Maryland Economic Development Corp. v. Montgomery County

ADKINS, J. In this case, we return to our well-established rules of statutory interpretation, searching for the Legislature’s intent ¹⁹⁵ in granting the Maryland Economic Development Corporation (“MEDCO”) a tax exemption “from any requirement to pay taxes or assessments on its properties or activities.” Md.Code (2008), § 10-129(a) of the Economic Development (“ED”) Article. We look first and foremost to the plain meaning of the statute by applying a common-sense perspective of how the words are understood. In so doing, we hold that the plain meaning of ED § 10-129(a) exempts MEDCO from paying the recordation tax at issue in this ease. We find nothing in the Tax-Property Article that necessitates a different interpretation, and MEDCO did not waive its tax-exempt status.

FACTS AND LEGAL PROCEEDINGS MEDCO is a public corporation formed by the General Assembly in 1984. See Chapter 498 of the Acts of 1984. The purpose for creating MEDCO, as expressed in the statute, was to “promote economic development” and “encourage the increase of business activity and commerce and a balanced economy in the State.” ED § 10-104(b). To help accomplish this purpose, MEDCO was given the power to “accept loans, grants, or assistance of any kind from ... a private source.” ED § 10-115(4).

Specifically, MEDCO may “borrow money and issue bonds to finance any part of the cost of a project or for any other corporate purpose of the Corporation.” Md. Code (2008, 2012 Cum. Supp.), ED § 10-117(a)(l). MEDCO may then “secure the payment of any portion of the borrowing by pledge of or mortgage or deed of trust on property or revenues of the Corporation.” Id. § 10-117(a)(2). In using these powers, MEDCO is authorized to “do all things necessary or convenient to carry out the powers expressly granted by this subtitle.” Md.Code (2008), ED § 10-115(14).

To further aid in promoting the economic development of the State, MEDCO was given a tax exemption. Specifically, the statute creating MEDCO stated: (a) Exemption. — Except as provided in subsection (b) of this section, the Corporation is exempt from any require ¹⁹⁶ ment to pay taxes or assessments on its properties or activities, or any revenue from its properties or activities. (b) Private entities. — Property that the Corporation sells or leases to a private entity is subject to State and local real property taxes from the time of the sale or lease. (Emphasis in bold added).

ED § 10-129. Finally, the legislature expressly instructed that MEDCO’s statutory scheme is to “be liberally construed to accomplish its purposes.” ED § 10-102. The current litigation arises from MEDCO’s involvement in the development of the Shady Grove Technology Development Center. MEDCO originally financed the project in 1998 by issuing bonds.

In 2009, MEDCO sought to retire the bonds but still finance the project and arranged to borrow $3,300,000 from PNC Bank (“PNC”). As part of the loan transaction, MEDCO was required to execute a promissory note and provide PNC with a “first priority perfected security interest” in the Shady Grove property. On March 26, 2009, MEDCO executed a Leasehold Deed of Trust, Assignment and Security Agreement with PNC, which required MEDCO to pay all “recording costs and fees and all federal, state, county and ... other taxes ... in connection with the recordation or filing of any Loan Documents.” To close the loan transaction, MEDCO presented the deed of trust for recording in Montgomery County, claiming an exemption from the recordation tax based on ED § 10-129(a). The County Transfer Office denied the exemption and required MEDCO to pay $31,450 in recordation tax, which MEDCO paid under protest.

MEDCO then filed a Transfer/Recordation Tax Refund Claim. Following an administrative hearing, the Montgomery County Department of Finance denied the claim. MEDCO appealed to the Maryland Tax Court, but on May 10, 2010 the court denied MEDCO’s Petition for Appeal. The Tax Court recognized that the Economic Development Article gave MEDCO the power to borrow money, the ability to secure such borrowing with a deed of trust, and exempted ¹⁹⁷ MEDCO from taxes on its properties and activities.

Nevertheless, the Tax Court focused on the Tax-Property (“TP”) Article and found that, strictly construing the tax exemption, TP § 12-108 only exempted from the recordation tax instruments of writing that grant a security interest in property to an agency of the State. Section 12-116 of the Tax-Property Article then allows each particular county to choose whether to exempt from the tax, an instrument of wilting granting a security interest given from an agency of the State. Montgomery County had not passed such a law, and therefore, strictly construing the tax exemption and resolving any doubt in favor of the County, the appeal was denied. On December 27, 2010, the Circuit Court for Montgomery County reversed the decision of the Maryland Tax Court and “found that the Maryland Economic Development Corporation is exempt from paying the Recordation Tax on the Deed of Trust.” The County appealed, and in a reported opinion, the Court of Special Appeals reversed and vacated the Circuit Court’s decision, affirming the judgment of the Maryland Tax Court.

Montgomery Cnty. v. Md. Econ. Dev. Corp., 204 Md.App. 282, 285 , 40 A.3d 1066, 1068 (2012). On August 20, 2012, this Court granted a writ of certiorari, Maryland, Economic Development Corp. v. Montgomery County, Maryland, 427 Md. 606 , 50 A.3d 606 (2012), to answer the following question: Should the Maryland Legislature’s determination to exempt MEDCO from “any requirement to pay taxes or assessments on its activities” in order to foster economic growth in the State be countermanded by the decision of Montgomery County to require MEDCO to pay recordation tax on a deed of trust MEDCO granted as part of an economic development project?

We shall hold that the plain meaning of ED § 10-129(a) exempts MEDCO from paying the recordation tax at issue in this case. ¹⁹⁸ DISCUSSION The Maryland Tax Court is an administrative agency, and thus, it “is subject to the same standards of judicial review as other administrative agencies.” Frey v. Comptroller of the Treasury, 422 Md. 111, 136 , 29 A.3d 475, 489 (2011); see also Colonial Pipeline Co. v. State Dep’t of Assessments & Taxation, 371 Md. 16 , 40 n. 15, 806 A.2d 648 , 655 n. 15 (2002). In this regard, the standard of review “depends on whether the court is reviewing a question of law, question of fact, or a mixed question of law and fact.” Prince George’s Cnty. v. Brown, 334 Md. 650, 658 , 640 A.2d 1142, 1146 (1994). In this case, we are “under no statutory constraints in reversing a Tax Court order which is premised solely upon an erroneous conclusion of law.” Read v. Supervisor of Assessments, 354 Md. 383, 392 , 731 A.2d 868, 872 (1999). As an initial matter, in this case of statutory interpretation, the parties disagree about which statute — and even which Article of the Code — we should be interpreting.

MEDCO focuses its argument on interpreting the plain meaning of the language of its tax exemption in § 10-129(a) of the Economic Development Article. To the contrary, the County would have us ignore ED § 10-129(a) altogether, and instead focus on §§ 12-108 and 116 of the Tax-Property Article, which provide generally for recordation taxes. At oral argument, the County’s counsel explained the County’s position, stating that we should only “look at the nature of the tax, ... look at the principles of statutory construction for [tax] exemptions, ... look at the fact that [MEDCO’s exemption is] not included in the Tax-Property Article, and those are the things [we should] consider when [we] write [our] opinion.” We reject the County’s invitation to limit our study to the Tax-Property Article. This case does not concern recordation taxes generally, as the County would have us believe, but rather the case is specific to MEDCO and its tax exemption.

Therefore, the heart of this case is whether ED § 10-129(a) exempts MEDCO from paying recordation tax on a deed of trust. Applying our canons of statutory interpretation, we ¹⁹⁹ search for the Legislature’s intent in granting MEDCO’s tax exemption by examining the plain meaning of the statute as it is commonly understood. Although the plain meaning of ED § 10-129(a) is sufficient to end our inquiry, we then entertain the County’s arguments based on the Tax-Property Article, and its final argument that MEDCO waived its right to claim tax-exempt status in the transaction at the heart of this matter. The Plain Meaning of MEDCO’s Tax Exemption Our ultimate objective of statutory interpretation is “to ascertain and effectuate the real and actual intent of the Legislature.” McCloud v. Dep’t of State Police, 426 Md. 473, 479 , 44 A.3d 993, 996 (2012) (citation and quotation marks omitted).

To do so, we must “begin[ ] with the plain language of the statute, and ordinary, popular understanding of the English language dictates interpretation of its terminology.” Bowen v. City of Annapolis, 402 Md. 587, 613 , 937 A.2d 242, 257 (2007) (quoting Kushell v. Dep’t of Natural Res., 385 Md. 563, 576 , 870 A.2d 186, 193 (2005)). This plain meaning should be construed “to carry out and effectuate, or aid in, the general purposes and policies” of the statute being interpreted. Johnson v. State, 75 Md.App. 621, 630 , 542 A.2d 429, 433 (1988) (citations omitted). When reading the statute, we apply “a common sense perspective” of how the statutory language is generally understood.

Huffman v. State, 356 Md. 622, 628 , 741 A.2d 1088, 1091 (1999). Section 10-129(a) of the Economic Development Article provides that “Except as provided in subsection (b) of this section, the Corporation is exempt from any requirement to pay taxes or assessments on its properties or activities.” (Emphasis added). MEDCO has three steps in its logic. First, it argues that the plain meaning of the term “any ... ta[x] ... on ... activitfy]” includes the recordation tax because the borrowing of money and subsequent recording of a deed of trust is an “activity.” Second, in order to engage in this activity of recording the deed, MEDCO was faced with a “requirement” to pay the recordation tax.

Finally, MEDCO ²⁰⁰ concludes that because this recordation tax is not listed in “subsection (b),” the plain meaning of ED § 10-129(a) expressly “exempts” MEDCO from paying the recordation tax. The County disagrees, and would interpret the words “any,” “activity,” and “requirement” quite differently. It maintains that the word “any” in ED § 10-129(a) does not include recordation taxes, that the recording of a deed of trust is not an “activity,” and that the recording of a deed of trust is not a “requirement.” We examine each of the County’s arguments. “Any ” Includes the Recordation Tax The County argues that ED § 10-129(a) was not intended to exempt MEDCO from “any” tax. In this regard, the County draws a distinction between direct taxes and excise taxes.

As this Court has explained, a direct tax is a property tax, which “is a charge on the owner of property by reason of his ownership alone without regard to any use that might be made of it.” Weaver v. Prince George’s County, 281 Md. 349, 357 , 379 A.2d 399, 403 (1977) (citation omitted). In contrast, an excise tax is “defined as a tax imposed upon the performance of an act, the engaging in an occupation, or the enjoyment of a privilege” which “is said to embrace every form of taxation that is not a burden directly imposed on persons or property.” Id. at 357-58 , 379 A.2d at 404 (citation and quotation marks omitted). The recordation tax at issue here is “an excise tax imposed upon the privilege of recording the deed.” Dean v. Pinder, 312 Md. 154, 159 , 538 A.2d 1184, 1187 (1988). The County argues that exemptions from “all taxation” are generally understood to apply only to direct taxes, but not excise taxes.

To support this proposition, the County cites United States v. Wells Fargo Bank, 485 U.S. 351 , 108 S.Ct. 1179 , 99 L.Ed.2d 368 (1988), and Pittman v. Housing Authority of Baltimore City, 180 Md. 457 , 25 A.2d 466 (1942) [hereinafter Pittman (Md.) ]. Wells Fargo involved the Housing Act which authorized “state and local housing authorities to issue ²⁰¹ tax-free obligations, termed ‘Project Notes.’ ” 485 U.S. at 353 , 108 S.Ct. at 1181 . The Act then provided that the Project Notes “shall be exempt from all taxation now or hereafter imposed by the United States.” Id. at 355 , 108 S.Ct. at 1182 (citation and quotation marks omitted). The issue was whether the Project Notes were subject to estate tax, a form of excise tax.

Id. at 354 , 108 S.Ct. at 1182 . The Supreme Court stated that historically, “an exemption of property from all taxation had an understood meaning: the property was exempt from direct taxation, but certain privileges of ownership, such as the right to transfer the property, could be taxed.” Id. at 355 , 108 S.Ct. at 1182 . The Court explained the distinction as “between an excise tax, which is levied upon the use or transfer of property ... and a tax levied upon the property itself.” Id. The Court then upheld imposition of the estate tax.

Id. at 356 , 108 S.Ct. at 1182 . In Pittman (Md.), the issue was whether the Housing Authority was exempted from paying recordation tax when the Act provided that its property “shall be exempt from all taxes ... of the city, the State or any political subdivision thereof, provided that the authority shall pay to the city in lieu of taxes a sum for each housing project not exceeding an amount equal to the regular taxes levied upon similar property.” 180 Md. at 459 , 25 A.2d at 467-68 (citation and quotation marks omitted). This Court “stated as a general rule that exemptions from taxation apply primarily to annual property taxes and ordinarily do not apply to excises or taxes which are imposed ... upon the enjoyment of a privilege.” Id. at 462 , 25 A.2d at 469 . “Thus an exemption from all State and local taxes would not relieve from some taxes where the intention of the Legislature to restrict the scope of the exemption can reasonably be inferred.” Id. at 463 , 25 A.2d at 469 . Regarding the legislative intent, this Court concluded that “the Legislature has not conferred upon [the Housing Authority] complete immunity from taxation, but has expressly delegated ... the power to determine the sum to be paid.” Id. at 462 , 25 A.2d at 468-69 .

As added support, the Court reasoned that, because the state recordation tax did not exist at the ²⁰² time the Housing Authority was created, such tax was not contemplated in the exemption. Id. at 464 , 25 A.2d at 470-71 . MEDCO distinguishes both cases. It argues that Wells Fargo concerned an exemption of property from tax, and did not involve a statute which expressly exempts an entity from paying any tax.

To illustrate the difference, MEDCO cites Federal Land Bank v. Bismarck Lumber Co., which considered whether the Federal Land Bank of St. Paul was exempt from state sales tax. 314 U.S. 95, 96-98 , 62 S.Ct. 1, 2-3 , 86 L.Ed. 65 (1941). In that case, the statute stated, “every Federal land bank ... shall be exempt from Federal, State, municipal, and local taxation.” Id. at 99, 62 S.Ct. at 3 (alteration in original) (citation and quotation marks omitted). The Supreme Court held that “[t]he unqualified term ‘taxation’ used in [the statute] clearly encompasses within its scope a sales tax.” Id. The Court reasoned that a broad construction of the term was “indicated by Congress’s intention to advance credit to farm borrowers at the lowest possible interest rate.” Id. at 100 , 62 S.Ct. at 4 .

Pittman (Md.) is also distinguishable, argues MEDCO, because the Legislature in that case did not exempt the Housing Authority from all taxes. Rather, the statute in Pittman (Md.) contained an express formula for how the taxes should be calculated. Here, argues MEDCO, the language in ED § 10-129(a) clearly evidences the Legislature’s intention to grant MEDCO a broad tax exemption. Focusing on the adjective “any,” MEDCO cites several cases for the proposition that the term “any” connotes a “broad” and “expansive meaning,” such as “every,” “all,” or “without restriction or limitation of choice.” 1 ²⁰³ Furthermore, argues MEDCO, even if this Court accepts the County’s distinction between direct and excise taxes, the plain meaning of ED § 10-129(a) contemplates an exemption for both.

As we previously explained, a direct tax is imposed on “property” and an excise tax is imposed on “the performance of an act.” See Weaver, 281 Md. at 357-58 , 379 A.2d at 403-04 . In this case, ED § 10-129(a) exempts MEDCO from any tax on its “properties or activities.” Therefore, argues MEDCO, the statute expressly contemplates that MEDCO is exempt from direct taxes on its properties and excise taxes on its activities. We agree with MEDCO that ED § 10-129(a) does exempt it from both direct and excise taxes. It is not correct to assume, as the County does, that an exemption for “all” or “any” taxation only exempts direct taxes — not excise taxes.

Instead, as we stated in Pittman (Md.), we look to the statutory intent to determine the scope of the exemption. 180 Md. at 463 , 25 A.2d at 469 . Applying the “plain meaning” rule, it is apparent that the Legislature did not seek to so restrict the exemption in this case. The Legislature chose to use the modifier “any” unrestricted by qualifiers. Cf.

Fed. Land Bank, 314 U.S. at 99 , 62 S.Ct. at 3 (“The unqualified term ‘taxation’ used in [the statute] clearly encompasses within its scope a sales tax.”). This modifier connotes a broad and expansive meaning which is commonly understood to mean “[o]ne, some, every, or all without specification.” American Heritage Dictionary of the English Language 81 (4th ed. 2006). And, the Legislature did not stop there. It went on to expressly exempt taxes on “properties or activities.” Thus, the Legislature expressly provided that MEDCO’s tax-exempt status in ED § 10-129(a) includes direct taxes on its properties and excise taxes on its activities.

As a result, ED § 10-129(a) includes an exemption from recordation taxes. ²⁰⁴ Recording of a Deed of Trust is an “Activity ” Undaunted in its pursuit of this tax, the County maintains that, even if ED § 10-129(a) does include an exemption for excise taxes, the recording of a deed of trust was not a MEDCO “activity” to which the tax exemption applies. The County asserts that ED § 10-129(a) only provides a tax exemption to MEDCO’s “properties and activities,” and “does not provide a blanket exemption that would extend the exemption to transactions that do not fit within the stated categories.” The County agrees that the activities that MEDCO is authorized to engage in include the borrowing of money and the securing of loans with a deed of trust. Yet, according to the County, “[t]he authority to enter into a loan transaction and to execute a deed of trust differs significantly from establishing an exemption from the recordation tax on the privilege of recording that deed of trust.” In the County’s view, because the statute does not expressly authorize MED-CO to record a deed of trust, such action cannot fall into the category of MEDCO’s activities. MEDCO counters that ED § 10-115(14) expressly authorizes MEDCO to “do all things necessary or convenient to carry out the powers expressly granted by this subtitle.” ED § 10-115(14).

In this regard, if MEDCO is expressly authorized to secure a loan with a deed of trust, it must of necessity be authorized to record that deed of trust in order to fully carry out its powers. Additionally, MEDCO relies on Pittman v. Home Owners’ Loan Corp., in which the Supreme Court, in determining whether Maryland recordation tax applies to a federal agency, recognized that “[b]oth the mortgage and its recordation were indispensable elements in the lending operations.” 308 U.S. 21, 32 , 60 S.Ct. 15, 17 , 84 L.Ed. 11 (1939) [hereinafter Pittman (S.Ct.) ]. In MEDCO’s view, the granting of a deed of trust and the recording of that deed of trust are one-and-the-same activity covered under MEDCO’s tax exemption. We agree with MEDCO that the recording of a deed of trust falls within the scope of MEDCO’s activities.

MEDCO is