A Superior Court judge expanded a lawsuit to include all taxpayers who had to pay North Carolina taxes on interest from out-of-state government bonds since 2000, the North Carolina Court of Appeals ruled.
Two Forsyth County taxpayers sued the state in February 2004, arguing that North Carolina unlawfully treats interest income from government bonds originating in North Carolina different from bonds from other states. The interest on North Carolina state or municipal bonds is not taxed.
Superior Court Judge Lindsay Davis agreed to expand the case to a class-action lawsuit to cover all who paid taxes on the interest income - individuals, companies and other entities - from Oct. 29, 2000, until the case is resolved. That means all entities could receive refunds on taxes paid if the lawsuit is successful.
The Attorney General's Office, which is representing the state's defendants, appealed, arguing the judge lacked jurisdiction over the case.
"The decision to grant or deny class certification rests within the discretion of the trial court and will not be overturned absent an abuse of that discretion," Court of Appeals Judge Linda Stephens wrote in the unanimous opinion. Stephens added she could not find the abuse.
The Attorney General's Office, who is representing the state's defendants, appealed, arguing the judge lacked jurisdiction over the case.
"The decision to grant or deny class certification rests within the discretion of the trial court and will not be overturned absent an abuse of that discretion," Court of Appeals Judge Linda Stephens wrote in the unanimous opinion. Stephens added she couldn't find that abuse.
Judges Martha Geer and Linda McGee concurred with Stephens' opinion.
Barring a request by the state for the state Supreme Court to rule on the class-action group, the case now will return to the trial court for a ruling on the lawsuit's merits, said a Greensboro attorney representing Lessie Dunn and Erwin Cook Jr., the original two plaintiffs. Smith projected a ruling could come in late 2007.
The Attorney General's Office is reviewing the ruling but hasn't decided whether to seek a review by the justices, a spokeswoman for the Attorney General's Office said.
The total possible refund amount is unclear. A 2004 legislative report by the Justice Department set the potential loss of up to $150 million. Attorneys claim the payments likely would total tens of millions of dollars.