November 6, 1985 Number 3

November 6, 1985 Number 3 Ira A. Jackson Commissioner of Revenue Department of Revenue 100 Cambridge Street Boston, MA 02204 Dear Conmiissioner Jackson: Pursuant to G.L. c. 58. § lA. *^ 5.^ you have asked my opinion on a question relating to computation of the excise tax due from a development proiect pro- }X)sed under G.L. c. 121A.- Your letter states the facts giving rise to your request as follows. A corporation organized under chapter 121A will acquire the propert\ in question from the Cit\ of Boston and would then give a forty-year ground lease to develop and operate that propert\" to a limited partnership that would not be organized under that statute.- The partnership would demolish the building now on the site and construct and operate a large underground garage. The surface of the site would be maintained as a park. During the term of that lease the chapter 121A corpo- ration would receive a percentage of the partnership's net income together with certain fixed sums. The precise question you have referred to me is whether, in those circumstances, "it is permissible for the computation of the gross income f>ortion of the excise imposed by G.L. c. 121A. § 10. to be based on the gross income of the c. 121A corporation rather than the gross income of the entire 121 A project. "'"^ In the circumstances described by your letter, it is my opinion that it is not only "permissible"" but. except as discussed below, ordinarily to be anticipated that the computation be based on the income of the chapter 121A corporation. My first ground for that opinion is the clear and unambiguous language of the statute, which must be given its ordinary meaning. Bronstein v. Prudential Insur- ance Co.. 390 Mass. 701. 704 (1984). In relevant^part, G.L. c. 121A. § 10. «" 3. provides: . . . [S]uch corporation shall pay in each calendar year to the commonwealth ... an excise . . . equal to five percent of its gross income in such preceding calendar year .... The obvious antecedent of "its"" in that provision is "such corporation."" and so the intent of the Legislature appears to be that the relevant excise on the corpo- ration v\ill be measured soleK by reference to that corporation's income. Any contrarv reading would immediately lead to serious difficulties and there- fore should be avoided. See Adamowicz v. Ipsv^ich. 395 Mass. 757. 760 (1985) (statutes should be construed so as to produce workable restilts). For example, looking beyond the mcome of the chapter 121A corporation would clearly be inappropriate in the majoritv of chapter 121A projects which involve residential development. Obviously, the Legislature did not intend that the amount of a chapter 121A corporation"s excise should depend on the amounts of its tenants" personal incomes. Furthermore, even in commercial chapter 121A prefects, there seems to be no basis for looking beyond the corporation"s income. The intended 20 P.D. 12 measure of the excise assessed on the gross income of a chapter 1 2 1A corporation that is a commercial lessor logically should be that corporation's own gross income rather than the gross income of the various entities that may lease office space from it. This result follows not only from the plain language of G.L. c. 121A, § 10, H 3, but also from the purpose which I believe underlies the excise imposed by that provision. That excise tax is assessed in lieu of the local property tax from which the chapter 121A corporation is exempted by G.L. c. 121A, § 10. See Opinion of the Justices, 341 Mass. 760, 774 (1960). Gross income derived from occupancy of a piece of property is one indication of the property's value, cf. Alstores Realty Corp. V. Board ofAssessors ofPeabody, 391 Mass. 60, 66-69 (1984), and it is also commonly used as a basis for measuring excise taxes. See, e.g. , G.L. c. 63, § 22A (gross investment income); Commissioner of Revenue v. Massachusetts Mutual Insurance Co., 384 Mass. 607, 612 (1981). On the other hand, the gross income of the corporation's lessees measures their individual business success or the value of their individual leases to them; in neither case does that income seem rationally related to the value of the tax exemptions granted to the chapter 12A corporation. The fact that the lease proposed here is a forty-year ground lease to develop the property and operate a garage on it rather than a short-term commercial lease for office space may have practical and financial consequences for the project, but I see no reason to infer that the Legislature intended that fact, standing alone, to require different treatment for purposes of section 10. Indeed, chapter 121A elsewhere discusses "ground rent," the payment made under a ground lease, in terms that suggest that a "ground lease" for purposes of chapter 121A should be viewed as simply one specific category of a "lease" rather than as a distinct form of legal interest. See G.L. c. 121A, § 15(1) ("expenses . . . including any ground rents or other payments under any lease . . ."). See also G.L. c. 121A, § 10, H 9 ("gross income" includes "payments actually made by persons for the right to . . . occupy ... all of the project . . ."). For these reasons, I conclude that the answer to your question is that the relevant income under G.L. c. 121A, § 10, H 3, is that of the chapter 121A corporation and not that of the limited partnership.^ This opinion is limited to answering the precise question you have asked. I do not hereby express any views as to the legality, propriety, or wisdom of the proposed project in terms of chapter 121A or other provisions of law. Cf 1961/62 Op. Atty. Gen., Rep. A.G., Pub. Doc. No. 12 at 199, 200-01 (1962). Your request for an opinion notes, and other comments 1 have received argue, that the pro- posed project may not be authorized by G.L. c. 121A or may be otherwise unlawful.^ It would be inappropriate for me to address those arguments for three basic reasons. First, I have not been directly asked for an opinion on those matters; your specific request relates only to "the computation of the gross income portion of the excise" and so is quite narrow. In issuing formal opinions it has been my consistent policy to answer only those questions explicitly presented to me and those which must necessarily be resolved to answer the questions explicitly asked. Cf Opinion ofthe Justices, 386 Mass. 1201, 1221 (1982) (Supreme Judicial Court advisory opinions are confined to the particular questions of law submitted to the Court). Second, even if you had explicitly asked for an opinion on one or more of the broader questions mentioned above, I would respectfully have to decline an answer. It has been my consistent policy, and that of my predecessors, to issue P.D. 12 21 formal opinions on only those questions that involve matters which are within the specific area of authority of the officer or agency making the request. 1967/68 Op. M\y. Gen. No. 30, Rep. A.G., Pub. Doc. No. 12 at 95, 96 (1967); cf. Opinion ofthe Justices, 386 Mass. 1201, 1219-20 (1982) (Supreme Judicial Court renders advi- sory opinions only as necessary to enable state departments to perform their duties). Your general duties with respect to G.L. c. 121A are limited and appear to involve only the "administration of taxes" rather than oversight over the aperation or enforcement of chapter 121A generally. See G.L. c. 121A, § 10, H 5.^ Your specific authority to opine on G.L. c. 121A matters is both conferred and limited by G.L. c. 58, § lA, the statute under which your request was made explicitly. It is limited to "any question arising under any statute relating to the assessment, classification and collection of taxes . . . ."While the narrow question y'ou have asked and I have answered above fits that formula, the broader ques- tions raised by materials submitted to me and discussed in footnote 6 above involve the construction and administration of Chapter 121A generally, rather than the specific topic of taxes. Hence they do not fall within the ambit of G.L. c. 58A, § lA, and I should not answer them. There is also a third reason why I decline to express any opinion on the broader issues potentially raised by this project. Each of those issues is or may be subject to the explicit oversight of another public agency, namely the Boston Redevelop- ment Authority, which St. 1960, c. 652, §§ 12-14, designates as the regulatory authority for chapter 121A projects in the City of Boston. See Bronstein v. Pru- dential Insurance Company, 390 Mass. 701, 705 (1984). Since the Authority has not yet finally approved the project, my opinion would seem both premature and perhaps unnecessary. Cf. 1984/85 Op. Atty. Gen. No. 5, Rep. A.G., Pub. Doc. No. 12 at (1984); 984/85 Op. Atty. Gen. No. 8, Rep. A.G., Pub. Doc No. 12 at (1985). Furthermore, it is certainly possible and perhaps quite likely, in view of the material I have received strenuously opposing the project, that litigation will be commenced which will raise some or all of the broad issues mentioned above. In such circumstances no opinion of this office would resolve the matter and so, as has been my consistent practice and that of my predecessors, none should be given. 1975/76 Op. Atty. Gen. No. 37, Rep. A.G. Pub. Doc. No. 12 at 121 (1976); see also G.L. c. 58, § lA, ^ 5 (Attorney GeneraFs opinion, when given, is to be "binding"). Significant legal questions such as those mentioned above may be resolved through litigation, and where, as provided by St. 1960, c. 652, §§ 13-14, any private person aggrieved has standing to seek judicial review,*^ the courts are the only forum that can provide a definitive resolution that will be binding upon all interested parties, both private and public. Very truly yours, FRANCIS X. BELLOTTI ATTORNEY GENERAL ' That statute provides in relevant part that: [the Commissioner of Revenue] shall, at the request of the asses- sors of any city or town or upon his own initiative, give his opinion 22 PD. 12 to assessors and collectors upon any question arising under any statute relating to the assessment, classification and collection of taxes or he may obtain the opinion of the attorney general upon such question. Your request states that your opinion on this question had previously been asked by the Commissioner of Assessing of the City of Boston. - Chapter 121 A has received extensive attention from both the legislative and judicial branches of government. As originally adopted, chapter 121A "was an attempt to eliminate substandard living conditions in urban areas by utilizing private capital to revitalize decaying urban areas. St. 1945, c. 654, §§ 1 and 3." Bronstein v. Prudential Insurance Co., 390 Mass. 701, 704 (1984). In 1960, chapter 121A was amended to include construction of commercial, industrial, and other non-residential buildings. Id. Despite that change, however, "the fundamental underpinning of the statute remained the same, i.e., that such projects be undertaken for a public purpose." Id. at 704-05 (citing Opinion of the Justices, 341 Mass. 760, 776-77 (I960)). This public purpose is accomplished, however, through reliance on private corpo- rations or, as permitted by G.L. c. 121A, § 18C, individuals or other entities regulated or organized pursuant to chapter 121 A. But see G.L. c. 121A, § 8 (every chapter 121 corporation "shall be deemed to have been organized to serve a public purpose . . ."). Thus "[a]lthough there is some measure of supervision and participation by a public agency, urban renewal projects under c. 121A are primarily conceived of and imple- mented by the private corporations which will operate them. Further, these projects receive large public benefits [through the tax concessions in G.L. c. 121A, § 10].'" Boston Edison Co. v. Boston Redevelopment Authority , 374 Mass. 37, 50 (1977). ^ At the expiration of the lease, title to the property would be transferred from the corporation to the City of Boston. "* I assume that by "the entire project" you refer to the partnership that will actually develop and operate the underground garage. ^ Of course in taxing that income, the Department of Revenue may exercise its statutory powers to verify the corporation's return and, if warranted, to assess any additional tax it finds, as a matter of fact, to be due. See G.L. c. 121A, § 10, H 5; G.L. c. 62C, § 26(b); cf. Brown, Rudnick, Freed & Gesmerv. Board ofAssessors ofBoston, 389 Mass. 298, 303 (1983); Massachusetts Pike Towers Associates v. Commissioner of Revenue, 381 Mass. 584 (1980). '' It has been argued that by giving a forty-year ground lease to the partnership, the corporation will "transfer in whole or in part the land or interests therein . . ." to an entity not organized under chapter 121A and so will violate G.L. c. 121 A, § 1 1, II 3. It has also been suggested that the terms of the ground lease between the chapter 121 corporation and the limited partnership may not reflect an ordinary, arms' length commercial transaction. Cf 760 C.M.R. § 25.()9(4)(a) (regulations of the Executive Office of Communities and Development making 5% of gross rental the maximum fee paid by a state-regulated chapter 1 21 A entity to a project manager). Finally, it has also been suggested that the limited partnership should itself be considered the true developer of the garage and taxed accordingly or that it should be treated as the developer of a separate subproject falling under chapter 121A for which a separate P.D. 12 23 excise payment would be due. Cf. G.L. c. 121 A. § 1, ^' 6 ("project" defined as "con- struction . . . operation and mainlenance . . .'" without explicit reference to formal ownership). On the other hand, the proponents of the project, the City of Boston, and certain other officials have responded to each of those arguments and have also stressed what they perceive would be the substantial financial and esthetic benefits the proposed project would have for Boston and the overall public interest. ^ However, as noted above, in performing those duties you are authorized to exercise all of your authority under G.L. c. 62C. Sec G.L. c. 121 A, § 10, H 5. '^ Sec\ e.g.. Boston Edison Company v. Boston Redevelopment Authority, 374 Mass. 37. 43(1977). 24 PD. 12