Montgomery Cnty. v. CC Homes Assocs., LLC

• Decision Date: 13 July 2021
• Docket Number: No. 2107,2107
• Parties: MONTGOMERY COUNTY v. CC HOMES ASSOCIATES, LLC
• Court: Court of Special Appeals of Maryland

MONTGOMERY COUNTY v. CC HOMES ASSOCIATES, LLC

No. 2107

COURT OF SPECIAL APPEALS OF MARYLAND

September Term, 2019

July 13, 2021

Circuit Court for Montgomery County

Case No. 463417-V

UNREPORTED

Arthur, Shaw Geter, Sharer, J., Frederick (Senior Judge, Specially Assigned), JJ.

Opinion by Sharer, J.

*This is an unreported opinion, and it may not be cited in any paper, brief, motion, or other document filed in this Court or any other Maryland Court as either precedent within the rule of stare decisis or as persuasive authority. Md. Rule 1-104.

In this appeal we are asked by Montgomery County, appellant, to determine whether the Maryland Tax Court properly interpreted the development impact tax exemption provisions of the Montgomery County Tax Code, Sec. 52-41(h) and Sec. 52-54(d), when it determined that a new development "replaced" existing facilities, thereby allowing an offset for the amount of impact taxes owed by the developer CC Homes Associates, LLC, appellee.

Montgomery County, appellant, presents two questions for our review:

1. Did the Maryland Tax Court err in ruling that a private developer's construction of Moderately Priced Dwelling Units (MPDUs) "replaced" existing affordable housing units when the developer had already agreed to relocate those units to another location?

2. Does the plain language in Sections 52-41(h) and 52-54(d) of the Montgomery County Code require the County to collect Impact Taxes on the difference between the tax due on the old and new dwelling units?

For the reasons discussed below, we shall affirm the judgment of the Circuit Court for Montgomery County affirming the Tax Court's grant of summary judgment.

I. BACKGROUND

While this appeal concerns solely a dispute of the Tax Court's interpretation and application of the Montgomery County Tax Code's development impact tax exemption provisions on the new development, we provide a brief background of the relevant facts underlying the development project for context.

For the purposes of this litigation, the parties have stipulated to the facts concerning the underlying agreement between the Housing Opportunities Commission of Montgomery County (HOC), which operates as the agency for public housing within the county, andEYA Development, LLC, an affiliate of CC Homes Associates, LLC¹ (CC Homes), for the redevelopment of four adjoining HOC-owned lots in the Chevy Chase Lake neighborhood of Montgomery County. Under that agreement, CC Homes would purchase three of the four lots from HOC, raze the four HOC-operated² low-income apartment buildings then on each of the lots, which consisted of a total of 68 garden apartments, and "lead the re-zoning, entitlement, and design of a townhome and multifamily project on the property...." The project called for (1) a new high-rise apartment building to contain 200 apartment units on the HOC-retained lot that would preserve the number of affordable housing units, (2) the construction of 62 townhomes, a minimum of 15% of which would be reserved for Moderately Priced Dwelling Units (MPDU's)³, (3) the construction of a public park between the high-rise and townhome developments, and (4) the construction of a new private connector road for the development.

In order to sell and redevelop the property, HOC sought the requisite approval and authority from Montgomery County and a mandatory referral by the County Planning Board for the disposition of HOC-owned property. The County's approval was contingent on the execution of an Agreement Not to Convert among HOC, Chevy Chase LakeDevelopment Corporation, and the County that was also consented to and executed by CC Homes. The Agreement required that the 68 apartment units from the four previous apartment buildings be relocated to the new high-rise apartment building on the HOC-retained lot, with at least 21 units to be reserved for low-income households and 35 units to be reserved for qualified workforce housing.⁴

CC Homes sought and received approval from the County Planning Board for the joint development plans of all four lots that included the proposed construction of the new multi-family high-rise apartment building on the HOC-retained lot, the re-subdivision of the remaining three lots into 62 individual lots, proposed construction of the 62 townhouses on the re-subdivided lots, a half-acre public park between the apartment building and the townhouses, and a new private local connector road. In its report approving the proposed development project, the Planning Board included its approval of HOC's mandatory referral request for disposition of three of its four lots.

Following Planning Board approval, CC Homes sought building permits from the County's Department of Permitting Services (DPS) for 62 townhouses and requested a development impact tax credit for the 47 garden apartment units that were previously located on the three lots where the 62 townhouses were to be built. DPS denied the request for an impact tax credit, finding that the exemptions would not apply because thetownhouses were not replacement buildings. CC Homes appealed that ruling to the Maryland Tax Court.

Review by the Tax Court

Before the Tax Court, the parties filed a joint stipulation of the relevant facts, together with exhibits, and proceeded on counter motions for summary judgment. As the Tax Court effectively summarized, the County's position was that CC Homes is not entitled to an exemption from the impact tax, based on two main arguments: (1) "because it did not construct its townhouses on the same site or project as the previous buildings[;]"⁵ and (2) "because all the previously owned apartments were exempt from the impact tax and thus the replacement building constructed cannot be exempt."

Following a hearing and supplemental briefing, the Tax Court issued a written memorandum and order denying the County's motion for summary judgment, and granting CC Homes' motion for summary judgment, thereby substantially reducing the impact tax assessment of the project against CC Homes.

The Tax Court explained:

Here, the plain language of the impact tax law requires the County to reduce the impact tax assessment of Petitioner's new market rate townhouses by the assessment of the previously demolished apartments when taxed at the same time. Moreover, the exemption from tax actually results in a credit/offset against the tax.

The 52 new [non-exempt] townhouses replaced the 47 garden apartments on the "same site" or in the same project as approved by the Planning Board and in accordance with the Preliminary Plan and Townhouse Site Plan....

* * *

The Impact Tax Law statutory framework and the legislative history supports an interpretation that Petitioner should only be responsible for paying its proportional impact on transportation and public-school facilities, namely, the net increase in dwelling units above the replaced development. The intent of the Impact Tax Law, which is best reflected by the plain language of the statute, is that the new development supports the need for transportation and school capacity above and beyond existing demand. The law requires new development to pay its pro rata share of the costs of impact transportation improvements and public-school improvements necessitated by that development. In fact, this is the stated purpose[] codified in the Impact Tax Law.⁶

The County sought judicial review in the Circuit Court for Montgomery County, which affirmed the decision of the Tax Court. This appeal followed.

Although CC Homes disputes the characterizations of the stipulated facts made by the County in its brief, the parties agree that the issue is a purely legal one concerning the interpretation of the County's impact tax exemption provisions.

II. DISCUSSION

Standard of Review - The Maryland Tax Court

Because "[t]he Maryland Tax Court is an administrative agency ... it 'is subject to the same standards of judicial review as other administrative agencies.'" Maryland Econ. Dev. Corp. v. Montgomery County, 431 Md. 189, 198 (2013) (quoting Frey v. Comptroller of the Treasury, 422 Md. 111, 136 (2011)). The Court of Appeals has recently reaffirmed the appropriate standard of review for Maryland Tax Court decisions:

"The Maryland Tax Court is an adjudicatory administrative agency" and, as we do when reviewing other administrative agencies, we "evaluate[ ] the decision of the agency[ ]" to determine whether, based on the "findings and reasons set forth by the Tax Court[,]" its determination can be upheld. Gore Enter. Holdings, Inc. v. Comptroller of Treasury, 437 Md. 492, 503-05 (2014) (quotation marks and citations omitted). ...

"When the Tax Court interprets Maryland [or county] tax law, we accord that agency a degree of deference as the agency that administers and interprets those statutes." Maryland State Comptroller of Treasury v. Wynne, 431 Md. 147, 160 (2013), aff'd sub nom. Comptroller of Treasury of Maryland v. Wynne, 575 U.S. 542 (2015); Gore Enter., 437 Md. at 505 ("The legal conclusions of an administrative agency that are premised upon an interpretation of the statutes that the agency administers are afforded great weight.") (quotation marks and citations omitted). That degree of deference, however, is not determinative; "a reviewing court is under no statutory constraints in reversing a Tax Court order which is premised solely upon an erroneous conclusion of law." Ramsay, Scarlett & Co., Inc. v. Comptroller of Treasury, 302 Md. 825, 834 (1985) (citations omitted); Lane v. Supervisor of Assessments of Montgomery Cty., 447 Md. 454, 464 (2016) ("We affirm the decision of the Tax Court unless that decision is not supported by substantial evidence appearing in the record or is erroneous as a matter of law.") (quotation marks and citations omitted); Comptroller of Treasury v.M. E. Rockhill, Inc., 205 Md. 226, 233 (1954) ("We have recognized that the interpretation placed by the State Comptroller upon the Retail Sales Tax Act is entitled to great weight as an administrative

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