Administrative – Mootness – Taxation – Renewable Energy Credit – Draft Consent Order

When the parties asked the administrative law judge to enter a consent order settling their dispute, the ALJ instead lifted a partial sentence from the proposed order and – without hearing argument on the parties’ cross-motions for summary judgment – used that language to grant summary judgment to the respondent-taxpayer. The ALJ should instead have determined whether the matter before it was moot.

The ALJ’s summary judgment order is reversed to the extent it is based on a purported admission by the petitioner Department of Revenue (DOR). This matter is remanded to determine if it is moot and, if not, for a hearing and determination of the parties’ cross-motions for summary judgment.

Background

For years, DOR refused to award respondent a tax credit, asserting that, rather than investing in renewable energy (Energy Credit), respondent had instead impermissibly purchased the Energy Credit. On the eve of a hearing on the parties’ cross-motions for summary judgment, DOR reversed course, and the parties stipulated to a proposed consent order. The parties presented the proposed consent order to the ALJ and asked that the action be dismissed.

Rather than dismissing the action as requested, and without hearing arguments on the cross-motions for summary judgment, the ALJ lifted a partial sentence from the proposed consent order – DOR “does not dispute [respondent’s] position in this contested case that [respondent] is entitled to a refund for tax year 2016 as a result of the tax credits” – and granted summary judgment for respondent. This was despite language stating that DOR was withdrawing its Notice of Final Determination and was issuing a refund to respondent “without conceding the correctness of any of the factual or legal arguments in this case.”

Discussion

First, subject matter jurisdiction is not ousted by subsequent events. Since the Office of Administrative Hearings (OAH) already had subject matter jurisdiction over this matter, it did not lose jurisdiction when DOR withdrew its Final Determination.

Respondent argues that DOR may not seek judicial review of the ALJ’s grant of summary judgment because DOR is not aggrieved. However, the record reveals that, by submitting the proposed order, DOR attempted to eliminate this controversy, not to concede it.

Even if a clause in a draft order could have the effect of a binding admission, this one does not. To constitute a binding admission, DOR’s statement must be clear, consistent, and unequivocal. This one was not. The reference to the “Petitioner’s position” in the proposed order is imprecise, and when considering the entire record, particularly DOR’s statement in the Notice of Withdrawal that it was “not conceding the correctness of any of the factual and legal arguments,” the court is not convinced that the language drawn from the proposed order evidences DOR’s clear, consistent, and unequivocal intention to abandon its legal arguments.

What is clear from the record is that both DOR and respondent believed that withdrawal of DOR’s Final Determination decision required dismissal of the contested case. In fact, the parties jointly filed their “Statement and Order” specifically requesting that the OAH dismiss the contested case, “because dismissal with prejudice is required by these factual developments.” When the ALJ did not dismiss the case and instead treated an excerpt from the proposed order as an admission, DOR became aggrieved.

Moreover, DOR’s purported admission could affect other cases. And, having noticed a hearing on the cross-motions for summary judgment and directed that there be oral argument, the ALJ should not have considered the motions before hearing argument.

Reversed and remanded for a decision on mootness.

N.C. Department of Revenue v. Integon National Insurance Co. (Lawyers Weekly No. 020-071-22, 21 pp.) (Julianna Theall Earp, J.) Ashley Hodges Morgan for petitioner; Kay Miller Hobart and Dylan Ray for respondent. N.C. Bus. Ct.