Kimball-Tyler Co. v. Mayor of Baltimore

Henderson, J., delivered the opinion of the Court. This case involves two appeals in one record, from identical decrees of the Circuit Court of Baltimore City, upholding the validity of the Baltimore City Ordinance, No. 643, which repealed the manufacturers’ tax exemption, and dismissing bills of complaint seeking permanent injunctions against the enforcement of the ordinance. The appellants include various corporations and a partnership engaged in the business of manufacturing in Baltimore City, and a taxpayer of Baltimore City. Some of the corporations are located in that portion of the City annexed by Chapter 82 of the Acts of 1918, and others are located in the older part of the City.

The suits were brought against the Mayor and City Council of Baltimore, various other officials of the City, and the State Tax Commission of Maryland. The appeals were advanced for argument in this Court. Ordinance No. 643, effective December 5, 1956, repealed the exemption from taxation which, prior to its passage, had applied to machinery and inventory of manufacturers in Baltimore City. Following its passage, the City Council passed, on December 18, 1956, and the Mayor approved before the end of the year, Ordinance No. 667, which established the ⁹⁰ tax rate in Baltimore City for 1957 at $2.88.

Had Ordinance No. 643 not been passed, it was estimated that some $400,000,000 would have been excluded from the estimated value of all the property in the City subject to taxation, and the tax rate for 1957 would have been $3.34. The cases were consolidated for trial in the equity court below and evidence was introduced by way of a consolidated stipulation, together with attached exhibits. Taken as a whole, the evidence related to the administrative practices of the State Tax Commission and Department of Assessments of Baltimore City, opinions and data bearing on the probable economic or business effects of the exemption and its repeal, estimated effects upon State revenue, and similar matters. Since the decisive questions presented on these appeals are questions of law, we shall not attempt to detail or even summarize the evidence, although we may refer to particular parts in the discussion of the legal principles involved.

The first question presented is whether the General Assembly, and the City acting pursuant to authority granted, possessed the power to repeal the tax exemption. This involves a consideration and construction of the various applicable statutes and ordinances. The history of the exemption begins with Chapter 187 of the Acts of 1880 (or Chapter 235 which seems to be identical), a local enabling act which permitted the City to exempt manufacturers’ machinery and equipment “whenever it shall seem expedient for the encouragement of the growth and development of manufactures and manufacturing industry in said city”. This was implemented by the City in 1881, by the passage of Ordinance No. 7.

The enabling act (broadened by Chapter 32 of the Acts of 1912 to include manufacturing inventories), was re-enacted from time to time by the General Assembly and is now included in Section 6 (33) of the City Charter. By Chapter 342 of the Acts of 1882, the General Assembly passed a public general law granting a similar exemption on machinery used in manufacturing in Baltimore City and in each county that by local action evidenced the desire to have the law made effective therein. Virtually the same exemption was authorized in Chapter 528, Acts of 1914, the year in which tangible personal ⁹¹ property of business corporations was made taxable and the share tax on such corporations was abolished by Chapter 324, Acts of 1914. At first the exemption on machinery was from local taxes only, but this was broadened to include State taxes by Chapter 226, Acts of 1929.

In 1918 the General Assembly passed the Annexation Act, Chapter 82, Acts of 1918, whereby certain portions of Anne Arundel County and Baltimore County were annexed to the City of Baltimore. Section 10 of this Act provided: “* * * that all personal property, of every description, owned by any person, firm or corporation and used entirely or chiefly in connection with manufacturing, in the territory annexed by this act to Baltimore City, including mechanical tools, or implements, whether worked by hand or steam or other motive power, machinery, manufacturing apparatus or engines, raw material on hand, manufactured products in the hands of the manufacturer, bills receivable and business credits of every kind, due to the manufacturer, for goods manufactured in Baltimore City shall be exempt from taxation for all ordinary municipal purposes.” It may be noted that this called for no concurrence by the City, but Section 15 of the Annexation Act provided that in the territory annexed the Mayor and City Council should possess the same power to pass ordinances, under powers granted by the Charter, as in the “old city”. In the following year, by Ordinance No. 462, approved March 6, 1919, the City for the first time broadened the scope of the exemption to include inventories, although it had possessed the power to do so in the “old city” since 1912. The last ordinance passed by the City, giving effect to the exemptions authorized, was apparently Ordinance No. 1503, approved December 20, 1950, and incorporated in the City Code (1950 ed.) as Article 37, sec. 50.

The present provisions of the Public General Laws, relative to manufacturers’ exemptions, are found in Code (1951), Art. 81, sec. 8 (23) and (24), which provide in part: “The following shall be exempt from assessment and from State, county and city taxation in this State * * * : (23) Tools * * * machinery, * * * used in manufacturing, * * * in any county or city, as herein defined, (including the City ⁹² of Baltimore) * * * in which by law, resolution or ordinance the same are or may be exempt from county or city taxation; and the County Commissioners of any county and any city, as herein defined, including the Mayor and City Council of Baltimore, are hereby authorized to pass such resolution or ordinance. * * *. (24) Raw materials on hand and manufactured products in the hands of the manufacturer in any city and/or county in which by law, resolution or ordinance the same are or may be exempt from county and/or city taxation; provided that nothing in this subsection shall exempt any such property from State taxation or from assessment therefor. * * * .” (All of this language is repeated in the 1956 Supplement with special provisions, added as to particular counties, not here pertinent.) As a result of a pressing need for additional revenues for the City of Baltimore, the General Assembly passed Chapter 1 of the Laws of 1945 (Extraordinary Session), which added subsection 30A to Section 6 of the 1938 City Charter. This law expressly granted to the City of Baltimore the power to tax to the same extent as the State. The period of this taxing power was to continue for only two years.

By Chapter 1, Acts of 1947 (Extraordinary Session), the City was given the power, in addition to its other taxing powers, to tax to the same extent as the State has or could exercise said powers within the limits of Baltimore City, with certain exceptions; to provide by ordinance for the imposition, assessment, levy and collection of any tax or taxes so authorized; “and from time to time to grant exemptions and to modify or repeal existing or future exemptions”. In the title to the Act its purpose was described as to confer “the power to tax, * * * and the power to exempt and to modify and repeal existing or future exemptions, all to the same extent as the State has or could exercise said powers within the limits of said City”. The Act contained a repealer of “all other laws, or parts of laws, inconsistent with the provisions of this Act, * * * to the extent of such inconsistency.” However, the powers then granted were limited to the years 1948 to 1951. Chapter 27, Acts of 1951, added subsection 33 to Section 6 of the 1949 Charter, re-enacting the earlier act with the same title, in ⁹³ identical language, but removing the time limitation.

It may be noted that this Act specifically enumerated certain sources of revenue over which the Mayor and City Council could not exercise the power to tax, with the obvious purpose of protecting State revenues. (A minor amendment contained in Chapter 768, Acts of 1953, is conceded to be irrelevant here.) Purporting to act pursuant to the Act of 1951, the City passed the repealing ordinance here challenged. The appellants contend that the General Assembly could not lawfully delegate to the municipality its power to exempt from taxation. It is argued that under the Home Rule Amendment, Article 11A of the Maryland Constitution, ratified in 1915, the Charter adopted became “the law of said City * * * subject only to the Constitution and Public General Raws of this State”.

Section 6 of the Charter recognizes these limitations. The City’s power to amend or repeal laws is confined to public local laws, and it is forbidden to repeal or amend public general laws or public special laws. Subsection 33, Section 6 of the Charter specifically states that “no authority is given by this subsection (33) to impose taxes on any property which is now or may hereafter be exempted from taxation by any general or special Act of the General Assembly of Maryland”. The appellants’ argument is based on the assumption that the manufacturers’ exemption is, in substance and effect, a creation of the General Assembly and a public general law.

But it is clear that, throughout the legislative history, except in the case of the Annexation Act, the General Assembly has allowed the choice to rest with the local governing body as to whether or not, and under what conditions, the exemption should come into existence. Thus, in Tar Products Corp. v. Tax Comm., 176 Md. 290, 295 , it was held that the Tax Revision Act of 1929 was not self-executing, and that reasonable conditions might be imposed by ordinance upon claimants seeking the benefit of the exemption. It is true that in Carroll County v. Shriver Co., 146 Md. 412, 419 , it was held that although Chapter 528, Acts of 1914, gave the County Commissioners the authority to determine whether the law should apply to Carroll County, it did not delegate to them the ⁹⁴ power to rescind the action taken and thus repeal the statute. But the power there found lacking is supplied in the instant case by the express language of subsection 33}4, Section 6 of the City Charter.

Insofar as the Legislature granted the express power to repeal exemptions theretofore granted, it would seem to have removed, pro tanto, any limitations on the powers theretofore granted, express or implied. It should be noted that under Section 2, Article 11A of the Maryland Constitution, the City has no authority at all to legislate on the subject of its express powers, contained in Section 6 of the Charter. Only the General Assembly can alter those provisions, and it has done so. Cf.

Castle Farms, etc. v. Lex. Mkt. Auth., 193 Md. 472, 485 . Whether the City would have the power to repeal other exemption provisions in Code (1951), Art. 81, sec. 8, which do not depend upon local action, we need not now consider.

Subsections (23) and (24) of sec. 8 are unique in this respect. Nor need we consider whether the power to exempt in the first instance was derived from subsection 33, Section 6 of the Charter, which had its genesis in the Public Local Law of 1880, or from subsections (23) and (24) of sec. 8 of Art. 81. Until the passage of Chapter 27, Acts of 1951, which was clearly a local act enlarging the express powers of the City, it may be that the General Assembly retained the sole power to exempt property, upon the theory advanced in Church Home v. Baltimore, 178 Md. 326, 333 , and Jones v. Broening, Mayor, 135 Md. 237, 240 . But we clearly recognize in Herman v. M. & C. C. of