SC Administrative Law Court Decisions

This matter came before me pursuant to S.C. Code Ann. §12-60-2540 (Supp. 1996), upon the request of Eugene F. Young (Taxpayer) contesting the Charleston County Auditor's (Auditor) determination to assess personal property taxes against the Taxpayer's personal watercraft "Need for Speed" for tax year 1996. During the process of Petitioner's appeal of the Auditor's decision to assess his personal property, the additional issue of whether the Petitioner's real property located at 154-B Tradd Street in Charleston, S.C. was properly assessed at four (4%) percent as a legal residence for tax years 1992, 1993, 1994, and 1995. The parties agree that the issue of ad valorem real property tax is properly before me.⁽¹⁾ The Taxpayer exhausted all pre-hearing remedies and is now seeking a contested case hearing before the Administrative Law Judge Division. After notice to the parties, a hearing was conducted July 29, 1997.

Any issues raised in the proceedings or hearing of the case but not addressed in this Order are deemed denied. ALJD Rule 29(B). I find that no assessment of personal property taxes against the Taxpayer's boat for the tax year 1996 may be made. I further find that the retroactive assessment of ad valorem real property taxes based upon a six (6%) percent ratio on Taxpayer's home for tax years 1992, 1993, 1994, and 1995 is proper.

Based upon the evidence presented, I make the following findings of fact, taking into consideration the burden on the parties to establish their respective cases by a preponderance of the evidence and taking into account the credibility of the witnesses:

1. This Division has personal and subject matter jurisdiction.

2. Notice of the date, time, place and nature of the hearing was timely given to all parties.

3. Eugene F. Young is a resident and citizen of the State of North Carolina. Eugene F. Young acquired the "Need for Speed" water craft, a 30' sailing vessel, in October of 1995, and was the owner of the vessel on December 31, 1995.

4. Young rented a slip at the Charleston City Marina in Charleston County, S.C., during the calendar year 1995. The "Need for Speed" was moored at this slip approximately half the time between October 1995 and December 31, 1995. At other times, the "Need for Speed" was participating in various regattas up and down the East Coast. The slip in Charleston was the only berth for "Need for Speed" that Young maintained at all times, and the hailing port on the stern of the vessel was listed as "Charleston, South Carolina."

5. Approximately two weeks before the end of 1995, Young removed the "Need for Speed" from its berth in Charleston and transported it to Florida, to participate in a regatta and to avoid a tax situs in South Carolina. Therefore, "Need for Speed" was in a slip in Florida on December 31, 1995.

6. On September 30, 1996, Young was sent a tax bill reflecting personal property taxes in the amount of $1,421.84 due on the "Need for Speed" for the tax year 1996.

7. Young paid personal property taxes on the "Need for Speed" in Cleveland County, North Carolina.

8. In 1991 or 1992 Eugene F. Young purchased real property located at 154-B Tradd Street in Charleston, S.C.

9. On April 23, 1992, Young applied for and received the four (4%) percent legal residence status for purposes of ad valorem real property taxes for Charleston County, S.C. on the property at 154-B Tradd Street.

10. Young occupied the Tradd Street property as his residence whenever he was in Charleston for business or personal purposes.

11. At the time that Eugene F. Young purchased the property on Tradd Street, and at all times that he owned the property on Tradd Street, he was a resident of, citizen of, and domiciled in the State of North Carolina. He was registered to vote in North Carolina. He paid income taxes in North Carolina. He held a North Carolina driver's license, and his dentistry practice was in North Carolina.

12. On February 7, 1997, the Charleston County Assessor sent a letter notifying Mr. Young and the Charleston County Auditor that the Tradd Street property had been erroneously qualified as a legal residence, and directing the Auditor to prepare revised tax bills reflecting the new 6% classification.

Based upon the foregoing findings of fact, I conclude as a matter of law, the following:

1. S.C. Code Ann. §12-60-2540 (Supp. 1996) authorizes the South Carolina Administrative Law Judge Division to hear contested cases pursuant to Chapter 23 of Title 1 of the 1996 Code, as amended.

2. The County Auditor is responsible for ascertaining that all personal property subject to ad valorem taxation by the Constitution or general law is listed and assessed according to manuals, guidelines, and regulations promulgated by the S.C. Tax Commission (now the S.C. Department of Revenue). S.C. Code Ann. §12-39-340 (1976).

3. S.C. Code Ann. §12-37-210 (1976) defines property which is taxable in South Carolina as follows:

All real and personal property in this State, personal property of residents of this State which may be kept or used temporarily out of the State, with the intention of bringing it into the State, or which has been sent out of the State for sale and not yet sold, and all monies, credits and investments and bonds, stocks, joint-stock companies or otherwise of persons resident in this State shall be subject to taxation.

(Emphasis added).

4. In South Carolina, the situs of personal property must be determined as of December 31 of the year preceding the tax year. Atkinson Dredging Co. v. Thomas, 266 S.C. 361, 223 S.E.2d 592 (1976).

5. Under S.C. Code Ann. § 12-37-900 (1976), personal property is taxable in this State if it is possessed or controlled on December 31, and the person possessing or controlling such property is "required by law to list property."

6. S.C. Code Ann. § 12-37-710 (1976) governs whether a person is required by law to list personal property. It states in pertinent part:

Every person of full age and of sound mind shall annually list for taxation the following personal property, to wit:

(1) All the tangible personal property in the State owned or controlled by him;

(2) All the tangible property owned by him or by any other resident of this State and under his control which may be temporarily out of the State but is intended to be brought into the State;

* * *

(Emphasis added).

7. In construing a statute, its words must be given their plain and ordinary meaning without resorting to subtle or forced construction to limit or expand the statute's operation. First Baptist Church of Mauldin v. City of Mauldin, 308 S.C. 226, 417 S.E.2d 592 (1992). Furthermore, sections which are part of the same general statutory law must be construed together and each one given effect, if it can be done by any reasonable construction. In Interest of Doe, 318 S.C. 527, 458 S.E.2d 556 (Ct. App. 1994).

8. Read together, the foregoing statutes indicate that all tangible personal property physically in South Carolina as of December 31, whether owned by a resident or a nonresident, is taxable unless otherwise provided by law. These sections also provide that all tangible personal property of residents which is temporarily out of the state on December 31 is likewise taxable. However, since both Sections 12-37-710(2) and 12-37-210 refer only to property of residents which is temporarily out of South Carolina, the necessary implication is that property of nonresidents which is temporarily out of South Carolina on December 31 is not taxable in this State. To hold otherwise would be to improperly expand the operation of the statutes.⁽²⁾

This interpretation is also consistent with S.C. Tax Commission Decision #94-8, in which the Commission determined that a boat belonging to a Florida resident, which was docked in South Carolina for a portion of each year but which was not located in South Carolina on December 31, was not taxable in South Carolina. Though Commission Decision #94-8 involved a boat that whose permanent slip and hailing port was in Florida, the reasoning of that Decision is applicable in this case.⁽³⁾ I therefore conclude that the "Need for Speed" was not taxable in South Carolina for the tax year 1995.

9. S.C. Code Ann. § 12-43-220(c) (Supp. 1993), which was in effect when Young applied for the legal residence classification on the Tradd Street property, provides in pertinent part:

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, is taxed on an assessment equal to four percent of the fair market value of the property. . . .

Thus, in determining whether Young is entitled to receive the 4% classification on the Tradd Street property, it must first be ascertained whether that property was Young's "legal residence" at the time he applied for the classification.

10. The term "legal residence" is not defined in Section 12-43-220. Therefore, this Court must look to other sources for a definition of the term. Black's Law Dictionary defines "legal residence" as "[t]he place of domicile or permanent abode, as distinguished from temporary residence. [The] [p]ermanent fixed place of abode which [a] person intends to be his residence and to which he intends to return despite temporary residences elsewhere or despite temporary absences." Black's Law Dictionary at 807 (5th ed. 1979). It further defines "domicile" as follows:

That place where a man has his true, fixed, and permanent home and principal establishment, and to which whenever he is absent he has the intention of returning. . . . A person may have more than one residence but only one domicile. The legal domicile of a person is important since it, rather than the actual residence, often controls the jurisdiction of the taxing authorities and determines where a person may exercise the privilege of voting and other legal rights and privileges. . . . It is his legal residence, as distinguished from his temporary place of abode; or his home, as distinguished from a place to which business or pleasure may temporarily call him.

Id. at 435.

The South Carolina Supreme Court has also held, in a case dealing with the assessment of income taxes, that the term "legal residence" is equivalent to "domicile." Phillips v. S.C. Tax Comm'n, 195 S.C. 472, 12 S.E.2d 13 (1940).

11. Where a statute uses a word having a well-recognized meaning in law, the presumption is that the legislature intended to use the word in that sense. Smalls v. Weed, 293 S.C. 364, 360 S.E.2d 531 (Ct. App. 1987). I therefore conclude that the term "legal residence" as used in Section 12-43-220(c) means "domicile," and that in order to receive the legal residence classification on a property, the owner must use that property as his domicile.⁽⁴⁾

12. Young admits that he was domiciled in North Carolina at the time he applied for the legal residence classification on the Tradd Street property. However, he contends that 27 S.C. Code Ann. Regs. 117-122 (1976) allows a legal resident of another state to receive the 4% classification. That regulation provides: "The term 'legal residence' for purposes of § 12-43-220(c), shall mean a person's actual and primary residence in this State, however, the same shall not include a residence maintained principally for vacation or recreational purposes." (Emphasis added.) Under the facts of this case, although Young used the property on Tradd Street as his actual residence, it is clear that the Tradd Street house was not his primary residence. Instead, Young's primary residence was, and continues to be, in North Carolina. Moreover, a construction of Regs. 117-122 allowing a domiciliary of another state to receive the legal residence classification in South Carolina would be inconsistent with the purposes and meaning of Section 12-43-220(c), and would render Regs. 117-122 void. Society of Professional Journalists v. Sexton, 283 S.C. 563, 324 S.E.2d 313 (1984) (a regulation must fall when it alters or adds to a statute); Milliken and Co. v. S.C. Dept. of Labor, 275 S.C. 264, 269 S.E.2d 763 (1980) (a regulation which materially alters or adds to the law is void).

13. Since Young was a legal resident and domiciliary of North Carolina at the time he applied for the legal residence classification on the Tradd Street property, I conclude that he was not entitled to receive the 4% classification for the tax years 1992, 1993, 1994, and 1995.

Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby:

ORDERED that no personal property taxes on "Need for Speed" may be assessed against Eugene F. Young for tax year 1996.

IT IS FURTHER ORDERED that the Petitioner's real property located at 154-B Tradd Street be retroactively assessed at the six (6%) percent assessment ratio for tax years 1992, 1993, 1994 and 1995.

Judge Ralph K. Anderson, III

Administrative Law Judge

Columbia, South Carolina

December 18, 1997

1. Accordingly, the caption of this case is amended to add the Charleston County Assessor as a Respondent.

2. The General Assembly certainly can, if it wishes, close this potential loop hole of its own statutory creation.

3. The Commission, in a footnote, stated that its holding, that property of nonresidents was not taxable in South Carolina if it were not physically present within the state on December 31, did not operate to allow nonresidents to escape taxation by fraudulently removing property temporarily from the state. However, the Commission cited no authority for this proposition, nor has this court been able to locate any such authority. Furthermore, although Young stated that he was aware of tax situs when he moved the "Need for Speed" to Florida, he also stated that the primary reason the boat was moved was to participate in a regatta. Therefore, under these circumstances, I cannot conclude that Young fraudulently removed the boat from South Carolina.

4. Section 12-43-220(c) has since been amended to state that "[f]or 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(c)(1) (Supp. 1996). This change was effective for tax years beginning after 1996. However, in light of my conclusion that the term "legal residence" is equivalent to "domicile," the subsequent amendment of the statute is of little consequence to Young.