North Carolina Dept. of Revenue v. Hudson

• Decision Date: 05 May 2009
• Docket Number: No. COA08-945.,COA08-945.
• Citation: 675 S.E.2d 709
• Parties: NORTH CAROLINA DEPARTMENT OF REVENUE, Petitioner, v. Thomas W. HUDSON, Jr. and Mary J. Hudson, Respondents.
• Court: North Carolina Court of Appeals

675 S.E.2d 709

NORTH CAROLINA DEPARTMENT OF REVENUE, Petitioner, v. Thomas W. HUDSON, Jr. and Mary J. Hudson, Respondents.

No. COA08-945.

Court of Appeals of North Carolina.

May 5, 2009.

Appeal by plaintiff from order entered 25 April 2008 by Judge A. Leon Stanback, Jr. in Superior Court, Wake County. Heard in the Court of Appeals 23 February 2009.

Attorney General Roy Cooper, by Assistant Attorney General Gregory P. Roney, for plaintiff-appellant.

Wyrick Robbins Yates & Ponton LLP, by K. Edward Greene, Charles George, and Tobias S. Hampson, Raleigh, for defendant-appellees.

WYNN, Judge.

"Where the language of a statute is clear and unambiguous, there is no room for judicial construction and the courts must construe the statute using its plain meaning."¹ In this appeal, the North Carolina Department of Revenue argues that N.C. Gen.Stat. § § 105-163.011(b1) and 105-163.012(a) (1999) limit the maximum amount of qualified business income tax credit that an individual may claim based on one years' investment to $50,000. Because the plain language of the statute permits a taxpayer to carry over unused amounts of qualified business income tax credit, accrued in one year and in excess of $50,000, to subsequent years' tax filings, we affirm.

In 1999, Thomas W. Hudson, Jr. was a partner in two pass-through business entities, Raindrop Partners, LLC and Xanthon Partners, LLC. Raindrop Partners, LLC and Xanthon Partners, LLC were granted qualified business income tax credits in the amounts of $528,877.92 and $427,592.40 respectively, for investments made in 1999. Mr. Hudson received a total of $91,061 in tax credits pursuant to N.C. Gen.Stat. § 105-163.011, which allows an individual owner of a pass-through entity to receive a tax credit equal to the owner's allocated share of the business entity's credit. In filing their individual income tax return for the tax year 2000, Mr. and Mrs. Hudson claimed a qualified business income tax credit of $84,207, which was limited to $50,000 on their 2000 individual income tax return. The Hudsons carried over tax credits in the amount of $34,569 in 2001 and $6,478 in 2002.

On 29 September 2005, the Department of Revenue notified the Hudsons that the amounts in excess of $50,000 from their 1999 qualified business income tax credit could not be carried over to 2001 and 2002. The Hudsons contested this decision on 26 October 2005, arguing that N.C. Gen.Stat. § 105-163.012(a) allows unused qualified business income tax credits to be carried forward for up to five succeeding years. On 26 June 2006, the Assistant Secretary for Administrative Tax Hearings of the Department of Revenue issued an opinion upholding the disallowance of the carryover tax credits. On a petition for review, the Tax Review Board reversed the decision of the Assistant Secretary and held that the Hudsons were entitled to the carryover tax credits taken on their 2001 and 2002 tax returns. On 24 April 2008, Department of Revenue appealed to the superior court, which upheld the decision of the Tax Review Board.

On appeal to this Court from the superior court's order, the Department of Revenue argues that the superior court erred in its interpretation of sections 105-163.011(b1) and 105-163.012(a) because section 105-163.011(b1) sets $50,000 as the maximum total amount of qualified business tax credit that an individual taxpayer may claim based on one years' investment. We disagree.

Our review of issues of statutory construction is de novo. See, e.g., American Nat'l Ins. Co. v. Ingram, 63 N.C.App. 38, 41, 303 S.E.2d 649, 651, cert. denied, 309 N.C. 819, 310 S.E.2d 348 (1983).² In our review, we must give a statute its plain meaning where the language of the statute is clear; however, where a statute is ambiguous or unclear as to its meaning, we must interpret the statute to give effect to the legislative intent. See Martin v. N.C. Dept. of HHS, ___ N.C.App. ___, ___, 670 S.E.2d 629, 632 (2009). Thus, the rules of construction are "relevant ... only in those instances in which the interpretation of the statute is ambiguous or in doubt." Broadwell Realty Corp. v. Coble, 291 N.C. 608, 612, 231 S.E.2d 656, 659 (1977). Because we find that the statutes at issue are unambiguous, we give effect to the plain meaning of their language.

Section 105-163.011(b1) provides "[t]he aggregate amount of credit allowed an individual for one or more investments in a single taxable year under this Part, whether directly or indirectly as owner of a pass-through entity, may not exceed fifty thousand dollars ($50,000)" (emphasis added). The Department of Revenue argues that section 105-163.011(b1) sets the maximum qualified business income tax credit allowed for all investments made in a single year at $50,000. However, this section does not use language indicating the $50,000 maximum is imposed on investments made in a single year. Rather, the statute provides that "[t]he aggregate amount of credit allowed an individual for one or more investments in a single taxable year ... may not exceed fifty thousand dollars ($50,000)." § 105-163.011(b1) (emphasis added). When a legislative body "`includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that [the legislative body] acts intentionally and purposely in the disparate inclusion or exclusion.'" Rodriguez v. United States, 480 U.S. 522, 525, 107 S.Ct. 1391, 94 L.Ed.2d 533, 537 (1987) (quoting Russello v. United States, 464 U.S. 16, 23, 104 S.Ct. 296, 78 L.Ed.2d 17, 24 (1983)).

Moreover, the absence of words indicating a maximum limit for investments made in a single taxable year is significant because the General Assembly does refer to investments "made" in a calendar year elsewhere in the statute. For example, section 105-163.012(b) provides that "[t]he total amount of all tax credits allowed to taxpayers under G.S. 105-163.011 for investments made in a calendar year may not exceed six million dollars ($6,000,000)." N.C. Gen.Stat. § 105-163.012(b) (1999) (emphasis added). The plain meaning of § 105-163.011(b1) provides a $50,000 limit on the amount of qualified business income tax credit a taxpayer may claim in a single taxable year, rather than a $50,000 maximum on the total qualified business income tax credit allowed a taxpayer.

Further, section 105-163.012(a) provides:

The credit allowed a taxpayer under G.S. 105-163.011 may not exceed the amount of income tax imposed by Part 2 of this Article for the taxable year reduced by the sum of all other credits allowable...