Reagan, et al. v. Comm’r of Revenue SJC-13287

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Reagan, et al. v. Comm’r of Revenue SJC-13287

In this case, the Supreme Judicial Court solicited amicus briefs on the issue: “Whether the commissioner may impose Massachusetts income tax on capital gain from the sale of an urban redevelopment project undertaken pursuant to G. L. c. 121A.”  NELF filed an amicus brief that has asserted the answer is a resounding “no.”

Plaintiffs were taxed on a capital gain made upon their sale of urban redevelopment projects.  Upon an agreed-upon statement of facts between plaintiffs and the Commissioner, the Appellate Tax Board (“Board”) determined that such a tax payment was due.

In its amicus brief, NELF has argued that the Board erred and no tax is due.  First, NELF pointed out the clear language of the statute exempted “the payment of any tax, excise or assessment to or for the commonwealth or any of its political subdivisions on account of a project.”  G.L. c. 121A, § 18C(f).  Further, the language of the statute makes clear that the Legislature wished to encourage private investment into blighted areas because the Legislature recognized governments could not solve the problem.  As an “aid” to such private investment, the Legislature expressly exempted certain state tax payments in exchange for the investors’ undertaking of other responsibilities and payments.

NELF has argued that the Commissioner and the Board did not follow the plain language of the statute and that an entity which owns an approved urban redevelopment project is exempt from paying any state tax “on account of a project.”  There is nothing in the statute that suggests that capital gains are not entitled to this broad exemption from taxation.  The phrase “on account of” means merely that the tax is exempt if the income is causally related to the project.

NELF further has argued that the Supreme Judicial Court should not defer to the Board because the issue is a question of law that involves interpretation of the urban redevelopment statutory scheme, and not of a tax provision.  The Board erred as a matter of law by not following the express language of Chapter 121A.   According to NELF’s President, Dan Winslow:  “The Legislature intended to harness the power of the private sector to help solve problems of urban decay. We hope that the Court embraces the plain language of the statute to give effect to that express intent rather than allowing an unelected agency to derail this important objective.”




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