July 24, 2013 South Carolina Supreme Court published opinion

Centex International, Inc. v South Carolina Department of Revenue 

Centex and two corporate partners claimed infrastructure tax credits in a consolidated partnership return. Department rejected the claim on the basis that only corporations can claim m the credit. The administrative law court upheld the denial. The Court, 3-2, affirmed. The majority held that “the taxpayer” in the relevant statute, South Carolina Code 12-6-3420, means the corporation entitled to the credit not partnerships or individuals. It held that Centex was not entitled to have the credit pass through the partnership under 12-6-3310 as only “qualified” entities meaning entities which can earn the credit may pass it through to partners. The majority also reasoned that the later addition of limited liability companies as entities which can earn then pass through the credit reinforces the construction of the statute that partnerships cannot the credit. Concerned about the apparent lack of wisdom in this harsh outcome, the majority noted other state decisions concluded that credits area matter of legislative grace and the legislature, not the courts, decide what is fair in this context and agreed with that reasoning. The Court rejected Centex’s claim that federal sate partnership principles require allowing the credit as the partnership here could not earn any credit and thus nothing existed to pass through. The Court finally held that filling a consolidated return did not change the statutorily mandated denial of the credit. The dissent argued that “the taxpayer” in 3420, means all corporations, partnerships and individuals as defined in 12-6-30 as there is no reason to limit the definition here to only corporate taxpayers and the credit should have been allowed to pass through to Centex.

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