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Taxation – Transportation Penny Tax – Proceeds Usage – DOR Authority

Holding: After the plaintiff-county misused proceeds of a transportation penny tax, the circuit court should have enjoined the county from further violating the Optional Methods for Financing Transportation Facilities Act.

We affirm in part, reverse in part, and remand.

Facts

Pursuant to the Optional Methods for Financing Transportation Facilities Act (the Transportation Act), Richland County voters approved a transportation penny tax (Penny Tax), the proceeds of which were to be used for three stated transportation-related purposes.

Some of the $5 million in monthly revenues was used for purposes unrelated to transportation. When the county declined to take remedial actions that the defendant South Carolina Department of Revenue (DOR) proposed, DOR decided to cease remitting Penny Tax proceeds to the county.

The county filed this action seeking declaratory and injunctive relief. DOR counterclaimed, seeking declaratory and injunctive relief, as well as reimbursement of improper expenditures of Penny Tax funds.

Standing

Because DOR is the agency statutorily tasked with administering the Penny Tax program, and the expenditure of millions of dollars of Penny Tax revenues is an issue of wide concern both to DOR and to the taxpayers of Richland County, the circuit court correctly determined that DOR has standing to assert defenses and counterclaims in this action.

Writ of Mandamus

The circuit court issued a writ of mandamus directing DOR to continue remitting all penny tax revenues to the state treasurer for further remittance to the county. However, S.C. Code Ann. 4-37-30(A)(15) says, “The revenues of the tax collected in each county pursuant to this section must be remitted to the State Treasurer. . . . After deducting he amount of refunds made and costs to the Department of Revenue of administering the tax, . . . the State Treasurer shall distribute the revenues and all interest earned on the revenues . . . to the county in which the tax is imposed. . . .”

Therefore, the circuit court correctly concluded DOR’s duty to remit Penny Tax funds is ministerial. We affirm the writ of mandamus.

Injunctive Relief

After issuing the writ of mandamus, the circuit court properly denied the county’s motion for a preliminary injunction. Since DOR will continue remittance of Penny Tax revenues, the county will not suffer any negative financial consequences and therefore cannot show irreparable harm.

However, the circuit erred when it denied DOR’s motion for injunctive relief. The Richland County taxpayers would suffer irreparable harm if the county were not required to follow the law.

In light of the county’s many suspect expenditures of Penny Tax funds, DOR requested an injunction against the county prohibiting the further expenditure of Penny Tax funds until the county “adopts IRC 262/263A or some other acceptable alternative as a standard to be used to determine when expenditures are proper within the [Transportation] Act.” Under these compelling circumstances, an injunction is appropriate.

To ensure objective criteria establishing compliance with the Transportation Act, the county shall be subject to guidelines for determining whether expenses are properly allocable to a specific transportation project, or the direct administration of a specific transportation project. Accordingly, the county is hereby enjoined from violating the Transportation Act. We direct the circuit court, no later than 30 days following remand, to enter the preliminary injunction in accordance with this opinion.

Affirmed in part, reversed in part and remanded.

Dissent

(Beatty, C.J.) I concur with the majority’s decision in all respects other than the extent of the injunction the majority authorizes the circuit court to grant to DOR, and the implication that DOR has broad powers to enforce any constitutional South Carolina statute.

DOR has no statutory authority to micro-manage a county’s governing entity by demanding a particular project evaluation process, or any other evaluation process, be used in determining which expenditures are in compliance with the transportation penny tax statute. To allow DOR to make such a demand of a county government, in effect, gives DOR pre-approval authority of each project. This would be a clear violation of the County Home Rule Act.

I would limit DOR’s injunction to those expenditures declared improper by the circuit court.

Richland County v. South Carolina Department of Revenue (Lawyers Weekly No. 010-023-18, 19 pp.) (John Kittredge, J.) (Donald Beatty, C.J., concurring in part & dissenting in part) Appealed from Richland County Circuit Court (G. Thomas Cooper Jr., J.) Andrew Lindemann, Benjamin Nicholson V, M. Elizabeth Crum, Ray Stevens, Ray Jones, and Larry Smith for Appellant/Respondent; James Smith Jr., Dylan Goff, Jason Luther, Milton Kimpson, Dana Krajack, Nicole Wooten and Lauren Acquaviva for Respondents/Appellants; Elizabeth Van Doren Gray, Robert Tyson Jr. and Alexis Lindsay for Respondent; Robert Lyon and John DeLoache for Amicus Curiae.

 

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