A BILL TO BE ENTITLED
AN ACT TO ESTABLISH A UNIFORM PROCEDURE FOR TAX REFUND CLAIMS.
The General Assembly of North Carolina enacts:
SECTION 1.  The first sentence of G.S. 105‑267 is recodified as the first sentence of G.S. 105‑266.1(a).  The remainder of G.S. 105‑267 is repealed.  
SECTION 2.  G.S. 105‑266.1, as amended by Section 1 of this act, reads as rewritten:
"§ 105‑266.1.  Contesting a tax; refunds of overpayment of taxes.
(a)	Contesting a Tax. – No court of this State shall entertain a suit of any kind brought for the purpose of preventing the collection of any tax imposed in this Subchapter.
(a1)	Request for Refund. – A taxpayer may request a refund of tax paid by the taxpayer by making a written request to the Secretary for a refund. The refund request must explain why the refund is due and must be submitted within the period of the statute of limitations established in G.S. 105‑266. The Secretary must review a request for refund within 90 days after it is received and determine whether the refund is due. If the Secretary requests the taxpayer to provide additional information needed to make a determination, the time allowed for making the determination is extended until 30 days after the Secretary received the information. The Secretary must notify the taxpayer of a determination and adjust the refund, if needed, in accordance with the determination. A taxpayer who disagrees with the Secretary's determination may request a hearing under subsection (a2) of this section or bring a civil action under subsection (c) of this section.
A request for a refund by one taxpayer constitutes sufficient notice to the Secretary of the disputed issue. It is unnecessary for any other similarly situated taxpayer to request a refund on the same issue in order to preserve the right to a refund. If the protesting taxpayer prevails on the contested issue, all other similarly situated taxpayers are entitled to a refund notwithstanding the fact they failed to follow the procedural requirements of this section or other applicable law. 
(a2)	Hearing. – A taxpayer may obtain a hearing on a refund determination by filing a written request for a hearing within 90 days after notification of the determination.  Within 60 days after a timely request for a hearing has been filed and at least 10 days before the date set for the hearing, the Secretary shall notify the taxpayer in writing of the time and place at which the hearing will be conducted. The date set for the hearing shall be within 90 days after the timely request for a hearing was filed or at a later date mutually agreed upon by the taxpayer and the Secretary. The date set for the hearing may be postponed once, at the request of the taxpayer or the Secretary, for a period of up to 90 days or for a longer period mutually agreed upon by the taxpayer and the Secretary.
Within 90 days after conducting a hearing under this subsection, the Secretary shall make a decision on the requested refund, notify the taxpayer of the decision, and adjust the computation of the tax in accordance with the decision. 
(b)	Procedure. – The rules of evidence do not apply in a hearing before the Secretary of Revenue under this section. G.S. 105‑241.2, 105‑241.3, and 105‑241.4 apply to a tax or additional tax assessed under this section. G.S. 105‑266 governs a refund issued under this section.
(c)	Civil Action. – A taxpayer may bring a civil action against the Secretary to recover the amount a taxpayer claims is an overpayment as a result of the determination denying the request for refund. The taxpayer must bring the civil action within 90 days after notification of the determination. If the alleged overpayment is more than two hundred dollars ($200.00), the taxpayer may bring the action either in the Superior Court of Wake County or in the superior court of the county in which the taxpayer resides; if the alleged overpayment is two hundred dollars ($200.00) or less, the taxpayer may bring the action in any State court of competent jurisdiction in Wake County. If upon trial it is determined that the taxpayer is entitled to a refund of tax or an additional tax paid by the taxpayer, judgment shall be rendered therefor, with interest, and the State shall refund the amount due. If a taxpayer successfully pursues a class action suit to obtain a refund under this section, then each class member is entitled to a refund regardless of whether that taxpayer filed taxes under protest or otherwise preserved rights to a refund.
(d)	Appeal. – Either party may appeal to the appellate division from the judgment of the superior court under the rules and regulations prescribed by law for appeals, except that if the Secretary appeals, the Secretary is not required to give any undertaking or make any deposit to secure the cost of the appeal.
(e)	Alternative Procedure. – Nothing in this section shall be construed to conflict with or supersede the provisions of G.S. 105‑241.2." SECTION 3.  G.S. 105‑113.113(a) reads as rewritten:
"(a)	Special Account. – The Secretary shall credit the proceeds of the tax levied by this Article to a special nonreverting account, to be called the State Unauthorized Substances Tax Account, until the tax proceeds are unencumbered. The Secretary shall remit the unencumbered tax proceeds as provided in this section on a quarterly or more frequent basis. Tax proceeds are unencumbered when either of the following occurs:
(1)	The tax has been fully paid and the taxpayer has no current right under Article 9 of this Chapter to seek a refund.
(2)	The taxpayer has been notified of the final assessment of the tax under G.S. 105‑241.1 and has neither fully paid nor timely contested the tax under Article 9 of this Chapter."
SECTION 4.  G.S. 105‑239.1(c) reads as rewritten:
"(c)	The provisions of G.S. 105‑241.1, 105‑241.2, 105‑241.3, 105‑241.4, and 105‑266.1 with respect to assessment procedure, demand for refund, review, and appeal  apply to the liability of any transferee assessed under this section or of any property subject to the liability imposed by this section and to the assertion of a lien upon property in the hands of the transferee."
SECTION 5.  G.S. 105‑241.4 reads as rewritten:
"§ 105‑241.4.  Action to recover tax paid.
Within 30 days after notification of the Secretary's decision with respect to liability under this Subchapter or Subchapter V, any taxpayer aggrieved  by the decision, in lieu of petitioning for administrative review thereof by the Tax Review Board under G.S. 105‑241.2, may pay the tax and bring a civil action for its recovery as provided in G.S. 105‑266.1.
Any taxpayer who has obtained an administrative review by the Tax Review Board as provided by G.S. 105‑241.2 and who is aggrieved by the decision of the Board may, in lieu of appealing pursuant to the provisions of G.S. 105‑241.3, within 30 days after notification of the Board's decision with respect to liability pay the tax and bring a civil action for its recovery as provided in G.S. 105‑266.1.
Either party may appeal to the appellate division from the judgment of the superior court under the rules and regulations prescribed by law for appeals, except that if the Secretary appeals, the Secretary is not required to give any undertaking or make any deposit to secure the cost of the appeal.
Any taxes, interest or penalties paid and found by the court to be in excess of those which can be properly assessed shall be ordered refunded to the taxpayer with interest from time of payment."
SECTION 6.  G.S. 105‑266(e) reads as rewritten:
"(e)	Scope. –	This section applies to a refund payable to a husband and wife who filed a joint return."
SECTION 7. G.S. 1‑52(15) reads as rewritten:
"(15)	For the recovery of taxes paid as provided in  G.S. 105‑381."
SECTION 8.  G.S. 20‑99(b)(3) reads as rewritten:
"(3)	Shall be accompanied by a copy of this subsection, and thereupon the procedure shall be as follows:
If the garnishee has no defense to offer or no setoff against the taxpayer, he shall, within 10 days after service of said notice, answer the same by sending to the Commissioner of Motor Vehicles by registered mail a statement to that effect, and if the amount due or belonging to the taxpayer is then due or subject to his demand, it shall be remitted to the Commissioner with said statement, but if said amount is to mature in the future, the statement shall set forth that fact and the same shall be paid to the Commissioner upon maturity, and any payment by the garnishee hereunder shall be a complete extinguishment of any liability therefor on his part to the taxpayer. If the garnishee has any defense or setoff, he shall state the same in writing under oath, and, within 10 days after service of said notice, shall send two copies of said statement to the Commissioner by registered mail; if the Commissioner admits such defense or setoff, he shall so advise the garnishee in writing within 10 days after receipt of such statement and the attachment or garnishment shall thereupon be discharged to the amount required by such defense or setoff, and any amount attached or garnished hereunder which is not affected by such defense or setoff shall be remitted to the Commissioner as above provided in cases where the garnishee has no defense or setoff, and with like effect. If the Commissioner shall not admit the defense or setoff, he shall set forth in writing his objections thereto and shall send a copy thereof to the garnishee within 10 days after receipt of the garnishee's statement, or within such further time as may be agreed on by the garnishee, and at the same time he shall file a copy of said notice, a copy of the garnishee's statement, and a copy of his objections thereto in the superior court of the county where the garnishee resides or does business where the issues made shall be tried as in civil actions.
If judgment is entered in favor of the Commissioner of Motor Vehicles by default or after hearing, the garnishee shall become liable for the taxes, interest and penalties due by the taxpayer to the extent of the amount over and above any defense or setoff of the garnishee belonging, owing, or to become due to the taxpayer, but payments shall not be required from amounts which are to become due to the taxpayer until the maturity thereof, nor shall more than ten percent (10%) of any taxpayer's salary or wages be required to be paid hereunder in any one month. The garnishee may satisfy said judgment upon paying said amount, and if he fails to do so, execution may issue as provided by law. From any judgment or order entered upon such hearing either the Commissioner of Motor Vehicles or the garnishee may appeal as provided by law. If, before or after judgment, adequate security is filed for the payment of said taxes, interest, penalties, and costs, the attachment or garnishment may be released or execution stayed pending appeal, but the final judgment shall be paid or enforced as above provided. The taxpayer's sole remedies to question his liability for said taxes, interest, and penalties shall be those provided in Article 9 of Chapter 105 of the General Statutes. If any third person claims any intangible attached or garnished hereunder and his lawful right thereto, or to any part thereof, is shown to the Commissioner, he shall discharge the attachment or garnishment to the extent necessary to protect such right, and if such right is asserted after the filing of said copies as aforesaid, it may be established by interpleader as now or hereafter provided by the General Statutes in cases of attachment and garnishment. In case such third party has no notice of proceedings hereunder, he shall have the right to file his petition under oath with the Commissioner at any time within 12 months after said intangible is paid to him and if the Commissioner finds that such party is lawfully entitled thereto or to any part thereof, he shall pay the same to such party as provided for refunds by G.S. 105‑407 and if such payment is denied, said party may appeal from the determination of the Commissioner to the Superior Court of Wake County or to the superior court of the county wherein he resides or does business. The intangibles of a taxpayer shall be paid or collected hereunder only to the extent necessary to satisfy said taxes, interest, penalties, and costs. Except as hereinafter set forth, the remedy provided in this section shall not be resorted to unless a warrant for collection or execution against the taxpayer has been returned unsatisfied: Provided, however, if the Commissioner is of opinion that the only effective remedy is that herein provided, it shall not be necessary that a warrant for collection or execution shall be first returned unsatisfied, and in no case shall it be a defense to the remedy herein provided that a warrant for collection or execution has not been first returned unsatisfied: Provided, however, that no salary or wage at the rate of less than two hundred dollars ($200.00) per month, whether paid weekly or monthly, shall be attached or garnished under the provisions of this section."
SECTION 9.  This act becomes effective January 1, 2006, and applies to taxes paid on or after that date.