West 914, Inc. v. City of York (Majority Opinion)
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IN THE COMMONWEALTH COURT OF PENNSYLVANIA West 914, Inc., Appellant v. City of York BEFORE: : : : : : : No. 2066 C.D. 2007 Submitted: May 16, 2008 HONORABLE DORIS A. SMITH-RIBNER, Judge HONORABLE ROBERT SIMPSON, Judge HONORABLE JIM FLAHERTY, Senior Judge OPINION NOT REPORTED MEMORANDUM OPINION BY JUDGE SMITH-RIBNER FILED: July 25, 2008 West 914, Inc., doing business as "Autumn House West" (Autumn House) appeals from the October 10, 2007 order of the Court of Common Pleas of York County denying Autumn House's petition for a declaratory judgment against the City of York. Autumn House lists three issues for review: 1) whether the trial court abused its discretion in finding that the monthly payments made to Autumn House by its residents do not constitute rent and thus are not exempt from the City's business privilege tax; 2) whether a taxpayer has the burden of proving what portion of its receipts are for rent when the ordinance imposing the subject tax fails to define the term; and 3) whether an assisted living facility is a landlord and its receipts are rent exempt from the business privilege tax. This matter is before the Court for the third time. It initially came before the Court following a 2004 decision by the trial court denying a petition for declaratory judgment filed by Autumn House. As an operator of a personal care/assisted living facility, Autumn House sought a declaration that its "basic charge" of $65 per day per resident constituted gross receipts received as rent by a landlord and therefore was exempt from the City's Business Privilege and Mercantile Tax Ordinance (Tax Ordinance) under Section 343.02(c)(5), a section of the ordinance known as the "landlord exemption."1 The trial court held that Autumn House was not a "landlord" and that it was not exempt from paying the business privilege tax. On Autumn House's appeal, this Court stated the following: Through the "basic charge" assessed by Autumn House, residents are paying rent as commonly defined, i.e., consideration for use or occupation of property (which occupation is intended to be on a long-term basis, even if the charge is calculated per diem), and they are also paying for a package of basic services that are beyond the charge for use or occupation of the property. These services include meals, transportation, laundry and other services that are not within any of the dictionary definitions of "rent." Thus it is clear to the Court that a portion of Autumn House's income from its "basic charge" is for rent. To the extent that the basic charge does relate to rent, Autumn House is entitled to receive the exemption for "gross receipts received by a landlord as rent" under Section 343.02(c)(5) of the Tax Ordinance. That amount, however, is less than the full amount that Autumn House has claimed as rent. The present state of the record, however, is not sufficient for a determination of what portion of the income of Autumn House from its basic charge relates to rent and what portion relates to other services. West 914, Inc. v. City of York, Pennsylvania (Pa. Cmwlth., No. 2420 C.D. 2004, filed November 30, 2005), Slip. Op. at 9. Accordingly, the Court reversed the trial court to the extent that it held that no part of Autumn House's income was subject 1 Section 343.02(c)(5) states: "Landlords and rental property: No [business privilege] tax shall be assessed and collected on the gross receipts received as rent by a landlord or his agent." 2 to the landlord exemption and affirmed the trial court's order to the extent that it held Autumn House was subject to business privilege tax for income related to services not classified as rent. The Court remanded the matter to the trial court specifically for proceedings to determine the appropriate proportion of Autumn House's income attributable to rent. On remand, Autumn House presented no records to show the volume of business eligible for the landlord exemption. Yet, notwithstanding this Court's prior determination that Autumn House's per diem or basic charge included receipts for certain ancillary services such as meals, transportation and laundry, which were not gross receipts received as rent, the trial court erroneously found that the entire amount of Autumn House's basic charge was exempt from the business privilege tax as receipts received as rent. The City appealed, and the Court vacated the trial court's order and again remanded the matter, citing the trial court's failure to follow the Court's clear direction to determine the appropriate proportion of Autumn House's income that constituted rent. The Court noted that given the fact that a portion of Autumn House's basic charge does not relate to rent, the amount that does relate to rent is necessarily less than the full amount claimed. West 914, Inc. v. City of York, Pennsylvania, (Pa. Cmwlth., No. 1410 C.D. 2006, filed May 25, 2007). With the matter before the trial court for a third time, the parties introduced no additional evidence and Autumn House agreed that the trial court could decide the matter on the evidence previously submitted. Based on its review of transcripts and exhibits developed below, the arguments of counsel, applicable law and opinions from this Court, the trial court determined that Autumn House failed to meet its burden of proving what portion of its basic charge related to rent. 3 The trial court reasoned: "Without any testimony as to the apportionment of 'rent' from 'services' we find that the daily $65 paid by each resident at West 914 is subject to the City of York's Business Privilege Tax." Trial Court Op. at 3.2 Without delving unnecessarily into the underlying facts, the Court observes that Autumn House's one-page argument raises two points of contention, both of which lack merit. First, Autumn House contends that the trial court abused its discretion by determining that the entire $65 per diem is taxable under the business privilege tax. Autumn House asserts that the result is absurd given the prior determinations that it is a landlord and that a portion of the $65 per diem constitutes rent. Appellant's Brief at p. 7 (citing Stoltzfus v. Zoning Hearing Board of Eden Township, Lancaster County, Pennsylvania, 937 A.2d 548 (Pa. Cmwlth. 2007), for the proposition that the rules of statutory construction do not allow for an interpretation that produces an absurd result). Lastly, Autumn House contends, without citation, that the trial court abused its discretion by requiring Autumn House to prove what portion of its per diem related to rent because the ordinance in question failed to define the word "rent." The trial court did not abuse its discretion by holding Autumn House liable for the business privilege tax with respect to the per diem because it failed to prove the extent to which the landlord exemption applies. It concedes that the burden of proving the applicability of a tax exemption in Pennsylvania falls upon the party claiming the exemption. See City of Harrisburg v. School District of 2 The Court's review in this declaratory judgment action is limited to determining whether the trial court committed an error of law, abused its discretion or made necessary findings of fact that are not supported by substantial evidence in the record as a whole. Program Admin. Servs., Inc. v. Dauphin County General Authority, 874 A.2d 722 (Pa. Cmwlth. 2005), aff'd, 593 Pa. 184, 928 A.2d 1013 (2007). 4 Harrisburg, 551 Pa. 295, 710 A.2d 49 (1998). Autumn House had ample opportunity to offer evidence to allow the trial court to apportion the per diem as between that which was attributable to rent and that which was attributable to ancillary services. In fact, as noted above, this Court notified Autumn House that the record was "not sufficient for a determination of what portion of the income of Autumn House from its basic charge relates to rent and what portion relates to other services" when the Court first remanded the matter in 2005. West 914, Inc. (No. 2420 C.D. 2004), Slip. Op. at 9. Autumn House presented no records to show the volume of business eligible for the landlord exemption when this matter was remanded the first time, and Autumn House decided not to present additional evidence when the matter was remanded the second time in 2007. Thus the state of the record is as it was previously when the matter was remanded in 2005. Therefore, the trial court did not abuse its discretion in determining that Autumn House failed to meet its burden of proof. While Autum House attempts to shift its burden of proof based on the fact that the ordinance in question fails to define the term "rent," the Court observes, as before, Section 1903(a) of the Statutory Construction Act of 1972, 1 Pa.C.S. ยง1903(a), which provides that words shall be construed according to their common and approved usage. An undefined term in an ordinance, such as the word "rent" in the ordinance in question, must be given its common and approved usage. Spahr-Alder Group v. Zoning Board of Adjustment of Pittsburgh, 581 A.2d 1002 (Pa. Cmwlth. 1990). The word "rent" is not some ambiguous term such that an impossible burden is placed on a taxpayer called upon to demonstrate what portion of certain receipts is attributable to rent. All Autumn House was required to do was to explain to the trial court how much of the $65 per diem pays for living 5 at the Autumn House as opposed to paying for the ancillary services that Autumn House provides. The trial court did not abuse its discretion by requiring Autumn House to meet its burden of proof, and as a result its order is affirmed. DORIS A. SMITH-RIBNER, Judge 6 IN THE COMMONWEALTH COURT OF PENNSYLVANIA West 914, Inc., Appellant v. City of York : : : : : : No. 2066 C.D. 2007 ORDER AND NOW, this 25th day of July, 2008, the order of the Court of Common Pleas of York County is affirmed. DORIS A. SMITH-RIBNER, Judge
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