A BILL TO BE ENTITLED
AN ACT TO PROVIDE FOR REIMBURSEMENT OF EXPENSES TO A PREVAILING TAXPAYER IN AN ADMINISTRATIVE APPEAL OR A LAWSUIT IF THE STATE WAS NOT SUBSTANTIALLY JUSTIFIED IN MAINTAINING ITS POSITION AGAINST THE TAXPAYER.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 105‑241.2 is amended by adding a new subsection to read:
"(b3)	Payment of Taxpayer's Costs. – The Tax Review Board shall award administrative costs, including reasonable attorneys' fees, to a taxpayer if all of the following requirements are met:
(1)	The taxpayer is the prevailing party. For the purposes of this subsection, a taxpayer is the prevailing party if the taxpayer substantially prevailed with respect to the amount in controversy or on the most significant tax issue or set of tax issues presented. A taxpayer is not the prevailing party if the Department of Revenue establishes that its position was substantially justified. The position of the Department of Revenue is presumed to be substantially justified if the Department of Revenue follows the applicable published guidelines in the proceeding or has prevailed in the courts on substantially similar issues.
(2)	The taxpayer exhausts all administrative remedies.
(3)	The following net worth requirements are satisfied:
a.	The net worth for individual taxpayers shall not exceed two million dollars ($2,000,000) as of the filing date of the petition for administrative review. For the purposes of this sub-subdivision, individuals filing a joint return are treated as separate individuals.
b.	The net worth for an estate shall not exceed two million dollars ($2,000,000) as of the date of the decedent's death.
c.	Charities and cooperatives shall not have more than 500 employees as of the filing date of the petition for administrative review.
d.	As to all other taxpayers, the net worth shall not exceed seven million dollars ($7,000,000), and there should be no more than 500 employees as of the filing date of the petition for administrative review.
(4)	The taxpayer did not unreasonably delay the proceedings.
(5)	The taxpayer provides the information requested by the Department of Revenue in a timely manner. 
(6)	The taxpayer applies for the administrative costs within 90 days of the date that the administrative decision of the Tax Review Board was mailed to the parties.
(7)	The Tax Review Board makes the final determination of the reasonable administrative costs including all of the following:
a.	Any administrative fees or similar charges imposed by the Department of Revenue.
b.	Reasonable expenses of expert witnesses in connection with an administrative review, except that no expert witness shall be compensated at a rate in excess of the highest rate of compensation for expert witnesses paid by the Department of Revenue.
c.	The reasonable cost of any study, analysis, engineering report, test, or project which is found by the Tax Review Board to be necessary for preparation of the party's case.
d.	As to attorneys' fees, a rate of one hundred fifty dollars ($150.00) per hour is deemed appropriate. 
(8)	The costs awarded to the taxpayer shall be paid from the General Fund as provided for in G.S. 143C‑1‑3(a)(3)."SECTION 2.  G.S. 105‑267 reads as rewritten:
"§ 105‑267.  Taxes to be paid; suits for recovery of taxes.
(a)	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. Whenever a person has a valid defense to the enforcement of the collection of a tax, the person shall pay the tax to the proper officer, and that payment shall be without prejudice to any defense of rights the person may have regarding the tax. At any time within the applicable protest period, the taxpayer may demand a refund of the tax paid in writing from the Secretary and if the tax is not refunded within 90 days thereafter, may sue the Secretary in the courts of the State for the amount demanded. The protest period for a tax levied in Article 2A, 2C, or 2D of this Chapter is 30 days after payment. The protest period for all other taxes is three years after payment.
The suit may be brought in the Superior Court of Wake County, or in the county in which the taxpayer resides at any time within three years after the expiration of the 90‑day period allowed for making the refund. If upon the trial it is determined that all or part of the tax was levied or assessed for an illegal or unauthorized purpose, or was for any reason invalid or excessive, judgment shall be rendered therefor, with interest, and the judgment shall be collected as in other cases. The amount of taxes for which judgment is rendered in such an action shall be refunded by the State. G.S. 105‑241.2 provides an alternate procedure for a taxpayer to contest a tax and is not in conflict with or superseded by this section.
(b)	Payment of Taxpayer's Costs. – The court shall award costs, including reasonable attorneys' fees, to a taxpayer if all of the following requirements are met:
(1)	The taxpayer is the prevailing party. For the purposes of this subsection, a taxpayer is the prevailing party if the taxpayer substantially prevailed with respect to the amount in controversy or on the most significant tax issue or set of tax issues presented. A taxpayer is not the prevailing party if the Department of Revenue establishes that its position was substantially justified. The position of the Department of Revenue is presumed to be substantially justified if the Department of Revenue follows the applicable published guidelines in the proceeding or has prevailed in the courts on substantially similar issues.
(2)	The taxpayer exhausts all administrative remedies.
(3)	The following net worth requirements are satisfied:
a.	The net worth for individual taxpayers shall not exceed two million dollars ($2,000,000) as of the filing date of the suit. For the purposes of this sub-subdivision, individuals filing a joint return are treated as separate individuals.
b.	The net worth for an estate shall not exceed two million dollars ($2,000,000) as of the date of the decedent's death.
c.	Charities and cooperatives shall not have more than 500 employees as of the filing date of the suit.
d.	As to all other taxpayers, the net worth shall not exceed seven million dollars ($7,000,000), and there should be no more than 500 employees as of the filing date of the suit.
(4)	The taxpayer did not unreasonably delay the proceedings.
(5)	The taxpayer provides the information requested by the Department of Revenue in a timely manner. 
(6)	The taxpayer applies for the costs within 90 days of the date that the court rendered its decision.
(7)	The court makes the final determination of the reasonable costs including all of the following:
a.	Reasonable court costs.
b.	Reasonable expenses of expert witnesses in connection with a court proceeding, except that no expert witness shall be compensated at a rate in excess of the highest rate of compensation for expert witnesses paid by the Department of Revenue.
c.	The reasonable cost of any study, analysis, engineering report, test, or project which is found by the court to be necessary for preparation of the party's case.
d.	 As to attorneys' fees, a rate of one hundred fifty dollars ($150.00) per hour is deemed appropriate.
(8)	The costs awarded to the taxpayer shall be paid from the General Fund as provided for in G.S. 143C‑1‑3(a)(3)."
SECTION 3.  This act becomes effective September 1, 2007.