Bodman v. State

• Decision Date: 08 May 2013
• Docket Number: No. 27248.,27248.
• Parties: Matthew BODMAN, Plaintiff, v. STATE of South Carolina and South Carolina Department of Revenue, Defendants. Appellate Case No. 2011–187466.
• Court: South Carolina Supreme Court

403 S.C. 60

742 S.E.2d 363

Matthew BODMAN, Plaintiff,

v. STATE of South Carolina and South Carolina Department of Revenue, Defendants.Appellate Case No. 2011–187466.

No. 27248.

Supreme Court of South Carolina.

Heard Nov. 29, 2011.

Decided May 8, 2013.

A. Camden Lewis and Ariail E. King, both of Lewis, Babcock & Griffin LLP, of Columbia, and Richard A. Harpootlian, of Richard A. Harpootlian, PA, of Columbia, for Plaintiff.

Attorney General Alan Wilson, Deputy Attorney General Robert D. Cook, and Assistant Deputy Attorney General J. Emory Smith, Jr., all of Columbia, and Ray N. Stevens, Parker Poe Adams & Bernstein, LLP, of Columbia, for Defendant State of South Carolina.

Milton G. Kimpson, Carol I. McMahan, Adam I. Marinelli, Sarah A. Powell, and Harry T. Cooper, Jr., all of Columbia, for Defendant South Carolina Department of Revenue.

Bradley S. Wright and Charles F. Reid, both of Columbia, for Amici Curiae Robert W. Harrell, Jr., in his official capacity as Speaker of the South Carolina House of Representatives, and W. Brian White, in his official capacity as Chairman of the South Carolina House of Representatives Ways and Means Committee.

Michael R. Hitchcock, John P. Hazzard, V, and Robert E. Maldonado, all of Columbia, for Amici Curiae Glenn F. McConnell, in his official capacity as President Pro Tempore of the South Carolina Senate, and Hugh K. Leatherman, in his official capacity as Chairman of the South Carolina Senate Finance Committee.

Burnet Rhett Maybank, III, of Nexsen Pruet, LLC, of Columbia, for Amicus Curiae South Carolina Manufacturers Alliance.

John C. von Lehe, Jr. and Bryson M. Geer, of Nelson Mullins Riley & Scarborough LLP, of Charleston, for Amicus Curiae Council on State Taxation.

Justice HEARN.

Mark Twain once quipped, “What is the difference between a taxidermist and a tax collector? The taxidermist takes only your skin.” Not necessarily so, according to Matthew Bodman. In this action brought in our original jurisdiction, Bodman alleges that the sheer number of exemptions to and caps on this State's sales and use tax removes any rational relationship they have to the underlying tax itself. He therefore requests that we strike down all of the exemptions and caps as being unconstitutional, leaving behind only the imposition of the tax. In particular, he contends that the entire exemption and cap scheme violates our State constitution's equal protection guarantee and prohibition against special legislation. We disagree.

FACTUAL/PROCEDURAL BACKGROUND

The facts of this case are simple and not in dispute. Bodman is a resident and taxpayer of Richland County, South Carolina. He is also the proud father of two young children, who presently are not yet old enough to attend public school. Ostensibly, he is also a consumer of goods subject to this State's sales and use tax.

A state-wide tax totaling six percent is imposed on the sale of all personal property at retail, the proceeds of which are used to support education. The first part of this tax is a five percent tax imposed by Section 12–36–910 of the South Carolina Code (2000 & Supp.2011). This five percent tax is divided up into a four percent levy and a one percent levy. Id.§ 12–36–2620 (2000 & Supp.2011). The four percent portion of the tax is credited to the public school building fund. Id.§ 12–36–2620(1); id.§ 59–21–1010 (2004). As to the remaining one percent, the funds it raises are deposited into the South Carolina Education Improvement Act of 1984 Fund “as a fund separate and distinct from the general fund of the State.” Id.§ 12–36–2620(2); id.§ 59–21–1010(B).

On top of this five percent tax, Section 12–36–1110 of the South Carolina Code (Supp.2011) levies an additional one percent sales tax. Revenues derived from this tax are credited to the Homestead Exemption Fund, id.§ 12–36–1120 (Supp.2011), which is also separate and distinct from the general fund, id.§ 11–11–155 (2011). Without delving into too much detail, this fund provides a revenue stream for school districts in lieu of certain property taxes. See id.§ 11–11–156 (2011).

Over the years, the General Assembly has passed into law a series of exemptions to and caps on the tax imposed by this general scheme. Currently, there are seven caps on the amount of the tax. Id.§ 12–36–2110 (2000 & Supp.2011). Additionally, there are seventy-eight exemptions from the tax. Id.§ 12–36–2120 (Supp.2011). These exemptions run the gamut from textbooks used in primary and secondary education, id.§ 12–36–2120(3) (2000), to water sold by public utilities, id.§ 12–36–2120(12) (Supp.2011), to electricity used to irrigate crops, id.§ 12–36–2120(44) (2000), to a certain percentage of the gross proceeds from the rental or lease of portable toilets, id.§ 12–36–2120(62) (Supp.2011), and to sweetgrass baskets, id.§ 12–36–2120(64) (Supp.2011). Recent data show that as a result of these numerous exemptions, South Carolina now exempts more sales taxes than it collects.

Spurred on by recent budget concerns and this declining source of revenue for education, Bodman sought our original jurisdiction pursuant to Rule 245, SCACR, to challenge the sales tax exemption and cap scheme. He asks that we strike down the exemptions and caps in toto because the number of them has grown to the point where they no longer bear a rational relationship to the purpose of imposing the tax in the first place. He therefore argues that sections 12–36–2110 and 12–36–2120 violate the equal protection clause and the prohibition against special legislation found in our State's constitution. We accepted this suit in our original jurisdiction.

STANDARD OF REVIEW

We are reluctant to declare a statute unconstitutional. In re Treatment and Care of Luckabaugh, 351 S.C. 122, 134, 568 S.E.2d 338, 344 (2002). Hence, we will make every presumption in favor of finding it constitutional. Id. Moreover, if possible, we must construe a statute so that it is valid. State v. Neuman, 384 S.C. 395, 402, 683 S.E.2d 268, 271 (2009). The party challenging the statute bears the heavy burden of proving that “its repugnance to the constitution is clear and beyond a reasonable doubt.” Luckabaugh, 351 S.C. at 134–35, 568 S.E.2d at 344.

ISSUES PRESENTED

I. Does Bodman have standing to bring this claim?

II. Do sections 12–36–2110 and 12–36–2120 violate the equal protection clause of the South Carolina Constitution?

III. Do sections 12–36–2110 and 12–36–2120 violate the prohibition against special legislation where a general law can be made applicable?

LAW/ANALYSIS

I. STANDING

As a threshold matter, the State and the Department of Revenue (collectively, Defendants) assert that Bodman does not have standing to bring this action because he has not suffered an individualized injury. Bodman counters that he has sufficient standing as a taxpayer and under the public importance exception to the individualized injury requirement.

“Standing to sue is a fundamental requirement in instituting an action.” Joytime Distribs. & Amusement Co. v. State, 338 S.C. 634, 639, 528 S.E.2d 647, 649 (1999). Under our current jurisprudence, there are three ways in which a party can acquire this fundamental threshold of standing: (1) by statute; (2) through what is called “constitutional standing”; and (3) under the public importance exception. ATC S., Inc. v. Charleston Cnty., 380 S.C. 191, 195, 669 S.E.2d 337, 339 (2008).

Bodman does not claim any statute confers standing upon him. ¹ As to constitutional standing, one of the core requirements is that the plaintiff suffered a “ ‘concrete and particularized’ ” injury. Id. (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)). Here, to the extent Bodman has suffered or will suffer any harm as a result of this tax scheme, this harm is shared by all taxpayers in the State. In ATC, we unanimously closed the door to a litigant asserting standing simply by virtue of his status as a taxpayer for this reason. There, we explained that “[t]he injury to ATC ... as a taxpayer is common to all property owners in Charleston County. This feature of commonality defeats the constitutional requirement of a concrete and particularized injury.” Id. at 198, 669 S.E.2d at 340–41 (citing Frothingham v. Mellon, 262 U.S. 447, 488, 43 S.Ct. 597, 67 L.Ed. 1078 (holding that a taxpayer lacks standing when he “suffers in some indefinite way in common with people generally”)). We reaffirm this principle today and hold that Bodman's status as a mere taxpayer is insufficient to confer standing upon him.

What remains to be determined is whether Bodman can claim standing under the public importance exception, a rule which “has been the subject of much confusion and misapplication.” Jessica Clancy Crowson & C.W. Christian Shea, Standing in South Carolina: What is Required and Who Has It?, S.C. Law., July 2009, at 19. Generally speaking,

a private individual may not invoke the judicial power to determine the validity of an executive or legislative act unless the private individual can show that, as a result of that action, a direct injury has been sustained, or that there is immediate danger a direct injury will be sustained.

Joytime Distribs., 338 S.C. at 639, 528 S.E.2d at 649–50. However, we have recognized that “standing is not inflexible.” Davis v. Richland Cnty. Council, 372 S.C. 497, 500, 642 S.E.2d 740, 741 (2007). Thus, “ standing may be conferred upon a party when an issue is of such public importance as to require its resolution for future guidance.” Id. In recentyears, we routinely have found standing through this exception. See Sloan v. Dep't of Transp., 379 S.C. 160, 170–71, 666 S.E.2d 236, 241 (2008); Davis, 372 S.C. at 500, 642 S.E.2d at 741–42;Sloan v. Hardee, 371 S.C. 495, 497 n. 1, 640 S.E.2d 457, 458 n. 1 (2007); Sloan v. Dep't of Transp., 365 S.C. 299, 304, 618 S.E.2d 876, 878–79 (2005); Sloan v. Wilkins, 362 S.C. 430, 436–37, 608 S.E.2d 579, 582–83 (2005), abrogated on other grounds, Am. Petroleum...