Case Closed: Nonprofits Eligible for Brownfields Tax Credits for Pre-2006 Cleanups
Massachusetts’ top court has given finality to a 2017 ruling by the Massachusetts Appeals Court that nonprofits are eligible for transferrable brownfields tax credits for remediation conducted prior to 2006. By denying further appellate review on May 4, 2018, the Massachusetts Supreme Judicial Court let stand the Appeals Court’s ruling, leaving no further route for the Massachusetts Department of Revenue to avoid granting nonprofits these credits under these circumstances. Northeastern University et al. v. Commissioner of Revenue, 479 Mass. 1107 (2018). In response to our inquiry, the DOR has informed us that they will issue a Technical Information Release addressing this court decision and stated that its guidance on brownfields tax credits remains in effect except where inconsistent with the Court’s decision.
The brownfields tax credit program was created in 1998 to allow eligible taxpayers to receive a tax credit if they pursue an environmental response action and achieve either a permanent solution or remedy operation status under the state cleanup law, M.G.L. c. 21E. The credit applies only to costs incurred on or after August 1, 1998. In 2006, the legislature expanded the program to nonprofit organizations and, as they are not taxpayers, allowed the credit to be transferred. From 2006 to 2013, DOR allowed nonprofits to benefit from the tax credit for work performed from August 1, 1998. Then in November 2013, DOR issued Directive 13-4: Guidance with Respect to Brownfields Tax Credit Applications, in which it stated that nonprofits were not entitled to receive the credit for a response action completed in a taxable year that began before the June 24, 2006 amendments.
As we previously reported in March 2018, a redevelopment company and several universities challenged determinations made by DOR to deny brownfields tax credits for remediation projects completed prior to 2006. 131 Willow Ave., LLC v. Commissioner of Revenue, 33 Mass.L.Rptr. 49 (2015). In making these determinations, DOR had relied on the language of its guidance, known as Directive 13-4. That court held that the plain language of the statute is unambiguous and does not contain any exclusion for nonprofits as to whether the environmental cleanup is completed before or after the 2006 amendment, and therefore the Directive is “unreasonable and DOR’s denial of the applications based on that directive was unlawful.” The Appeals Court affirmed the Superior Court’s ruling. In light of the recent decision of the Supreme Judicial Court to deny further appellate review, this case is now closed, and the DOR must grant tax credits for response actions completed by nonprofits prior to the June 2006 amendments.