Brownfields Tax Credit Regulations Proposed by MassDOR
On March 9, 2020, the Massachusetts Department of Revenue (DOR) released a “Working Draft Regulation: 830 CMR 63.38Q.1: Massachusetts Brownfields Tax Credit” for public comment. Cooperstown Environmental LLC staff have thoroughly read through the proposed guidance and have summarized some of our observations here for our clients and colleagues. Comments are due back to DOR by April 3, 2020.
Many people will be surprised that the Brownfields Tax Credit program has operated since its inception in 1998 without a formal regulation in place. Instead, the DOR has operated on guidance and documents in the form of eight Technical Information Releases or TIRs (1999, 2000, 2004, 2006, 2010, 2013, 2015, and 2018), instructions on application forms (BCA and BCTA), and DOR Directive 13-4, issued in 2013. The working draft regulation attempts to codify and consolidate prior guidance and recent practices.
The draft regulations address many of the thorniest issues that have precipitated application denials and partial denials over the past several years as the DOR has taken a more conservative stance when reviewing applications. Definitions in the draft of what costs are considered eligible versus ineligible will draw the most attention. The text addresses, for example, costs for asbestos and lead paint abatement in buildings to be demolished; costs for soil containing oil and/or hazardous materials (OHM) below certain regulatory thresholds; costs for vapor mitigation systems (sub slab depressurization systems); costs for engineered barriers; and costs for removing an Activity and Use Limitation (AUL), among many others.
The draft also seeks to grant DOR new powers that have never been identified in prior guidance nor appear to be derived from the statutory language. For example, DOR now defines its role as determining whether costs are “appropriate” and “reasonable” whereas prior practice has been to verify whether the costs were for eligible activities, were documented, and were paid.
In general, applicants and Brownfields Tax Credit practitioners should be pleased that there will be more clarity for application reviews. The draft sets forth specific procedures for determining the assessed value, for determining how to evaluate sites with multiple releases, and costs incurred prior to purchase or lease of the property, all common points of contention during past applications.
Questions and comments regarding the draft regulations may be directed to [email protected].