Could South Carolina penalize an electric cooperative and inspect pre-1978 records under the Unclaimed Property Act, and did the ruling decide its limitation and capital-credit defenses?

Plain-English summary

South Carolina Private Letter Ruling 87-10 answered two electric-cooperative unclaimed-property enforcement questions and declined to answer two others:

1. The Tax Commission could impose $100-per-day civil penalties under section 27-17-270(B) before June 22, 1989.
2. The Commission could inspect available cooperative records from before January 1, 1978.
3. It gave no opinion on whether a statute of limitations barred payment of the debts.
4. It gave no opinion on whether a cooperative bylaw could transfer ownership of unclaimed capital credits after fewer than seven years.

The last two issues had been referred to the South Carolina Attorney General's office for potential litigation.

The cooperative's dispute

ABC was an electric cooperative organized under Chapter 49 of Title 33.

The Audit Division requested records covering 1968 through 1986 to confirm previously filed abandoned-property reports. ABC provided records from January 1, 1978 forward but questioned the relevance and availability of earlier records.

ABC also asserted that it could refuse to pay debts once they were no longer legally enforceable.

Its members had adopted a 1972 bylaw under which unclaimed capital credits would be donated to the cooperative if not claimed within six years after being declared payable.

The 1987 transition did not delay penalties

The 1987 amendments reduced utility dormancy periods described in the ruling:

• deposits from seven years to one year; and
• refunds from seven years to five years.

A transition provision kept the former section 27-17-50 reporting, paying, and delivery responsibilities in place for Chapter 49 entities for two years after the amendment.

The Commission read that postponement narrowly. It applied only to reporting, paying, and delivering property, not to the penalty and interest provisions.

It therefore concluded that penalties could be imposed under amended section 27-17-270(B) before June 22, 1989.

Authority to inspect pre-1978 records

The ruling described the Unclaimed Property Act's central purpose as requiring cooperatives to transfer custody of unclaimed funds to the state.

It noted that the Act was adopted in 1971 and, under the earlier rule, treated property as abandoned after more than seven years unclaimed.

Section 27-17-250 allowed the Commission, after reasonable notice, to examine a person's records when it had reason to believe reportable property had not been reported.

The Commission therefore could examine records predating January 1, 1978 if those records were available.

Questions the Commission did not decide

ABC asked whether the statute of limitations prevented the state from claiming debts that had ceased to be enforceable.

It also asked whether its six-year bylaw caused unclaimed capital credits to become cooperative property before the seven-year abandoned-property period.

Both issues were referred to the Attorney General's office for potential litigation. The Commission's policy was to defer judgment until a court or the Attorney General decided them.

PLR 87-10 therefore should not be read as accepting or rejecting either defense.

What this means for you

Electric cooperatives

PLR 87-10 treated the 1987 transition as limited to reporting, payment, and delivery duties. It did not create a two-year shield against penalties or interest.

Unclaimed-property compliance teams

The Commission's examination authority extended to available historical records when it had reason to believe property should have been reported.

Records and audit teams

The ruling did not limit review to the statutory codification date. Available earlier records could be relevant to property that later became reportable.

Capital-credit administrators

The ruling did not resolve whether a cooperative could acquire ownership under a bylaw before the abandoned-property dormancy period expired.

Readers applying the ruling today

PLR 87-10 applied 1987 abandoned-property law and transition language. Current holder definitions, dormancy periods, report years, lookback rules, penalties, interest, record-retention duties, limitations, and cooperative capital-credit statutes must be checked independently.

Common questions

Q: Could the Commission impose the $100 daily penalty before June 22, 1989?

A: Yes. The two-year transition did not postpone the penalty provision.

Q: Could the Commission inspect records from before 1978?

A: Yes, if the records were available and the statutory reason-to-believe standard was met.

Q: Did the ruling decide the statute-of-limitations defense?

A: No. That issue was pending with the Attorney General's office.

Q: Did the ruling validate the six-year capital-credit bylaw?

A: No. The Commission also deferred that question pending Attorney General or court action.

Q: What records had ABC already produced?

A: It provided access to records from January 1, 1978 forward, including abandoned-property reports.

Q: Can another holder rely on PLR 87-10?

A: No. The ruling states that it applied only to ABC's specific facts, had no precedential value, and was not intended for general distribution.

Citations and references

• S.C. Code section 27-17-50 (1976, amended 1987) — abandoned-property duties and utility dormancy periods discussed in the ruling
• S.C. Code section 27-17-270(B) — civil penalty
• S.C. Code section 27-17-250 — record-examination authority
• 1987 Permanent Provisions, section 22(L) — Chapter 49 cooperative transition
• South Carolina Tax Commission v. Metropolitan Life Insurance Company, 266 S.C. 34, 221 S.E.2d 522 (1975) — pre-Act property and state conservatorship authority cited in the ruling
• S.C. Code section 12-3-170 and SC Revenue Procedure 87-3 — private-letter-ruling authority

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/PLR87-10.pdf

Original ruling text

SC PRIVATE LETTER RULING #87-10

TO:

ABC Electric Cooperative

SUBJECT:

Abandoned Property

REFERENCE:

S.C. Code Ann. Section 27-17-50 (1976)
S.C. Code Ann. Section 27-17-270(B) (as amended June 22, 1987)
S.C. Code Ann. Section 27-17-250 (1976)

AUTHORITY:

S.C. Code Ann. Section 12-3-170 (1976)
SC Revenue Procedure #87-3

SCOPE:

A Private Letter Ruling is a temporary document issued to a
taxpayer, upon request, and it applies only to the specific facts or
circumstances related in the request. Private Letter Rulings have no
precedential value and are not intended for general distribution.

Question:
1.

Does the South Carolina Tax Commission have authority to assess civil penalties
of $100 per day upon electric cooperatives pursuant to Section 27-17-270(B) prior
to June 22, 1989?

2.

Does the South Carolina Tax Commission have authority, pursuant to the
Unclaimed Property Act, to inspect records of the Cooperative for years prior to
January 1, 1978?

3.

Was the statute of limitation upon the payment of debt, as it relates to presumed
Abandoned Property, barred prior to January 1, 1978?

4.

May the Cooperative claim ownership in property assigned pursuant to its by-laws
after the said property is unclaimed for a specified period less than 7 years?

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Facts:
1.

ABC Cooperative is a corporation organized and operating under Chapter 49 of
Title 33 of the 1976 Code. The Cooperative received notice that a refusal to
deliver certain pre-1978 records to the Audit Division would be a failure to carry
out a duty under the Abandoned Property Act and would result in a civil penalty of
$100 per day being charged pursuant to Title 27-17-270(B) of the South Carolina
Code As Amended June 22, 1987.

2.

The Cooperative was directed to provide the Tax Commission all records of
accounts for the period 1968 through 1986. The purpose of the review is to
confirm previously filed reports. The cooperative has provided access to all
corporate records from January 1, 1978 forward, including Abandoned Property
Reports. The cooperative seeks clarification as to the relevancy of pre-1978
records to the 1978 status of the corporation.

3.

The Cooperative asserts that the Cooperative has refused to pay debts of the
Cooperative after such debts cease to be legally enforceable. The Tax
Commission has advised that the Cooperative cannot utilize the statute of
limitation to prevent claim of accounts by the Tax Commission.

4.

In 1972, the Cooperative members passed, at a duly constituted annual meeting, a
bylaw provision whereby the membership designated that funds owed them as
capital credits would be donated to the Cooperative if not claimed within six years
of the date the credit was declared payable.

Discussion:
1.

Section 22, Subsection L of the 1987 Permanent Provisions amending the
Abandoned Property Act states:
"Notwithstanding the amendment to section 27-17-50 of the 1976 Code
contained in this section, for a period of two years after the effective date of
this section, the provisions of former Section 27-17-50 of the 1976 Code,
relating to the responsibilities of reporting, paying, and delivering property
apply for entities organized under the provisions of Chapter 49 of Title 33 of
the 1976 Code."
As the section states, the postponement relates only to reporting, paying, and
delivering. "A statute is to be taken, construed, and applied in the form enacted."
73 Am Jur 2d Section 196. The amendment to 27-17-50 reduced the holding
periods (the period property is to be held before it is presumed abandoned) for
utilities from seven years to one year the time after which a deposit is presumed
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abandoned and from seven to five years the period after which a refund is
presumed abandoned. Therefore, penalties may be imposed under section 27-17270(B) as amended. There is no provision under penalty or interest sections for
exempting utilities from the application of penalty and interest for abandoned
property.
2.

The main thrust of the Abandoned Property Act is to affix a duty on cooperatives
to transfer custody of unclaimed funds to the State. In accordance with the plain
wording of the statute as adopted in 1971 and codified January 1, 1978, property is
deemed abandoned if unclaimed for more than 7 years.
The South Carolina Supreme Court in South Carolina Tax Commission v.
Metropolitan Life Insurance Company 266 S.C. 34, 221 SE 2d 522(1975) stated:
The South Carolina Tax Commission seeks to have Metropolitan Life
Insurance Company pay its maturity value of three thousand eighty (3,080)
unclaimed policies. The policies matured by 1965 and the Commission
contends the funds are "abandoned property" within the meaning of the
Uniform Disposition of Unclaimed Property Act. S.C. Code Section 57-240.1
et seq. (1974 Cum. Supp.). The Uniform Act was adopted in 1971. Pursuant
to it, the Commission acts as a conservator of "all abandoned property."
The Supreme Court reversed the judgment of the trial court and rendered judgment
for the Commission.
Pursuant to 27-17-250, the Tax Commission has authority to examine the records
of any person, after reasonable notice, if it has reason to believe that such person
has failed to report property that should have been reported. Thus the Tax
Commission may examine records prior to 1978 if they are available.

3.

This issue has been referred to the South Carolina Attorney General's office for
potential litigation. It is the policy of the South Carolina Tax Commission to defer
judgments on such matter until the court or the Attorney General's office has made
a decision.

4.

This issue has been referred to the South Carolina Attorney General's office for
potential litigation. It is the policy of the South Carolina Tax Commission to defer
judgments on such matter until the court or the Attorney General's office has made
a decision.

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Conclusion:
1.

The Tax Commission has the authority to assess civil penalties of $100 per day
upon electric cooperatives pursuant to 27-17-270(B) prior to June 22, 1989.

2.

The South Carolina Tax Commission has authority pursuant to the Unclaimed
Property Act to inspect records of the Cooperative for years prior to January 1,
1978 if these records are available.

3.

No opinion will be issued on this question pending determination by the Attorney
General's office.

4.

No opinion will be issued on this question pending determination by the Attorney
General's office.

SOUTH CAROLINA TAX COMMISSION

s/Hunter Howard, Jr.
S. Hunter Howard, Jr., Chairman

s/John M. Rucker
John M. Rucker, Commissioner

s/A. Crawford Clarkson Jr.
A. Crawford Clarkson, Jr., Commissioner

Columbia, South Carolina
November 18
, 1987

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