A Georgia company has sued the North Carolina Department of Revenue for blocking tax credits.
Monarch Tax Credits LLC, an investor and tax credit syndicator, said the department overreached its authority when it denied participants of a renewable energy tax credit program and audited others.
The lawsuit, which also names Secretary of Revenue Ronald G. Perry, alleges that the NCDOR misapplied federal law when it placed all of the companies in its investment partnership under audit.
The company worked as a pass-through entity that received credits for participating in projects that support renewable energy through a now-expired tax incentive program established by the General Assembly.
Under the law, operating businesses using renewable energy were eligible for the Renewable Energy Tax Credit equal to 35 percent of the cost to build, buy or lease the property. The credits were issued in five payment installments.
According to the legislation, the tax incentives’ purpose was to help grow the economy and secure the environment. The program ended in 2016.
Monarch claims it invested in more than 80 renewable energy projects costing about $900 million. In September, the department issued a notice halting the credits for some partnership arrangements. NCDOR said the federal Internal Revenue Code doesn’t allow the partner arrangements, so the state should not.
Monarch alleges that by issuing the notice, the department overstepped the state’s constitution, which dictates that only the General Assembly can make laws.
“Notably with respect to these credits, the General Assembly chose not to adopt federal law concerning when a taxpayer is a partner for purposes of claiming tax credits for federal income purposes,” the lawsuit says.
Monarch said the department's actions have “damaged its ability to stay in business in North Carolina.”
Attorneys for the company want NCDOR to issue a declaratory ruling stating why it denied the credits before the court. Monarch is seeking damages from the department based on the claims that the decision it made was unconstitutional.
Representatives for the NCDOR could not be reached for comment; however, the lawsuit was filed two days before Gov. Roy Cooper announced the launch of a new clean energy plan.
The plan calls for a 70 percent reduction in power sector greenhouse gas emissions; creation of economic opportunities through clean energy; and maintaining affordable energy rates for North Carolinians.
“I’m committed to fighting climate change and securing more clean energy jobs for our state and these plans help us do both,” Cooper said. “Our state is taking strong action to reduce greenhouse gas emissions and grow renewable energy sources, which will create jobs and support innovation.”