economic loss (NEL) deduction under N.C. Gen. Stat. 105-130.8(a) for North Carolina corporate income tax purposes.The Department found that the dividends received constituted "income not taxable" and that, therefore, Graybar was required to reduce its NEL deductions by the amount of the dividends apportioned to North Carolina. On appeal, (OAH) entered summary judgment for Graybar, holding that the dividends were taxable as a matter of law and were not "income not taxable." The Supreme Court reversed, holding (1) the dividends deducted pursuant too I.R.C. 243(a)(3) were "income not taxable" under section 105-130.8(a)(3); and (2) therefore, Graybar failed to bring itself within the statutory provisions authorizing the NEL deduction calculation it sought. View "North Carolina Department of Revenue v. Graybar Electric Co." on Justia Law

The North Carolina Department of Revenue (Defendant) unconstitutionally taxed the income of The Kimberly Rice Kaestner 1992 Family Trust (Plaintiff) pursuant to N.C. Gen. Stat. 105-160.2 based solely on the North Carolina residence of the beneficiaries during certain tax years because Plaintiff did not have sufficient minimum contacts with the State of North Carolina to satisfy the due process requirements of the state and federal Constitutions.Plaintiff filed a complaint alleging that Defendant wrongfully denied Plaintiff’s request for a refund because the taxes collected pursuant to section 105-160.2 violate the due process clause. The North Carolina Business Court concluded that the provision of section 105-160.2 allowing taxation of a trust income “that is for the benefit of a resident of this State” violated both the Due Process Clause and N.C. Const. art. I, 19, as applied to Plaintiff. The court therefore granted Plaintiff’s motion for summary judgment. The court of appeals affirmed. The Supreme Court affirmed, holding (1) section 105-160.2 is unconstitutional as applied to collect income taxes from Plaintiff for the tax years at issue; and (2) therefore, summary judgment was properly granted for Plaintiff. View "Kaestner 1992 Family Trust v. North Carolina Department of Revenue" on Justia Law

The Supreme Court held that summary judgment was improper in this case alleging fraudulent concealment and professional negligence.In her complaint, Plaintiff alleged that Defendants failed properly to prepare and file her delinquent tax returns for tax years 2006 through 2009 and intentionally deceived her about the status of the returns. The trial court allowed Defendants’ motion for partial summary judgment regarding Plaintiff’s fraudulent concealment claim, the corresponding claim for punitive damages, and Defendants’ statute of repose defense for professional negligence for tax years 2006 and 2007. The court of appeals reversed the trial court’s decision regarding the statute of repose and affirmed the trial court’s dismissal of Plaintiff’s fraudulent concealment claim and Plaintiff’s related claim for punitive damages. The Supreme Court reversed in part, holding that genuine issues of material fact existed regarding the fraudulent concealment claim and the accompanying punitive damages claim, as well as the triggering event for the running of the statute of repose. View "Head v. Gould Killian CPA Group, P.A." on Justia Law

The Supreme Court affirmed the North Carolina Business Court’s substantive decision interpreting N.C. Gen. Stat. 105-130.5(b)(1) so as to preclude The Fidelity Bank from deducting “market discount income” relating to discounted United States obligations for North Carolina corporate income taxation purposes. The Supreme Court, however, reversed the Business Court’s decision to dismiss the second of two judicial review petitions that Fidelity Bank filed in these cases and remanding that matter to the North Carolina Department of Revenue with instructions to vacate that portion of the Department’s second amended final agency decision relating to the deductibility issue for lack of subject matter jurisdiction, holding that the Business Court’s decision to dismiss the portions of the second judicial review petition challenging the Department’s decision concerning the deductibility issue in the second amended final agency decision was erroneous. View "Fidelity Bank v. N.C. Department of Revenue" on Justia Law

The parties in this case were the City of Lumberton and four companies that ran promotional sweepstakes as part of their business plans. In 2010, the City amended its existing privilege license tax on businesses that utilized electronic machines to conduct sweepstakes. The prior tax for these companies was $12.50 per year. The new law made the minimum tax owed by these businesses $7,500. This change imposed a 59,900% minimum increase per business location. The trial court granted summary judgment in favor of the City, finding the new tax to be constitutional. Addressing the Just and Equitable Tax Clause of the North Carolina Constitution, the court of appeals affirmed, determining that the tax did not amount to a prohibition of the companies' businesses. The Supreme Court reversed, holding that the City's privilege license tax violated the Just and Equitable Tax Clause as a matter of law, as the present tax transgressed the boundaries of permissible taxation. View "IMT, Inc. v. City of Lumberton" on Justia Law

In 2007, Brunswick County conducted an authorized appraisal of all property in the County. However, in 2008, which was not a statutorily designated year for setting property values for tax purposes, the County reassessed the tax value of real property belonging to Ocean Isle Palms LLC. Ocean Isle disputed the resulting tax values, arguing that the values were unlawful because they were based on an invalid reassessment. The County Board of Equalization and Review declined to change the valuations. On appeal, the Property Tax Commission found the 2008 revaluation was unlawful and granted Ocean Isle's summary judgment motion. The court of appeals reversed. The Supreme Court reversed, holding that the reassessment conducted in the nonreappraisal year 2008 violated the relevant statutes, and the alteration of the taxable value of Ocean Isle's property under the 2008 reassessment was unlawful. View "In re Ocean Isle Palms LLC" on Justia Law