Appeal of AMP Incorporated

• Decision Date: 26 June 1975
• Docket Number: No. 99,99
• Citation: 287 N.C. 547,215 S.E.2d 752
• Parties: Appeal of AMP INCORPORATED from the Decision of the State Board of Assessment, sitting as the State Board of Equalization and Review, Affirming the Action of the Guilford County Board of Commissioners Assessing Additional Taxes, Penalties and Interest for the Years 1964 through 1968, Inclusive.
• Court: North Carolina Supreme Court

Page 752

215 S.E.2d 752

287 N.C. 547

Appeal of AMP INCORPORATED from the Decision of the State

Board of Assessment, sitting as the State Board of

Equalization and Review, Affirming the Action of the

Guilford County Board of Commissioners Assessing Additional

Taxes, Penalties and Interest for the Years 1964 through

1968, Inclusive.

No. 99.

Supreme Court of North Carolina.

June 26, 1975.

Adams, Kleemeier, Hagan, Hannah & Fouts by William J. Adams, Jr., Robert G. Baynes and Paul H. Livingston, Jr., Greensboro, for petitioner appellant.

W. B. Trevorrow, Guilford County Atty., and William L. Daisy, Asst. Guilford County Atty., Greensboro, for respondent appellee.

COPELAND, Justice.

This controversy involves two drastically differing methods for valuing AMP's Inprocess and Raw material inventories on hand as of 1 January for the years 1964 through 1968, inclusive. There is apparently no controversy as to the proper standard for valuing AMP's Finished goods inventory as of 1 January 1964 and 1965 (AMP had no such inventory on hand on 1 January 1966, 1967 and 1968), since AMP readily concedes that the 'book value' of such goods is equivalent to their 'true value in money.' As to the former, however, AMP takes the position that since it can only sell its Inprocess and Raw material inventories to its suppliers of brass and copper, the only 'true value in money' of these inventories is their 'scrap value.' On the other hand, Guilford County takes the position that the 'true value in money' of these same inventories on the relevant dates is their 'book value' as listed by AMP on its North Carolina corporate and franchise tax returns. We believe that both positions are basically erroneous. However, since we are here reviewing the actions of a state administrative agency, with limited scope of review, the basic issue does not necessarily involve the relative merits or demerits of either position.

The duties of the State Board are quasi-judicial in nature and require the exercise of judgment and discretion. Albemarle Electric Membership Corp. v. Alexander, 282 N.C. 402, 409, 192 S.E.2d 811, 816 (1972). Upon a review of an order of the State Board (now the Property Tax Commission--See G.S. § 105--288), the Superior Court is without authority to make findings at variance with the findings of the Board when the findings of the Board are supported by competent, material and substantial evidence. See, e.g., Albemarle Electric Membership Corp. v. Alexander, Supra; In re Reeves Broadcasting Corp., 273 N.C. 571, 160 S.E.2d 728 (1968); In re Property of Pine Raleigh Corp., 258 N.C. 398, 128 S.E.2d 855 (1963). G.S. § 143--315 (now G.S. § 150A--51 effective 1 February 1976), in defining the scope of review and power of the court in disposing of decisions of certain administrative agencies (including the State Board), provides:

'The court may affirm the decision of the agency or remand the case for further proceedings; or it may reverse or modify the decision if the substantial rights of the petitioners may have been prejudiced because the administrative findings, inferences, conclusions, or decisions are:

(1) In violation of constitutional provisions; or

(2) In excess of the statutory authority or jurisdiction of the agency; or

(3) Made upon unlawful procedure; or

(4) Affected by other error of law; or

(5) Unsupported by competent, material, and substantial evidence in view of the entire record as submitted; or

(6) Arbitrary or capricious.'

Accordingly, applying the above stated rules to the instant case, the basic issue for determination is whether the decision of the State Board was supported by 'competent, material, and substantial evidence.' In deciding this issue, it is clear that no court of the General Courts of Justice can weigh the evidence presented to the State Board and substitute its evaluation of the evidence for that of the Board. See, e.g., Clark Equipment Co. v. Johnson, 261 N.C. 269, 134 S.E.2d 327 (1964).

It is also a sound and a fundamental principle of law in this State that ad valorem tax assessments are presumed to be correct. See, e.g., Albemarle Electric Membership Corp. v. Alexander, Supra. See also 7 Strong, N.C.Index 2d, Taxation § 25 (1968). 'All presumptions are in favor of the correctness of tax assessments. The good faith of tax assessors and the validity of their actions are presumed.' 72 Am.Jur.2d State and Local Taxation § 713 (1974). See also 84 C.J.S. Taxation § 557 (1954). As a result of this presumption, when such assessments are attacked or challenged, the burden of proof is on the taxpayer to show that the assessment was erroneous. See 72 Am.Jur.2d State and Local Taxation, Supra. Accord, Albemarle Electric Membership Corp. v. Alexander, Supra, 282 N.C. at 409--10, 192 S.E.2d at 816.

The purpose underlying this presumption of correctness arises out of the obvious futility of allowing a taxpayer to fix the final value of his property for purposes of ad valorem taxation. See Brandis, Listing and Assessing of Property for County and City Taxes in North Carolina 108, Cited in Albemarle Electric Membership Corp. v. Alexander, 282 N.C. at 410, 192 S.E.2d at 817.

If the presumption did not attach, then every taxpayer would have unlimited freedom to challenge the valuation placed upon his property, regardless of the merit of such challenge.

Of course, the presumption is only one of fact and is therefore rebuttable. But, in order for the taxpayer to rebut the presumption he must produce 'competent, material and substantial' evidence that tends to show that: (1) Either the county tax supervisor used an Arbitrary method of valuation; or (2) the county tax supervisor used an Illegal method of valuation; AND (3) the assessment Substantially exceeded the true value in money of the property. See Albemarle Electric Membership Corp. v. Alexander, Supra, 282 N.C. at 410, 192 S.E.2d at 816--17. Simply stated, it is not enough for the taxpayer to show that the means adopted by the tax supervisor were wrong, he must also show that the result arrived at is Substantially greater than the true value in money of the property assessed, i.e., that the valuation was Unreasonably high. Id. The Court of Appeals held that AMP failed to overcome this burden. 23 N.C.App. at 571, 210 S.E.2d at 67--68. For the reasons hereinafter set forth, we agree.

I

We find nothing in this record tending to show that the county tax supervisor employed an 'arbitrary' method of valuation. But see In re Carolina Quality Block Co., 270 N.C. 765, 155 S.E.2d 263 (1967).

On the other hand, the record clearly shows that the county tax supervisor used an 'illegal' method of valuation. Specifically, we point to the following testimony of the witness Brooks (Guilford Tax Supervisor) on cross-examination:

'. . . The Tax Department tries to follow the Statutes as set out in the North Carolina Machinery Act which governs the listing of ad valorem taxes. I do not know where in the General Statutes I was authorized to instruct the taxpayer to list as property value: 'the dollar amount should come from your records such as books of account, invoices, or tax depreciation schedules.' As to the instruction, 'Determination of Assessed or Tax Value--this will be done by the Tax Supervisor using market or cash value as a basis (GS 105--294), multiplied by the assessment ratio which is set annually', I make the assumption that the cash value of the inventory is determined by the cash value figures furnished on the State tax returns. I do not know the State's requirements for its tax returns insofar as whether they call for cash value or book value is concerned. I was with Burlington Industries as a Production Controller prior to coming with Guilford County. I was not an Accountant. I have never held a position as an Accountant. I have examined the State tax returns of other taxpayers. I am not familiar with the requirements of the State. There is no difference between the reporting on the State corporate income tax returns, income and franchise returns, and that reported on the ad valorem listings because of the cash factor, although I have personally not made any investigation to determine it.

'I heard Mr. Westphal's statement that book value is used as an item for measuring income and not value. As to whether I take exception to his statement, I think you are confusing ad valorem tax with income reporting. This is based on my assumption that State income tax reporting and County ad valorem tax reporting is on the same basis, or should be on the same basis. As I have previously stated, that is my assumption which is not based on any knowledge that I have about the State returns.'

In this State there is no statutory authority that permits the county tax supervisor, as a Per se rule, to equate 'book value' with true value in money as a uniform measure of assessment for purposes of ad valorem tax valuation. See G.S. § 105--294 (now G.S. § 105--283). See also In re McLean Trucking Co., 281 N.C. 375, 189 S.E.2d 194 (1972), Rehearing denied, 282 N.C. 156, Cert. denied, 409 U.S. 1099, 93 S.Ct. 909, 34 L.Ed.2d 681 (1973). The legislative intent on this matter is crystal clear. The 1969 General Assembly specifically rejected with an unfavorable report the following proposed legislation (H.B. 631) entitled: 'An Act to Amend Chapter 105 of the General Statutes to Provide for the Listing of Inventories for Ad Valorem Tax Purposes at a Valuation Consistent with Value Reported on Income Tax Returns.':

'At the time of listing tangible personal property, each taxpayer or person, firm or corporation, whose duty it is to list property for taxation and who reports goods, wares, merchandise and other taxable personal property as inventory on an income tax return to the North Carolina Department of Revenue shall list such tangible personal property at the valuation shown on such income tax return.'

Tax Supervisor Brooks 'assumed' that State Income tax...