HENDERSON, J., delivered the opinion of the Court.
Appellants are three domestic corporations of the State of Maryland who leased five parcels of land from the United States of America and constructed apartment projects thereon, the land in each case being located within military or other reservations over which the federal government has exclusive jurisdiction. The County Commissioners of Anne Arundel County and Harford County assessed appellants for ordinary taxation both as to the land and the buildings. Appellants then took an appeal to the State Tax Commission, which reversed the assessments as to the land, but sustained the assessments as to the buildings. The appellants appealed to the Baltimore City Court; there was no cross-appeal. The court affirmed the assessments, and the appeal comes here. It is conceded that the principles in all five cases are the same, so we shall discuss only the facts relating to Meade Heights, Inc.
The lease of the land was for a period of 75 years, at a ground rental of $720 per annum, with a provision that title to all improvements erected thereon should be and remain in the lessee. At the termination of the lease, the lessee was to have the right to remove the improvements if it so elected. If it should not elect to do so, they would become the property of the government without compensation to the lessee. During the term of the lease the lessee was to fully insure the improvements for its own benefit and the benefit of any mortgagee. The government agreed to provide certain services, such as police and fire protection and garbage collection, on a reimbursement basis. The lessee agreed to comply with all applicable State, county and municipal laws as to construction, sanitation, licenses, permits and all other matters. The lease provided that the lessee should pay "all taxes, assessments, and similar charges,
The State Tax Commission and the court below held that the appellant had the only substantial interest in the buildings erected by it under the terms of the lease, and could be assessed on the full value thereof. Appellant contends that the lessee does not hold a complete interest in the buildings and, therefore, an assessment measured by the full value of the buildings goes beyond the permissibe limits of state taxation, as fixed by Congress. Appellant also contends that the law of Maryland does not authorize the taxation of any interest in property less than a fee simple interest. The United States, as intervenor, supports the first contention, but takes no position as to the second. We shall deal with the contentions in inverse order.
Section 7(1), Article 81, Code of 1951, provides for the "assessment to the owner and taxation for ordinary taxes" of "all real properties in this State, by whomsoever owned, including that owned or leased by the United States, or any department or agency of the United States,
In Baltimore Dry Dock Co. v. Baltimore City, 97 Md. 97, 54 A. 623, land previously conveyed to the United States was conveyed by it to a private corporation, on condition that the latter should build a drydock according to prescribed specifications and operate it, giving free dockage to government vessels. The conveyance provided that the property should revert to the United States absolutely, if the property should be used for any other purpose, or if the drydock were unfit for use for a period of six months. The court said: "Under this conveyance the appellant did not acquire the absolute fee-simple title to the land, but took only an estate therein limited to a particular use under special conditions and
The appellant contends, however, that the law was changed by the repeal of the so-called omnibus clause of the tax law in 1929. We do not agree. Section 2, Article 81, prior to 1929, provided that certain types of property should be exempt, and then stated that "all other property of every kind, nature and description within this State * * * shall be valued and assessed for the purpose of state, county and municipal taxation to the respective owners thereof." The amendments adopted by Chapter 226, Acts of 1929, undertook to list the types of taxable property and then spell out the exceptions. But it is clear from the report of the Revision Commission of 1928, that no change in substance was intended. As stated in the preamble to Section 1, the intention was to codify and clarify, not to make changes in substance. The right of taxation is never to be presumed to be surrendered. M. & C.C. of Baltimore v. B. & O.R.R. Co., 6 Gill 288; Co. Comm'rs v. Sisters of St. Joseph, 48 Md. 34; Sindall v. Baltimore City, 93 Md. 526, 530, 49 A. 645; Clarke v. Union Tr. Co. of D.C., 192 Md. 127, 134, 63 A.2d 635.
The language we have quoted making real property, including leaseholds, taxable to the owner was not designed to create an exemption. The provisions of Section 3(c), Article 81, Code of 1951, providing that the owner of certain limited interests in real and personal property shall be treated as the owner in fee for purposes of taxation, merely allows the person in possession
Coming to the main point, it is perfectly clear that, in the absence of congressional consent, express or implied, a State cannot impose a direct tax upon property owned by the federal government or held for it. Johns Hopkins Univ. v. Co. Commrs., 185 Md. 614, 45 A.2d 747; United States, et al. v. Co. of Allegheny, 322 U.S. 174, 64 S.Ct. 908, 88 L.Ed. 1209. But it is equally clear that private interests in government property are taxable to their full value. Baltimore Dry Dock Co. v. Baltimore City, supra; S.R.A., Inc. v. Minnesota, 327 U.S. 558; Buckstaff Bath House Co. v. McKinley, 308 U.S. 358, 60 S.Ct. 279, 84 L.Ed. 322; New Brunswick v. United States, 276 U.S. 547, 48 S.Ct. 371, 72 L.Ed. 693. In the instant case, Congress has definitely consented to the taxation of the lessee's interest, whatever that may be. It can only complain if, in fact, its reserved interest is subjected to taxation.
In the absence of a cross-appeal, we need not consider whether the Tax Commission was right or wrong in striking down the assessment on the land, or in failing to make any assessment on it. Its reason for abating
Under the terms of the lease, we think the government has committed itself to the legal proposition that title to the buildings is in the lessee. The lease so declares. The fact that another branch of the government supplied funds secured by a mortgage is not material. New Brunswick v. United States, supra. Nor is the fact that the buildings were constructed by the lessee according to plans approved by the government. Baltimore Dry Dock Co. v. Baltimore City, supra. Even at the end of the lease, the lessee has the right to remove the buildings. The appellant argues, however, that the retention of control, in the form of agreements not to sublease except to military personnel (with certain exceptions) and at approved rental figures, is an "interest" that belongs to the government which should have been excluded from the assessment.
We think the argument is unsound. The "lessee's interest" referred to in the federal statute is described in the lease as the "leasehold interest", and the tax contemplated by the statute is referred to in the lease as a tax "upon the leased property". The interest to the taxation of which Congress has consented is a property interest, and the fact that it is not wholly free of restrictions as to use does not detract from the quality of of the legal estate in the lessee, or render it immune from tax. The fact that there is a reversionary interest which is exempt, in this case a mere possibility of reverter, would not vitiate an assessment of improvements
The appellant points out that in the Baltimore Dry Dock case, the assessment was reduced to reflect the condition calling for free dockage, a fact stressed by the Supreme Court as indicating that only the lessee's interest was assessed. In the instant case it has not been shown that the restrictions detract from the value of the lessee's interest. It is true that the subrents have been "frozen", a condition that exists in many other places, and that the subleases are limited in the main to military personnel. However, occupancy is now 100%. If demand should fall off in the future, due to a slackening of the defense effort or other reasons, such a change would naturally be reflected in the subsequent annual assessments. The subrents fixed are in fact adequate to retire the mortgage and show a handsome profit to the private investor.
"The Maryland law requires that all property shall be assessed `at the full cash value thereof on the date of finality.' Code 1939, art. 81, sec. 11 [now section 13]. Ordinarily the cash value of property is the market value." Rogan v. Commrs. of Calvert Co., 194 Md. 299, 311, 71 A.2d 47, 52. It was recognized in that case, however, that assessors are not required to be guided entirely by market prices, regardless of how "thin" the "spot market" may be, or how much it may be affected by temporary or abnormal conditions. In the instant case, it was shown that there were no sales of comparable properties that could be used as a guide, and the assessors used a standard method of reproduction cost, set out
It is not contended that the final assessment was illegal, arbitrary or unreasonable. The contention is that it failed to segregate, and hence included, the government's interest. We have pointed out that the government has no property interest in the buildings except of a remote and indeterminate character. In answer to the contention that the restrictions as to tenants and subrents constitute a residual interest, we think that insofar as the assessment is lower than a fair capitalization of existing subrents, it cannot be said that the effect of the restrictions was disregarded. The only testimony that might be taken as challenging the assessors' capitalization was that of Mr. Moss, a real estate expert. He sought to place a valuation of $212,000 on the "lessee's interest", which he stated would be what an investor would pay for the properties under the restricted conditions. He admitted that in reaching this valuation he eliminated the debt service. Manifestly such an elimination is improper in determining taxable value. The case of Allen v. Harford Co., 74 Md. 294, is controlling on the point. He admitted that if the mortgage could not be disregarded, his figure would be in excess of a million dollars. Moreover, his calculation was unique, in that he capitalized the net income on a "present worth"
Order affirmed, with costs.