Massachusetts Department of Revenue guidance declared a “naked, confiscatory attempt by a state administrative agency to appropriate private property to fill government coffers” by the Massachusetts Superior Court remains on the department’s website without any notice of the court’s actions, potentially misleading nonprofits seeking to use brownfields tax credits.  The court’s decision has been appealed by DOR but there is no indication on DOR’s website that the directive has been declared unlawful by the trial court.

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 nonprofits 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.  On November 18, 2013, DOR issued Directive 13-4: Guidance with Respect to Brownfields Tax Credit Applications, in which it stated that nonprofit organizations were not entitled to receive the credit for a response action completed in a taxable year that began before the June 24, 2006 amendments.   

In subsequent litigation, 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 this determination, DOR relied on the language of the Directive 13-4. 

The 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.”  DOR has filed a notice of appeal and the guidance remains on the DOR’s website as apparently valid guidance.  Nonprofits should be aware that the directive remains on the DOR website without any indication that it has been ruled unlawful and should follow the appeal carefully.