Travel, tourism groups eye court case targeting Currituck County taxes | Eastern North Carolina Now

    Publisher's Note: This post appears here courtesy of the Carolina Journal. The author of this post is CJ Staff.

    Four groups tied to North Carolina's travel and tourism industry are speaking out as the N.C. Court of Appeals tackles a lawsuit from Currituck County. The groups filed a friend-of-the-court brief in the case Wednesday.

    Plaintiffs allege that Currituck County officials have ignored a 2004 change in state law. That year the General Assembly required the county to devote all future occupancy tax revenue to promoting tourism. That's according to court filings in the lawsuit titled Costanzo v. Currituck County.

    Critics filed suit against the county in 2019. A trial judge ruled in December 2021 in favor of the county government.

    "Occupancy tax statutes are special taxes levied for a particular purpose - the support and development of tourism in a specific city or county," according to the new friend-of-the-court brief. "The decision of the Superior Court granting summary judgment contains no explanation for its decision, even though it appears there was evidence before the trial court that Currituck County is spending at least some portion of its occupancy tax revenues for general services, which is not consistent with that county's occupancy tax legislation."

    The brief represents the N.C. Travel and Tourism Coalition, N.C. Restaurant and Lodging Association, N.C. Hospitality Alliance, and N.C. Vacation Rental Managers Association. The groups argue that the Currituck case could affect other communities across the state.

    "To the extent Currituck County seeks to argue that a tourism development authority can disregard the statutory limitations and conditions on its spending authority and transfer occupancy tax revenues into their general fund, that contention clearly is not correct under the law," according to the brief. "Any decision in this appeal should be careful not to upset the hundreds of occupancy tax statutes that apply to other jurisdictions, where no one has ever argued that occupancy tax revenues may simply be transferred to a general fund for spending on general public services."

    The Travel and Tourism Coalition has been pushing since 1991 to have local occupancy taxes devoted to "growing the tourism economy," the brief argued. "The occupancy tax is the only tax specifically targeting an industry where that industry is not opposed to the additional tax, as long as the proceeds of the tax are reinvested in tourism promotion or for tourism related expenditures."

    Currituck County's 2004 occupancy tax law differs from statewide guidelines adopted in the 1990s, according to the tourism groups. Yet revenue from the county's 6% occupancy tax still must be split between promotion of travel and tourism and "tourism-related expenditures."

    Yet at least some occupancy tax proceeds end up in the county's general fund, according to the tourism groups. "[T]o the extent the County merely deposits occupancy tax revenue into its general fund for subsequent spending, doing so cannot either meet the legislative intent of Currituck's legislation, or that statute's specific language."

    The 2004 law marked a change, the tourism groups argued. Currituck's original 1987 occupancy tax law allowed the county to count building construction, solid waste collection, and police and emergency services as "tourist-related" purposes.

    Currituck's critics argue that the county continues to use occupancy tax money for more general local government purposes.

    "The fact that the 2004 Currituck Statute is titled 'TO ... CHANGE THE PURPOSES FOR WHICH THE TAX MAY BE USED' should not be controversial or hard to interpret. The prior statute was being superseded and made to be in closer conformity to the Guidelines," the tourism groups argued.

    "The Guidelines do not contemplate the use of occupancy tax revenue for such general services as 'police protection and emergency services' that had been permitted uses under the prior Currituck statute, and certainly do not contemplate occupancy tax revenues raised for 'tourism-related expenditures' being transferred to Currituck's general fund for subsequent spending."

    "The general services provided by local government are no doubt a key component of local government - but they are not tourism-related expenditures," according to the brief.

    It's not clear when the N.C. Court of Appeals will hear or decide the case.