Cfre Llc v. Greenville County Assessor

• Decision Date: 29 August 2011
• Docket Number: No. 27032.,27032.
• Citation: 716 S.E.2d 877,395 S.C. 67
• Court: South Carolina Supreme Court
• Parties: CFRE, LLC, Appellant,v.GREENVILLE COUNTY ASSESSOR, Respondent.

395 S.C. 67
716 S.E.2d 877

CFRE, LLC, Appellant,
v.
GREENVILLE COUNTY ASSESSOR, Respondent.

No. 27032.

Supreme Court of South Carolina.

Heard June 21, 2011.Decided Aug. 29, 2011.

[716 S.E.2d 879]

J. William Ray, of Greenville, for Appellant.Jeffrey D. Wile, County of Greenville, of Greenville, for Respondent.Acting Justice MOORE.

[395 S.C. 71] CFRE, LLC appeals the decision of the Administrative Law Court (ALC) that real estate owned by the company is not entitled to the residential tax ratio under Section 12–43–220(c) of the South Carolina Code (Supp.2010). Furthermore, CFRE argues the ALC erred in not sanctioning the Greenville County Assessor (Assessor) for failing to respond to discovery requests from CFRE. While we hold the ALC did not abuse its discretion in not sanctioning the Assessor, we reverse the ALC's conclusion regarding CFRE's entitlement to the legal residence tax ratio and remand.

FACTUAL/PROCEDURAL BACKGROUND

Sherry Ray purchased residential property in Greenville County, South Carolina, in 1991 and has lived there continuously ever since. Because she owned no other residential property, the property was taxed at the four percent legal residence tax ratio.

In 2004, Ray formed CFRE, a single-member limited liability company with herself as the sole member. CFRE conducts no business and was formed solely for estate planning and asset protection purposes. To that end, Ray declined to have CFRE taxed as a corporation and, in 2006, deeded the title in her home to it. Because there was a conveyance by deed of the property, the Assessor automatically commenced a reassessment of the property for the 2007 tax year. Accordingly, the property was subjected to the default property tax ratio of six percent until CFRE could prove entitlement to the lower ratio under section 12–43–220.¹

When CFRE sought the four percent ratio, the Assessor denied it eligibility. CFRE then requested a personal interview with the Assessor's office, which is the next step in the appeals process. During that interview, Ray met with Debbie Adkins, who is the manager for the group within the Assessor's office responsible for property classifications. Adkins refused to change the ratio back to four percent because she [395 S.C. 72] believed, based primarily on an Attorney General's Opinion from 2003, a limited liability company categorically cannot qualify for it. CFRE then appealed to the Greenville County Board of Assessment Appeals, which affirmed the Assessor's

[716 S.E.2d 880]

decision.² Accordingly, CFRE requested a contested case hearing before the ALC.

Following assignment to the ALC, CFRE filed interrogatories and a request for production on the Assessor. After not receiving a response to either of these, CFRE filed a motion to compel. Apparently in response to CFRE's motion, the ALC ordered the Assessor to produce certain documents pertaining to the case; however, the court did not specifically order the Assessor to respond to the interrogatories or requests for production. Although the Assessor never did respond to CFRE's discovery requests, it fully complied with the court's order, submitting its preliminary tax appeal statement, which set forth a statement of the facts and legal authority it planned to use, and a filing titled “Exchange of Evidence and Foundation for Documents.” Furthermore, the Assessor twice supplemented these filings.

Just days before the hearing, CFRE moved to prevent the Assessor from presenting any evidence or argument due to its failure to respond to the discovery requests. The Assessor steadfastly maintained that it had provided CFRE all the information in the Assessor's possession regarding this dispute and asked the court to permit the case to proceed. Although the ALC sua sponte offered to grant CFRE a continuance and order the Assessor to specifically respond to CFRE's discovery requests, CFRE declined the court's invitation because it believed the Assessor would simply respond that there is no additional information it could provide.

Ultimately, the ALC found CFRE was not entitled to the four percent ratio. In particular, the ALC held that only a “natural person” could qualify for the legal residence ratio. [395 S.C. 73] The court further found that the General Assembly's failure to adopt two amendments to section 12–43–220 specifically stating that single-member limited liability companies could qualify demonstrates the General Assembly's original intent that they could not. Finally, the court supported its ruling with two Attorney General's Opinions stating these companies cannot receive the four percent ratio. CFRE appealed to the court of appeals, and this case was certified to us pursuant to Rule 204, SCACR.

ISSUES PRESENTED

Three issues are raised on appeal: ³

I. Did the ALC err in concluding that a single-member limited liability company that is not taxed as a corporation cannot qualify for the four percent legal residence property tax ratio?

II. Did the ALC err in not sanctioning the Assessor for its failure to respond to CFRE's discovery requests?

III. Is CFRE entitled to costs and attorney's fees?

LAW/ANALYSIS I. ELIGIBILITY FOR FOUR PERCENT RATIO

CFRE argues the ALC erred in concluding that section 12–2–25(B)(1) only applies to income taxes ⁴ and only natural persons can qualify for the legal residence ratio. We agree.

Tax appeals to the ALC are subject to the Administrative Procedures Act (APA).

[716 S.E.2d 881]

[395 S.C. 74] Long Cove Home Owners' Ass'n v. Beaufort County Tax Equalization Bd., 327 S.C. 135, 139, 488 S.E.2d 857, 860 (1997). Accordingly, we review the decision of the ALC for errors of law. S.C.Code Ann. § 1–23–380(5)(d) (Supp.2010). Questions of statutory interpretation are questions of law, which we are free to decide without any deference to the court below. City of Rock Hill v. Harris, 391 S.C. 149, 152, 705 S.E.2d 53, 54 (2011).

“The cardinal rule of statutory interpretation is to ascertain and effectuate the intent of the legislature.” Sloan v. Hardee, 371 S.C. 495, 498, 640 S.E.2d 457, 459 (2007). In doing so, we must give the words found in the statute their “plain and ordinary meaning without resort to subtle or forced construction to limit or expand the statute's operation.” Id. at 499, 640 S.E.2d at 459. Thus if the words are unambiguous, we must apply their literal meaning. Id. at 498, 640 S.E.2d at 459.

However, “the statute must be read as a whole and sections which are part of the same general statutory law must be construed together and each one given effect.” S.C. State Ports Auth. v. Jasper County, 368 S.C. 388, 398, 629 S.E.2d 624, 629 (2006). We therefore should not concentrate on isolated phrases within the statute. Id. Instead, we read the statute as a whole and in a manner consonant and in harmony with its purpose. State v. Sweat, 379 S.C. 367, 376, 665 S.E.2d 645, 650 (Ct.App.2008), aff'd, 386 S.C. 339, 688 S.E.2d 569 (2010). In that vein, we must read the statute so “that no word, clause, sentence, provision or part shall be rendered surplusage, or superfluous,” id. at 377, 665 S.E.2d at 651, for “[t]he General Assembly obviously intended [the statute] to have some efficacy, or the legislature would not have enacted it into law” id. at 382, 665 S.E.2d at 654.

In this case, interlaced with these standard canons of statutory construction is our policy of strictly construing tax exemption statutes against the taxpayer. See Se.-Kusan, Inc. v. S.C. Tax Comm'n, 276 S.C. 487, 489, 280 S.E.2d 57, 58 (1981). “This rule of strict construction simply means that constitutional and statutory language will not be strained or liberally construed in the taxpayer's favor. It does not mean that we will search for an interpretation in [DOR]'s favor where the plain and unambiguous language leaves no room for [395 S.C. 75] construction.” Id. It is “[o]nly when the literal application of the statute produces an absurd result will we consider a different meaning.” Id. at 499–90, 280 S.E.2d at 58.

Section 12–43–220 provides, in relevant part:

(c)(1) The legal residence and not more than five acres contiguous thereto, when owned totally or in part in fee or by life estate and occupied by the owner of the interest, ... are taxed on an assessment equal to four percent of the fair market value of the property. If residential real estate is held in trust and the income beneficiary of the trust occupies the property as a residence, then the assessment ratio allowed by this item applies.... If this property has located on it any ... business for profit, this four percent value does not apply to those businesses.... For purposes of the assessment ratio ..., a residence does not qualify as a legal residence unless the residence is determined to be the domicile of the owner-applicant.

Section 12–2–25(B) further provides that “[f]or South Carolina tax purposes: (1) a single-member limited liability company, which is not taxed for South Carolina income tax purposes as a corporation, is not regarded as an entity separate from its owner.”

In the case before us, it is undisputed that the residence is on less than five acres, owned in fee by CFRE, has no business for profit conducted on it, and is Ray's sole domicile. It is further undisputed that CFRE is a single-member limited liability company that conducts no business for profit, is not taxed as a corporation, and has no other location besides the property in question. Thus, the only question presented is whether section 12–2–25(B)(1) permits single-member limited liability companies in the same position as CFRE to receive the lower ratio provided for in section 12–43–220.

Initially, we note that section 12–2–25(B)(1) appears in the “General Provisions”

[716 S.E.2d 882]

chapter of Title 12, which ostensibly applies to all the different forms of taxation provided for therein, be it income tax, corporate license fees, deed recording fees, gasoline tax, sales and use tax, county property tax, or any of the other...