Maryland Appellate Panel: Lockheed Martin Not Entitled To Hotel Tax Refund
Bethesda-based company sought a $1.47 million refund for taxes paid before state law changed in 2013
The Center for Leadership Excellence is adjacent to Lockheed Martin's corporate headquarters on Rockledge Drive in Bethesda.
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Lockheed Martin operates a private hotel in Montgomery County–and the company isn’t eligible for a hotel tax refund that it sought, a state appellate court has ruled.
State law has since been changed to exempt Lockheed Martin from paying the county’s 7 percent hotel tax, but the case in the Maryland Court of Special Appeals focuses on the company’s effort to get a refund for the $1.47 million it paid from 2009 to 2012.
At the center of the dispute is Lockheed Martin’s Center for Leadership Excellence (CLE), a 300,000-square-foot conference and lodging center with 183 guest rooms, a 250-seat amphitheater, training rooms, a restaurant and fitness center on the grounds of the company’s corporate headquarters in Bethesda. Lockheed Martin uses the CLE as a training center and to provide sleeping accommodations for the company’s 100,000 employees. The facility is not open to the public. The lodging fees for the training center are allocated back to the business units or programs that the employees or contractors work for.
The effort by Lockheed Martin to avoid paying the county’s hotel tax started in June 2012, when the company filed a claim with the county for a refund of the $1.47 million it had paid from 2009 through June 2012.
The county’s chief of the Division of Treasury met with Lockheed Martin officials to discuss the claim in July 2014, but no formal letter was issued approving or denying the company’s refund request. Lockheed Martin then filed a case with the Maryland Tax Court, an independent agency that provides the highest administrative level in the state and local tax-related appeals process. The tax court denied Lockheed Martin’s appeals claim.
The company next filed a petition for judicial review in Montgomery County Circuit Court. A judge concluded that a 2009 change to the county’s hotel tax law–to remove the phrase “public and private” from the definition of hotel–rendered the applicability of the tax to the CLE ambiguous. The Circuit Court concluded that Lockheed Martin was entitled to a refund of the taxes that it had paid since the definition change in June 2009.
The county appealed in April 2017 to the Court of Special Appeals and Lockheed Martin cross-appealed.
In an opinion released last week, a three-judge panel agreed with the county that the hotel tax had been properly applied to the CLE before the state law changed in 2013. The court did deny the county’s claim that the initial appeal from Lockheed Martin was not filed in a timely fashion.
A spokesperson from Lockheed Martin did not immediately respond to a voice message asking whether the company plans to file an appeal in the state’s highest court, the Maryland Court of Appeals.
Lockheed Martin’s efforts to seek a hotel tax refund were somewhat controversiallocally. In 2013 and 2014, state lawmakers undertook legislation to exempt the CLE from hotel taxes. A bill introduced during the 2013 General Assembly session calling for the exemption originally sought to apply the exemption retroactively, with the company receiving a refund of the more than $1.4 million already paid. The bill, which had been opposed by the Montgomery County Council, was ultimately stripped of its retroactivity and passed by the General Assembly, but half of the county’s delegation voted against it.
At the time the bill was passed, the CLE was the only private hotel facility in the state covered by the exemption and paid about $450,000 a year in hotel taxes, about 2 percent of the total collected in the county.