Law360 recently reported on a legal dispute between Philip Morris USA and the North Carolina Department of Revenue regarding the interpretation of an economic development tax incentive statute providing export tax credits to the tobacco industry.
Ward and Smith's Alex Dale argued on behalf of Philip Morris USA before the state's Supreme Court. The dispute centers on the meaning of the phrase "credit allowed" within the tax credit statute, specifically whether it limits the generation of credits or the usage of credits. Dale contended that the phrase "credit allowed" in the law must be interpreted according to its ordinary and long-standing meaning, which refers to a credit claimed or taken by a taxpayer.
The article emphasizes Dale's focus on the plain language of the statute, which aligns with his interpretation. As stated in the article:
"We're dealing strictly with a cap-and-carry-forward" tax credit limit, Dale told the justices.
Dale argued Philip Morris' interpretation of the statute's "credit allowed" phrase was supported by plain language, case law, the context in which the law was created and extrinsic evidence.
Lawmakers knew of this "long-running" meaning of "credit allowed" when they amended a law to include the phrase, according to Dale.
In context of the law's creation and application, lawmakers were thinking of increasing incentives for tobacco companies, not decreasing them, and the state department of revenue has in the past applied the cap-and-carry-forward interpretation under an earlier version of the law, Dale contended.
As for extrinsic evidence, Dale posited that a merger of tobacco companies when the law was amended weighed on lawmakers, who wanted to ensure a predecessor company and subsequent company after a merger didn't both claim tax credits, and thus included the $6 million cap on claims, but not generation.
On the other hand, Ronald D. Williams II, representing the Department of Revenue, asserted that the law limits the annual generation of export tax credits to $6 million. You can read more about the case here, behind the Law360 paywall.
