State Tax Commission v. Wakefield

Citation222 Md. 543,161 A.2d 676
Decision Date13 June 1960
Docket NumberNo. 61,61
PartiesSTATE TAX COMMISSION and H. Lee Ramsburg et al. v. M. A. WAKEFIELD, Jr., Inc., Timothy W. Gales et ux.
CourtMaryland Court of Appeals

John Martin Jones, Jr., Asst. Atty. Gen. (C. Ferdinand Sybert, Atty. Gen., on the brief), for State Tax Commission.

Bernard F. Goldberg, Ellicott City, for H. Lee Ramsburg et al.

Markell, Veazey & Gans, Hilary W. Gans (J. B. Randol Carroll, Baltimore, on the brief), amicus curiae filed by Maryland Farm Bureau, Inc.

Charles E. Hogg, Ellicott City, for M. A. Wakefield, Jr., Inc.

No brief and no appearance for Timothy W. Gales et ux.

Before BRUNE, C. J., and HENDERSON, HAMMOND, PRESCOTT and HORNEY, JJ.

BRUNE, Chief Judge.

This case is now before us for decision following a reargument granted on motion of the appellant. In our opinion following the original argument (published in the Baltimore Daily Record of February 9, 1960), we assumed, without deciding, that, as the appellant State Tax Commission (now the State Department of Assessments and Taxation) contended, the Legislature had power to grant a partial exemption from taxation of land. Even with that assumption, a majority of this Court was of the opinion that the classification which the statute undertook to make was not sustainable. The appellant contended in its motion for reargument that this conclusion was erroneous and also that it was reached upon an inadequate record insofar as the ground of decision was concerned. We withdrew our original opinion upon granting the motion for reargument, and we have now considered the case anew. This opinion supersedes our original opinion, and leaves open the question upon which that original opinion turned.

In this case 1 there are three appeals and one cross-appeal. We are no longer concerned with the latter by reason of a confession of error made by the cross-appellee at the time of the reargument, if the statute should be held valid. All involve Code (1957), Article 81, Section 19(b) (referred to below simply as Section (or Sec.) 19 (b), without reference to Article 81 or to the 1957 Edition of the Code, or as 'the Farm Assessment Act'). The appellant, referred to below as the 'Commission', is the State Tax Commission (these proceedings having originated prior to the passage of Ch. 757 of the Acts of 1959), and the appellees are owners of properties located in Howard County. What is now Sec. 19 (b) as originally enacted (over a veto) by Ch. 9 of the Acts of 1956 was an addition to Sec. 17 of Article 81 of the Code of 1951 under the sub-title 'Method of Assessment' reading as follows:

'Lands which are actively devoted to farm or agricultural use shall be assessed on the basis of such use, and shall not be assessed as if subdivided or on any other basis.'

Section 680 of the Acts of 1957 added provisions to Sec. 19(b) empowering the Commission to establish criteria for determining whether lands are actively devoted to farm or agricultural use. Such criteria are to include, but are not limited to the following: (i) zoning; (ii) past and present use of the land, including the land under 'soil bank' provisions of the Federal Agricultural Stabilization Act, 7 U.S.C.A. § 1801 et seq.; (iii) productivity of the land, including timberlands and lands used for reforestation; and (iv) the ratio of farm or agricultural use as against other uses of the land.

In all three cases here combined the Commission is contesting the holding of the Circuit Court that Sec. 19(b) is unconstitutional. Each of the taxpayers takes the opposite position on this question. The Commission is seeking to uphold a statute which would permit lower tax assessments than would otherwise be made; and disappointed taxpayers, held not to be entitled to the benefit of the statute, are seeking to strike it down. The positions of the parties thus may seem the reverse of the usual positions of tax authorities and taxpayers. 2

The Commission contends that the statute is valid as a reasonable partial exemption from taxation. The appellees attack it as providing for the classification of land for taxation in contravention of Article 15 of the Maryland Declaration of Rights. This is a question which we did not decide in our original opinion. We shall now address ourselves to its determination.

Article 15 of the Declaration of Rights now reads as follows:

'That the levying of taxes by the poll is grievous and oppressive and ought to be prohibited; that paupers ought not to be assessed for the support of the government; that the General Assembly shall, by uniform rules, provide for separate assessment of land and classification and sub-classifications of improvements on land and personal property, as it may deem proper; and all taxes thereafter provided to be levied by the State for the support of the general State Government, and by the Counties and by the City of Baltimore for their respective purposes, shall be uniform as to land within the taxing district, and uniform within the class or sub-class of improvements on land and personal property which the respective taxing powers may have directed to be subjected to the tax levy; yet fines, duties or taxes may properly and justly be imposed, or laid with a political view for the good government and benefit of the community.'

The trial court held that the requirements of uniformity contained in Article 15 applied to assessments of land as well as to the rate of taxes thereon. The Commission concedes that Article 15 does not expressly grant the right to classify land for tax purposes, but contends that nonetheless the statute is valid. In essence, it argues that the Farm Assessment Act allows a partial exemption based upon what it says is a sound policy to protect agriculture and to prevent farmers in suburban areas from being forced off the land by high assessments and high taxes based thereon, and it contends that the General Assembly has always had power to grant complete exemptions, and that it also has power to grant partial exemptions.

The Commission is entirely correct in pointing out that the power of the Legislature to grant full exemptions from taxation where reasonable and for a public purpose has long been recognized in this State, even though there is no express constitutional authorization therefor. Buchanan v. County Com'rs of Talbot County, 47 Md. 286; Wells v. Commissioners of Hyattsville, 77 Md. 125, 26 A. 357, 20 L.R.A. 89; Simpson v. Hopkins, 82 Md. 478, 33 A. 714; City of Baltimore v. Minister & Trustees of Starr Methodist Protestant Church, 106 Md. 281, 67 A. 261; Niles, Maryland Constitutional Law, p. 32. See also Kimball-Tyler Co. v. City of Baltimore, 214 Md. 86, 133 A.2d 433. This was true, although Article 15, prior to the 1915 amendment, required uniformity with regard to assessment as well as with regard to tax rate. National Can Corp. v. State Tax Comm., 220 Md. 418, 153 A.2d 287.

The Commission has called attention to a statement in the majority opinion in the National Can Corp. case, supra, 220 Md. at page 425, 153 A.2d at page 291 (an opinion written by the author of the present opinion) that '[t]he power to classify property for purposes of taxation was conferred by the amendment to Article 15 * * * ratified November 2, 1915.' (This statement was, as the Commission points out, in accordance with one made in its brief in that case.) It made no practical difference in National Can whether the 1915 amendment to Article 15 conferred the above power to classify or removed a previously existing bar to its exercise. To avoid possible difficulty in the future, however, we may say that we consider it preferable to state that the 1915 amendment removed some previously existing bar to the exercise of a power of reasonable classification of property for purposes of taxation. This, we believe, is in accord with the general rule long recognized in this State that the taxing power, to which the power of classification for tax purposes is incidential, is an inherent power of the State, exercisable by the General Assembly within such limits as may be imposed by the Constitution of the State (including the Declaration of Rights) or by the Constitution of the United States. See State v. Sterling, 20 Md. 502, 516; Faust v. Twenty-Third German American Bldg. Ass'n, 84 Md. 186, 192, 35 A. 890; Allen v. National State Bank of Camden, N. J., 92 Md. 509, 512, 48 A. 78, 52 L.R.A. 760; City of Baltimore v. Safe Deposit & Trust Co., 97 Md. 659, 662, 55 A. 316. Cf. State v. Mayhew, 2 Gill 487. (We may observe in passing that any bar based upon uniformity which the 1915 amendment to Article 15 removed, was one which dated from the adoption of the original Declaration of Rights and Constitution of the State in 1776, since Article 15 was only slightly charged from its form in 1776 (when it was Article 13) until 1915. An 'inherent power' of this State was thus limited ab initio.)

Under the terms of the 1915 amendment to Article 15, it is clear that the General Assembly has power to classify and subclassify both improvements on land and personal property, so long as any such classification or subclassification is not arbitrary or unreasonable. In the case of ad valorem taxes, the application of a lower rate of assessment or taxation to one or more classes of property than to others sets up a classification which operates practically to grant a partial exemption in favor of the class or classes subject to the lower rate. Doubtless because of this practical effect this Court, in speaking of the restrictions (chiefly as to rates rather than assessments), imposed upon taxation for city purposes of property in the area annexed to the City of Baltimore by the Annexation Act of 1888 (Ch. 98 of the Acts of that year), has referred to them a number of times as exemptions, at least twice as partial exemptions. See Daly v. Morgan, 69 Md. 460, 470-471, 16 A. 287, 1 L.R.A. 757 ('qualified exemption'): Sindall v....

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