80.19

OPINION NO. 80-19

The Administrator of the Property Tax Assessment Appeals Board has requested advice of the Ethics Commission concerning the propriety of his owning commercial real property through a less than one-third interest in a partnership.

The Property Tax Assessment Appeals Board (the Board) was established by Act of the Legislature in 1977 (Md. Code Ann., Art. 81, §§248 et seq.). The Board consists of 24 separate Appeals Boards, one for each county and Baltimore City, which are authorized to hear all appeals in their respective jurisdictions concerning property tax assessments set by the local Supervisor of Assessments. The position of Administrator is also established by statute (Md. Code Ann., Art. 81, §224A), with appointment by the Governor for a term of six years, with the advice and consent of the Senate. The Administrator is responsible for developing and enforcing rules and regulations governing the activities of the Board and for providing centralized administrative support services. Certain decisions regarding the assignments of alternate Board members and make-up of hearing panels are also within the Administrator's purview.

The Administrator indicates that his authority to assign panels comes into play only where there is a substantial backlog that would require the assignment of a temporary Board member. He indicates that neither the Boards themselves nor his Office have any authority whatever over the tax assessor or the original assessment decision. Assessment authority is vested solely in the Department of Assessments and Taxation, which is also the source of all general assessment information. This Department is also the sole decision-maker as to decisions to appeal a tax case on behalf of the State. Nor, he says, is the Administrator's Office involved in the process of appointment of members to serve on the various Appeals Boards.

The Administrator's original request was directed to the general issue of the ability of a person in his position to own any real property, either as a personal or investment residence or for commercial purposes. He subsequently indicated, however, that he does not own a personal residence and that his request is more particularly related to the ownership of a piece of property by a partnership in which he holds less than one-third interest (the Partnership). The Administrator states that the Partnership is not an entity that deals generally in the buying and selling of real estate. Rather, the entity holds one piece of commercial property (a trailer park); the property (and the Administrator's interest) was acquired prior to his appointment to his current position, and no additional investments are anticipated. The property is titled in the Partnership name and not the names of the individual owners, and any assessment appeal would also be in the Partnership name. The Administrator indicates research connected with an appeal would not result in disclosure of the identity of the individual partners.

Though other sections may also be of concern,¹ the primary issue here arises under section 3-103(a) of the Law, which prohibits an official from having an interest in an entity subject to the authority of his agency. Section 1-201(c) defines the term "business or business entity" to mean "any entity regardless of form." The term "entity" is not defined in the Law, though the prior Code of Ethics defined it to include:

any individual, partnership, association, corporation, firm, institute, trust, foundation, or other organization (other than the State or an agency thereof) whether or not operated for profit.

Code of Ethics, Art. II, section 5; Title 19 COMAR.

We believe a partnership is an entity intended to be included in the coverage of section 3-103(a) of the Law. Thus, the Administrator's interest in the Partnership would be prohibited by §3-103(a) if the Partnership is under the authority of the Board.

Certainly any piece of real property, including the property owned by the Partnership, is potentially subject to the authority of a local Board, where an appeal of a tax assessment determination is made to the Board. The Board's authority, however, appears to be narrowly confined to making determinations relating to particular properties on a case-by-case basis. The Board does not appear to have any regulatory or other general authority to control real property or assessments thereon. Even where a Board has ruled on a particular property, the tax assessor's duty to follow the ruling in subsequent assessments is not absolute; the assessment law specifically provides that the assessor give the Board's ruling "due consideration." (Md. Code Ann., Art. 81, section 234A).

Some agencies have general regulatory or enforcement responsibilities that result in entities being under their authority, even though the entity may seldom if ever be specifically involved in a matter pending before the agency. The responsibilities of the Board, however, are much more narrowly drawn than this. Moreover, in the facts presented in this situation, the Partnership is not a developer, land speculator or other entity dealing generally in real estate and regularly involved in the whole assessment and appeals process. Under these circumstances, we conclude that, so long as no appeal is made to the Board by the Partnership, it is not under the authority of the Board, and the holding of the Partnership interest by the Administrator as set forth in the facts provided to the Commission is not an interest prohibited by §3-103(a).

Sections 3-101 and 3-104 of the Law set forth additional limitations on the conduct of Maryland public officials. Section 3-101 prohibits participation by such persons (in a non-ministerial or non-administrative way) in any matter in which they have an interest or in which an entity with which they are connected in specified ways is involved as a party. Section 3-104 provides that no public official or employee may intentionally use the prestige of his State office for his own benefit or that of another. The Administrator must keep in mind that even though the absolute prohibition of section 3-103(a) may not apply in his particular situation, these other conflict of interest rules continue to have effect. He must take great care to avoid activities involving the assessment process, in his official capacity or in connection with his private endeavor, that could be construed as participation in a matter in which he has a private interest or as lending the prestige of his public office to a private endeavor. In finding that the people have the right to expect impartiality and independence of judgment from those conducting the public's business, the Legislature in §1-102 of the Law pointed to the erosion of trust and confidence resulting from a conflict of interest or "even the appearance of improper influence."

Moreover, the Administrator should be aware that the propriety of his continued holding of the Partnership interest while he serves in his present position could depend upon the continued lack of any appeal to the Board of an assessment determination relating to the property. Appeal by the Partnership of an assessment determination could well bring it and the Administrator's interest under the authority of his agency and constitute a holding prohibited by section 3-103(a).²

Mr. Calvert was a member of the Commission when this case was considered and decided, but resigned prior to the issuance of the formal opinion.

Herbert J. Belgrad, Chairman
   William B. Calvert
   Jervis S. Finney
   Reverend John Wesley Holland
   Barbara M. Steckel

Date: September 10, 1980

——————

¹ See below for discussion of §§3-101 and 3-104.

² We specifically do not address here the general question of property interests held by persons involved in the assessment process, or what the precise result would be if an appeal regarding the Administrator's interest were to be brought before his agency. The facts here do not raise that question. We do note, however, that the distinction between property held for commercial, speculative or other investment purposes, and property held primarily for personal residential use, may well be a key factor in evaluating the application of section 3-103(a) of the Law to officials and employees involved in the State's programs of taxation and regulation of real property.