Proposed Assessments of Additional Sales v. Jefferson-Pilot Life Insurance Co.

TYSON, Judge

dissenting.

I respectfully dissent from the majority’s opinion.

I. Issue

The issue before this Court is whether the trial court erred in concluding that N.C. Gen. Stat. § 105-228.10 does not prohibit North Carolina counties, cities, or towns from imposing local use taxes upon insurance companies who pay gross premium taxes under this statute prior to its amendment in 1998.

II. Standard of Review

When reviewing appeals from an administrative agency, “the proper standard of review to be employed by the [trial] court depends upon the nature of the alleged error.” Dorsey v. UNC-Wilmington, 122 N.C. App. 58, 62, 468 S.E.2d 557, 559 (1996) (quoting Amanini v. N.C. Dept. of Human Resources, 114 N.C. App. 668, 674, 443 S.E.2d 114, 118 (1994)).

If a petitioner asserts that the administrative agency decision was based on an error of law, then ‘de novo’ review is required. ‘De novo’ review requires a court to consider a question anew, as if not considered or decided by the agency. The court may freely substitute its own judgment for that of the agency.
On the other hand, if a petitioner asserts that the administrative agency decision was not supported by the evidence, or was arbitrary or capricious, then the court employs the ‘whole record’ test. The ‘whole record’ test requires the court to examine all *566competent evidence comprising the ‘whole record’ in order to ascertain if substantial evidence therein supports the administrative agency decision.

Id. at 62, 468 S.E.2d 559-60 (internal citations omitted). “The standard of review for an appellate court upon an appeal from an order of the superior court affirming or reversing an administrative agency decision is the same standard of review as that employed by the superior court.” Id. at 62-63, 468 S.E.2d at 560 (quoting In re Appeal of Ramseur, 120 N.C. App. 521, 463 S.E.2d 254 (1995)). Where the position of a petitioner is “not clear,” this Court, in its discretion, undertakes a de novo review of the agency’s conclusions of law, as well as a review of the “whole record” to determine whether evidence supports the agency’s action. Davis v. N.C. Dept. of Human Resources, 110 N.C. App. 730, 735, 432 S.E.2d 132, 134-35 (1993).

Here, the trial court applied a de novo standard of review and the “whole record” test in making its findings of fact and conclusions of law. Jefferson-Pilot contends that the trial court’s order is: (1) affected by errors of law; (2) not supported by competent, material, and substantial evidence in the record; and (3) arbitrary and capricious. At bar, we should apply a de novo standard of review and the “whole record” test in reviewing that agency’s decisions. Id.

ill. N.C. Gen. Stat. § 105-228.10

This case arises under N.C. Gen. Stat. § 105-228.10 prior to its amendment in 1998. The statute read:

No county, city, or town shall be allowed to impose any additional tax, license or fee, other than ad valorem taxes, upon any insurance company or association paying the fees and taxes levied in this Article.

N.C. Gen. Stat. § 105-228.10 (1945). N.C. Gen. Stat. § 105-228.10 (2001) now reads:

No city or county may levy on a person subject to the tax levied in this Article a privilege tax or a tax computed on the basis of gross premiums.

The paramount objective of statutory interpretation is to give effect to the intent of the legislature. Polaroid Corp. v. Offerman, 349 N.C. 290, 297, 507 S.E.2d 284, 290 (1998). Our Supreme Court has held that “[w]hen the language of a statute is clear and unambiguous, it must be given effect and its clear meaning may not be evaded by an *567administrative body or a court under the guise of construction.” Utilities Comm. v. Edmisten, Atty. General, 291 N.C. 451, 465, 232 S.E.2d 184, 192 (1976) (citations omitted).

This Court has held “[w]here the language of a statute is clear and unambiguous there is no room for judicial construction and the courts must give it its plain and definite meaning . . . .” Begley v. Employment Security Comm., 50 N.C. App. 432, 436, 274 S.E.2d 370, 373 (1981) (citations omitted). “[T]he Court is without power to interpolate or superimpose conditions and limitations which the statutory exception does not of itself contain.” Utilities Comm. v. Electric Membership Corp., 275 N.C. 250, 260, 166 S.E.2d 663, 670-71 (1969) (quoting Board of Architecture v. Lee, 264 N.C. 602,142 S.E.2d 643 (1965)).

This Court has further held that “although courts are the final interpreters of statutory terms, ‘the interpretation of a statute by an agency created to administer that statute is traditionally accorded some deference.’ ” Best v. N. C. State Board of Dental Examiners, 108 N.C. App. 158, 162, 423 S.E.2d 330, 332 (1992) (quoting Savings and Loan League v. Credit Union Comm’n, 302 N.C. 458, 466, 276 S.E.2d 404, 410 (1981)).

The scope of administrative review for petitions filed with the North Carolina Tax Review Board (“Tax Review Board”) is governed by N.C. Gen. Stat. § 105-241.2(b2) (2001). After the Tax Review Board conducts a hearing, this statute provides in pertinent part: “The Board shall confirm, modify, reverse, reduce, or increase the assessment or decision of the Secretary . ...” Id.

This matter was twice appealed to and heard by the Tax Review Board, chaired by Harlan E. Boyles, State Treasurer, with Ms. Jo Anne Sanford, Chair of the Utilities Commission, and Noel L. Allen, Attorney at Law, Adjunct Professor at Norman Adrian Wiggins School of Law at Campbell University, participating. The Tax Review Board is a statutory body charged to hear sales and use tax appeals. Its members possess detailed and specialized knowledge of the Revenue statutes. After the first hearing, the Tax Review Board found that the Secretary of Revenue erred in concluding that N.C. Gen. Stat. § 105-228.10 did not grant a specific exemption to insurance companies from liability for local sales and use taxes. The Tax Review Board remanded the matter to the Secretary for further consideration based on the Tax Review Board’s findings.

*568On remand, the Secretary disagreed with the Tax Review Board and again found that the statute did not grant a specific exemption. The Tax Review Board heard the matter for the second time and again ruled that the Secretary had erred.

The Tax Review Board held that N.C. Gen. Stat. § 105-228.10 was clear and unambiguous in prohibiting additional local taxes, “other than ad valorem taxes,” from being imposed upon insurance companies who pay taxes solely on gross premiums. Although the Tax Review Board’s ruling is not binding upon this Court, we should give its decision deference in reaching our decision given the specialized knowledge and power given to the Tax Review Board under N.C. Gen. Stat. § 105-241.2(b2). Best, 108 N.C. App. at 162, 423 S.E.2d at 332.

Here, the language of N.C. Gen. Stat. § 105-228.10, prior to its amendment, clearly and unambiguously prohibited the imposition of additional taxes, “other than ad valorem taxes,” upon insurance companies who paid the gross premiums tax. N.C. Gen. Stat. § 105-228.10 (1945). The 1998 amendment to N.C. Gen. Stat. § 105-228.10 substantively changed this prohibition against additional taxes, including local use taxes, by limiting the prohibition to “a privilege tax or a tax computed on the basis of gross premiums.” N.C. Gen. Stat. § 105-228.10 (2001). It is undisputed that the General Assembly substantively narrowed the statute by omitting the exemption from local use or other taxes previously granted to- insurance companies by enacting the 1998 ¿mendment.

The majority’s opinion relies on Wilmington Underwriter Ins. Co. v. Stedman to support its conclusion that the “identical” language of N.C. Gen. Stat. § 105-228.10 was interpreted under its predecessor statute by our Supreme Court and held to mean that insurance companies are only exempted from privilege taxes, not local use taxes. 130 N.C. 155, 41 S.E. 279 (1902). Wilmington Underwriter Ins. Co., however, was decided over 100 years ago when the entire statutory scheme of state and local taxation was far different from what exists today. In 1902, the General Assembly had not delegated any authority to cities, towns, or counties for the imposition of local sales and use taxes, and individual state income taxes were not levied. The language at issue in Wilmington Underwriter Ins. Co. dealt specifically with local taxes on capital stock, not local sales and use taxes. Delegation of the power to impose local sales and use taxes was not enacted until 1971. See N.C. Gen. Stat. § 105-467 (2001); N.C. Gen. Stat. § 105-468 (2001). As taxes on capital stock were the only taxes *569at issue in Wilmington Underwriter Ins. Co., the reliance on this case in the majority’s opinion is misplaced.

The majority’s opinion contends that the addition of the phrase “other than ad valorem taxes” to N.C. Gen. Stat. § 105-228.10 in 1945 shows the General Assembly’s intent to codify the holding of Wilmington Underwriter Ins. Co. issued forty-three years earlier. I disagree. The addition of this phrase significantly altered the meaning of the statute from its original text. By adding this phrase, the General Assembly made it clear that under N.C. Gen. Stat. § 105-228.10, counties, cities, and towns were prohibited from imposing any additional taxes, “other than ad valorem taxes,” upon insurance companies who pay gross premium taxes. N.C. Gen. Stat. § 105-228.10 (2001).

In Watson Industries v. Shaw, Comr. of Revenue, our Supreme Court reviewed a different revenue statute and stated,

[t]ax statutes are to be strictly construed against the State and in favor of the taxpayer.
In the interpretation of statutes levying taxes, it is the established rule not to extend their provisions, by implication, beyond the clear import of the language used, or to enlarge their operation so as to embrace matters not specifically pointed out. In case of doubt they are construed most strongly against the government, and in favor of the citizen.

235 N.C. 203, 211-12, 69 S.E.2d 505, 511-12 (1952) (emphasis supplied) (internal citations omitted).

In Childers v. Parker’s Inc., our Supreme Court interpreted a statute which had been subsequently amended. Justice Sharp wrote,

[i]n construing a statute with reference to an amendment it is presumed that the legislature intended either (a) to change the substance of the original act, or (b) to clarify the meaning of it. The presumption is that the legislature intended to change the original act by creating a new right or withdrawing any existing one.

274 N.C. 256, 260, 162 S.E.2d 481, 483 (1968) (internal citations omitted). In Phillips v. Phillips, Justice Sharp similarly wrote, “[w]hile the purpose of an amendment to an ambiguous statute may be presumed to be to clarify that which was previously doubtful, it is logi*570cal to infer that an amendment to an unambiguous provision . . . evinces an intent to change the law.” 296 N.C. 590, 597, 252 S.E.2d 761, 766 (1979) (citations omitted).

The language of N.C. Gen. Stat. § 105-228.10, prior to the 1998 amendment, is clear and unambiguous in prohibiting “any additional tax, license, or fee, other than ad, valorem taxes,” from being imposed upon insurance companies who solely and alternatively pay gross premium taxes. N.C. Gen. Stat. § 105-228.10 (1945) A plain comparison of the text of N.C. Gen. Stat. § 105-228.10, before and after the 1998 amendment, shows that the 1998 amendment eliminated the prohibition against the levy of local use taxes by limiting the prohibition to “a privilege tax or a tax computed on the basis of gross premiums.” N.C. Gen. Stat. § 105-228.10 (2001).

As the plain language of N.C. Gen. Stat. § 105-228.10 is unambiguous, it is “logical to infer that an amendment to [this] unambiguous provision . . . evinces an intent to change the law,” not clarify it. Phillips, 296 N.C. at 597, 252 S.E.2d at 766. The General Assembly amended N.C. Gen. Stat. § 105-228.10 in 1998 to further limit the exemption to insurance companies from imposition of additional local taxes. Childers, 274 N.C. at 260, 162 S.E.2d at 483. The majority’s opinion construes plain statutory language that is neither unclear nor ambiguous. I defer to the specialized knowledge and decision of the Tax Review Board. I respectfully dissent.