901 v. Supervisor of Assessments of Balt. City

261 Md. App. 316

313 A.3d 1

901, LLC

v.SUPERVISOR OF ASSESSMENTS OF BALTIMORE CITY

No. 0491, Sept. Term, 2023

Appellate Court of Maryland.

April 3, 2024

Circuit Court for Baltimore City, Case No. 24-C-21-000219, Lawrence P. Fletcher-Hill, Judge

Argued by Harris W. Eisenstein, Rosenberg Martin Greenberg, LLP, Baltimore, MD, on brief, for Appellant.

Argued by William K. Hammond, Asst. Atty. Gen. (Anthony G. Brown, Atty. Gen. of Maryland, Baltimore, MD), on brief, for Appellee.

Argued before: Arthur, Leahy, Shaw, JJ.

Leahy, J.

Appellant, 901, LLC, claims that the Supervisor of Assessments of Baltimore City (the "Supervisor" or "Appellee") erred in denying its applications, filed in 2017, for partial exemptions from property tax on real property that it has leased from the Maryland Transit Administration ("MTA"). The real property at issue—which is located across the street from the Joseph Meyerhoff Symphony Hall—includes 1010, 1030, and 1040 Park Avenue in Baltimore City, Maryland; throughout this opinion, we refer to these properties collectively as the "Property." The Property is the product of a series of agreements between the MTA and Appellant’s predecessor-in-interest, Symphony Center, LLC ("Symphony Center"), to finance and construct the Property, and thereafter permit Symphony Center (and Appellant) to sublease/license the Property as part of a for-profit business.

Appellant contends that it is entitled to partial exemptions from tax under Maryland Code (1985, 2019 Repl. Vol., 2023 Supp.), Tax-Property Article ("TP"), § 7-210(a),¹ because a government entity is the record owner of the Property and portions of the Property are used by various governmental subtenants for qualifying governmental uses or purposes. The Supervisor denied Appellant’s applications, however, because the provisions of TP § 7-210(a) are expressly made subject to TP § 6-102, which provides, in subsection (e), that a lessee or user of government property is subject to property tax as if the lessee or user were the owner of the property if, among other things, the property is "leased or otherwise made available" to the lessee or user with the "privilege to use the property in connection with a business that is conducted for profit." TP § 6-102(e). Because Appellant’s for-profit business involves subletting the leased Property to a variety of subtenants, the Supervisor determined that Appellant satisfied the conditions of TP § 6-102(e) and, accordingly, that Appellant’s request for exemption under TP § 7-210(a) would have to be denied.

Appellant, however, maintains that because some of its subtenants are governmental entities, those portions of the Property are used for a qualifying governmental use or purpose under TP § 7-210(a)(1). Further, Appellant asserts that it does not have the "privilege to use" the Property under TP § 6-102(e)(2) because its subtenants are the end-users of the Property; in other words, Appellant argues that an intermediate use of real property, i.e., the business of leasing units of property to so-called end-users of the property, does not qualify as "use" of property under TP § 6-102(e)(2).

The Maryland Tax Court relied on TP § 6-102(e) to affirm the decision of the Supervisor, and the Circuit Court for Baltimore City affirmed the decision of the Tax Court. Appellant presents two questions for our review:

I. "Did the Tax Court err in denying partial exemptions from real property tax for the Property, which is owned and used by tax-exempt organizations?"

II. "Did the Tax Court violate the doctrine of stare decisis, principles of statutory construction, and public policy in denying partial exemptions from real property tax for the Property?"

We consider both questions together because they concern the same fundamental issue—whether the Tax Court correctly determined that Appellant’s "privilege to use the property in connection with a business that is conducted for profit" makes Appellant "subject to property tax as though" Appellant was the owner of the Property for tax purposes by operation of TP § 6-102(e). As explained below, we hold that the Tax Court correctly determined that partial property tax exemptions under TP § 7-210(a) were unavailable to Appellant because, under TP § 6-102(e), Appellant is a lessee of qualifying government property with the privilege to use the property in connection with a business that is conducted for profit.²

BACKGROUND

The underlying facts of this case are largely undisputed. As summarized by the Circuit Court for Baltimore City:

The parties stipulated to the relevant facts in their Joint Stipulation of Facts submitted to the Tax Court. The Property at issue is located in midtown Baltimore adjacent to the MTA’s Cultural Center/State Center Light Rail Station and near the Joseph Meyerhoff Symphony Hall. According to the Baltimore City Land Records, the Property is owned by the MTA, an agency of the Maryland Department of Transportation. The MTA proposed a "transit-oriented mixed use redevelopment of the [P]roperty." The MTA selected Symphony Center … to develop the Property following a competitive bidding process. The MTA leased the Property to the Symphony Center on June 8, 2000, for a term of 91 years.

The MTA approved Symphony Center’s Master Site Plan for the Property. The Master Site Plan includes four buildings: two office buildings at 1010 and 1040 Park Avenue, a parking garage at 1030 Park Avenue, and an apartment building at 1020 Park Avenue (collectively the "Improvements"). [901, LLC] does not claim a property tax exemption for any part of the apartment building. The MTAprovided Symphony Center a $6.8 million grant "[i]n consideration of the various obligations undertaken" in constructing the parking garage. Pursuant to the Grant Agreement, Symphony Center is required to provide at least sixty parking spaces for "the tenants and occupants of governmental and commercial office buildings" on the Property.

On October 24, 2000, [901, LLC] was formed by Symphony Center to develop the Property. [901, LLC] is a for-profit entity. On June 7, 2001, Symphony Center assigned the Ground Lease to [901, LLC]. [901, LLC] "expressly agree[d] to assume all of the obligations of [Symphony Center] under the Ground Lease and under all contracts, including the Grant Agreement. The assignment was made to "facilitate the development of the" Property. "[901, LLC] constructed [the] [I]mprovements on the Property."

On January 28, 2004, the MTA and [901, LLC] amended the Ground Lease. Before amending the Ground Lease, [901, LLC] could "sell, assign, transfer or convey, sublet or license the Property, or any part thereof’ without the MTA’s prior written consent. [901, LLC] did need to provide the MTA prior written notice if [901, LLC] took any of these actions. Pursuant to the Amendment, "[901, LLC] may not subdivide the [Property], or sell, assign, transfer or convey, sublet or license the [Property], or any part thereof" without the MTA’s prior written consent, but [901, LLC] "can sublet or license retail spaces and office spaces within the Improvements" without the MTA’s consent or providing the MTA prior written notice. [901, LLC] subleases the Property to various for-profit, non-profit, and governmental subtenants. Upon the expiration of the Ground Lease, [901, LLC] will yield the Property to the MTA and have no right in or to the Property, including the Improvements.

901, LLC v. Supervisor of Assessments of Balt. City, No. 24-C-21-000219, slip op. at 2-4 (Balt. City Cir. Ct. Apr. 14, 2023) (first, third, eighth, tenth, eleventh, seventeenth, and eighteenth alterations supplied by the circuit court) (citations and footnote omitted).

Appellant filed three applications for exemption for the Property (the "Applications") on May 25, 2017. Collectively, the Applications sought "an exemption of 85.45% [for 1010 Park Avenue] because of the rentals to government agencies"; "an exemption of 39.97% [for 1040 Park Avenue] because of the rentals to the State and nonprofit organizations"; and "an exemption of 55.85% [for 1030 Park Avenue] because of the lease of parking spaces in the garage to government and nonprofit organizations." In their joint stipulation of facts before the Maryland Tax Court, the parties agreed that as of January 1, 2017, 85.45% of the leasable space at 1010 Park Avenue was leased to "Governmental Subtenants and the Non-Profit Subtenants";³ as was 39.97% of the leasable space at 1040 Park Avenue. Meanwhile, 57.89% of the total parking spaces at 1030 Park Avenue⁴ was "reserved for either" governmental or non-profit subtenants "that have offices in 1010 Park Avenue and 1040 Park Avenue or the [t]he University of Maryland Medical Center."

Appellee, the Supervisor of Assessments of Baltimore City, denied the Applications in November 2017. The Property Tax Assessment Board ("PTAB") for Baltimore City affirmed in December 2018, and Appellant appealed to the Tax Court.⁵

The Tax Court affirmed the ruling of the PTAB on December 28, 2020, in an amended memorandum and order, thus denying Appellant’s Applications. In the amended memorandum, the Tax Court acknowledged that Appellant "relies on TP §§ 7-202 and 7-210 to justify the exemption[s] it seeks" as those sections "exempt from property tax property titled to a non-profit or government, which is used for non-profit or government purposes, respectively." However, the Tax Court declared that "adherence to the plain meaning of TP § 6-102(e) mandates a denial of" the Applications for exemptions for the government subleases, emphasizing that TP § 7-210 "specifically references TP § 6-102(e)[.]" Under TP § 6-102(e), the Tax Court explained, property tax is imposed on certain "lessee[s] or … user[s]" of government-owned property by deeming those entities the hypothetical owners of the property for tax purposes, "[u]nless exempted" by enumerated sections of the Code. The Tax Court clarified that the enumeration of specific exemptions under TP §...