SC Administrative Law Court Decisions

This matter is before the court for a final order and decision pursuant to S.C. Code Ann. § 12-60-2540 (2000) and S.C. Code Ann. § 1-23-600(B) (Supp. 2006). The Respondent, Charleston County Assessor (“Assessor”), filed a motion for summary judgment. Prior to the contested case hearing in this matter, the court held a conference call with the parties’ representatives. Both parties agreed that because this matter turns solely on a question of statutory application and there is no genuine issue of material fact, a ruling on the Assessor’s motion would resolve the case. For the reasons that follow, the court finds that the Assessor’s motion should be denied.

STIPULATIONS OF FACT

Pursuant to ALC Rule 25(C), the parties submitted Stipulation of Facts to the court at the hearing of this matter. Specifically, the parties stipulated to the following:

1. Petitioner owns real property located at 3123 Marshall Blvd[.], Sullivan’s Island, South Carolina identified as tax map parcel number 529-12-00-105.

2. On July 14, 2006, the Charleston County Assessor mailed a Notice of Classification, Appraisal, & Assessment of Real Estate 2006 Tax Year to Petitioner for her real property showing, among other things, a 6% tax assessment ratio. The reason stated for the change is the initial qualification for 4% assessment ratio was disapproved by the Assessor’s audit.

3. Petitioner appealed to the Charleston County Board of Assessment Appeals claiming that she should receive a 4% tax assessment ratio because she lived in the house over 9 months in the 2006 taxable year and that it is her primary

residence. The Board affirmed the Assessor’s denial of the 4% tax assessment ratio
to Petitioner’s property. Petitioner appealed that decision to the Administrative Law Court.

4. Petitioner possess[es] a valid South Carolina driver’s license, voter registration card, and vehicle registration. She filed a South Carolina income tax return for 2006. She rented the house for 85 days and occupied the house for 280 days in the [] 2006 taxable year. The property was advertised for rental by Island Realty, Inc., 1304 Palm Blvd., Isle of Palms, SC 29451 from 5/20/06 - 6/9/06 at the rate of $2,795 per week and from 6/10/06 - 8/11/06 at $3,625 per week.

5. Petitioner was issued a vacation rental business license by the Town of Sullivan’s Island for the 2006 taxable year to operate the property as a vacation rental.

6. Petitioner occupied the house on the real property as her residence for 280 days during the 2006 tax year and rented the house for 85 days during the tax year.

7. The residence is rented for more than 15 days during the 2006 taxable year.

ISSUE

Does subsection (7) of § 12-43-220(c) preclude owner-occupants who rent their dwellings for fifteen days or more from receiving the four percent tax assessment ratio if they otherwise qualify?

DISCUSSION

Section 12-43-220(c)(1) provides the general rule that the legal residence and not more than five contiguous acres when owned and occupied by the taxpayer is taxed at the four percent assessment ratio. A residence does not qualify as a legal residence unless it is the taxpayer’s domicile. S.C. Code Ann. §12-43-220(c)(1) (Supp. 2006). Generally, residential real property that does not qualify for the four percent assessment ratio is taxed at six percent. S.C Code Ann. § 12-43-220(e) (2000).

This matter turns on the application of a 2005 amendment to § 12-43-220. The amendment added subsection (7) to § 12-43-220(c), providing as follows:

Notwithstanding any other provision of law, the owner-occupant of a legal residence is not disqualified from receiving the four percent assessment ratio allowed by this item if the taxpayer’s residence meets the requirements of Internal Revenue Code Section 280A(g) as defined in Section 12-6-40(A) and the taxpayer otherwise is eligible to receive the four percent assessment ratio.

In turn, I.R.C. § 280A(g) is entitled “Special rule for certain rental use” and provides:

Notwithstanding any provision of this section or section 183, if a dwelling unit is used during the taxable year by the taxpayer as a residence and such dwelling unit is actually rented for less than 15 days during the taxable year, then

(1)   no deduction otherwise allowable under this chapter because of the rental use of such dwelling unit shall be allowed, and

(2)   the income derived from such use for the taxable year shall not be included in the gross income of such taxpayer under section 61.

I.R.C. § 280A(g). Thus, while I.R.C. § 280A(g) is a federal income tax statute addressing how rental income is to be treated, subsection (7) of § 12-43-220(c) specifically incorporates, for county property tax purposes, its provision regarding dwelling units that are actually rented for less than fifteen days during a taxable year and expressly provides that such dwelling units are not disqualified from receiving the four percent assessment ratio.

A. Application of § 12-43-220(c)(7)

The Assessor contends that this amendment operates as an exclusion, prohibiting a taxpayer from receiving the four percent assessment ratio if she rents her home for fifteen days or more. The Assessor relies on the principle of statutory construction that the expression of one thing implies the exclusion of another. Riverwoods, LLC v. County of Charleston, 349 S.C. 378, 563 S.E.2d 651 (2002) (“The canon of construction ‘expressio unius est exclusio alterius’ or ‘inclusio unius est exclusio alterius’ holds that ‘to express or include one thing implies the exclusion of another, or of the alternative.’” (quoting Hodges v. Rainey, 341 S.C. 79, 86, 533 S.E.2d 578, 582 (2000))). According to the Assessor, by including taxpayers who rent their residences for less than fifteen days as eligible to receive the four percent assessment ratio, the amendment implies the exclusion of taxpayers who rent their homes for fifteen days or more. Thus, it argues, Metts, although otherwise eligible to receive the four percent assessment ratio based on the other qualifying factors of the statute, is disqualified under (c)(7) because she rented her home for fifteen days or more.

Metts, by contrast, argues that subsection (7) was intended as a statutory “safe harbor” provision^[1] rather than an exclusion. The court agrees.

1. Metts’s facts fall outside the plain language of subsection (7).

The cardinal rule of statutory construction is to give effect to the intent of the legislature. Hodges v. Rainey, 341 S.C. 79, 85, 533 S.E.2d 578, 581 (2000) (citing Charleston County Sch. Dist. v. State Budget and Control Bd., 313 S.C. 1, 437 S.E.2d 6 (1993)). Legislative intent is first and foremost determined by the language of the statute. State v. Pittman, 373 S.C. 527, 561, 647 S.E.2d 144, 161 (2007) (citing Whitner v. State, 328 S.C. 1, 6, 492 S.E.2d 777, 779 (1997)). If the statutory language is plain and unambiguous, then its terms should be applied as written and resort to the principles of statutory interpretation need not be had. Paschal v. State Election Comm’n, 317 S.C.
434, 454 S.E.2d 890 (1995). The literal language of a statute should be disregarded only when the
result is so plainly absurd that it clearly could not have been the intent of the legislature. Kiriakides v. United Artists Commc’ns, Inc., 312 S.C. 271, 275, 440 S.E.2d 364, 366 (1994) (citing Stackhouse v. Rowland, 86 S.C. 419, 68 S.E. 561 (1910)).

In the case of § 12-43-220(c)(7), the words of the amendment are plain: “[T]he owner-occupant of a legal residence is not disqualified from receiving the four percent assessment ratio allowed by this item if the taxpayer’s residence meets the requirements of Internal Revenue Code Section 280A(g) as defined in Section 12-6-40(A) and the taxpayer otherwise is eligible to receive the four percent assessment ratio.” Substituting the pertinent portion of I.R.C. § 280A(g), the language unambiguously states that a taxpayer is not disqualified from receiving the four percent assessment ratio if her residence is rented for less than fifteen days and she otherwise qualifies. The amendment is silent as to how a taxpayer who otherwise qualifies but rents her home for fifteen days or more should be treated. Accordingly, such a situation falls outside the plain language of subsection (7).

Here, since the Assessor has conceded that Metts is entitled to the four percent assessment ratio if subsection (7) does not apply, the court need not engage in the fact-specific analysis of whether the property is the legal residence or domicile of the owner-applicant pursuant to § 12-43-220(c)(1) and (2). See, e.g., Widdicombe v. Tucker-Cales, 366 S.C. 75, 620 S.E.2d 333 (Ct. App. 2005) (“The question of a person’s place of residence is largely one of intent to be determined under the facts and circumstances of each case. The act and intent as to domicile, not the duration of the residence, are the determining factors.”); Ravenel v. Dekle, 265 S.C. 364, 378, 218 S.E.2d 521, 528 (1975) (considering factors such as ownership of a home, payment of state income taxes, car registration, driver’s license, voter registration, listing of “legal” or “permanent” address on federal tax returns, and expressed intention in determining domicile).

2. Subsection (7) cannot be logically expanded by implication to include Metts.

Metts’s position is supported not only by the plain language of the statute but also by logic. Cf. Shoney’s, Inc. v. Schoenbaum, 894 F.2d 92, 96 (4^th Cir. 1990) (“[T]his interpretation is supported in logic and by the traditional canons of statutory construction.”); see also Ken Moorhead Oil Co. v. Federated Mut. Ins. Co., 323 S.C. 532, 544, 476 S.E.2d 481, 488 (1996) (rejecting the appellant’s construction of a term as “contrary to precedent and logic”). The Assessor’s argument that subsection (7) operates as an exclusion is logically flawed because it infers the validity of the inverse of the actual statutory language. Restated in terms of a conditional proposition, the essence of the amendment for a taxpayer like Metts who rents her residence but otherwise qualifies for the four percent assessment ratio is: If a taxpayer rents her dwelling unit for less than fifteen days, then she is not disqualified from receiving the four percent assessment ratio. See S.C. Code Ann. § 12-43-220(c)(7) (“[T]he owner-occupant of a legal residence is not disqualified from receiving the four percent assessment ratio allowed by this item if the taxpayer’s residence meets the requirements of Internal Revenue Code Section 280A(g) as defined in Section 12-6-40(A) and the taxpayer otherwise is eligible to receive the four percent assessment ratio.”). The Assessor seeks to have the court apply the inverse^[2] of this statement: If it is not the case that a taxpayer rents her dwelling unit for less than fifteen days – i.e., she rents it for fifteen days or more – then she is disqualified from receiving the four percent assessment ratio.

It is a fundamental principle of logic that the inverse of a statement does not necessarily have the same truth value of the original statement but must be independently proven. See First Fed. Sav. & Loan Ass’n of Temple v. United States, 694 F. Supp. 230, 243 n.14 (W.D. Tex. 1988); see also Hill v. City of Warren, ____ N.W.2d ____, ____, 2007 WL 2121715 (Mich. Ct. App. 2007) (“But the logical inverse is not necessarily true . . . .”); Deborah J. Bennett, Logic Made Easy: How to Know When Language Deceives You 115 (2004) (“[I]t is a mistake to believe that its inverse is true just because a conditional is true.”). In other words, the inverse does not necessarily follow from the original statement. Accordingly, the “expressio unius est exclusio alterius” principle of statutory

construction upon which the Assessor relies has no application here.^[3] See S.C. Dep’t of Consumer Affairs v. Rent-A-Center, Inc., 345 S.C. 251, 547 S.E.2d 881 (Ct. App. 2001) (noting that the expressio principle should be used with care and rejecting an expressio argument because it had no basis in logic).

Several courts have aptly illustrated the fallacy of the Assessor’s reasoning.^[4] In First Federal Savings & Loan, a district court analyzing a federal tax statute rejected a similar argument to that of the Assessor in the instant case.

What the Government proposes the Court do is say that the premise “a tax loss is generated by the exchange of property which is materially different” necessarily (logically) implies the truth of the statement “a tax loss is not generated by the exchange of property which is not materially different.” This fallacy is illustrated by the statement “A = B, therefore, not A = not B.” Such a statement is not logically valid. While it may be true that “not A = not B” its truth cannot be derived from the statement “A = B,” but has to be supported independently.

First Fed. Sav. & Loan Ass’n of Temple v. United States, 694 F. Supp. 230 at 243 n.14 (emphasis added); see also Crouse-Hinds Co. v. InterNorth, Inc., 634 F.2d 690, 702, 703 n.20 (2d Cir. 1980) (“This inference has no basis in either law or logic. The proposition that ‘A implies B’ is not the equivalent of ‘non-A implies non-B,’ and neither proposition follows logically from the other.”); Deborah J. Bennett, Logic Made Easy: How to Know When Language Deceives You at 130 (2004) (“Given the two premises ‘If p is true then q is true. p is not true,’ it would fallacious to conclude that ‘q is not true.’”).

Accordingly, fundamental logic requires that if the General Assembly wants to preclude taxpayers who rent their dwelling units for more than fifteen days from receiving the four percent assessment ratio, it must independently say so. Such a prohibition cannot be logically inferred from the language of subsection (7).

B. Assessor’s Remaining Arguments^[5]

In support of its position, the Assessor relies upon the title to 2005 Act No. 145, which enacted the amendment at issue. Although the title of a statute can be used for guidance in construing an ambiguous statute, the title of the amendment at issue here does not assist the court for two reasons. First, as previously discussed, the language of the amendment is unambiguous, so the court need not resort to the title of the Act to aid in ascertaining legislative intent. Garner v. Houck, 312 S.C. 481, 486, 435 S.E.2d 847, 849 (1993) (“For interpretative purposes, the title of a statute and heading of a section are of use only when they shed light on some ambiguous word or phrase and as tools available for resolution of doubt, but they cannot undo or limit what the text makes plain.”). Second, even if the language of (c)(7) were ambiguous, the language of the title does nothing to clarify it. The relevant portion of the title of the Act amending § 12-43-220(c) to add subsection (7) states that it is “RELATING TO QUALIFICATION FOR THE FOUR PERCENT ASSESSMENT RATIO, SO AS TO PROVIDE A FURTHER PROVISION FOR QUALIFICATION.”

This can be read in two ways. First, it could be interpreted, as the Assessor contends, to create a further provision for qualification for a taxpayer who is otherwise eligible to receive it in that it implements an additional obstacle for a taxpayer to qualify – i.e., in addition to satisfying the requirements of § 12-43-220(c)(1), she must also establish that she rents her dwelling unit for less than fifteen days per taxable year. Alternatively, it could be read to “provide a further provision for qualification” in that it would provide for more taxpayers to qualify for the four percent assessment ratio by creating a safe harbor. In other words, taxpayers who previously were found not to qualify for the four percent ratio solely because they rented their dwelling units would now expressly qualify due to the amendment if they rented their residences for less than fifteen days. Accordingly, the court finds that, in this case, the title of the amendment does not shed any light on the legislative intent behind the language of subsection (7).

The Assessor also argues that the 2005 amendment should be construed to change existing law and to depart from the original language of the statute. Key Corporate Capital, Inc. v. County of Beaufort, 373 S.C. 55, 60, 644 S.E.2d 675, 678 (2007) (“We have long acknowledged the presumption that in adopting an amendment to a statute, the Legislature intended to change the existing law.”). In support of this argument, the Assessor presented evidence that Charleston County’s practice prior to the 2005 amendment was to evaluate on a case-by-case basis the question whether a dwelling unit that is rented by the owner constitutes her legal residence. Therefore, it argues, the amendment must be construed to exclude taxpayers who rent out their residences unless they do so for less than fifteen days.

The court cannot infer from this practice that the General Assembly intended to effect a change in the tax treatment of such dwelling units in Charleston County, since the amendment at issue applies to all forty-six counties in South Carolina and no evidence was presented that all forty-six counties were treating rented dwelling units in the same way prior to the amendment. The amendment may just have easily been intended to change some other county’s practice of taxing all rented dwelling units at six percent by providing a safe harbor for those that were rented for less than fifteen days. Alternatively, the amendment could be construed to clarify rather than change the pre-existing statutory language. Cotty v. Yartzeff, 309 S.C. 259, 262 n.1, 422 S.E.2d 100, 102 n.1 (1992) (“‘[L]ight may be shed upon the intent of the General Assembly by reference to subsequent amendments which, although normally presumed to change existing law, may be interpreted as clarifying it.’” (quoting Ridge Cmty. Investors, Inc. v. Berry, 239 S.E.2d 566 (N.C. 1997))). For these reasons, the court finds the Assessor’s argument on this point to be unpersuasive.

CONCLUSION

The Assessor’s application of § 12-43-220(c)(7) to disqualify Metts’s legal residence from the four percent assessment ratio is unsupported by either the plain language of the statute or by logical implication. Accordingly, the Assessor’s motion for summary judgment is denied. It is therefore

ORDERED that, for the 2006 tax year, the Assessor shall assess Metts’s property located at 3123 Marshall Boulevard, Sullivan’s Island, South Carolina 29482 at the four percent assessment ratio and refund the appropriate amount to the taxpayer.

IT IS SO ORDERED.

______________________________________

PAIGE J. GOSSETT

Administrative Law Judge

October 19, 2007

Columbia, South Carolina