The Massachusetts Appellate Tax Board remains closed to the public but is expected to resume in-person hearings later this year. In the meantime, there was no activity this quarter from the board, appellate courts, or commissioner of revenue with respect to state-level taxes. But there were several local property tax decisions addressing, among other things, exemption eligibility for solar power facilities, disregarded entities, and outdoor advertising structures.
In PelleVerde Capital, LLC v. Board of Assessors of West Bridgewater, the Massachusetts Appeals Court held that the owner of a solar power system was not allowed a personal property tax exemption because the power was sold to a municipality.
PelleVerde was the owner of a solar photovoltaic facility. It sold all the solar power facility’s electricity or net metering credits to the town. The town allocated the credits to eight municipal properties, all of which were used for public purposes. Massachusetts exempts from taxation "[a]ny solar or wind powered system or device which is being utilized as a primary or auxiliary power system for the purpose of heating or otherwise supplying the energy needs of property taxable under this chapter.”
The exemption requires proof that the facility was a solar- or wind-powered system or device, it was utilized as a primary or auxiliary power system to supply energy, and it was utilized to supply the energy needs of property that was “subject to Massachusetts property tax.” At trial, the taxpayer satisfied the first two items, but it was determined that the municipal property wasn’t subject to Massachusetts property tax. As a result, the taxpayer didn’t qualify for the exemption.
All property in Massachusetts, whether real or personal, is subject to local property taxation unless a specific exemption applies. There is no specific statutory exemption for municipal property in Massachusetts. On appeal, the taxpayer argued that because there is no express exemption, the municipal property is subject to tax.
While the Massachusetts Appeals Court noted that this argument had some merit, Massachusetts courts have long recognized a judicial, rather than statutory, exemption for property held for a public use by a municipality. The rationale is that property held and used for the public benefit should not be burdened with paying local taxes. As such, the solar facility was taxable because it was not supplying the energy needs of property taxable under G.L. c. 59.
Outfront Media LLC v. Board of Assessors of Boston examined whether certain outdoor advertising structures (signs) owned by the Massachusetts Bay Transportation Authority and assessed to Outfront Media LLC were exempt from taxation. G.L. c. 161A Section 24 exempts all real property of the MBTA from local taxation unless leased, used, or occupied in connection with a business conducted for profit. In such cases, the lessee, user, or occupant may be assessed as if they were the owner.
Although the MBTA contractually retained ownership of the advertising structures, Outfront had the exclusive right to advertise on the structures and install, operate, and maintain telecommunications equipment on them. The Appellate Tax Board found that the rights and responsibilities outlined in the contract established that Outfront used the advertising structures in connection with a business conducted for profit. Consequently, the assessors were allowed to assess Outfront on the structures under exception to the MBTA exemption statute. The valuation of structures issue was reserved for later consideration.
For Massachusetts local property tax purposes, with certain exceptions, all personal property owned by business corporations that are subject to the state corporate excise tax is exempt from local property tax. Brayton Point Energy, LLC v. Board of Assessors of Somerset addressed whether disregarded entities—entities that are not classified as separate from their owners for purposes of paying Massachusetts corporate excise taxes—nonetheless are business corporations subject to the excise tax under G. L. c. 63 Section 39. If disregarded entities are not considered business corporations subject to the excise tax, Brayton Point did not qualify for the exemption and was obligated to pay local property tax.
Brayton Point owned coal and fuel oil situated in the town of Somerset that was used in connection with the generation of electricity at a power plant. Accordingly, the town valued and assessed Brayton Point’s taxable personal property at $89 million, approximately $56 million of which was for the coal and fuel oil.
For Massachusetts corporate excise tax purposes, Brayton Point elected to be classified as a disregarded entity (limited liability company). As such, it was not classified as separate from its owner for purposes of paying federal income taxes or Massachusetts corporate excise taxes. The board had concluded that Brayton Point did not qualify for the exemption, and the appeals court affirmed the board’s decision. Under the definition of business corporation, disregarded entities are not business corporations because disregarded entities are not classified as corporations for Federal income tax purposes. See G. L. c. 63 Section 30 (1). Since Brayton Point was not a business corporation, it wasn’t eligible for the personal property tax exemption.
All practitioners understand the need to strictly adhere to statutory deadlines in a local (or state) tax appeal. Song v. Board of Assessors of Scituate is an example of how a small misstep can have serious consequences. In this case, the taxpayer appealed the real estate tax assessment for her single-family home. The remedy of abatement of taxes is created by statute. The Appellate Tax Board does not have jurisdiction over an appeal that is commenced late or prosecuted differently from that prescribed by statute.
The first step in the appeal process for local property taxes is to pay the tax when it is due. All preliminary and actual installments must be paid on time without incurring any interest. Here, the appellant paid the tax due, but the fourth-quarter tax payment was made one day late, incurring a nominal amount of interest. Regardless of whether it was one penny worth of interest, the town’s motion to dismiss was allowed because the appellant didn’t comply with the statutory requirement for timely payment of taxes.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Philip S. Olsen is a tax attorney at the Boston law firm of Davis Malm, where he focuses on state and local tax consulting and litigation. He has over 25 years of experience litigating and resolving major tax controversies before courts and administrative boards.
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