County to begin paying IBM for tax overcharge
County Commissioners on Monday took the first step toward repaying taxes to an IBM subsidiary that state appellate judges say were improperly collected from the computing giant.
The commissioners via a unanimous vote allotted $240,240 to cover interest local governments owe the IBM Credit Corp. because of an overcharge on the firm’s 2001 property taxes.
A similar move will follow late next month as county officials settle the debt’s principal – some $403,013, according to figures from Durham Tax Administrator Kim Simpson.
The repayment is coming because the N.C. Supreme Court in December refused to hear the county’s appeal of a lower-court decision that favored IBM.
Justices thus let stand an August N.C. Court of Appeals ruling that said county officials hadn’t proved their approach to valuing computer equipment owned by the IBM subsidiary was proper.
Durham officials and IBM disagreed about how quickly to depreciate the equipment.
The county tried to apply a state-standard depreciation schedule, but IBM argued, successfully, that computer gear loses value more quickly than state and local officials were assuming.
The case went back and forth between appellate courts and the state Property Tax Commission several times. The tax commission, the body that’s normally supposed to sort out valuation disputes, consistently sided with Durham County.
But Court of Appeals judges with their decision in August finally handed down an order that gave the tax commission and the county no wiggle room for further argument.
The order included some sharp criticism of both the county and the tax commission.
They put appellate courts in a “ridiculous position” by repeatedly failing to follow the proper procedure for weighing IBM’s claims, Judge Donna Stroud said in August’s Court of Appeals opinion.
However, August’s Court of Appeals ruling and the unfolding $655,253 payment to IBM only addresses one year of what’s been an annual struggle between the company and the county.
Simpson said there’s litigation under way that affects the taxes IBM Credit and another subsidiary were charged from 2002 to 2005, and appeals of the county’ levy on the subsidiaries from 2006 to 2012.
All told, the county and IBM – Durham’s second-largest employer – have been fighting over $9.7 million in taxes and interest, counting the money that will go to the court-ordered 2001 repayment, Simpson said.
The county is by far the largest beneficiary of IBM’s tax payments, but the city government, RTP and two volunteer fire departments also get small shares.
The county is handling the dispute as an internal matter and isn’t seeking approval by the other agencies of the payment to IBM. It by joint agreement handles tax collections for itself, the city and all other local-government entities in Durham.