785 A.2d 1123 (R.I. 2001), 2000-194, Delta Airlines, Inc. v. Neary
|Citation:||785 A.2d 1123|
|Opinion Judge:||LEDERBERG, Justice.|
|Party Name:||DELTA AIRLINES, INC., et al. v. James T. NEARY, Jr., in his Capacity as Tax Assessor for the City of Warwick.|
|Attorney:||Brent Caning, William E. Reed, 3rd, Boston, Massachusetts/ Gerald John Petros, Providence,/Steven M. Richard, Boston, Massachusetts, for Plaintiff., Stephen J. MacGillivray, Newport, for Defendant., Present: LEDERBERG, BOURCIER, FLANDERS, and GOLDBERG, JJ. Brent Caning, William E. Reed, 3rd, Bos...|
|Judge Panel:||Present: LEDERBERG, BOURCIER, FLANDERS, and GOLDBERG, JJ.|
|Case Date:||December 07, 2001|
|Court:||Supreme Court of Rhode Island|
This case arose from a dispute between the plaintiffs, Delta Airlines, Inc., and U.S. Airways, Inc. (the airlines), and the defendant, James T. Neary, Jr., in his capacity as tax assessor for the City of Warwick (the assessor), over the legality of municipal taxes assessed against the airlines for certain leasehold improvements at the Sundlun Terminal at T.F. Green Airport in the City of Warwick. The airlines have appealed a judgment of the Superior Court, granting the assessor's motion for
summary judgment and denying the airlines' motion for summary judgment. For the reasons stated herein, we sustain the appeal, vacate the judgment, and remand the case to the Superior Court with instructions to enter judgment in favor of the airlines.
Facts and Procedural History
In December 1992, the Rhode Island Economic Development Corporation (EDC) created the Rhode Island Airport Corporation (RIAC), pursuant to G.L.1956 § 42-64-7.1, to operate and manage Rhode Island's state airports. See In re Advisory Opinion to Governor, 627 A.2d 1246, 1247-48 (R.I.1993). Although the State of Rhode Island retains title to T.F. Green Airport, RIAC entered into a thirty-year lease of the airport property from the state, beginning on July 1, 1993. The lease since has been extended an additional five years.
The Sundlun Terminal (terminal) was constructed at T.F. Green Airport between 1993 and 1996. In 1993, the airlines each entered into seventeen-year lease agreements with RIAC for portions of the terminal, and during the next three years they installed leasehold improvements, such as carpets, baggage carriers, counters and partitions in the terminal. By the terms of the airlines' lease agreements, all such improvements became the property of RIAC when construction was completed. Upon the termination of RIAC's lease with the state, all airport assets will be transferred to the state.
The airlines have paid taxes on a regular basis to the City of Warwick for personal property, such as office supplies, vehicles, and aircraft equipment since the outset of their operations at T.F. Green Airport. In 1997 and 1998, in its assessment of the airlines' "tangible personal property," the assessor included an assessment of the "leasehold improvements." This tax was assessed at a rate of $55 per square foot of area that each airline leased in the terminal.
The airlines appealed the 1997 and 1998 tax assessments to the Warwick Board of Assessment Review (board). 1 The board denied the appeal, and the airlines filed four petitions for relief from local tax assessment in the Superior Court, each airline filing a petition for each of the tax years now in dispute. The airlines claimed that lessees cannot be taxed on property that is otherwise exempt, as is the terminal by virtue of § 42-64-20, or alternatively, G.L.1956 § 44-3-3(1) and G.L.1956 § 44-4-4.1(5). The airlines also asserted that, in general, lessees cannot be held responsible for property taxes unless they expressly agree to pay them under the terms of the lease. After consolidating the four cases, the Superior Court denied the airlines' motion for summary judgment and granted the assessor's cross-motion, ruling as follows:
"Clearly, Sections 42-64-20(a) and (b) did not entitle the plaintiffs to a broad-based exemption from municipal taxes at the expense of the municipality. Sections 42-64-20(a) and (b) state that Rhode Island Airport Corporation must make payments in lieu of real property taxes to municipalities 'during such times as the Rhode Island Airport Corporation derives revenue from the lease or operation of the projects.' Additionally, the Rhode Island Supreme Court has determined that a lessee is bound to pay taxes when the property is productive and yields income."
The airlines appealed the judgment to this Court. The RIAC and Anton Airfood of Rhode Island, Inc., another lessee at the
terminal, filed briefs as...
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