Company sues state over tax credits, audits
After more than $1 billion in renewable energy, historic rehabilitation investments, disagreement in interpretation leads to lawsuit.Posted — Updated
Monarch Tax Credits wants the department's moves declared unconstitutional, and it seeks more than $5 million in damages. The case was filed last week in Wake County Superior Court, but because of its complex nature will be heard in the state's Business Court.
Monarch helped clients invest in solar energy and historic rehabilitation projects tied to tax credits the state offers to boost those industries. But it has clashed for a couple of years now with the Department of Revenue over just how those credits work, and the company said in its lawsuit that DOR has been "overreaching its authority and attempting to make, rather than administer and interpret, tax law."
The company's legal team said the department is applying a federal tax law it shouldn't to the programs and misapplying that law to boot. It also said the department should have issued a declaratory ruling, either changing a decision it made or explaining it.
In a late August letter denying the ruling, the department said state law prohibits it from doing so.
"The department contends that taxpayers, or persons marketing tax planning strategies to taxpayers, who fail to undertake adequate due diligence should be precluded from using (the state's declaratory ruling law) as a weapon against the department when that failure results in negative audit consequences," the department's assistant secretary for tax administration wrote.
A department spokesman said Monday that DOR can't comment on audits or litigation. He said in an email that the department "supports renewable energy tax credits as allowed by the law."
In its suit, Monarch said most of its clients involved in these programs have been audited, and it described the audits as "burdensome and needlessly drawn out." The company said it has worked on 80 projects worth at least $900 million in North Carolina's renewable energy sector and another 15 historic or mill redevelopment projects worth about $140 million.
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