Maryland-National Capital Park & Planning Commission v. State Department of Assessments & Taxation

⁶⁸¹ EYLER, Justice. The 94th Aero Squadron restaurant (“Restaurant”), a privately run concern located on tax exempt property belonging to the Maryland-National Park and Planning Commission (“Commission”) in College Park, Maryland, was designed to resemble a fortified French chalet from the World War I era that had been damaged by bombing. In this appeal, the disputants call upon us to decide whether the Restaurant can withstand an “attack” by the State Department of Assessments and Taxation (“Department”), seeking to impose a tax assessment. After wending their way through four other adjudicative levels, the parties to this appeal, Commission, appellant, and Department, appellee, ask us to answer four questions.

I. Did the circuit court err in ruling that the operation of the 94th Aero Squadron restaurant does not constitute a ‘concession’ as required by Tax-Property Article, § 7-211?

II

Did the circuit court err in ruling that the 94th Aero Squadron restaurant is not ‘available for use by the general public’ as required by Tax-Property Article, § 7-211?

III

Did the circuit court err in granting the State Department of Assessments and Taxation’s motion to strike? IY. Did the tax court lose jurisdiction to hear the appeal from the decision of the Property Tax Assessment Appeals Board for failure to hear and decide the appeal on or before 60 days from the date that said appeal was entered, as required by the Tax-Property Article, § 14—512(f)(5)? I. In 1973, the Commission, a State-created agency, 1 purchased the historic College Park Airport.

The Airport, located in the Calvert Road Park, Prince George’s County, is the world’s oldest continuously operated airport, and counts, among its other distinctions, the training by the Wright broth ⁶⁸² ers of Army Signal Corps pilots on its premises. In October, 1980, the Commission circulated a prospectus that outlined the Commission’s interest in soliciting bids from the private sector to construct, operate, and maintain a restaurant “concession.” 94th of College Park, Inc. (“94th”) and its holding company, Specialty Restaurants Corporation (“Specialty”), the only bidders on the project (hereinafter, “lessee”), entered into a lease with the Commission on May 1, 1981. 2 The lease did not include all of the items detailed in the prospectus, including several that would have imposed specific operational controls. For example, the following section relating to charges to the public was not included. The Director of Parks and Recreation shall exercise the authority over rates charged with a reasonable opportunity for the concessionaire to realize a profit on these facilities and services as a whole, commensurate with the investment and .obligation assumed.

The concessionaire will prepare and submit to the Director of Parks and Recreation for approval a schedule of fees and prices to be charged for all goods or services offered for sale or hire on the premises. No charge will be made for any such goods, or services, except in strict compliance with the approved schedule and any violation of this provision shall constitute grounds for the termination of the license and/or privilege herein granted. In approving rates, primary consideration will be given to the prices charged for similar facilities and services furnished or sold outside the areas administered by the Maryland-National Capital Park and Planning Commission under similar conditions with due regard being given to such other factors as may be deemed significant. The principal objective of such controls is to assure the public satisfactory service and quality merchandise at reasonable rates.

The concessionaire will pay all expenses of promoting or operating the concession, including the payment of salaries of such personnel to provide for efficient operation, ⁶⁸³ together with expenses for supplies and all public utility expenses. The lease began with several recitals, including: WHEREAS, the Lessor has the power to lease the same to any responsible individual, partnership, or corporation, on such terms and conditions as the Lessor in the exercise of its discretion may deem advantageous to the development of the Park System under its jurisdiction; and WHEREAS, the Lessor has determined that the Lessee is responsible and that the purposes set forth herein are consistent with the use of the Land for park and recreation purposes; and WHEREAS, the Lessee desires to take the Land and to construct thereon a Restaurant as defined herein, the (improvements to be constructed on the Land by the Lessee in accordance with this Agreement, being sometimes hereinafter called the ‘Improvements’), for the benefit of all of the citizens of the State of Maryland, and, in particular, the citizens of Prince George’s and Montgomery Counties. The Commission granted concession rights to the lessee and indemnified the lessee from the payment of any tax that might be assessed against the fee title or leasehold as follows: The Lessor hereby grants to Lessee for the period of said Lease (including any extension periods), the right to construct, operate, and maintain upon said Land the Improvements as herein defined in accordance with this Lease, provided the Lessee shall faithfully perform the terms and conditions of this Lease and Agreement. Lessor agrees not to grant the rights as herein granted to any other persons, nor will it construct and operate any financially competitive facility on the premises owned by it adjacent to the Leased Premises during the term of this Lease and Agreement, including any renewal period.

It is acknowledged by the parties hereto that, because the fee title to the Leased Premises is owned by the Lessor, a ⁶⁸⁴ public entity, the Leased Premises are not subject to either ad valorem taxation or possessory interest taxation against the leasehold. Accordingly, the aforesaid percentage rent schedule is structured in consideration of the tax-free status of the Leased Premises and that the Lessor and its assigns hereby indemnifies the Lessee and holds it harmless from any tax which may be assessed against either the fee title or the leasehold of the Lessee. Paragraph Nine of the lease provided: USE OF LEASED PREMISES The Lessee covenants and agrees to operate, manage, and maintain throughout the term hereof, in a good, courteous, and efficient manner a Restaurant (and the other improvements to be constructed by it in accordance with this Lease) and further covenants that it will operate, manage, and maintain the premises in a manner consistent with the purposes of this Lease and the public interest generally.- The lessee was required to provide a capital investment of $900,000 to construct the restaurant facility and to provide $100,000 in working capital. The design of the facility was subject to approval by the Commission.

The payment structure of the lease required the lessee to pay to the Commission a flat monthly fee plus a percentage of the lessee’s gross receipts. The Commission and the lessee learned, somehow, that the leasehold was not automatically tax-exempt, as each had assumed, and that application had to be made. Accordingly, they filed a request for an exemption to the Department; the Department denied the request. The matter was next heard by the Property Tax Assessment Appeals Board (“Board”) which, in a decision dated July 12, 1993, reversed the Department’s denial of the exemption.

Unsatisfied with that result, the Department filed an appeal with the Maryland Tax Court on June 30, 1994. More than one year later, on August 25, 1994, the Tax Court conducted a hearing, during which Robert ⁶⁸⁵ Young, Associate Director of the Department, 3 Richard Stevenson, Associate Director of the Commission, and Louis Viggiano, Divisional Manager of Specialty and General Manager of the Restaurant testified, respectively. The Tax Court accepted the parties’ stipulation that the Restaurant was, in fact, a “restaurant,” and that it was located in a public park that contained an airport. 4 After hearing testimony and considering the parties’ arguments, the Tax Court reversed the Board’s decision and reinstated the assessment. The Tax Court characterized the question before it as one of law and, specifically, one of statutory interpretation.

The Tax Court construed “concession” in § 7-211(b) as requiring specific, detailed, operational controls by the granting authority over the concessionaire and requiring that the service be primarily for the people using the airport, park, market or fairground. There was some evidence that the Commission occasionally checked on the quality of the Restaurant’s operation but the Tax Court found there were no specific controls of the type required to be a “concession.” The Tax Court further found from the evidence that the Restaurant was primarily used by persons who were not users of the other facilities in the park and airport. In fact, the Tax Court stated that the Restaurant would not be able to survive if it depended upon only those persons using the park and airport. Of note, the Tax Court did not cite any cases to support the construction of the statute.

Three days after the Tax Court’s decision, the Commission filed a petition requesting the Circuit Court for Prince George’s County to review the decision. In the proceedings before the Circuit Court, the Department filed a motion to strike those portions of the Commission’s pleadings that quoted excerpts of Viggiano’s deposition testimony relating to the question whether restaurant patrons ⁶⁸⁶ also used the park or airport because, the Department contended, the Tax Court had not admitted the deposition into evidence. The Circuit Court granted the motion during a March 23, 1995 hearing and, after listening to the parties’ arguments on the merits, took the primary issue under advisement. Thereafter, on August 18, 1995, the Circuit Court issued an opinion and order affirming the Tax Court’s decision.

The Circuit Court relied on a Tax Court decision rendered in 1970 and two cases decided by the Supreme Court of Michigan, County of Kent v. City of Grand Rapids, 381 Mich. 640 , 167 N.W.2d 287 (1969), and City of Detroit v. Tygard, 381 Mich. 271 , 161 N.W.2d 1 (1968). 5 The Circuit Court agreed with the Tax Court’s legal ruling but, apparently relying on the dissent in Kent, elaborated by ruling that a ⁶⁸⁷ “concession” had to meet a three-prong test. First, there had to be more than a leasing agreement. Second, there had to be a specific obligation by service providers to maintain particular services, including a requirement of minimum hours and specific standards and regular supervision. Third, the service had to be customarily and needfully required in a park, airport, market, or fairground.

The Circuit Court construed the language “available for use by the general public” as meaning those members of the “general public” who have occasion to be on park property for the use of other park facilities. The Circuit Court’s construction was in essence the same as that of the Tax Court. The Circuit Court then held that there was substantial evidence to support the Tax Court’s conclusion that the test was not met by the Restaurant. The Commission then noted a timely appeal to this Court from the Circuit Court’s judgment.

II

The Commission contends that the ordinary meaning of the language in § 7-211(b) leads to a conclusion that the lessee, granted an exclusive right to construct and operate a restaurant with a required motif, is a “concession.” The legislative purpose is not inconsistent with that plain meaning and there is no evidence of a contrary legislative intent. Similarly, it contends that the plain language “available for use by the general public” is not restricted to park and airport patrons. Alternatively, the Commission contends that, if the three-part test is a valid construction of “concession,” it was satisfied by the evidence; if “general public” is limited to park and airport patrons, the evidence is insufficient to support the finding that the Restaurant was primarily used by non-patrons of the park and airport. The Department argues that the statutory provision in question is a tax exemption and, as such, must be strictly construed.

Thus, it contends, the Tax Court and the Circuit Court interpreted the statute correctly. ⁶⁸⁸ III. Despite its name, the Tax Court is not a judicial body, but rather, is an administrative agency that-acts in a quasi-judicial capacity. Shell Oil Co. v. Supervisor of Assessments, 276 Md. 36, 38-48 , 343 A.2d 521 (1975); see §§ 3-101 to 3-113 of the Tax-General Article. Our review of the Tax Court’s decision is precisely the same as that of the Circuit Court.

DHMH v. Riverview Nursing Centre, Inc., 104 Md.App. 593, 601 , 657 A.2d 372 , cert. denied, 340 Md. 215 , 665 A.2d 1058 (1995). The “substantial evidence” test is our guide when reviewing the Tax Court’s factual findings. Id. at 602, 657 A.2d 372 . When reviewing questions of law, on the other hand, we are free to substitute our judgment for the judgment of the Tax Court, and we seek to determine whether it erred as a matter of law.

Id. The General Assembly’s use of the term “concession” in § 7-211(b) is the crux of this dispute. (b) Public use.—An interest of a person in property of the federal government, the State, a county, or a municipal corporation is not subject to property tax, if the property is used for a concession that: (1) is located in a public airport, park, market, or fairground; and (2) is available for use by the general public. If, as in the instant case, the parties call upon us to interpret an exemption, we first look to the general principles of statutory construction, and then, narrowing our inquiry, turn to those principles that are applicable to the taxation arena.

Ever mindful of our desire to discern and effectuate the General Assembly’s intent, Oaks v. Connors, 339 Md. 24, 35 , 660 A.2d 423 (1995), we examine the language of the enactment and give to the language its natural and ordinary import. Montgomery County v. Buckman, 333 Md. 516, 523 , 636 A.2d 448 (1994). If the language is plain and free from ambiguity and expresses a definite and sensible meaning, we will, ordinarily, end our inquiry. Id.

We are not, however, rigidly bound to the precepts of the “plain meaning” rule. ⁶⁸⁹ Department of Gen. Servs. v. Harmans Assocs. Ltd. Partnership, 98 Md.App. 535, 545 , 633 A.2d 939 (1993). Where the General Assembly has chosen not to define a term used in a statute, we will give that term its ordinary and natural meaning and will not resort to subtle or forced interpretations for the purpose of extending or limiting the operation of the statute.

Brown v. State, 285 Md. 469, 474 , 403 A.2d 788 (1979). Furthermore, we examine the entire statutory scheme and consider the purpose behind the particular statute before us. Department of Public Safety v. Howard, 339 Md. 357, 369 , 663 A.2d 74 (1995). Cognizant that the language of the statute is the foundation from which our inquiry commences, we also review legislative history and the prior state of law, and contemplate the particular evil, abuse, or defect that the General Assembly wished to remedy with the enactment of the statute at issue.

Lemley v. Lemley, 102 Md.App. 266, 290 , 649 A.2d 1119 (1994). Moreover, the examination of related statutes is not beyond our reach. GEICO v. Insurance Comm’r, 332 Md. 124, 132 , 630 A.2d 713 (1993). When interpreting tax exemptions, we strictly construe the exemption and resolve any doubt in the taxing authority’s favor.

Comptroller v. Martin G. Imbach, Inc., 101 Md.App. 138, 145 , 643 A.2d 513 , cert. denied, 336 Md. 593 , 650 A.2d 239 (1994); § 7-101 of the Tax-Property Article (“Property tax exemptions provided under this title shall be strictly construed.”). In Suburban Propane Gas Corp. v. Tawes, 205 Md. 83, 87 , 106 A.2d 119 (1954), Judge Collins recited for the Court of Appeals the judicial approach towards interpreting tax exemptions. Of course, tax exemption statutes are to be strictly construed in favor of the State. The taxing power is never presumed to be surrendered.

Every assertion that it has been relinquished must, to be effective, be distinctly supported by clear and unambiguous legislative enactment. To doubt an exemption is to deny it. However, the tax exemption statute should not receive a strained or unreasonable construction that would defeat the purpose of the legislative enactment. ⁶⁹⁰ (Citations omitted). In the final analysis, the real legislative intent prevails.

Comptroller v. Fairchild Indus., 303 Md. 280, 288 , 493 A.2d 341 (1985). The burden of showing that an exemption, is allowed under the law falls upon the claimant. Pittman v. Housing Auth., 180 Md. 457, 460 , 25 A.2d 466 (1942). The parties do not point us to, nor have we found, any reported opinion in this State interpreting the term “concession” as used in § 7-211(b).

Thus, we turn to the precursor of that section, § 8(8)(e) of Article 81, which the General Assembly approved as emergency legislation effective May 8, 1961, for further information. 6 (8) Leaseholds and Other Limited■ Interests in Real or Personal Property.—No leasehold or other limited interest in real or tangible personal property shall be subject to taxation except the following which shall be subject to taxation in the same amount and to the same extent as though the person in possession or the user thereof were the owner of such property. (e) The interest or privilege of any lessee, bailee, pledgee, agent, or other person in possession of or using any real or personal property which is owned by the federal or State governments, and which is leased, loaned, or otherwise made available to any person, firm, corporation, association, or other legal entity, with the privilege to use or possess ⁶⁹¹ such property in connection with a business conducted for profit, except where the use is by way of a concession for occupancy of a public airport, park, market, fairground, or similar property, which is available to the use of the general public, shall be subject to taxation in the same amount and to the same extent as though the lessee or user were the owner of such property; provided, that the foregoing shall not apply to federal or State property for which negotiated payments are made in lieu of taxes by any of the aforesaid owners, nor shall it apply to any real or personal property which is owned by the federal or State governments and which is in the possession of any person, persons or corporation who or which is engaged in (1) the manufacture, construction, or assembling of equipment, supplies or component parts thereof, to be used for national defense purposes, or (2) research or development for national defense purposes, nor shall it apply to port facilities owned by the federal or State governments (or any agencies or instrumentality thereof) (or by any political subdivision of the State of Maryland). Provided further that for purposes of municipal and county taxation in the counties of Allegany, Anne Arundel, Montgomery, and Washington, any such interest or privilege shall not be subject to assessment and taxation. As used herein, the term ‘port facilities’ shall mean and shall include, without intending thereby to limit the generality of such term, any one or more of the following or any combination thereof: Lands, piers, docks[,] wharves, warehouses, sheds, transit sheds, elevators, compressors, refrigeration storage plants, buildings, structures, and other facilities, appurtenances and equipment necessary or useful in connection with the operation of a modern port or in connection with shipbuilding and ship repair and every kind of terminal or storage structure or facility now in use or hereafter designed for use in the handling, storage, loading or unloading of freight or passengers at steamship terminals, and every kind of transportation facility now in use or hereafter designed for use in connection therewith. ⁶⁹² Effective July 1, 1967, the General Assembly eliminated the words “or similar property” following the word “fairground.” Chapter 414, Acts 1967.

In 1968, the General Assembly redesignated § 8(8)(e) as § 8(6)(e) of Article 81. That change did not last long, for in 1970, the General Assembly renumbered § 8(6)(e) as § 8(7)(e) and eliminated “real or” preceding “personal property” and substituted “pursuant to a contract with such federal or State governments for” instead of “who or which is engaged in.” Chapter 526, Acts 1970. The 1983 amendment divided subparagraph (e) into sub-subparagraphs and substituted “federal, State, county, or municipal” for “federal or State.” Chapter 640, Acts 1983. In 1985, the General Assembly repealed § 8(7)(e) of Article 81, along with other sections and subsections, reenacted, and recodified them in the Tax-General and Tax-Property Articles.

Chapter 8, Acts 1985. The Revisor notes that, for clarity, the term “municipal corporation” was substituted for the term “municipal governments” and the reference to “for occupancy,” was deleted as superfluous. Section 7-211(b) appeared at that time and has not been amended since. The General Assembly has used the term “concession” in other contexts. 7 The most pertinent use, for our purposes, is Article 28, § 5-110: ⁶⁹³ (Maryland-National Capital Park and Planning Commission) (Title 5, Property; Powers; Recreation Program; Subtitle 1, Metropolitan District Property and Powers Generally) (emphasis added) The Commission may (1) lease for a term not exceeding 40 years and renew the lease from time to time for additional terms not exceeding ten years each, to any responsible individual, partnership or corporation, any portion of the lands within the metropolitan district, acquired for park purposes under any of the provisions of this article.

The Commission may not enter into any lease agreement in excess of 20 years duration without the prior approval of the provisions of the lease by legislative enactment of the county in which the lease property is located in whole or in part. Further, all such lease agreements shall contain provisions for reversion without cost to the Commission of the property and its improvements regardless of whether the improvements were added to the property by the lessee during the term of the lease or any extension of the lease; and/or (2) grant privileges, permits, and/or concessions, and/or enter into contracts relating to the same, with any ⁶⁹⁴ responsible individual, partnership, or corporation, to engage in any business or enterprise on lands acquired for park purposes within the metropolitan district under any of the provisions of this article; all on terms and conditions the Commission deems advantageous to the development of the park system as a part of the Maryland-Washington Regional District within the metropolitan district. The purpose for which the property is leased, and/or the privileges, permits, and/or concessions are granted, may not be inconsistent with the use of the property for park purposes. Any lease and/or contract executed under the authority of this section shall contain a condition, stating specifically the purposes for which the property is leased, and/or the privilege, permit, or concession is granted.

All agreements entered into by the Commission pursuant to this article shall contain provisions forbidding the assignment of the agreement without the consent of the Commission. This article may not be interpreted as a limitation on the Commission’s authority to require in any agreement more restrictive provisions deemed by the Commission to be in the public interest. The provisions of this article may not be construed to validate any lease or agreement executed prior to July 1, 1972, which provides for an initial term beyond 20 years duration, nor to permit the renegotiation of any lease or agreement executed prior to July 1, 1972, for the purpose of extending the initial term of the lease beyond 20 years duration. This limitation does not apply to any lease with a nonprofit, service-oriented organization.

Keeping in mind, for present, the General Assembly’s use of the term “concession,” we turn to the statutory scheme before us. In Maryland, leaseholds and other limited interests in property are generally not subject to property tax. § 6-102(a) of the Tax-Property Article (“Except as otherwise provided in this section, a leasehold or other limited interest in property is not subject to property tax.”). Government-owned property is not subject to taxation if devoted to a governmental use or purpose, except as provided in § 6-102. § 7-210(a) of the Tax-Property Article. The non-taxable status applies to property ⁶⁹⁵ owned by a State agency only to the extent a law exempts the property. § 7—210(b) of the Tax-Property Article.

Lands acquired by the Commission pursuant to Article 28 are exempt from “State, county, and municipal taxes.” Art. 28, § 5-109(a). Interests in government-owned property are, unless otherwise exempted, taxable. (e) Interests in government property.—Unless exempted under § 7-211 or § 7-501 [public leasehold property—local exemptions] of this article, the interest or privilege of a person in property that is owned by the federal, the State, a county, or a municipal corporation government is subject to property tax as though the lessee or the user of the property were the owner of the property, if the property is leased or otherwise made available to that person: (1) by the federal, the State, a county, or municipal corporation government; and (2) with the privilege to use the property in connection with a business that is conducted for profit. § 6-102(e) of the Tax-Property Article. The above analysis leads us to § 7-211(b).

The facts before us satisfy the first three elements found in that section. The parties do not dispute that the facts establish an “interest” (leasehold) of a “person” (Restaurant) 8 in property of the State (Commission). 9 The next element, and one that is contested, is that the property should