Agenda - 06-05-2018 8-d - Refund Request – Sports Endeavors, Inc.

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5 The direction provided in the Wesleyan case is applicable to this case in that SEI listed allegedly non - taxable property on its annual listing form since 2013, against the instructions provided by Orange County. No appeal was filed. SEI did not identify any non - taxable property on its listing form within the listing period. Orange County relied on the tax base as submitted by SEI for projected revenues in each affected year. The Board of County Commissioners adopted a budget ordinance making appropriations and levying taxes upon this tax base before July 1 of each affected year. North Carolina General Statute 105- 275(40)b. SEI submits this statute, amended for the 2014 tax year, in support of its request for refund. The statute allows for an exclusion for computer software and documentation, but negates the exclusion where the taxpayer purchases or licenses the software from a person or entity unrelated to the taxpayer. SEI has submitted no evidence it is related to the seller of the software. SEI notes correctly that the relationship provision does not apply to "development of software or any modifications to software, whether done internally by the taxpayer or externally by a third party, to meet the customer's specified needs." However, SEI has submitted no evidence the referenced software was developed specifically for SEI use or is generic software that was modified in a manner specifically for SEI use, only that SET purchased a generic software and procured training for that software. Recommendation As a summary of the issues involved: • SEI claims to have listed taxable and non- taxable business personal property for tax years 2013 -2017 and has requested a refund of $1,200,000 for tax overpayment. • Orange County proactively modified its annual listing form instructions beginning with tax year 2014 to try and preempt taxpayers from listing such property and losing the entitlement to its exemption. In addition, the modified language in the listing form instructions, which was promulgated by the North Carolina Department of Revenue Property Tax Division, even imply that the listing such equipment would result in a loss of exclusion. • Through its long- standing contractual auditing firm, a random audit was performed on SEI in 2014, which included its 2014 listing. The professional auditor recognized no non- taxable equipment listed, and SEI agreed completely to the findings of the audit including prior and current year (2014 at that time) listings. • SEI paid taxes due voluntarily and without objection or compulsion. It was not paid under protest as cited in Redevelopment Commission v Guilford County and City of High Point case. Therefore, the Supreme Court has ruled that such taxes "cannot be recovered, even though the tax be levied unlawfully."