The City of Goose Creek (the City) collected a business license fee on persons doing business within the city limits. The amount of the fee was based upon a business's gross income from the preceding year. The issue on appeal before the South Carolina Supreme Court stemmed from Todd Olds' dispute with the City as to the meaning of "gross income" under the City's business license fee ordinance. Since Olds and the City differed on the definition of gross income, their calculations of the amount of the fee owed differed too. The circuit court ruled the City's definition of gross income was correct, and the court of appeals affirmed. The Supreme Court granted Olds a writ of certiorari to address whether the court of appeals erred in its interpretation of the term "gross income" as defined and used in the City's business license ordinance. Under the very narrow facts of this case, the Supreme Court reversed. Based on the plain language of this particular ordinance, the Court found the City adopted the definition of gross income as provided in section 61(a)(3) of the I.R.C. for Olds' particular business. For Olds' business, "gross income" therefore meant "[g]ains derived from dealings in property." For the years in dispute, Olds' business license fee had to be calculated according to Olds' gains derived from dealings in property. View "Olds v. City of Goose Creek" on Justia Law
This direct cross-appeal to the South Carolina Supreme Court involved the scope of the authority the Department of Revenue (DOR) to enforce various provisions of state law relating to the imposition of a transportation penny tax by Richland County (County) and the County's expenditure of the funds generated by the tax. After DOR conducted an audit and informed the County that DOR intended to cease future remittances to the County based on purported misuse of funds, the County filed a declaratory judgment action in circuit court, arguing DOR lacked the authority to stop payments and seeking a writ of mandamus compelling DOR to continue remitting revenues. DOR counterclaimed seeking a declaration that the County's expenditures were unlawful, an injunction to prohibit future unlawful expenditures, and alternatively, the appointment of a receiver to administer the County's tax revenues. Following a hearing, the circuit court issued a writ of mandamus compelling DOR to remit the tax revenues, denied injunctive relief, and refused to appoint a receiver. Both the County and DOR appealed. After review, the Supreme Court affirmed in all respects except it reversed the circuit court's denial of DOR's request for injunctive relief. DOR was entitled to an injunction requiring the County to expend the funds generated by the tax solely on transportation-related projects in accordance with the law. View "Richland County v. So. Carolina Dept. of Revenue" on Justia Law
Believing the purchase of orthopaedic prosthetic devices and other implants were eligible for a sales tax exemption, CareAlliance Health Services (the Hospital) sought a refund from South Carolina Department of Revenue (DOR). Following an audit, DOR denied the request as to orthopaedic prosthetic devices on the grounds they did not require a prescription to be sold and a prescription was not used in the purchase of the devices. The DOR also held other bone, muscle, and tissue implants were not exempt because they did not replace a missing part of the body, as required for the exemption. The Hospital filed for a contested case hearing. After discovery, both parties filed motions for summary judgment. Following a hearing on the motions, the ALC granted summary judgment in favor of the Hospital, finding orthopaedic prosthetic devices qualified for the exemption and other bone, muscle, and tissue implants replaced a missing part of the body. The DOR appealed, arguing the ALC erred in finding a prescription was required for the sale of an orthopaedic device between the Hospital and vendor because of federal regulations. The Supreme Court agreed and reversed: "The ALC's broad interpretation of the federal regulation is fundamentally at odds with the plain reading of the regulation and the strict construction afforded a tax exemption." Further, the Court reversed the ALC's finding that other bone, muscle and tissue implants replace a missing body part because it was not supported by substantial evidence in the record. The Court reversed the ALC and found the Hospital was not entitled to a tax exemption. View "CareAlliance Health Services v. SCDOR" on Justia Law
The controversy in this case arose out of the South Carolina Department of Revenue's ("SCDOR") computation of Duke Energy's taxable income. Because Duke Energy did business in both North Carolina and South Carolina, it had apportion its income to determine its income tax liability in South Carolina. Duke Energy had a treasury department responsible for purchasing and selling securities. In 2002, Duke Energy filed amended corporate tax returns with the SCDOR for the income tax years of 1978 to 2001, seeking a total refund of $126,240,645 plus interest. In the amended returns, Duke Energy sought to include the principal recovered from the sale of short-term securities from 1978 to 1999 in the sales factor of the multi-factor apportionment formula. In its original returns, Duke Energy included only the interest or gain from those transactions. The SCDOR denied the refund request. Duke Energy appealed the decision to the SCDOR's Office of Appeals. The Office of Appeals denied Duke Energy's refund request, finding, inter alia, that including recovered principal in the apportionment formula: was contrary to the SCDOR's long-standing administrative policy, would lead to an absurd result, and would misrepresent the amount of business Duke Energy does in South Carolina. Duke Energy filed a contested case in the Administrative Law Court ("ALC"). The parties filed cross-motions for summary judgment. The ALC found this was an issue of first impression in South Carolina, and adopted the reasoning of states that found including the principal recovered from the sale of short-term investments in an apportionment formula would lead to "absurd results" by greatly distorting the calculation, and by defeating the intent and purpose of the applicable statutes. The Court of Appeals affirmed, albeit on different grounds. The South Carolina Supreme Court granted certiorari to review the Court of Appeals' decision affirming the administrative law judge's finding. The Supreme Court affirmed the Court of Appeals. View "Duke Energy v. SCDOR" on Justia Law
Petitioners the State and the South Carolina Department of Revenue (DOR) requested the Supreme Court declare a proposed tax referendum invalid under the Capital Project Sales Tax Act, sections 4-10-300 to -380 of the South Carolina Code, and enjoin Respondents the County of Florence, Florence County Council, and Florence County Registration and Elections Commission from placing the proposed referendum on the ballot for county elections. The Court found Respondents' actions valid pursuant to the Act, and denied Petitioners' request for an injunction. Accordingly, the tax referendum was permitted to go forward. View "South Carolina v. County of Florence" on Justia Law
Appellant Centex International filed consolidated income tax returns for three of its corporate affiliates. It appealed an Administrative Law Court order that upheld the state Department of Revenue's denial of its claim for tax credits for the 2002-2005 tax years. Finding no error in the ALC's calculation of the tax, the Supreme Court affirmed. View "Centex International v. SCDOR" on Justia Law
The issue before the Supreme Court in this case concerned the question of when tax liability for property is determined. Appellant Hampton Friends of the Arts challenged the Administrative Law Court's (ALC) finding that real property it acquired in March 2008 was subject to 2008 property taxes because the property was subject to taxes on December 31, 2007. Appellant contended that, as a non-profit corporation, it was entitled to a property tax exemption for the 2008 tax year. The Supreme Court disagreed and affirmed the ALC: "pursuant to settled law, the 2008 tax status of the Hampton County property was determined on December 31, 2007. Because the property was subject to property taxes as of December 31, 2007, the property is subject to 2008 property taxes." View "Hampton Friends v. So. Carolina Dept. of Revenue" on Justia Law
Posted in: Constitutional Law, Government & Administrative Law, South Carolina Supreme Court, Tax Law
The issue before the Supreme Court in this case was whether the Alltel Entities (collectively Petitioners Alltel Communications, Inc. and its regional subsidiaries), were included in the definition of "telephone company" for the purpose of increased license fees in S.C. Code Ann. section 1220-100 (2000). Pursuant to cross motions for summary judgment, the Administrative Law Court (ALC) granted summary judgment in favor of Petitioners, finding that they were not telephone companies for purposes of section 12-20-100. Alternatively, the ALC found that if the statute were ambiguous, Petitioners would prevail under the rule that an ambiguity in a taxing statute must be construed in favor of the taxpayer. Though the court of appeals recognized that the application of section 12-20-100 to Petitioners was not "absolutely clear," it reversed the grant of summary judgment and remanded the matter to the ALC for additional fact finding. Upon review, the Supreme Court reversed the court of appeals and reinstated the ALC's grant of summary judgment in favor of Petitioners. The term "telephone company" was not a defined term and its application to Petitioners was "doubtful." The presence of an ambiguity in a tax assessment statute requires that a court resolve that doubt in favor of the taxpayer. View "Alltel v. SCDOR" on Justia Law
Posted in: Business Law, Communications Law, Government & Administrative Law, South Carolina Supreme Court, Tax Law
Emerson Electric Company and its subsidiaries timely filed consolidated tax returns for South Carolina in fiscal years 1999 through 2002. The periods at issue in this appeal were tax years 1999, 2000, and 2001 (license tax years 2000, 2001, and 2002). In its initial returns, Emerson did not claim deductions for expenses related to its receipt of dividends from subsidiary corporations. Emerson later filed amended returns, claiming the deductions and seeking a refund. Emerson's claimed entitlement to the deductions on its South Carolina returns was the question before the Supreme Court. Emerson argued in the that section 12-6-2220(2), as applied, discriminated against non-resident taxpayers in violation of the Commerce Clause of the United States Constitution. Upon review, the Supreme Court found that the record revealed Emerson availed itself of these same deductions numerous times against its taxable income in various other taxing jurisdictions. The Administrative Law Court properly found Emerson failed to carry its burden of proving that the application of section 12-6-2220 violated the Commerce Clause. The Department of Revenue properly disallowed Emerson's related expense deductions. Emerson's related expense deductions were properly allocated to the state of its principal place of business, Missouri.
In 2004, Sherry Ray formed CFRE, a single-member limited liability company with herself as the sole member. CFRE conducts no business and was formed solely for estate planning and asset protection purposes. To that end, Ray declined to have CFRE taxed as a corporation and, in 2006, deeded the title in her home to it. Because there was a conveyance by deed of the property, the Greenville County Assessor automatically commenced a reassessment of the property for the 2007 tax year. Accordingly, the property was subjected to the default property tax ratio of six percent until CFRE could prove entitlement to the lower ratio under section 12-43-220. When CFRE sought the four percent ratio, the Assessor denied it eligibility. CFRE, LLC appealed the decision of the Administrative Law Court (ALC) that held that real estate owned by the company was not entitled to the residential tax ratio. Furthermore, CFRE argued the ALC erred in not sanctioning the Assessor for failing to respond to discovery requests from CFRE. While the Supreme Court held the ALC did not abuse its discretion in not sanctioning the Assessor, the Court reversed the ALC's conclusion regarding CFRE's entitlement to the legal residence tax ratio and remanded the case for further proceedings.