Montgomery County v. Maryland Economic Development Corp.

²⁸⁵ WATTS, J. This is an administrative appeal from a decision of the Maryland Tax Court (the “tax court”) regarding a request for a refund of State recordation tax paid by appellee, the Maryland Economic Development Corporation (“MEDCO”). Appellant, Montgomery County, Maryland (the “County”) denied the request for a refund and MEDCO appealed to the tax court. The tax court agreed with the County that no exemption applied and affirmed the denial of the refund. MEDCO petitioned for judicial review in the Circuit Court for Montgomery County.

The circuit court reversed the tax court and remanded for further proceedings consistent with the circuit court’s conclusion that the recordation tax falls within an exemption. The County noted a timely appeal, raising one issue, which we quote: I. Did the tax court properly interpret the law and find that MEDCO was not exempt from paying recordation tax on a deed of trust, where the tax is imposed on the privilege of recording the document and not on a particular party to the transaction? We answer this question in the affirmative and, as such, we reverse and vacate the decision of the Circuit Court for Montgomery County with instructions to affirm the judgment of the Maryland Tax Court. FACTUAL AND PROCEDURAL BACKGROUND In 2009, MEDCO entered into a loan agreement with PNC Bank, National Association (“PNC Bank”) in which MEDCO borrowed $3,300,000 from PNC Bank. 1 On March 26, 2009, MEDCO’s Executive Director, Robert Brennan, signed a document titled “Leasehold Deed of Trust,[ 2 ] Assignment and ²⁸⁶ Security Agreement.” In this document, MEDCO was identified as the grantor, PNC Bank was identified as the bank, as well as the beneficiary of the Deed of Trust, and Richard Woo, who was listed at the same address as PNC Bank, was identified as the trustee.

The Leasehold Deed of Trust, Assignment and Security Agreement contained the following provision: 14. Expenses. The performance of each and every obligation on the Grantor’s part under the Loan Documents shall be at the sole expense of the Grantor, and neither the Bank nor the Trustee shall have any obligation for any such expenses. In addition to any other amounts required to be paid by the Grantor under the Loan Documents or with respect to the Property, the Grantor shall pay the following (collectively called the “Expenses”): (a) all filing, registration and recording costs and fees and all federal, state, county and municipal stamp taxes and other taxes, duties, imposts, assessment and charges in connection with the recordation or filing of any Loan Documents or related instruments, and any documents in connection with any foreclosure____ In April 2009, the Leasehold Deed of Trust, Assignment and Security Agreement, dated March 26, 2009, from MEDCO as ²⁸⁷ grantor for the benefit of PNC, was presented to the County Transfer Office for processing, prior to the deed being recorded among the County Land Records.

At the time the deed of trust was presented, MEDCO claimed an exemption from the recordation tax pursuant to Md.Code Ann., Economic Development (“Econ.Dev.”) § 10-129. 3 The Transfer Office denied the exemption and imposed the recordation tax. On April 6, 2009, MEDCO filed a “Transfer/Recordation Tax Refund Claim” with the County Department of Finance and a request for a hearing. In the refund claim, MEDCO alleged it was improperly required to pay $31,450, representing the recordation tax on the deed of trust. MEDCO stated that it was entitled to a refund because the transaction involved the recording of a deed of trust, an act which was exempt from taxation based on MEDCO’s tax-exempt status under State law.

On May 20, 2009, an administrative hearing was held on the refund claim. In a letter dated June 19, 2009, Timothy L. Jones, Tax Operations Manager, Division of Treasury, for the County, denied the request for a refund. The letter contained a section captioned the “Basis of Decision,” which provided as follows: Recordation tax is an excise tax computable on the amount of consideration on the privilege of recording a document among the Land Records.... The taxes become due when the instrument of writing is presented for record-ing____State law does not require any particular party to pay the recordation tax.

The tax is imposed on the privilege of recording the document among the Land Records. ²⁸⁸ The Tax-Property Article in Section 12-108 also lists several transactions that are exempt from recordation tax. There is an exemption that applies to a transfer to a state entity; however, there is no exemption that applies to a transfer from a state agency. The Claimant has relied on the argument that because MEDCO’s activities are exempt from tax, there is no tax due on this transfer. ([Eco.

Dev. §] 10-129) The reliance on this section is misplaced. The County agrees that MEDCO is exempt from the requirement to pay taxes on its property, activities, or any revenue derived from its property or activities. Because the recordation tax is not a tax on its property, activities or revenues, this general exemption from payment of taxes to MEDCO is not available to prevent imposition of the recordation tax on the recording of the Deed of Trust because the recordation tax is not imposed on a particular party. MEDCO may have contractually agreed to be responsible for the recordation tax, but that contractual commitment to pay a tax cannot create an exemption from recordation tax.

Only the General Assembly can create an exemption from recordation tax. In this particular case, there is no exemption from recordation tax for transfers from a state agency to a private commercial lender. MEDCO appealed to the tax court, and on May 10, 2010, the tax court issued a Memorandum and Order, agreeing with the County and denying the refund. The tax court explained, in pertinent part, as follows: It is [MEDCO’s] contention that when MEDCO borrowed money for this particular project in Montgomery County and those funds were secured by a Deed of Trust to PNC Bank, this action was an activity as referred to in [Econ.

Dev. § 10-129(a) ]. [MEDCO’s] theory of the case is that the recordation tax generated by recording the Deed of Trust from MEDCO to PNC Bank is exempt pursuant to [Econ. Dev. § 10-129(a).] It is the [County’s] position that there was no requirement in the statute that the grantor or a Deed of Trust pay ²⁸⁹ the recordation tax, and that the payment of that tax may be negotiated between the parties. That is to say, it is just as likely that PNC Bank could pay the recordation tax without the claim of any exemption. The [County] further argues that Section 12-108 of the Tax-Property Article, exempts from recordation tax, instruments of writing that transfers property to or grants a security interest to an agency of the State.

Lastly, Tax-Property Section 116, indicates that a governing body of a County may exempt, by law, from recordation tax an instrument of writing that transfers property from or grants a security interest from an agency of the State. Further evidence established by the [County] was that [the County] had not, by law, created an exemption as set forth in Sections 112-116, supra. The interpretation of tax exemptions are to be strictly construed and resolved and any doubt found in the taxing authority’s favor... .While [MEDCO] claims that the payment of the recordation tax in this matter is exempt under [Econ. Dev. § 10-129(a) ], by virtue of the fact that this action was one of the Corporation’s regular activities, strictly construing a tax exemption, this Court cannot find under Tax-Property Section 12-108 where [MEDCO] is specifically exempt from granting a secured interest to a private third party.

In Tax-Property Section 12-116, the Legislature recognized that there was not a specific exemption from a recordation tax on an instrument of writing which transfers property or grants a security interest from an agency of the State and enables the governing bodies of the County, as well as the City of Baltimore the opportunity to grant an exemption if they saw fit. In this particular case, Montgomery County did not enact the legislation referred to above. Based on the specific exemptions contained] in the Tax-Property Article and mindful of the law which requires the Court to narrowly construe tax exemptions and to resolve any doubt in the favor of the taxing authority, it is this 10th day of May, 2010, by the Maryland Tax Court ²⁹⁰ ORDERED that the Petition for Appeal is hereby DENIED. On June 2, 2010, MEDCO filed a Petition for Judicial Review in the circuit court.

On November 30, 2010, the circuit court held a hearing. On December 27, 2010, the circuit court issued an Order reversing and remanding the tax court’s decision. On January 25, 2011, the County noted an appeal. DISCUSSION The County contends that this Court should affirm the tax court’s decision denying MEDCO an exemption from payment of the recordation tax in this case.

In support of this contention, the County makes three overarching arguments: (1) “that MEDCO was not exempt from paying the recordation tax on a deed of trust, because the tax is imposed on the privilege of recording the document and not on a particular party to the transaction”; (2) “[njeither MEDCO’s status as a State agency nor its enabling statute creates an exemption from payment of the recordation tax”; and (3) even if an exemption existed in this case, MEDCO waived its right to claim the exemption by entering into a consensual agreement with PNC Bank to pay the tax. The County asserts that the Econ. Dev. § 10-129 exemption “applies only to the requirement to pay taxes or assessments on MEDCO’s ‘properties or activities’ or the revenue from those properties or activities.” The County points out that State law clearly identifies the activities of MEDCO that are exempt from taxes and “[ajlthough the loan transaction is within MEDCO’s activities, recording the deed of trust is not a required step to effectuate the loan.” The County maintains that the purpose of the recordation tax is for the privilege of recording a document among the land records, and it is not a tax on the property or activities of the borrower. The County points out that, pursuant to Md.Code Ann., Tax-Property Art. (“Tax-Prop”) §§ 12-102 and 12-111, the tax is not imposed on a particular party to the transaction. ²⁹¹ The County contends that “instruments of writing that transfer property or grant a security interest to the State or any agency of the State are exempt from payment of State recordation tax”; however, transfers of interest from the State or from an agency of the State are not exempt.

The County contends that Tax-Prop. § 12-116 permits local governments to enact a law providing for an exemption from recordation tax when an interest is transferred from the State or agency. The County points out that it has not enacted such a law, exempting from the recordation tax transfers from the State or from a State agency. The County maintains that in enacting the recordation tax statute, the General Assembly carved out specific exemptions, and, as such, if the General Assembly sought to exempt MEDCO from paying recordation tax when transferring property it could have done so. Alternatively, the County argues that if such an exemption exists, MEDCO “affirmatively waived that exemption by entering into a contract with PNC Bank and agreeing to pay the tax.” The County asserts that the waiver occurred when MEDCO “voluntarily entered into an agreement with the bank to pay the tax when they believed they were otherwise exempt from payment of the tax.

The voluntary act relinquishing its right to claim the exemption by contract with the bank created the waiver—not the objection to payment at the County’s transfer office.” The County points out the terms of the loan agreement between MEDCO and PNC Bank demonstrate that MEDCO “agreed that any expense incurred by the bank would be paid by MEDCO, including recording of security interests.” The County contends that “[t]o allow MEDCO to pay the tax and then claim an exemption, however, has the effect of expanding the exemption to private parties engaged in a transaction with MEDCO.” The County argues that the agreement MEDCO signed with PNC Bank “shifted only the economic responsibility for payment of the tax to MEDCO-the agreement did not shift the legal incidence of the tax to MEDCO.” The County contends that the General Assembly “intended to exempt MEDCO only from taxes that it was ²⁹² required to pay by law—not taxes that MEDCO agreed to pay or reimburse by contract.” MEDCO responds that the tax court “erred by failing to find that [it] is exempt from payment of the State recordation tax as a matter of law.” MEDCO points out that it was created “for the purpose of stimulating economic growth, stimulating employment and to engage in the promotion of technological enterprise as enumerated in [Econ. Dev.] Section 10-104” and was empowered “to ‘lease as lessee ... real property ... necessary to carry out its purpose^]’ ” MEDCO asserts that as a result of its purpose, combined with its power to borrow money, and the “unlimited language contained in [Econ. Dev.] Section 10-129(a),” it is exempt from “all taxes or assessments on the property or activities of MEDCO, including the state recordation tax.” MEDCO argues that Econ. Dev. § 10-129 “specifically exempts the property and activities of MEDCO from taxation in any form.” MEDCO argues that the tax court’s strict construction of Econ.

Dev. § 10-129 ignores the plain language of the statute and intent of the General Assembly. MEDCO argues that the General Assembly is presumed to have full knowledge of existing law. Accordingly, MEDCO contends that “when the Legislature enacted subsections 10-117(a)(1) and (2)[ 4 ] it was aware that any mortgage or deed of trust securing payment of money borrowed by MEDCO to finance one of its activities would be recorded to achieve and maintain priority and enforceability over subsequent encumbrances ____As a consequence, if the Legislature had intended that the universal exemption from taxation contained in subsection 10-129(a) was not applicable to the state recordation tax, it would have so provided.” MEDCO argues that by ²⁹³ enacting Tax-Prop. § 12-111—which permits the recordation tax to be paid by any person—the General Assembly “must have envisioned the possibility that an entity which was by statute exempt from payment of state recordation tax would be contractually obligated to pay all expenses related to a mortgage loan resulting in no tax being paid.” MEDCO contends that it “did not voluntarily waive the statutory exemption absolving it from the payment of the State recording tax.” MEDCO argues that the record demonstrates that it at no point waived the exemption and at all times asserted that it was exempt from paying the recordation tax. MEDCO argues that it involuntarily paid the recordation tax, as the deed of trust would not be recorded in the land records had MEDCO refused, and after paying the tax, MED-CO immediately applied for a refund.

(1) Standard of Review The Maryland Tax Court is an administrative agency, and as such, final orders of the tax court are subject to judicial review. Md.Code Ann., Tax-General Art. § 3-102; Md.Code Ann., State Gov’t Art. § 10-222; Supervisor of Assessments of Anne Arundel County v. Hartge Yacht Yard, Inc., 379 Md. 452, 460-61 , 842 A.2d 732 (2004). When reviewing the decision of an administrative agency, “we employ the same statutory standards as would the Circuit Court; the inquiry is whether the administrative agency erred, not whether the Circuit Court erred.” Comptroller of the Treasury v. Phillips, 384 Md. 583, 590 , 865 A.2d 590 (2005). “The standard of review for Tax Court decisions is generally the same as that for other administrative agencies.” Hartge Yacht Yard, 379 Md. at 461 , 842 A.2d 732 . “[U]nder this standard, a reviewing court is under no statutory constraints in reversing a Tax Court order which is premised solely upon an erroneous conclusion of law.” Id. The Court of Appeals has explained that an agency’s “legal interpretations of the statute it administers are entitled to some deference.” Phillips, 384 Md. at 591 , 865 A.2d 590 . “[WJhere the Tax ²⁹⁴ Court’s decision is based on a factual determination, and there is no error of law, the reviewing court may not reverse the Tax Court’s order if substantial evidence of record supports the agency’s decision.” Hartge Yacht Yard, 379 Md. at 461 , 842 A.2d 732 .

(2) MEDCO In 1984, the General Assembly created MEDCO, “Maryland Code (1957, 1982 RepLVol., 1985 Supp.), Article 41, §§ 558 through 573, as a public corporation with the objective of promoting economic development within the state.” Atlantic Golf, Ltd. P’ship v. MEDCO, 377 Md. 115, 117 , 832 A.2d 207 (2003). Pursuant to Econ. Dev. § 10-105, MEDCO is an “instrumentality of the State.” Enacted in its present form on October 1, 2008, Econ. Dev. § 10-104, entitled “Legislative findings; purposes; intent,” contains language derived without substantive change from former Art. 83A, § 5-202, concerning the purpose of MEDCO, and provides as follows: (a) Findings.—The General Assembly finds that: (1) the State’s economy continues to experience technological change and restructuring; (2) technological change may result in economic contraction and dislocation, but affords opportunities to expand productive employment and expand the State’s economy and tax base; (3) the establishment of a public corporation to acquire or improve projects: (i) serves the public interest by accomplishing one or more of the Corporation’s legislative purposes listed in subsection (b) of this section; and (ii) complements existing State marketing programs administered by the Department and through the Department’s financial assistance programs including the Maryland Industrial Development Financing Authority and the Maryland Economic Development Assistance Authority under Title 5 of this article; and ²⁹⁵ (4) the State lacks and needs direct property development capability for economic development purposes.

(b) Purposes.—The legislative purposes of the Corporation are to: (1) relieve unemployment in the State; (2) encourage the increase of business activity and commerce and a balanced economy in the State; (3) help retain and attract business activity and commerce in the State; (4) promote economic development; and (5) promote the health, safety, right of gainful employment, and welfare of residents of the State. (c) Intent.—The General Assembly intends that: (1) the Corporation operate and exercise its corporate powers in all areas of the State; (2) without limiting its authority to otherwise exercise its corporate powers, the Corporation exercise its corporate powers to assist governmental units and State and local economic development agencies to contribute to the expansion, modernization, and retention of existing enterprises in the State as well as the attraction of new business to the State; (3) the Corporation cooperate with workforce investment boards, private industry councils, representatives of labor, and governmental units in maximizing new economic opportunities for residents of the State; (4) the Corporation accomplish at least one of the purposes listed in subsection (b) of this section and complement existing State marketing and financial assistance programs by: (i) owning projects; (ii) leasing projects to other persons; or (iii) lending the proceeds of bonds to other persons to finance the costs of acquiring or improving projects that the persons own or will own; and ²⁹⁶ (5) the Corporation not own and operate a project unless: (i) the Board determines by resolution that the private sector has not demonstrated serious and significant interest and development capacity to own and operate the project; or (ii) a representative of a governmental unit requests in writing that the Corporation own and operate the project. The powers of MEDCO are stated in Econ. Dev. §§ 10-115 through 10-117.

Borrowing money is a power set forth in Econ. Dev. § 10-117, which provides, in pertinent part, as follows: (a) In general.—The Corporation may: (1) borrow money and issue bonds to finance any part of the cost of a project or for any other corporate purpose of the Corporation; (2) 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; (4) otherwise provide for the security of bonds and the rights of bondholders. MEDCO’s tax status in the State is set forth in Econ. Dev. § 10-129, which provides: (a) Exemption.—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, 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. (c) Bonds.—The bonds of the Corporation, including the interest on the bonds, are forever exempt from all State and local taxes. ²⁹⁷ (3) The Recordation Tax The State recordation tax is “in the nature of an excise tax imposed upon the privilege of recording certain instruments, including, among other things, the transfer of title to real property,” and is not a tax on the property itself. Dean v. Pinder, 312 Md. 154, 165 , 538 A.2d 1184 (1988) (citation omitted). “A property tax is a charge on the owner of the property by reason of his ownership alone without regard to any use that might be made of it____[while] the modern conception of an excise tax includes any tax not levied directly on the ownership of property as such.” 5 Montgomery Cty. v. Waters Landing Ltd. P’ship, 99 Md.App. 1, 14 , 635 A.2d 48 , aff'd, 337 Md. 15 , 650 A.2d 712 (1994) (citations and internal quotation marks omitted). The authority for the State recordation tax is set forth in Tax-Prop. § 12-102, which provides: Except as otherwise provided in this title, recordation tax is imposed on an instrument of writing: (1) recorded with the clerk of the circuit court for a county; or (2) filed with the Department and described in § 12-103(d) of this title. “By agreement, [the] recordation tax may be paid by any person.” Tax-Prop. § 12-111.

The General Assembly has carved out several exemptions to the State recordation tax, the most relevant being Tax-Prop. § 12-108(a) which provides that: (a) Transfers to public agency.— ²⁹⁸ (1) Except as provided in paragraph (2) of this subsection, an instrument of writing is not subject to recordation tax, if the instrument of writing transfers property to or grants a security interest to: (i) the United States; (ii) the State; (iii) an agency of the State; or (iv) a political subdivision in the State. (2) The Mayor and City Council of Baltimore City or the governing body of a county may impose, by law, the recor-dation tax uniformly on all instruments of writing that secure repayment of debt created by the sale of bonds authorized under Title 12, Subtitle 1 of the Economic Development Article. Pursuant to Tax-Prop. § 12-116, a county may enact its own law exempting from the recordation tax an instrument of writing that transfers property from or grants a security interest from a State or State agency. Tax-Prop. § 12-116 provides that: The Mayor and City Council of Baltimore City or the governing body of a county may exempt, by law, from the recordation tax an instrument of writing that transfers property from or grants a security interest from: (1) the United States; (2) the State; (3) an agency of the State; or (4) a political subdivision in the State.

(4) Econ. Dev. § 10-129 and Tax-Prop. §§ 12-108, 12-111, 12-116 This case involves the interaction between Econ. Dev. § 10-129(a) 6 and Tax-Prop. § § 12-108, 12-111 and 12-116. We ²⁹⁹ must, therefore, apply the canons of statutory construction to the statutes.

In Md.-Nat’l Capital Park & Planning Comm’n v. State Dept. of Assessments and Taxation, 110 Md.App. 677, 688-90 , 678 A.2d 602 (1996), aff'd, 348 Md. 2 , 702 A.2d 690 (1997), we explained the standard by which we interpret tax exemptions as follows: 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, we examine the language of the enactment and give to the language its natural and ordinary import. If the language is plain and free from ambiguity and expresses a definite and sensible meaning, we will, ordinarily, end our inquiry. We are not, however, rigidly bound to the precepts of the “plain meaning” rule.

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. Furthermore, we examine the entire statutory scheme and consider the purpose behind the particular statute before us. 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. Moreover, the examination of related statutes is not beyond our reach.

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 ³⁰⁰ 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. In the final analysis, the real legislative intent prevails. The burden of showing that an exemption is allowed under the law falls upon the claimant.

(Most internal citations omitted). When interpreting a statute, “we presume that the Legislature has acted with full knowledge of prior legislation, and construe the statute as a whole so that no word, clause, sentence, or phrase is rendered surplusage, superfluous, meaningless, or nugatory.” Dep’t of Health & Mental Hygiene v. Kelly, 397 Md. 399, 420 , 918 A.2d 470 (2007); Mayor of Oakland v. Mayor of Mountain Lake Park, 392 Md. 301, 316-17 , 896 A.2d 1036 (2006) (“In construing statutes, we presume that the General Assembly acted with full knowledge of prior legislation and intended statutes affecting the same subject matter ‘to blend into a consistent and harmonious body of law.’ Therefore, we read together statutes on the same subject and harmonize them to the extent possible, so as to avoid rendering either statute ‘or any portion, meaningless, surplusage, superfluous or nugatory.’ ” (internal citations omitted)). (A) Plain Language (i) Econ. Dev. § 10-129(a) Econ.

Dev. § 10~129(a) provides, as follows: (a) Exemption.—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 ³⁰¹ activities, or any revenue[ 7 ] from its properties or activities. (Emphasis added). A review of the plain reading of the language of Econ. Dev. § 10-129(a) demonstrates that the General Assembly sought to exempt MEDCO from any requirement to pay taxes or assessments on its properties or activities, or any revenue from its properties or activities.

A plain language analysis of Econ. Dev. § 10-129(a) reveals that MEDCO is exempt from payment of taxes imposed on its real property and activities and taxes imposed on the income from those properties or activities. If MEDCO is required to pay a tax or assessment on its properties or activities or revenue therefrom, then MEDCO is exempt; conversely, if MEDCO is not required to pay the tax, it is not exempt. Nothing in the statute provides that MEDCO is exempt from paying a tax which it was not required to pay but agreed to pay or from paying an excise tax on the transfer of a security interest to a private entity, such as PNC Bank.

(ii) Tax-Prop. §§ 12-108(a), 12-116 and 12-111 Tax-Prop. § 12-108(a) provides as follows: (a) Transfers to public agency.— (1) Except as provided in paragraph (2) of this subsection, an instrument of writing is not subject to recordation tax, if the instrument of writing transfers property to or grants a security interest to: (i) the United States; (ii) the State; (iii) an agency of the State; or (iv) a political subdivision in the State. ³⁰² (2) The Mayor and City Council of Baltimore City or the governing body of a county may impose, by law, the recor-dation tax uniformly on all instruments of writing that secure repayment of debt created by the sale of bonds authorized under Title 12, Subtitle 1 of the Economic Development Article. Tax-Prop. § 12-116, provides: The Mayor and City Council of Baltimore City or the governing body of a county may exempt, by law, from the recordation tax an instrument of writing that transfers property from or grants a security interest from: (1) the United States; (2) the State; (3) an agency of the State; or (4) a political subdivision in the State. Through the plain meaning of its terms, Tax-Prop. § 12-108(a) specifically provides that when an instrument of writing transfers property to, or grants a security interest to, a State agency, such as MEDCO, the instrument of writing is exempt from the recordation tax. Conversely, Tax-Prop. § 12-116 specifically addresses instruments of writing which transfer property from a State agency, such as MEDCO.

Tax-Prop. § 12-116 permits counties, such as Montgomery County, to enact a law which exempts from the recordation tax an instrument of writing that transfers property from, or grants a security interest from, a State agency. It is undisputed that Montgomery County has not enacted such a provision. 8 As such, there is no law exempting from the recordation tax an instrument of writing that transfers property from or grants a security interest from a State agency. Tax-Prop. § 12-111 provides that: “By agreement, recordation tax may be paid by any person.” “Agreement” is defined as “[a] mutual understanding between two or more persons about their relative rights and duties regarding past or future ³⁰³ performances!)]” Black’s Law Dictionary 74 (8th ed.2004). “Agreement” is also defined as “an arrangement as to a course of action[.]” Merriam-Webster’s Collegiate Dictionary 26 (11th ed.2003). “May” is defined as “to be permitted to” or “[t]o be a possibility!)]” Black’s Law Dictionary 1000 (8th ed.2004). “May” is also defined as “‘have power, am able,’ ‘have the ability to,’ ‘be free to.’ ” Merriam-Webster’s Collegiate Dictionary 767 (11th ed.2003). In sum, the plain language of Tax-Prop. § 12-111 demonstrates that recordation tax may be paid by either party, and the parties are able to agree as to who will pay the tax.

From the language of Tax-Prop. § 12-111, MEDCO is clearly not mandated or required to pay the recordation tax, as the tax “may be paid by any person.” A plain language review of Econ. Dev. § 10-129, Tax-Prop. §§ 12-108(a), 12-116, and 12-111 does not support the conclusion that MEDCO is exempt from paying the recordation tax in this case-a tax which it was not required to pay but voluntarily agreed to pay. (B) Legislative History The legislative history of Econ. Dev. § 10-129, Tax-Prop. §§ 12-108(a), 12-116, and 12-111 compels the conclusion that MEDCO is not exempt from paying the recordation tax in this case.

(i) Econ. Dev. § 10-129 Econ. Dev. § 10-129 was first enacted in 1984, by Article 41 § 567, which provided that: With the exception of the State and local real estate taxes as required below, the Corporation shall not be required to pay any taxes or assessments upon its properties or activities or upon any revenues therefrom; provided however that whenever the Corporation sells or leases land or facilities to any private entity or entities, such land or facilities shall be subject to State and local property taxes from the time of such sale or lease. The bonds of the Corporation and the interest thereon are forever exempt from all State, municipal, and local taxation. ³⁰⁴ (Emphasis added).

In 1984, Senate Bill 485, Chapter 498 provided the purpose of Article 41 § 567 as follows: FOR the purpose of providing for the creation and organization of a public corporation to be known as the Maryland Economic Development Corporation for certain economic development purposes; making certain legislative findings and expressions of intent; defining certain terms; ... stating the applicability of certain State and local laws, regulations, or approvals to the activities of the corporation; ... providing that, subject to certain exceptions, the corporation is exempt from State or local taxation or assessments; ... and generally relating to the creation, organization, powers, and limitations of the Maryland Economic Development Corporation. In 2008, Article 83A § 5-210 9 was recodified to Econ. Dev. § 10-129 by Chapter 306 § 2 into its current form. 10 Econ. Dev. § 10-129(a) provides as follows: (a) Exemption.—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, or any revenue from its properties or activities.

(Emphasis added). A review of the statute from 1984, Article 41 § 567, to the 2008, Econ. Dev. § 10-129, reveals that MEDCO is exempt only from taxes it is required to pay upon its properties or activities. Article 41 § 567 and Econ.

Dev. § 10-129 demonstrate a clear intention to exempt MEDCO from paying taxes ³⁰⁵ which it is required to pay, not taxes, such an excise tax for the benefit of a lender, which, pursuant to Tax-Prop. § 12-111, can be paid by either party. (ii) Tax-Prop. §§ 12-108(a), 12-111 and 12-116 The general recordation tax was enacted in 1987, and was contained in Section 213, which provided: A tax is hereby imposed upon every instrument of writing recorded or offered for record with the Clerks of the Circuit Courts of the respective Counties, or the Clerk of the Superior Court of Baltimore City, on and after June 1,1937, to and including September 30th, 1939, including mechanics liens, deeds, mortgages (except purchase money mortgages), chattel mortgages, bills of sale, conditional contracts of sale, leases, confessed judgments, magistrates’ judgments, crop liens, deeds of trust, and any and all other instruments of writing, so recorded or offered for record, which create liens or incumbrances on real or personal property, or convey title to real or personal property; provided, however, that said tax shall not apply to assignments of mortgages, purchase money mortgages, absolute or partial releases, or orders of satisfaction.... In 1945, in Senate Bill 160, Chapter 253, the recordation tax law was amended to include the following language, which was contained in Section 220: A tax is hereby imposed upon every instrument of writing conveying title to real or personal property, or creating liens or incumbrances upon real or personal property, offered for record and recorded in this State with the Clerks of the Circuit Courts of the respective counties, or the Clerk of the Superior Court of Baltimore City, provided that conveyances to the State or any agency thereof or any political sub-division of the State shall not be subject to the tax or charge imposed by this Section. The term “instruments of writing” shall include deeds, mortgages, chattel mortgages, bills of sale, leases, deeds of trust, contracts and agreements, but shall not include mechanics liens, crop liens, purchase money mortgages, assignments of mortgag ³⁰⁶ es, conditional sales contacts, judgments, releases or orders of satisfaction____ (Emphasis added).

This was the first appearance of language exempting conveyances to the State or any agency thereof or any political sub-division of the State from the recordation tax. This law was to take effect June 1,1945. In 1982, in House Bill 1301, Chapter 698, Md.Code Ann., Art. 81, § 277 was amended, in pertinent part, to include the following language: (a)(3)(I) Except as otherwise provided in this paragraph, the recordation tax does not apply to conveyances to: 1. This State; 2.

An agency of this State; or 3. Any political subdivision of this State. (II) A local governing body, by ordinance or resolution, may apply the recordation tax to mortgages, deeds of trust, or other conveyances that secure the repayment of any indebtedness, funded in any part, directly or indirectly, from the proceeds of bonds issued under Article 41, §§ 266A, et seq. of the Code (relating to industrial buildings for counties and municipalities). If the local governing body passes such an ordinance or resolution, the tax shall be applied uniformly to every conveyance described in this subparagraph.

The purpose of this amendment was to authoriz[e] any local governing body, by ordinance or resolution, to apply the recordation tax to the conveyance of properties funded in any part through the issuance of certain bonds, even if the conveyance is to a political subdivision or would otherwise have been exempt from the recordation tax; and requiring any local governing body so applying the recordation tax to apply it uniformly to those conveyances. (Emphasis added). In the 1987, Cumulative Supplement to the 1957, Md.Code Ann., Art. 81, §§ 277-277B were repealed and recodified into Tax-Prop. § 12-108 by Acts 1985, Senate Bill 1, Chapter 8, ³⁰⁷ Section 1, effective February 1, 1986. In 1986, Tax-Prop. § 12-108(a) provided: (a) Transfers to public agency.

(1) Except as provided in paragraph (2) of this subsection, an instrument of writing is not subject to recordation tax, if the instrument of writing transfers property to or grants a security interest to: (1) the United States; (ii) the State; (iii) an agency of the State; or (iv) a political subdivision in the State. (2) The Mayor and City Council of Baltimore City or the governing body of a county may impose, by law, the recordation tax uniformly on all instruments of writing that secure repayment of debt created by the sale of bonds authorized under Article 41 §§ 266A through 266-1 of the Code.[ 11 ] The Revisor’s Notes following Tax-Prop. § 12-108(a) provided, in pertinent part, that: Subsections (a) through (q) of this section are new language derived without substantive change from former Art. 81, § 277(a)(2)(h), (8) and (1), as that paragraph related to the exemptions for vehicles and vessels, and (b)(2), (j), and the second sentence of (t) and as those subsections related to exemptions from tax, (h), and (i), and § 277(e) as that subsection related to recordation tax. In subsection (a) of this section, the defined term “instrument of writing” is substituted for the former words “con ³⁰⁸ veyances” and “mortgages, deeds of trust, or other conveyances”, for clarity. In the introductory language of subsection (a)(1) of this section, the reference to if the instrument of writing “grants a security interest to” is added for clarity.

Also in subsection (a)(2) of this section, the reference to imposition of the tax “uniformly” is substituted for the former, lengthy reference to “the tax shall be applied uniformly to every conveyance described in this subpara-graph”, for clarity. Also in subsection (a)(2) of this section, the reference to “debt created by the sale” of bonds is substituted for the former phrase “funded in any part, directly or indirectly from the proceeds” of bonds, for clarity. In Senate Bill 1, Chapter 8, the stated purpose of Tax-Prop. § 12-108(a) was as follows: FOR the purpose of adding a new Article to the Annotated Code of Maryland, to be designated and known as the “Tax-Property Article”, to revise, restate, and recodify the laws of the State relating and pertaining to property tax, recordation tax, and transfer tax matters generally ... revising the laws relating to recordation tax, including imposition, exemptions, rate, calculation, payment, and administration, and to distribution of recordation tax; ... revising the laws relating to procedures for property tax, recordation tax, and transfer taxes, including returns and records, determination of liability and enforcement, appeal and judicial procedures, interest, additions to tax and assessable penalties, collection, tax sales, tax abatements, tax credits, refunds, crimes and offenses, and limitations;.... In 2007, in House Bill 231, Chapter 384, the General Assembly enacted Tax-Prop. § 12-116, as it is in its current form.

The purpose of the enactment was: FOR the purpose of authorizing the Mayor and City Council of Baltimore City or the governing body of a county to exempt from recordation tax certain instruments of writing ³⁰⁹ if the transferor is the United States, the State, an agency of the State, or a political subdivision of the State; and generally relating to exemptions from the recordation tax. Senate Bill 1 added Tax-Prop. § 12-111, which provided: “By agreement, recordation tax may be paid by any person.” 12 In Senate Bill 1, the Revisor’s Note after Tax-Prop. § 12-111 provided that: “This section is new language added to conform to practice under the general provisions of [Md.Code Ann., Real Property Art.] § 1-104.” 13 The intent of the General Assembly in enacting Tax-Prop. § 12-108(a) was to exempt instruments of writing which transfer property to or grants a security interest to the State or a State agency. The General Assembly specifically set forth an exemption for transfer to the State or a State agency. The General Assembly, however, starting in 2007, permitted individual counties to enact laws which would exempt from the recordation tax instruments of writing which transfer property from or grant a security interest from a State or State agency, which is the type of transaction at issue in this case.

The General Assembly, by intent and express action, has left it for the individual counties to determine if they want to exempt transfers of property from or grants of a security interest from a State or State agency from the recordation tax. As stated above, Montgomery County has not enacted such a law. ³¹⁰ In enacting Tax-Prop. § 12-111, the General Assembly demonstrated an intent to permit the recordation tax to be paid by any person by agreement. The purpose of Tax-Prop. § 12-111 was to streamline the payment of the recordation tax, with the payment of the costs of recording, which by agreement could be paid by any person. By enacting Tax-Prop. § 12-111, the General Assembly demonstrated an intent to neither impose the tax or require the tax to be paid by a specific person.

(C) Precedent (i) Tax Exemptions We will review relevant case law pertaining to tax exemptions for the payment of recordation taxes. In Fed. Land Bank of New Orleans v. Crosland, 261 U.S. 374, 377 , 43 S.Ct. 385 , 67 L.Ed. 703 (1923), the Supreme Court of the United States held that the Supreme Court of Alabama erred in dismissing a federal land bank’s petition for mandamus to compel a recording officer of Alabama to accept a mortgage for recording without payment of the recordation tax. The Supreme Court held that under the Federal Farm Loan Act of 1916, the federal land bank was exempt from paying the recordation tax. Id. at 378-79 , 43 S.Ct. 385 .

The Federal Farm Loan Act provided that “first mortgages executed to Federal Land Banks shall be deemed ‘instrumentalities of the Government of the United States, and as such they and the income derived therefrom shall be exempt from Federal, State, municipal and local taxation.” Id. at 377 , 43 S.Ct. 385 . The Supreme Court held that: The tax was