Major Taxpayer Win in North Carolina Renewable Energy Tax Credit Dispute

By William Nelson
Published by Tax Notes State

On April 3, 2023, the North Carolina Business Court issued opinions handing taxpayers decisive victories in two cases that are part of a long-running dispute over the state’s now-expired renewable energy tax credit program.

The North Carolina General Assembly offered the tax credits to encourage private investment in renewable energy projects that would not have been economically feasible without them. The program was wildly successful. However, after the program expired in 2017, the DOR launched an effort to claw back hundreds of millions of dollars in credits from taxpayers that had invested in syndicated projects.

Five years later, the North Carolina Business Court ruled that in two separate cases that the project's investors were entitled to the credits, despite DOR objections. Smith Anderson’s Bill Nelson, who was part of the Smith Anderson team that represented one of the taxpayers, analyzes the decisions for Tax Notes State. Bill writes that at the highest level, the business court decisions erect a bulwark against the erosion of North Carolina’s tax sovereignty. Preventing the DOR from selectively importing federal tax law into state law through its audits, litigation positions, and administrative pronouncements is crucial to preserving the state’s control over its tax system and the legislature’s exclusive control of state fiscal policy. Bill’s earlier writings about the cases can be found here.


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