Gateway Terry, LLC v. Prince George's Cnty.
| Decision Date | 26 January 2022 |
| Docket Number | 0708, Sept. Term, 2020 |
| Citation | 268 A.3d 908,253 Md.App. 457 |
| Parties | GATEWAY TERRY, LLC v. PRINCE GEORGE'S COUNTY, et al. |
| Court | Court of Special Appeals of Maryland |
Argued by Nathan D. Adler (Robert C. Baker, II, Neuberger, Quinn, Gielen, Rubin & Gibber, PA, Baltimore, MD), all on the brief, for Appellant.
Argued by Joseph Dudek (Brian E. Frosh, Atty. Gen., on the brief), Baltimore, MD, for Appellee.
Fader, C.J., Arthur,James A. Kenney, III (Senior Judge, Specially Assigned), JJ.*
An LLC, owned by a pension fund for the employees of Los Angeles County, California, purchased real property in Prince George's County. The LLC claimed a statutory exemption from State transfer and recordation taxes on the ground that it was "a political subdivision in the State." See Md. Code , § 12-108 of the Tax-Property Article ("TP"); TP § 13-207(a)(1). The LLC also claimed a statutory exemption from County transfer taxes on the ground that it was a "political subdivision of the State." See Prince George's County Code § 10-187(a)(1).
The Maryland Tax Court denied the LLC's request for a refund, and the Circuit Court for Prince George's County affirmed the tax court's decision.
The LLC appealed. We too affirm.
This appeal involves pure questions of law. The material facts are not in dispute.
Appellant Gateway Terry, LLC, is a California limited liability company, wholly owned and managed by the Los Angeles County Employees Retirement Association. In November 2017, Gateway Terry purchased Terrapin Row, a group of residential condominium units in College Park, for $186,460,000. After the sale, Gateway Terry presented a deed, a deed of trust, and other related documents for recordation among the land records of Prince George's County.
Absent an exemption, a transferee, such as Gateway Terry, must pay State and local transfer and recordation taxes when it records certain documents among the land records. In general, the amount of taxes due depends on the consideration paid.
Using the figure of $186,460,000 as the consideration paid, the County's Office of Finance collected $2,610,440 in County transfer taxes and $1,025,530 in State recordation taxes. Using the same figure, the Clerk of the Circuit Court for Prince George's County collected $932,300 in State transfer taxes.
Gateway Terry applied for a refund. As grounds for the refund, Gateway Terry invoked the exemption from State recordation and transfer taxes in the case of a transfer to "the State[,] an agency of the State[,] or a political subdivision in the State." See TP § 12-108 ; TP § 13-207(a)(1). In addition, Gateway Terry invoked the exemption from County transfer taxes for "[c]onveyances to the State, any agency of the State, or any political Subdivision of the State." See Prince George's County Code § 10-187(a)(1). Gateway Terry argued that, as an LLC whose sole owner was a public pension fund for employees of a local government in the State of California, it qualified as a political subdivision in or of "the State." Both the County and the State of Maryland denied the request for a refund.
Gateway Terry appealed to the Maryland Tax Court, arguing that it was entitled to the exemptions. The court convened a hearing, at which the Gateway Terry and the taxing authorities, Prince George's County and the State of Maryland, debated the correct interpretation of the term "the State" in the applicable statutes.
At the end of the hearing, the court held the record open to allow the parties to submit materials pertaining to the legislative history of the term "the State." Gateway Terry submitted additional materials, but those materials did not concern the legislative history. Instead, the materials raised a new question about whether the State had discriminated against foreign LLCs like Gateway Terry, in violation of principles of equal protection, by requiring them to pay transfer and recordation taxes while exempting agencies and political subdivisions of the State of Maryland.
The tax court issued a memorandum opinion and order, affirming the decisions to deny the tax exemptions. The court held that, under the applicable statutes, the term "the State" refers to the State of Maryland and to no other state. Because Gateway Terry is not a political subdivision in or of the State of Maryland, the court held that it does not qualify for the exemptions. The tax court also held that, even if the exemptions applied to a transfer to a state other than the State of Maryland (or to an agency or political subdivision of a state other than the State of Maryland), Gateway Terry could not claim the exemption, because it is not a political subdivision of the State of California. The tax court did not address the equal protection argument that Gateway Terry raised in the supplemental submission that it filed after the hearing.
Gateway Terry petitioned for judicial review in the Circuit Court for Prince George's County, which affirmed the tax court's decision. Like the tax court, the circuit court did not consider the equal protection argument.
Gateway Terry noted this timely appeal.
Gateway Terry has submitted three questions, which we have reworded as follows:
We shall hold that Gateway Terry is not a political subdivision in or of "the State," within the meaning of the statutory exemptions. In view of our disposition of those issues, we need not address whether an LLC, which is owned by a pension fund for employees of a local government in another state, is a "political subdivision" of that state.
"The Tax Court is ‘an adjudicatory administrative agency in the executive branch of state government.’ " Frey v. Comptroller , 422 Md. 111, 136, 29 A.3d 475 (2011) (quoting Furnitureland S., Inc. v. Comptroller , 364 Md. 126, 137 n.8, 771 A.2d 1061 (2001) ); accord Gore Enter. Holdings, Inc. v. Comptroller , 437 Md. 492, 503, 87 A.3d 1263 (2014). "As such, the Tax Court is subject to the same standards of judicial review as other administrative agencies." Frey v. Comptroller , 422 Md. at 136, 29 A.3d 475 ; see Comptroller v. Johns Hopkins Univ. , 186 Md. App. 169, 181, 973 A.2d 256 (2009). "We review the decision of the Tax Court, not the ruling of the circuit court."
Comptroller v. Johns Hopkins Univ. , 186 Md. App. at 181, 973 A.2d 256 ; accord Blue Buffalo Co. v. Comptroller , 243 Md. App. 693, 701, 221 A.3d 1130 (2019).
Because the tax court's decision involves a pure question of law concerning the meaning of the State and County enactments, we review it without deference. See Blue Buffalo Co. v. Comptroller , 243 Md. App. at 702, 221 A.3d 1130. Although we are directed to place " ‘great weight’ " on the tax court's interpretations of the statutes and regulations that it administers ( id. (quoting Gore Enter. Holdings, Inc. v. Comptroller , 437 Md. at 505, 87 A.3d 1263 )), "[t]his principle is limited by the ‘plain meaning’ rule of interpretation; that is ‘where there is no ambiguity and the words of the statute are clear, we simply apply the statute as it reads.’ " Id. (quoting Frey v. Comptroller of Treasury , 422 Md. at 182, 29 A.3d 475 ). As the County and the State point out, however, "it is well settled that tax-exemption statutes are to be strictly construed in favor of the taxing authority." Supervisor of Assessments of Baltimore Cnty. v. Keeler , 362 Md. 198, 209, 764 A.2d 821 (2001).
This case turns on the interpretation of three enactments: TP § 12-108(a)(1), TP § 13-207(a)(1), and § 10-187(a) of the Prince George's County Code.
TP § 12-108(a)(1) creates an exemption from State recordation taxes for an instrument of writing that transfers property or grants a security interest to "the State," "an agency of the State," or "a political subdivision in the State." TP § 13-207(a)(1) creates an exemption from State transfer taxes "to the same extent" that "[a]n instrument of writing" is exempt from the "recordation tax under ... [TP] § 12-108(a)." Section 10-187(a) of the Prince George's County Code creates an exemption from County transfer taxes for "[c]onveyances to the State, any agency of the State, or any political Subdivision of the State." Thus, in the case of each enactment, the availability of the exemption depends, directly or indirectly, on whether the transferee is "the State," "an agency of the State," or a "political subdivision" in or of "the State."
Gateway Terry contends that it is entitled to the exemptions because, it says, it is a political subdivision in or of "the State." The validity of that contention depends, in part, on competing definitions of the term "State" or "state" in the Maryland Code.
The General Provisions Article of the Code supplies a number of definitions that apply throughout the Code in its entirety, except as otherwise provided. Md. Code , § 1-101 of the General Provisions Article ("GP").
GP § 1-115(a) defines the term "state," with a lower case "s," to mean:
By contrast, GP § 1-115(b) defines the term "State", with a capital "S," to mean "Maryland."
The Tax-Property Article, however, contains another definition of "State." According to TP § 1-101(kk) :
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