SC Administrative Law Court Decisions

Due to a denial of a homestead exemption for tax years 1995 through 1998, Hilda N. Stone (Hilda) seeks a refund of property taxes. The Aiken County Auditor (Auditor) opposes Hilda's position and asserts the homestead exemption was properly denied. Further, while not directly argued, the Auditor's argument implies that even if the homestead exemption was wrongly denied, no authority exists to grant a refund for 1995 through 1998.

1. Was Hilda improperly denied the homestead exemption for tax years 1995 through 1998?

2. If yes, can a refund be granted for tax years 1995 through 1998?

1. Positions of Parties

The Auditor argues that the removal of the exemption in 1995 was proper since the ownership of the homestead changed from joint ownership in Hilda and James Stone (Hilda's husband) to sole ownership in Hilda. The Auditor concludes that the loss of the exemption in 1995 required denial of the exemption in 1996, 1997, and 1998 since Hilda failed to file an application seeking the exemption for those subsequent years.

Hilda disagrees. She argues the Auditor erred in removing the exemption for tax year 1995 since she held ownership of the homestead prior to the deed change and held ownership afterward. Thus, she argues no change in the ownership of the homestead occurred. Therefore, her view is that the homestead exemption was wrongly removed in 1995 and improperly denied for 1996, 1997, and 1998.

2. Findings of Fact

I find by a preponderance of the evidence the following facts:

In 1978, James and Hilda occupied, as the owners, property located at 116 Hasty Road, Aiken, South Carolina. At the time of occupancy, James and Hilda held the property as tenants in common and used the property as their permanent home and legal residence.

On October 28, 1993, James and Hilda applied for a homestead exemption on their property. James was 67, and Hilda was 65. After a review, the Aiken County Auditor approved the application and granted the exemption. However, from the Auditor's point of view, events occurring in 1994 and 1995 brought the exemption into question.

On November 17, 1994, by deed, James conveyed his one half interest in the property to Hilda resulting in Hilda obtaining sole ownership in the property. Further, on June 28, 1995, Hilda applied to the Aiken County Assessor for the 4% assessment ratio for a legal residence. The 4% classification was granted.

At some point during late 1994 or early 1995, the Assessor notified the Auditor that a deed had altered the ownership in the 116 Hasty Road property. The Auditor did not know the manner in which the title to the property had changed. Rather, the Auditor concluded that a change in ownership had occurred and that such a change warranted the withdrawal of the homestead exemption for 1995. Further, the Auditor concluded that the exemption could not be given for years after 1995 unless the new owner filed a new application for the homestead exemption.

3. Conclusions of Law

Based upon the preponderance of the evidence, I make the following conclusions of law:

The General Assembly, acting upon its constitutional authority to grant homestead exemptions, established an exemption "for persons sixty-five years of age and older, for persons permanently and totally disabled and for blind persons." S.C. Const. Art. X, § 4 and S.C. Code Ann. § 12-37-220 (A)(9) (Revised 2000). The homestead exemption reduces the fair market value of the "dwelling place" with "dwelling place" defined as "the permanent home and legal residence of the applicant." S.C. Code Ann. § 12-37-250. Further, "legal residence" status is limited to one who is the owner and occupant of the property. See S.C. Regs. Ann. 117-124.6 (there the regulation explains that "[f]or property tax purposes the term 'Legal Residence' shall mean the permanent home or dwelling place owned by a person and occupied by the owner thereof.").

Not surprisingly, given the above emphasis on "ownership," once the exemption is granted, the exemption continues for all subsequent years as long as "the ownership of the homestead or the other qualifications for the exemption remain unchanged." S.C. Code Ann. § 12-37-255(a) (Revised 2000). Here, the Auditor argues the ownership of the homestead changed in 1994 when James deeded his one-half interest to Hilda. I disagree.

The primary concern in interpreting a statute is to ascertain and effectuate legislative intent. Whitner v. State, 328 S.C. 1, 492 S.E.2d 777 (1997). In ascertaining legislature intent, one should not focus on any single section or provision but should consider the language of the statute as a whole. Mid-State Auto Auction of Lexington, Inc. v. Altman, 324 S.C. 65, 476 S.E.2d 690 (1996). The terms must be construed in context and their meaning determined by looking at the other terms used in the statute. Southern Mut. Church Ins. Co. v. South Carolina Windstorm and Hail Underwriting Ass'n, 306 S.C. 339, 412 S.E.2d 377 (1991). Furthermore, sections which are part of the same general statutory law must be construed together. State v. Alls, 330 S.C. 528, 500 S.E.2d 781 (1998); see also South Carolina Dept. of Transp. v. Faulkenberry, 337 S.C. 140, 522 S.E.2d 822 (Ct. App. 1999) (Statutes should be construed with regard to the whole system of law of which they form a part.); Doe v. Brown, 331 S.C. 491, 489 S.E.2d 917 (1997) (Statutes which are part of the same legislative scheme should be read together.).

When construed with other related statutes and when read in context as well as a part of the statute as a whole, section 12-37-255 addresses a change that will impact the qualifications for the exemption. Indeed, the General Assembly's emphasis in 12-37-255 is on "qualifications."

The intent to emphasize qualifications is apparent since the exemption continues so long as "the ownership of the homestead or the other qualifications for the exemption remain unchanged." (Emphasis added). S.C. Code Ann. § 12-37-255(a) (Revised 2000). "Other" is commonly used to link one member of a class to another member of the same class. See Coleman v. U.S., 93 Ct.Cl. 127, 37 F.Supp. 273 (1941) (where the court found the class under review was "liquid substances"and then found a specific liquid substance was taxable as gasoline since the liquid was an "other liquid" within a statute taxing gasoline, benzol, and "any other liquid the chief use of which is as a fuel for the propulsion of motor vehicles, motorboats, or airplanes."). Thus, the General Assembly intended "the ownership of the homestead" to be a qualification and did not intend for the exemption to be lost due to a transfer having no impact on the qualification for the exemption.

What change in ownership of the homestead will disqualify the exemption? Construing section 12-37-255 together with section 12-37-250, a change in ownership of the homestead is any change that alters (either by an increase or a decrease) the total degree of exempt homestead ownership held by the applicants at the time the exemption was granted. ⁽¹⁾ Applying this rule to the instant case shows that the exemption should not have been removed.

In 1993, the homestead was owned by James and Hilda and each independently qualified for the exemption. Thus, since two equal owners qualified, James received the benefit of 50% of the exemption and Hilda received the benefit of 50%. See S.C. Code Ann. § 12-37-250 (Revised 2000) (where the exemption is granted to all owners who qualify with the amount of the exemption for each based on the percentage of ownership); S.C. Op. Atty. Gen. 120 (June 12, 1980) (where seven persons held equal shares in the homestead but only one qualified so that the amount of the exemption was limited to 14.285%.)

Thus, in 1993, the total degree of exempt ownership held by the applicants was 100%. After the 1994 deed from James to Hilda, the total degree of exempt ownership held by the applicants remained at 100%, now in one of the original applicants instead of two. Therefore, no change in the ownership of the homestead occurred.

Based upon the above meaning of S.C. Code Ann. § 12-37-255(a) (Revised 2000), no change in the ownership of the homestead occurred by James' deeding of his interest to Hilda, and the Auditor erred in removing the homestead exemption in 1995. Further, since the exemption should not have been removed in 1995, Hilda had no obligation to file an application for an exemption for 1996, 1997, or 1998. See S.C. Code Ann. § 12-37-255(a) (Revised 2000) (the exemption continues with no additional application for any subsequent year after the initial year of approval as long as "the ownership of the homestead or the other qualifications for the exemption remain unchanged."). Therefore, the Auditor also erred in denying the homestead exemption for 1996, 1997, and 1998. ⁽²⁾

1. Positions of Parties

While not directly argued by the Auditor, the Auditor's argument implies that no authority exists to refund the taxes even if the exemption removal in 1995 and the exemption denials in 1996, 1997, and 1998 were in error. Hilda asserts that an overpayment of taxes due to an error involving a denial of the homestead exemption can be refunded.

2. Findings of Fact

I find by a preponderance of the evidence the following facts:

Hilda paid taxes without the benefit of the homestead exemption for tax years 1995 through 1999. On November 6, 2000, Hilda requested a refund of property taxes for 1995 through 1999. The Auditor granted a refund for 1999 but denied a refund for 1995 through 1998.

3. Conclusions of Law

The issue is whether authority exists to issue a refund of overpaid property taxes resulting from an improper removal of a homestead exemption in 1995 and an improper denial of the exemption for 1996 through 1998. In answering this issue, the impact of S.C. Code Ann. § 12-45-78 as enacted by Act No. 399, 2000 Acts of the General Assembly must be addressed.

The applicable language of Act 399 as found in §3, subsection X(1) is as follows:

If a homestead exemption is granted pursuant to Section 12-37-250 or a residential classification is made pursuant to Section 12-43-220(c) after payment of the property tax for that year, a resulting overpayment must be refunded to the owner of record at the time the exemption is granted or the classification is made.

Here, Hilda has an overpayment of taxes for each tax year of 1995 through 1998. Further, the homestead exemption will be granted by the Auditor during 2001, a date well beyond the dates the taxes were paid. Under such circumstances, the "overpayment must be refunded to the owner of record at the time the exemption is granted."

Accordingly, if Act 399 is applicable to the instant case, the Auditor must issue refunds to Hilda, the current owner of record and the presumed owner of record at the time the Auditor will grant the exemptions. In this case, Act 399, §3, subsection X(1) is applicable.

Section 3, subsection X(10) expressly holds that all of subsection X "takes effect January 1, 2001." Such language does not state the refund is limited to "tax years beginning on or after January 1, 2001." Rather, no limit is imposed other than the requirements that the homestead must be granted after the payment of the tax. Thus, any homestead exemptions granted after January 1, 2001 for which an overpayment exists will require a refund of any overpaid taxes. In this case, the evidence establishes that the Auditor will grant the disputed homestead exemptions during 2001 for the overpaid tax years of 1995 through 1998. Thus, the plain language makes §3, subsection X(1) applicable here. See Bryant v. City of Charleston, 295 S.C. 408, 368 S.E.2d 899 (1988) (where court explains that in ascertaining legislative intent, words must be given their plain and ordinary meanings).

In addition, to the extent that applying subsection X(1) to tax years 1995 through 1998 could be considered a retroactive application, such an application is proper. Statutes that are remedial or procedural in nature are generally held to operate retrospectively. See Merchants Mut. Ins. Co. v. South Carolina Second Injury Fund, 277 S.C. 604, 291 S.E.2d 667 (1982); Hercules, Inc. v. South Carolina Tax Comm'n, 274 S.C. 137, 262 S.E.2d 45 (1980) (statutes affecting the remedy, not the right, are generally retrospective); Smith v. South Carolina Retirement Sys., 336 S.C. 505, 520 S.E.2d 339 (Ct.App.1999). The provision of subsection X here under review is a remedial statute since it allows a refund for a wrongly denied but pre-existing right to an exemption and thereby "creates new remedies for existing rights or enlarges the rights of persons under disability." Hooks v. Southern Bell Tel. & Tel. Co., 291 S.C. 41, 351 S.E.2d 900 (Ct.App. 1986). Accordingly, subsection X(1) is properly applied to tax years 1995 through 1998 and refunds are due.

Within ten days of the date of this order, the Aiken County Auditor shall grant a homestead exemption to Hilda N. Stone for tax years 1995 through 1998 and shall notify Hilda in writing that the homestead has been granted for tax years 1995 through 1998.

After notice of the granting of the exemption, Hilda shall provide reasonable proof to the Auditor that Hilda is the owner of record at the time the exemption is granted.

Within ten days of the Auditor receiving such reasonable proof, the Auditor shall refund to Hilda the overpayment of taxes resulting from the denial of the homestead exemption for tax years 1995 through 1998.

AND IT IS SO ORDERED

______________________

RAY N. STEVENS

Administrative Law Judge

Dated: April 27, 2001

Columbia, South Carolina

1. To aid in understanding the rule of this case, the following illustrations are provided:

A, B, and C have equal interests in a home. A and B qualify for and are receiving a homestead exemption of 33.3% each. C does not qualify. C sells to D who also does not qualify. No new application is needed since the total exempt homestead ownership (66.6%) held by the applicants (A & B) at the time the exemption was granted remains the same (66.6%) after the transfer by C.

Same, except C sells to B. New application is required since the total exempt homestead ownership (66.6%) held by the applicants (A & B) at the time the exemption was granted changes to 100% (A has 33.3% and B now has 66.6%) for the same two applicants who held the original 66.6%. Even though A stays at 33.3%, a new application is required when any of the original applicants change their percentage of exemption and that change affects the total exempt percentage that existed at the time of the original application.

Same, except A sells to B. No new application is required since the total exempt percentage at the time of application was 66.6% and the original applicants were A and B. Now B, an original applicant, has 66.6%. Thus, the total degree of exempt ownership held by the original applicants at the time the exemption was granted did not change.

A caveat is in order. Dicta, such as the above, is language in a decision that addresses a subject outside the question being answered. See Drummond v. Beasley, 331 S.C. 559, 503 S.E.2d 455 (1998). Some courts have unceremoniously characterized "dicta" as "neither binding nor illuminating" on subsequent controversies. State v. Addison, 338 S.C. 277, 525 S.E.2d 901 (Ct.App. 1999). However, since the rule being applied in the current case is new to both tax administrators and taxpayers, the likely ramifications of that rule are expounded upon to the limited degree addressed in this footnote.

2. Certainly, in deciding whether to remove a homestead exemption, the Auditor is benefitted by the Assessor notifying the Auditor of any deeds which change the title-ownership of properties receiving the residential four percent assessment ratio. However, the Auditor, not the Assessor, has the sole duty to determine whether the deed change warrants removal of the exemption. S.C. Code Ann. § 12-37-255 (Revised 2000). Moreover, once the Auditor determines the property qualifies for the homestead exemption, "[n]otwithstanding any other provision of law" the property "is classified and taxed as residential on an assessment equal to four percent [and] the county auditor shall notify the county assessor of the property so qualifying and no further application is required for such classification and taxation." S.C. Code Ann. § 12-37- 252 (Revised 2000). Thus, the Auditor determines the exemption and that determination sets the Assessor's assessment ratio, not the other way around.