Comptroller v. Blanton

• Decision Date: 12 January 2006
• Docket Number: No. 15, September Term, 2005.,15, September Term, 2005.
• Citation: 890 A.2d 279,390 Md. 528
• Parties: COMPTROLLER OF THE TREASURY v. Edward L. BLANTON, Jr., et al.
• Court: Court of Special Appeals of Maryland

890 A.2d 279

390 Md. 528

COMPTROLLER OF THE TREASURY v. Edward L. BLANTON, Jr., et al.

No. 15, September Term, 2005.

Court of Appeals of Maryland.

January 12, 2006.

COPYRIGHT MATERIAL OMITTED

Cristina A. Milnor, Assistant Attorney General (J. Joseph Curran, Jr., Attorney General of Maryland, of Baltimore), on brief, for appellant.

Jan I Berlage (Ballard, Spahr, Andrews & Ingersoll, LLP, Edward L. Blanton, Jr. of Baltimore), on brief, for appellee.

Argued before BELL, C.J., RAKER, WILNER, CATHELL, HARRELL, BATTAGLIA and GREENE, JJ.

GREENE, J.

In this case, we must determine whether a tax credit provided pursuant to Maryland Code (1998, 2004 Repl.Vol.), § 10-703(a) of the Tax-General Article, may be applied to both State and local income taxes paid by an individual.¹ We hold that § 10-703(a) of the Tax-General Article does not reduce the amount owed by a Maryland resident for local income tax. The tax credit may be applied only to reduce the amount of an individual's state income tax liability. In so holding, we reverse the judgment of the Circuit Court for Baltimore County that, for the purposes of the tax credit in § 10-703(a), "State income tax" includes both State and local income taxes.

Edward L. Blanton, Jr., and his wife, Estelle E. Blanton (collectively "the Blantons") contested their 2001 income tax assessment by filing a complaint with the Maryland Comptroller of the Treasury (hereafter "Comptroller"). A hearing officer from the Comptroller's office determined that the tax credit applied exclusively to reduce state income taxes.² The Blantons appealed to the Maryland Tax Court and that administrative body affirmed the Comptroller's decision. The Blantons filed a petition for judicial review in the Circuit Court for Baltimore County. After a hearing in the Circuit Court, the hearing judge reversed the decision of the Tax Court. On November 10, 2004, the Comptroller appealed that decision to the Court of Special Appeals. Before that court could decide the appeal, we issued, on our initiative, a writ of certiorari. Comptroller v. Blanton, 387 Md. 122, 874 A.2d 917 (2005).

Facts

The underlying facts in this case are largely undisputed. In 2001, the Blantons, as residents of Baltimore County, Maryland, held property interests in North Carolina and paid income taxes in both states. On August 15, 2002, the Blantons filed a 2001 Form 502 Resident Maryland Tax Return ("Form 502"). The Blantons' federal adjusted gross income was $360,036.00 and their Maryland taxable net income was $287,676.00. The Maryland State income tax was $13,754.44 and the local Baltimore County tax was $8,026.16, for a combined total of $21,780.60. The Blantons were allowed a credit of $10,905.60, calculated under the Maryland tax formula, for taxes paid to North Carolina for North Carolina income tax. After application of the credit, the Blantons owed $2,849.44 for State income tax, while the local income tax portion remained at $8,026.16. The total combined amount of Maryland and local tax owed was $10,875.60. The amount owed after prior payments, taxes withheld, and all credits and offsets was $4,637.60, not including interest and penalties. Instead of paying the amount of tax assessed by this State, the Blantons subtracted the North Carolina income tax amount of $16,782.00 from $21,780.60, which yielded a difference of taxes owed as $4,998.00.³ Further, the Blantons enclosed a letter with their Maryland income taxes in which they challenged the layout of Form 502. Specifically, they argued that the flaw in Form 502 exists in the fact that the State and local income taxes are calculated independently of each other. The Comptroller disregarded the letter and sent a letter to the Blantons, requiring them to pay the outstanding tax balance of $4,637.60.⁴ In a letter dated October 22, 2002, the Blantons requested an informal hearing on the assessment. A hearing was later held. In the Notice of Final Determination, dated January 13, 2003, the Comptroller affirmed the assessment, finding that the Legislature intended a credit against the State income tax only.⁵ Among other things, the Comptroller stated that the definition of "State" under § 1-101(u) excluded counties or local districts.⁶

On January 28, 2003, the Blantons filed a "Petition of Appeal" with the Maryland Tax Court. On December 3, 2003, a hearing was held where both parties presented oral arguments. The Tax Court determined that the Legislature defined State tax and local tax as two distinct taxes, and, as such, they "are not the same, they are two separate ideas." Further, the Tax Court concluded that § 10-703(a) of the Tax-General Article that states "a resident may claim a credit only against the State income tax" directs a credit against the State income tax only. In addition, on December 18, 2003, the Tax Court affirmed the Comptroller's decision and held that the Legislature intended for the credit to apply against the State income tax and not the local income tax.

On January 7, 2004, the Blantons filed a petition for judicial review in the Circuit Court for Baltimore County. On July 23, 2004, a hearing was held. Thereafter, on October 15, 2004, the Circuit Court reversed the decision of the Tax Court and held that an ambiguity existed with the term "State income tax." The Circuit Court further held that the definition of "State income tax" also includes local income tax for purposes of the tax credit under § 10-703(a) of the Tax — General Article.⁷

Standard of Review

This Court recently examined, in detail, a court's role in reviewing an administrative agency's adjudicatory decision, and held that

a court's task on review is not to "substitute its judgment for the expertise of those persons who constitute the administrative agency," United Parcel v. People's Counsel,, ... 336 Md. [569,] ... 576-577, 650 A.2d [226,] ... 230 [(1990)], quoting Bulluck v. Pelham Wood Apts.,... 283 Md. [505,] ... 513, 390 A.2d [1119,] ... 1124 [(1978)]. Even with regard to some legal issues, a degree of deference should often be accorded the position of the administrative agency. Thus, an administrative agency's interpretation and application of the statute which the agency administers should ordinarily be given considerable weight by reviewing courts. Lussier v. Md. Racing Commission, 343 Md. 681, 696-697, 684 A.2d 804, 811-812 (1996), and cases there cited; McCullough v. Wittner, 314 Md. 602, 612, 552 A.2d 881, 886 (1989) ("The interpretation of a statute by those officials charged with administering the statute is ... entitled to weight."). Furthermore, the expertise of the agency in its own field should be respected. Fogle v. H & G Restaurant, 337 Md. 441, 455, 654 A.2d 449, 456 (1995); Christ v. Department of Natural Resources, 335 Md. 427, 445, 644 A.2d 34, 42 (1994) (legislative delegations of authority to administrative agencies will often include the authority to make "significant discretionary policy determinations"); Bd. of Ed. for Dorchester Co. v. Hubbard, 305 Md. 774, 792, 506 A.2d 625, 634 (1986) ("application of the State Board of Education's expertise would clearly be desirable before a court attempts to resolve the" legal issues).

Maryland Aviation Administration v. Noland, 386 Md. 556, 571-72, 873 A.2d 1145, 1154-55 (2005), quoting Board of Physician Quality Assurance v. Banks, 354 Md. 59, 68-69, 729 A.2d 376, 381 (1999) (alternation in original) (alterations added) (footnote omitted).

Recognizing that the agency's decision is "prima facie correct and presumed valid," "we must review the agency's decision in the light most favorable to it." Comptroller of the Treasury v. Citicorp Int'l. Commc'ns, 389 Md. 156, 163, 884 A.2d 112, 116 (2005)(quoting Ramsay, Scarlett & Co. v. Comptroller, 302 Md. 825, 834-35, 490 A.2d 1296, 1301 (1985)); Md. Code (1998, 2004 Repl.Vol.) § 13-411 of the Tax-General Article ("[a]n assessment of tax ... is prima facie correct").

Unless the Tax Court's decision was erroneous as a matter of law, or its conclusion was not supported by substantial evidence, we must affirm that decision. See Citicorp, 389 Md. at 164, 884 A.2d at 117; CBS v. Comptroller, 319 Md. 687, 697-98, 575 A.2d 324, 329 (1990) (internal quotations and citations omitted).

Analysis

The issue in this case is whether the language of § 10-703(a) of the Tax — General Article allows for a credit solely toward the State income tax, or allows for a credit toward both State and local income taxes. We hold that the statute refers only to the State income tax.

The Comptroller maintains that the Circuit Court erred when it failed to recognize that only non-substantive changes were made to § 10-703(a) of the Tax-General Article during the Legislature's revision of the tax code in 1988.⁸ The Comptroller argues that when the Legislature undertakes code recodification, any modifications or enactments ordinarily are non-substantive, unless the Legislature denotes otherwise. Further, the Comptroller contends that the plain language of § 10-703(a), which states that a taxpayer may "claim a credit only against the State income tax," explicitly means that the local tax is not available for the credit.

The Blantons argue that the Legislature intended that § 10-703(a) of the Tax — General Article include both State and local income tax; thus, the Maryland Tax Return, Form 502, which separates computation of State and local taxes, is inaccurate.⁹

The issue sub judice is one of statutory interpretation. The cardinal rule of statutory interpretation is to ascertain and effectuate legislative intent. O'Connor v. Baltimore County, 382 Md. 102, 113, 854 A.2d 1191, 1198 (2004); Privette v. State, 320 Md. 738, 744, 580 A.2d 188, 191 (1990) (citations omitted). We may consider the general purpose and aim of a statute in an effort to discern legislative intent. Kaczorowski v. City of Baltimore, 309 Md. 505, 513, 525 A.2d 628, 632 (1987). Our long-standing rule is that if the language used...