ORDERS:
ORDER
STATEMENT
OF THE CASE
This
matter is before the Administrative Law Court (ALC or Court) pursuant to S.C.
Code Ann. § 12-60-2940 (Rev. 2000). Thomas P. Tolpa (Petitioner
or Taxpayer) asserts that his residence is entitled to be taxed on an
assessment of four percent of the fair market value of his property notwithstanding
the fact that the property was rented for 134 days during the tax year in
question (2006). I disagree.
Petitioner’s primary contentions are as follows:
- The
portion of S.C. Code Ann. § 12-43-220 (c)(1) (Supp. 2007) which
disqualifies property containing rented residences or businesses from
eligibility for the 4% assessment applies only to the leased property
referred to in the sentence which precedes the disqualifying language;
and,
- The
provisions of S.C. Code Ann. §12-43-220 (c)(7) (Supp. 2007) do
not limit the number of days that a residence can be rented yet still
qualify for the 4% assessment and instead provides a “safe harbor” of 14
days.
FINDINGS OF FACT
Having
carefully considered all testimony, exhibits, and arguments presented at the
hearing of this matter, and taking into account the credibility and accuracy of
the evidence, I make the following findings of fact by a preponderance of
evidence:
- This Court has procedural and subject matter
jurisdiction over this case.
- The parties have exhausted their pre-hearing
remedies. Furthermore, notice of the date, time, place and subject matter
of the hearing was timely given to all parties.
- Petitioner
is the owner of a home on Hilton Head Island in Beaufort County S.C. and
is a resident of and is domiciled in Beaufort County, S.C. This home is
his legal residence. Before the tax year of 2006, Petitioner’s
residence was assessed at the 4% ratio.
- During
the tax year 2006, Petitioner rented his legal residence for 134 days.
Petitioner spent 83 nights at his legal residence during the tax year in
question. The property was available for rent for the entire tax year in
question. Petitioner would have rented this residence out at any time
during the tax year in question, although anticipated renting the property
for only 3 to 4 months out of the year. Petitioner is not claiming the 4%
ratio on any other property that he owns.
- The
Beaufort County Assessor (Respondent) has denied Petitioner’s request to
be taxed at the 4% assessment for the tax year of 2006 because he rented
his residence for more than 14 days in the tax year in question.
Respondent asserts that the disqualification found in S.C. Code Ann. § 12-43-220
(c)(1) ( Supp. 2007) and S.C. Code Ann. § 12-43-220 (c)(7) (Supp.
2007) is applicable to all legal residences.
- Petitioner
maintains a business at a different address on Hilton Head Island.
- Petitioner
did receive some business mail at his legal residence, but it was not such
as would result in the location being deemed a business and would not prevent
him from receiving the 4% assessment if otherwise qualified.
CONCLUSIONS OF LAW
The
cardinal rule of statutory construction is to determine and effectuate the
intent of the legislature. Wieters v.
Bon-Secours-St. Francis Xavier Hosp., Inc., 378 S.C. 160, 168, 662 S.E.2d 430, 434 (Ct. App. 2008). “Where the statute’s language
is plain and unambiguous…the rules of statutory interpretation are not needed
and the court has no right to impose another meaning.” Hodges v. Rainey,
341 S.C. 79, 85, 533 S.E.2d 578, 581 (2000). The words of a statute “must be
given their plain and ordinary meaning without resort to subtle or forced
construction to limit or expand the statute’s operation.” Hitachi Data Sys.
Corp. v. Leatherman, 309 S.C. 174, 178, 420 S.E.2d 843, 846 (1992). “[W]here
a statute is ambiguous, the Court must construe the terms of the statute.” Wade v. Berkeley County, 348 S.C. 224, 229, 559 S.E.2d 586, 588 (2002).
“In
construing a statute, the court looks to the language as a whole in light of
its manifest purpose.” Wieters 662 S.E.2d at 435. Courts will rebuff an
interpretation which leads to a result that is so plainly absurd that it could
not have been intended by the legislature. Id at 436. “A court should
not consider a particular clause in a statute as being construed in isolation,
but should read it in conjunction with the purpose of the whole statute and the
policy of the law.” Id (emphasis added); see also Mid-State Auto Auction v. Altman, 324 S.C. 65, 69, 476 S.E.2d 690, 692 (1996) (when determining legislative intent, courts should consider the language of
the statute as a whole).
Importantly,
statutory ambiguities will be resolved against a taxpayer claiming an
exemption. SCANA Corp. v. S. C. Dep’t of Revenue, 2008 WL 2572595 at *2 (2008); see also State
v. Life Ins. Co. of Georgia, 254 S.C. 286, 292, 175 S.E.2d 203, 206 (1970)
(stating the general rule that statutory language creating exemptions from
taxation will not be strained or liberally construed in favor of a taxpayer
claiming an exemption, the taxpayer must clearly bring himself within the
statutory language upon which he relies); Guaranty Bank & Trust Co. v.
S. C. Tax Comm’n, 254 S.C. 82, 90, 173 S.E.2d 367, 370 (1970) (“A refund of
taxes is solely a matter of governmental or legislative grace and any person
seeking such relief must bring himself clearly within the terms of the statute
authorizing the same.”).
Each
of the constructions that follow are, standing alone, enough to support a
finding in favor of Respondent.
I. CONSTRUCTION BASED ON
UNIFORMITY AND EQUALITY AND READING THE STATUTE AS A WHOLE
Here,
the operative statute is S.C. Code Ann. §12-43-220. It provides, in pertinent
part:
Except as otherwise provided, the ratio of assessment to value of
property in each class shall be equal and uniform throughout the State. All
property presently subject to ad valorem taxation shall be classified as
follows…
(c)(1) The legal
residence and not more than five acres contiguous thereto, when owned totally
or in part in fee or by life estate and occupied by the owner of the interest,
and additional dwellings located on the same property and
occupied by immediate family members of the owner of the interest, are taxed on
an assessment equal to four percent of the fair market value of the property.
If residential real property is held in trust and the income
beneficiary of the trust occupies the property as a residence, then the
assessment ratio allowed by this item applies if the trustee certifies to the
assessor that the property is occupied as a residence by the income beneficiary
of the trust.
When the legal residence is located on leased or rented property
and the residence is owned and occupied by the owner of a residence on leased
property, even though at the end of the lease period the lessor becomes the
owner of the residence, the assessment for the residence is at the same ratio
as provided in this item. If the lessee of property upon which he has located
his legal residence is liable for taxes on the leased property, then the
property upon which he is liable for taxes, not to exceed five acres contiguous
to his legal residence, must be assessed at the same ratio provided in this
item.
If this property has
located on it any rented mobile homes or residences which are rented or any
business for profit, this four percent value does not apply to those businesses
or rental properties. For purposes of the
assessment ratio allowed pursuant to this item, a residence does not qualify as
a legal residence unless the residence is determined to be the domicile of the
owner-applicant.
S.C.
Code Ann. §12-43-220 (Supp. 2007) (emphasis added).
S.C.
Code Ann. §12-43-220 (c) continues:
(7) 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.
S.C.
Code Ann. §12-43-220 (c)(7) (Supp. 2007).
Internal Revenue Code Section 280 A(g) provides, in
pertinent part:
(g) Special rule
for certain rental use. Notwithstanding any other provision of this section…if
a dwelling unit is used during the taxable year by the taxpayer as a residence
and such dwelling 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. § 280 A(g).
The Petitioner argues that the
disqualifying language pertaining to rental property found in § 12-43-220(c)(1)
should only apply to the leasehold interests mentioned in the sentence
preceding the disqualifying language. An examination of the language of §
12-43-220 reveals that the legislature intended otherwise.
The preliminary language of § 12-43-220 reflects the true
intention of the legislature, to wit, that equality be achieved in the
assessment of all property. See S.C. Code Ann. § 12-43-220 (Supp.
2007), supra. Section 12-43-220(c)(7), supra, was added as an amendment in 2005 after the parent subsection was
enacted in 2002. The obvious intent of the amendment was to prevent the strict disqualification
by rental in (c)(1) from denying the 4% assessment to taxpayers who may have
occasion to rent their legal residences for 14 days or less in the tax year in
question. Thus, this is clearly an instance of “legislative grace”. See SCANA Corp., supra.
II.
CONSTRUCTION BASED ON LANGUAGE IN § 12-43-220 (c)(7)
Special note should be given to the portion of § 12-43-220 (c)(7)
which states: “…the owner occupant of a legal residence is not disqualified from receiving the four per cent assessment ratio …”. S.C. Code Ann § 12-43-220(c)(7)
(Supp. 2007) (emphasis added). The language of the amendment plainly recognizes
that there are disqualifying terms contained within the operative statute, and the
enactment of the amendment allowing the 14 day exemption to the “owner-occupant
of a legal residence” clearly points to the intention for the exemption to
apply to all legal residences, not just those on leased properties. As noted
above, the only disqualification applying to legal residences found in § 12-43-220
is the rental and business disqualification contained in (c)(1).
Since the “is not disqualified” language of (c)(7) can only
refer to the rental and business disqualifications of (c)(1), the amendment clearly
presumes that the rental and business qualification applies to all legal
residences. Plainly stated, there would have been no need for the exemption to
apply to all if the disqualification did not apply to all. Therefore, reading
the statute as a whole, it is evident that the provisions of (c)(7) apply to make less
restrictive the provisions of (c)(1), and that
the disqualifying language found in (c)(1) should be applied uniformly to all
legal residences. To hold otherwise would not only avoid the equality and
uniformity sought by the legislature in the opening paragraph of § 12-43-220,
but would also contravene the well settled rule resolving ambiguities against
the taxpayer in matters involving “legislative grace”. See SCANA
Corp., supra.
The Taxpayer also contends that, even if the exemption of §
12-43-220 applies to all property, the fourteen day exemption operates only as
a “safe harbor” and does not prevent a taxpayer who rents his legal residence
from obtaining the 4% assessment ratio if otherwise qualified. I disagree.
When read in conjunction with § 12-43-220 in its entirety,
neither § 12-43-220 (c)(7) nor I.R.C. § 280 A(g) support the contention that
properties rented in excess of fourteen (14) days are entitled to a case by
case analysis to determine whether the 4% ratio applies. The foregoing
subsections clearly do not provide any language pertaining to an expansion of
taxpayer recourse beyond the prescribed fourteen day limitation. Accordingly, this court will not seek to impose another meaning
in this regard. See Wieters, supra (“Where
the statute’s language is plain and unambiguous…the rules of statutory
interpretation are not needed and the court has no right to impose another
meaning.”).
Additionally, as noted above, § 12-43-220 was enacted with the
express purpose of uniformly applying the rules set forth therein. See S.C. Code Ann. § 12-43-220, supra. I find that expanding the scope of §
12-43-220 would prove to be an obvious frustration of this intent.
ORDER
Accordingly,
based on the forgoing reasons, I find that the Beaufort County’s application of
the 6% tax assessment ratio to Petitioner’s legal residence for the tax year of
2006 is hereby AFFIRMED.
AND
IT IS SO ORDERED.
______________________________
John
D. McLeod, Judge
Administrative
Law Court
August 11, 2008
Columbia, SC
A more simple expression of (c)(7)
would be: The owner occupant of a legal residence is not disqualified from
receiving the four percent assessment ratio so long as the legal residence is
not rented for more than fourteen (14) days in the tax year in question.
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