Delta Airlines, Inc. v. Neary

Summary

The Supreme Court of Rhode Island held that leasehold improvements installed by Delta Airlines and US Airways at T.F. Green Airport were exempt from municipal taxation because the property was owned by, or ultimately transferred to, statutorily tax-exempt entities. The court further held that the tax-exempt status followed the property despite possession by nonexempt airline lessees. The court sustained the appeal, vacated the Superior Court judgment, and remanded with instructions to enter judgment for the airlines.

Holdings

1. The leasehold improvements were exempt from municipal taxation. Whether title was deemed held by RIAC or by the State, the applicable Rhode Island statutes exempted the property from municipal taxes.
2. The tax-exempt status of leased property is governed by the status of its owner; property owned by a tax-exempt entity remains exempt even when possessed by a nonexempt lessee. The airlines therefore were not liable for municipal taxes from which RIAC or the State, as owner, was exempt.
3. G.L. 1956 § 44-4-6 and the cited common-law rules allocating tax burdens between tenants and remaindermen did not authorize taxation of the airlines' leasehold improvements because the property remained exempt and the lease did not produce a taxable event.

Questions Presented

1. Whether leasehold improvements at T.F. Green Airport were exempt from municipal taxation because they were owned by RIAC or the State of Rhode Island.
2. Whether the statutory tax exemption applicable to RIAC or the State extended to the airlines as lessees of the exempt airport property.
3. Whether the airlines could be taxed on the leasehold improvements under statutes or common-law rules allocating property-tax obligations to long-term lessees.

Disposition

reversed_and_remanded