State Dept. of Assessments and Taxation v. Glick

• Decision Date: 10 November 1980
• Docket Number: No. 143,143
• Citation: 422 A.2d 34,47 Md.App. 150
• Parties: STATE DEPARTMENT OF ASSESSMENTS AND TAXATION v. Philip M. GLICK, et ux.
• Court: Court of Special Appeals of Maryland

Page 150

47 Md.App. 150

422 A.2d 34

STATE DEPARTMENT OF ASSESSMENTS AND TAXATION v. Philip M. GLICK, et ux.

No. 143.

Court of Special Appeals of Maryland.

Nov. 10, 1980.

Peter W. Taliaferro, Asst. Atty. Gen., with whom were Stephen H. Sachs, Atty. Gen. of Maryland on the brief, for appellant.

Elmer J. Kelsey, Washington, D. C., for amicus curiae.

Philip M. Glick, Chevy Chase, for appellees.

Argued before MASON, LISS and MacDANIEL, JJ.

MacDANIEL, Judge.

In this appeal we are asked to construe the definition of "gross income" which appears in the Real Property Tax Credit Act (the so-called "circuit-breaker" credit) codified in Article 81, § 12F-1 of the Annotated Code of Maryland. Specifically, appellant, the State Department of Assessments and Taxation, asks us to decide whether the return of monies, formerly withheld from a federal employee's earnings and currently repaid as pension benefits constitutes "gross income" within the meaning of the Act.

The facts are not in dispute. Philip M. Glick and his wife Rose, appellees, live at their home in Montgomery County, Maryland. Philip Glick is a retired federal employee. He has received a retirement pension from the Civil Service Retirement Fund since 1971. In 1974, when the Property Tax Credit Program went into effect, the Fund paid appellee Philip Glick $17,986. At that time they notified him that this sum included the last of his past contributions to the Fund, $7,581. ¹

In August 1975, appellees filed an application for a property tax credit with the Department of Finance of Montgomery County. Appellees stated that Philip Glick's gross income for 1974 included $10,405 which he had received as a pension; they stated that he had also received a repayment of $7,581 in that tax year from the Civil Service Retirement Fund, but that this represented a return of his contributions to the Fund. Appellees denied that the $7,581 constituted "income" when received in 1974.

The Montgomery County Finance Department disagreed. In September 1975, they ruled that both the $10,405 received as a pension and the $7,581 received as a repayment of past contributions constituted "income" for purposes of the Act. The Department then applied the statute's eligibility formula and ruled that appellees did not qualify for a property tax credit. ²

Appellees appealed the County Finance Department's ruling to the Property Tax Assessment Appeal Board of Montgomery County. In June 1976, the Board reversed the Finance Department's ruling, and directed the county not to include the repayment of $7,581 in its calculation of appellees' 1974 "gross income" under § 12F-1 of the Act. In August 1976, the State appealed the Board's decision to the Maryland Tax Court. A trial de novo was held in June 1977, and in February 1978, the Tax Court issued an Order and Memorandum of Grounds for Decision affirming the Board's ruling. The State then appealed the Tax Court's Order to the Circuit Court for Montgomery County. On November 1, 1979, the circuit court affirmed the Tax Court's decision. This appeal followed.

Before turning to consider the question for decision, we think it advisable to comment upon the proper standard of review in cases such as this. Appellees assert that judicial review of decisions of the Maryland Tax Court is, by statute, severely limited. The circuit court noted as much in delivering its ruling from the bench, citing Article 81, § 229 (o) of the Annotated Code of Maryland to the effect that the "circuit court ... shall affirm the Tax Court order if it is not erroneous as a matter of law and if it is supported by substantial evidence appearing in the record." And, in Comptroller v. Diebold, Inc., 279 Md. 401 at 407, 369 A.2d 77 (1977), the Court of Appeals stated:

"We have held that the standard by which a result reached by the Tax Court is reviewed is whether a reasoning mind reasonably could have reached the factual conclusion which that agency reached, Fairchild Hiller Corp. v. Supervisor of Assessments, 267 Md. 519, 298 A.2d 148, 149 (1973). The application of this test need not and must not be either judicial fact finding or a substitution of judicial judgment for agency judgment."

And see Comptroller v. Mandel Re-election Com., 280 Md. 575, 374 A.2d 1130 (1977).

But, as we have said, the facts here are undisputed; and the State does not so much challenge the correctness of the Tax Court's fact-finding, but rather the correctness of its (and the circuit court's) interpretation of the definition of "gross income" contained in the statute. As such, the State presents a question of law, and the scope of our review is clear. The general proposition is contained in 73 C.J.S. Public Administrative Bodies and Procedure § 228, from which we quote:

"On a judicial review of an order, decision, or award of an administrative officer, board, commission, or agency, questions of law are open for consideration, and determination. An administrative agency's conclusion of law, or its determination, or decision of a question of law, is subject to judicial review; and on such review the court is free to substitute its own judgment for, and is not bound or concluded by, the judgment or conclusion of the agency. The reviewing court may correct errors of law; and it may interfere where the administrative agency has violated, misconceived improperly construed, or failed to follow, the law, or has proceeded on an erroneous theory of law, or committed a material error of law.... A reviewable question of law may exist where the facts are not in dispute, even though the administrative agency has erroneously labeled or styled its conclusion thereon a finding of fact. So, too, the lack of substantial conflict in the evidence may render a question, which is ordinarily one of fact for a board or commission, one of law for a court. The legal effect of evidence and the ultimate conclusions drawn by an administrative agency from the facts, as distinguished from its findings of primary or evidential facts, are questions of law for the reviewing court." (Footnotes omitted.)

And see generally Snowden v. Mayor and C. C. of Balto., 224 Md. 443, 168 A.2d 390 (1961) (Court will correct illegal action of administrative agency); Gower v. Davis Coal and Coke Co., 197 Md. 52, 78 A.2d 195 (1951) (administrative finding based upon erroneous conception of law "clearly reviewable"); and Brown v. Md. Unemp. Comp. Board, 189 Md. 233, 55 A.2d 696 (1947) (though facts undisputed, implications of facts constitute question of law). Having these precepts in mind, we turn to address the sole issue in this appeal.

The so-called "circuit-breaker" tax credit, codified as Article 81, § 12F-1 of the Annotated Code of Maryland, was enacted by the General Assembly during the 1974 legislative session. ³ Section (a) provides that,

"For taxable year 1975-1976 and each year thereafter, there is created a program of property tax credits from real property taxation imposed by the State, counties, Baltimore City, municipal corporations and special taxing districts for certain homeowners by reason of income."

The tax credit is derived by applying the formula contained in section (c); the exact amount of the homeowner's credit is established through comparison of his financial condition (as measured by "gross income") with his property tax bill. "Gross income" is defined in section (b)(2) as follows:

" 'Gross income' means total income from all sources, for the calendar year immediately preceding the taxable year, whether or not included in the definitions of gross income for federal or State tax purposes, including but not limited to benefits under the Social Security Act or Railroad Retirement Act as these acts may be amended from time to time, the aggregate of gifts in excess of $300, alimony, support money, non-taxable strike benefits, public assistance received in cash grants, pensions, annuities, unemployment insurance benefits, and workmen's compensation benefits. Gross income shall include the net income received from business, rental, or other endeavors but in no event shall a loss from business, rental or other endeavors be used in the determination of gross income."

Essentially, appellees argue that the Maryland Property Tax Credit Act makes "income" the controlling determinant of eligibility; that "income" is a term of art; that it is not the same thing as money, or cash flow, or a return of what one has himself paid out but to which one remains entitled. Appellees direct our attention to a body of cases and other authority construing "income," beginning with the United States Supreme Court's decision in Eisner v. Macomber, 252 U.S. 189, 40 S.Ct. 189, 64 L.Ed. 521 (1920), wherein the Court stated, at 207, "Income may be defined as the gain derived from capital, from labor, or from both combined," provided it be understood to include profit gained through a sale or conversion of capital assets." Appellees insist that although they are not relying on the fact that both Federal and State income tax laws exclude the repayments in question from gross income, nevertheless they are relying on the fact that, by the terms of the Act itself, "gross income" is defined to include "income from all sources...." And thus, by indirection, they insist that the definition of "income" referred to earlier must control. We find this reasoning specious, and we are not persuaded. We think that what must control here, as in other cases of statutory interpretation, is the real and actual intention of the Legislature as expressed in the terms of the statute, taken as a whole. The Court of Appeals expressed this in greater detail in Comptroller v. Mandel Re-election Com., supra, 280 Md. at 578-80, 374 A.2d 1130:

"Principles relative to statutory construction were summed up for the Court by Chief Judge Murphy in State v. Fabritz, 276 Md. 416, 348 A.2d 275 (1975), cert. denied, 425 U.S. 942, 96 S.Ct. 1680, 48 L.Ed.2d 185 (1976):

'The...