Campground Owner Snarled in Tax Dispute

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October 22, 2007 by   - () Leave a Comment

Walter Toomer runs a small campground in eastern Pennsylvania during the summers. Since opening three seasons ago, he has yet to turn a profit. He owns no land. And Pike County just assessed his business at a value of $1 million, according to the Pocono Record.
The subsequent tax levied will put him out of business.
Toomer, owner of Dingman Campground, operates his campground and canoe rental business in the Delaware Water Gap National Recreation Area, a national park owned and operated by the National Park Service.
It's a rustic campground and the rates are modest. He runs the business under a contract with the park service, and pays them 4% of his revenues. It's a seasonal business, and since he opened it three years ago, he has yet to make a dime. His other job as a consultant allows him to do this.
Other businesses – farmers and an inn – have similar contracts. They are part of the ambiance of the park and enhance the environment for visitors and local residents, not to mention preserving open space.
The park is federal property, so it cannot be taxed by any local or state entity. But the national recreation area pays an annual fee to Pike County in lieu of taxes the county may have collected on the property. In 2006, according to the park service, that amount came to nearly $39,000. The county disputes this figure, putting it at about $13,000.
The tax for Toomer on an assessment of $1 million could be thousands of dollars a year, something his small business can't support.
Toomer is scheduled to appear before the Pike County Board of Assessment Appeals on Tuesday (Oct. 23) to appeal the issue.
His landlord, the park service, is already paying a fee in lieu of taxes to the county. The assessment is essentially the equivalent of a renter receiving a direct bill for property taxes after their landlord had already paid them.
Toomer considers himself a concessionaire, which he says is different from a lease, like what a farm may have. He believes Pike County is trying to double dip.
But several area business owners complained that people who were operating commercial entities in the park didn't pay property taxes.
Harry Forbes, chairman of the board of commissioners in Pike County, says they are simply complying with the law and the way it applies to taxation.
"We are charged with putting properties on the tax rolls. If they tax you and me, they should tax them too," he said.
Forbes pointed out that a business is responsible for any taxes on the properties. "We haven't taxed them in the past," he said. Apparently, the past tax assessor never got around to looking at it, according to Forbes. "We hired a professional firm to do this, to bring us into total compliance with the law," Forbes said.
Forbes insists the county is required to tax these businesses because of the leasehold agreements the businesses have with the park service.
"The law is very clear. The lease with the federal government says they (the businesses operating in the national recreation area) are required to be responsible for all their taxes," Forbes said.
The county hired 21st Century Appraisals to manage the assessment office functions for Pike. The company performs this function for 30 of the 67 counties in the state. Gene Porterfield, 21st Century Appraisals representative for Pike County, advised the commissioners that state-owned properties leased to commercial entities are taxed.
Porterfield sent letters to the park service asking for information on the leases between it and those doing business in the park. "The feds said federal lands aren't taxable, so go away," he said. So he turned it over to the county's solicitor. The attorney agreed that state-owned properties leased to private concerns can be taxed, so the county sent out letters alerting the businesses of the assessments.
"The tax intended to be levied is a real estate tax, and is based on the fact they have a leasehold position," Porterfield said. And he added that the leases between the park service and business concerns state those businesses are responsible for any and all taxes that get levied against that property during the term of that lease.
Porterfield said business owners can apply for an exemption if the fees any business is charging for their product or service are returned to the community or put back into the business to benefit the public at large.
So how did Porterfield come up with a value of $1 million for Toomer's small, seasonal business that has yet to turn a profit and doesn't own any real estate?
"People need to cooperate. We went down to the property and they threw my staff off. We called them, and they said it's not taxable, so we are not going to let you gather the information," he said. So Porterfield created a value high enough that Toomer would appeal and the court would force him to allow an inspection of the property.
John Donahue, superintendent of the Delaware Water Gap National Recreation Area, is not pleased.
Donahue said the park service has no other experience with any county in the U.S. trying to tax the leasehold interest. "We are in 49 states. There are five states that allow the taxing on a leasehold interest, but none have done it to us," he said.
Donahue cited several court decisions affirming his position that the effort to tax these leasehold interests of federal property is improper. But he had other compelling reasons why it is a bad idea.
"All of the entities in the park are furthering the services the park service is trying to provide to the public," he said. He believes many of the businesses in the park could be forced out of business if large tax assessments are sustained.

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