Brayton Point Energy, LLC v. Bd. of Assessors of Somerset

• Decision Date: 29 July 2022
• Docket Number: 21-P-967
• Parties: BRAYTON POINT ENERGY, LLC v. BOARD OF ASSESSORS OF SOMERSET.
• Court: Appeals Court of Massachusetts

101 Mass.App.Ct. 466
194 N.E.3d 211

BRAYTON POINT ENERGY, LLC
v.
BOARD OF ASSESSORS OF SOMERSET.

No. 21-P-967

Appeals Court of Massachusetts.

Argued May 2, 2022
Decided July 29, 2022

Daniel J. Finnegan, Springfield, for the taxpayer.

David L. Klebanoff, Boston, for board of assessors of Somerset.

Present: Vuono, Sullivan, & Lemire, JJ.

SULLIVAN, J.

This appeal from a decision of the Appellate Tax Board (board) presents the question whether "disregarded entities" -- entities that are not classified as separate from their owners for purposes of paying Massachusetts corporate excise taxes -- are nonetheless business corporations subject to the excise tax under G. L. c. 63, § 39. If disregarded entities are business corporations subject to the State excise tax, then the taxpayer, Brayton Point Energy, LLC (Brayton Point), qualified for an exemption in G. L. c. 59, § 5, Sixteenth (2) (clause 16 [2]), for purposes of paying local property taxes on coal and fuel oil that it owned. If disregarded entities are not business corporations subject to the excise tax, then Brayton Point did not qualify for the exemption, and was obligated to pay the local property tax. The board concluded that Brayton Point did not qualify for the exemption. We affirm the board's decision.

101 Mass.App.Ct. 467

Background. Brayton Point was a Virginia limited liability company whose sole member was Dynegy Resource III, LLC (Dynegy Resource). As Brayton Point's sole member, Dynegy Resource was also Brayton Point's owner. Brayton

194 N.E.3d 213

Point owned coal and fuel oil situated in the town of Somerset (town) that was used in connection with the generation of electricity at a power plant.

For the Massachusetts corporate excise tax year ending December 31, 2016, Brayton Point, either by itself or through Dynegy Resource, elected to be classified as a disregarded entity, meaning that it was not classified as separate from its owner for purposes of paying Federal income taxes and, thus, Massachusetts corporate excise taxes. See G. L. c. 63, § 30 (2) (defining "[d]isregarded entity" for purposes of Massachusetts corporate excise tax statute as one "that is disregarded as a separate entity from its owner for federal income tax purposes"; "all income, assets, and activities of the entity shall be considered to be those of the owner"). In practice, Brayton Point's coal and fuel oil were reported on a combined excise tax return that included schedules for numerous affiliated entities; while the combined excise tax return did not include any schedules for Brayton Point itself, Brayton Point's coal and fuel oil were reported on a schedule for Dynegy Resource. All the tangible property reported on Dynegy Resource's schedule, including Brayton Point's coal and fuel oil, resulted in an excise tax liability in the amount of $200,309.

For fiscal year 2018, which had a valuation date of January 1, 2017, the town issued a local property tax bill to Brayton Point.¹ The tax bill stated that the value of Brayton Point's personal property was $89 million, which included $55,699,775 for the coal and fuel oil. The town assessed tax on Brayton Point's personal property at the rate of $28.76 per $1,000. Brayton Point asserts that approximately $1,601,925 of the tax bill was attributable to the coal and fuel oil.²

Brayton Point filed an application for a tax abatement, which the town's board of assessors (assessors) denied. Brayton Point

101 Mass.App.Ct. 468

timely appealed to the board on the basis that the subject property -- Brayton Point's coal and fuel oil -- was reported on the combined excise tax return and therefore should have been exempt from local property taxation. The board issued a decision in favor of the assessors. Brayton Point then appealed to this court.

Discussion. Before addressing the dispositive question -- whether disregarded entities are business corporations subject to the excise tax under G. L. c. 63, § 39, and qualify for the local property tax exemption in clause 16 (2) -- we first address...