764 S.E.2d 712
S.C. Ct. App.2014Background
- Duke Energy sought a $126,240,645 SC corporate income tax refund plus interest for 1978–2001; department denied the claims.
- Tax is apportioned between SC and NC using a base representing SC trade or business; two formulas exist: (i) three-factor manufacturing formula, (ii) sales-only formula for other taxpayers.
- ALC granted partial summary judgment: refunds for 1978–1993 untimely and no gross-receipts in the denominator; trial determined Duke must use the manufacturing formula.
- SC Supreme Court held Duke Energy is a “manufacturer” under 12-6-2252, so the three-factor formula applies.
- Court also held gross receipts from short-term investments may not be included in the denominator of the apportionment formula.
- Court affirmed the ALC’s rulings and did not reach the timeliness issue because dispositive issues were resolved.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of refund claims | Duke Energy contends refunds were timely | Department argued refunds untimely | Timeliness not reached; affirmed on other issues. |
| Whether Duke is manufacturing or falls under nonmanufacturing formula | Duke Energy principal business is manufacturing | Department contends not manufacturing | Duke Energy is a manufacturer; 12-6-2252 applies. |
| Whether gross receipts from short-term investments may be in the denominator | Include gross receipts in denominator | Exclude gross receipts; only net receipts or not receipts from principal | May not include gross receipts from short-term investments in the denominator. |
Key Cases Cited
- Columbia Railway, Gas & Electric Co. v. Query, 134 S.C. 319 (1926) (electric utilities held to be manufacturers under tax act)
- Duke Power Co. v. Bell, 156 S.C. 299 (1930) (electric power plant considered a manufactory for tax purposes)
- Futch v. McAllister Towing of Georgetown, Inc., 335 S.C. 598 (1999) (appellate court prescribes dispositive issue approach and relief when appropriate)
- Centex Int'l, Inc. v. S.C. Dep’t of Revenue, 406 S.C. 132 (2013) (statutory interpretation and apportionment standards in tax context)
- Town of Summerville v. City of N. Charleston, 378 S.C. 107 (2008) (statutory interpretation and tax allocation principles)
- ESA Servs., LLC v. S.C. Dep’t of Revenue, 392 S.C. 11 (Ct.App.2011) (summary judgment standard in administrative tax context)