Tax bill ruling may hurt revenues Decision to exempt Md.-leased concession could be far-reaching

July 08, 1996|By Dennis O'Brien | Dennis O'Brien,SUN STAFF

A three-year battle over a College Park restaurant property tax bill ended with an appeals court ruling last week that experts say may have enlarged a tax loophole that would cost state and county governments thousands of dollars in lost revenues.

The Court of Special Appeals ruled that the 94th Aero Squadron restaurant, on the grounds of the College Park Airport, qualifies as a concession on government-owned land and that its landlord, the Maryland-National Capital Park and Planning Commission, is excused from paying its $30,000 real estate tax bill.

The commission bought the property in 1973 and appealed to the Property Tax Assessment Appeals Board on June 3, 1993, after learning it was liable for the property tax bill under its lease with the restaurant. The appeals board held that the commission wasn't liable, and the case made its way to the state's intermediate appellate court.

Isaac H. Marks, a commission lawyer, said the July 1 ruling will save about $600,000 over the 20-year life of the lease with the commission, which operates the park system in Prince George's and Montgomery counties.

But Marks and other legal experts say the decision goes much further -- giving anyone who operates a state-approved business in public parks, airports, markets and fairgrounds the chance to win a similar property tax exemption.

"Potentially, it could have very far-reaching effects, in terms of the exemptions. There could be a lot of them out there that may qualify now," Marks said.

Marks said the ruling is significant because it applies an open-ended definition to the term "concession" that could include many businesses for the first time.

"The word concession means, in essence, a grant of some right," Judge James R. Eyler wrote in the decision. "This carries with it, ++ by implication, the power to grant or withhold the right and to determine the degree of exclusivity and control."

Maryland law grants operators of concessions at any "public airport, park, market or fairground" property tax exemptions if their concession is an amenity used by the general public.

Robert E. Young, associate director of the state Department of ++ Assessments and Taxation, said the ruling could result in exemptions for at least a half-dozen businesses that lease state-owned parcels at parks and airports.

Lawyers for the state Department of Natural Resources are reviewing the decision to see if it means exemptions for 15 merchants who lease land in parks.

David M. Lyon, assistant attorney general for the Department of Assessments and Taxation, said he is weighing whether to ask the Maryland Court of Appeals to reverse the ruling.

The counties and cities where the concessions are located would be hit harder than the state treasury because local governments net most of the property tax dollars collected, Young said.

Brenda Ward, who operates the Black Walnut Point Inn on Tilghman Island, said she has always thought it unfair that she and her husband are required to pay real estate taxes on the state-owned, 7-acre site they have leased for seven years.

"We're more or less a joint venture with the state. We aren't like just any business that can come in here and do whatever they want," she said.

She said she intends to have her lawyer review the decision.

John A. Dellavecchia, a lawyer for USF&G, said the company reached an agreement with the Maryland attorney general's office to postpone its request for an exemption on a tract it leases for its aircraft hangar at Martin State Airport.

USF&G petitioned the Maryland Tax Court for an exemption on the 0.6-acre tract it leases from the Maryland Aviation Administration. It pays $3,517 annually, he said.

He said the Court of Special Appeals decision should help him win his argument.

"We feel this is absolutely crucial to our case," he said.

Nicholas J. Schaus, deputy administrator of the Maryland Aviation Administration, said the 70 hotel chains, car rental agencies and other firms operating at Baltimore-Washington International Airport are unlikely to be affected by the ruling because they have been granted exemptions.

Pub Date: 7/08/96

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