SC Administrative Law Court Decisions

STATEMENT OF THE CASE

This is a contested case brought by the Petitioner Rachel L. Watson (Taxpayer) seeking review of a Final Agency Determination of the Respondent South Carolina Department of Revenue (Department) denying Taxpayer a property tax exemption under S.C. Code Ann. § 12-37-220(B)(1) (Supp. 1998). Section 12-37-220(B)(1), in part, provides an exemption from taxation for certain real property obtained by devise by a surviving spouse from a disabled veteran. The Department determined that, although Taxpayer's husband was a disabled veteran, the Taxpayer did not qualify for the exemption because the property at issue was never owned by Taxpayer's husband. Jurisdiction is granted to the Administrative Law Judge Division by S.C. Code Ann. § 12-60-2150 (Supp. 1998) and S.C. Code Ann. §§ 1-23-310 et seq. (Supp.1998).

This matter was heard by this tribunal at the County Courthouse, North Charleston, South Carolina on December 16, 1999. The pivotal issue is whether Taxpayer qualifies for an exemption under S.C. Code Ann. § 12-37-220(B)(1). I conclude that Taxpayer is not entitled to the claimed exemption, and the Final Agency Determination of the Department is sustained.⁽¹⁾

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, this tribunal makes the following Findings of Fact by a preponderance of the evidence.

Taxpayer was married to a totally and permanently disabled veteran. The disability of Taxpayer's husband was service-related. The Department determined that Taxpayer's husband was a "disabled veteran" within the meaning of § 12-37-220(B)(1).

On September 4, 1986, Taxpayer and her brother obtained title to the property located at 1117 Oakcrest Drive, Charleston, SC 29412 (Property). Taxpayer's husband was not named on the deed due to credit issues. Nevertheless, Taxpayer and her husband resided together at the Property. In 1989, the dwelling at the Property was destroyed by Hurricane Hugo. Thereafter, Taxpayer's husband obtained a mobile home for their use as a temporary residence at the Property until the house was rebuilt. It is unclear, however, whether Taxpayer or her husband held legal title to the mobile home; neither party presented evidence of title documents or records of property tax payments on the mobile home. Taxpayer's husband passed away on December 30, 1990 while the couple was residing in the mobile home. The permanent home at the Property was completed in 1991.

On November 11, 1993, Taxpayer filed an application for a property tax exemption under S.C. Code Ann. § 12-37-220(B)(1) for tax years 1991 forward. The Department denied that application on the grounds that Taxpayer's husband did not own the Property and did not transfer by devise the Property to Taxpayer. By letter dated January 25, 1994, Taxpayer contested the denial of her application on the grounds that she and her husband owned the mobile home at the Property, and, on that basis, she was entitled to the exemption under § 12-37-220(B)(1). Taxpayer, however, did not pursue this appeal.

On April 22, 1996, Taxpayer's brother deeded his interest in the Property to Taxpayer, thereby hoping to enable Taxpayer to obtain the property tax exemption. On March 5, 1998, Taxpayer applied for a property tax exemption for the tax years 1990 forward. The Department also denied this application. This second application is the subject of the present contested case hearing.

During tax year 1989, the dwelling at the property was valued at $43,900, and the property was valued at $7,700. During tax years 1990-1992, which were after Hurricane Hugo destroyed the dwelling, there was no valuation of any dwelling at the property, and the property was valued at $7,700. During tax year 1993, the rebuilt dwelling was valued at $62,000, and the property was valued at $14,400. The only evidence of the value of the mobile home was a purported statement by Taxpayer that the mobile home was sold for $16,000. Based on these figures, the value of the rebuilt dwelling ($62,000) is most likely more that 1.5 times the value of the mobile home ($16,000), but less than 1.5 times the value of the original home ($43,900).

CONCLUSIONS OF LAW AND DISCUSSION

Based upon the foregoing Findings of Fact, I conclude, as a matter of law, the following.

The South Carolina Administrative Law Judge Division has subject matter jurisdiction over this action pursuant to S.C. Code Ann. § 12-60-2150 (Supp. 1998) and S.C. Code Ann. §§ 1-23-310 et seq. (Supp. 1998). Taxpayer seeks a property tax exemption under S.C. Code Ann. § 12-37-220(B)(1) for certain real property obtained by devise by a surviving spouse from a disabled veteran.

Section 12-37-220(B)(1) states, in part:

(B) In addition to the exemptions provided in subsection (A) the following classes

of property shall be exempt from ad valorem taxation subject to the provisions of

Section 12-3-145:

(1) The dwelling house in which he resides and a lot not to exceed one acre of land owned in fee or for life, or jointly with a spouse, by any veteran who is one hundred percent permanently and totally disabled from a service-connected disability . . . The exemption is allowed the surviving spouse of the veteran . . . who owned the lot and dwelling house in fee or for life, or jointly with his spouse, so long as the spouse does not remarry, resides in the dwelling, and obtains by devise the fee or a life estate in the dwelling. . . .

S.C. Code Ann. § 12-37-220(B)(1). The Department contends that § 12-37-220(B)(1) contains the following five relevant elements: (1) the disabled veteran must have resided in the dwelling; (2) the disabled veteran must have owned the property in fee, for life or jointly with his spouse; (3) the spouse must not be remarried; (4) the spouse must reside at the same dwelling; and (5) the spouse must have obtained by devise a fee or life estate in the property from the disabled veteran.

The Department concedes that Taxpayer's husband was a veteran who was "one hundred percent permanently and totally disabled from a service-connected disability," as required by the statute. The Department further concedes that Taxpayer has not remarried (element 3, above) and Taxpayer resides in the residence at issue (element 4, above). Consequently, Taxpayer has the burden of proving the remaining elements: (1) her husband resided at the dwelling; (2) her husband owned the property in fee, for life or jointly with Taxpayer; and (3) Taxpayer obtained by devise a fee or life estate in the property from her husband.

In civil cases, generally, the burden of proof rests upon the party who asserts the affirmative of an issue. 29 AM. JUR.2d Evidence § 127 (1994); 2 AM JUR.2d Administrative Law § 360 (1994); Alex Sanders, ET AL., South Carolina Trial Handbook § 9:3 Party with Burden, Civil Cases (1994). In the present case, Taxpayer claims that she is entitled to a property tax exemption under § 12-37-220(B)(1); therefore, Taxpayer asserts the affirmative in the present case. Accordingly, Taxpayer must prove, by a preponderance of the evidence, that she is entitled to the property tax exemption under § 12-37-220(B)(1). See Anonymous v. State Board of Medical Examiners, 329 S.C. 371, 769 S.E.2d 17 (1998) (setting forth standard of proof as a preponderance of the evidence).⁽²⁾

In the present case, Taxpayer did not establish that her husband owned the Property "in fee or for life, or jointly with [his] spouse." See S.C. Code Ann. § 12-37-220(B)(1). The deed to the Property indicates that Taxpayer and her brother purchased the Property on September 4, 1986; on April 22, 1996, Taxpayer's brother deeded his interest in the property to Taxpayer alone. Taxpayer's husband was never named in the deed due to credit problems. Finally, whether Taxpayer and her husband jointly owned a temporary mobile home at the Property is unclear, as the parties did not present title documents or property tax records for the mobile home. Thus, I cannot find that Taxpayer's husband held legal title⁽³⁾ to either the land or a dwelling at the Property, and Taxpayer cannot qualify for an exemption under § 12-37-220(B)(1).

Obviously, since Taxpayer's husband did not legally own any land or dwelling at the Property, Taxpayer could not have "obtain[ed] by devise" any land or dwelling at the Property from her husband. See id. Under § 12-37-220(B)(1), a surviving spouse must demonstrate that she "obtain[ed] by devise" the dwelling and land from a disabled veteran in order to qualify for the exemption. See id. Since Taxpayer failed to demonstrate this element of § 12-37-220(B)(1), she is not entitled to the claimed exemption.

Finally, Taxpayer did not identify a "dwelling" at the Property that would qualify for the property tax exemption under § 12-37-220(B)(1). See id. As indicated above, Taxpayer's husband did not legally own the real property at issue, the original dwelling destroyed by Hurricane Hugo,⁽⁴⁾ or the mobile home located temporarily at the Property after Hurricane Hugo. Consequently, Taxpayer's husband was never required to pay property taxes associated with the Property. Accordingly, he did not qualify for a property tax exemption. Section 12-37-220(B)(1), in essence, transfers the property tax exemption available to the disabled veteran to his surviving spouse, at least under certain circumstances. Since Taxpayer's husband was not entitled to a property tax exemption under § 12-37-220(B)(1), Taxpayer is not entitled to that property tax exemption.

It is a well-settled rule of construction that statutory language creating exemptions from taxation shall not be strained or liberally construed in favor of a taxpayer claiming the exemption, and the taxpayer must clearly bring himself within the language on which he relies. Textile Hall Corp. v. Hill, 215 S.C. 262, 54 S.E.2d 809 (1949). The statute requires that the Taxpayer be the surviving spouse of a disabled veteran who owned the property at issue "in fee or for life, or jointly with [his] spouse" and that the surviving spouse "obtain[] by devise" his interest. See S.C. Code Ann. § 12-37-220(B)(1). Unquestionably, Taxpayer's husband did not own the property "in fee or for life, or jointly with [his] spouse." Also, Taxpayer could not have "obtain[ed] by devise" any interest in the Property from her husband. Although unfortunate, the language of the statute cannot be strained or liberally construed in favor of Taxpayer. Consequently, I find that Taxpayer is not entitled to the claimed exemption under § 12-37-220(B)(1).

ORDER

IT IS HEREBY ORDERED that Taxpayer Rachel L. Watson's application for a property tax exemption under S.C. Code Ann. § 12-37-220(B)(1) is denied.

AND IT IS SO ORDERED.

___________________________________

JOHN D. GEATHERS

Administrative Law Judge

January 21, 2000

Columbia, South Carolina

1. The second issue presented is whether Taxpayer is entitled to challenge property tax payments for tax years prior to 1996. My decision that Taxpayer is not entitled to the claimed exemption renders this issue moot. Nevertheless, S.C. Code Ann. § 12-4-720(A)(1) (Supp. 1998) clearly states that a taxpayer must file an application for an exemption within the time-frame provided in S.C. Code Ann. § 12-54-540(F) (Supp. 1998), and § 12-54-540(F) explicitly requires that a claim be filed within three years of filing a tax return or two years from the date of payment, whichever is later. Here, there is no evidence that Taxpayer filed a tax return or paid property taxes after 1991. Nevertheless, under these facts, it logically follows that the time-period would begin to run from the date the taxes were due, and that a taxpayer may seek an exemption only for tax years within two years of the date the taxes were due. Since Taxpayer applied for the exemption on March 5, 1998 and tax payments are due annually on January 15, Taxpayer can only seek an exemption for 1996, 1997 and 1998.

2. The preponderance of the evidence means "[t]he greater weight of the evidence" or "superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other." BLACK'S LAW DICTIONARY 1201 (7th ed. 1999). "The preponderance of the evidence means such evidence as, when considered and compared with that opposed to it, has more convincing force and produces in the mind the belief that what is sought to be proved is more likely true than not true." Sanders, supra, § 9:5 Quantum of Evidence in Civil Cases (1994), citing Frazier v. Frazier, 228 S.C. 149, 89 S.E.2d 225 (1955).

3. At the hearing, Taxpayer was unable to show that her husband had an "equitable" ownership interest in the Property. For example, she did not present evidence that her husband paid the property taxes or that he was otherwise responsible for the Property. It is unclear whether such factors would satisfy the ownership requirements of S.C. Code Ann. § 12-37-220(B)(1).

Based on former law, it has been held that only a holder of legal title is required to pay property taxes. See S.C. Public Service Authority v. 11,754.8 Acres of Land, More or Less, in Berkeley Cty., S.C., 123 F.2d 738 (4th Cir. 1942) (citing 1932 Code). Current South Carolina law, however, states that any person who owns property is required to pay property taxes, without limiting this duty to holders of legal title. See S.C. Code Ann. § 12-37-610 (Supp. 1998). Generally, absent statutory authority otherwise, ". . . contracts between private persons with respect to taxes may be binding as between them and given effect according to their terms, but such contracts do not affect the right of the state unless it is in privity thereto." 84 C.J.S. Taxation § 61(b) (1954 & Supp. 1999). Since there was no evidence of equitable ownership in this case, we need not determine whether such factors satisfy § 12-37-220(B)(1).

4. There is no statutory language to support the proposition that the destruction of a dwelling by a hurricane alone defeats an entitlement of a disabled veteran to a property tax exemption for that dwelling merely because the dwelling was not rebuilt by the time of death of the veteran.