Laurel Apartments Master Tenant, LLC, and Laurel Hotel Master Tenant, LLC, Respondents, v. City of St. Louis, Missouri and Gregory F.X. Daly, Collector of Revenue for the City of St. Louis, Appellants.

Jul 21, 2026
ED113753

This case concerns the 2012 rehabilitation of the historic Laurel building located at the intersection of Washington Avenue and 7th Street in downtown St. Louis and the treatment under Missouri‘s and the City of St. Louis’ earnings tax laws of the federal historic tax credits (HTCs) that the owners of the building acquired as a result of the rehabilitation.

The dispute here arose after the building‘s owners transferred those HTCs to their lessees (Respondents Laurel Master Tenants, hereinafter “Laurel“), a maneuver permitted by the Internal Revenue Code. On January 15, 2019, Laurel made estimated earnings tax payments to the City and included in those payments the full amount without deducting the HTCs. But in October 2019, Laurel filed their 2018 City earnings tax returns in which they treated the HTCs as unearned income not subject to the City‘s earnings tax.

In response, Appellant Gregory F.X. Daly, the Collector of Revenue for the City of St. Louis (Collector), notified Laurel (1) that the HTCs constituted earned income subject to the earnings tax and (2) that the Collector had deducted the hotel‘s refund and the apartments owed additional taxes. Laurel then sought a declaratory judgment that the Collector‘s treatment of the HTCs as earned income was in error. After a bench trial, the court agreed with Laurel and granted their petition.

The Collector now appeals claiming that the trial court erred in three ways: (1) by failing to find that Laurel‘s noncompliance with section 139.031.1‘s1 mandatory tax protest requirements barred their right to relief; (2) by finding that Laurel‘s earnings tax returns constituted a “written application[s]” under section 139.031.5, which is the provision that allows taxpayers who seek a refund or credit to file a written application within three years after the tax is mistakenly or erroneously paid; and (3) in finding that

HTCs are not earned income under section 92.111, the enabling statute that defines what income is subject to the City‘s earnings tax.

We affirm. First, we find that section 139.031.1‘s protest provision does not apply here because Laurel‘s estimated earnings tax payments were not disputed tax assessments and the protest provision applies only to disputed tax assessments. Second, we find that Laurel‘s City earnings tax returns constituted a “written application” under section 139.031.5 because the returns were in writing, stated the amount of the requested refunds, and identified the basis for the refunds. Finally, under the plain language of section 92.111 and pursuant to I.R.C. section 50(d), we find the HTCs are not earned income subject to section 92.111‘s earnings tax.

Background

In 2012, Laurel Apartments Landlord, LLC, and Laurel Hotel Landlord, LLC, (the Owners), completed a rehabilitation of the historic Laurel building which qualified them to receive HTCs which are designed to incentivize the rehabilitation of historic buildings by allowing the building‘s owners to take a tax credit equal to twenty percent of the qualified rehabilitation expenses. I.R.C. section 47.

The Owners leased the building to Laurel Apartments Master Tenant, LLC, and Laurel Hotel Master Tenant, LLC, and then, pursuant to I.R.C. section 50(d), transferred those HTCs to Laurel.2 Section 50(d) grants to building owners which have qualified for

HTCs the option of transferring HTCs to a “master tenant” entity that has leased the rehabilitated building.

On January 15, 2019, Laurel each made their estimated earnings tax payments to the City, $93,803.00 for the apartments and $107,247.00 for the hotel, but did not deduct the HTCs. In their City earnings tax returns filed in October 2019, however, Laurel treated the HTCs as unearned income and requested refunds, $93,803.00 for the apartments and $102,731.00 for the hotel.

The Collector responded. In his November 5, 2019 correspondence, he disagreed with Laurel‘s position on the taxability of the HTCs. On a copy of Laurel‘s tax returns that he included in his letters, the Collector handwrote “item is taxable” under Schedule K in response to Laurel‘s HTC computation. The Collector‘s recalculation was that the apartments owed $231.21, and the hotel‘s refund dropped to $3,356.74. Laurel received and deposited that refund check.

On April 10, 2024, Laurel filed their first amended petition which brought the Collector into the lawsuit and sought a declaratory judgment that the Collector‘s application of the City‘s earnings tax ordinances to the HTCs at issue here was beyond the scope of section 92.111, the earnings-tax enabling statute. Laurel also asked for an award of the refunds.

At trial, Laurel‘s expert, tax attorney Brian Beck, testified that Laurel‘s estimated earnings tax payments assumed the HTCs were not subject to the earnings tax because the HTCs reported by Laurel were not part of either business‘s gross receipts in that they were not related to rent received from tenants or hotel bookings, were not cash items, and were not otherwise generated from their business operations. Beck also testified that the HTCs were not part of Laurel‘s net profits because Section 50(d) income is not related to the operations of the business. Moreover, Beck testified that the IRS considers Section 50(d) HTC income to be unearned.

Beck further testified that at the time that Laurel made their estimated tax payments, there had been no assessment by the City as to the amount of earnings taxes Laurel owed. Unlike property taxes in which the Collector sends the taxpayer a bill indicating how much tax is owed, earnings taxes are self-reporting. And it was not until the Collector responded to Laurel‘s tax returns that Laurel became aware of the City‘s contrary position. Thus, according to Beck, the “disputed assessment” language of section 139.031.1 is inapplicable.

The trial court granted Laurel‘s petition for declaratory judgment finding that the HTCs do not qualify as earned income for the purpose of the City‘s earnings tax. Further, the trial court held that Laurel had established their right to refunds under section 139.031.5 because their tax returns constituted a “written application” in that the returns identified the basis for the refund and the Collector‘s handwritten notes on those returns

demonstrated his understanding of the basis for the requested refunds. The trial court ordered the Collector to refund the apartments $93,803.00 and the hotel $103,890.26.3

This appeal follows.

Standard of Review

In a court-tried case, this court will affirm the trial court‘s judgment unless it is not supported by substantial evidence, is against the weight of the evidence, or erroneously declares or applies the law. Davis v. Director of Revenue, 346 S.W.3d 319, 322 (Mo. App. 2011); Murphy v. Carron, 536 S.W.2d 30 (Mo. banc 1976). We review the evidence in the light most favorable to the trial court‘s decision and disregard contrary evidence and inferences. Id. We defer to the trial court‘s findings of fact. Id.

This appeal also involves statutory interpretation, a question of law that we review de novo. Ivie v. Smith, 439 S.W.3d 189, 202 (Mo. banc 2014).

Discussion

The Collector first claims the trial court erred because Laurel‘s failure to comply with the mandatory tax protest requirements in section 139.031.1 barred Laurel from obtaining any relief. We disagree because when Laurel made their estimated earnings tax payments, it was not a disputed assessment and therefore Laurel was not required to make the payments under protest.

Section 139.031.1 states that any taxpayer may protest all or any part of any taxes. “Any such taxpayer desiring to pay any current taxes under protest or while paying taxes based upon a disputed assessment shall, at the time of paying such taxes, make full payment before the delinquency date and file with the collector a written statement setting forth the grounds on which the protest is based.” Section 139.031.1. This section “establishes a procedure under which a taxpayer can adjudicate the legality of an imposed tax.” Daly v. Helmsing, 717 S.W.3d 272, 274 (Mo. App. 2025) (internal citations omitted).

In Helmsing, the taxpayer filed earnings tax forms reporting earned income from her businesses. Id. After auditing her returns, the Collector sent the taxpayer a tax delinquency letter that she had underpaid her earnings taxes and owed money. Id. The Collector then filed a petition for declaratory judgment and for collection of the delinquency amount on the basis that the taxpayer had failed to adhere to section 139.031.1‘s protest provision. Id. The trial court entered judgment against the Collector. Id.

This court affirmed finding that “[s]ection 139.031 does not apply in this case because the Collector did not inform [taxpayer] of the amount of earnings tax it believed she owed until after the delinquency date.” Id. at 275. The Helmsing court reasoned that “[w]hen an individual is responsible for determining the amount owed to the City and must prepare and submit a tax return setting forth that amount, there is nothing to protest because no tax was imposed.” Id.

While Helmsing differs slightly on its facts since the taxpayer was defending herself from the Collector‘s action instead of initiating it as here, we find its legal analysis sound and on point. As in Helmsing, here there was no disputed assessment because Laurel submitted their estimated earnings tax payments before the Collector had imposed its tax. Thus, section 139.031.1 does not apply because there was nothing to protest until after the delinquency date when the Collector sent letters to Laurel that their tax returns were incorrect. We deny this point.

The Collector next claims that the trial court erred in finding that Laurel‘s tax returns constituted written applications under section 139.031.5. We agree with the trial court‘s finding that Laurel‘s earning tax returns qualified as a written application because the returns were in writing, stated the amount of the requested refunds, and identified the basis for the refunds.

Section 139.031.5 states that all county tax collectors shall “upon written application of a taxpayer, refund or credit the taxpayer‘s tax liability in the following taxable year ... until the taxpayer has received credit in full for any real or personal property tax mistakenly or erroneously levied against the taxpayer and collected in whole or in part by the collector. Such application shall be filed within three years after the tax is mistakenly or erroneously paid.” Section 139.031.5 does “not require the taxpayer to pay in protest ....” Lane v. Lensmeyer, 158 S.W.3d 218, 222 n.7 (Mo. banc 2005). Rather, it provides an alernative to the administrative remedies and the requirement that taxes be paid under protest. Id.

The statute does not define “written application” and the Collector has not directed us to the specific requirements of such written application or an exemplar the Collector would deem satisfactory under section 139.031.5. Thus, we turn to our principles of statutory construction to determine whether Laurel‘s tax returns constitutes a written application. “The primary rule of statutory construction is to ascertain the intent of the legislature from the language used and to give effect to that intent if possible.” Henry County v. Dunn, 700 S.W.3d 320, 323 (Mo. App. 2024). We give the statute its plain and ordinary meaning. Id. In the absence of a statutory definition, this Court will rely on the dictionary definition. Id.

“Written” is self-evident. “Application” is defined as “an act of applying” or to “appeal, request, petition.” Application, WEBSTER‘S THIRD NEW INTERNATIONAL DICTIONARY (2002). Laurel‘s tax returns were in writing, requested refunds of the previous overpayments, and stated the amount of those refunds. This put the Collector on notice that there was a mistaken or erroneous payment especially given the Collector‘s letter in response in which he rejected in his own hand Laurel‘s refund claims. Manifestly, the Collector understood Laurel‘s legal position and request in this matter.

The Collector cites to three cases to support his argument that Laurel‘s tax returns did not constitute “written application[s].” Crest Comm. v. Kuehle, 754 S.W.2d 563 (Mo. banc 1988); Mo Am. Water Co. v. Collector of St. Charles County, Mo., 103 S.W.3d 266 (Mo. App. 2003); Buck v. Leggett, 813 S.W.2d 872 (Mo. banc 1991). None of these cases supports this contention. Rather, they illustrate certain ways that taxpayers may make refund claims under section 139.031.5.

Therefore, we find, under the facts of this case, that Laurel‘s tax returns which claimed refunds on Laurel‘s estimated earnings tax payments “mistakenly or erroneously paid,” constitute a written application particularly since the Collector‘s response fully grasped the nature of Laurel‘s claims. It is up to the legislature if it deems fit to delineate what form and substance such written applications should have. For its part, the Collector might consider formulating its own.

Finally, in point three, we get to the legal issue underlying this case — whether Section 50(d) HTCs are “earned income” under section 92.111. We find that they are not. Tax statutes are construed in favor of the taxpayer and against the taxing authority. Helmsing, 717 S.W.3d at 276. Section 92.111 provides that “unless the context clearly requires otherwise, the term ‘earnings tax’ means a tax on the ‘salaries, wages, commissions and other compensation earned’ as well as ‘[n]et profits of associations, businesses or other activities conducted by residents ....‘” Id. (quoting section 92.111). Thus, “[t]he imposition of the earnings tax is limited to earnings from work or services, and does not include other kinds of income such as interest on investments, rents, dividends, capital gains, and the like.” Id. (quoting Bachman v. City of St. Louis, 868 S.W.2d 199, 202 (Mo. App. 1994)). This does not authorize “the imposition of an earnings tax on what has been termed ‘unearned income.‘” Barhorst v. City of St. Louis, 423 S.W.2d 843, 846 (Mo. banc 1967). Distinguishing between earned and unearned income “can be resolved only after consideration is given to all available facts and information pertinent to the particular individual taxpayer.” Id. (quoting State ex rel. Agard v. Riederer, 448 S.W.2d 577, 582 (Mo. banc 1969)).

We find the plain language of section 92.111 to be precise and dispositive. Simply put, Laurel‘s Section 50(d) HTCs are not part of the salaries, wages, or commissions of either the apartments or the hotel. Moreover, they are not part of the profits of either business. Importantly, the IRS itself considers “income under section 50(d)(5) [to be] not ‘earned ...’ It has no economic effect as it is merely a notional item.” Income Inclusion When Lessee Treated as Having Acquired Investment Credit Property, 84 Fed. Reg. 34777 (July 19, 2019) (26 C.F.R. Part 1). We deny this point.

Conclusion

We affirm.

James M. Dowd, Judge

Rebeca Navarro-McKelvey, Presiding Judge and Gary M. Gaertner, Jr., Judge, concur.

Notes

1
All statutory references are to the Revised Statutes of Missouri (2016) unless otherwise stated.
2
Laurel Apartments Master Tenant managed and operated the apartment complex consisting of roughly 205 individual apartments as well as some ground-retail and Laurel Hotel Master Tenant managed and operated a hotel space through Embassy Suites within the same building.
3
While this figure differs from Laurel‘s refund request, it appears that to arrive at this sum, the court subtracted the $3,356.74 refund check the hotel deposited from the hotel‘s $107,247.00 estimated tax earnings payment. Neither party has raised any issue here regarding this matter.