Richland penny tax dispute heads to court next week

Richland County and the state Department of Revenue will argue their cases before a judge June 17, in the ongoing dispute over the county’s transportation penny tax program.

The county sued DOR almost four weeks ago, asking a judge to order DOR to release penny tax revenue it is withholding from the county. DOR, meanwhile, has said it won’t release the money until the county brings its program into compliance with department standards. The county argues DOR has no legal authority to withhold funds or to demand changes to the program.

Richland County and DOR officials have been at odds for months over the county’s use of its penny-on-the-dollar sales tax intended for transportation improvement projects. The tax revenues have totaled more than $156 million since collections began in May 2013, after voters approved the $1 billion, 22-year tax program in 2012.

In April, DOR told the county it would withhold further allocations of penny tax collections until its demands were met. The next $16 million payment to the county would be due in July.

With time and DOR’s demands pressing against them, County Council voted in May to authorize the county to take legal action if necessary; Councilman Seth Rose was the sole dissenting vote.

Richland County Circuit Court Judge Alison Lee will hear the case at 3 p.m. June 17.

The county is being represented by attorneys Elizabeth Crum and Ned Nicholson of the McNair Law Firm; Ray Jones and Ray Stevens of the Parker Poe firm; and Larry Smith, the county’s in-house attorney. DOR is being represented by its general counsel, Milton Kimpson, and by James Smith, a local attorney and Richland County Democratic state representative.

DOR began an audit of the penny tax program in April 2015 and in December announced it had uncovered evidence of possible corruption, fraud and millions in wasteful or potentially illegal spending of the penny tax. The department turned over its findings to the State Law Enforcement Division, which continues to investigate possible criminal wrongdoings.

DOR has criticized the penny program for, among other things, what it says was the improper hiring of the program’s management team, making excessive payments for public information work and paying the start-up costs for a small-business program.

The county’s lawsuit against DOR, which seeks what is called a writ of mandamus ordering a government official to properly fulfill their duties or to correct an improper consideration of the law, claims DOR has tried to “usurp” the county’s authority to manage its own affairs by making “absurd” and “contradictory” interpretations of state law.

DOR “has exceeded its authority by the directives of its Director that if not stopped will destroy much of the benefit” the county has received from the penny tax program, the county’s lawsuit says.

Plus, the lawsuit says, DOR’s actions “will set a dangerous precedent for the micro-management by SCDOR not just of the affairs of Richland County, but also the affairs of any county in this state that has a penny sales tax program.”

This story was originally published June 8, 2016 at 12:23 PM with the headline "Richland penny tax dispute heads to court next week."