{ "id": 4168150, "name": "WAL-MART STORES EAST, INC., a/k/a, WAL-MART STORES EAST I, INC., Plaintiff v. REGINALD S. HINTON, Secretary of Revenue of the State of North Carolina, Defendant", "name_abbreviation": "Wal-Mart Stores East, Inc. v. Hinton", "decision_date": "2009-05-19", "docket_number": "No. COA08-450", "first_page": "30", "last_page": "59", "citations": [ { "type": "official", "cite": "197 N.C. App. 30" } ], "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": "526 U.S. 1098", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 11178628, 11178790, 11178507, 11178542, 11178897, 11178867, 11178836, 11178709, 11178675, 11178586, 11178751 ], "year": 1999, "opinion_index": 0, "case_paths": [ "/us/526/1098-04", "/us/526/1098-08", "/us/526/1098-01", "/us/526/1098-02", "/us/526/1098-11", "/us/526/1098-10", "/us/526/1098-09", "/us/526/1098-06", "/us/526/1098-05", "/us/526/1098-03", "/us/526/1098-07" ] }, { "cite": "489 U.S. 1096", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 12091138, 12091309, 12091503, 12091344, 12091410, 12091378, 12091286, 12091450, 12091227, 12091196, 12091101 ], "year": 1989, "opinion_index": 0, "case_paths": [ "/us/489/1096-02", "/us/489/1096-06", "/us/489/1096-11", "/us/489/1096-07", "/us/489/1096-09", "/us/489/1096-08", "/us/489/1096-05", "/us/489/1096-10", "/us/489/1096-04", "/us/489/1096-03", "/us/489/1096-01" ] }, { "cite": "661 S.E.2d 264", "category": "reporters:state_regional", "reporter": "S.E.2d", "case_ids": [ 12641006 ], "year": 2008, "pin_cites": [ { "page": "268", "parenthetical": "citation, quotation marks, ellipses and brackets in original omitted" } ], "opinion_index": 0, "case_paths": [ "/se2d/661/0264-01" ] }, { "cite": "691 F.2d 1220", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 1477891 ], "year": 1982, "pin_cites": [ { "page": "1223", "parenthetical": "Dumbauld, J., dissenting" } ], "opinion_index": 0, "case_paths": [ "/f2d/691/1220-01" ] }, { "cite": "143 L. Ed. 2d 671", "category": "reporters:federal", "reporter": "L. Ed. 2d", "year": 1999, "opinion_index": 0 }, { "cite": "203 S.E.2d 51", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1974, "pin_cites": [ { "page": "55" } ], "opinion_index": 0 }, { "cite": "285 N.C. 64", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8561713 ], "year": 1974, "pin_cites": [ { "page": "71" } ], "opinion_index": 0, "case_paths": [ "/nc/285/0064-01" ] }, { "cite": "N.C. Gen. Stat. \u00a7 105-236", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "weight": 5, "pin_cites": [ { "page": "(a)(5)" }, { "page": "(a)(5)(c)" }, { "page": "(a)(5)(a)" }, { "page": "(a)(5)(a)" } ], "opinion_index": 0 }, { "cite": "609 S.E.2d 407", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2005, "pin_cites": [ { "page": "417", "parenthetical": "\"[T]he Operations Manual is a non-binding interpretive statement, not a rule requiring formal rule-making procedures.\" (Citing N.C. Gen. Stat. \u00a7 150B-2(8a)(c))" } ], "opinion_index": 0 }, { "cite": "169 N.C. App. 17", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8468339 ], "year": 2005, "pin_cites": [ { "page": "31", "parenthetical": "\"[T]he Operations Manual is a non-binding interpretive statement, not a rule requiring formal rule-making procedures.\" (Citing N.C. Gen. Stat. \u00a7 150B-2(8a)(c))" } ], "opinion_index": 0, "case_paths": [ "/nc-app/169/0017-01" ] }, { "cite": "N.C. Gen. Stat. \u00a7 105-130.14", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "year": 2007, "opinion_index": 0 }, { "cite": "N.C. Gen. Stat. \u00a7 105-262", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "year": 2005, "opinion_index": 0 }, { "cite": "443 S.E.2d 716", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1994, "pin_cites": [ { "page": "728-29", "parenthetical": "holding that the Industrial Commission was not given authority by the legislature to \"set 'reasonable' hospital rates at or below the prevailing community charge\"" } ], "opinion_index": 0 }, { "cite": "336 N.C. 200", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2538759 ], "year": 1994, "pin_cites": [ { "page": "221", "parenthetical": "holding that the Industrial Commission was not given authority by the legislature to \"set 'reasonable' hospital rates at or below the prevailing community charge\"" } ], "opinion_index": 0, "case_paths": [ "/nc/336/0200-01" ] }, { "cite": "269 S.E.2d 547", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1980, "pin_cites": [ { "page": "569", "parenthetical": "\"The Commissioner correctly argues that [even when the APA otherwise applies,] a second mode by which administrative agencies can establish rules is through the case-by-case process of [ad hoc] administrative adjudication.\"" } ], "opinion_index": 0 }, { "cite": "300 N.C. 381", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8562647 ], "weight": 2, "year": 1980, "pin_cites": [ { "page": "413", "parenthetical": "\"The Commissioner correctly argues that [even when the APA otherwise applies,] a second mode by which administrative agencies can establish rules is through the case-by-case process of [ad hoc] administrative adjudication.\"" } ], "opinion_index": 0, "case_paths": [ "/nc/300/0381-01" ] }, { "cite": "379 S.E.2d 30", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1989, "opinion_index": 0 }, { "cite": "324 N.C. 373", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2483734 ], "year": 1989, "opinion_index": 0, "case_paths": [ "/nc/324/0373-01" ] }, { "cite": "395 S.E.2d 685", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1990, "opinion_index": 0 }, { "cite": "327 N.C. 431", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2494531, 2495910, 2493800, 2493228, 2496926 ], "year": 1990, "opinion_index": 0, "case_paths": [ "/nc/327/0431-02", "/nc/327/0431-03", "/nc/327/0431-04", "/nc/327/0431-05", "/nc/327/0431-01" ] }, { "cite": "391 S.E.2d 509", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1990, "opinion_index": 0 }, { "cite": "98 N.C. App. 504", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8525191 ], "year": 1990, "opinion_index": 0, "case_paths": [ "/nc-app/98/0504-01" ] }, { "cite": "172 S.E.2d 531", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1970, "opinion_index": 0 }, { "cite": "276 N.C. 411", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8561596 ], "year": 1970, "opinion_index": 0, "case_paths": [ "/nc/276/0411-01" ] }, { "cite": "167 S.E.2d 808", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1969, "pin_cites": [ { "page": "811" } ], "opinion_index": 0 }, { "cite": "5 N.C. App. 53", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8548033 ], "year": 1969, "pin_cites": [ { "page": "58" } ], "opinion_index": 0, "case_paths": [ "/nc-app/5/0053-01" ] }, { "cite": "103 L. Ed. 2d 935", "category": "reporters:federal", "reporter": "L. Ed. 2d", "year": 1989, "opinion_index": 0 }, { "cite": "371 S.E.2d 468", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1988, "pin_cites": [ { "page": "472", "parenthetical": "citation omitted" } ], "opinion_index": 0 }, { "cite": "323 N.C. 132", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2566187 ], "weight": 2, "year": 1988, "pin_cites": [ { "page": "140" } ], "opinion_index": 0, "case_paths": [ "/nc/323/0132-01" ] }, { "cite": "239 U.S. 69", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 3933299 ], "weight": 2, "year": 1915, "pin_cites": [ { "page": "72", "parenthetical": "\"There was error, as it seems to us, in seeking a theoretically accurate definition of 'net income,' instead of adopting the meaning which is so clearly defined in the [Corporation Tax] Act itself.\"" }, { "page": "154", "parenthetical": "\"There was error, as it seems to us, in seeking a theoretically accurate definition of 'net income,' instead of adopting the meaning which is so clearly defined in the [Corporation Tax] Act itself.\"" } ], "opinion_index": 0, "case_paths": [ "/us/239/0069-01" ] }, { "cite": "262 U.S. 413", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 6142011 ], "weight": 13, "year": 1923, "pin_cites": [ { "page": "424" }, { "page": "1061" }, { "page": "420-21" }, { "page": "1059-60" }, { "parenthetical": "emphasis added" }, { "page": "422" }, { "page": "422" }, { "page": "416" }, { "page": "1058" } ], "opinion_index": 0, "case_paths": [ "/us/262/0413-01" ] }, { "cite": "82 F.3d 433", "category": "reporters:federal", "reporter": "F.3d", "year": 1996, "opinion_index": 0 }, { "cite": "33 Fed. Cl. 685", "category": "reporters:specialty", "reporter": "Fed. Cl.", "case_ids": [ 774848 ], "year": 1995, "pin_cites": [ { "page": "707-08" } ], "opinion_index": 0, "case_paths": [ "/fed-cl/33/0685-01" ] }, { "cite": "387 F.2d 966", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 10816466, 2091220 ], "year": 1967, "pin_cites": [ { "page": "972" } ], "opinion_index": 0, "case_paths": [ "/us-ct-cl/181/0807-01", "/f2d/387/0966-01" ] }, { "cite": "611 F.2d 117", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 469944 ], "year": 1980, "pin_cites": [ { "page": "119-20", "parenthetical": "quoting Wagner v. United States, 387 F.2d 966, 972 (Ct.Cl. 1967); see also Galveston by Galveston Wharves v. United States, 33 Fed. Cl. 685, 707-08 (1995" } ], "opinion_index": 0, "case_paths": [ "/f2d/611/0117-01" ] }, { "cite": "174 Ct.Cl. 74", "category": "reporters:specialty", "reporter": "Ct.Cl.", "case_ids": [ 10816426 ], "year": 1966, "pin_cites": [ { "page": "78" } ], "opinion_index": 0, "case_paths": [ "/us-ct-cl/174/0074-01" ] }, { "cite": "355 F.2d 639", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 10816426, 842214 ], "year": 1966, "pin_cites": [ { "page": "641" } ], "opinion_index": 0, "case_paths": [ "/us-ct-cl/174/0074-01", "/f2d/355/0639-01" ] }, { "cite": "3 S.E.2d 316", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1939, "pin_cites": [ { "page": "321", "parenthetical": "citation, quotation marks and ellipses omitted" } ], "opinion_index": 0 }, { "cite": "216 N.C. 89", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8595231 ], "year": 1939, "pin_cites": [ { "page": "94", "parenthetical": "citation, quotation marks and ellipses omitted" } ], "opinion_index": 0, "case_paths": [ "/nc/216/0089-01" ] }, { "cite": "136 L. Ed. 2d 839", "category": "reporters:federal", "reporter": "L. Ed. 2d", "year": 1997, "opinion_index": 0 }, { "cite": "519 U.S. 1112", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 11775264, 11775708, 11775654, 11775399, 11775499, 11775307, 11775602, 11775219, 11775543, 11775448, 11775353, 11775899, 11775964, 11775774 ], "year": 1997, "opinion_index": 0, "case_paths": [ "/us/519/1112-02", "/us/519/1112-11", "/us/519/1112-10", "/us/519/1112-05", "/us/519/1112-07", "/us/519/1112-03", "/us/519/1112-09", "/us/519/1112-01", "/us/519/1112-08", "/us/519/1112-06", "/us/519/1112-04", "/us/519/1112-13", "/us/519/1112-14", "/us/519/1112-12" ] }, { "cite": "471 S.E.2d 342", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1996, "opinion_index": 0 }, { "cite": "343 N.C. 426", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 798949 ], "year": 1996, "opinion_index": 0, "case_paths": [ "/nc/343/0426-01" ] }, { "cite": "451 S.E.2d 641", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 4, "year": 1995, "pin_cites": [ { "page": "646-47" }, { "page": "647" }, { "page": "647" } ], "opinion_index": 0 }, { "cite": "117 N.C. App. 484", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8525830 ], "weight": 3, "year": 1995, "pin_cites": [ { "page": "491-92" }, { "page": "492" } ], "opinion_index": 0, "case_paths": [ "/nc-app/117/0484-01" ] }, { "cite": "336 S.E.2d 621", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1985, "opinion_index": 0 }, { "cite": "314 N.C. 664", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 4689129, 4685964, 4687317, 4686872, 4687966 ], "year": 1985, "opinion_index": 0, "case_paths": [ "/nc/314/0664-04", "/nc/314/0664-03", "/nc/314/0664-02", "/nc/314/0664-01", "/nc/314/0664-05" ] }, { "cite": "332 S.E.2d 696", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 4, "year": 1985, "pin_cites": [ { "page": "703" }, { "page": "703" }, { "page": "703" } ], "opinion_index": 0 }, { "cite": "76 N.C. App. 202", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8526927 ], "weight": 3, "year": 1985, "pin_cites": [ { "page": "213" }, { "page": "213" }, { "page": "213" } ], "opinion_index": 0, "case_paths": [ "/nc-app/76/0202-01" ] }, { "cite": "249 S.E.2d 402", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1978, "pin_cites": [ { "page": "411", "parenthetical": "holding the statute authorizing the Coastal Resources Commission to be sufficiently specific" } ], "opinion_index": 0 }, { "cite": "295 N.C. 683", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8568518 ], "year": 1978, "pin_cites": [ { "page": "698", "parenthetical": "holding the statute authorizing the Coastal Resources Commission to be sufficiently specific" } ], "opinion_index": 0, "case_paths": [ "/nc/295/0683-01" ] }, { "cite": "6 S.E.2d 854", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1940, "pin_cites": [ { "page": "860", "parenthetical": "declaring unconstitutional on the grounds of improper delegation of legislative responsibilities a statute granting an administrative agency unlimited discretion to set licensing requirements for dry cleaners" }, { "page": "860", "parenthetical": "statute granting administrative agency unlimited discretion to set licensing requirements for dry cleaners was an unconstitutional delegation of legislative authority" } ], "opinion_index": 0 }, { "cite": "216 N.C. 746", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8614002 ], "weight": 2, "year": 1940, "pin_cites": [ { "page": "754", "parenthetical": "declaring unconstitutional on the grounds of improper delegation of legislative responsibilities a statute granting an administrative agency unlimited discretion to set licensing requirements for dry cleaners" }, { "page": "754" } ], "opinion_index": 0, "case_paths": [ "/nc/216/0746-01" ] }, { "cite": "107 S.E.2d 549", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 3, "year": 1959, "pin_cites": [ { "page": "550" }, { "page": "551" } ], "opinion_index": 0 }, { "cite": "249 N.C. 699", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8621318 ], "weight": 3, "year": 1959, "pin_cites": [ { "page": "701-02" }, { "page": "702" } ], "opinion_index": 0, "case_paths": [ "/nc/249/0699-01" ] }, { "cite": "14 N.C. Reg. 1431", "category": "laws:admin_register", "reporter": "N.C. Reg.", "opinion_index": 0 }, { "cite": "254 U.S. 113", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 1160783 ], "weight": 2, "year": 1920, "pin_cites": [ { "page": "120-21" } ], "opinion_index": 0, "case_paths": [ "/us/254/0113-01" ] }, { "cite": "182 N.E. 481", "category": "reporters:state_regional", "reporter": "N.E.", "year": 1932, "opinion_index": 0 }, { "cite": "189 S.E.2d 474", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1972, "pin_cites": [ { "page": "476" } ], "opinion_index": 0 }, { "cite": "472 N.E.2d 259", "category": "reporters:state_regional", "reporter": "N.E.2d", "weight": 4, "year": 1984, "pin_cites": [ { "page": "261" } ], "opinion_index": 0 }, { "cite": "147 S.E.2d 522", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 4, "year": 1966, "pin_cites": [ { "page": "529" }, { "page": "524-25", "parenthetical": "emphasis added" } ], "opinion_index": 0 }, { "cite": "267 N.C. 15", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8558205 ], "weight": 3, "year": 1966, "pin_cites": [ { "page": "24-25" }, { "page": "18" } ], "opinion_index": 0, "case_paths": [ "/nc/267/0015-01" ] }, { "cite": "210 S.E.2d 199", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 3, "year": 1974, "pin_cites": [ { "page": "204" }, { "page": "206" } ], "opinion_index": 0 }, { "cite": "286 N.C. 215", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8564966 ], "weight": 3, "year": 1974, "pin_cites": [ { "page": "222" }, { "page": "225" } ], "opinion_index": 0, "case_paths": [ "/nc/286/0215-01" ] }, { "cite": "19 N.C. L. Rev. 435", "category": "journals:journal", "reporter": "N.C. L. Rev.", "year": 1941, "pin_cites": [ { "page": "534-35" } ], "opinion_index": 0 }, { "cite": "507 S.E.2d 284", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 5, "year": 1998, "pin_cites": [ { "page": "287-88", "parenthetical": "overruling the taxpayer's attempt to classify money received in a patent lawsuit as nonapportionable" }, { "page": "293" }, { "page": "290-91" }, { "page": "288", "parenthetical": "citing N.C. Gen. Stat. \u00a7 105-130.4(h) [(1997)], cert. denied, 526 U.S. 1098, 143 L. Ed. 2d 671 (1999" } ], "opinion_index": 0 }, { "cite": "349 N.C. 290", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 571505 ], "weight": 5, "year": 1998, "pin_cites": [ { "page": "293", "parenthetical": "overruling the taxpayer's attempt to classify money received in a patent lawsuit as nonapportionable" }, { "page": "301" }, { "page": "298" }, { "page": "294", "parenthetical": "citing N.C. Gen. Stat. \u00a7 105-130.4(h) [(1997)], cert. denied, 526 U.S. 1098, 143 L. Ed. 2d 671 (1999" } ], "opinion_index": 0, "case_paths": [ "/nc/349/0290-01" ] }, { "cite": "445 U.S. 425", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 1777870 ], "weight": 29, "year": 1980, "pin_cites": [ { "page": "436-37", "parenthetical": "listing cases which discuss the concept of true earnings in a State" }, { "page": "520", "parenthetical": "listing cases which discuss the concept of true earnings in a State" }, { "page": "440" }, { "page": "523" }, { "page": "440-41" }, { "page": "523" }, { "page": "520" }, { "page": "430" }, { "page": "517" }, { "page": "431" }, { "page": "517" }, { "page": "449" }, { "page": "528" }, { "page": "437" }, { "page": "521" }, { "page": "437-38" }, { "page": "521" }, { "page": "439" }, { "page": "522" }, { "page": "439" }, { "page": "522" }, { "page": "439-40" }, { "page": "522" }, { "page": "441" }, { "page": "523", "parenthetical": "\"Transforming . . . income into dividends from legally separate entities works no change in the underlying economic realities of a unitary business[.]\"" }, { "page": "437" }, { "page": "521" } ], "opinion_index": 0, "case_paths": [ "/us/445/0425-01" ] }, { "cite": "504 U.S. 768", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 11730954 ], "weight": 12, "year": 1992, "pin_cites": [ { "page": "772-73", "parenthetical": "discussing the concept of true earnings in a State and listing cases " }, { "page": "542", "parenthetical": "discussing the concept of true earnings in a State and listing cases " }, { "page": "772" }, { "page": "542" }, { "page": "772" }, { "page": "542", "parenthetical": "\"A State may not tax a nondomiciliary corporation's income if it is derived from unrelated business activity which constitutes a discrete business enterprise.\" (Citations, brackets and quotation marks omitted.)" }, { "page": "772" }, { "page": "542", "parenthetical": "\"[A] State need not attempt to isolate the intrastate income-producing activities from the rest of the business; it may tax an apportioned sum of the corporation's multistate business if the business is unitary.\"" }, { "page": "779-80" }, { "page": "778" }, { "page": "546", "parenthetical": "emphasis added" } ], "opinion_index": 0, "case_paths": [ "/us/504/0768-01" ] }, { "cite": "164 S.E.2d 289", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1968, "pin_cites": [ { "page": "295", "parenthetical": "relying on definitions in cases from the North Carolina Supreme Court, the United States Supreme Court and courts of other states to define a statutory term" } ], "opinion_index": 0 }, { "cite": "274 N.C. 505", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8560794 ], "year": 1968, "pin_cites": [ { "page": "513-14", "parenthetical": "relying on definitions in cases from the North Carolina Supreme Court, the United States Supreme Court and courts of other states to define a statutory term" } ], "opinion_index": 0, "case_paths": [ "/nc/274/0505-01" ] }, { "cite": "589 S.E.2d 179", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 2003, "pin_cites": [ { "page": "181", "parenthetical": "citations and quotation marks omitted" }, { "page": "181", "parenthetical": "citations, quotation marks and brackets omitted" } ], "opinion_index": 0 }, { "cite": "161 N.C. App. 558", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8959285 ], "weight": 2, "year": 2003, "pin_cites": [ { "page": "560", "parenthetical": "citations and quotation marks omitted" }, { "page": "560" } ], "opinion_index": 0, "case_paths": [ "/nc-app/161/0558-01" ] }, { "cite": "190 N.C. App. 532", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 4157901 ], "year": 2008, "pin_cites": [ { "page": "536", "parenthetical": "citation, quotation marks, ellipses and brackets in original omitted" } ], "opinion_index": 0, "case_paths": [ "/nc-app/190/0532-01" ] }, { "cite": "N.C. Gen. Stat. \u00a7 105-267", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "opinion_index": 0 }, { "cite": "N.C. Gen. Stat. \u00a7 105-130.6", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "weight": 11, "pin_cites": [ { "parenthetical": "or \"the statute\"" }, { "parenthetical": "a discrete business enterprise is implied by the requirement of intercompany eliminations" } ], "opinion_index": 0 }, { "cite": "N.C. Gen. Stat. \u00a7 105-241.1", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "opinion_index": 0 }, { "cite": "N.C. Gen. Stat. \u00a7 105-130.4", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "weight": 6, "pin_cites": [ { "parenthetical": "defining \"apportion-able income\" as \"all income that is apportionable under the United States Constitution\" and setting forth the bases and factors for apportioning income" }, { "page": "(h)" }, { "page": "(a)(l)" } ], "opinion_index": 0 } ], "analysis": { "cardinality": 2082, "char_count": 69602, "ocr_confidence": 0.742, "pagerank": { "raw": 6.075929054698591e-08, "percentile": 0.3752129950433404 }, "sha256": "45b932cb5471e0108df00d13e6d041f588969dd72f4d8f3122d84b495ae25162", "simhash": "1:93210707ef57265a", "word_count": 11087 }, "last_updated": "2023-07-14T21:19:41.072184+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Judges STEELMAN and JACKSON concur." ], "parties": [ "WAL-MART STORES EAST, INC., a/k/a, WAL-MART STORES EAST I, INC., Plaintiff v. REGINALD S. HINTON, Secretary of Revenue of the State of North Carolina, Defendant" ], "opinions": [ { "text": "STROUD, Judge.\nPlaintiff Wal-Mart Stores East, Inc. appeals from an order entered 4 January 2008 granting summary judgment in favor of defendant. We affirm.\nI. Background\nViewed in the light most favorable to plaintiff, the evidence tended to show the following facts:\nPlaintiff Wal-Mart Stores East, Inc. (\u201cW-M SEI\u201d) operates WalMart retail stores in North Carolina and in 29 other states. At all times relevant to this action, plaintiff was wholly owned by Wal-Mart Stores, Inc. (\u201cW-M SI\u201d), a publicly traded corporation listed on the New York Stock Exchange.\nAt the beginning of 1996, all of the Wal-Mart stores in North Carolina operated by plaintiff during the tax years relevant to this appeal were owned and operated by W-M SI. In the fall of 1996 W-M SI reorganized its corporate structure. As a result of the corporate reorganization, plaintiff became the sole owner of WSE Management, LLC and WSE Investment, LLC. WSE Investment, LLC was the 99% owner and limited partner of Wal-Mart Stores East, LP. WSE Management, LLC was the 1% owner and general partner of Wal-Mart Stores East, LP. Wal-Mart Stores East, LP owned 100% of Wal-Mart Property Company (\u201cW-M PC\u201d). W-M PC owned all of the voting units of Wal-Mart Real Estate Business Trust (\u201cW-M REBT\u201d), a Delaware business trust with its principal place of business in Bentonville, Arkansas. On 31 October 1996 all real property pertaining to Wal-Mart store premises, including both freeholds and leaseholds, was transferred from W-M SI to W-M REBT.\nOn or about 31 January 1997, plaintiff entered into a ten-year agreement with W-M REBT to lease land and buildings owned by W-M REBT for plaintiffs store premises. The lease agreement included at least 12 store premises owned in fee by W-M REBT in North Carolina. Plaintiff also executed a sub-lease agreement with W-M REBT to sub-let store premises, including at least 70 store premises in North Carolina.\nPlaintiff filed a North Carolina Corporation Income Tax Return for the tax year ended 31 January 1999 (\u201c1998-99 Tax Return\u201d), disclosing $3,173,869,445 in Total State Net Income. Total State Net Income included a deduction for $1,657,646,765 for rent paid to W-M REBT pursuant to the lease and sub-lease agreements noted above. From the $3,173,869,445 in Total State Net Income, plaintiff classified as nonbusiness income and subtracted $1,270,259,076 that it received in dividends from W-M PC, to yield a total business income of $1,903,610,369. Of the total business income, 4.1625% was apportioned to North Carolina per N.C. Gen. Stat. \u00a7 105-130.4: $79,237,782. Plaintiff adjusted the apportioned amount for contributions to North Carolina donees, resulting in a Total Net Taxable Income of $78,638,377. On this Total Net Taxable Income, plaintiff calculated tax at 7.25% in the amount of $5,701,282.\nW-M REBT filed a North Carolina Corporation Tax Return for the tax year ended 31 December 1998 (\u201c1998 Tax Return\u201d). On its 1998 Tax Return, W-M REBT reported total income of $1,208,178,874. From its total income, it deducted $1,207,831,069 for dividends paid to W-M PC, resulting in a net taxable income of $347,805. W-M REBT apportioned 3.1185% of this income to its business in North Carolina per N.C. Gen. Stat. \u00a7 105-130.4, resulting in Total Net Taxable Income of $10,846. On this Total Net Taxable Income, W-M REBT calculated tax at 7.25% in the amount of $786. W-M PC did not file a corporation income tax return in the state of North Carolina for any of the years at issue in this appeal.\nDefendant (or \u201cthe Secretary\u201d) audited plaintiffs tax return for the tax year ended 31 January 1999. As a result of the audit, defendant determined that the earnings of plaintiff must be combined with Wal-Mart Property Company and Wal-Mart Real Estate Business Trust in order to present true earnings in the State of North Carolina. Accordingly, defendant prepared workpapers showing an additional $4,183,704.00 tax payable by W-M SEI if the results of W-M SEI were combined with those of W-M PC and W-M REBT.\nBased on the tax payable as calculated on the audit workpapers, on 14 April 2005 defendant issued a notice of proposed assessment pursuant to N.C. Gen. Stat. \u00a7 105-241.1 in the amount of $4,184,490.00 for the tax year ending 31 January 1999. Defendant further assessed interest of $1,675,694.77 and a penalty of $1,045,926.00.\nDefendant also audited plaintiffs tax returns for the years ending 31 January 2000, 2001 and 2002. As a result of those audits, defendant made similar adjustments, issuing notices of proposed assessments in the amounts of $4,847,198.00, $5,680,383.00, and $5,148,500.00 respectively. The proposed assessments for 2000, 2001, and 2002 also included interest of $1,552,583.51, $1,364,010.85, and $935,635.98 respectively and penalties of $1,211,608.25, $1,418,417.50, and $1,310,933.00 respectively.\nOn 2 May 2005, the Secretary notified plaintiff, pursuant to N.C. Gen. Stat. \u00a7 105-130.6, to file combined returns within 60 days to include W-M SEI, W-M PC and W-M REBT. There is no evidence in the record that plaintiff filed the combined returns, but on 12 May 2005, Wal-Mart Stores, Inc., plaintiffs sole owner, issued a check to the North Carolina Department of Revenue for $26,564,516.25 in payment of an assessment against W-M SI which is not at issue in this appeal; the assessment against plaintiff for the tax years ending 31 January 1999, 2000, and 2001; and an assessment against Sam\u2019s Club, the subject of related appeal No. COA08-453 for which an opinion will be filed simultaneously with this opinion.\nOn 17 March 2006 plaintiff filed a complaint pursuant to N.C. Gen. Stat. \u00a7 105-267 demanding refund of taxes paid. Plaintiff filed an amended complaint on or about 31 March 2006 to more fully set forth its reasons for demanding refund in the amount $30,230,338.89. The gravamen of the complaint was that defendant had no authority to force combination of plaintiff with W-M REBT and W-M PC for the purpose of reporting taxable income.\nPlaintiff filed a motion for summary judgment on 1 September 2006. Defendant filed a cross-motion for summary judgment on 12 September 2007. An order granting defendant\u2019s motion for summary judgment was entered on 4 January 2008. Plaintiff appeals.\nII. Standard of Review and Questions Presented\nThe standard of review for an order granting summary judgment is well established:\nThe trial court must grant summary judgment upon a party\u2019s motion when there is no genuine issue as to any material fact and any party is entitled to a judgment as a matter of law. Summary judgment is appropriate if: (1) the non-moving party does not have a factual basis for each essential element of its claim; (2) the facts are not disputed and only a question of law remains; or (3) if the non-moving party is unable to overcome an affirmative defense offered by the moving party. On appeal, an order granting summary judgment is reviewed de novo, with the evidence in the record viewed in the light most favorable to the [non-moving party].\nCarter v. West Am. Ins. Co., 190 N.C. App. 532, 536, 661 S.E.2d 264, 268 (2008) (citation, quotation marks, ellipses and brackets in original omitted). In the instant appeal, there is no dispute about the material facts and only questions of law remain, making the case ripe for summary judgment.\nPlaintiff presents three questions of law to this Court: (1) whether N.C. Gen. Stat. \u00a7 105-130.6 (or \u201cthe statute\u201d) provides defendant with authority to combine the three entities for the purpose of reporting taxable income, (2) whether, if Section 105-130.6 provides defendant with authority to combine the three entities for the purpose of reporting taxable income, the statute is unconstitutional, and (3) whether defendant\u2019s administration of Section 105-130.6 was unlawful.\nIII. Statutory Authority to Combine\nPlaintiffs chief argument is that defendant had no statutory authority to combine the three entities for the purpose of reporting taxable income. The statute reads, in pertinent part:\nThe net income of a corporation doing business in this State that is a parent, subsidiary, or affiliate of another corporation shall be determined by eliminating all payments to or charges by the parent, subsidiary, or affiliated corporation in excess of fair compensation in all intercompany transactions of any kind whatsoever. If the Secretary finds as a fact that a report by a corporation does not disclose the true earnings of the corporation on its business carried on in this State [(\u201ctrue earnings\u201d)], the Secretary may require the corporation to file a consolidated return of the entire operations of the parent corporation and of its subsidiaries and affiliates, including its own operations and income. The Secretary shall determine the true amount of net income earned by such corporation in this State.\nN.C. Gen. Stat. \u00a7 105-130.6 (1999).\nPlaintiff argues that the first sentence of N.C. Gen. Stat. \u00a7 105-130.6 must be construed as a limit on the authority granted to the Secretary in the second sentence. Specifically, plaintiff argues that this construction is required because \u201ctrue net income\u201d or \u201ctrue earnings\u201d must be defined as \u201cwhat the taxpayer\u2019s income would be if it had no affiliates and dealt with all parties on an arm\u2019s length basis[.]\u201d Plaintiff reasons from this definition of true earnings \u201cthat, absent non-arm\u2019s length dealings, a company\u2019s separate return will accurately reflect its true earnings and neither adjustment nor forced combination are required to achieve the legislature\u2019s intent to tax entities on their true earnings.\u201d Plaintiff concludes therefrom that if its definition of true earnings is placed in the second sentence, and the second sentence of the statute is then read in pari materia with the first, the second sentence grants the Secretary authority to force combination only when he finds that there were intercompany payments in excess of fair value, but otherwise disallows forced combination. According to plaintiff, its proposed construction of the statute is supported by the \u201cplain language of [the statute], [legislative history], the North Carolina case law and administrative practice, and persuasive authority from other states with similar statutes[.]\u201d.\nPlaintiff further urges us to decide in its favor because \u201c[p]rior to the trial court\u2019s decision in this case, no North Carolina court had ever held that related entities may be required to file a combined return if intercompany transactions are performed at arm\u2019s length.\u201d Assuming arguendo that this statement is true, it is not dispositive. Our research revealed no cases where this precise question was presented to a North Carolina appellate court, which would explain why no North Carolina court has answered it one way or the other. Accordingly, we conclude that this case presents a question of first impression.\nA. The Language of the Statute\nWhen this Court applies a statute duly passed by the General Assembly to a given set of facts:\nThe paramount objective of statutory interpretation is to give effect to the intent of the legislature. The primary indicator of legislative intent is statutory language; the judiciary must give clear and unambiguous language its plain and definite meaning. However, strict literalism will not be applied to the point of producing absurd results.\nIn Re Proposed Assessments v. Jefferson-Pilot Life Ins. Co., 161 N.C. App. 558, 560, 589 S.E.2d 179, 181 (2003) (citations and quotation marks omitted).\nThe language of the statute on its face does not limit the Secretary\u2019s authority to require combined reporting by mandating that he first find that the entity engaged in \u201cnon-arm\u2019s length dealings,\u201d that is, conducted intercompany transactions at amounts other than fair value. To the contrary, the language of the statute is broad, allowing the Secretary to require combined reporting if he finds as a fact that a report by a corporation does not disclose the true earnings of the corporation on its business carried on in this State. N.C. Gen. Stat. \u00a7 105-130.6. On its face, it does not restrict the Secretary to a finding of a particular type of transaction or dealing. Id.\nB. Definition of True Earnings\nPlaintiff\u2019s proposed definition of true earnings as \u201cwhat the taxpayer\u2019s income would be if it had no affiliates and dealt with all parties on an arm\u2019s length basis\u201d is crucial to its interpretation of the statute. However, we reject plaintiffs proposed definition of true earnings.\nIf the definition of a word or phrase is not found in the statute, and the meaning of the word or phrase is not otherwise clear, we consider the meaning of the word or phrase in cases where the word or phrase has been defined. See Duke Power Co. v. Clayton, Com\u2019r of Revenue, 274 N.C. 505, 513-14, 164 S.E.2d 289, 295 (1968) (relying on definitions in cases from the North Carolina Supreme Court, the United States Supreme Court and courts of other states to define a statutory term). Relevant sub judice, there is a line of cases from the United States Supreme Court which discusses the concept of \u201ctrue earnings.\u201d See Allied-Signal, Inc. v. Dir., Div. of Taxation, 504 U.S. 768, 772-73, 119 L. Ed. 2d 533, 542 (1992) (discussing the concept of true earnings in a State and listing cases ); Mobil Oil Corp. v. Commissioner of Taxes, 445 U.S. 425, 436-37, 63 L. Ed. 2d 510, 520 (1980) (listing cases which discuss the concept of true earnings in a State).\nThe essential meaning of the phrase \u201ctrue earnings\u201d refers to the limit on state taxation found in the United States Constitution. Allied-Signal, 504 U.S. at 772, 119 L. Ed. 2d at 542. However, there are two very different methods for calculating true earnings: First, if the intrastate activities of an entity amount to a discrete business enterprise, the net income of that discrete business enterprise represents the true earnings in the State. See id. at 772, 119 L. Ed. 2d at 542 (\u201cA State may not tax a nondomiciliary corporation\u2019s income if it is derived from unrelated business activity which constitutes a discrete business enterprise.\u201d (Citations, brackets and quotation marks omitted.)); accord N.C. Gen. Stat. \u00a7 105-130.6 (a discrete business enterprise is implied by the requirement of intercompany eliminations). However, if the entire enterprise is a unitary business, true earnings in the State may be calculated by apportioning the earnings of the entire enterprise on the basis of sales and other indicia of activity in the State. Allied-Signal, 504 U.S. at 772, 119 L. Ed. 2d at 542 (\u201c[A] State need not attempt to isolate the intrastate income-producing activities from the rest of the business; it may tax an apportioned sum of the corporation\u2019s multistate business if the business is unitary.\u201d); accord N.C. Gen. Stat. \u00a7 105-130.4 (2007) (defining \u201capportion-able income\u201d as \u201call income that is apportionable under the United States Constitution\u201d and setting forth the bases and factors for apportioning income).\nIt is important to note that in determining true earnings, \u201cthe form of business organization may have nothing to do with the underlying unity or diversity of business enterprise.\u201d Mobil Oil, 445 U.S. at 440, 63 L. Ed. 2d at 523. Functional integration is the key; whether the earnings are derived as divisional profits from a legally integrated enterprise or as dividends from a legally separate entity is of no consequence in determining if a business is unitary for the purposes of computing true earnings. See id. at 440-41, 63 L. Ed. 2d at 523.\nIf a taxpayer reports income based on the discrete enterprise method, then plaintiff is correct, absent any non-arm\u2019s length transactions the taxpayer\u2019s reported income will reflect its true earnings in the State. However, where a taxpayer\u2019s business is concededly unitary, and where, as here, the taxpayer attempts to reclassify income as nonbusiness or nonapportionable, the reclassification has the potential to distort true earnings in North Carolina even if all inter-company transactions are accounted for at arm\u2019s length, or fair value, prices. See Polaroid Corp. v. Offerman, 349 N.C. 290, 293, 507 S.E.2d 284, 287-88 (1998) (overruling the taxpayer\u2019s attempt to classify money received in a patent lawsuit as nonapportionable). We therefore hold that plaintiff\u2019s proposed definition of true earnings is flawed because it is too narrow.\nC. Statutory Construction\nWhere the language of a statute is not entirely clear, the basic principles of construction of tax statutes are well established:\nWhen the plain language of a statute proves unrevealing, a court may look to other indicia of legislative will, including: the purposes appearing from the statute taken as a whole, the phraseology, the words ordinary or technical, the law as it prevailed before the statute, the mischief to be remedied, the remedy, the end to be accomplished, statutes in pari materia, the preamble, the title, and other like means. The intent of the General Assembly may also be gleaned from legislative history. Likewise, later statutory amendments provide useful evidence of the legislative intent guiding the prior version of the statute.\nStatutory provisions must be read in context: Parts of the same statute dealing with the same subject matter must be considered and interpreted as a whole. Statutes dealing with the same subject matter must be construed in pari materia, as together constituting one law, and harmonized to give effect to each.\nTax statutes are to be strictly construed against the State and in favor of the taxpayer. In arriving at the true meaning of a taxation statute, the provision in question must be considered in its appropriate context within the Revenue Act.\nProposed Assessments, 161 N.C. App. at 560, 589 S.E.2d at 181 (citations, quotation marks and brackets omitted).\nPlaintiff argues that the legislative history supports its proposed construction of the statute. Plaintiff cites A Survey of Statutory Changes in North Carolina in 1941, 19 N.C. L. Rev. 435, 534-35 (1941), as evidence of the legislative history of the enactment of the second sentence in the statute. Even if we accept plaintiffs contention that a contemporaneous commentary in a law review is persuasive as to legislative history and intent, the article cited offers no support to plaintiff.\nSpecifically, plaintiff argues that A Survey of Statutory Changes\ninterpreted the second sentence to continue to relate to the non-arm\u2019s length charges situation, but suggested that Defendant could force combination without having to find exactly which intercompany charges were excessive and by how much, if he found other evidence indicating non-arm\u2019s length charges (e.g., if a subsidiary consistently loses money).\nHowever the actual language of A Survey of Statutory Changes, as opposed to plaintiff\u2019s paraphrase, characterizes the second sentence as an\nattempt to determine the taxable income of the subsidiary by assigning it a reasonable portion of the consolidated net income of the system. . . . Particularly is this true when . . . over a long period of years the system as a whole has earned money while the subsidiary operating in this state, though doing a substantial business with the system and the public, has nominally earned none. . . . [T]he new provision [the second sentence of N.C. Gen. Stat. \u00a7 105-130.6] will. . . authorize consideration of the system\u2019s entire income without finding any unfairness ... in connection with specific intercompany transactions.\n19 N.C. L. Rev. at 534-35 (footnotes omitted and emphasis added). If we accord A Survey of Statutory Changes any weight at all in construction of the second sentence, it cuts directly against plaintiffs argument that the authority granted to the Secretary in the second sentence was limited to a finding of non-arms\u2019 length transactions which by definition are intercompany transactions not accounted for at fair value. In fact, the tax payable calculated by W-M REBT for 1998-99 \u2014 $786 income tax payable in North Carolina on $1,208,178,874 in total net income when plaintiff operated at least 82 stores in North Carolina \u2014 is exactly the type of example noted in the article as a reason for enacting the second sentence of the statute.\nD. North Carolina Case Law\nPlaintiff further contends that its proposed construction of the statute is supported by \u201cthe North Carolina case law.\u201d Plaintiff cites two North Carolina cases in support of its position, In re Clayton-Marcus Co., 286 N.C. 215, 210 S.E.2d 199 (1974), and Polaroid Corp. v. Offerman, 349 N.C. 290, 507 S.E.2d 284 (1998).\nIn Clayton-Marcus, the Court relied on the plain language of the statute and accordingly overruled the Secretary\u2019s attempt to assess additional tax by adding words to a statute defining property to be taxed. 286 N.C. at 222, 210 S.E.2d at 204. Polaroid Corp. v. Offerman upheld the Secretary\u2019s assessment of tax because the Secretary\u2019s proposed construction of the statute followed \u201cgeneral rules of grammar and syntax[,]\u201d 349 N.C. at 301, 507 S.E.2d at 293, while the taxpayer\u2019s proposed construction required that the word \u201cincludes\u201d be considered a \u201cmisplaced modifier,\u201d rather than a \u201ccompound predicate,\u201d 349 N.C. at 298, 507 S.E.2d at 290-91.\nNeither case avails for plaintiff. Plaintiff would prevail only if we adopt a construction that adds words to the statute, or replaces words in the statute with a definition that we rejected in supra Part III.B., while the Secretary prevails if we apply the statute as written.\nWe further note that Gulf Oil Corp. v. Clayton, a case cited by plaintiff in another section of the brief is easily distinguishable from the case sub judiee and thereby supports the Secretary\u2019s application of the statute. 267 N.C. 15, 147 S.E.2d 522 (1966). In Gulf .Oil, the North Carolina Supreme Court held that the Secretary had incorrectly combined the income of subsidiaries, in the form of dividends, with the income of the parent company. 267 N.C. at 24-25, 147 S.E.2d at 529. In so holding, the Supreme Court recited the following facts:\nNone of the [four] subsidiary corporations ... were domesticated in North Carolina, or owned property here, and none conducted any business activities within the State. Business transactions between them and plaintiff... were [all] conducted at fair market value, i.e., no benefit innured [sic] to plaintiff by reason of the corporate kinship. No products from any of the [four] subsidiaries ever had any connection whatever with North Carolina. The earnings which produced the dividends which the subsidiaries paid plaintiff were all subject to taxation elsewhere, i.e., in Kuwait, Iran, Italy and Canada, respectively. The net income of each subsidiary is shown on separate books and records of accounts maintained by each entirely outside of North Carolina. There is no interchange or sharing of patents or trademarks between them and plaintiff. Each subsidiary paid its pro rata share of the cost of every service which plaintiff or any other subsidiary performed for it.\nGulf Oil, 267 N.C. at 18, 147 S.E.2d at 524-25 (emphasis added). Combination was improper in Gulf Oil because the intercompany transactions were all conducted at fair value (arm\u2019s length) and none of the combined entities \u201chad any connection whatever with North Carolina.\" Id.\nTo the contrary, in the case sub judice, W-M REBT owned and leased stores within North Carolina, passed along income to W-M PC received from leasing and sub-leasing those stores, which W-M PC further passed along to plaintiff in the form of dividends. This was a connection of the three combined subsidiaries with North Carolina which distinguishes this case from Gulf Oil. Plaintiff\u2019s argument that its proposed construction of the statute is supported by North Carolina case law is without merit.\nE. Authority from Other Jurisdictions\nPlaintiff cites a case from Massachusetts, Polaroid Corp. v. Commissioner of Revenue, 472 N.E.2d 259 (Mass. 1984), and a case from Georgia, Blackmon v. Campbell Sales Company, 189 S.E.2d 474 (Ga. App. 1972), as persuasive authority to support its proposed construction of the statute. While \u201cdecisions [from other states] construing [similar] statutes are somewhat indicative of the general legislative purpose in the enactment of a . . . tax[,]\u201d Clayton-Marcus, 286 N.C. at 225, 210 S.E.2d at 206, the cases cited by plaintiff from other states have very little persuasive weight sub judice. As discussed in more detail below, the statutes in both states were materially different from the North Carolina statute, and the interpretation of the Massachusetts statute was based on legal grounds which do not exist in North Carolina.\nThe Georgia statute interpreted in Blackmon read:\nThe net income of a domestic or foreign corporation which is a subsidiary of another corporation or closely affiliated therewith by stock ownership shall be determined by eliminating all payments to the parent corporation or affiliated corporation in excess of fair value, and by including fair compensation to such domestic business corporation for its commodities sold to or services performed for the parent corporation or affiliated corporation. For the purposes of determining such net income the Commissioner may equitably determine such net income by reasonable rules of apportionment of the combined income of the subsidiary, its parent and affiliates or any thereof.\n189 S.E.2d at 476 (quoting Code \u00a7 92-3113(6), Ga.L.1950, pp. 299, 300). Despite plaintiff\u2019s contention that this statute is \u201cthe Georgia analog to N.C. Gen. Stat. \u00a7 105-130.6,\u201d the Georgia statute lacks any language at all authorizing the Georgia tax commissioner to require combination upon a finding that a taxpayer\u2019s return \u201cdoes not disclose the true earnings of the corporation on its business carried on in this Statef.]\u201d N.C. Gen. Stat. \u00a7 105-130.6. The omission of similar language is fatal to plaintiff\u2019s contention that Blackmon is persuasive.\nThe Massachusetts statute interpreted by Polaroid v. Commissioner contains language almost identical to the Georgia statute, except that the Massachusetts statute adds language referring to federal consolidated returns not relevant sub judice. 472 N.E.2d at 264 n.9 (discussing the similarity of the Georgia statute with the Massachusetts statute). Further, Polaroid v. Commissioner\u2019s interpretation of the Massachusetts statute rested entirely on the fact that when the Massachusetts statute was passed in 1933, the Massachusetts Supreme Court had determined that the unitary method of assessment violated the United States Constitution. 472 N.E.2d at 265-66 (citing Commissioner of Corps. & Taxation v. J.G. McCrory Co., 182 N.E. 481 (Mass. 1932)). However, by 1920 the United States Supreme Court had already determined that the unitary method of assessment did not violate the United States Constitution. Allied-Signal, 504 U.S. at 779-80, 119 L. Ed. 2d at 547 (citing Underwood Typewriter Co. v. Chamberlain, 254 U.S. 113, 120-21, 65 L. Ed. 165 (1920)). Furthermore, plaintiff did not cite any cases, and we found none, where the North Carolina Supreme Court has ever deemed the unitary method to be constitutionally infirm. Therefore, Polaroid v. Commissioner\u2019s reasoning is wholly inapplicable sub judice.\nTo the extent that cases from other jurisdictions are relevant in determining legislative intent, the Secretary\u2019s interpretation of the statute is supported by the opinion of the United States Supreme Court in Mobil Oil Corp. v. Commissioner of Taxes, 445 U.S. 425, 63 L. Ed. 2d 510, 520 (1980). In Mobil Oil, as here, the taxpayer classified as \u201cnon apportionable\u201d certain dividends received from its corporate subsidiaries and subtracted those dividends from its apportionable taxable income in the state of Vermont. Id. at 430, 63 L. Ed. 2d at 517. The Vermont tax commissioner reversed the taxpayer, and added those dividends back to apportionable taxable income. Id. at 431, 63 L. Ed. 2d at 517. On appeal, the United States Supreme Court upheld the Commissioner of Taxes. Id. at 449, 63 L. Ed. 2d at 528.\nMobil Oil noted that \u201cin its Vermont tax returns for the years in question, Mobil included all its operating income in apportionable net income, without regard to the locality in which it was earned.\u201d Id. at 437, 63 L. Ed. 2d at 521. Mobil Oil opined that .\u201c[t]o carve [dividends received from subsidiaries and affiliates] out as an exception [from inclusion in apportionable net income, the taxpayer] must demonstrate something about the nature of this income that distinguishes it from operating income, a proper portion of which the State concededly may tax.\u201d Id. at 437-38, 63 L. Ed. 2d at 521. Mobil Oil further opined that in order to re-classify income as non-apportionable, the taxpayer \u201cmust show . . . that the income was earned in the course of activities unrelated to the sale of [its] products in that State.\u201d Id. at 439, 63 L. Ed. 2d at 522. In other words, the burden is on the taxpayer to demonstrate that its \u201csubsidiaries and affiliates are distinct in any business or economic sense from its . . . sales activities in [the taxing State].\u201d Id. at 439, 63 L. Ed. 2d at 522. Therefore, \u201c]i]n the absence of any proof of discrete business enterprise, [the Commissioner of Taxes] was entitled to conclude that the dividend income\u2019s foreign source did not destroy the requisite nexus with in-state activities.\u201d Id. at 439-40, 63 L. Ed. 2d at 522. Plaintiff has not shown that the dividends received from W-M PC are in any way part of a discrete business. It is undisputed that W-M REBT owns the physical premises which plaintiff rents to operate its stores in North Carolina and that rent from those store premises transferred from W-M REBT to W-M PC in the form of dividends is a significant part of the income of W-M PC. As in Mobil Oil, and distinct from Gulf Oil, as discussed in supra Part III.D, W-M REBT, W-M PC and plaintiff form a unitary business. The Secretary was properly allowed to combine the returns of those businesses if he found that plaintiff\u2019s return did not disclose its true earnings on its North Carolina business activity. In sum, to the extent that authority from other jurisdictions helps us construe the statute, it weighs in favor of the Secretary and against plaintiff. This argument is overruled.\nIV. Constitutionality\nPlaintiff argues that if the statute authorizes combination in the case sub judice, then the assessments based on that combination were unconstitutional. Plaintiff specifically argues that the assessments violated (1) the prohibition on retroactive taxation in article I, section 16 of the North Carolina Constitution; (2) the Due Process Clause of the United States Constitution; (3) the tax uniformity requirements of article V, section 2(2) of the North Carolina Constitution; (4) \u201cthe Commerce Clause of the U.S. Constitution because Defendant only forces combination of foreign multistate corporations[;]\u201d and (5) the requirement that the income taxes be assessed on net income found in article 4, section 2(6) of the North Carolina Constitution by denying a deduction for rent paid. We consider each of these issues in turn.\nA. Retroactive Taxation\nPlaintiff argues that the assessments violated article I, section 16 of the North Carolina Constitution because \u201c[defendant's assessments were not based on any facially applicable statute or interpretation published by [defendant that could be reasonably applied to these facts . . . .\u201d The applicable regulation at the time plaintiff filed its 1998-99 Tax Return stated,\nThe business income of the taxpayer is that portion of the taxpayer\u2019s entire income which arises from the conduct of the taxpayer\u2019s trade or business operations. For purposes of administration of G.S. 105-130.4, the income of the taxpayer is business income unless classified as nonbusiness income under the law and these Rules.\n17 N.C.A.C. \u00a7 5C.0702 (1998) (emphasis added) (repealed effective 1 July 2000). The regulations further stated:\nThe classification of income by the labels customarily given them, such as interest, rents, royalties, or capital gains, is of no aid in determining whether that income is business or nonbusiness income. . . . Rental income from real or tangible personal property constitutes business income when the rental of the property is a principal business activity of the taxpayer or the rental of the property is related to or incidental to the taxpayer\u2019s principal business activity.\n17 N.C.A.C. \u00a7 5C.0703 (1998) (emphasis added).\nEven though 17 N.C.A.C. \u00a7 5C.0703 also stated that \u201c[d]ividend income is business income when dealing in securities is a principal business activity of the taxpayer [but o]ther dividends are nonbusiness income [,]\u201d it is an elementary principle of taxation law that the label attached to a transaction or balance is of no importance. See Mobil Oil, 445 U.S. at 441, 63 L. Ed. 2d at 523 (\u201cTransforming . . . income into dividends from legally separate entities works no change in the underlying economic realities of a unitary business[.]\u201d). It is clear that the amount plaintiff sought to classify as \u201cdividends\u201d was in actual fact rental income. Since more than one-third of plaintiff\u2019s total income on its 1998-99 Tax Return was derived from rental of its store properties, there can hardly be any dispute that the rental income, as stated in the regulation, was \u201ca principal business activity of the taxpayer[.]\u201d 17 N.C.A.C. \u00a7 5C.0703 (1998).\nFurthermore, after 17 N.C.A.C. \u00a7 5C.0702 was repealed and 17 N.C.A.C. \u00a7 5C.0703 was amended, both effective 1 July 2000, the regulations spoke to plaintiff\u2019s situation with even more clarity: \u201cIncome is business income unless it is clearly classifiable as nonbusiness income. A taxpayer must establish that its classification of income as nonbusiness income is proper. . . . Dividend income is business income if . . . [t]he dividend is received from a unitary subsidiary of the taxpayer. 17 N.C.A.C. \u00a7 5C.0703 (2000) (emphasis added) (published 15 February 2000 in 14 N.C. Reg. 1431, effective 1 July 2000). The argument that \u201c[defendant\u2019s assessments were not based on any facially applicable statute or interpretation\u201d is without merit.\nB. Delegation of Legislative Responsibilities\nPlaintiff cites Harvell v. Scheldt, 249 N.C. 699, 107 S.E.2d 549 (1959), to contend that \u201c [defendant did not determine the assessments by any constitutionally sufficient standard in the General Statutes and thereby violated the North Carolina Constitution, Article 1 [sic], sec. 6 and Article V, sec. 2(2).\u201d The question presented in Harvell was \u201cwhether or not the authority granted to the Commissioner of Motor Vehicles by the General Assembly . . . constitute [d] an unconstitutional delegation of legislative power.\u201d 249 N.C. at 701-02, 107 S.E.2d at 550. In Harvell, the legislature had given the Department of Motor Vehicles (\u201cDMV\u201d) the authority, without a preliminary hearing, to suspend the driver\u2019s license of a \u201chabitual violator of the traffic laws\u201d and had also given the DMV sole discretion to define the meaning of \u201chabitual violator\u201d by reference to \u201cthe number and character of such violations of the traffic laws and the period of time during which such violations may have occurred[.]\u201d 249 N.C. at 702, 107 S.E.2d at 551.\n\u201cWhere [certain] power[s are] left to the unlimited discretion of a board, to be exercised without the guide of legislative standards, the statute . . . must be regarded as an attempted delegation of the legislative function offensive both to the State and the Federal Constitution.\u201d State v. Harris, 216 N.C. 746, 754, 6 S.E.2d 854, 860 (1940) (declaring unconstitutional on the grounds of improper delegation of legislative responsibilities a statute granting an administrative agency unlimited discretion to set licensing requirements for dry cleaners). On the other hand,\n[w]hen there is an obvious need for expertise in the achievement of legislative goals the General Assembly is not required to lay down a detailed agenda covering every conceivable problem which might arise in the implementation of the legislation. It is enough if general policies and standards have been articulated which are sufficient to provide direction to an administrative body possessing the expertise to adapt the legislative goals to varying circumstances.\nAdams v. North Carolina Dept. of Natural and Economic Resources, 295 N.C. 683, 698, 249 S.E.2d 402, 411 (1978) (holding the statute authorizing the Coastal Resources Commission to be sufficiently specific).\nThe case sub judice is more like Adams than Harvell. The need for expertise in the implementation of income tax law for assessment and collection of all taxes legally due is obvious. Unlike \u201cHarvell, [where] it would have been a simple matter for the General Assembly to define an \u2018habitual violator of the traffic laws\u2019 rather than leaving the definition to the Commissioner of Motor Vehiclesf,]\u201d Farlow v. North Carolina State Bd. of Chiropractic Examiners, 76 N.C. App. 202, 213, 332 S.E.2d 696, 703, disc. review denied and appeal dismissed, 314 N.C. 664, 336 S.E.2d 621 (1985), \u201cit would be virtually impossible for the General Assembly to define all possible\u201d accounting and business configurations by which taxpayers endeavor to minimize taxes payable. 76 N.C. App. at 213, 332 S.E.2d at 703. Consequently, \u201c[s]ome discretion ha[d] to be left\u201d to the Secretary, id., which the General Assembly did leave when it granted the Secretary discretionary authority to force combination of entities on a finding that a report does not disclose true earnings in North Carolina. N.C. Gen. Stat. \u00a7 105-130.6.\nFurthermore, the authority given to the Secretary in Section 105-130.6 was not without sufficient direction. Contrary to plaintiff\u2019s assertion, true earnings attributable to income earned in North Carolina is not an uncertain or ambiguous concept. As the United States Supreme Court has said in explaining the \u201ctrue earnings\u201d concept:\nBecaus\u00e9 of the complications and uncertainties in allocating the income of multistate businesses to the several States, we permit States to tax a corporation on an apportionable share of the multistate business carried on in part in the taxing State. That is the unitary business principle. It is not a novel construct, but one that we approved within a short time after the passage of the Fourteenth Amendment\u2019s Due Process Clause.\nAllied-Signal, 504 U.S. at 778, 119 L. Ed. 2d at 546 (emphasis added); see also supra Part III.B. (discussing the meaning of true earnings). Accordingly, we hold that true earnings \u201cis a sufficiently definite standard so that the [Secretary] may set policies within it without exercising a legislative function.\u201d Farlow, 76 N.C. App. at 213, 332 S.E.2d at 703. This argument is overruled.\nC. Uniform Taxation\nPlaintiff next contends that:\nThe assessments violated the tax uniformity requirement of the North Carolina Constitution, Article V, sec. 2(2) and the U.S. Constitution Equal Protection Clause of the Fourteenth Amendment. Specifically, taxpayers with affiliated Real Estate Investment Trusts have presumably paid tax as separate corporations as required by the statutes except when Defend\u00e1nt audits them and forces combination, which he did not do in all such cases, thus treating Plaintiff differently from similarly situated taxpayers. . . . [I]t can be assumed that other taxpayers simply followed that law (i.e., filed on separate company basis), as did Plaintiff.\nPlaintiff contends that Edward Valves, Inc. v. Wake County, 117 N.C. App. 484, 451 S.E.2d 641 (1995), modified and aff\u2019d on other grounds, 343 N.C. 426, 471 S.E.2d 342 (1996), cert. denied, 519 U.S. 1112, 136 L. Ed. 2d 839 (1997), controls this case because two statements appearing in the record as admissions by the Secretary provide evidence of non-uniform taxation: (1) \u201cDefendant has not assessed additional taxes based on requiring a combination of a corporate taxpayer with a[n] affiliated REIT in every case in which he audited corporate taxpayers that had affiliated REIT\u2019s for all of the years 1998-2002[;]\u201d and (2) \u201c[A]t the September 5, 2006 meeting of the North Carolina General Assembly\u2019s Revenue Laws Study Committee, Greg Radford stated that the North Carolina Department of Revenue cannot audit all inter-company transactions between related companies, one or more of which is doing business in North Carolina.\u201d\nHowever, this case is distinguishable from Edward Valves. In Edward Valves, the record showed, and the County admitted, that no effort was made in the County\u2019s enforcement procedures to require taxpayers to list certain types of intangible property for tax assessment purposes. 117 N.C. App. at 491-92, 451 S.E.2d at 646-47. This Court held that this \u201cpurposeful, though somewhat informal, classification based upon an improper distinction between taxpayers who owned the same class of property\u201d violated the legal requirement of uniformity in taxation. 117 N.C. App. at 492, 451 S.E.2d at 647. However, we do not agree that the first admission by the Secretary quoted above amounts to \u201cimproper distinction\u201d between similarly situated taxpayers. For example, it is entirely possible that the affiliated REIT in another audited company would not form part of a unitary business, as was the case sub judice, so that the Secretary would be constitutionally disallowed from assessing additional taxes, see supra Part III.B. It is also entirely possible that another corporation owning an affiliated REIT would not try to minimize North Carolina income taxes by reclassifying REIT dividends as nonbusiness or nonapportionable. In other words, it may not have been possible or necessary for the Secretary to assess taxes after every audit of a corporation owning a REIT. Accordingly, the Secretary\u2019s statement is not equivalent to the County\u2019s \u201cpurposeful, though informal classification based upon an improper distinction\u201d in Edward Valves. Id. at 492, 451 S.E.2d at 647.\nAs to the second admission, that it is not possible for the Secretary to audit all corporations with intercompany transactions, the North Carolina Supreme Court has held that \u201c[t]he rule of equality [in taxation] permits many practical inequalities. And necessarily so. What satisfies this equality has not been, and probably never can be, precisely defined.\u201d Leonard v. Maxwell, 216 N.C. 89, 94, 3 S.E.2d 316, 321 (1939) (citation, quotation marks and ellipses omitted). The Fifth Circuit Court of Appeals further opined that:\nIt is inherent in any voluntary system of taxation that there will be those who, knowingly or not, fail to file the required tax returns. The fact that all taxpayers or all areas of the tax law cannot be dealt with by the Internal Revenue Service with equal vigor and that there thus may be some taxpayers who avoid paying the tax cannot serve to release all other taxpayers from their obligation. As this court said in Kehaya v. United States, 355 F.2d 639, 641, 174 Ct.Cl. 74, 78 (1966): \u201cThe Commissioner\u2019s failure to assess deficiencies against some taxpayers who owe additional tax does not preclude him from assessing deficiencies against other taxpayers who admittedly owe additional taxes on the same type of income... . . \u201d\nAustin v. United States, 611 F.2d 117, 119-20 (5th Cir. 1980) (quoting Wagner v. United States, 387 F.2d 966, 972 (Ct.Cl. 1967); see also Galveston by Galveston Wharves v. United States, 33 Fed. Cl. 685, 707-08 (1995) (\u201cThe mere fact that another taxpayer has been treated differently from the plaintiff does not establish the plaintiffs entitlement. ... A taxpayer cannot premise its right to an exemption by showing that others have been treated more generously, leniently or even erroneously by the IRS.\u201d (Internal footnotes omitted.)), aff\u2019d, 82 F.3d 433 (1996). This argument is without merit.\nD. Commerce Clause\nPlaintiff \u00e1rgues that \u201c[t]he assessments violated the Commerce Clause of the U. S. Constitution because Defendant only forces combination of foreign multistate corporations.\u201d However, plaintiff cites nothing in the factual record, and we find nothing, in support of this assertion. Accordingly, this argument is dismissed.\nE. Tax on Net Income\nNext, plaintiff, citing Atlantic Coast Line v. Daughton, 262 U.S. 413, 67 L. Ed. 1051 (1923), contends that the assessments violated the North Carolina Constitution, article V, section 2(6) \u201cby denying a deduction for rent paid and thus not taxing Plaintiffs net income.\u201d Defining \u201cnet income\u201d for the purpose of applying N.C. Const, art. V, sec. 2(6), appears to be a question of first impression.\nPlaintiff contends that Atlantic Coast Line supports its position because according to plaintiffs characterization of the case, \u201conly because the tax was on property income rather than a taxpayer\u2019s entire income was rent deduction not required on the facts of that case.\u201d We disagree with plaintiff\u2019s characterization of Atlantic Coast Line and his general conclusion that denying a particular type of deduction violates article V, section 2(6) of the North Carolina Constition.\nIn Atlantic Coast Line, 262 U.S. at 424, 67 L. Ed. at 1061, a tax was contended to be in violation of a now superseded constitutional provision similar to the current article V, section 2(6), which requires that \u201cthere shall be allowed personal exemptions and deductions so that only net incomes are taxed.\u201d However, in deciding Atlantic Coast Line, the United States Supreme Court made clear that the dispute in that case was not what particular items made up \u201cnet income,\u201d but on which particular entity net income should be calculated. 262 U.S. at 420-21, 67 L. Ed. at 1059-60. In the Court\u2019s own words:\nThe differences between the parties arise, in the main, not from difference in the method of determining what is net income, but from difference as to what is the subject of the tax. In other words, they differ as to the thing of which the net income is to be ascertained. . . . The question of law thus presented is not one which involves enquiry into the intricacies of railroad accounting.\nId. (emphasis added). Atlantic Coast Line further acknowleged that\n[t]he term \u201cnet income,\u201d in law or in economics, has not a rigid meaning. Every income tax act necessarily defines what is included in gross income; what deductions are to be made from the gross to ascertain net income; and what part, if any, of the net income, is exempt from taxation. These details are largely a matter of governmental policy.\n262 U.S. at 422, 67 L. Ed. at 1060 n.6; accord Anderson v. Forty-Two Broadway Co., 239 U.S. 69, 72, 60 L. Ed. 152, 154 (1915) (\u201cThere was error, as it seems to us, in seeking a theoretically accurate definition of \u2018net income,\u2019 instead of adopting the meaning which is so clearly defined in the [Corporation Tax] Act itself.\u201d).\nAtlantic Coast Line in no way stands for the proposition that a deduction must be allowed for rental expense if an income tax law is to pass muster under the North Carolina Constitution. To the contrary, Atlantic Coast Line\u2019s view that the particular deductions allowed from gross income is \u201clargely a matter of governmental policy[,]\u201d 262 U.S. at 422, 67 L. Ed. at 1060 n.6, was tacticly supported by the North Carolina Supreme Court in Aronov v. Secretary of Revenue, 323 N.C. 132, 371 S.E.2d 468 (1988), cert. denied, 489 U.S. 1096, 103 L. Ed. 2d 935 (1989). While Aronov admittedly interpreted a statute and not the North Carolina Constitution, Aronov declared: \u201cDeductions, such as that authorized in N.C.G.S. \u00a7 105-147(9)(d)(2), are in the nature of exemptions: they are privileges, not rights, and are allowed as a matter of legislative grace.\u201d 323 N.C. at 140, 371 S.E.2d at 472 (citation omitted). This Court has similarly held: \u201cA taxpayer claiming a deduction must bring himself within the statutory provisions authorizing the deduction.\u201d Ward v. Clayton, 5 N.C. App. 53, 58, 167 S.E.2d 808, 811 (1969), aff'd, 276 N.C. 411, 172 S.E.2d 531 (1970).\nFrom these cases, we reason that article V, section 2(6) does not require any particular deduction from gross income to be allowed in calculating \u201cnet\u201d income. Rather, we conclude that while article Y, section 2(6) requires deductions and allows only net income to be taxed, it implicitly recognizes the authority of the General Assembly to determine what deductions from gross income are properly allowed in the computation of net income. This argument is overruled;\nV. Administration of the Statute\nA. Ad Hoc Rule-Making\nOne of the sub-subsections in plaintiff\u2019s argument that the statute did not give the Secretary authorization to combine the three entities is headed: \u201cWithout the Arm\u2019s Length Standard, [the Secretary] would Need to Engage in Improper Ad Hoc Rule-Making.\u201d In that sub-subsection, plaintiff contends that defendant engaged in \u201cad hoc rule-making with no ascertainable standard[,]\u201d citing National Service Industries v. Powers, 98 N.C. App. 504, 391 S.E.2d 509 (1990), appeal dismissed and disc. review denied, 327 N.C. 431, 395 S.E.2d 685 (1990), and that \u201cAdministrative rule-making is proper only when the statute provides \u2018proper standards\u2019 to \u2018check\u2019 the agency and to inform the public of punishable conduct[,]\u201d citing In re Civil Penalty, 324 N.C. 373, 379 S.E.2d 30 (1989). Plaintiff further contends\n[w]hile flexibility for ad hoc rule[-]making can be necessary to deal with problems not reasonably foreseeable, that is clearly not the situation here because Defendant did not act under a reasonably circumscribed grant of authority that was applicable to cases such as this. . . . Defendant concealed [his criteria for combination], which is not one of the reasons recognized [in Com\u2019r of Insurance v. N.C. Rate Bureau, 300 N.C. 381, 269 S.E.2d 547 (1980)] to justify ad hoc rule[-]making.\nIt appears that plaintiff has conflated two distinct and different legal concepts: (1) whether the General Assembly unconstitutionally delegated its legislative authority without clear guidelines, see-Charlotte-Mecklenburg Hosp. Auth. v. N. C. Industrial Comm., 336 N.C. 200, 221, 443 S.E.2d 716, 728-29 (1994) (holding that the Industrial Commission was not given authority by the legislature to \u201cset \u2018reasonable\u2019 hospital rates at or below the prevailing community charge\u201d); see Harris, 216 N.C. at 754, 6 S.E.2d at 860 (statute granting administrative agency unlimited discretion to set licensing requirements for dry cleaners was an unconstitutional delegation of legislative authority), or (2) whether, pursuant to a constitutionally sufficient grant of authority, the Secretary set forth a rule ad hoc without following the statutory procedures for rule-making required by the Administrative Procedure Act (\u201cAPA\u201d). See Com\u2019r of Insurance v. N.C. Rate Bureau, 300 N.C. 381, 413, 269 S.E.2d 547, 569 (1980) (\u201cThe Commissioner correctly argues that [even when the APA otherwise applies,] a second mode by which administrative agencies can establish rules is through the case-by-case process of [ad hoc] administrative adjudication.\u201d) We discussed the first concept when we addressed plaintiff\u2019s other constitutional arguments supra Part IV.B. We will address the second concept here.\nThe Revenue Act authorizes the Secretary to \u201cadopt rules needed to administer a tax collected by the Secretary\u201d and provides that the APA, specifically, N.C. Gen. Stat. \u00a7 \u201c150B-1 and Article 2A of Chapter 150B of the General Statutes set[s] out the procedure for the adoption of rules by the Secretary.\u201d N.C. Gen. Stat. \u00a7 105-262 (2005). The APA defines \u201cRule\u201d as \u201cany agency regulation, standard, or statement of general applicability that implements or interprets an enactment of the General Assembly or Congress or a regulation adopted by a federal agency or that describes the procedure or practice requirements of an agency.\u201d N.C. Gen. Stat. \u00a7 150B-2(8a) (2005) (emphasis added).\nThe Revenue Act, as plaintiff points out, forbids related corporations from \u201cfil[ing] a consolidated return with the Secretary of Revenue, unless specifically directed to do so in writing by the Secretary[.]\u201d N.C. Gen. Stat. \u00a7 105-130.14 (2007). Because the filing of a consolidated (or combined) return is exceptional, and not allowed unless specifically required, we conclude the Secretary\u2019s decision to combine plaintiff\u2019s financial results with its related corporations is not and could not have been a standard of \u201cgeneral applicability\u201d.as described in the APA, and is therefore by definition not a \u201cRule.\u201d\nAccordingly, we hold the Secretary was not required to follow' the formal rule-making procedures in Chapter 150B in order to make this determination. See N.C. Comm\u2019r of Labor v. Weekley Homes, L.P., 169 N.C. App. 17, 31, 609 S.E.2d 407, 417 (2005) (\u201c[T]he Operations Manual is a non-binding interpretive statement, not a rule requiring formal rule-making procedures.\u201d (Citing N.C. Gen. Stat. \u00a7 150B-2(8a)(c))). This argument is without merit.\nB. Defendant\u2019s History\nPlaintiff heads a subsection in its argument that the statute did not give the Secretary authorization to combine the three entities thusly: \u201cThis Case Represents Another One of Defendant\u2019s Several Attempts to Exceed Statutory Authority[.]\u201d In this subsection, plaintiff cites several cases lost by defendant over the last eighty years to argue that\n[t]his case ... represents another unlawful attempt to manipulate statutes with long-understood meaning to impose tax liability where none would otherwise exist. ... So long as the General Assembly sits, there is no need for Defendant to invent new laws to tax corporations employing organizational structures that displease the Defendant.\nHowever, plaintiff has failed to show this Court how the cases cited compel a result in its favor in this case. Plaintiff points us to no material factual similarities from those cases to this one other than the fact that each case is about the amount of income properly reportable as taxable. This argument is also without merit.\nVI. Penalties\nFinally, plaintiff argues:\nDefendant assessed substantial penalties under G.S. 105-236(a)(5) entitled \u201cNegligence.\u201d The penalties were for Plaintiff\u2019s allegedly negligent behavior in filing its returns.... The penalties were levied at 25% of the assessed tax, rather than 10%, due to the large size of the assessments. But Plaintiff was not negligent in the original filings because those filings were made on a separate company basis, just as the statute explicitly requires; combined returns, as noted above, can only be filed when specifically requested by Defendant. . . . Therefore, Plaintiff\u2019s conduct in reporting their [sic] income could not have been negligent, and the penalties are not applicable.\nThis Court should contrast the treatment of Plaintiff with that of the taxpayers in . . . [an] other . . . corporate income tax case ....\nWe disagree.\nN.C. Gen. Stat. \u00a7 105-236 reads, in pertinent part:\n(5) Negligence.\u2014\na. Finding of negligence. \u2014 For negligent failure to comply with any of the provisions to which this Article applies, or rules issued pursuant thereto, without intent to defraud, the Secretary shall assess a penalty equal to ten percent (10%) of the deficiency due to the negligence.\nc. Other large tax deficiency. \u2014 In the case of a tax other than individual income tax, if a taxpayer understates tax liability by twenty-five percent (25%) or more, the Secretary shall assess a penalty equal to twenty-five percent (25%) of the deficiency.\nN.C. Gen. Stat. \u00a7 105-236(a)(5) (2003).\nPlaintiff correctly notes that subsubsection (a)(5) is entitled \u201cNegligence.\u201d However, the title is somewhat misleading, and \u201c[t]he law is clear that captions of a statute cannot control when the text is clear.\u201d In re Forsyth County, 285 N.C. 64, 71, 203 S.E.2d 51, 55 (1974).\nIn the case sub judice, penalties were assessed under N.C. Gen. Stat. \u00a7 105-236(a)(5)(c), which does not require a finding of negligence as is necessary under N.C. Gen. Stat. \u00a7 105-236(a)(5)(a). Plaintiff does not appear to dispute that if the Secretary\u2019s assessment based on the combined returns is lawful, then plaintiff\u2019s income was understated by more than 25%, which operates to invoke the penalty provision of N.C. Gen. Stat. \u00a7 105-236(a)(5)(a) without a finding of negligence.\nWe determined above that the Secretary\u2019s assessment based on the combined returns was indeed lawful. Furthermore, as specifically discussed in supra Part IV.C, a taxpayer cannot establish its claim based solely on the treatment of other taxpayers. Accordingly, the penalty assessed against plaintiff is affirmed.\nVII. Conclusion\nThe Secretary acted within his lawful authority when he assessed additional taxes against plaintiff as a result of the combination of plaintiff with two related entities. Judgment is affirmed with respect to the assessment of additional taxes and interest thereon. Furthermore, plaintiff understated its taxable income by more than 25%. Accordingly, the penalties assessed are also affirmed.\nAFFIRMED.\nJudges STEELMAN and JACKSON concur.\n. Plaintiff\u2019s statement of the facts in its brief was sketchy and at times argumentative. We admonish plaintiff\u2019s counsel to follow Rule 28(b)(5) of the North Carolina Rules of Appellate Procedure in future cases before this Court:\nA full and complete statement of the facts [is required in an appellant\u2019s brief]. This should be a non-argumentative summary of all material facts underlying the matter in controversy which are necessary to understand all questions presented for review, supported by references to pages in the transcript of proceedings, the record on appeal, or exhibits, as the case may be.\nN.C.R. App. P. 28(b)(5). We note that compliance with this rule is especially important when the Record on Appeal contains 2,531 pages and an additional stack of exhibits and transcripts standing approximately two feet tall.\n. We were unable to locate copies of any of plaintiffs North Carolina Corporation Tax Returns in the 2,531 page Record on Appeal. However, all amounts from the tax returns relevant to this appeal were included in the workpapers prepared during the Secretary\u2019s audit of plaintiff. Plaintiff did not contest any of the amounts in the audit workpapers. The workpapers disclosed the following amounts for plaintiff for the tax year ended 31 January 1999 (\u201c1998-99 Tax Year\u201d), summarized in columnar format, rounded and expressed in millions (except for apportionment factors and tax payable):\nGross Profit $ 18,946\nDividends from W-M PC 1,270\nOther Income 148\nTotal Income $ 20,364\nRent Expense $ 1,658\nOther Deductions 15,532\nTotal Deductions 17.190\nTotal State Net Income $ 3,174\nLess: Non-business Income $ 1,270\nBusiness Income $ 1,904\nApportionment Factors 4.1625 %\nBusiness Income Apportioned to N.C. $ 79.2\nLess Contributions to N.C. Donees _.6.\nTotal Net Taxable Income $ 78.6\nTax Payable at 7.25% (not rounded) $5,701,282\n. At the time plaintiff filed its 31 January 1999 Tax Return, multistate corporations operating in North Carolina divided income for tax purposes into business and nonbusiness income. N.C. Gen. Stat. \u00a7 105-130.4. Business income was apportioned and taxed among the several states in which the corporation operated, while nonbusiness income was \u201callocated in a manner whereby it [was] taxed only by the state with which the asset that generated the income [was] most closely associated[.]\u201d Polaroid Corp. v. Offerman, 349 N.C. 290, 294, 507 S.E.2d 284, 288 (1998) (citing N.C. Gen. Stat. \u00a7 105-130.4(h) [(1997)], cert. denied, 526 U.S. 1098, 143 L. Ed. 2d 671 (1999).\nBusiness income per N.C. Gen. Stat. \u00a7 105-130.4(a)(l) was redefined by the General Assembly on 30 September 2002, with effect on taxable years beginning on or after 1 January 2002, to mean \u201call income that is apportionable under the United States Constitution.\u201d 2002 N.C. Sess. Law 126 \u00a7 30G.1. The heading above \u00a7 30G.1 is \u201cCLOSE CORPORATE TAX LOOPHOLES,\u201d which we construe as an attempt to keep the meaning of the statute the same but to foreclose a reading of the statute that might allow a corporation to avoid taxes properly due within the legislature\u2019s original intent. Section 105-130.4(a)(l) was amended again 14 August 2003, with effect from that date, changing the term \u201cbusiness income\u201d to \u201capportionable income,\u201d but keeping the same definition. 2003 N.C. Sess. Law 416 \u00a7 5.\n. W-M REBT\u2019s 31 December 1998 North Carolina Corporation Tax Return, summarized in columnar format, rounded and expressed in millions (except for apportionment factors and tax payable) disclosed the following amounts:\nTaxable Income Per Federal Return Before\nSpecial Deductions $ 1,207.83\nAddition per N.C. Tax Code _.35\nTotal Income $ 1,208.18\nDividends Paid Deduction (W-M PC) $ 1,207.83\nTotal State Net Income $ 0.35\nApportionment Factors 3.1185 %\nTotal Net Taxable Income $ .01\nTax Payable at 7.25% (not rounded) $ 786\n. On appeal, the only issues raised by defendant were purely legal questions, and the numerical amounts and the arithmetic underlying the notices of proposed assessment were uncontroverted.\n. The difference from the calculation in the workpapers ($4,184,490-$4,183,704) is the $786 shown as tax payable on the 1998 tax return of W-M REBT.\n. The appeal sub judice also includes plaintiff\u2019s tax years ended 31 January 2000, 31 January 2001, and 31 January 2002. The taxes payable for those tax years involve the same question of law, so we have not included the details of those numbers in the factual background.\n. The record does not reveal how plaintiff arrived at this exact number. In the \u201csummary of material facts\u201d attached to its order, the trial court rounded off the refund sought to \u201caround $30 million.\u201d\n. The statute was amended effective 1 January 1999 to its current form and controls three of the four tax years relevant to this appeal. The previous statute controls for plaintiffs 1998-99 tax return. The 1999 changes were immaterial for purposes of this appeal.\n. As in Mobil Oil Corp. v. Commissioner of Taxes, 445 U.S. 425, 437, 63 L. Ed. 2d 510, 521 (1980), plaintiff sub judice \u201cincluded all its operating income in apportionable net income, without regard to the locality in which it was earned.\u201d Id.\n. We note that the facts and result of both the Georgia case and the Massachusetts case are very similar to Gulf Oil, in that the tax commissioner in each of the respective states was prevented from combining discrete entities that had no connection to the taxing state. Gulf Oil was distinguished from the case sub judice supra Part III.D.\n. It appears that Polaroid v. Commissioner\u2019s construction of the Massachusetts statute is mere dicta, because the case was disposed of on the grounds that the Commissioner of Revenue had not issued relevant regulations beforehand. Polaroid Corp. v. Commissioner of Revenue, 472 N.E.2d 259, 261 (Mass. 1984). However, even if Polaroid v. Commissioner\u2019s interpretation of the statute had been dispositive in Massachusetts, it would only be persuasive, not controlling, in North Carolina.\n. \u201cNo law taxing retrospectively sales, purchases, or other acts previously done shall be enacted.\u201d N.C. Const, art. I, \u00a7 16.\n. As was well put by Judge Learned Hand:\n[T]he words of. . . the Income Tax [Act], for example, merely dance before my eyes in a meaningless procession: cross-reference to cross-reference, exception upon exception \u2014 couched in abstract terms that offer no handle to seize hold of\u2014 leave in my mind only a confused sense of some vitally important but successfully concealed, purport .... I know that these monsters are the result of fabulous industry and ingenuity, plugging up this hole and casting out that net, against all possible evasion].]\nA.O. Smith v. United States, 691 F.2d 1220, 1223 (7th Cir. 1982) (Dumbauld, J., dissenting) (quoting Irving Dilliard (ed.), The Spirit of Liberty: Papers and Addresses of Learned Hand (2nd ed. 1953) 213).\n. The United States Supreme Court passed on this North Carolina constitutional question because \u201cthe cases are properly here on federal questions, [therefore] all questions presented by the record, whether involving federal law or state law, must be considered.\u201d Atlantic Coast Line v. Daughton, 262 U.S. 413, 416, 67 L. Ed. 1051, 1058 (1923).", "type": "majority", "author": "STROUD, Judge." } ], "attorneys": [ "Alston & Bird LLP, by Jasper L. Cummings, Jr. for plaintiff - appellant.", "Attorney General Roy A. Cooper, III, by Special Deputy Attorney General Kay Linn Miller Hobart, for defendant-appellee.", "Wilson & Coffey, LLP by G. Gray Wilson and Stuart H. Russell for amicus curiae." ], "corrections": "", "head_matter": "WAL-MART STORES EAST, INC., a/k/a, WAL-MART STORES EAST I, INC., Plaintiff v. REGINALD S. HINTON, Secretary of Revenue of the State of North Carolina, Defendant\nNo. COA08-450\n(Filed 19 May 2009)\n1. Taxation\u2014 corporate income tax \u2014 assessment of additional taxes \u2014 statutory authority to combine three related entities\nThe trial court did not err by granting summary judgment in favor of defendant Secretary of Revenue based on its conclusion that the Secretary acted within his lawful statutory authority when he assessed additional corporate income taxes against plaintiff company as a result of the combination of plaintiff with two related entities because: (1) N.C.G.S. \u00a7 105-130.6 on its face does not restrict the Secretary to a finding of a particular type of transaction or dealing; (2) plaintiff\u2019s definition of true earnings, what the taxpayer\u2019s income would be if it had no affiliates and dealt with all parties on an arm\u2019s length basis, was rejected by the Court of Appeals since the form of business organization may \u2022have nothing to do with the underlying unity or diversity of business enterprise; (3) the tax payable calculated by W-M REBT for 1998-99 was $786 income tax payable in North Carolina on $1,208,178,874 in total net income when plaintiff operated at least 82 stores in North Carolina; (4) there was a connection with the three combined subsidiaries with North Carolina when W-M REBT owned and leased stores within North Carolina, passed along income to W-M PC received from leasing and subleasing these stores, which W-M PC further passed along to plaintiff in the form of dividends; (5) plaintiff did not cite any cases, and none were found, where our Supreme Court has ever deemed the unitary method to be constitutionally infirm, and plaintiff has not shown that the dividends received from W-M PC are in any way part of a discrete business; and (6) to the extent that authority from other jurisdictions help construe our statute, it weighs in favor of the Secretary and against plaintiff.\n2. Constitutional Law; Taxation\u2014 corporate income tax\u2014 true earnings definite standard \u2014 Commerce Clause \u2014 N.C. Constitution article V, section 2(6) \u2014 formal rule-making procedures not required\nThe trial court did not err by granting summary judgment in favor of defendant Secretary of Revenue based on its conclusion that the Secretary acted within his lawful constitutional authority when he assessed additional corporate income taxes against plaintiff as a result of the combination of plaintiff with two related entities because: (1) an elemental principle of taxation law is that the label attached to a transaction or balance is of no importance, and the amount plaintiff sought to classify as dividends was in actual fact rental income; (2) the authority given the Secretary in N.C.G.S. \u00a7 105-130.6 was not without sufficient direction, and true earnings is a sufficiently definite standard so that the Secretary may set policies within it without exercising a legislative function; (3) the mere fact that another taxpayer has been treated differently from the plaintiff does not establish plaintiff\u2019s entitlement, and the taxpayer cannot premise its right to an exemption by showing that others have been treated more generously, leniently or even erroneously by the IRS; (4) plaintiff cited nothing in the record, and nothing was found, supporting its argument that the assessments violated the Commerce Clause of the U.S. Constitution since defendant allegedly only forces combination of foreign multistate corporations; , (5) North Carolina Constitution article V, section 2(6) does not require any particular deduction from gross inqome to be allowed in calculating net income, but implicitly recognizes the authority of the General Assembly to determine what deductions from gross income are properly allowed in the computation of net income; (6) the Secretary was not required to follow the formal rule-making procedures in Chapter 150B since the filing of a consolidated or combined return is exceptional and not allowed unless specifically required; and (7) plaintiff failed to show how the cases it cited compelled a result in its favor.\n3. Penalties, Fines, and Forfeiture\u2014 understating taxable income by more than 25% \u2014 negligence finding not required\nThe Secretary of Revenue did not err by assessing penalties against plaintiff based on plaintiffs understating its taxable income by more than 25% because: (1) N.C.G.S. \u00a7 105-236(a)(5)(c) does not require a finding of negligence as is typically necessary under N.C.G.S. \u00a7 105-236(a)(5)(a); and (2) plaintiff did not appear to dispute that if the Secretary\u2019s assessment based on the combined returns was lawful, the plaintiff\u2019s income was understated by more than 25% which operated to invoke the penalty provision of N.C.G.S. \u00a7 105-236(a)(5)(a) without a finding of negligence.\nAppeal by plaintiff Wal-Mart Stores East, Inc. from order entered 4 January 2008 by Judge Clarence E. Horton, Jr. in Wake County Superior Court. Heard in the Court of Appeals 22 October 2008.\nAlston & Bird LLP, by Jasper L. Cummings, Jr. for plaintiff - appellant.\nAttorney General Roy A. Cooper, III, by Special Deputy Attorney General Kay Linn Miller Hobart, for defendant-appellee.\nWilson & Coffey, LLP by G. Gray Wilson and Stuart H. Russell for amicus curiae." }, "file_name": "0030-01", "first_page_order": 60, "last_page_order": 89 }