NORTH CAROLINA
REGISTER
Volume 18, Issue 19
Pages 1635 - 1759
April 1, 2004
This issue contains documents officially filed
through March 11, 2004.
Office of Administrative Hearings
Rules Division
424 North Blount Street (27601)
6714 Mail Service Center
Raleigh, NC 27699-6714
(919) 733-2678
FAX (919) 733-3462
Julian Mann III, Director
Camille Winston, Deputy Director
Molly Masich, Director of APA Services
Ruby Creech, Publications Coordinator
Linda Dupree, Editorial Assistant
Dana Sholes, Editorial Assistant
Julie Brincefield, Editorial Assistant
IN THIS ISSUE
I. IN ADDITION
Voting Rights Letters.....................................................1635 - 1636
Tax Review Board Decisions.......................................1637 - 1662
Notice of Intent to Redevelop A Brownsfield
Property – Estate of Katherine C Bell ........................1663
Notice of Intent to Redevelop A Brownsfield
Property – Wede Corporation, LLC...........................1664
II. PROPOSED RULES
Administration
State Energy Office ...................................................1665 - 1670
Environment and Natural Resources
Coastal Resources Commission...............................1673 - 1678
Water Treatment Facility Operators
Certification Board ..............................................1678 - 1684
Health and Human Services
Facility Services..........................................................1670 - 1673
Licensing Boards
Cosmetic Art Examiners ...........................................1684
III. APPROVED RULES ...................................................1685 - 1730
Agriculture
Plant Industry
Board of Elections
Departmental Rules
Election Protests
Voting Equipment
Partisan Elections
Filing of Notice of Candidacy for Office of Superior Court Judge
Conduct of Vote Recounts by County Boards of Elections
Ballot Rotation Rules for Primary Election Ballots
Rules for Military & Overseas Citizens Absentee Voting Procedures
Environment and Natural Resources
Departmental Rules
Health and Human Services
Medical Assistance
Insurance
Consumer Services Division
Justice
Criminal Justice Education & Training Standards
Alarm Systems Licensing Board
Licensing Boards
Funeral Service, Board of
Locksmith Licensing Board
Pharmacy, Board of
Real Estate Commission
Respiratory Care Board
Transportation
Highways Division of
IV. RULES REVIEW COMMISSION..........................1731 - 1738
V. CONTESTED CASE DECISIONS
Index to ALJ Decisions .....................................................1739 - 1745
Text of Selected Decisions
03 DHR 0505.................................................................1746 - 1759
For the CUMULATIVE INDEX to the NC Register go to:
http://oahnt.oah.state.nc.us/register/CI.pdf
North Carolina Register is published semi-monthly for $195 per year by the Office of Administrative Hearings, 424 North Blount Street, Raleigh, NC
27601. North Carolina Register (ISSN 15200604) to mail at Periodicals Rates is paid at Raleigh, NC. POSTMASTER: Send Address changes to
the North Carolina Register, 6714 Mail Service Center, Raleigh, NC 27699-6714.
NORTH CAROLINA ADMINISTRATIVE CODE CLASSIFICATION SYSTEM
The North Carolina Administrative Code (NCAC) has four major classifications of rules. Three of these, titles, chapters, and sections are
mandatory. The major classification of the NCAC is the title. Each major department in the North Carolina executive branch of
government has been assigned a title number. Titles are further broken down into chapters which shall be numerical in order.
Subchapters are optional classifications to be used by agencies when appropriate.
NCAC TITLES TITLE 21
LICENSING BOARDS
TITLE 24
INDEPENDENT AGENCIES
1 ADMINISTRATION
2 AGRICULTURE & CONSUMER SERVICES
3 AUDITOR
4 COMMERCE
5 CORRECTION
6 COUNCIL OF STATE
7 CULTURAL RESOURCES
8 ELECTIONS
9 GOVERNOR
10A HEALTH AND HUMAN SERVICES
11 INSURANCE
12 JUSTICE
13 LABOR
14A CRIME CONTROL & PUBLIC SAFETY
15A ENVIRONMENT &NATURAL RESOURCES
16 PUBLIC EDUCATION
17 REVENUE
18 SECRETARY OF STATE
19A TRANSPORTATION
20 TREASURER
21* OCCUPATIONAL LICENSING BOARDS
22 ADMINISTRATIVE PROCEDURES
(REPEALED)
23 COMMUNITY COLLEGES
24* INDEPENDENT AGENCIES
25 STATE PERSONNEL
26 ADMINISTRATIVE HEARINGS
27 NC STATE BAR
28 JUVENILE JUSTICE AND DELINQUENCY
PREVENTION
1 Acupuncture
2 Architecture
3 Athletic Trainer Examiners
4 Auctioneers
6 Barber Examiners
8 Certified Public Accountant Examiners
10 Chiropractic Examiners
11 Employee Assistance Professionals
12 General Contractors
14 Cosmetic Art Examiners
16 Dental Examiners
17 Dietetics/Nutrition
18 Electrical Contractors
19 Electrolysis
20 Foresters
21 Geologists
22 Hearing Aid Dealers and Fitters
25 Interpreter/Transliterator (Reserved)
26 Landscape Architects
28 Landscape Contractors
29 Locksmith Licensing
30 Massage & Bodywork Therapy
31 Marital and Family Therapy
32 Medical Examiners
33 Midwifery Joint Committee
34 Funeral Service
36 Nursing
37 Nursing Home Administrators
38 Occupational Therapists
40 Opticians
42 Optometry
44 Osteopathic Examination (Repealed)
45 Pastoral Counselors, Fee-Based Practicing
46 Pharmacy
48 Physical Therapy Examiners
50 Plumbing, Heating & Fire Sprinkler
Contractors
52 Podiatry Examiners
53 Professional Counselors
54 Psychology
56 Professional Engineers & Land Surveyors
57 Real Estate Appraisal
58 Real Estate Commission
60 Refrigeration Examiners
61 Respiratory Care
62 Sanitarian Examiners
63 Social Work Certification
64 Speech & Language Pathologists &
Audiologists
65 Therapeutic Recreation Certification
66 Veterinary Medical
68 Substance Abuse Professionals
69 Soil Scientists
1 Housing Finance
2 Agricultural Finance Authority
3 Safety & Health Review
Board
4 Reserved
5 State Health Plan Purchasing
Alliance Board
Note: Title 21 contain s the chapters of the various occupational licensing boards and Title 24 contains the chapters of independent agencies.
NORTH CAROLINA REGISTER
Publication Schedule for January 2004 – December 2004
FILING DEADLINES NOTICE OF TEXT PERMANENT RULE TEMPORARY
RULES
Volume &
issue
number
Issue date Last day
for filing
Earliest date for
public hearing
End of required
comment
period
Deadline to submit
to RRC
for review at
next meeting
Earliest Eff.
Date of
Permanent Rule
Delayed Eff. Date of
Permanent Rule
(first legislative
day of the next
regular session)
270th day from publication
in the Register
18:13 01/02/04 12/08/03 01/17/04 03/02/04 03/22/04 05/01/04 05/10/04 09/28/04
18:14 01/15/04 12/19/03 01/30/04 03/15/04 03/22/04 05/01/04 05/10/04 10/11/04
18:15 02/02/04 01/09/04 02/17/04 04/02/04 04/20/04 06/01/04 01/26/05 10/29/04
18:16 02/16/04 01/26/04 03/02/04 04/16/04 04/20/04 06/01/04 01/26/05 11/12/04
18:17 03/01/04 02/09/04 03/16/04 04/30/04 05/20/04 07/01/04 01/26/05 11/26/04
18:18 03/15/04 02/23/04 03/30/04 05/14/04 05/20/04 07/01/04 01/26/05 12/10/04
18:19 04/01/04 03/11/04 04/16/04 06/01/04 06/21/04 08/01/04 01/26/05 12/27/04
18:20 04/15/04 03/24/04 04/30/04 06/14/04 06/21/04 08/01/04 01/26/05 01/10/05
18:21 05/03/04 04/12/04 05/18/04 07/02/04 07/20/04 09/01/04 01/26/05 01/28/05
18:22 05/17/04 04/26/04 06/01/04 07/16/04 07/20/04 09/01/04 01/26/05 02/11/05
18:23 06/01/04 05/10/04 06/16/04 08/02/04 08/20/04 10/01/04 01/26/05 02/26/05
18:24 06/15/04 05/24/04 06/30/04 08/16/04 08/20/04 10/01/04 01/26/05 03/12/05
19:01 07/01/04 06/10/04 07/16/04 08/30/04 09/20/04 11/01/04 01/26/05 03/28/05
19:02 07/15/04 06/23/04 07/30/04 09/13/04 09/20/04 11/01/04 01/26/05 04/11/05
19:03 08/02/04 07/12/04 08/17/04 10/01/04 10/20/04 12/01/04 01/26/05 04/29/05
19:04 08/16/04 07/26/04 08/31/04 10/15/04 10/20/04 12/01/04 01/26/05 05/13/05
19:05 09/01/04 08/11/04 09/16/04 11/01/04 11/22/04 01/01/05 01/26/05 05/29/05
19:06 09/15/04 08/24/04 09/30/04 11/15/04 11/22/04 01/01/05 01/26/05 06/12/05
19:07 10/01/04 09/10/24 10/16/04 11/30/04 12/20/04 02/01/05 05/00/06 06/28/05
19:08 10/15/04 09/24/04 10/30/04 12/14/04 12/20/04 02/01/05 05/00/06 07/12/05
19:09 11/01/04 10/11/04 11/16/04 12/31/04 01/20/05 03/01/05 05/00/06 07/29/05
19:10 11/15/04 10/22//04 11/30/04 01/14/05 01/20/05 03/01/05 05/00/06 08/12/05
19:11 12/01/04 11/05/04 12/16/04 01/31/05 02/21/05 04/01/05 05/00/06 08/28/05
19:12 12/15/04 11/22/04 12/30/04 02/14/05 02/21/05 04/01/05 05/00/06 09/11/05
EXPLANATION OF THE PUBLICATION SCHEDULE
This Publication Schedule is prepared by the Office of Administrative Hearings as a public service and the computation of time periods are not to be deemed binding or controlling.
Time is computed according to 26 NCAC 2C .0302 and the Rules of Civil Procedure, Rule 6.
GENERAL
The North Carolina Register shall be published twice
a month and contains the following information
submitted for publication by a state agency:
(1) temporary rules;
(2) notices of rule-making proceedings;
(3) text of proposed rules;
(4) text of permanent rules approved by the Rules
Review Commission;
(5) notices of receipt of a petition for municipal
incorporation, as required by G.S. 120-165;
(6) Executive Orders of the Governor;
(7) final decision letters from the U.S. Attorney
General concerning changes in laws affecting
voting in a jurisdiction subject of Section 5 of
the Voting Rights Act of 1965, as required by
G.S. 120-30.9H;
(8) orders of the Tax Review Board issued under
G.S. 105-241.2; and
(9) other information the Codifier of Rules
determines to be helpful to the public.
COMPUTING TIME: In computing time in the
schedule, the day of publication of the North Carolina
Register is not included. The last day of the period so
computed is included, unless it is a Saturday, Sunday,
or State holiday, in which event the period runs until
the preceding day which is not a Saturday, Sunday, or
State holiday.
FILING DEADLINES
ISSUE DATE: The Register is published on the first
and fifteen of each month if the first or fifteenth of
the month is not a Saturday, Sunday, or State holiday
for employees mandated by the State Personnel
Commission. If the first or fifteenth of any month is
a Saturday, Sunday, or a holiday for State employees,
the North Carolina Register issue for that day will be
published on the day of that month after the first or
fifteenth that is not a Saturday, Sunday, or holiday for
State employees.
LAST DAY FOR FILING: The last day for filing for any
issue is 15 days before the issue date excluding
Saturdays, Sundays, and holidays for State
employees.
NOTICE OF TEXT
EARLIEST DATE FOR PUBLIC HEARING: The hearing
date shall be at least 15 days after the date a notice of
the hearing is published.
END OF REQUIRED COMMENT PERIOD
An agency shall accept comments on the text of a
proposed rule for at least 60 days after the text is
published or until the date of any public hearings held
on the proposed rule, whichever is longer.
DEADLINE TO SUBMIT TO THE RULES REVIEW
COMMISSION: The Commission shall review a rule
submitted to it on or before the twentieth of a month
by the last day of the next month.
FIRST LEGISLATIVE DAY OF THE NEXT REGULAR
SESSION OF THE GENERAL ASSEMBLY: This date is
the first legislative day of the next regular session of
the General Assembly following approval of the rule
by the Rules Review Commission. See G.S. 150B-
21.3, Effective date of rules.
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1635
This Section contains public notices that are required to be published in the Register or have been approved by the Codifier of
Rules for publication.
U.S. Department of Justice
Civil Rights Division
JDR:TCH:VNR:jdh Voting Section – NWB.
DJ 166-012-3 950 Pennsylvania Ave., NW
2003-4542 Washington, D.C. 20530
February 10, 2004
Mr. Gary O. Bartlett
Executive Director
State Board of Elections
P.O. Box 27255
Raleigh, North Carolina 27611-7255
Dear Mr. Bartlett:
This refers to revisions to the English and Spanish versions of the voter registration application/update forms for the State of
North Carolina, submitted to the Attorney General pursuant to Section 5 of the Voting Rights Act, 42 U.S.C. 1973c. We received
your submission on December 12, 2003; supplemental information was received on February 2, 2004.
The Attorney General does not interpose any objection to the specified changes. However, we note that Section 5 expressly
provides that the failure of the Attorney General to object does not bar subsequent litigation to enjoin the enforcement of the changes.
See procedures for the Administration of Section 5 of the Voting Rights Act (28 C.F.R. 51.41).
Sincerely,
Joseph D. Rich
Chief, Voting Section
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1636
U.S. Department of Justice
Civil Rights Division
JDR:JBG:JEM:par Voting Section – NWB.
DJ 166-012-3 950 Pennsylvania Ave., NW
2003-0205 Washington, D.C. 20530
February 17, 2004
Mr. Gary O. Bartlett
Executive Director
State Board of Elections
P.O. Box 27255
Raleigh, North Carolina 27611-7255
Dear Mr. Bartlett:
This refers to the schedule for the March 23, 2004, special vacancy election for the City of Goldsboro in Wayne County,
North Carolina, submitted to the Attorney General pursuant to Section 5 of the Voting Rights Act, 42 U.S.C. 1973c. We received
your submission on January 21, 2004.
The Attorney General does not interpose any objection to the specified changes. However, we note that Section 5 expressly
provides that the failure of the Attorney General to object does not bar subsequent litigation to enjoin the enforcement of the changes.
In addition, as authorized by Section 5, we reserve the right to reexamine this submission if additional information that would
otherwise require an objection comes to our attention during the reminder of the sixty-day review period. See the Procedures for the
Administration of Section 5 (28 C.F.R. 51.41 and 51.43).
Sincerely,
Joseph D. Rich
Chief, Voting Section
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1637
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessment of Unauthorized )
Substance Tax dated March 13, 2002 by the )
Secretary of Revenue of North Carolina )
1996 by the Secretary of Revenue ) ADMINISTRATIVE DECISION
vs. ) Number: 415
)
Karen Leigh Lawing Bostic )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, on Tuesday, April 22, 2003, upon a petition filed by Karen Leigh Lawing Bostic (hereafter “Taxpayer”) for
administrative review of the Final Decision of the Assistant Secretary of Revenue entered on August 29, 2002, sustaining the proposed
assessment of unauthorized substance tax for the period at issue.
Pursuant to N.C. Gen. Stat. § 105-113.111(a) and N.C. Gen. Stat. § 105-241.1, a Notice of Unauthorized Substance Tax
Assessment was issued to the Taxpayer by Agent E. T. Brown, Enforcement Agent of the Unauthorized Substance Tax Division,
assessing $8,008.00 tax, $3,203.20 penalty and $40.04 interest, for a total liability of $11,251.24. The assessment alleged that on
March 8, 2002, the Taxpayer possessed 2,288 grams of marijuana without the proper tax stamps affixed to the substance.
ISSUES
1. Did the Taxpayer have actual/or constructive possession of marijuana without proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
FINDINGS OF FACT
After considering the petition, brief, record and matters of record, the Board makes the following finding of fact:
1. An Assessment of Unauthorized Substance Tax was made against the Taxpayer on March 13, 2002, in the sum of
$8,008.00 tax, $3,203.20 penalty and $40.04 interest, for a total liability of $11,251.24, based upon the possession of
2,288 grams of marijuana.
2. The Taxpayer made a timely objection and application for hearing.
3. The Taxpayer did not submit any arguments or evidence in support of her objection to the assessment.
4. On March 8, 2002, the Taxpayer possessed 2,288 grams of marijuana.
5. No tax stamps were purchased for or affixed to the marijuana as required by law.
CONCLUSIONS OF LAW
The Board reviewed the following conclusions of law made by the Assistant Secretary in his decision regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption.
3. The Taxpayer had constructive possession of 2,288 grams of marijuana on March 8, 2002, and was therefore a dealer as
that term is defined in N.C.G.S. 105-106 (3).
4. The Taxpayer is liable for tax in the sum of $8,008.00 tax, $3,203.20 penalty and interest until date of full payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-
241.2(b2). After the Board conducts a hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary.”
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1638
The Board having conducted an administrative hearing in this matter, and having considered the petition, the brief, the record
and the final decision, concludes that the findings of fact contained in the Assistant Secretary’s final decision are supported by
competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law are fully supported
by the findings of fact; therefore the Assistant Secretary’s final decisions should be confirmed.
WHEREFORE, THE TAX REVIEW BOARD ORDERS that the Assistant Secretary final decision sustaining the
proposed tax assessment together with interest against the Taxpayer be and is hereby Confirmed.
Made and entered into the 18th day of November 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Attorney at Law
Appointed Member
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1639
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessment of Unauthorized )
Substance Tax date January 7, 2002 by the )
Secretary of Revenue of North Carolina ) ADMINISTRATIVE DECISION
vs. ) Number: 416
)
Charles Edward Rice, II )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (here inafter “Board”) in the City of Raleigh, Wake County,
North Carolina, on Tuesday, April 22, 2003, upon a petition filed by Charles Edward Rice, II (hereafter “Taxpayer”) for
administrative review of the Final Decision of the Assistant Secretary of Revenue entered on August 15, 2002, sustaining the proposed
assessment of unauthorized substance tax for the period at issue.
Pursuant to N.C. Gen. Stat. § 105-113.111(a) and N.C. Gen. Stat. § 105-241.1, a Notice of Unauthorized Substance Tax
Assessment was issued to the Taxpayer on January 7, 2002 by Enforcement Agent T. L. Staley, of the Unauthorized Substance Tax
Division, assessing $500.00 tax, $200.00 penalty and $1.89 interest, for a total liability of $701.89. The assessment alleged that
Taxpayer possessed 9.5 grams of crack cocaine on January 7, 2002, without the proper tax stamps affixed to the substance.
ISSUES
1. Did the Taxpayer have actual/or constructive possession of crack cocaine without proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
FINDINGS OF FACT
After considering the petition, brief, record and matters of record, the Board makes the following finding of fact:
1. An Assessment of Unauthorized Substance Tax was made against the Taxpayer on January 7, 2002, in the sum of
$500.00 tax, $200.00 penalty and $1.89 interest, for a total proposed liability of $701.89, based upon the possession
of 9.5 grams of crack cocaine on December 14, 2001.
2. The Taxpayer made a timely objection and application for hearing.
3. The State Bureau of Investigation’s lab analysis reported that the evidence submitted for testing was 7.7 grams of
crack cocaine.
4. The Taxpayer was in constructive possession of 7.7 grams of crack cocaine on December 14, 2001, without proper
tax stamps affixed to the substance.
CONCLUSIONS OF LAW
The Board reviewed the following conclusions of law made by the Assistant Secretary in his decision regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption.
3. The Taxpayer constructively possessed 7.7 grams of crack cocaine on December 14, 2001, and was therefore a dealer as
that term is defined in N.C.G.S. 105-106.
4. The Taxpayer is liable for tax in the sum of $400.00, penalty in the sum of 160.00, and accrued interest until date of full
payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-
241.2(b2). After the Board conducts a hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary.”
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1640
The Board having conducted an administrative hearing in this matter, and having considered the petition, the brief, the record
and the final decision, concludes that the findings of fact contained in the Assistant Secretary’s final decision are supported by
competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law are fully supported
by the findings of fact; therefore the Assistant Secretary’s final decisions should be confirmed.
WHEREFORE, THE TAX REVIEW BOARD ORDERS that the Assistant Secretary final decision sustaining the
proposed tax assessment together with interest against the Taxpayer be and is hereby Confirmed.
Made and entered into the 18th day of November 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Attorney at Law
Appointed Member
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1641
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The proposed Assessment of Sales and )
Use Tax for the periods of June 1, 1997 )
Through March 31, 2000 by the Secretary of Revenue ) ADMINISTRATIVE DECISION
vs. ) Number: 417
)
Coreslab Structure, Inc. )
Taxpayer )
This matter was heard before the Regular Tax Review Board (hereinafter “Board” in the City of Raleigh, Wake County,
North Carolina on Tuesday, June 17, 2003 upon a petition filed pursuant to N.C. Gen. Stat. § 105-241.2(a)(2) by Coreslab Structure,
Inc. (hereinafter “Taxpayer”) for administrative review of the adverse decision entered by the Secretary of Revenue on October 21,
2003, sustaining the Department’s denial of Taxpayer’s claim for refund of sales and use tax for the period of June 1, 1997 through
March 31, 2000.
STATEMENT OF CASE
Pursuant to G.S. §105-241.2(a)(2), Coreslab Structure, Inc. (hereinafter “Taxpayer”) petitions the Tax Review Board
(hereinafter “Board”) for administrative review of the adverse decision entered by the Secretary of Revenue on October 21, 2002 upon
remand of Taxpayer’s original appeal. On March 20, 2002, the Board conducted a hearing on the petition filed for administrative review
of the final decision of the Secretary of Revenue entered on August 28, 2001 sustaining the denial of refund of sales and use tax for
the period of June 1, 1997 through March 31, 2000. On June 17, 2002, the Board issued Administrative Decision No. 384 and
remanded this matter to the Secretary for a further proceeding.
Without conducting a hearing on the above referenced remand, the Assistant Secretary issued a final decision on October 21,
2002. In that decision, the Assistant Secretary made findings that the Taxpayer’s invoices “match” the dates upon its applications for
progress payments, but that the “dollar amount” for the invoices were different because the greater number of invoices. The Assistant
Secretary also found that $23,926 of a possible $26,468 had been refunded to nonprofits. The Assistant Secretary also determined that
any refunds allowed to the Taxpayer would be subject to income tax in the year received.
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, and other materials that the
Secretary of Revenue received prior to issuing the October 21, 2002 final decision. From a review of this record, the Board finds that
the Assistant Secretary issued his final decision without conducting a formal hearing on the remand of this matter. The record also
reflects that the Assistant Secretary received additional documentation, which the Taxpayer did not review or respond to prior to the
Assistant Secretary’s issuance of the October 21, 2002 final decision.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-
241.2(b2). After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
In the October 21, 2002 final decision, the Assistant Secretary made findings that Taxpayer’s invoices “match” the dates
upon its applications for progress payments, but that the “dollar amount” for the invoices were different because the greater number of
invoices. The Assistant Secretary also found that $23,926 of a possible $26,468 had been refunded to nonprofits. The Assistant
Secretary also determined that any refunds allowed the Taxpayer would be subject to income tax in the year received.
The Taxpayer is a corporation that produces and erects customized concrete structural buildings and components, such as
those used in buildings, stadiums, and parking garages. Taxpayer is basically a manufacturer and subcontractor and produces these
items for general contractors and erects them for the general contractors. Taxpayer submits a bid to the general contractor that only
lists the total contract price for the project and finished materials. The Taxpayer calculated “sales tax” on manufacturing labor and
marked-up the cost of the tangible personal property used in the performance contracts. The sales tax was separately stated on the
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1642
invoices that the Taxp ayer provided to its customers. The Taxpayer submitted a refund claim in the amount of $79,100.88 for sales
tax billed and collected on tangible personal property used in its performance contracts.
N.C. Gen. Stat. § 105-164.11, “Excessive and erroneous collections” provides that “When the tax collected for any period is
in excess of the total amount that should have been collected, the total amount collected must be paid to the Secretary. When tax is
collected for any period on exempt or nontaxable sales the tax erroneously collected shall be remitted to the Secretary and no refund
shall be made to the taxpayer unless the purchaser has received credit for or has been refunded the amount of tax erroneously charged.
The provision shall be constructed with other provisions of this Article and given effect so as to result in the payment to the Secretary
of the total amount collected as tax if it is in excess of the amount that should have been collected.”
In its Petition, the Taxpayer argues that it did not collect any excise tax from the general contractors under the performance
contracts. The Taxpayer contends that when it calculated the tax due, it failed to use the actual cost of the raw materials that were
used to perform the contracts. Instead, the Taxpayer used a lump sum, which was equal to the actual cost of raw materials, labor,
overhead and profit. Thus, the Taxpayer is requesting a refund in the amount of $79,100.88.
For sales and use tax purposes, the Taxpayer is a contractor consuming tangible personal property through its execution of
performance contracts. Under N.C. Gen. Stat. § 105-164.6, it is required to pay a “use” tax to the Secretary based upon the cost price
of the personal property consumed in its construction projects. Even though this statute directs the Taxpayer to pay use tax, the
Taxpayer collected “sales” taxes from its customers with respect to its lump sum performance contracts. From a review of the record,
the Taxpayer added and collected sales tax to the invoices delivered to the customers.
The Board, after reviewing this matter on Taxpayer’s petition regarding the Assistant Secretary’s October 21, 2002 final
decision, remands this matter back to the Assistant Secretary and Orders that a formal hearing be conducted for the limited purpose of
rendering a determination regarding the following issues:
1. If the Taxpayer issued specific invoices simultaneously with the applications for payment when it billed its
customers under the performance contracts, and
2. The specific amo unt that the Secretary has already refunded to nonprofits, and the income tax consequences of the
amount of refund claimed by the taxpayer for the period at issue.
In remanding this matter, the Board grants the Taxpayer an opportunity to present evidence regarding the above referenced
issues and allows the Taxpayer an opportunity to review and respond to the documentation that the Assistant Secretary received and
considered prior to issuing the October 21, 2002 final decision.
THEREFORE, it is the decis ion of the Board to Remand this matter to the Assistant Secretary for a Hearing to address the
issues set forth above.
Made and entered into the 31st day of December 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1643
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Refund Claims for Installment Paper )
Dealer Tax for the period beginning July 1,)
1997 through June 30, 2000 filed by )
)
CONSECO FINANCE SERVICING )
CORP. ) ADMINISTRATIVE DECISION
vs. ) Number: 418
)
NORTH CAROLINA DEPARTMENT OF REVENUE )
Taxpayer )
This matter was heard before the Regular Tax Review Board (hereinafter “Board” in the City of Raleigh, Wake County,
North Carolina on Tuesday, June 17, 2003 upon a petition filed pursuant to N.C. Gen. Stat. § 105-241.2(a)(2) by Conseco Finance
Servicing Corporation (hereinafter “Taxpayer”) for administrative review of the adverse decision entered by the Secretary of
Revenue on April 4, 2002, sustaining the auditors’ adjustment of the refund claimed on installment paper purchased from out-of-state
dealers.
Conseco Finance Servicing Corporation (“Taxpayer”) is engaged in the business of buying installment paper. Taxpayer is a
subsidiary of Conseco Finance Corporation (“Finance”) which is in business of financing mobile homes and other tangible personal
property. Taxpayer has several offices in North Carolina, including Winston-Salem, Charlotte, Raleigh and Asheville. Taxpayer filed
installment paper dealer tax returns for the period beginning July 1, 1997 through June 30, 2000.
Conseco (“Taxpayer”) appeals from an adverse decision of the Assistant Secretary of Revenue entered on April 4, 2002 that
sustained the Department of Revenue’s partial denial of Taxpayer’s claims for refund of installment paper dealer tax. Taxpayer
submitted claims for a partial refund totaling $313,425.68 for the overpayment of “Installment Paper Tax” purportedly assessed and
paid pursuant to N.C. Gen. Stat. § 105-83 for the period at issue. During the course of examining Taxpayer’s claim, the auditors
discovered certain errors and reduced the claim by $5,201.27. The Taxpayer does not dispute the adjustment. The auditors also
discovered that the Taxpayer had under-reported its tax liability on its installment paper dealer tax returns by failing to include the
face value of certain installment paper it had purchased. The refund claim was further reduced by $129,220.67. The Taxpayer timely
protested this adjustment and requested a hearing that was held by the Assistant Secretary on December 4, 2001. On April 4, 2002,
the Assistant Secretary issued his final decision that sustained the partial denial of the refund claim. Thereafter, the Taxpayer timely
filed a petition for administrative review of the final decision with the Tax Review Board.
ISSUE
Is the Taxpayer required to include the face value of installment paper on property located in North Carolina and secured by a
lien in this State in the calculation of the installment paper dealer tax if the property is purchased from an out-of-state retailer?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, that
evidence is incorporated by reference and is made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. Taxpayer (f/k/a Green Tree Financial Servicing Corporation) is a Delaware corporation engaged in the business of
financing and leasing various types of tangible personal property, and purchasing installment paper.
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1644
2. Taxpayer is a subsidiary of Conseco Finance Corporation (“Conseco”), which is in the business of financing mobile
homes and other tangible personal property.
3. Taxpayer has several offices in North Carolina, including Winston-Salem, Charlotte, Raleigh, and Asheville.
4. The Department conducted an audit at the corporate headquarters of Conseco in St. Paul, Minnesota.
5. During the audit, the Taxpayer provided copies of its Installment Paper Dealer Tax returns for the quarters ending
September 1997 through 2000 along with the details for the tax returns including: listing region, territory, account
number, state code, date of transaction, loan type, proceeds, and total amount financed.
6. Taxpayer also submitted two claims for partial refund of taxe s paid during the period beginning July 1, 1997 through
September 30, 1997 and the period beginning October 1, 1997 through June 30, 2000 in the amount of $21,367.60
and $292,058.08, respectively, pursuant to N.C. Gen. Stat. § 105-266.1.
7. Taxpayer claimed there were three categories of overpayment and provided the auditor with three separate schedules
(A, B, and C) for each category, described as follows:
Schedule A lists payments of tax on contracts in which the buyer resided outside of North Carolina
(property must be located in this State to be subject to the Installment Paper Dealer tax on the contract for
the property);
Schedule B lists payments of tax on contracts with no dealer involvement (refinancing of existing contracts,
where no third party from whom contract is purchased exists); and
Schedule C lists payments of tax on the finance charges on the installment contract (finance charges are not
part of the face value or amount financed, upon which tax is due.)
8. The auditors requested a sample of contracts to confirm which type of overpayment was represented and examined
the original installment paper tax returns to verify that the value of the installment paper had actually been included
in those returns.
9. The auditors also examined motor vehicle titles registered with the North Carolina Division of Motor Vehicles
(DMV). These motor vehicle titles showed the existence of a lien on the tangible personal property, and their title
numbers were used to obtain names and dates of liens in order to request additional contracts to examine.
10. During the examination, the auditors determined that some of the installment paper in Taxpayer’s Schedule A had
been included in that refund category in error, since examination of the relevant documents showed that the
purchaser had a North Carolina address.
11. An additional sample of that type of contract was requested and examined, and an error rate was determined on the
basis of the errors found in the sample. The rate was applied to that refund category and the refund was reduced by
$5,201.37.
12. The auditors also discovered a number of liens associated with installments paper, which had not been reported on
any of the Taxpayer’s installment paper tax returns. The installment paper in this group involved property
purchased by North Carolina residents from out-of-state dealers.
13. The auditors concluded that the unreported installment paper should have been included in Taxpayer’s return since
the property upon which the lien is taken was located in this State.
14. The auditors then further reduced the refund by $129,220.67, the amount of the computed tax on the improperly
excluded contracts.
15. In the final audit report dated August 14, 2001, the claim for refund was partially denied in the total amount of
$134,422.04.
16. The Taxpayer accepted the $5,201.37 adjustment, but timely protested the adjustment of $129,220.67 in its letter
dated September 12, 2001.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law made by the Assistant Secretary in his decision
regarding this matter:
1. N.C. Gen. Stat. § 105-83 states: “Every person engaged in the business of dealing in, buying, or discounting
installment paper, notes, bonds, contracts, or evidences of debt for which, at the time of or in connection with the
execution of the instruments, a lien is reserved or taken upon personal property located in this State to secure the
payment of the obligations, shall submit to the Secretary…a full, accurate, and complete statement, verified by the
officer, agent, or person making the statement, of the total face value of the obligations dealt in, bought, or
discounted within the preceding three calendar months and, at the same time, shall pay a tax of two hundred
seventy-seven thousandths of one percent (.277%) of the face value of these obligations.”
2. Pursuant to N.C. Gen. Stat. § 105-33(a), taxes imposed under Article 2 are imposed for the privilege of carrying on
the business, exercising the privilege, or doing the act named.
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1645
3. The installment paper dealer tax levied under N.C. Gen. Stat. § 105-83 is a privilege tax imposed upon persons
engaged in the business of dealing in, buying or discounting installment paper for the privilege of engaging in such
business.
4. The business of “dealing in, buying, or discounting installment paper” neither begins nor ends with Taxpayer’s
formal acceptance of the installment paper. Instead, it encompasses the entire range of conduct in furtherance of
Taxpayer’s financing business.
5. The installment paper dealer tax is not a transactional tax.
6. Neither the underlying consumer purchase or the purchase of installment paper is the incidence of the tax.
7. The imposition of the privilege tax must be upheld if activity incident to and in furtherance of the business is
conducted within the State notwithstanding that documents necessary to the business are executed, accepted, or
transferred elsewhere.
8. N.C. Gen. Stat. § 105-83 does not require that the property securing the obligation be purchased in North Carolina.
9. Taxpayer is engaged in the business of dealing in, buying, or discounting installment paper in North Carolina.
10. At the time of or in connection with the execution of all of the instruments included in the calculation of the tax, a
lien was reserved or taken upon personal property located in this State to secure the payment of the obligations.
11. Taxpayer is subject to the installment paper dealer tax under N.C. Gen. Stat. § 105-83.
12. Taxpayer is required to include the total face value of all obligations bought which are secured by property located
in this State in the calculation of the installment paper dealer tax.
13. A finding that Taxpayer is entitled to a refund of taxes paid on installment paper purchased from out-of-state dealers
because the tax violates the Commerce Clause requires a ruling or declaration by the Secretary that N. C. Gen. Stat.
§ 105-83 operates in an unconstitutional manner as to the Taxpayer.
14. The Secretary has no authority under N.C. Gen. Stat. § 105-266.1 to order the refund of an invalid or illegal tax,
since questions of constitutionality are for the courts.
15. N.C. Gen. Stat. § 105-266.1 does not provide an exception to the general rule that voluntary payments of
unconstitutional tax are not refundable.
16. The only remedy for challenging a tax provision as being unlawful or invalid as opposed to being excessive or
incorrect is found in N.C. Gen. Stat. § 105-267.
17. Taxpayer has the burden of establishing that its claim for refund under N.C. Gen. Stat. § 105-266.1 results from
paying an incorrect or excessive tax computed in accordance with the applicable statutory provisions.
18. Taxpayer has not established that the auditors’ $129,220.67 reduction of the refund claim was incorrect.
19. The auditors properly adjusted the refund claim to include installment paper purchased from out-of-state dealers
secured by property located in North Carolina.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
This case involves the question of whether the face value of installment paper on property located in North Carolina and
secured by a lien in this State is includible in the calculation of the installment paper dealer tax imposed under N.C. Gen. Stat. § 105-
83 if the property is purchased from an out-of-state retailer.
Taxpayer is in the business of financing and leasing various types of tangible personal property, and purchasing installment
paper. Taxpayer has several offices in North Carolina, including Winston Salem, Charlotte, Raleigh, and Asheville.
The Taxpayer contends that the installment paper purchased from mobile home retailers located outside of North Carolina is
beyond the reach of the statute notwithstanding that the property securing the obligation is located in the state. The Taxpayer also
contends that, concerning the sales of installment paper at issue, it conducted no activity in North Carolina, which is “incident to the
buying and selling of such installment payer.” The Taxpayer argues that the incidence of the tax is the assignment of the installment
paper, which it contends occurred outside of North Carolina. Thus, the Taxpayer argues that the face value of the installment paper
that was assigned to it outside the state should be excluded from the calculation of the tax imposed by N.C. Gen. Stat. § 105-83.
The Department of Revenue, through counsel, argues that the Assistant Secretary properly found that, as an installment paper
dealer engaged in business in this state, the Taxpayer was required to include the face value of all installment obligations it bought
which were secured by property located in North Carolina in the calculation of the tax imposed by N.C. Gen. Stat. § 105-83. In
support of this argument, the Department of Revenue notes that the Court of Appeals has rejected the very same argument raised by
the Taxpayer in its Petition in Chrysler Financial Company v. Offerman, 138 N.C. App. 268, 531 S.E.2d 223, rev. denied, 352 N.C.
588, 544 S.E.2d 777 (2000). In that case, the Court recognized that where the assignment of the installment paper occurs is not
determinative; and that the activity triggering the tax is not limited to the actual transfer of the paper. The “tax is to be assessed for
engaging in the business of dealing in installment paper in North Carolina.” Id., 138 N.C. App. at 273, 531 S.E.2d at 226.
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1646
It is the function of this Board, upon administrative review, to review the record and determine whether the final decision is
proper based upon the evidence presented at the hearing before the Assistant Secretary. Thus, the Board having conducted an
administrative hearing in this matter, and having considered the petition, the briefs, the whole record and the Assistant Secretary’s final
decision, concludes that the findings of fact made by the Assistant Secretary were supported by competent evidence in the record; that
based upon the findings of fact, the Assistant Secretary’s conclusions of law were fully supported by the findings of fact; therefore the
decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into the 31st day of December 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1647
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessment of Withholding )
Tax, Penalty and Interest for the Quarters )
Ending December 31, 1999, March 31, and )
June 30, 2001 by the Secretary of Revenue ) ADMINISTRATIVE DECISION
vs. ) Number: 419
)
DeHaven's Transfer & Storage of Raleigh )
Taxpayer )
This matter was heard before the Regular Tax Review Board (hereinafter “Board” in the City of Raleigh, Wake County,
North Carolina on Tuesday, June 13, 2003 upon a petition filed pursuant to N.C. Gen. Stat. § 105-241.2(a)(2) by DeHaven’s Transfer
& Storage of Raleigh (hereinafter “Taxpayer”) for administrative review of the adverse decision entered by the Secretary of Revenue
on April 11, 2002, (Docket Number 2001-611) sustaining the proposed assessment of withholding tax, penalty and interest for the
quarters ending December 31, 1999, March 31, 2001 and June 30, 2001 in the total amount of $36,415.18.
During calendar year 1999, Taxpayer paid North Carolina income tax withheld of $460.30. On February 29, 2000, the
Taxpayer filed its annual withholding reconciliation for 1999 reflecting total North Carolina income tax withheld of $23,609.46. A
Notice of Tax Assessment for the underpayment of tax withheld of $23,149.16 ($23,609.46-$460.30) plus accrued interest was mailed
to the Taxpayer on June 27, 2001. Because the Taxpayer did not pay the proposed assessment and did not request a hearing within 30
days, the late payment penalty of ten percent of the tax was assessed under N.C. Gen. Stat. § 105-236(4).
Taxpayer also filed income tax withholding returns for the quarters ended March 31, and June 30, 2001, reflecting income tax
withheld of $4,348.01 and $5,348.48 respectively, but did not include payment with the returns. On August 1, 2001, Taxpayer made a
payment of $4,348.01 for the taxes withheld for the quarter ended March 31, 2001. Thereafter the Department issued Notices of
Withholding-Immediate Jeopardy Tax Assessment for the periods at issue. Taxpayer objected to the proposed assessment and timely
requested a hearing before the Secretary of Revenue. The Taxpayer also objected to the reasonableness of the jeopardy assessment
and requested the Secretary to review that matter pursuant to N.C. Gen. Stat. § 105-241.1(g). Upon review, the Secretary ruled that
the jeopardy assessments were reasonable and proper and issued the final assessment on October 18, 2001. On April 11, 2002, the
Assistant Secretary issued the final decision sustaining the proposed assessment against the Taxpayer. Thereafter, the Taxpayer filed a
petition for administrative review of the April 11, 2002 final decision with the Board.
ISSUE
Are the withholding tax assessments proposed against the Taxpayer lawful and proper?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, and evidence that the parties
presented at the hearing before the Assistant Secretary. The Board, after reviewing these documents, incorporates the documents by
reference in this decision.
FINDINGS OF FACT
The Board reviewed and considered the findings of fact entered by the Assistant Secretary in his decision regarding this
matter and upon review; the Board incorporates the findings of fact by reference in this decision.
CONCLUSIONS OF LAW
The Board reviewed and considered the conclusions of law made by the Assistant Secretary in his decision regarding this
matter and upon review; the Board incorporates the conclusions of law by reference in this decision.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-
241.2(b2). After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1648
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax assessment is presumed to be correct and the burden is on the
Taxpayer to rebut that presumption. In order to rebut the presumption, the Taxpayer must offer evidence to show that the assessment
is not proper.
N.C. Gen. Stat. § 105-236(4) provides that the Secretary may assess a ten percent penalty for the failure to pay tax when due,
provided there is no intent to evade the tax. The penalty does not apply in connection with an amended return if the tax is paid when
the return is filed, or if a tax due but not shown on a return, is paid within 30 days after the proposed notice of assessment. N.C. Gen.
Stat. § 105-237 states that the Secretary may reduce or waive penalties but does not mandate reduction or waiver of penalties under
any circumstances.
In the Petition, the Taxpayer argues that since reasonable cause for late payment is present, the Taxpayer should be excused
from the late payment penalty assessed. The Taxpayer also argues that there were no grounds for issuance of a jeopardy assessment in
this case and that since the Assistant Secretary found that the late payment penalties on the jeopardy assessment of tax were
improperly assessed, the entire jeopardy assessment should be found incorrect.
The record shows that the Taxpayer withheld certain amounts of income tax and failed to remit payment of the tax to the
Department of Revenue. The record also shows that the Taxpayer has not presented any substantial basis for its objection to the
proposed assessment. Thus, the Taxpayer failed to provide evidence to show that the assessment, including the late payment penalty,
was not properly assessed in this matter. The Board will not address Taxpayer’s jeopardy assessment argument because it does not
have jurisdiction over that issue.
Thus, the Board having conducted an administrative hearing in this matter, and having considered the petition, the briefs, the
documents of record and the Assistant Secretary’s final decision, concludes that the findings of fact made by the Assistant Secretary
were supported by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law
were fully supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into the 31st day of December 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1649
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Individual )
Income Tax and Interest for the 2000 tax )
year by the Secretary of Revenue )
) ADMINISTRATIVE DECISION
vs. ) Number: 420
)
David A. McGowan, )
Taxpayer )
This matter was heard before the Regular Tax Review Board (hereinafter “Board” in the City of Raleigh, Wake County,
North Carolina on Tuesday, June 17, 2003 upon a petition filed pursuant to N.C. Gen. Stat. § 105-241.2(a)(2) by David A. McGowan
(hereinafter “Taxpayer”) for administrative review of the adverse decision entered by the Assistant Secretary of Revenue on
November 25, 2002, sustaining the proposed assessment of individual income tax and interest in the total amount of $1,249.83 for the
period at issue.
Taxpayer was employed by Procter & Gamble Paper Products Company, (hereinafter “Procter”) at its plant located in
Greenville, NC. Procter sold the plant to Paper-Pak Products, Inc. (hereinafter “Buyer”). Some employees were not retained by
Buyer and were paid severance wages. Others employees, including the Taxpayer, were retained by the Buyer and signed an
“Incentive to Stay Agreement and Release.” Under this contract, an employee was paid one-half of an incentive stay allowance as
soon as practical after the employee signed the agreement and the remaining one-half was paid as soon as practical after the
employee’s last day of employment, provided the employee’s employment had started with the Buyer. Effective January 1, 2000, the
Taxpayer was employed by the Buyer at the Greenville plant. Taxpayer’s returns show that he received the first payment of $16,184
from the Employer in tax year 1999 and the second payment of $15,996 in tax year 2000. Taxpayer had claimed a deduction for
severance wages of these amounts on his 1999 and 2000 tax returns.
Upon examination of the Taxpayer’s 2000 individual income tax return, the Department of Revenue adjusted Taxp ayer’s tax
return to disallow the deduction that he claimed for severance wages. On April 12, 2002, a Notice of Individual Income Tax
Assessment was mailed to the Taxpayer. Taxpayer objected to the proposed assessment and timely requested a hearing before the
Secretary of Revenue. On October 16, 2002, Eugene J. Cella, Assistant Secretary, conducted a hearing upon Taxpayer’s timely
application and objection to the proposed assessment. On November 25, 2002, Assistant Secretary issued a final decision sustaining
the proposed assessment against the Taxpayer. Thereafter, the Taxpayer timely filed a petition for administrative review of the final
decision with the Board.
ISSUES
1. Is the Taxpayer entitled to the deduction for severance wages for tax year 2000?
2. Is the individual income tax assessment proposed against the Taxpayer for taxable year 2000 lawful and proper?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. The Board, after reviewing these documents, incorporates the
documents by reference in this decision.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-
241.2(b2). After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1650
Assessments of tax are presumed to be correct and the taxpayer has the burden to show that the assessment is not proper. It is
the function of this Board, upon administrative review, to review the record and determine whether the final decision is proper based
upon the evidence presented at the hearing before the Assistant Secretary. Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax
assessment is presumed to be correct and the burden is on the Taxpayer to rebut that presumption. In order to rebut the presumption,
the Taxpayer must offer evidence to show that the assessment is not proper.
N.C. Gen. Stat. § 105-134.6(b)(11) provides that “severance wages received by a taxpayer from an employer as the result of
the taxpayer’s permanent, involuntary termination from employment through no fault of the employee” shall be deducted from taxable
income in order to determine North Carolina taxable income.
The Taxpayer contends that all of the money received from Procter & Gamble was severance wages, regardless of how it was
referenced in the agreement between Procter & Gamble and the Taxpayer, and is therefore deductible from federal adjusted gross
income under the provisions of N.C. Gen. Stat. § 105-134.6(b)(11). The Department of Revenue allowed the first payment received
by the Taxpayer in tax year 1999 as a severance wage deduction because that payment was contingent upon Taxpayer ceasing
employment with Procter & Gamble. The Department of Revenue disallowed the second payment because it was due, pursuant to the
agreement, only if the Taxpayer started work with the new employer. In disallowing the second payment, the Department of Review
noted that the second payment was characterized as “incentive to stay” allowance, not as a “severance allowance” in the agreement
between the Taxpayer and Procter & Gamble.
Upon review of the record, the Board concludes that the Taxpayer failed to furnish evidence to show that the assessment is
not proper. Thus, the Board having conducted an administrative hearing in this matter, and having considered the petition, the
documents of record and the Assistant Secretary’s final decision, concludes that the findings of fact made by the Assistant Secretary
were supported by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law
were fully supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into the 31st day of December 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1651
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax date d February 8, 2002 )
By the Secretary of Revenue ) ADMINISTRATIVE DECISION
vs. ) Number: 421
)
Juan Carlos Ramirez Sales )
Taxpayer )
This matter was heard before the Regular Tax Review Board (hereinafter “Board” in the City of Raleigh, Wake County,
North Carolina on Tuesday, June 17, 2003 upon a petition filed pursuant to N.C. Gen. Stat. § 105-241.2(a)(2) by Juan Carlos
Ramirez Sales (hereinafter “Taxpayer”) for administrative review of the adverse decision entered by the Secretary of Revenue on
December 20, 2002, that reduced the proposed assessment of unauthorized substance tax imposed against the Taxpayer for the period
at issue.
Pursuant to G.S. § 105-113.111(a) and G.S. § 105-241.1, a Notice of Unauthorized Substance Tax Assessment was issued to
the Taxpayer by Enforcement Agent Brian Zieverink of the Unauthorized Substance Tax Division, assessing $1,650.00 tax, $660.00
penalty and $6.33 interest, for a total liability of $2,316.33. The assessment alleged that on June 7, 2002, the Taxpayer had
unauthorized possession of 33 grams of cocaine without the proper tax stamps affixed to the substance. The Taxpayer protested the
assessment and requested a hearing before the Secretary of Revenue. On September 18, 2002, Eugene J. Cella, Assistant Secretary
conducted a hearing upon Taxpayer’s timely application and objection to the proposed assessment. The Assistant Secretary issued a
final decision reducing the proposed assessment against the Taxpayer to $1,500.00 plus penalty and interest for unauthorized
possession of 30 grams of cocaine. Thereafter, the Taxpayer timely filed a petition for administrative review of the final decision with
the Board.
ISSUES
1. Did the Taxpayer have actual and/or constructive possession of cocaine without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, that
evidence is incorporated by reference and is made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. Assessment of Unauthorized Substance Tax was made against the Taxpayer on June 12, 2002, in the sum of
$1,650.00 tax, $660.00 penalty and $6.33 interest, for a total proposed liability of $2,316.33, based upon possession
of 33 grams of cocaine on June 7, 2002.
2. The Taxpayer made timely objection and application for a hearing.
3. The Taxpayer was present at the apartment when Suspect #1 came to the apartment with the cocaine. The Taxpayer
said Suspect #1 had purchased jewelry, but no jewelry was found on Suspect #1 upon his apprehension.
4. After the call from Suspect #1 to the Taxpayer’s apartment, while Suspect #1 was being chased by the police, the
Taxpayer and all the occupants of his apartment were seen leaving the apartment in haste.
5. The crime lab determined the substance at issue was cocaine weighing 30 grams.
6. The Taxpayer had actual and/or constructive possession of 30 grams of cocaine on June 7, 2002, without proper tax
stamps affixed to the substance.
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18:19 NORTH CAROLINA REGISTER April 1, 2004
1652
CONCLUSIONS OF LAW
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption, and that burden was
not met.
3. The Taxpayer had actual and/or constructive possession of 30 grams of cocaine on June 7, 2002, and was therefore a
dealer as that term is defined in G.S. 105-113.106.
4. The Taxpayer is liable for tax in the sum of $1,500.00, penalty in the sum of $600.00, and accrued interest until date
of full payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-
241.2(b2). After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Assessments of tax are presumed to be correct and the taxpayer has the burden to show that the assessment is not proper. It is
the function of this Board, upon administrative review, to review the record and determine whether the final decision is proper based
upon the evidence presented at the hearing before the Assistant Secretary.
Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax assessment is presumed to be correct and the burden is on the
Taxpayer to rebut that presumption. In order to rebut the presumption, the Taxpayer must offer evidence to show that the assessment
is not proper.
The Board having conducted an administrative hearing in this matter, and having considered the petition, the briefs, the
whole record and the Assistant Secretary’s final decision, concludes that the findings of fact made by the Assistant Secretary were
supported by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were
fully supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into the 31st day of December 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1653
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated August 9, 2002 by )
the Secretary of Revenue of North Carolina )
1996 by the Secretary of Revenue ) ADMINISTRATIVE DECISION
vs. ) Number: 422
)
Delcina McMillion )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, on Tuesday, June 17, 2003, upon a petition filed by Delcina McMillion (hereafter “Taxpayer”) for administrative
review of the Final Decision of the Assistant Secretary of Revenue entered on November 27, 2002, sustaining the proposed
assessment of unauthorized substance tax for the period at issue.
Pursuant to N.C. Gen. Stat. § 105-113.111(a) and N.C. Gen. Stat. § 105-241.1, a Notice of Unauthorized Substance Tax
Assessment was issued to the Taxpayer on August 9, 2002 by Enforcement Agent Dennis O’ Dell of the Unauthorized Substance Tax
Division, assessing $500.00 tax, $200.00 penalty and $4.50 interest, for a total liability of $704.50. The assessment alleged that on
June 16, 2002, the Taxpayer was in unauthorized possession 9.27 grams of cocaine without the proper tax stamps affixed to the
substance.
ISSUES
1. Did the Taxpayer have actual/or constructive possession of cocaine without proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. An Assessment of Unauthorized Substance Tax was made against the Taxpayer on August 9, 2002, in the sum of
$500.00 tax, $200.00 penalty and $4.50 interest, for a total proposed liability of $704.50, based upon the possession
of 9.7 grams of cocaine.
2. The Taxpayer made a timely objection and application for hearing.
3. Neither the Taxpayer nor anyone representing the Taxpayer appeared at the hearing to offer arguments or evidence
in support of the obligation to the assessment.
4. The weight of the cocaine at issue is 7.7 grams.
5. On June 16, 2002, the Taxpayer possessed 7.77 grams of cocaine.
6. No tax stamps were purchased for or affixed to the cocaine as required by law.
CONCLUSIONS OF LAW
The Board reviewed the following conclusions of law made by the Assistant Secretary in his decision regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption, and that burden was
not met.
3. The Taxpayer constructively possessed 7.7 grams of cocaine on June 16, 2002, and was therefore a dealer as that
term is defined in N.C. Gen. Stat. § 105-106(3).
4. The Taxpayer is liable for tax in the sum of $400.00, penalty in the sum of 160.00, and accrued interest until date of
full payment.
DECISION
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1654
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-
241.2(b2). After the Board conducts a hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary.”
The Board having conducted an administrative hearing in this matter, and having considered the petition, the brief, the record
and the final decis ion, concludes that the findings of fact contained in the Assistant Secretary’s final decision are supported by
competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law are fully supported
by the findings of fact; therefore the Assistant Secretary’s final decisions should be confirmed.
WHEREFORE, THE TAX REVIEW BOARD ORDERS that the Assistant Secretary’s final decision be and is hereby
confirmed in every respect.
Made and entered into the 31st day of December 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1655
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated March 7, 2002 by the )
Secretary of Re venue of North Carolina ) ADMINISTRATIVE DECISION
vs. ) Number: 423
)
Kip Aaron Bartlett and Laura M. Bartlett )
Taxpayer )
This matter was heard before the Regular Tax Review Board (hereinafter “Board” in the City of Raleigh, Wake County,
North Carolina on Tuesday, June 17, 2003 upon a petition filed pursuant to N.C. Gen. Stat. § 105-241.2(a)(2) by Kip Aaron Bartlett
and Laura M. Bartlett (hereinafter “Taxpayers”) for administrative review of the adverse decision entered by the Secretary of
Revenue on November 27, 2002, sustaining the proposed assessment of unauthorized substance tax in the total amount of $24,717.00,
plus penalty and interest for the period at issue.
Pursuant to N.C. Gen. Stat. § 105-113.111(a) and N.C. Gen. Stat. § 105-241.1, a Notice of Unauthorized Substance Tax
Assessment was issued to the Taxpayers by Enforcement Agent Tim Townsend, of the Unauthorized Substance Tax Division,
assessing $24,717.00 tax, $9,886.80 penalty and $123.59, interest, for a total liability of $34,727.39. The assessment alleged that on
March 4, 2002, the Taxpayers had actual and/or constructive possession of 7,062 grams of marijuana that did not have the proper
stamps affixed thereto. This assessment was an amendment to a prior assessment that was issued on March 5, 2002, which reflected
the weight of marijuana to be 8,896 grams.
The Taxpayers objected to the assessment and requested a hearing before the Secretary of Revenue. After conducting a
hearing, the Assistant Secretary issued his final decis ions affirming the proposed assessment against the Taxpayers on November 27,
2002. Thereafter, the Taxpayers timely filed a petition for administrative review of the final decisions with the Board.
ISSUES
1. Did the Taxpayers have actual and/or constructive possession of marijuana without proper tax stamps affixed?
2. Are the Taxpayers subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. The evidence is listed as follows:
1. US-1 Form BD-10, “Notice of Unauthorized Substance Tax Assessment,” dated March 7, 2002.
2. US-2 Letter from the Taxpayers’ attorney, dated March 13, 2002, requesting a hearing.
3. US-3 Letter to the Taxpayers’ attorney, dated March 26, 2002, requesting a hearing.
4. US-4 Form BD-4, “Report of Arrest and/or Seizure Involving Nontaxpaid (Unstamped) Controlled Substances,”
naming the Taxpayer as the possessor of the controlled substance.
5. US-5 Case report by the New Hanover County Sheriff’s Office and a statement by Enforcement Agent Tim
Townsend of the Unauthorized Substances Tax Division.
6. US-6 Memorandum from E. Norris Tolson, Secretary of Revenue, dated May 16, 2002, delegating to Eugene J.
Cella, Assistant Secretary of Administrative Hearings, the authority to hold any hearing required or allowed under
Chapter 105 of the North Carolina General Statutes.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decisions
regarding these matters:
1. Assessment of Unauthorized Substance Tax was made against the Taxpayers on March 7, 2002, in the sum of
$24,717.00 tax, $9,886.80 penalty and $123.59 interest, for a total proposed liability of $34,727.39, based on
possession of 7,062 grams of marijuana.
2. The Taxpayers made timely objection and application for a hearing.
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1656
3. The correct method of determining the weight of growing marijuana plants is to cut off the root ball and weigh the
rest of the plant. The stems and stalks of intact, growing marijuana plants clearly are not “separated from and …not
mixed with any other parts of the … plant” in such a way that would confer on those stems and stalks the tax rate of
$.40 per gram authorized in N.C. Gen. Stat. § 105-113.107(a)(1).
4. The unauthorized substance tax is imposed on the quantity of controlled substance possessed by a dealer. The
marijuana at issue was weighed the day after its seizure on calibrated scales at a company that manufactures
calibrated scales. The weight determined on these scales was 7,062 grams. The SBI lab weighed the marijuana 65
days after it was seized and concluded it weighed 1,905 grams. Clearly the 79 growing marijuana plants dried out
during the 65-day period before the SBI weighed the plants. Therefore, the best information available indicates the
quantity of marijuana possessed by the Taxpayer was 7,062 grams.
5. The Taxpayers’ briefs contained a critical misstatement of law on Page 5. The brief states that G.S. 105-241.2-
1(g)(sic) requires that within five working days after a jeopardy assessment is made under Article 2D the Secretary
must provide the Taxpayer with a written statement of the information upon which the Secretary relied in making
the assessment. On the contrary, N.C. Gen. Stat. § 105-241.1(g) specifically excludes Article 2D assessments from
the “written statement” provision.
6. Although exempt from the aforementioned “written statement” requirement, the taxpayer was issued such a
document. Form BD-4, “Report of Arrest and/or Seizure Involving Nontaxpaid (Unstamped) Controlled
Substances,�� serve as the “written statement” for the assessment proposed against Mr. Bartlett. A copy of Form BD-
4 was provided to the Taxpayer with his notice of assessment and a letter that accompanied the notice advised the
Taxpayer that Form BD-4 constituted the written statement.
7. The Taxpayers’ briefs further allege that the Taxpayers were not notified that the assessment was a jeopardy
assessment. On the contrary, the notice of assessment, Form BD-10, expressly states the following: “In the event
you fail to respond immediately to this proposed assessment by remitting the full amount shown due or by posting a
bond, collection may proceed pursuant to G.S. 105-241.1(g) or G.S. § 105-242 without regard to whether you have
requested a hearing.”
8. On March 4, 2002, the Taxpayers had actual and/or constructive possession of 7,062 grams of marijuana.
9. No tax stamps were purchased for or affixed to the marijuana as required by law.
CONCLUSIONS OF LAW
The Board reviewed and considered the conclusions of law entered by the Assistant Secretary in his decisions regarding these
matters:
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayers who object to an assessment to overcome that presumption, and that burden
was not met.
3. An Administrative Tax Hearing lacks the statutory authority to rule on alleged constitutional violations.
4. Per N.C. Gen. Stat. § 105-241.1(a), the Secretary must base a proposed assessment on the best information
available. While one can argue that the SBI lab’s scales are more accurate than the calibrated scales upon
which the marijuana was first weighed, the possible difference in accuracy is offset by the fact that the two
scales essentially did not weigh the same substance. The calibrated scales weighed marijuana plants that had
been harvested the previous day. The SBI scales weighed dried vegetable matter that two months earlier had
been freshly harvested marijuana plants. The best information regarding the weight of the marijuana possessed
by the Taxpayers is clearly the 7,062 grams determined by the calibrated scales on March 5, 2002.
5. The Taxpayers received all notices required by statute as well as a “written statement of information” that was
not required by statute.
6. The Taxpayers had actual and/or constructive possession of 7,062 grams of marijuana on March 5, 2002, and
were therefore dealers as that term is defined in N.C. Gen. Stat. § 105-113.106(3).
7. The Taxpayers are liable for $24,717.00 tax, $9,886.80 penalty and interest until date of full payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Ge n. Stat. § 105-
241.2(b2). After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
It is the function of this Board, upon administrative review, to review the record and determine whether the final decision is
proper based upon the evidence presented at the hearing before the Assistant Secretary. Pursuant to N.C. Gen. Stat. § 105-241.1(a), a
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1657
proposed tax assessment is presumed to be correct and the burden is on the Taxpayer to rebut that presumption. In order to rebut the
presumption, the Taxpayer must offer evidence to show that the assessment is not proper. Thus, the Board having conducted an
administrative hearing in this matter, and having considered the petition, the briefs, the whole record and the Assistant Secretary’s final
decisions, concluded that the findings of fact made by the Assistant Secretary were supported by competent evidence in the record;
that based upon the findings of fact, the Assistant Secretary’s conclusions of law were fully supported by the findings of fact; therefore
the decisions of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decisions be confirmed in every respect.
Made and entered into the 31st day of December 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1658
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated February 8, 2002 by )
the Secretary of Revenue of North Carolina ) ADMINISTRATIVE DECISION
vs. ) Number: 424
)
Lillian Rena Fishback )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, on Friday September 26, 2003, upon a petition filed by Lillian Rena Fishback (hereafter “Taxpayer”) for
administrative review of the Final Decision of the Assistant Secretary of Revenue entered on February 28, 2003, sustaining the
proposed assessment of unauthorized substance tax for the period at issue.
Pursuant to N.C. Gen. Stat. § 105-113.111(a) and N.C. Gen. Stat. § 105-241.1, a Notice of Unauthorized Substance Tax
Assessment was issued to the Taxpayer on February 8, 2002 by Enforcement Agent Buddy Mozingo of the Unauthorized Substance
Tax Division, assessing $60,368.00 tax, $24,147.20 penalty and $301.48 interest, for a total liability of $84,817.04. The assessment
alleged that on February 8, 2002, the Taxpayer was in unauthorized possession of 17,248 grams of marijuana without the proper tax
stamps affixed to the substance.
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, the
evidence presented is incorporated by reference and is made a part of this decision.
ISSUES
1. Did the Taxpayer have actual/or constructive possession of cocaine without proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. Assessment of Unauthorized Substance Tax was made against the Taxpayer on February 8, 2002, in the sum of
$60,368.00 tax, $24,147.20 penalty and $301.84 interest, for a total proposed liability of $84,817.04, based
upon possession of 17,248 grams of marijuana on February 8. 2002.
2. The Taxpayer made timely objection and application for a hearing.
3. The marijuana was located in a vehicle operated by the Taxpayer.
4. The Taxpayer’s nervousness and the inconsistencies between her statements and those of her passenger as to
their travels and the nature of their relationship tend to corroborate the presumption that the Taxpayer, as driver,
was fully aware of the contents of the vehicle.
5. The Taxpayer was in constructive possession of the vehicle and the marijuana on February 8, 2002.
6. The SBI lab confirmed the substance at issue as marijuana weighing 36.9 pounds (16,737.84 grams ).
7. The Taxpayer was in constructive possession of 16,737.84 grams of marijuana on February 8, 2002, without
proper tax stamps affixed to the substance.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law made by the Assistant Secretary in his decision
regarding this matter:
1. An assessment of tax is presumed to be correct.
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1659
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption, and that burden
was not met.
3. The Taxpayer had constructive possession of 16,737.84 grams of marijuana on February 8, 2002, and was
therefore a dealer as that term is defined in G.S. 105-113.106.
4. The Taxpayer is liable for tax in the sum of $58,583.00, penalty in the sum of $23,433.20, and accrued interest
until date of full payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-
241.2(b2). After the Board conducts a hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary.”
Pursuant to G.S. 105-241.1(a), a proposed tax assessment is presumed to be correct and the burden is on the Taxpayer to
rebut that presumption. In order to rebut that presumption, the Taxpayer must offer evidence to show that the assessment is not
proper. It is the function of this Board, upon administrative review, to review the record and determine whether the final decision is
proper based upon the evidence presented at the hearing before the Assistant Secretary.
Thus, the Board having conducted an administrative hearing in this matter, and having considered the petition, the brief, the
record and the final decision, concludes that the findings of fact contained in the Assistant Secretary’s final decision are supported by
competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law are fully supported
by the findings of fact; therefore the Assistant Secretary’s final decisions should be confirmed.
WHEREFORE, THE TAX REVIEW BOARD ORDERS that the Assistant Secretary’s final decision be and is hereby
confirmed in every respect.
Made and entered into the 31st day of December 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Attorney at Law
Appointed Member
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1660
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated June 5, 2002 by )
the Secretary of Revenue of North Carolina )
) ADMINISTRATIVE DECISION
vs. ) Number: 425
)
Sherry J. Roberts )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, on Friday September 26, 2003, upon a petition filed by Sherry J. Roberts (hereafter “Taxpayer”) for administrative
review of the Final Decision of the Assistant Secretary of Revenue entered on March 6, 2003, sustaining the proposed assessment of
unauthorized substance tax for the period at issue.
Pursuant to N.C. Gen. Stat. § 105-113.111(a) and N.C. Gen. Stat. § 105-241.1, a Notice of Unauthorized Substance Tax
Assessment was issued to the Taxpayer on June 5, 2002 by Enforcement Agent James Spence of the Unauthorized Substance Tax
Division, assessing $82,512.50 tax, $33,005.00 penalty and $0 interest, for a total liability of $115,517.50. The assessment alleged
that on June 5, 2002, the Taxpayer was in unauthorized possession of 528 grams of cocaine 15,875 grams of marijuana and 102
dosages of ecstasy without the proper tax stamps affixed to the substance.
ISSUES
1. Did the Taxpayer have actual/or constructive possession of cocaine, marijuana and ecstasy without proper tax
stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, the
evidence presented is incorporated by reference and is made a part of this decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. Assessment of Unauthorized Substance Tax was made against the Taxpayer on June 5, 2002, in the sum of
$82,512.50 tax, $33,005.00 penalty and $0 interest, for a total proposed liability of $115,517.50 based upon possession
of 528 grams of cocaine, 15,875 grams of marijuana and 102 dosages of ecstasy.
2. The Taxpayer made timely objection and application for a hearing.
3. The codefendant’s claim that he had taken the drugs and weapons to the Taxpayer’s house on June 5, 2002, after
8:00 a.m., with the intention of removing them before the Taxpayer returned from work at 4:00 p.m., is not credible
since:
· The drugs were located in numerous locations about the house: three baggies of tan, rock-like substance,
one baggie of white powder, one baggie of 2 1/2 white pills, and the .38 caliber Smith and Wesson in the
top dresser drawer in the master bedroom; an 11 1/2 pound taped bundle of marijuana, four one-pound
packages of marijuana and two quarter-pound packages of marijuana in the computer room closet; 16 one-pound
packages of marijuana in a duffel bag on the computer room floor; two baggies of tan rock-like
substance and two baggies of white pills in a plastic box in the computer desk in the computer room; and
the shotgun in the master bedroom closet.
· Not counting the duffel bag containing marijuana on the floor in the computer room, there were 16
individual packages of controlled substances in three different locations. It is illogical to believe that the
codefendant would bring the drug and weapons to the Taxpayer’s house and spread them all over the place
if he intended to remove them later the same day.
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18:19 NORTH CAROLINA REGISTER April 1, 2004
1661
· The codefendant’s statement indicates he expected the Taxpayer to return from work at about 4:00 p.m., by
which time he intended to have the drugs and weapons removed from the house. Law enforcement did not
make entry to execute the search warrant until 7:21 p.m., meaning that the codefendant did not just miss his
alleged deadline, but that nearly 3 ½ hours later there was still no sign of him. Not only is there no reliable
evidence that the codefendant ever returned to the Taxpayer’s home on June 5, 2002, there is no evidence
that he was ever there to begin with.
· The Taxpayer pleaded guilty to possession of the same weapons that the codefendant stated she knew
nothing about, further detracting from the statement’s credibility.
4. The informant whose information provided probable cause for the search warrants indicated that the codefendant
kept controlled substances at several residences, which further tends to refute any claim that the presence of controlled
substance at the Taxpayer’s home on June 5, 2002, was a one-time event.
5. The Department has the authority to levy upon and seize a Taxpayer’s assets for the purpose of selling them at
auction and applying the proceeds to the tax debt. Whether the assets were purchased with legitimate income or proceeds
from the drugs sales is irrelevant.
6. On June 5, 2002, the Taxpayer had constructive possession of 528 grams of cocaine, 15,875 grams of marijuana and
102 dosages of ecstasy.
7. No tax stamps were purchased for or affixed to the controlled substances as required by law.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law made by the Assistant Secretary in his decision
regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption, and that burden was
not met.
3. The Taxpayer had constructive possession of 528 grams of cocaine, 15,875 grams of marijuana and 102 dosages of
ecstasy on June 5, 2002, and was therefore a dealer as that term is defined in G.S. 105-113.106(3).
4. The Taxpayer is liable for tax in the sum of $82,512.50, penalty in the sum of $33,005.00, and accrued interest until
date of full payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-
241.2(b2). After the Board conducts a hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary.”
Pursuant to G.S. 105-241.1(a), a proposed tax assessment is presumed to be correct and the burden is on the Taxpayer to
rebut that presumption. In order to rebut that presumption, the Taxpayer must offer evidence to show that the assessment is not
proper. It is the function of this Board, upon administrative review, to review the record and determine whether the final decision is
proper based upon the evidence presented at the hearing before the Assistant Secretary.
Thus, the Board having conducted an administrative hearing in this matter, and having considered the petition, the brief, the
record and the final decision, concludes that the findings of fact contained in the Assistant Secretary’s final decision are supported by
competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law are fully supported
by the findings of fact; therefore the Assistant Secretary’s final decisions should be confirmed.
WHEREFORE, THE TAX REVIEW BOARD ORDERS that the Assistant Secretary’s final decision be and is hereby
confirmed in every respect.
Made and entered into the 31st day of December 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1662
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1663
SUMMARY OF NOTICE OF
INTENT TO REDEVELOP A BROWNFIELDS PROPERTY
The Estate of Katherine C. Bell
Pursuant to N.C.G.S. § 130A-310.34, the Estate of Katherine C. Bell has filed with the North Carolina Department of Environment
and Natural Resources (“DENR”) a Notice of Intent to Redevelop a Brownfields Property (“Property”) in Charlotte, Mecklenburg
County, North Carolina. The Property consists of 0.6 acres and is located at 2935 Griffith Street (a.k.a. 111 New Bern Street).
Known environmental contamination, in excess of applicable standards, exists on the Property in groundwater. The Estate of
Katherine C. Bell has committed itself to make no use of the Property other than for commercial uses such as warehouse space. The
Notice of Intent to Redevelop a Brownfields Property includes: (1) a proposed Brownfields Agreement between DENR and Estate of
Katherine C. Bell, which in turn includes (a) a map showing the location of the Property, (b) a description of the contaminants
involved and their concentrations in the media of the Property, (c) the above-stated description of the intended future use of the
Property, and (d) proposed investigation and remediation; and (2) a proposed Notice of Brownfields Property prepared in accordance
with G.S. 130A-310.35. The new Notice of Intent to Redevelop a Brownfields Property is a second one regarding this Property; it has
been filed because it was determined that three underground storage tanks could be addressed by the state Brownfields Program,
which led to changes in the proposed Brownfields Agreement. The full Notice of Intent to Redevelop a Brownfields Property may be
reviewed at City of Charlotte, Economic Development, located at 600 East Trade Street, Charlotte, NC 28202 by contacting Carolyn
Minnich at that address, at cminnich@ci.charlotte.nc.us, or at (704)336-3499; or at 401 Oberlin Rd., Raleigh, NC 27605 by contacting
Shirley Liggins at that address, at shirley.liggins@ncmail.net, or at (919) 733-2801, ext. 336, where DENR will provide auxiliary aids
and services for persons with disabilities who wish to review the documents. Written public comments, and/or requests for a public
meeting, may be submitted to DENR within 30 days after the date this Notice is published in a newspaper of general circulation
serving the area in which the brownfields property is located, or in the North Carolina Register, whichever is later. All such
comments and requests should be addressed as follows:
Mr. Bruce Nicholson
Brownfields Program Manager
Division of Waste Management
NC Department of Environment and Natural Resources
401 Oberlin Road, Suite 150
Raleigh, North Carolina 27605
IN ADDITION
18:19 NORTH CAROLINA REGISTER April 1, 2004
1664
SUMMARY OF NOTICE OF
INTENT TO REDEVELOP A BROWNFIELDS PROPERTY
Wede Corporation, LLC
Pursuant to N.C.G.S. § 130A-310.34, Wede Corporation, LLC has filed with the North Carolina Department of Environment
and Natural Resources (“DENR”) a Notice of Intent to Redevelop a Brownfields Property (“Property”) in Bessemer City, Gaston,
County, North Carolina. The Property consists of 10.7 acres and is located at 1111 Oates Road. Environmental contamination exists
on the Property groundwater. Wede Corporation, LLC has committed itself to redevelop the Property exclusively for industrial light
manufacturing and commercial use. The Notice of Intent to Redevelop a Brownfields Property includes: (1) a proposed Brownfields
Agreement between DENR and Wede Corporation, LLC, which in turn includes (a) a map showing the location of the Property, (b) a
description of the contaminants involved and their concentrations in the media of the Property, (c) the above-stated description of the
intended future use of the Property, and (d) proposed investigation and remediation; and (2) a proposed Notice of Brownfields
Property prepared in accordance with G.S. 130A-310.35. The full Notice of Intent to Redevelop a Brownfields Property may be
reviewed offices of the City of Charlotte, Neighborhood Development Key Business, Employment & Business Service, located at 600
East Trade Street, by contacting Carolyn Minnich at that address, at cminnich@ci.charlotte.nc.us, or at (704) 336-3499; or at 401
Oberlin Rd., Raleigh, NC 27605 by contacting Shirley Liggins at that address, at shirley.liggins@ncmail.net, or at (919) 733-2801,
ext. 336, where DENR will provide auxiliary aids and services for persons with disabilities who wish to review the documents.
Written public comments may be submitted to DENR within 60 days after the date this Notice is published in a newspaper of general
circulation serving the area in which the brownfields property is located, or in the North Carolina Register, whichever is later. Written
requests for a public meeting may be submitted to DENR within 30 days after the period for written public comments begins. All
such comments and requests should be addressed as follows:
Mr. Bruce Nicholson
Brownfields Program Manager
Division of Waste Management
NC Department of Environment and Natural Resources
401 Oberlin Road, Suite 150
Raleigh, North Carolina 27605
PROPOSED RULES
18:19 NORTH CAROLINA REGISTER April 1, 2004
1665
Note from the Codifier: The notices published in this Section of the NC Register include the text of proposed rules. The agency
must accept comments on the proposed rule(s) for at least 60 days from the publication date, or until the public hearing, or a
later date if specified in the notice by the agency. If the agency adopts a rule that differs substantially from a prior published
notice, the agency must publish the text of the proposed different rule and accept comment on the proposed different rule for 60
days.
Statutory reference: G.S. 150B-21.2.
TITLE 1 – DEPARTMENT OF ADMINISTRATION
Notice is hereby given in accordance with G.S. 150B-21.2 that
the Department of Administration, State Energy Office intends to
adopt the rules cited as 01 NCAC 41C .0101-.0104, .0201-.0211,
.0301-.0303.
Proposed Effective Date: July 1, 2004
Public Hearing:
Date: April 21, 2004
Time: 2:00 p.m.-4:00 p.m.
Location: Auditorium/NC Archives and History/State Library,
109 E. Jones St, Raleigh, NC.
Reason for Proposed Action: Legislation section: G.S. 143-
345.16; 143-345.17; 143-345.18
Procedure by which a person can object to the agency on a
proposed rule: Written objections may be submitted to the
Director of State Energy Office. Objections will be received by
mail, delivery service, hand delivery or facsimile transmission.
Objections may be directed to: Larry Shirley, Director, NC State
Energy Office. Mail Service Center 1340, Raleigh, NC 27699-
1340, Phone (919)733-2230, Fax (919)733-2953, Email
larry.shirley@ncmail.net.
Written comments may be submitted to: Larry Shirley, NC
State Energy Office, MSC 1340, Raleigh, NC 27699-1340,
Phone (919)733-2230, Fax (919)733-2953, Email
larry.shirley@ncmail.net.
Comment period ends: June 1, 2004
Procedure for Subjecting a Proposed Rule to Legislative
Review: Any person who objects to the adoption of a permanent
rule may submit written comments to the agency. A person may
also submit written objections to the Rules Review Commission.
If the Rules Review Commission receives written and signed
objections in accordance with G.S. 150B-21.3(b2) from 10 or
more persons clearly requesting review by the legislature and the
Rules Review Commission approves the rule, the rule will
become effective as provided in G.S. 150B-21.3(b1). The
Commission will receive written objections until 5:00 p.m. on
the 6th business day preceding the end of the month in which a
rule is approved. The Commission will receive those objections
by mail, delivery service, hand delivery, or facsimile
transmission. If you have any further questions concerning the
submission of objections to the Commission, please call a
Commission staff attorney at 919-733-2721.
Fiscal Impact
State
Local
Substantive (>$3,000,000)
None
CHAPTER 41-STATE ENERGY OFFICE
SUB CHAPTER 41C-ENERGY IMPROVEMENT LOAN
PROGRAM
SECTION .0100-GENERAL PROVISIONS
01 NCAC 41C .0101 RESPONSIBILITY
The Department of Administration is responsible for adopting
rules as specified in G.S. 143-345.18(b)(3) to facilitate this
program and to adopt rules to allow State-regulated financial
institutions to provide secured loans for this program pursuant to
G.S. 143-345.18(b)(2a).
Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3).
01 NCAC 41C .0102 SCOPE
This Subchapter shall apply to the revolving loan program
mandated by G.S. 143-345.18. Sectors served by the Program
are local government organizations, nonprofit organizations, and
commercial and industrial businesses pursuant to G.S. 143B,
Article 10, Part 14.
Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3).
01 NCAC 41C .0103 RULE MAKING AUTHORITY
Authority for adopting these Rules is found in G.S. 143-18(b)(3)
and G.S. 143-345.18(b)(2a).
Authority G.S. 143-345.18(b)(3); 143-345.18(b)(2a).
01 NCAC 41C .0104 DEFINITIONS
For the purposes of this Chapter, the following definitions apply:
(1) "Allowable Costs," origination cost, up front
cost, letter of credit fee (first year),
engineering design fee, and implementation of
eligible energy conservation measure. All
allowable costs to be included in the loan must
be incurred after the execution date of the
Letter of Intent;
(2) "Applicant," any commercial or industrial
business applying for a loan under the
Program;
(3) "Btu," British thermal unit; the amount of heat
required to raise the temperature of one pound
PROPOSED RULES
18:19 NORTH CAROLINA REGISTER April 1, 2004
1666
of water one degree Fahrenheit at or near 39.2
degrees F;
(4) "Btu/sq. ft/yr.," Btu per square foot per year;
an index of building energy use, calculated by
dividing the total annual energy use of a
building by its square foot area;
(5) "Commercial or industrial business," a
commercial or industrial concern which
provides goods or services for profit from a
location in North Carolina;
(6) "Credit worthiness", ability of applicant to
meet lending institution's standard lending
criteria.
(7) "DOA Fiscal Department," the Fiscal
Management Department, N. C. Department of
Administration;
(8) "Energy conservation measure," a
commercially available energy efficient
device, technique or technology, designed to
reduce energy consumption, peak demand,
and/or utility costs at an existing or proposed
commercial or industrial business;
(9) "Letter of Intent," written notification of the
intent of the Department to originate the Loan,
subject to the conditions and limitations of the
Program;
(10) "Payback," the total energy conservation
measure costs (including installation,
equipment and engineering design) divided by
the annual estimated utility cost savings;
(11) "Program," the Energy Improvement Loan
Program authorized by G.S. 143B, Article 10,
Part 14.
(12) "Recycling Projects," projects which extract
and reprocess energy, water and/or materials
for reuse in buildings, transportation systems,
environmental management, consumer
products and/or outreach;
(13) "Renewables," solar, wind, biomass and/or
hydropower resources;
(14) "Repayment Schedule," a schedule of periodic
payments based upon simple payback as
projected in the TA, rounded to the next
quarter. Prepayments shall reduce the term of
the loan with periodic payments remaining
unchanged;
(15) "State Energy Office," the State Energy
Office, N. C. Department of Administration;
(16) "Technical Analysis," a report that identifies
and analyzes in detail cost-effective capital
energy conservation improvements that the
applicant wishes to implement. The Technical
Analysis need address only the specific energy
conservation measures for which the loan is
being requested. Each energy conservation
measure analyzed should be the subject of a
single, focused recommendation incorporating
technical and economic analyses of the
measure, considering building, process and
equipment characteristics and energy use
patterns pertinent to the improvement. The
Technical Analysis must include the estimated
cost of the implementation, a construction
schedule, and expected energy savings;
(17) "Technical analyst," a professional engineer or
architect registered in accordance with the
provis ions of G. S. 89C or G. S. 83A as
applicable having demonstrated experience in
energy conservation to conduct technical
analysis for the purposes of this article;
(18) "Third Party Technical Analyst", a technical
analysis performed by a professional engineer
or registered architect who has neither
financial interest in the commercial business,
non-profit institution, local government
institution, or industrial business nor in the
sale and installation of any proposed energy
conservation measure; however, the Technical
Analyst is permitted to provide construction
management services to an approved
applicant.
(19) "Unallowable costs," costs associated with
Technical Analysis preparation, costs
associated with pre-application conference,
costs incurred prior to execution date of Letter
of Intent, costs associated with loan
application (i.e., consultation fees, Technical
Analysis modifications); and
(20) "Up front cost," the prepaid charge, if any, at a
rate to be determined by the DOA Fiscal
Department sufficient to cover the costs of
administering and servicing the program.
Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3).
SECTION .0200 – LOANS
01 NCAC 41C .0201 ELIGIBILITY
The following classes of applicants in descending order of
priority are eligible to apply for loans:
(1) A local government organization, nonprofit
organization, commercial or industrial
business located in North Carolina that owns
the existing building or site of planned
construction where the energy conservation
measures will be made, or which has a lease or
management agreement for such proposed
building site or building extending beyond the
term of the loan; provided, however, that
where the owner of the building authorizes the
approved energy conservation measures, the
lease or management agreement need not
extend beyond the term of the loan.
(2) A local government organization, nonprofit
organization, commercial or industrial
business translocating to North Carolina that
owns the site of planned construction where
the energy conservation measures will be
made, or which has a lease or management
agreement for such proposed building or
PROPOSED RULES
18:19 NORTH CAROLINA REGISTER April 1, 2004
1667
building site extending beyond the term of the
loan; provided, however, that where the owner
of the building or building site authorizes the
approved energy conservation measures, the
lease or management agreement need not
extend beyond the term of the loan.
Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3).
01 NCAC 41C .0202 CRITERIA FOR ENERGY
CONSERVATION LOANS
Energy conservation projects for which the loans are desired
must meet the following criteria:
(1) The building site where the measures are to be
installed must be in North Carolina;
(2) The project must demonstrate the ability to
conserve energy through efficient energy use
or the utilization of renewable energy
resources which results in energy savings
based upon a net reduction in the use of
nonrenewable resources;
(3) To keep interest rates low, with a maximum
total loan indebtedness of five hundred
thousand dollars ($500,000) for a single local
government organization, nonprofit
organizations, commercial business or
industrial business at any given time;
(4) The project must utilize existing, proven
reliable commercially available technologies
recognized by the State Energy Office;
(5) Experimental or research-related technologies
are not eligible for funding;
(6) Each energy conservation measure must
address energy efficiency;
(7) The installation of the energy conservation
measure may, at the discretion of the
applicant, commence after DOA Fiscal Office
issues the Letter of Intent; however, the
applicant places itself at risk and is reminded
that origination of the Loan is subject to the
conditions and limitations of the Program;
(8) The energy conservation measure must
demonstrate a simple payback period of 10
years or less;
(9) Each energy conservation measure must have
a useful life at least equal to its estimated
simple payback;
(10) Eligible energy conservation measures shall
fall under one of the following categories:
(a) lighting systems;
(b) heating, ventilation, and air
conditioning systems;
(c) electrical distribution systems
(motors, variable speed drives, fans,
etc.);
(d) energy management systems;
(e) boiler efficiency systems;
(f) energy recovery systems, including
on-site generation of electricity;
(g) alternate/renewable energy systems;
(h) building envelope (doors, windows,
roofs, etc.);
(i) industrial process or fabrication
systems;
(j) load management systems;
(k) fuel conversion projects provided that
the simple payback calculations shall
be based on the cost of the current
fuel;
(l) other cost-effective demand or
rate-based improvements; and
(m) recycling projects;
(11) The energy conservation measure shall meet
applicable state air and water quality
standards; and
(12) The energy conservation measure shall be
based on a current Technical Analysis report
as defined in Section .0300 of this Subchapter.
Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3).
01 NCAC 41C .0203 CONDITIONS AND
LIMITATIONS
Loans are made subject to the following conditions and
limitations:
(1) Interest shall be charged at the rate of 3% per
annum and 1% for renewable and recycling
projects;
(2) The amount of the loan shall not exceed
allowable costs;
(3) The repayment schedule shall be based on the
estimated payback as shown in the Technical
Analysis report;
(4) Payments shall be made at a frequency of not
less than once per month;
(5) The total amount of the loan, or any portion
thereof may be repaid at any time without
penalty;
(6) Rebates received through other program
offerings of the State Energy Office for
projects undertaken from loan proceeds shall
be used to reduce the amount of principal;
(7) The borrower shall warrant that all work or
construction done with the proceeds of a loan
under this program shall comply with all
building codes and standards;
(8) Project implementation should begin within 90
days after approval of the application. If
delays are encountered following loan closing,
any arbitrage profits will be repaid to the
revolving fund;
(9) Loans may not be used to replace an existing
loan;
(10) Loan payments or drafts shall be sent or
delivered to the DOA Fiscal Department at its
current address as stated in the loan
agreement;
(11) A letter of credit from a bank approved to do
business in North Carolina and acceptable to
the Secretary of Administration shall secure
PROPOSED RULES
18:19 NORTH CAROLINA REGISTER April 1, 2004
1668
the loan against non-payment and also serve as
a quarterly drafting mechanism for loan
repayment from the bank; and
(12) No loans shall be forgiven.
Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3).
01 NCAC 41C .0204 PRE-APPLICATION
CONFERENCE
(a) At least one week prior to submission of a project
application a pre-application conference will be convened by
email, telephone or office visit.
(b) Parties present at the pre-application conference will include
representatives from the DOA Fiscal Division, the State Energy
Office, the applicant, and/or the applicant’s engineer.
(c) The purpose of the conference is to help ensure the
application procedures are clearly understood and that the
application and technical analysis, when accepted, will be
complete.
(d) The applicant shall offer verbal, and if available, written
project descriptions.
(e) The applicant will address environmental impact of the
project.
(f) When final, copies of water and air permits will be provided
in addition to the technical analysis.
(g) Another purpose of this conference will be to reach an
understanding among all parties that the project is of the type
that may be considered for approval.
Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3).
01 NCAC 41C .0205 APPLICATION PROCEDURES
Application forms are provided by the DOA Fiscal Department
and must contain, at a minimum, the following information:
(1) The name and complete mailing address,
including the county, of the applicant;
(2) The address, building name (where applicable)
or site description including photographs to
locate where the energy conservation
measure(s) will be installed;
(3) The name of a contact person, including title
and telephone number;
(4) The amount of the loan requested;
(5) The estimated dates of start and completion of
the project;
(6) A copy of the Technical Analysis approved by
the State Energy Office as fulfilling the energy
aspects of the proposed energy conservation
measures;
(7) Identification of the commercial lending
institution that is providing letter of credit,
depository and repayment services;
(8) All applicants shall provide financial data on
which to base a determination of the
applicant’s creditworthiness. Documentation
may include the following:
(a) Recent financial statements; and
(b) Profit and loss statements.
Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3).
01 NCAC 41C .0206 APPLICATION REVIEW
Application review shall consist of the following two phases:
(1) The administrative review shall be conducted
by the DOA Fiscal Department and may
include any data or information needed to
complete that review.
(2) The technical review shall be conducted of the
Technical Analysis by the State Energy Office.
(3) The technical review may occur concurrently
with application submittal to the DOA Fiscal
Department.
(4) The technical review shall consider each
energy conservation measure for which
funding is requested and shall include the
accuracy and sufficiency of calculations,
engineering principles considered, and labor
and material costs relative to the current local
market.
(5) Following acceptance, the State Energy Office
will approve those Energy Conservation
Measures that were found to meet the energy
aspects of the Program.
(6) No application shall be accepted for
consideration by the DOA Fiscal Department
without the acceptance of the Technical
Analysis by the State Energy Office.
Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3).
01 NCAC 41C .0207 LOAN APPROVAL
Applications shall be considered for loan approval upon
completion of the administrative and technical review. Approval
shall be based upon the following:
(1) Results of the administrative and technical
review documenting energy efficiency; and
(2) Creditworthiness of the applicant.
Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3).
01 NCAC 41C .0208 LOAN AGREEMENT AND
PROMISSORY NOTE
After an application for a loan is approved, a loan agreement
shall be executed between the DOA Fiscal Department and the
borrower. The loan agreement shall include a standard North
Carolina promissory note and other necessary documents
including, but not limited to, security agreements, mortgages,
recordings; and shall contain the covenants and representations
as to the borrower's qualification to borrow for the loan, intended
use of the loan proceeds, conditions under which the loan will be
repaid and events requiring the acceleration, rights and
responsibilities of the parties and the terms and conditions of the
loan. The requirements to secure the loan shall be included in the
loan agreement. Loans shall be secured through bank Letter of
Credit.
Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3).
01 NCAC 41C .0209 REPORTS
Reports must be submitted as follows:
PROPOSED RULES
18:19 NORTH CAROLINA REGISTER April 1, 2004
1669
(1) Progress reports must be submitted quarterly
to the State Energy Office during the period
implementation or construction is in progress
and must include a description of the current
status, any problems, and forecast of
expectations or deviations from the planned
schedule; and
(2) A final report certified by the technical analyst
with professional registration seal affixed must
be submitted to the State Energy Office upon
completion of the project. The report must
include a description of the measures
implemented; the actual cost of each measure,
and the adjusted estimated payback, based on
the actual cost.
Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3).
01 NCAC 41C .0210 MONITORING
The DOA Fiscal Department shall monitor the use of the funds
under this program through continuous review of reports. The
State Energy Office shall monitor those buildings/projects where
the energy conservation projects are in progress to verify the
installation of the energy conservation measures conforms to the
original Technical Analysis. At least one visit shall be made to
the site of each energy conservation project during the life of the
loan.
Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3).
01 NCAC 41C .0211 DEFAULT
If the borrower violates any of the terms of the loan agreement,
the DOA Fiscal Department may place the borrower in default.
Borrowers determined to be in default shall be notified by
certified mail and the letter of credit provided as security
invoked to protect the interest of the State of North Carolina.
Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3).
SECTION .0300 - TECHNICAL ANALYSIS
01 NCAC 41C .0301 TECHNICAL ANALYSIS
REQUIRED
An application for an energy conservation loan must be
accompanied by a Technical Analysis that has been conducted
by a qualified third party technical analyst and certified by the
State Energy Office as fulfilling the energy aspects of the
Program.
Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3).
01 NCAC 41C .0302 TECHNICAL ANAYLYST
QUALIFICATIONS
To be qualified to conduct the Technical Analysis required by
this article, a technical analyst must meet the following
requirements:
(1) Have experience in energy conservation in
building construction, mechanical systems
and/or manufacturing processes;
(2) Be a registered architect or registered
professional engineer licensed under the
regulatory authority of the State of North
Carolina, or be an architect-engineer team, the
principal members of which are licensed under
the regulatory authority of the State of North
Carolina;
(3) Comply with the licensing provisions of the
"Architects" Act (G.S. 83A) and/or the
"Engineering and Land Surveying" Act (G.S.
89C), to the extent to which one or both may
be applicable; and
(4) Have neither financial interest in the
commercial business, non-profit institution,
local government institution, or industrial
business nor in the sale and installation of any
proposed energy conservation measure;
however, the Technical Analyst is permitted to
provide construction management services to
an approved applicant.
Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3).
01 NCAC 41C .0303 REPORT REQUIRED
A qualified third party technical analyst shall submit three copies
of the results of a Technical Analysis in writing in a format
acceptable to the State Energy Office. The report must include
the following:
(1) A description of facility characteristics and
energy data, including the operational
characteristics of the energy-using systems;
(2) A description and engineering analysis of each
identified energy conservation measure,
including the following:
(a) A detailed estimate of the cost of
design, acquisition, and installation,
including monitoring equipment to
assess the performance of the
measure discussing pertinent
assumptions as necessary;
(b) An estimate of the annual energy and
energy cost savings by fuel type using
generally accepted engineering
standards and practices, including all
formulae, data and assumptions
clearly presented in arriving at the
estimate;
(c) The results of a combustion
efficiency test, if furnace or boiler
modifications or replacements are
being imp lemented;
(d) The simple payback period of each
energy conservation measure,
calculated by dividing the estimated
total cost of the measure by the
estimated annual energy cost saving;
(e) A proposed construction schedule for
each energy conservation measure;
and
PROPOSED RULES
18:19 NORTH CAROLINA REGISTER April 1, 2004
1670
(f) The payback period of each energy
conservation measure;
(3) The energy use and cost data for each fuel type
used for the prior 12-month period, by month
or in accordance with the usual billing cycle;
(4) A certification bearing the registration seal,
number and original signature and stating that
the contents of the Technical Analysis
conform to the provisions of the Program; and
(5) An outline of qualifications of the analyst
documenting previous experience in energy
conservation in building construction,
mechanical systems, and/or manufacturing
processes.
Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3).
* * * * * * * * * * * * * * * * * * * *
TITLE 10A – DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Notice is hereby given in accordance with G.S. 150B-21.2 that
the Division of Facility Services (DFS) intends to adopt the rules
cited as 10A NCAC 14C .3801-.3805 and amend the rule cited
as 10A NCAC 14C .0203.
Proposed Effective Date: October 1, 2004
Public Hearing:
Date: May 28, 2004
Time: 10:00 a.m.
Location: Council Building, Room 201, Dorothea Dix Campus,
701 Barbour Dr., Raleigh, NC
Reason for Proposed Action: One of the subject matters
contained in the 2004 State Medical Facilities Plan (SMFP) is
the filing deadline for Certificate of Need (CON) applications.
The 2004 SMFP notes that deadline to be 5:30 p.m. 10A NCAC
14C .0203 must be amended to ensure that its reference to the
filing deadline be consistent with the SMFP. The other subject
matter pertains to the SMFP in relation to acute care beds.
Certificate of Need (CON) rules are needed to implement the
new need determinations for acute care beds in the 2004 SMFP.
Procedure by which a person can object to the agency on a
proposed rule: A person may object to the agency on the
proposed rule by submitting written comments on the proposed
rule. They may also object by attending the public hearing and
personally voice their objections during that time.
Written comments may be submitted to: Nadine Pfeiffer,
NCDFS, 2711 Mail Service Center, Raleigh, NC 27699-2711,
phone (919) 733-7461, fax (919) 733-8274, and email
Nadine.pfeiffer@ncmail.net.
Comment period ends: June 1, 2004
Procedure for Subjecting a Proposed Rule to Legislative
Review: Any person who objects to the adoption of a permanent
rule may submit written comments to the agency. A person may
also submit written objections to the Rules Review Commission.
If the Rules Review Commission receives written and signed
objections in accordance with G.S. 150B-21.3(b2) from 10 or
more persons clearly requesting review by the legislature and the
Rules Review Commission approves the rule, the rule will
become effective as provided in G.S. 150B-21.3(b1). The
Commission will receive written objections until 5:00 p.m. on
the 6th business day preceding the end of the month in which a
rule is approved. The Commission will receive those objections
by mail, delivery service, hand delivery, or facsimile
transmission. If you have any further questions concerning the
submission of objections to the Commission, please call a
Commission staff attorney at 919-733-2721.
Fiscal Impact
State
Local
Substantive (>$3,000,000)
None
CHAPTER 14 - DIRECTOR, DIVISION OF FACILITY
SERVICES
SUBCHAPTER 14C - CERTIFICATE OF NEED
REGULATIONS
SECTION .0200 - APPLICATION AND REVIEW
PROCESS
10A NCAC 14C .0203 FILING APPLICATIONS
(a) An application shall not be reviewed by the agency until it is
filed in accordance with this Rule.
(b) An original and a copy of the application shall be received
by the agency no later than 5:00 5:30 p.m. on the 15th day of the
month preceding the scheduled review period. In instances
when the 15th of the month falls on a weekend or holiday, the
filing deadline is 5:00 5:30 p.m. on the next business day. An
application shall not be included in a scheduled review if it is not
received by the agency by this deadline. Each applicant shall
transmit, with the application, a fee to be determined according
to the following formula:
(1) With each application proposing the addition
of a sixth bed to an existing or approved five
bed intermediate care facility for the mentally
retarded, the proponent shall transmit a fee in
the amount of two thousand dollars ($2,000).
(2) With each application, other than those
referenced in Subparagraph (b)(1) of this Rule,
proposing no capital expenditure or a capital
expenditure of up to, but not including, one
million dollars ($1,000,000), the proponent
shall transmit a fee in the amount of three
thousand five hundred dollars ($3,500).
(3) With each application, other than those
referenced in Subparagraph (b)(1) of this Rule,
proposing a capital expenditure of one million
dollars ($1,000,000) or greater, the proponent
shall transmit a fee in the amount of three
thousand five hundred dollars ($3,500), plus
PROPOSED RULES
18:19 NORTH CAROLINA REGISTER April 1, 2004
1671
an additional fee equal to .003 of the amount
of the proposed capital expenditure in excess
of one million dollars ($1,000,000). The
additional fee shall be rounded to the nearest
whole dollar. In no case shall the total fee
exceed seventeen thousand five hundred
dollars ($17,500).
(c) After an application is filed, the agency shall determine
whether it is complete for review. An application shall not be