Posted by: Patricia Salkin | July 23, 2008

Vested Rights Doctrine is Not Applicable to an Impact Tax Because the Tax Does Not Restrict Use of the Property

Montgomery County, Maryland imposed a countywide impact tax on development that increased the gross floor area of nonresidential development for building permit applications filed on or after July 1, 2002.  Less than one month before the effective date, Srour and his company filed a building permit application with the County Department of Permitting Services (DPS) for three retaining walls to be constructed as part of a plan to build two warehouses.  Srour submitted two additional permit applications relating to the construction of the retaining walls after the July 1, 2002 effective date, and construction was commenced and completed under both permits without assessment of impact taxes.

In July 2004, Srour applied for two additional building permits needed to construct the warehouse buildings and DPS assessed a combined impact tax payment of $295,622.50.  Srour contested the assessments and the Maryland Tax Court ruled in favor of the County, rejecting Srour’s argument that the earlier permit for a retaining wall exempted subsequent development from the tax.  The Tax Court also rejected the argument that vested rights applied to the tax case.  The circuit court affirmed the Tax Court ruling.

On appeal to the Court of Special Appeals of Maryland, Srour argued that because its June 2002 permit application to construct retaining walls was a building permit “for development” within the meaning of the ordinance, Srour’s subsequent permits related back to the initial permit and were thus exempt from the tax.  However, the court concluded that Srour’s initial permit application did not constitute a permit “for development” because the building of the retaining walls did not “increase the gross floor area of nonresidential development” within the statutorily defined meaning of “for development.”  The date on which the first permit was filed, therefore, was insignificant.

The court also rejected Srour’s argument that the application for the first permit gave Srour a vested right.  Refusing to extend the doctrine of vested rights to impact taxes, the court held that vested rights was inapplicable to the county development impact tax, and thus did not exempt Srour from paying the taxes to build the warehouses.  It further observed that vested right principles apply to zoning and building regulations and that an impact tax was not a regulation or a regulatory fee. 

F.D.R. Srour P’ship v. Montgomery County, 944 A.2d 1149 (Md. App. 2008).

The opinion can be accessed at:

Special thanks to John Delaney, Esq. of Linowes and Blocher for sharing this case brief, prepared as part of his August 2008 ALI-ABA Land Use Institute presentation in Boston.

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