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 asserted the answer is a resounding “no.”

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

In its amicus brief in support of the taxpayers, NELF argued that the Board erred and no tax was due.  First, NELF pointed out that the clear language of the statute precluded “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 strongly wishes to encourage private investment in blighted areas because the Legislature has recognized that governments cannot solve the problem on their own.  Hence, as an incentive to private investment, the Legislature has exempted certain incomes in exchange for the developer’s undertaking of other responsibilities and payments.

NELF argued that the Commissioner and the Board failed to 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 that language that suggests that capital gains are not entitled to this broadly expressed exemption.  The phrase “on account of” means merely that the tax is exempt if the income is causally related to the project.  NELF further argued that the Supreme Judicial Court should not defer to the Board because the issue is a question of law involving interpretation of the urban redevelopment statutory scheme and not of a tax provision.

In its March 2023 decision the Court, relying on the plain language of the statute, ruled that exemption from “any tax” “on account of” a qualified project includes capital gains such as those here.  It reasoned that there was a clear nexus between the capital gain and the developer’s construction, management, and sale of the project.  Moreover, looking at the relevant statutes as a whole, it was apparent to the Court that a broad tax exemption was intended as the principal incentive offered by the Legislature to private developers.


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