IP files new suits against county over taxes

Published 11:17 am Friday, August 18, 2017

It would appear that International Paper’s tax dispute with Isle of Wight County is far from over. The company filed two new lawsuits against it in Isle of Wight Circuit Court on Wednesday afternoon.

The first alleges that the County, in substantially raising its machinery and tools rate for the current fiscal year, has effectively defied a court order granting IP machinery and tools refunds for fiscal years 2013, 2014 and 2015.

The second alleges that the County’s real estate assessment of the Franklin mill is three to four times its fair market value, and is in violation of the Virginia Constitution.

Both suits were filed on the same day and time by Craig D. Bell, an attorney with the Richmond-based firm McGuire Woods LLP, which is representing IP in this case. James S. McNider III of the Hampton-based firm James S. McNider PLC is serving as co-counsel.

Assistant County Administrator Don Robertson said that the county had retained the services of Sands Anderson PC, a Richmond-based firm. He added that County Attorney Mark Popovich would also be part of the county’s legal team, but that no motions had been filed in the county’s defense yet.

In late February 2017, Judge Carl E. Eason ruled in favor of IP in its initial lawsuit against the county concerning machinery and tools taxes, which the company had filed in December 2014. That suit, titled “Application for Correction of Erroneous Assessments of Machinery and Tools Tax,” had contended that the County’s tax assessment of the Franklin paper mill and its equipment over the past several fiscal years was overly high because it had not taken into account the equipment’s depreciation.

Nearly three months after the ruling, the Board of Supervisors voted to temporarily increase the county’s M&T tax rate for fiscal year 2017-2018 from $1.75 per $100 of assessed value to $4.24 per $100, an increase of approximately 142 percent. IP’s new M&T suit, which refers to this act as a “clawback ordinance,” alleges that this action was taken with the intent of recouping the county’s refund obligation to M&T taxpayers in the amount of $5.6 million, and that the burden of paying the new rate would fall solely on M&T taxpayers who have been unlawfully taxed and who are entitled to the refunds.

Among the evidence the new suit includes is a letter accompanying the county’s first 2017 M&T tax bill, in which Gerald H. Gwaltney, the County’s commissioner of revenue, affirms that Isle of Wight’s Board of Supervisors adopted the increased M&T tax rate “to offset revenues due to the refunds” and assures taxpayers that “next year the board is anticipated to roll tax rate back to the 2016-17 rate of $1.75.”

Jennifer Dixon, communications manager for International Paper’s Franklin mill, declined to comment on the new suits, saying she could not discuss pending litigation.

Robertson had previously remarked to The Tidewater News that the County intended its adjusted M&T tax rate for the current fiscal year to be revenue neutral, which he defined to mean that the intent was “to recover the amount of funds that had been provided in refunds.”

That statement was made following the Board of Supervisors’ unanimous vote during its July meeting to appropriate roughly $6.3 million in anticipated revenues from the increased M&T tax rate. Robertson also said that of the $6.3 million, $1,164,274 would be used to provide economic development incentive grants to businesses that would end up paying more in M&T taxes this year than the amount they received in refunds last year.

The M&T lawsuit seeks $2,742,741 in damages, plus the abatement of all remaining 2017 taxes subsequently assessed by Isle of Wight upon IP. The real estate tax lawsuit seeks $3,109,000 in damages plus accrued interest.

Attorneys representing IP said that the next step in both lawsuits will be for the county to file a responsive pleading, most likely by Sept. 6 or 7. From there, the suits will move into the discovery phase and eventually go to trial.

Editor’s note: A previous version of this article listed the judge’s name as Carl E. Faison.