Last month, the U.S. Court of Appeals for the Third Circuit affirmed the district court’s ruling that protections pursuant to the Servicemembers Civil Relief Act (SCRA) do not apply to a business owned by a servicemember. Davis v. City of Philadelphia, No. 15-2937 (3d Cir. May 4, 2016). In 2004, the servicemember plaintiff transferred his and his wife’s property to a Pennsylvania company that he and his wife owned. The plaintiff, having served in the military between 2008 and 2011, claimed that the property’s tax debt should have been reduced under the SCRA. The district court granted the City’s motion to dismiss, holding that because the plaintiff was not personally liable for his company’s debt, the City had not denied him relief under the SCRA.
The Third Circuit affirmed, finding that the plain language of the SCRA’s property tax interest rate cap and its protection against penalties extend only to “property…owned individually by a servicemember or jointly by a servicemember and a dependent or dependents.” 50 U.S.C. § 3991(e) (emphasis added). The SCRA defines “servicemember” as “a member of the uniformed services;” therefore, the court reasoned that property owned by a servicemember is a separate legal entity from the actual servicemember and is ineligible for the SCRA’s protections. The court held that the servicemember failed to prove that an interest in excess of six percent was assessed against him while on active duty or that he actually owned the property. Rather, because the company was the actual owner of the property and was solely liable for tax debt, the Third Circuit affirmed the district court’s ruling.