Circuit Court for Montgomery County Case No. 333135-V
Maryland Economic Development Corporation v. Montgomery County, Maryland, Case No. 44, September Term 2012,
STATUTORY CONSTRUCTION - MARYLAND ECONOMIC DEVELOPMENT CORPORATION - TAX LAW - RECORDATION TAX - EXEMPTIONS:
The plain meaning of MEDCO's tax exemption in § 10-129(a) of the Economic Development Article includes an exemption from excise taxes on MEDCO's activities, which "activities" include the recording of a deed of trust as an indispensable element necessary to close the loan, and which tax MEDCO was "required" to pay by both its contractual agreement with PNC and by being the entity to present the deed to the County; therefore, the plain meaning of § 10- 129(a) exempts MEDCO from the paying the recordation tax in this case.
STATUTORY CONSTRUCTION - TAX LAW - TAX EXEMPTIONS: Although the general rule is to strictly construe tax exemptions and resolve any doubt in favor of the tax authority, such a construction does not apply when the Legislature has specifically instructed us to apply a liberal construction to a particular tax exemption in order to achieve its statutory purpose.
STATUTORY CONSTRUCTION - TAX LAW - RECORDATION TAXES: Reading § 10-129(a) of the Economic Development Article together with §§ 12-108 and 116 of the Tax-Property Article, § 10-129(a) creates a limited exception to the general framework of the Tax-Property Article under which transfers from MEDCO are exempt from recordation tax, but the counties retain the power to decide whether transfers from the State or other state agencies are exempt.
Bell, C.J. Harrell Battaglia Greene Adkins Barbera Eldridge, John C. (Retired, Specially Assigned) JJ.
Opinion by Adkins, J. Bell, C.J., dissents.
In this case, we return to our well-established rules of statutory interpretation, searching for the Legislature's intent 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 case. 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)(1). 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 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. (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 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 writing 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.
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 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) ...