MassDOR Channels Nixon in Brownfields Tax Credit Court Case vs. Colleges
Richard Nixon famously declared “When the President does it that means that it is not illegal.” The Massachusetts Department of Revenue (DOR) seems to have adapted this line of reasoning to justify its position in a current lawsuit regarding the denial of Brownfields Tax Credits for three Boston-area colleges.
The case, now underway in Suffolk Superior Court (officially, Civil Action 2014-02617, Northeastern University, Trustees of Boston University and Wellesley College vs. Massachusetts Commissioner of Revenue), is scheduled for a hearing on October 1, 2015. Both sides have asked for summary judgment, as the facts are not in dispute.
In essence, the colleges’ argument is that the DOR changed its rules after each college had applied for credits but before the applications had been granted approval. While the applications were awaiting approval, DOR issued new guidance and then applied the rules retroactively, rendering the applications ineligible for credits. The new directive was applied to the applications even though the applications appeared to qualify under the procedures and interpretations that had been in place at the time the applications had been submitted. This ex post facto change denied the colleges due process and therefore, in the eyes of the schools, the denial of the tax credits should be overturned by the court. The United States Constitution specifically prohibits ex post facto laws.
The DOR is being represented by the Massachusetts Attorney General’s Office (AGO). Its case rests on the principle that “the Commissioner’s regulations and rulings, when reasonably designed to carry out the intent and purpose of a statute, are prima facie evidence of the proper interpretation of that statute.” In other words, because the new rules were issued by the DOR, that makes them correct – reminiscent of President’s Nixon’s quote.
This position appears to beg the question and entirely ignores the crux of the plaintiff’s case that the rules were changed and applied retroactively. That logic, if adopted by the Court, would seemingly allow the agency to change direction at will, as long as the new interpretations were deemed “reasonable.” An earlier article with additional detail about the case is available.
The essence of DOR’s changes, which were first released in early 2013 and finalized in November 2013, as Directive 13-4, is the concept that a Brownfields credit is “generated” by the filing of a final cleanup report with the Department of Environmental Protection (DEP). An applicant then “claims” the credit when it files an application with DOR. In contradiction to prior practice, these definitions effectively restricted for which cleanups an applicant could apply for credits. Throughout the previous years of the program, a credit was generated by the submittal of an application and its subsequent review and approval by DOR. A credit recipient then had five years following the approval to use or sell the credit.
The outcome of this case is being closely watched not only by those with a vested interest in the specific applications involved in the lawsuit but also by those interested in government accountability and transparency. A victory by the agency here would signal that the public ought not to rely on the rules, policies, and procedures that are in place at any particular time because those rules can be changed seemingly at the will of the bureaucracy, with little recourse by the affected parties.