SC Administrative Law Court Decisions

This matter is a contested case in which Charleston County (County) seeks to deny the payment of interest to Golf Wheels, Inc. on a refund of taxes for the 1994 tax year. The Charleston County Assessor (County) denied payment of the interest but on review the Charleston County Board of Assessment Appeals found that interest was due. The County brought this dispute to the Administrative Law Judge Division.⁽¹⁾ In this case, interest of $2,068.43 is due the taxpayer.

Is the County required to pay interest on a refund of overpaid 1994 taxes and, if so, at what rate?

1. Positions of Parties

The County argues no interest is due for 1994 since in its view S.C. Code Ann. § 12-43-305 applies to this controversy and that statute prohibits interest on overpayments made after June 30, 1994. The taxpayer disagrees. The taxpayer argues that interest is due for 1994 under S.C. Code Ann. § 12-60-2550 and that § 12-43-305 does not apply. In the alternative, the taxpayer argues that if § 12-43-305 applies, that statute limits interest only for the reassessment year of 1993, not for the non-reassessment year of 1994. Thus, in its view, interest must be paid on the 1994 overpayment at the rate of one percent a month until the payment is made to the taxpayer.

2. Findings of Fact

Based upon the preponderance of the evidence, the following Findings of Fact are entered:

In Charleston County, tax year 1993 was a reassessment year. As a result, a significant number of taxpayers appealed their reassessments. In fact, over five percent of the parcels of Charleston County were appealed as the result of the 1993 reassessment. As a part of the 1993 reassessment, Golf Wheels, Inc. received a valuation notice on its property, PID # 358-00-00-026. The taxpayer disagreed with the valuation and filed a challenge with the County. The taxpayer paid its 1994 property tax of $59,334.92 on January 13, 1995 and continued its challenge for that year as well.

In addressing the challenges, the Charleston County Board of Assessment Appeals denied the taxpayer's request on the ground that the challenges were untimely. However, after a contested case hearing, Administrative Law Judge Stephen P. Bates ruled that the challenges were timely and remanded the matter for further consideration. On remand, the County reduced significantly the appraised value of the taxpayer's property for tax years 1993 and 1994.

The reduction entitled the taxpayer to a refund of $37,664.47 for overpaid taxes for tax year 1993 and $34,473.92 for tax year 1994. The overpaid taxes for both tax years 1993 and 1994 were refunded on March 6, 1997. However, the County paid interest to the taxpayer only on the 1993 tax year refund. The interest paid on the 1993 tax year was calculated at one percent per month for six months for a total of $2,259.84.

The taxpayer seeks the payment of interest for the 1994 overpayment and the County opposes the payment of any interest. No dispute exists as to the amount or method of calculating the interest for tax year 1993. Rather, the controversy is solely the lack of any interest paid for tax year 1994.

3. Conclusions of Law

Based upon the Findings of Fact, the following Conclusions of Law are entered:

Historically, refunds of taxes in South Carolina have not required the payment of interest unless directed by statute. See Monarch Mills v. S.C. Tax Comm'n, 149 S.C. 219, 146 S.E. 870 (1929) ("It is well settled, both as to principle and authority, that a [taxing entity] cannot be held to the payment of interest on its debts unless bound by an act of the Legislature or by a lawful contract . . . ."), overruled on other grounds by McCall by Andrews v. Batson, 285 S.C. 243, 329 S.E.2d 741 (1985); see also Colonial Life & Accident Ins. Co. v. South Carolina Tax Commission, 233 S.C. 129, 103 S.E.2d 908 (1958) ("[Colonial] is not entitled to interest on the amount [of taxes] so paid by it, there being no statute permitting recovery of interest in such cases."). But see U.S. v. Livingston, 179 F.Supp. 9, 15, affirmed 80 S.Ct. 1611 (1960) (where the bar to federal court jurisdiction was lifted since the "right to recover taxes illegally collected is not an adequate remedy if it does not include the right to recover interest at a reasonable rate for the period during which the taxpayer's money is withheld."). Thus, the analysis in the instant case requires deciding what statute, if any, governs the payment of interest and further, if a statute does require interest, how is the statute to be applied to the facts of this case.

a. Applicable Statute

Two statutes potentially govern the payment of interest to the taxpayer: S.C. Code Ann.§§ 12-43-305 as in effect for tax year 1994 and 12-60-2550 as enacted in 1995. The taxpayer asserts the County may not apply § 12-43-305 to this dispute since the 1995 Revenue Procedures Act explicitly repealed S.C. Code Ann. § 12-43-305 in August of 1995 and did so without including a savings clause. Further, interest should be made under § 12-60-2550 since the refund was not made until March of 1997 at which point the 1995 enactment of § 12-60-2550 was applicable. I cannot agree with the taxpayer. Rather, § 12-43-305 controls this controversy.

Certainly, the general rule is that the repeal of a statute operates retrospectively, and has the effect of blotting the statute out so completely that it is viewed as if it had never existed and that further a repeal is viewed as putting an end to all proceedings based upon the statute unless the proceedings have been prosecuted to final judgment. E.g., Taylor v. Murphy, 293 S.C. 316, 360 S.E.2d 314 (1987). However, all general rules of interpretation must yield to the expressed intent of the General Assembly. Singletary v. South Carolina Dep't of Educ., 316 S.C. 153, 447 S.E.2d 231 (Ct. App.1994).

In this instance, effective July 1, 1991, the General Assembly expressly stated that "the repeal . . . of a code section or act does not release or extinguish any tax, interest, . . . or liability incurred, unless the repealing section or act expressly so provides [and] [t]he repealed . . . code section or act must be treated as remaining in force for the purpose of sustaining any proper action . . . for the enforcement of the tax, interest, . . . or liability." S.C. Code Ann. § 12-2-30 (Supp. 1997).

Under an application of § 12-2-30 (Supp. 1997), § 12-43-305 is applicable to the current controversy. First, no dispute exists that the County is enforcing § 12-43-305 as the means to deny the payment of interest to the taxpayer. For example, the reliance upon that statute by the County began as soon as the taxpayer challenged the 1993 assessment by its letter of June 6, 1993 to the County Assessor. That reliance continued as the County accepted the taxpayer's tax payments for the disputed tax years of 1993 and 1994. The County has continued its reliance upon § 12-43-305 by asserting that statute as the basis for paying no interest for the 1994 tax refund. Second, § 12-2-30 keeps the County's action viable since in order to defeat the County's efforts to employ § 12-43-305, the repeal must have expressly provided for the release or extinguishment of any tax, interest, or liability based upon that statute. No such express statement is made in the repealing language. Accordingly, § 12-43-305 is the applicable statute for determining the payment of interest to the taxpayer in this dispute.

b. Provisions of § 12-43-305

The pertinent provisions of § 12-43-305 as that statute existed in 1994 are as follows:

[Overpayments] must be refunded together with interest at the rate of one percent a month on the amount of the overpayment.

* * * * *

If the valuation of more than five percent of the parcels of real property in a county is appealed as a result of a reassessment and equalization program, no interest is due on refunds or underpayments for any month the valuation remains under appeal beginning after June thirtieth of the year succeeding the reassessment year. (Emphasis added).

S.C. Code Ann. § 12-43-305 (Supp. 1994).⁽²⁾

Under this statute the "normal" interest is one percent per month while the "exception," applicable to a reassessment and equalization program, limits the interest to one percent per month with no increase in the interest at the end of June 30. In other words, assuming the taxpayer paid its taxes in January (which is the case in this dispute) the interest is calculated at six percent and does not increase to any higher percentage regardless of how long the refund is held by the County.

Thus, for the instant case, the statute does not deny interest to the taxpayer; rather it requires interest to be paid. The statute merely establishes two different calculations of interest depending upon whether the "valuation" under appeal "is appealed as a result of a reassessment and equalization program."⁽³⁾

c. Application of § 12-43-305

Payment of six percent interest on a refund is required if three factors are established. First, more than five percent of the parcels of the county must have been appealed. Second, the appeals must result from a reassessment program. Third, the "valuation" must remain under appeal beyond June thirtieth of the year after the reassessment year. Under the facts of this case, all three requirements are met.

No dispute exists that more than five percent of the parcels of real property in Charleston county were appealed during the reassessment year of 1993. Further, no dispute exists that the 1993 reassessment program was responsible for the large number of appeals. Finally, the valuation remained under appeal after June 30, 1994 since the valuation was not resolved until the overpayment was refunded in March of 1997. Accordingly, interest is due at the six percent calculation.

The remaining question is deciding to what amount the six percent must be applied. The County argues the six percent applies only to the 1993 refund since that is the only year for which a reassessment and equalization program was applied. I cannot agree with the County's reading of the statute. Rather, the "overpayment" which must be refunded is the total overpayment made as a result of the challenged reassessment valuation, i.e., the total of the 1993 and 1994 refunds are subject to six percent interest. Such a conclusion is consistent with the use of the term "valuation" in the statute.

The statute governs "refunds . . . for any month the valuation remains under appeal." (Emphasis added.) The term "valuation" is well understood to mean the duty performed by the Assessor in determining the fair market value of property for purposes of arriving at an assessed value. S.C. Code Ann. Sec. 12-37-90 (Supp. 1997). See also § 12-43-305 (Supp. 1994) ("Upon receipt of a written notice of appeal of a property valuation, . . . the assessing officer shall prepare immediately an assessment for the property under appeal . . . ."). When used in such a fashion, the word "valuation" denotes the true market value of the property, while an assessment is the "assessed value" which represents only a small fractional part of the actual value and is obtained by applying fractional ratios statutorily provided in S.C. Code Ann. § 12-43-220 (Supp. 1997). See Article X, South Carolina Constitution; Powell v. Chapman, 260 S.C. 516, 197 S.E.2d 287 (1973); County of Lee v. Stevens, 277 S.C. 421, 423, 289 S.E.2d 155, 156 (1982). Accordingly, a valuation must be entered first before an assessment is entered and, further, that valuation must be performed by the Assessor.

In arriving at the annual assessed value, the Assessor does not perform a new valuation each year for all of the property in the County. Rather, the Assessor relies upon the existing valuation of the property. See § 12-60-2510(A)(4) (Supp. 1997) (for years in which no new valuation is issued, the taxpayer has until March 1 of the tax year to appeal the valuation but if a new valuation is issued, the taxpayer has thirty days in which to appeal).

In fact, as a practical matter, significant limitations prohibit the Assessor from issuing a new valuation each year since the authority to revalue property is restricted by statute. Once valued, the assessor may not revalue property just because another tax year is at hand; rather, revaluing property is not allowed unless all property in the county is revalued in the same year.⁽⁴⁾ S.C. Code Ann. Sec. 12-43-210(B) (Supp. 1997). Thus, a county-wide reassessment program in tax year 1993 effectively prevents the assessor from issuing a new valuation for 1994 unless the Assessor revalues the entire county. No statute requires the Assessor to annually revalue the property in the county. In fact, revaluations are now mandated on a quadrennial basis. S.C. Code Ann. § 12-43-217 (Supp. 1997).

Accordingly, the "valuation" used in 1994 is the same as that used in 1993. Thus, § 12-43-305's limitation on interest "for any month the valuation remains under appeal" refers to the months the reassessment valuation is under appeal. Therefore, since the 1994 refund is premised upon an appeal of the reassessment valuation (the same valuation used for the 1993 tax year), the limitation on interest imposed by § 12-43-305 applies to the combined overpayment of 1993 and 1994. In other words, six percent interest having already been paid the taxpayer for 1993, the only additional amount due is the payment of a further six percent interest on the 1994 refund. Therefore, in the instant case, the County must pay the taxpayer $2,068.43 as interest calculated at 6% on the taxpayer's 1994 overpayment of taxes of $34,473.92.

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

The County shall pay Golf Wheels, Inc. $2,068.43 as interest on the 1994 overpayment of tax.

AND IT IS SO ORDERED.

RAY N. STEVENS

Administrative Law Judge

Dated: July 23, 1998

Columbia, South Carolina

1. The Division has jurisdiction in this matter pursuant to S.C. Code Ann. § 12-60-2540 (Supp. 1997)

2. While this dispute involves an overpayment, one should note that the statute also addresses underpayments and works on an equal basis for each. In other words, a taxpayer found to owe more tax is limited to paying six percent interest to the County and a county owing a refund to a taxpayer is likewise limited to paying interest at six percent.

3. The General Assembly is free to impose different interest rates for different circumstances. In PalmettoNet, Inc. v. South Carolina Tax Com'n, 318 S.C. 102, 456 S.E.2d 385 (1995) a statutorily imposed higher interest rate on refunds was proper when the Tax Commission discovered its error than when the refund was recovered through litigation. In the instant case, the General Assembly evenhandedly chose to limit the interest to a maximum rate of six percent for reassessment valuation disputes regardless of whether the County was paying a refund or the taxpayer was paying funds to the County.

4. Exceptions do apply. For example, even without a county-wide reassessment, the Assessor may revalue property upon a change in the use or condition of the property. S.C. Code Ann. Sec. 12-37-90(c) (Supp. 1997); see Lexington Co. Assessor v. Hendrix, 96-ALJ-17-0555-CC (May 5, 1997); S.C. Code Ann. Sec. 12-37-90(c) (Supp. 1997) (the Assessor shall, "[w]hen values change, reappraise and reassess any or all real property to reflect its proper valuation in light of changed conditions. . . ."). Nothing in this case demonstrates a change in use or condition of the taxpayer's property for 1994 from 1993.