Rosecroft Trotting & Pacing Ass'n v. Prince George's County
Docket: Nos. 145, 146 and 147
Court: Court of Appeals of Maryland; March 6, 1984; Maryland; State Supreme Court
Prince George’s County, Maryland, imposed property tax rates for fiscal year 1984 of $2.54 per $100 of assessed valuation on real property and $3.57 on personal property. Taxpayers contest the validity of the higher personal property tax rate, arguing that a county lacks the authority to levy two different rates within the same district. The county’s defense relies on the Express Powers Act, but this defense is undermined by a later public general law and the county's charter amendment, known as the 'TRIM' amendment, which limits real property tax collections to those of fiscal year 1979. If dual tax rates are disallowed, the lower real property tax rate would apply to all properties.
The ongoing litigation includes appeals from three cases, following the precedent set in Potomac Electric Power Co. v. Prince George's County, where the court dismissed PEPCO's challenge due to their payment of taxes. Subsequently, Rosecroft initiated a declaratory action against the higher personal property tax rate without having paid it, with PEPCO intervening. Additional cases involve Metrovision, which faces lawsuits from the county for unpaid taxes while also challenging the validity of the higher tax rate.
Prince George’s argues that its tax practices comply with the Maryland Declaration of Rights, asserting that uniformity is maintained within property classes. It claims authority under the Express Powers Act and contends that the General Assembly has classified real estate and personal property separately. In contrast, taxpayers cite provisions of the Maryland Code, which mandate a single tax rate for all property, arguing that the county misinterprets statutory language regarding the singular use of "rate" or "levy."
The circuit court ruled in favor of Prince George’s County regarding its authority to levy taxes using two rates, agreeing with the county's legal arguments. The court granted certiorari before the Court of Special Appeals could consider taxpayer appeals. Prince George’s bases its tax authority on § 5(0) of the Express Powers Act, which empowers charter counties to determine the class of improvements subject to taxation. This provision, first enacted in 1918, is supported by a 1915 amendment to Article XV of the Declaration of Rights. The amendment introduced the concept of separate assessments for land and improvements, reflecting the Single Tax movement initiated by Henry George, which advocated taxing only land values. Historical context includes the case Wells v. Hyattsville, where a municipal tax levy on land alone was deemed unconstitutional under the then-existing Article XV. The 1915 amendment replaced the previous language with a requirement for uniform rules in assessing land and improvements separately, allowing for classifications but eliminating the need for overall uniformity in tax burdens.
The amendment permits exemptions for classes of improvements and personal property but explicitly excludes land from such exemptions. The 1915 amendment to Article XV of the Maryland Constitution allowed the General Assembly greater flexibility in classifying property for tax purposes, shifting the focus from strict uniformity to the reasonableness of classifications. This amendment did not, however, grant the General Assembly the power to classify land for taxation. Maryland's voters also approved the Home Rule Amendment, which requires the General Assembly to provide express powers for counties to form their charters. Following this, the Express Powers Act established that while land would always be subject to county tax, charter counties could determine which classes of improvements and personal property would be taxable. The Act implies that specific provisions must exist to authorize different tax rates for Prince George’s County. Additionally, legislation from 1916 granted municipalities the authority to categorize property for local taxation and to exceed charter-imposed tax rate ceilings to compensate for revenue losses due to property exemptions.
Article XV was amended in 1960 to address the ruling in State Tax Comm’n v. Gales, which determined that the 1915 version of Article XV prohibited the classification of land for tax purposes. The amendment modified the uniformity clause to empower the General Assembly to establish uniform rules for the separate assessment and classification of land and personal property, ensuring taxes within each class or subclass are uniform. Prince George’s argument hinges on the necessity for separate classification of realty and personalty for different tax rates to apply, referencing Art. 81. § 14(a), which mandates separate classification for assessment. Taxpayers contend that § 14(a) was specifically a response to the Sears, Roebuck & Co. case, which found a violation of Equal Protection due to unequal assessment practices. They argue that since § 14(a) classifies property only for assessment purposes, it cannot justify separate tax rates. The analysis assumes that if a charter county can levy different rates on classified properties, then § 14(a) would provide adequate classification. However, for § 5(0) to allow such levies, it must imply that the power to include classes also entails the power to exclude them, including partial exemptions and lower rates. Despite assuming Prince George’s clears these legal hurdles, the unamended § 5(0) suggests that a charter county may not classify land, complicating the county’s attempt to apply a lower tax rate on real estate, which includes land. This interpretation potentially conflicts with the historical limitations imposed by the prior version of Article XV.
The § 5(0) paragraph allows charter counties to levy taxes based on land value under Article 15, which has been interpreted to enable the application of two tax rates, potentially allowing some land to qualify for a lower rate. However, this interpretation conflicts with Art. 81, § 30(a), which mandates that all property subject to ordinary taxation must pay the full county or city rate, asserting that there cannot be different rates for separate classes of property. Prince George’s argues that "rate" can be interpreted to include "rates," but doing so would lead to inconsistency with § 30(a), as it would imply that not all property pays the full rate, contradicting the language that states all property "shall pay" the full rate. Efforts to reconcile these sections are hindered by § 12, which permits municipalities to impose different rates, explicitly excluded from § 30(a) to maintain its uniformity. This exclusion underscores that a system of varying tax rates for different property classes is incompatible with the requirements set forth in § 30(a).
§ 30(a) should not be interpreted as requiring that all property within a class be taxed at the full county rate, as evidenced by the provision for exceptions in the statute. This provision dates back to the 1929 revision of Art. 81, where former § 27(a) included various limits on property tax rates for specific intangibles, such as interest-bearing bonds, mortgages, and shares of stock. These limits indicate that certain intangibles were not subject to the full county rate if it exceeded the established limits. The statute was designed to allow for these exceptions to accommodate lower rates on defined classes of intangibles. Furthermore, subsection (f) of the 1929 version provided guidelines for allocating tax revenues between county and city authorities based on the full tax rates. The principle of a fixed county rate remains relevant, as reflected in present § 30(a).
Additionally, while Prince George’s County referenced municipal tax differentials and historical variations in property tax rates, these do not undermine the conclusion that property taxes are generally applied at a full county rate. Municipal tax differentials result in lower county tax rates for properties within municipalities compared to those in unincorporated areas, reflecting the differing costs of services provided by the county and municipalities. In cases where a municipality is the sole provider of services, distinct tax rates emerge based on property location rather than property class. Historical instances of such tax differentials have consistently been applied based on the geographic location of taxable properties across all classes, rather than differentiated by property class.
Art. 81 § 32A, enacted in 1975, permits counties, including charter counties, to grant municipal tax differentials, which aligns with the interpretation of § 30(a) that allows deviations from the full county tax rate. Although Griffin v. Anne Arundel County involved a failed attempt by Annapolis taxpayers to secure a larger tax differential, it did not present a public general law supporting such a differential at the time; however, it was assumed by the parties and the court that counties had the discretion to grant them. This assumption influenced subsequent Attorney General opinions but overlooked the implications of § 30(a), which is deemed crucial in this context.
Historical context indicates that annexations by Baltimore City led to varying property tax rates under local laws predating § 30(a), specifically noted in Acts of 1929, which included a proviso exempting special rates from the general rule of § 30(a). This exemption highlights the tension between the interpretations of § 5(0) and § 30(a), both of which are public general laws, with § 30(a) being the more recent law. A chronology of legislative actions illustrates that inconsistencies with prior laws were repealed as new provisions were adopted, underscoring the conflict between local interpretations and statewide regulations.
Section 7 of Ch. 453 includes a specific repealer for any public general or public local laws that conflict with it, stating that in cases of inconsistency, the later public general law prevails. Article XI-A, § 2 mandates that the General Assembly must provide express powers through public general law, which can be modified or repealed by the Assembly. However, Article XI-A, § 4 restricts the General Assembly from enacting public local laws for charter counties concerning subjects already covered by express powers. Article 81, § 30 is identified as a public general law not subject to this limitation. Previous court rulings confirmed that when local laws from charter counties conflict with public general laws, the latter prevails, as established in cases like Rockville Grosvenor, Inc. v. Montgomery County and East v. Gilchrist. The excerpt notes that the court has not directly addressed situations when an express power granted by the Act conflicts with a later public general law. It concludes that in such scenarios, the later public general law takes precedence, even regarding powers exercised through property tax levies. This principle is supported by the Express Powers Act, which emphasizes that powers granted must be exercised in a manner consistent with existing public general laws. The original provisions of the Express Powers Act include clauses ensuring that granted powers do not limit the county council's ability to enact resolutions consistent with state law.
In State’s Atty v. City of Baltimore, the Maryland Court addressed the authority of Baltimore City under its charter and the implications of Art. XI-A. 4 of the Maryland Constitution. The court found that the General Assembly's attempt to categorize violations of Baltimore's building and electrical codes as civil proceedings was invalid, as it constituted a public local law that conflicted with the express powers granted to the city. The court emphasized that while the General Assembly can enact public general laws that may override previously granted powers, it cannot do so with public local laws. Specifically, Art. 81 § 30(a) mandates a uniform property tax rate across the county, prohibiting Prince George’s County from imposing different rates or classifying properties for tax purposes in a manner that would contravene this provision. Consequently, the judgments from the Circuit Court for Prince George’s County were vacated and remanded for declaratory judgments consistent with this opinion. Additionally, the court noted that the Rosecroft case involved collusion and proceeded under legal understandings established in Reyes v. Prince George’s County. The excerpt also referenced a resolution from a historic conference advocating for equal rights to community resources.
Natural opportunities should not be held without providing fair returns to the community, and the benefits of land growth and improvement should serve communal use. Individuals deserve to retain the full value of their labor without taxation on its products. To implement these principles, a single tax on land values—disregarding improvements—should replace all forms of direct and indirect taxation for public revenue purposes at all governmental levels. This position was reaffirmed at the 1912 Single Tax Conference, reflecting the ongoing commitment to the ideals established in the 1890 platform.
The Court noted that a fair distribution of tax burdens across property classes would reduce individual contributions, preventing oppressive taxation on specific property owners. This principle has been entrenched in Maryland's organic law since 1776 and consistently upheld by its courts. Following the Wells decision, Maryland Single Tax advocates, led by Judge Alfred S. Niles, sought a constitutional amendment for home rule in taxation, but the General Assembly did not approve it. Subsequently, Ralston proposed an amendment for classifying taxable property, including land, which was passed by the legislature and became part of the Maryland Constitution in 1915.
Judge Oscar Leser, a significant figure in Maryland’s tax administration, also credited Ralston and the Single Taxers for the 1915 amendment to Article XV. In 1915, Ralston was appointed to draft legislation for county home rule in Maryland, which was enacted with minor changes. The legislation mandated that all incorporated towns adhere to uniform taxation rules for land and improvements, aligning with the provisions established in the 1914 amendment to Article 15 of the Maryland Constitution, adopted by voters in the 1915 General Election.
Incorporated towns possess the authority to determine the types of property subject to local taxation, regardless of contrary provisions in their charters, as long as they adhere to the state's Public General Laws. They must follow the classification rules for taxation established in Article 15 and any related legislation. Towns are also empowered to adjust tax rates set by their charters if necessary to compensate for revenue losses resulting from the exemption or partial exemption of certain property classes.
Additionally, Prince George's argues that Article XV of the Declaration of Rights delineates major property classes and that charter counties have classification powers. Conversely, appellants assert that Article XV does not independently execute classifications and that charter counties can only direct rate differentials for classes specified by the General Assembly. Section 12 is identified as a successor to earlier legislation mandating municipalities to comply with the 1915 amended version of Article XV. The revision of Article 81 in 1929 included parts of the 1916 statute into existing sections, allowing incorporated towns to alter tax rates to offset revenue losses due to property exemptions or to impose special tax rates.
