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Duke Energy Corp. v. South Carolina Dep't of Revenue

Court of Appeals of South Carolina

October 8, 2014

Duke Energy Corporation, Appellant,
v.
South Carolina Department of Revenue, Respondent

Heard: February 18, 2014.

Appeal from the Administrative Law Court Ralph King Anderson, III, Administrative Law Judge. Appellate Case No. 2012-213180.

Eric S. Tresh and Maria M. Todorova, both of Atlanta, GA, and Jeffrey A. Friedman, of Washington, DC, all of Sutherland Asbill & Brennan, LLP, and Burnet Rhett Maybank, III and Tanya Amber Gee, Nexsen Pruet, LLC, both of Columbia, for Appellant.

Tracey Colton Green, John Marion S. Hoefer, and John William Roberts, Willoughby & Hoefer, PA, all of Columbia, Jonathon Abraham Gutting, Young Clement Rivers, LLP, of Charleston, Milton Gary Kimpson, of Columbia, and Harry A. Hancock, of Bordentown, NJ, for Respondent.

FEW, C.J. SHORT and GEATHERS, JJ., concur.

OPINION

Page 713

[410 S.C. 417] FEW, C.J.:

This appeal arises from Duke Energy Corporation's claims to the South Carolina Department of Revenue for corporate income tax refunds totaling $126,240,645, plus interest, for tax years 1978 to 2001. We affirm the denial of Duke Energy's refund claims.

I. Facts and Procedural History

Duke Energy generates electricity and sells it to customers. Because it does business in North Carolina and South Carolina, Duke Energy must apportion its income between these states to determine the income tax due to each state. See S.C. Code Ann. § 12-6-2210(B) (2014) (" If a taxpayer is transacting or conducting business partly within and partly without this State, the South Carolina income tax is imposed upon a base which reasonably represents the proportion of the trade or business carried on within this State." ).[1] A taxpayer's [410 S.C. 418] income is

Page 714

apportioned using a formula--a fraction--in which the numerator represents the business the taxpayer did in the applicable tax year in this state, and the denominator indicates the total business the taxpayer did in all states. The South Carolina Income Tax Act provides two formulas: (1) the formula applicable to " manufacturers," which contains three factors in both the numerator and the denominator--property, sales, and payroll, S.C. Code Ann. § 12-6-2252 (2014); [2] and (2) the formula applicable to all other taxpayers, which contains only one factor--sales, S.C. Code Ann. § 12-6-2290 (2014).[3] In either formula, the business of the taxpayer in this state is converted to a fraction of its total business, which becomes the " base" upon which the taxpayer's state income tax is calculated.

Duke Energy filed timely income tax returns for each of the tax years at issue--1978 to 2001. In December 2002, Duke Energy filed amended tax returns for each of these years. Duke Energy sought to have its South Carolina income tax recalculated and requested refunds in the amount of $126,240,645, plus interest. In February 2003, the department denied the requests. In March 2003, Duke Energy appealed this decision to the department's Office of Appeals. The department did not act on the appeal until February 2010-- [410 S.C. 419] almost seven years--when it issued a " determination" denying the appeal.

Duke Energy filed a contested case in the administrative law court (" ALC" ). The ALC faced three primary issues: (1) whether Duke Energy's refund claims were timely, (2) which apportionment formula Duke Energy was required to use, which we refer to as the " manufacturing" issue, and (3) whether Duke Energy could include in the denominator of the applicable formula its gross receipts from sales of certain short-term investments, which we refer to as the " gross receipts" issue. The department moved for summary judgment on all three issues, and Duke Energy moved for summary judgment on the gross receipts issue. The ALC granted partial summary judgment to the department, ruling Duke Energy's refund claims were untimely for tax years 1978 to 1993,[4] and Duke Energy may not include gross receipts in the denominator of the applicable apportionment formula. The ALC then conducted a trial on the question of which formula Duke Energy must use and ruled for the department, finding Duke Energy must use the formula set forth in section 12-6-2252.

We find the ALC properly granted summary judgment to the department because it correctly determined Duke Energy may not include its gross receipts from sales of short-term investments. We also affirm the ALC's ruling that Duke Energy must use the apportionment formula in section 12-6-2252. Because our resolution of these issues is dispositive of this appeal, we do not reach the timeliness of Duke Energy's refund claims. See Futch v. McAllister Towing of Georgetown, Inc., 335 S.C. 598, 613, 518 S.E.2d 591, 598 (1999) (explaining an appellate court need not address remaining issues when the court's resolution of the issues it does address are dispositive of the appeal).

Page 715

II. Standard of Review

We review the ALC's decision under subsection 1-23-610(B) of the South Carolina Code (Supp. 2013). The gross receipts [410 S.C. 420] issue is a pure question of law that the parties presented to the ALC on cross motions for summary judgment. Thus, we review the ALC's decision as to that issue under subsections 1-23-610(B)(a), (c), and (d). See Doe ex rel. Doe v. Wal-Mart Stores, Inc., 393 S.C. 240, 244, 711 S.E.2d 908, 910 (2011) ( " Summary judgment is appropriate when there is no genuine issue of material fact such that the moving party must prevail as a matter of law." ); Alltel Commc'ns, Inc. v. S.C. Dep't of Revenue, 399 S.C. 313, 319 n.2, 731 S.E.2d 869, 872 n.2 (2012) (" [T]he parties filed cross motions for summary judgment, thereby indicating the parties' belief that further development of the facts was unnecessary." ); id. ( " [C]ross motions for summary judgments . . . authorize the court to assume that there is no evidence which needs to be considered other than that which has been filed by the parties." (alteration in original) (citation omitted)); Wiegand v. U.S. Auto. Ass'n, 391 S.C. 159, 163, 705 S.E.2d 432, 434 (2011) (" Where cross motions for summary judgment are filed, the parties concede the issue before us should be decided as a matter of law." ).

As to the manufacturing issue, the ALC decided the question after a trial. Both parties, as well as the ALC, address the question as one of fact. However, we find the manufacturing issue to be primarily one of statutory interpretation in which the facts are undisputed. To this extent, we review the ALC's ruling as a question of law under subsections 1-23-610(B)(a), (c), and (d). Centex Int'l, Inc. v. S.C. Dep't of Revenue, 406 S.C. 132, 139, 750 S.E.2d 65, 69 (2013) (stating " questions of statutory interpretation are questions of law" ); Town of Summerville v. City of N. Charleston, 378 S.C. 107, 110, 662 S.E.2d 40, 41 (2008) (stating " the proper interpretation of a statute is a question of law" ). However, we review under a different standard the ALC's ruling that Duke Energy's " manufacturing" business is its " principal" business in South Carolina. In making this ruling, the ALC resolved a factual dispute as to the appropriate inferences that should be drawn from undisputed facts. Therefore, we review this ruling as a factual determination under subsection 1-23-610(B)(e) and must determine if it is " clearly erroneous in view of the reliable, probative, and substantial evidence." See ESA Servs., LLC v. S.C. Dep't of Revenue, 392 S.C. 11, 24, 707 S.E.2d 431, 438 (Ct. App. 2011) (stating " as to [the ALC's] [410 S.C. 421] findings of fact, we may reverse or modify decisions that . . . are clearly erroneous in view of the substantial evidence" ); Comm'rs of Pub. Works v. S.C. Dep't of Health ...


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