Fid. Bank v. N.C. Dep't of Revenue, 370 N.C. 10

Fidelity Bank, a NC corporation, earned Market Discount Income from discounted US government bonds in 2001 and deducted it as interest for NC corporate income tax purposes.
The NC Department of Revenue initially disallowed the deduction, assessing additional taxes and interest.
Fidelity challenged the Department’s deductibility decision via a contested-case petition and a complex-business-case track in the Business Court.
The Administrative Law Judge and Department issued decisions upholding the non-deductibility, then the Department issued final and amended final agency decisions remanding for further findings on interest abatement.
The Business Court affirmed the deductibility decision but dismissed Fidelity’s second petition challenging that deductibility issue for lack of state-law claim, remanding for a separate disposition.
This Court consolidated review to address (i) the proper interpretation of ‘interest’ under NC law for the deduction, and (ii) the propriety of dismissing the second petition against the deductibility issue.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Market Discount Income is deductible interest under NC law	Fidelity Bank argues ‘Market Discount Income’ falls within the Code’s definition of interest under NC § 105-130.5(b)(1).	Department contends ‘interest’ means periodic payments from a bond and does not include Market Discount Income for the deduction.	Market Discount Income not deductible; defined as periodic payments, unambiguous under NC law.
Whether the second petition was properly dismissed for failure to state a claim	Fidelity contends the second petition should not be dismissed because the Department’s remand decision related to a void portion of the earlier ruling.	Department argues the second petition raised the same issue already decided and dismissing is proper.	Business Court’s dismissal reversed; remanded to vacate the deductibility portion of the second amended final agency decision.

Polaroid Corp. v. Offerman, 349 N.C. 290 (1998) (defines 'interest' in context of tax statutes)
E. Carolina Lumber Co. v. West, 247 N.C. 699 (1958) (void judgments bind no one; assertion of voids allowable to obtain relief)
In re Clayton-Marcus Co., 286 N.C. 215 (1974) (taxation can require favorable interpretation of exemptions; rely on statute as a whole)
Walker v. Bd. of Trs. of the N.C. Local Gov’t Emps. Ret. Sys., 348 N.C. 63 (1998) (primary rule of statutory construction: ascertain legislative intent from text)
Diaz v. Div. of Soc. Servs., 360 N.C. 384 (2006) (ambiguous statutes require ordinary rules of construction)
In re Estate of Kapoor, 303 N.C. 102 (1981) (special canons of statutory construction apply to taxation)
State v. Buckner, 351 N.C. 401 (2000) (interpretation of tax provisions within NC Revenue Act; give meaning to all provisions)