Weaver v. Prince George's County

• Citation: 281 Md. 349,379 A.2d 399
• Decision Date: 01 September 1977
• Docket Number: No. 2,2
• Parties: Lynda Lee WEAVER et al. v. PRINCE GEORGE'S COUNTY, Maryland. ,
• Court: Court of Appeals of Maryland

Page 349

281 Md. 349

379 A.2d 399

Lynda Lee WEAVER et al. v. PRINCE GEORGE'S COUNTY, Maryland.

No. 2, Sept. Term, 1977.

Court of Appeals of Maryland.

Nov. 3, 1977.

Louis Pohoryles, Washington, D.C. (Pohoryles, Goldberg, Repetti & Harris, Washington, D.C., on the brief) and Thomas P. Smith, Langley Park (Burt M. Kahn and Kaplan, Smith, Joseph, Greenwald & Laake, Langley Park, on the brief), for appellants.

James C. Chapin, County Atty. and Steven M. Gilbert, Associate County Atty., Upper Marlboro (Richard S. Alper, Associate County Atty., Upper Marlboro, on the brief), for appellee.

Argued before MURPHY, C. J., and SINGLEY, ^* SMITH, DIGGES, LEVINE, ELDRIDGE and ORTH, JJ.

LEVINE, Judge.

In this appeal, we are called upon to determine whether the Prince George's County Multifamily Occupancy Tax (the Occupancy Tax) is a property tax subject to the uniformity requirements of Article 15 of the Maryland Declaration of Rights and whether the County acted ultra vires the State enabling Act (the State Act) in denying recipients of military housing allowances the benefit of the State Act's exemption for families receiving a "housing subsidy." ¹ Appellants, who are tenants, landlords and rental management companies in Prince George's County, commenced this declaratory judgment proceeding in the Circuit Court for Prince George's County. There, the chancellor (Bowling, J.) upheld the constitutionality of the Occupancy Tax on the grounds that the plaintiffs were foreclosed from raising the issue by the doctrine of collateral estoppel. ² The circuit court, however, did rule that by applying the tax to persons receiving military housing allowances, the County had exceeded its authority under the State Act. All parties appealed to the Court of Special Appeals, which, in Weaver v. Prince George's County, 34 Md.App. 189, 205, 366 A.2d 1048 (1976), reversed the chancellor's ruling with respect to the military housing allowances. Holding also that appellants' constitutional claims were not barred by the doctrine of collateral estoppel, the Court of Special Appeals considered each of the constitutional challenges and held ultimately that both the State Act and the implementing County ordinance were constitutional in all respects. We then granted certiorari, and for reasons that follow, we affirm.

I

Chapter 925 of the Laws of 1976 authorizes Prince George's County to levy a tax not to exceed 4% of the rent paid by lessees of "multifamily residential units" during the period of possession by the lessee. A "multifamily residential unit" is defined to include "any building . . . operated as a single unit in which the landlord provides . . . two or more rental dwelling units." The statute further permits the County to render the operator or owner of a multifamily residential unit personally liable for collection and remittance of the tax to the appropriate local authorities. The County may also require landlords to collect the Occupancy Tax as part of the tenant's monthly rental installment, and upon failure of a tenant to pay the tax may proceed against him as in an ordinary case for non-payment of rent. The State Act specifically exempts from the operation of the tax families receiving a "housing subsidy."

The County Ordinance, enacted pursuant to the grant of authority in the State Act, imposed the maximum 4% tax on monthly rents charged for the use and occupancy of rental multifamily residential units. Under the Ordinance, landlords who fail to remit the tax are subject to criminal prosecution and fines up to $500.00. A civil penalty equal to ten times the unpaid tax plus interest is assessed against any landlord who refuses to collect the tax. Tenants failing to remit the tax may be guilty of a misdemeanor punishable by a fine not to exceed $500.00 or no more than three months in jail.

Although the State Act and County Ordinance are for the most part identical, the Ordinance supplements the Act in several respects. First, the Ordinance adds a definition of the term "rent" as "consideration paid or required to be paid by a tenant for the use or occupancy of any structure and appurtenance thereto, valued in money, . . . including utilities . . ." (emphasis added). Secondly, the Ordinance supplies a definition of the phrase "housing subsidy," as used in the State Act, to include "direct or indirect payments by the federal or state government, payable to either a tenant or to a landlord on behalf of a tenant where the amount is based on the tenant's income or ability to pay and used exclusively for the payment of rent." The Ordinance further provides that this "term shall not include quarters allowances or similar military housing allowances." (emphasis added).

II

Appellants contest the constitutionality of the Prince George's County Occupancy Tax on two grounds, both of which arise under the uniform taxation mandate of Article 15 of the Declaration of Rights. First, say appellants, the tax is infirm because it is a property tax on a tenant's leasehold estate, which is not based on the actual worth of the possessory interest in the hands of the tenant. ³ Secondly, it is contended that the uniformity limitation of Article 15 is violated because the County Ordinance defines "rent" to include utilities charges; therefore, the tax unreasonably discriminates against those apartment dwellers whose monthly rental payments cover utilities, since they are compelled to pay a higher effective rate of tax than similarly situated tenants who do not pay utility fees together with their rent installments.

In its entirety, Article 15 of the Declaration of Rights presently provides:

"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 the separate assessment, classification and sub-classification of land, 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 within each class or sub-class of land, 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." (emphasis added).

Under the Article, taxes laid directly upon property, as such, must be equal, uniform and according to the actual worth of all property in the same class located within the State. See State Tax Comm. v. Gales, 222 Md. 543, 560, 161 A.2d 676 (1960); National Can Corp. v. Tax Comm., 220 Md. 418, 426, 153 A.2d 287 (1959), appeal dismissed, 361 U.S. 534, 80 S.Ct. 586, 4 L.Ed.2d 538 (1960); State v. P., W. & B.R.R. Co., 45 Md. 361, 378 (1876). As the current formulation of the Article makes clear, however, the requirement that taxes be equal and uniform applies only to property taxes, Katzenberg v. Comptroller, 263 Md. 189, 196-97, 282 A.2d 465 (1971); A. Niles, Maryland Constitutional Law 32-34 (1915). As early as 1776, the framers of Article 15 expressly permitted the General Assembly to depart from the principle of uniformity in taxation where the particular revenue measure enacted was an excise, that is, a tax imposed or laid with a political view for the good government and benefit of the community. Williams' Case, 3 Bland. 186, 257 (1831); accord, Oursler v. Tawes, 178 Md. 471, 485-86, 13 A.2d 763 (1940).

The keystone of appellants' challenge to the Prince George's County Occupancy Tax and the central issue of this appeal is whether the tax is a direct tax on the tenant's property or whether it constitutes an indirect excise tax on the privilege of using or occupying a rented multifamily residential unit. If the latter, our inquiry is at an end, since, as we have indicated, there are no uniformity or ad valorem restrictions on the Legislature's power to levy excise taxes.

Several preliminary observations are in order at this juncture. First, our decisions have acknowledged that a strong presumption exists in favor of the constitutionality of legislative enactments, Department of Natural Res. v. Linchester Sand & Gravel Corp., 274 Md. 211, 218, 334 A.2d 514 (1974); Md. Bd. of Pharmacy v. Sav-a-Lot, 270 Md. 103, 106, 311 A.2d 242 (1973), including revenue measures such as the County Occupancy Tax at issue here. See Adm'r, Motor Veh. Adm. v. Vogt, 267 Md. 660, 674, 299 A.2d 1 (1973). Secondly, the Legislature's power of taxation is an inherent attribute of the sovereignty of the state, and the right of the Legislature to exercise it should seldom be questioned except in cases where it is plain that the power has been relinquished or where invocation of the power would clearly overstep a limitation placed on its exercise by either the federal or state constitution. State v. C. & P.R.R. Co., 40 Md. 22, 44 (1874); see State Tax Comm. v. Gales, 222 Md. at 549, 161 A.2d 676.

The line that separates an excise tax from a property tax is a difficult one to draw, and courts have not fully succeeded in developing a truly useful definition of either concept. Blaustein v. Tax Comm'n., 176 Md. 423, 426, 4 A.2d 861 (1939). To draw that line here, we examine the designation placed upon the tax by the Legislature, the subject matter of the tax, and the incidents of the tax, i. e., the manner in which it is assessed and the measure of the tax.

Although the nature of any tax should be determined by reference to its actual operation and practical effect, rather than by any particular descriptive language which may have been employed by the legislative body, Herman v. M. & C.C. of Baltimore, 189 Md. 191, 198, 55 A.2d 491, 173 A.L.R. 1310 (1947), we are nevertheless cognizant...