{ "id": 4166782, "name": "IN THE MATTER OF: THE DENIAL OF NC IDEA'S REFUND OF SALES AND USE TAX FOR THE PERIOD JANUARY 1, 2003 THROUGH JUNE 30, 2003 BY THE SECRETARY OF REVENUE OF NORTH CAROLINA", "name_abbreviation": "In re the Denial of NC IDEA's Refund of Sales & Use of Tax", "decision_date": "2009-04-21", "docket_number": "No. COA08-561", "first_page": "426", "last_page": "438", "citations": [ { "type": "official", "cite": "196 N.C. App. 426" } ], "court": { "name_abbreviation": "N.C. Ct. App.", "id": 14983, "name": "North Carolina Court of Appeals" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "2007 N.C. Sess. Laws 491", "category": "laws:leg_session", "reporter": "N.C. Sess. Laws", "opinion_index": 0 }, { "cite": "597 S.E.2d 674", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2004, "pin_cites": [ { "page": "693" } ], "opinion_index": 0 }, { "cite": "358 N.C. 440", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2986682 ], "year": 2004, "pin_cites": [ { "page": "469" } ], "opinion_index": 0, "case_paths": [ "/nc/358/0440-01" ] }, { "cite": "253 S.E.2d 912", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1979, "pin_cites": [ { "page": "922" } ], "opinion_index": 0 }, { "cite": "297 N.C. 48", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8566826 ], "year": 1979, "pin_cites": [ { "page": "65" } ], "opinion_index": 0, "case_paths": [ "/nc/297/0048-01" ] }, { "cite": "215 S.E.2d 752", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1975, "pin_cites": [ { "page": "761" } ], "opinion_index": 0 }, { "cite": "287 N.C. 547", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8564265 ], "year": 1975, "pin_cites": [ { "page": "561-62" } ], "opinion_index": 0, "case_paths": [ "/nc/287/0547-01" ] }, { "cite": "N.C. Gen. Stat. \u00a7 105", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "opinion_index": 0 }, { "cite": "443 S.E.2d 114", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1994, "pin_cites": [ { "page": "118", "parenthetical": "quotation omitted" }, { "page": "118", "parenthetical": "quotation omitted" } ], "opinion_index": 0 }, { "cite": "114 N.C. App. 668", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8527936 ], "weight": 2, "year": 1994, "pin_cites": [ { "page": "675", "parenthetical": "quotation omitted" }, { "page": "675" } ], "opinion_index": 0, "case_paths": [ "/nc-app/114/0668-01" ] }, { "cite": "573 S.E.2d 572", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2002, "pin_cites": [ { "page": "579", "parenthetical": "quotation omitted" } ], "opinion_index": 0 }, { "cite": "155 N.C. App. 225", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 9249787 ], "year": 2002, "pin_cites": [ { "page": "233-34", "parenthetical": "quotation omitted" } ], "opinion_index": 0, "case_paths": [ "/nc-app/155/0225-01" ] }, { "cite": "593 S.E.2d 764", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 2004, "pin_cites": [ { "page": "769" } ], "opinion_index": 0 }, { "cite": "358 N.C. 190", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2986024 ], "year": 2004, "pin_cites": [ { "page": "199" } ], "opinion_index": 0, "case_paths": [ "/nc/358/0190-01" ] }, { "cite": "565 S.E.2d 9", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2002, "pin_cites": [ { "page": "17" } ], "opinion_index": 0 }, { "cite": "356 N.C. 1", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 1511222 ], "year": 2002, "pin_cites": [ { "page": "13" } ], "opinion_index": 0, "case_paths": [ "/nc/356/0001-01" ] }, { "cite": "509 S.E.2d 165", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1998, "pin_cites": [ { "page": "171" } ], "opinion_index": 0 }, { "cite": "349 N.C. 656", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 571673 ], "year": 1998, "pin_cites": [ { "page": "665, 670" } ], "opinion_index": 0, "case_paths": [ "/nc/349/0656-01" ] }, { "cite": "576 S.E.2d 316", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2003, "pin_cites": [ { "page": "319" } ], "opinion_index": 0 }, { "cite": "356 N.C. 642", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 1511442 ], "year": 2003, "pin_cites": [ { "page": "647" } ], "opinion_index": 0, "case_paths": [ "/nc/356/0642-01" ] }, { "cite": "483 S.E.2d 388", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1997, "pin_cites": [ { "page": "392" } ], "opinion_index": 0 }, { "cite": "345 N.C. 699", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 53839 ], "year": 1997, "pin_cites": [ { "page": "706" } ], "opinion_index": 0, "case_paths": [ "/nc/345/0699-01" ] }, { "cite": "599 S.E.2d 888", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 7, "year": 2004, "pin_cites": [ { "page": "896" }, { "page": "894" }, { "page": "894" }, { "page": "894" }, { "page": "896" }, { "page": "898" } ], "opinion_index": 0 }, { "cite": "358 N.C. 649", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2987357 ], "weight": 6, "year": 2004, "pin_cites": [ { "page": "662" }, { "page": "659" }, { "page": "659" }, { "page": "659" }, { "page": "662" }, { "page": "666" } ], "opinion_index": 0, "case_paths": [ "/nc/358/0649-01" ] }, { "cite": "269 S.E.2d 547", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1980, "pin_cites": [ { "page": "565" } ], "opinion_index": 0 }, { "cite": "300 N.C. 381", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8562647 ], "year": 1980, "pin_cites": [ { "page": "406" } ], "opinion_index": 0, "case_paths": [ "/nc/300/0381-01" ] }, { "cite": "608 S.E.2d 831", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2005, "pin_cites": [ { "page": "839" } ], "opinion_index": 0 }, { "cite": "168 N.C. App. 598", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8471263 ], "year": 2005, "pin_cites": [ { "page": "608-09" } ], "opinion_index": 0, "case_paths": [ "/nc-app/168/0598-01" ] }, { "cite": "N.C. Gen. Stat. \u00a7 105-164.14", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "weight": 6, "pin_cites": [ { "page": "(b)(3)" }, { "page": "(b)" }, { "page": "(b)(3)" }, { "page": "(b)(3)" }, { "page": "(b)(3)" }, { "page": "(b)(3)" } ], "opinion_index": 0 } ], "analysis": { "cardinality": 999, "char_count": 27901, "ocr_confidence": 0.748, "pagerank": { "raw": 8.262683731656364e-08, "percentile": 0.47817710607838526 }, "sha256": "226f5910524003460c16822fb3b65eef92acc3856041c6a58fe614654d3df2dc", "simhash": "1:5dcb4066462b3f52", "word_count": 4411 }, "last_updated": "2023-07-14T15:08:58.268450+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Judges WYNN and STEPHENS concur." ], "parties": [ "IN THE MATTER OF: THE DENIAL OF NC IDEA\u2019S REFUND OF SALES AND USE TAX FOR THE PERIOD JANUARY 1, 2003 THROUGH JUNE 30, 2003 BY THE SECRETARY OF REVENUE OF NORTH CAROLINA" ], "opinions": [ { "text": "ERVIN, Judge.\nThe North Carolina Secretary of Revenue (Appellant) appeals from a judgment entered in Wake County Superior Court on 8 February 2008 reversing the 1 November 2006 decision by the Tax Review Board in Administrative Decision No. 498. The Tax Review Board\u2019s decision affirmed the Assistant Secretary of Revenue\u2019s conclusion that NC IDEA is not a charitable organization and was not, therefore, entitled to sales and use tax refunds pursuant to N.C. Gen. Stat. \u00a7 105-164.14(b)(3). We reverse and remand this case to the trial court for further proceedings not inconsistent with our decision.\nNC IDEA was incorporated on 28 May 2002. On 24 July 2003, NC IDEA filed a non-profit and governmental entity claim for semiannual refunds of the sales and use taxes paid on direct purchases of tangible personal property for use in carrying on charitable operations. On 16 January 2004, the Department of Revenue notified NC IDEA that it was not eligible to receive the requested refund. NC IDEA protested the Department of Revenue\u2019s decision and filed an application for a hearing with the Department of Revenue.\nIn August 2005, Assistant Secretary of Revenue Eugene J. Celia (Assistant Secretary) heard NC IDEA\u2019S protest of the denial of its claim for refund of sales and use tax for the period of 1 January 2003 through 30 June 2003. The question before the Assistant Secretary of Revenue was whether NC IDEA was a non-profit entity pursuant to N.C. Gen. Stat. \u00a7 105-164.14(b). The final decision of the Secretary of Revenue contained the following pertinent findings of fact:\n13. Taxpayer conducts lobbying activities.\n14. Taxpayer paid one lobbying firm, Barfield Associates, $352,865 in its 2002 fiscal year and $290,439 in its 2003 fiscal year.\n15. During its 2003 fiscal year, the Taxpayer\u2019s president devoted 10% to 20% of his time to lobbying activities.\n22. During the period at issue in the Claim for Refund, Taxpayer conducted two primary business\u00e9s: (1) venture capital investing (\u201cVC\u201d) and (2) research and development (\u201cR&D\u201d) under contracts to design or construct computer software systems and electronic systems.\n26. Taxpayer owns and manages two venture capital f\u00fcnds: (1) MCNC Ventures, LLC, (100% owned by Taxpayer) and (2) MCNC Enterprise Fund, LP (owned approximately 49% by Taxpayer, 50% by MCNC, and 1% by MCNC Ventures, LLC).\n27. Taxpayer acts as the management company for both entities, and the Taxpayer\u2019s activities include the management of both entities.\n28. Taxpayer\u2019s VC investing is not limited to any geographic area and is not limited to any charitable class.\n29. The VC activities are dedicated to profitability where the Taxpayer, like any for-profit investor, will invest money, take preferred stock or convertible preferred debt, and seek a profitable exit opportunity.\n30. Taxpayer\u2019s VC investing is a for-profit operation investing in the same businesses as other for-profit corporations and providing \u201ctraditional\u201d VC funding.\n31. Taxpayer conducts commercial VC investing.\n32. Taxpayer competes with other for-profit companies for VC funding opportunities.\n33. Taxpayer\u2019s R&D services were purchased by many for-profit, corporate customers.\n34. Taxpayer is not conducting and disseminating fundamental research for public benefit.\n35. Taxpayer\u2019s R&D services service commercial and industrial operations to design, construct, and commercialize products.\n42. Taxpayer\u2019s R&D operations are commercial and have the goal to produce commercial products.\n43. Taxpayer competes with other for-profit companies for R&D contracts.\nBased on these and other findings of fact, the Secretary of Revenue reached certain conclusions, some of which are more properly delineated as findings of fact, including the following determinations:\n17. Taxpayer\u2019s objective is to create profitable, commercial products with its R&D activities or make profitable VC investments.\n18. Taxpayer did not use its tangible property to carry on a charitable purpose because Taxpayer had a commercial, profit-driven purpose.\n19. Taxpayer lacks a humane and philanthropic objective.\n20. Taxpayer\u2019s VC activities benefit the commercial businesses that receive funding from Taxpayer.\n21. Taxpayer\u2019s R&D activities benefit the commercial businesses that employ Taxpayer to help commercialize their products.\n22. Neither the R&D nor the VC investing benefit a broad charitable class.\n23. Taxpayer operates both VC and R&D to maximize commercial gain.\n28. Taxpayer\u2019s VC funding benefits private companies and competes with other sources of financing for private businesses.\n29. Taxpayer\u2019s R&D activities are conducted for compensation, focus on research contracts to design and build commercial products, and the results are not freely disseminated.\n30. Taxpayer\u2019s lobbying activities are not charitable.\n31. Taxpayer does not offer its facilities for public use.\n32. Taxpayer\u2019s primary activities do not provide a public benefit.\n33. Taxpayer operates like a private business seeking to make profits from VC and R&D activities.\nBased on these and other findings and conclusions, the Assistant Secretary concluded that \u201c[t]he level of charitable activity required to meet the definition of a charitable organization under North Carolina law exceeds that found among the general population of commercial businesses which often make efforts to help the community;\u201d that \u201c[a] charitable organization must primarily operate to further its charitable purpose and not substantially operate to further non-charitable purposes;\u201d that \u201cTaxpayer\u2019s VC, R&D, and lobbying activities are substantial, while its grant making and educational activities are insubstantial;\u201d and that \u201c[a]ny incidental benefits to the community from the Taxpayer\u2019s VC or R&D are not charitable and are commercial.\u201d As a result, the Assistant Secretary concluded that NC IDEA did not qualify for a refund of sales and use tax as a charitable organization pursuant to N.C. Gen. Stat. \u00a7 105-164.14(b)(3).\nNC IDEA sought review of the Assistant Secretary\u2019s decision by the Tax Review Board. \u201c[A]fter conducting an administrative hearing in this matter during which [NC IDEA] appeared and presented oral argument through counsel,\u201d the Tax Review Board concluded in Administrative Decision No. 498, which was entered on 1 November 2006, that \u201cthe findings of fact made by the Assistant Secretary were supported by competent evidence in the recordf;] that[,] based upon the findings of fact, the Assistant Secretary\u2019s conclusions of law were fully supported by the findings of fact[;] . . . that the final decision of the Assistant Secretary was supported by the conclusions of law[;]\u201d and \u201cthat the Assistant Secretary\u2019s final decision is AFFIRMED.\u201d\nNC IDEA sought judicial review of the Tax Review Board\u2019s decision in the Superior Court of Wake County on 1 December 2006. The Secretary of Revenue filed a response to NC IDEA\u2019S petition for judicial review on 2 January 2007. After reviewing the administrative record and the briefs submitted by the parties and after hearing oral argument on 6 July 2007, the trial court entered a Judgment and Order reversing the Tax Review Board\u2019s decision on 8 February 2008.\nIn its Judgment and Order, the trial court initially reviewed the procedural history of this matter and then discussed the applicable standard of review. The trial court concluded, in reliance on the decision of this Court in Vanderburg v. N.C. Dep\u2019t of Revenue, 168 N.C. App. 598, 608-09, 608 S.E.2d 831, 839 (2005), that the Tax Review Board\u2019s decision was subject to de novo review. After stating that most of the facts are not in dispute and that, \u201c[t]o the extent factual disputes exist, the Court has reviewed the facts in the light most favorable to the Department of Revenue,\u201d the trial court proceeded to specify what, in its opinion, the record evidence established.\nAccording to the trial court, \u201cthe record clearly show[ed] that\u201d \u201cNC IDEA and its predecessor, MCNC Research & Development Institute (\u201cMCNC-RDI\u201d) exist for the sole purpose of promoting economic development in North Carolina by attracting, forming, growing, and retaining microelectronic, wireless, networking, and related technology businesses in North Carolina;\u201d that NC IDEA\u2019S. \u201coriginal purpose of promoting economic development in the microelectronic and other high technology industries for the benefit of the people and State of North Carolina has remained constant;\u201d that, \u201c[although [NC IDEA] has operated as aventure capital company that invests in small technology companies,\u201d it had never \u201coperate[d] as a for-profit corporation;\u201d that NC IDEA \u201chas consistently remained a non-profit corporation that seeks to inject funds into nascent companies so that they in turn can grow and become successful and benefit the State of North Carolina and its people by creating jobs and tax revenues;\u201d that, \u201ceven though [NC IDEA] looks to make a profit and get a return on investments, the so-called \u2018profit\u2019 made provides funds that can be invested back into growing technology companies in North Carolina and does not inure to the benefit of any individual or for-profit entity;\u201d that \u201cthe stated intent and purpose of [NC IDEA] is economic development to create jobs and benefit the people and economy of North Carolina;\u201d and that \u201cthe manner in which [NC IDEA] accomplished its objectives does not detract from its charitable nature.\u201d The trial court further concluded \u201cas a matter of law, based on the undisputed evidence and taking the disputed evidence in the light most favorable to the Department of Revenue, that [NC IDEA\u2019s] economic development activities, carried out by its research and development and venture capital activities,\u201d during and after the Refund Period \u201cpromote social welfare, lessen the burdens of government, aid the citizens of North Carolina, and dispense public good;\u201d that these \u201care charitable purposes within the meaning of\u2019 N.C. Gen. Stat. \u00a7 105-164.14(b)(3); and that NC IDEA \u201chas . . . satisfied its burden of demonstrating that it is entitled to sales and use tax refunds pursuant to [N.C. Gen. Stat.] \u00a7 105-164.14(b)(3) \u201cfor the Refund Period.\u201d As a result, the trial court reversed the decision of the Tax Review Board. From this judgment, the Department of Revenue appeals.\nOn appeal, the Secretary contends that the trial court erred by applying an incorrect standard of review. We agree with the Secretary, reverse the trial court\u2019s judgment, and remand this matter to the trial court for further proceedings not inconsistent with this opinion.\nJudicial review of the final decision of an administrative agency in a contested case is governed by section 150B-51(b) of the Administrative Procedures Act (APA). N.C. Gen. Stat. \u00a7 150B-51(b) (2007). According to well-established law, it is the responsibility of the administrative body, not the reviewing court, \u201cto determine the weight and sufficiency of the evidence and the credibility of the witnesses, to draw inferences from the facts, and to appraise conflicting and circumstantial evidence.\u201d Comr. of Insurance v. Rate Bureau, 300 N.C. 381, 406, 269 S.E.2d 547, 565 (1980). In other words, \u201c[w]hen the trial court exercises judicial review over an agency\u2019s final decision, it acts in the capacity of an appellate court.\u201d N.C. Dep\u2019t of Env\u2019t & Natural Res. v. Carroll, 358 N.C. 649, 662, 599 S.E.2d 888, 896 (2004).\nDuring judicial review of an administrative agency\u2019s final decision, the substantive nature of each assignment of error dictates the standard of review. ACT-UP Triangle v. Commission for Health Services, 345 N.C. 699, 706, 483 S.E.2d 388, 392 (1997). According to the relevant provisions of the APA, an agency\u2019s final decision may be reversed or modified only if the reviewing court determines that the petitioner\u2019s substantial rights might have been prejudiced because the agency\u2019s findings, inferences, conclusions, or decisions are:\n(1) In violation of constitutional provisions;\n(2) In excess of the statutory authority or jurisdiction of the agency;\n(3) Made upon unlawful procedure;\n(4) Affected by other error of law;\n(5) Unsupported by substantial evidence admissible under G.S. 150B-29(a), 150B-30, or 150B-31 in view of the entire record as submitted; or\n(6) Arbitrary, capricious, or an abuse of discretion.\nN.C. Gen. Stat. \u00a7 150B-51(b) (2007). The first four grounds for reversing or modifying an agency\u2019s decision- \u2014 that the decision was \u201cin violation of constitutional provisions,\u201d \u201cin excess of the statutory authority or jurisdiction of the agency,\u201d \u201cmade upon unlawful procedure,\u201d or \u201caffected by other error of law,\u201d N.C. Gen. Stat. \u00a7 150B-51(b)(l)-(4) \u2014 are \u201claw-based\u201d inquiries. Carroll, 358 N.C. at 659, 599 S.E.2d at 894. The final two grounds \u2014 -that the decision was \u201cunsupported by substantial evidence ... in view of the entire record\u201d or \u201carbitrary or capricious,\u201d N.C. Gen. Stat. \u00a7 150B-51(b)(5),(6) \u2014 involve \u201cfact-based\u201d inquiries. Carroll, 358 N.C. at 659, 599 S.E.2d at 894.\nIn cases appealed from administrative agencies, \u201c[qjuestions of law receive de novo review,\u201d whereas fact-intensive issues \u201csuch as sufficiency of the evidence to support [an agency\u2019s] decision are reviewed under the whole-record test.\u201d In re Appeal of the Greens of Pine Glen Ltd. P\u2019ship, 356 N.C. 642, 647, 576 S.E.2d 316, 319 (2003). Specifically, in cases where the gravamen of an assigned error is that the agency is subject to reversal under subsections 150B-51(b)(l), (2), (3), or (4) of the APA, a court engages in de novo review. See Meads v. N.C. Dep\u2019t of Agric., 349 N.C. 656, 665, 670, 509 S.E.2d 165, 171 (1998). However, where the substance of the alleged error involves an allegation that the agency\u2019s decision should be overturned pursuant to subsections 150B-51(b)(5) or (6), the reviewing court must apply the \u201cwhole record test.\u201d See Carroll, 358 N.C. at 659, 599 S.E.2d at 894.\nUnder the de novo standard of review, the trial court \u201cc.onsider[s] the matter anew[] and freely substitutes] its own judgment for the agency\u2019s[.]\u201d Mann Media, Inc. v. Randolph County Planning Bd., 356 N.C. 1, 13, 565 S.E.2d 9, 17 (2002). When the trial court reviews an administrative decision under the whole record test, it \u201cmay not substitute its judgment for the agency\u2019s as between two conflicting views, even though it could reasonably have reached a different result had it reviewed the matter de novo.\u201d Watkins v. N.C. State Bd. of Dental Exam\u2019rs, 358 N.C. 190, 199, 593 S.E.2d 764, 769 (2004). In conducting \u201cwhole record\u201d review, the trial court must examine all the record evidence in order to determine whether there is substantial evidence to support the agency\u2019s decision. Id. \u201cSubstantial evidence\u201d is \u201crelevant evidence a reasonable mind might accept as adequate to support a conclusion.\u201d N.C. Gen. Stat. \u00a7 150B-2(8b) (2007).\nThis Court\u2019s review of \u201ca superior court order entered upon review of an administrative agency decision, . . . [involves a] two-fold task: (1) [to] determine whether the trial court exercised the appropriate scope of review and, if appropriate; (2) [to] decide whether the court did so properly.\u201d County of Wake v. N.C. Dep\u2019t of Env\u2019t & Natural Res., 155 N.C. App. 225, 233-34, 573 S.E.2d 572, 579 (2002) (quotation omitted). In performing this task, this Court need only consider \u201cthose grounds for reversal or modification argued by the petitioner before the superior court and properly assigned as error on appeal to this Gourt.\u201d Amanini v. N.C. Dept. of Human Resources, 114 N.C. App. 668, 675, 443 S.E.2d 114, 118 (1994) (quotation omitted).\nAfter careful consideration of the record, we agree with the Secretary that the trial court applied an incorrect standard of review in its examination of the Assistant Secretary\u2019s decision, which the Tax Review Board affirmed without significant further discussion. The essence of NC IDEA\u2019S appeal to the superior court appears to have been that the Assistant Secretary erred by making incomplete and inaccurate factual findings and by applying an incorrect legal standard to the properly found facts. Rather than subjecting the Assistant Secretary\u2019s decision to pure de novo review, the trial court should have examined the Assistant Secretary\u2019s decision in order to ascertain (1) whether the factual findings made by the Assistant Secretary were supported by substantial evidence in view of the whole record, N.C. Gen. Stat. \u00a7 105-B-51 (b)(5); (2) whether the Assistant Secretary failed to make findings of fact addressing any material issue arising on the evidentiary record, N.C. Gen. Stat. \u00a7 150B-51(b)(4); (3) whether the Assistant Secretary\u2019s legal conclusions embodied a correct understanding of the applicable law, N.C. Gen. Stat. \u00a7 150B-51(b)(4); and (4) whether the Assistant Secretary\u2019s factual findings supported his ultimate legal conclusion that NC IDEA was not entitled to a refund of sales and use tax payments pursuant to former N.C. Gen. Stat. \u00a7 105-164.14(b)(3) because it did not qualify as a \u201ccharitable . . . organization not operated for profit.\u201d N.C. Gen. Stat. \u00a7 150B-51 (b)(4). Since not all of these steps involved the resolution of \u201claw-based\u201d issues properly subject to de novo review, the trial court erred by reviewing the Tax Review Board\u2019s decision under that standard of review.\nThe trial court\u2019s review of the Tax Review Board\u2019s decision to affirm the Assistant Secretary\u2019s determination on a de novo basis appears to have resulted in the commission of a more specific error: A trial court reviewing an agency decision may not engage in independent fact-finding. See Carroll, 358 N.C. at 662, 599 S.E.2d at 896. In other words, a reviewing court may not independently weigh the record evidence or substitute its evaluation of the evidence for that of the adjudicating agency. In re Appeal of AMP, Inc., 287 N.C. 547, 561-62, 215 S.E.2d 752, 761 (1975). As a result, the principal duty of a reviewing court in examining an administrative agency\u2019s factual findings involves evaluating all the evidence for the purpose of determining whether the agency\u2019s findings have a \u201crational basis\u201d in the record. In re Rogers, 297 N.C. 48, 65, 253 S.E.2d 912, 922 (1979).\nAs we have already noted, the trial court attempted to specify the facts that the \u201cundisputed evidence and . . . [the] disputed evidence [taken] in the light most favorable to the Department of Revenue\u201d tended to show. However, the trial court\u2019s recitation of the applicable facts cannot be reconciled with the factual findings made by the Assistant Secretary.\nFor example, the trial court stated that \u201cNC IDEA and its predecessor, MCNC Research & Development Institute (\u201cMCNC-RDI\u201d) exist for the sole purpose of promoting economic development in North Carolina by attracting, forming, growing, and retaining microelectronic, wireless, networking, and related technology businesses in North Carolina.\u201d After careful review, we have not found any language in the Assistant Secretary\u2019s findings of fact that addresses the purpose for which NC IDEA was formed and is operated. However, the Assistant Secretary did find that \u201cTaxpayer\u2019s VC investing is not limited to any geographic area and is not limited to any charitable class,\u201d a finding which may be inconsistent with the trial court\u2019s determination that NC IDEA\u2019S efforts are focused on North Carolina-based economic development activities.\nFurthermore, the trial court stated that the evidence tended to show that, while NC IDEA \u201chas operated as a venture capital company that invests in small technology companies, it did not during the Refund Period, nor does it now, operate as a for-profit corporation.\u201d On the contrary, the trial court indicated that NC IDEA \u201chas consistently remained a non-profit corporation that seeks to inject funds into nascent companies so that they in turn can grow and become successful and benefit the State of North Carolina and its people by creating jobs and tax revenues.\u201d Although the Assistant Secretary does not appear to have addressed NC IDEA\u2019S ultimate goals in his findings of fact, he did determine that \u201c[t]he VC activities are dedicated to profitability where the Taxpayer, like any for-profit investor, will invest money, take preferred stock or convertible preferred debt, and seek a profitable exit opportunity;\u201d that \u201cTaxpayer\u2019s VC investing is a for-profit operation investing in the same businesses as other for-profit corporations and providing \u2018traditional\u2019 VC funding;\u201d that \u201cTaxpayer conducts commercial VC investing;\u201d that \u201cTaxpayer competes with other for-profit companies for VC funding opportunities;\u201d that \u201cTaxpayer is not conducting and disseminating fundamental research for public benefit;\u201d that \u201cTaxpayer\u2019s R&D services serve commercial and industrial operations to design, construct, and commercialize products;\u201d that \u201cTaxpayer\u2019s R&D operations are commercial and have the goal to produce commercial products;\u201d and that \u201cTaxpayer competes with other for-profit companies for R&D contracts.\u201d Once again, these findings of fact are, arguably, inconsistent with the trial court\u2019s view of the undisputed evidence and the evidence taken in the light most favorable to the Department.\nFinally, the trial court stated that \u201cthe undisputed evidence\u201d and the \u201cdisputed evidence [viewed] in the light most favorable to the Department of Revenue\u201d indicated that, despite the fact that NC IDEA \u201clooks to make a profit and get a return on investments, the so-called \u2018profit\u2019 made provides funds that can be invested back into growing technology companies in North Carolina and does not inure to the benefit of any individual or for-profit entity;\u201d that \u201cthe stated intent and purpose of [NC IDEA] is economic development to create jobs and benefit the people and economy of North Carolina;\u201d and that, \u201cin this case, the manner in which [NC IDEA] accomplished its objectives does not detract from its charitable nature.\u201d Once again, the Assistant Secretary\u2019s findings of fact do not contain a discussion of the treatment of the \u201cprofit\u201d that NC IDEA earns by virtue of its activities. In addition, the Assistant Secretary\u2019s findings, as quoted in detail above, tend to suggest that NC IDEA\u2019S operations cannot be meaningfully distinguished from those of a for-profit entity. Thus, this portion of the trial court\u2019s discussion of the evidentiary record is arguably inconsistent with the Assistant Secretary\u2019s findings of fact.\nAs this analysis suggests, it appears that the trial court\u2019s review of the Tax Review Board\u2019s affirmance of the Assistant Secretary\u2019s decision erroneously rests on a factual basis which is either inconsistent with or simply not contained within the Assistant Secretary\u2019s findings of fact. Put another way, the trial court\u2019s judgment is susceptible to the interpretation that the trial court engaged in impermissible independent factfinding during his review of the administrative agency\u2019s decision. Any determination that the trial court had the authority to disregard or supplement the administrative agency\u2019s factual determinations would be inconsistent with the applicable standard of review and rest upon a misapplication of governing law.\nWhen an \u201corder or judgment appealed from was entered under a misapprehension of the applicable law,\u201d an appellate court may remand for application of the correct legal standards. Howerton v. Arai Helmet, Ltd., 358 N.C. 440, 469, 597 S.E.2d 674, 693 (2004). \u201cThe trial court\u2019s erroneous application of the standard of review does not automatically necessitate remand[,]\u201d Carroll, 358 N.C. at 666, 599 S.E.2d at 898, if the \u201ccourt [may] reasonably determine from the record whether the petitioner\u2019s asserted grounds for challenging the agency\u2019s final decision warrant reversal or modification of that decision under the applicable provisions of N.C.G.S. \u00a7 150B-51(b)[.]\u201d Id.\nHere, however, the trial court\u2019s erroneous application of a de novo standard of review necessitates remand for further proceedings in the court below. Although the suggestion was made at oral argument that this Court should proceed to conduct an appropriate review of the Tax Review Board\u2019s decision to affirm the Assistant Secretary\u2019s determination based on the existing administrative record, we do not believe that we should act in that manner. First, the scope of this Court\u2019s review is limited to \u201cthose grounds for reversal or modification . . . assigned as error on appeal to this Court.\u201d Amanini, 114 N.C. App. at 675, 443 S.E.2d at 118 (quotation omitted). Given the procedural posture of this case, there are no specific assignments of error directed to the Assistant Secretary\u2019s findings of fact and conclusions of law upon which we could base such independent review of the Assistant Secretary\u2019s decision. Secondly, and even more importantly, we have not had the benefit of briefing and argument directed toward the sufficiency of the Assistant Secretary\u2019s findings of fact and conclusions of law. Given the complexity of the record in this matter and the fact that the parties have not had an opportunity to be heard before this Court with respect to the issues which remain unresolved, we conclude that we should remand this case to the superior court for further proceedings not inconsistent with this opinion.\nThus, we hold that the trial court failed to apply the appropriate standard of review in examining the Tax Review Board\u2019s Administrative Decision No. 498 affirming the Assistant Secretary\u2019s decision to deny NC IDEA\u2019S request for a sales and use tax refund. Accordingly, the decision of the trial court is reversed and the case is remanded to the trial court for further review of the Tax Review Board\u2019s decision in light of the appropriate standard of review. If the trial court deems it necessary, after further review of the Tax Review Board\u2019s decision, the court may further remand this case to the Secretary of Revenue for the purpose of making further findings of fact and conclusions of law.\nREVERSED and REMANDED.\nJudges WYNN and STEPHENS concur.\n. N.C. Gen. Stat. \u00a7 105-164.14(b)(3) (2007) states that \u201c[a] nonprofit entity ... is allowed a semiannual refund of sales and use taxes paid by it under this Article on direct purchases of tangible personal property and services!.]\u201d Included in the list of nonprofit entities entitled to a refund are the following: \u201cChurches, orphanages, and other charitable or religious institutions and organizations not operated for profit.\u201d We also note that this section was repealed by Session Laws 2008-107, s. 28.22(a), effective 1 July 2008, and applicable to purchases made on or after that date.\n. The Court notes that the General Assembly abolished the Tax Review Board and created a new structure for adjudicating tax disputes at the administrative level, effective 1 January 2008. 2007 N.C. Sess. Laws 491.", "type": "majority", "author": "ERVIN, Judge." } ], "attorneys": [ "Attorney General Roy Cooper, by Assistant Attorney General Gregory R Roney, for Appellant.", "Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P, by Elizabeth V. LaFollette and William G. McNairy, for Appellee." ], "corrections": "", "head_matter": "IN THE MATTER OF: THE DENIAL OF NC IDEA\u2019S REFUND OF SALES AND USE TAX FOR THE PERIOD JANUARY 1, 2003 THROUGH JUNE 30, 2003 BY THE SECRETARY OF REVENUE OF NORTH CAROLINA\nNo. COA08-561\n(Filed 21 April 2009)\nTaxation\u2014 appeal to superior court \u2014 standard of review\u2014 mixed law and fact\nThe trial court erred by applying a pure de novo standard of review to a review of the Tax Review Board that involved issues of law and fact. Moreover, the trial court\u2019s review erroneously rests on a factual basis which is either inconsistent with or not contained in the agency findings. The matter was remanded, given the complexity of the record and that the parties were heard on issues that remain unresolved.\nAppeal by the Secretary of Revenue of North Carolina from judgment entered 8 February 2008 by Judge Howard E. Manning, Jr., Wake County Superior Court. Heard in the Court of Appeals 10 February 2009.\nAttorney General Roy Cooper, by Assistant Attorney General Gregory R Roney, for Appellant.\nBrooks, Pierce, McLendon, Humphrey & Leonard, L.L.P, by Elizabeth V. LaFollette and William G. McNairy, for Appellee." }, "file_name": "0426-01", "first_page_order": 454, "last_page_order": 466 }