Gulf Marine Repair Corp. v. Henriquez

375 So.3d 306

GULF MARINE REPAIR CORPORATION, Appellant,

v.Bob HENRIQUEZ, as Hillsborough County Property Appraiser; Tampa Port Authority; Doug Belden, as Hillsborough County Tax Collector; and Jim Zingale, as Executive Director of the State of Florida Department of Revenue, Appellees.

No. 2D20-2613

District Court of Appeal of Florida, Second District.

July 7, 2023

Appeal from the Circuit Court for Hillsborough County; Martha J. Cook, Judge.

Marie A. Borland and Robert E. V. Kelley, Jr., of Hill, Ward & Henderson, PA., Tampa, and Chris W. Altenbernd of Banker Lopez Gassier P.A., Tampa, for Appellant.

William D. Shepherd of Hillsborough County Property Appraiser’s Office, Tampa, for Appellee Bob Henriquez.

Ashley Moody, Attorney General, and Timothy E. Dennis, Assistant Attorney General, Tallahassee, for Appellee Jim Zingale.

No appearance for remaining Appellees.

NORTHCUTT, Judge.

In this multifaceted litigation, Gulf Marine Repair Corporation appeals a judgment determining that property it leases from the Tampa Port Authority is not exempt from ad valorem taxes. The Port Authority was also a party in the proceedings below, and it filed a separate appeal from the same judgment. See Tampa Port Auth. v. Henriquez, No. 2D20-2605, 2023 WL 4372853 (Fla. 2d DCA July 7, 2023). Both appellants asked us to refrain from consolidating the appeals, seeking instead to have them merely considered together (that is, for the cases to "travel together"). We granted the request, and today we announce in each case a separate decision affirming the judgment.¹

I. Background

The Port Authority is a government body that operates a deepwater port in Tampa. See ch. 95-488, §§ 4, 7, Laws of Fla. It owns the property at issue, comprising contiguous parcels on which Gulf Marine, a for-profit corporation, conducts a commercial shipyard business. Gulf Marine’s lease obligates it to pay all ad valorem taxes on the property. The property had been taxed for many years when, in February 2014, Gulf Marine filed applications with the property appraiser to exempt the parcels from ad valorem taxes. It claimed entitlement to the exemptions on the ground that its use of the parcels was for a governmental purpose.²

After inspecting the premises, the property appraiser issued written notices denying the exemption applications because the properties were "being used for proprietary purposes." Gulf Marine filed a timely petition to Hillsborough County’s Value Adjustment Board (VAB) for relief pursuant to section 194.011, Florida Statutes (2014).³ The VAB’s special magistrate conducted an evidentiary hearing on the peti tion in December 2014. Beforehand, the VAB clerk contacted the Port Authority to request its participation. The Port Authority’s vice president for legal affairs briefly appeared at the hearing to advise that the Port Authority approved of Gulf Marine proceeding on its behalf.

In March 2015, the magistrate recommended denying Gulf Marine’s petition. But in April 2015, the VAB granted the petition and awarded tax exemptions to the subject parcels. The property appraiser contested that decision by filing a de novo circuit court action in accordance with section 194.036 and naming Gulf Marine as the defendant.⁴

The circuit court later permitted the property appraiser to amend his complaint to add the Port Authority as a defendant, and it denied the Port Authority’s motion to dismiss on the ground that it had not been joined as a party to the VAB case during the statutory period for filing it. Gulf Marine, as well, unsuccessfully moved for judgment on the pleadings on that ground, arguing that the Port Authority was an indispensable party that had not been timely joined.

While the suit regarding the 2014 exemptions was pending, Gulf Marine filed additional exemption applications for each tax year from 2015 through 2019. As before, the property appraiser denied the applications. Following each denial, Gulf Marine filed suit against the property appraiser pursuant to section 194.171, asserting theories why each exemption disapproval was improper and should be overturned. The circuit court eventually consolidated the actions, and ultimately it awarded a summary judgment to the property appraiser as to them all.

II. The Tax Exemption Issue

[1] The central issue posed in Gulf Marine’s appeal is whether two laws, sections 196.012(6) and 196.199(2)(a), Florida Statutes (2014), together exempt the shipyard property from taxation. As will be seen, the Florida Supreme Court has long interpreted those statutes narrowly, beginning with Williams v. Jones, 326 So. 2d 425 (Fla. 1975). In that pivotal decision, the Williams court established the "governmental-governmental" use test—the keystone principle that determines whether a particular use of privately leased government property exempts it from taxes. 326 So. 2d at 433. Employing that test, the court below concluded that Gulf Marine’s use of the property as a for-profit shipyard does not serve a governmental-governmental function and that therefore the property is not tax exempt. We agree.

[2] When applying property tax exemption statutes such as the two involved here, courts must abide by several important precepts. These include the Florida constitutional requirement that, with few exceptions, all property in the state must be taxed. See art. VII, Fla. Const. The legislature’s authority to exempt property from taxation is tightly fettered; lawmakers may only enact exemptions that are authorized in the Constitution. Art. VII, §§ 3, 4, Fla. Const.; Sebring Airport Auth. v. McIntyre (Sebring IV), 783 So. 2d 238, 247 (Fla. 2001); Archer v. Marshall, 355 So. 2d 781, 783 (Fla. 1978) (citing Presbyterian Homes of the Synod of Fla. v. Wood, 297 So. 2d 556 (Fla. 1974)).

[3-5] Consistent with that important constitutional limitation, statutory tax exemptions can only be created expressly, not by inference. Cap. City Country Club, Inc. v. Tucker, 613 So. 2d 448, 452 (Fla. 1993); Volusia County v. Daytona Beach Racing & Recreational Facilities Dist., 341 So. 2d 498, 502 (Fla. 1976). As such, courts must strictly construe tax exemption laws against the taxpayer. Cap. City Country Club, 613 So. 2d at 452; Volusia County, 341 So. 2d at 502. Further, the taxpayer has the burden to clearly prove its entitlement to a property tax exemption. Volusia County, 341 So. 2d at 502.

[6] Finally, as with all statutes, courts must interpret a tax exemption law in a manner that preserves its constitutionality when possible. Cap. City Country Club, 613 So. 2d at 452; Fla. Dep't of Revenue v. City of Gainesville, 918 So. 2d 250, 256 (Fla. 2005); Hillsborough Cnty. Aviation Auth. v. Walden, 210 So. 2d 193, 195 (Fla. 1968).

Sections 196.012(6) and 196.199(2)(a) were created as part of comprehensive tax-reform legislation in 1971. Ch. 71-133, §§ 1, 11, Laws of Fla. The 2014 version of section 196.199(2)(a), in force when Gulf Marine applied for the exemptions at issue here, is materially unchanged from the original enactment. It provides that property owned by a government entity but used by a nongovernmental lessee is exempt from taxation "only when the lessee serves or performs a governmental, municipal, or public purpose or function, as defined in s. 196.012(6)."⁵

The referenced definition in section 196.012(6) has been amended in the years since its inception in 1971. Importantly, however, the legislature has carried forward the definition’s initial sentence with no material alteration. It reads:

Governmental, municipal, or public purpose or function shall be deemed to be served or performed when the lessee under any leasehold interest created in property of the United States, the state or any of its political subdivisions, or any municipality, agency, special district, authority, or other public body corporate of the state is demonstrated to perform a function or serve a governmental purpose which could properly be performed or served by an appropriate governmental unit or which is demonstrated to perform a function or serve a purpose which would otherwise be a valid subject for the allocation of public funds.

§ 196.012(6).

When the Williams court considered this law in 1975, the statute consisted entirely of just that sentence and two others.⁶ Construing it along with section 196.199(2)(a), the court was mindful of the constitutional mandate that all property in the state must be taxed. Subject to provisos not relevant here, article VII, section 4 of the Constitution directs that "[b]y general law regulations shall be prescribed which shall secure a just valuation of all property for ad valorem taxation." The Williams court observed that this passage in the Constitution "was clearly intended to be a check upon the Legislature so as to prohibit it from classifying property for ad valorem taxation in such a manner as to result in a valuation of any class of property at Less than just value." 326 So. 2d at 430. In accordance with that prohibition and with the attendant principle that tax exemption laws must be strictly construed against exemption claimants, the court concluded that

[t]he exemptions contemplated under Sections 196.012(5) and 196.199(2)(a), Florida Statutes, relate to "governmental-governmental" functions as opposed to "governmental-proprietary" functions. With the exemption being so interpreted all property used by private persons and commercial enterprises is subjected to taxation either Directly or Indirectly through taxation on the leasehold.

Id. at 433. "Thus," the court continued, "all privately used property bears a tax burden in some manner and this is what the Constitution mandates." Id.

As one writer observed, Williams "marked a dramatic turning point in extending ad valorem tax exemptions to governmentally owned property that is being used by nongovernmental persons or entities." David M. Hudson, Governmental Immunity and Taxation in Florida, 9 U. Fla. J.L. & Pub. Poly 221, 244 (1998).

No longer is it

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