Commissioner of Revenue v. Cargill, Inc.

• Decision Date: 01 March 1999
• Citation: 429 Mass. 79,706 N.E.2d 625
• Parties: COMMISSIONER OF REVENUE v. CARGILL, INCORPORATED.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 625

706 N.E.2d 625

429 Mass. 79

COMMISSIONER OF REVENUE v. CARGILL, INCORPORATED.

Supreme Judicial Court of Massachusetts,

Suffolk.

Argued Feb. 1, 1999.

Decided March 1, 1999.

Rosemary S. Gale, Assistant Attorney General, for the plaintiff.

William Hazel, Boston, for the defendant.

Present: WILKINS, C.J., ABRAMS, LYNCH, GREANEY, FRIED, MARSHALL, & IRELAND, JJ.

IRELAND, J.

The question presented is whether a foreign corporation, whose primary business is agriculture, is entitled to the investment tax credit contained in G.L. c. 63, § 31A, where its operations within the Commonwealth are not primarily agricultural. The Appellate Tax Board (board) ruled that the corporation is entitled to the credit. The board concluded that the § 31A credit is available to those businesses which are "primarily engaged in agriculture" and own property situated within the Commonwealth, whether or not the business activity they conduct within the Commonwealth is agricultural. The Commissioner of Revenue (commissioner) appealed and we transferred the case to this court on our own motion. The commissioner argues that § 31A is only intended to apply to corporations whose primary business within the Commonwealth is agriculture. ¹ We hold that the board's conclusion is supported by the clear language of G.L. c. 63, § 31A, and, accordingly, affirm its ruling.

1. Background. Cargill, Incorporated, is a Minnesota-based corporation that conducts business in the Commonwealth. The parties agree, and the board found, that during the tax years in question, 1986 through 1988, Cargill's business consisted primarily of the marketing and sale of agricultural products. ² Cargill is also involved in nonagricultural businesses. During the relevant years, Cargill sold both agricultural and non-agricultural products within the Commonwealth. Cargill does not grow, produce, or process agricultural products in the Commonwealth. Cargill and the commissioner stipulated that Cargill's Northeast Petroleum division used the property, for which the tax credit was sought, principally for distribution of petroleum products.

Cargill timely filed its Massachusetts corporate excise tax returns for the years in question. In these returns, Cargill claimed the § 31A tax credits. The commissioner conducted an audit and determined that Cargill was not entitled to the credit because it is "not primarily based in agriculture in Massachusetts." The commissioner then assessed, and Cargill paid, an additional assessment due to the disallowance of the credit.

Cargill filed applications for abatement of the additional assessment. See G.L. c. 62C, § 37C. The abatement bureau (bureau) denied the applications, basing its denial on its determination that Cargill's business was not "primarily engaged in agriculture." The bureau did not base its decision on whether or not Cargill's activities within Massachusetts were primarily related to agriculture.

Cargill appealed to the board. See G.L. c. 62C, § 39. In its ruling, the board found that "Cargill is a 'corporation primarily engaged in agriculture' which owned and used property situated within the Commonwealth for purposes of G.L. c. 63, § 31A." The board further found that the commissioner's interpretation of § 31A, requiring that the corporation be engaged primarily in agriculture within Massachusetts, would "engraft conditions and limitations onto the statutory provision which are simply not present in the plain language" of the statute. Consequently, the board ruled that Cargill was entitled to the § 31A tax credit for the years in question. ³ The commissioner then filed a notice of appeal, see G.L. c. 58A, § 13, and we transferred the case to this court on our own motion.

2. Massachusetts corporate excise. Massachusetts imposes an excise on all corporations "doing business" within the Commonwealth. See G.L. c. 63, §§ 32, 39. The statutory provision central to the present dispute, G.L. c. 63, § 31A, provides corporations an investment tax credit against the excise due. The relevant language of § 31A(a ) states:

"[A] corporation primarily engaged in agriculture ... shall be allowed a credit as hereinafter provided against its excise due under this chapter. The amount of such credit shall be one per cent of the cost or other basis for federal income tax purposes of qualifying tangible property acquired, constructed, reconstructed, or erected during the taxable year.... Qualifying property shall be tangible personal property and other tangible property including buildings and structural components of buildings acquired by purchase ... used by the corporation in the commonwealth; situated in the commonwealth on the last day of the taxable year...."

3. Discussion. Decisions of the board are final as to findings of fact. See G.L. c. 58A, § 13. Consequently, "[a] decision of the board will not be reversed or modified if it is based on substantial evidence and on a correct application of the law." Koch v. Commissioner of Revenue, 416 Mass. 540, 555, 624 N.E.2d 91 (1993). See Commissioner of Revenue v. Houghton Mifflin Co., 423 Mass. 42, 43, 666 N.E.2d 491 (1996) (when reviewing a decision of the board, "the sole question before us is whether the board erred as a matter of law"). The commissioner argues that the board committed an error of law by relying solely on...