New England Forestry Found., Inc. v. Bd. of Assessors of Hawley

• Decision Date: 15 May 2014
• Docket Number: SJC–11432.
• Parties: NEW ENGLAND FORESTRY FOUNDATION, INC. v. BOARD OF ASSESSORS OF HAWLEY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

468 Mass. 138

9 N.E.3d 310

NEW ENGLAND FORESTRY FOUNDATION, INC.

v.BOARD OF ASSESSORS OF HAWLEY.

SJC–11432.

Supreme Judicial Court of Massachusetts,

Suffolk.

Submitted Jan. 6, 2014.

Decided May 15, 2014.

Douglas Hallward–Driemeier (Jesse Mohan Boodoo & Jacob Scott, Boston, with him) for the plaintiff.

Rosemary Crowley (David J. Martel with her), Springfield, for the defendant.

The following submitted briefs for amici curiae:

Robert H. Levin, of Maine, for Massachusetts Land Trust Coalition, Inc., & another.

Gregor I. McGregor & Luke H. Legere, Boston, for Massachusetts Association of Conservation Commissions, Inc., & another.

James F. Sullivan, Plymouth, for Massachusetts Association of Assessing Officers.

Robert E. McDonnell & Patrick Strawbridge, Boston, for The Nature Conservancy & another.

Lisa C. Goodheart, Susan A. Hartnett, Phelps T. Turner, & Joshua D. Nadreau, Boston, for The Trustees of Reservations.

Present: IRELAND, C.J., SPINA, CORDY, BOTSFORD, GANTS, DUFFLY, & LENK, JJ.

SPINA, J.

This case comes to us on direct appellate review from a decision of the Appellate Tax Board (board). The taxpayer, New England Forestry Foundation, Inc. (NEFF), is a nonprofit corporation organized under G.L. c. 180. NEFF is the record owner of a 120–acre parcel of forest land in the town of Hawley (Hawley). In 2009, NEFF applied to the board of assessors of Hawley (assessors) for a charitable tax exemption on the parcel under G.L. c. 59, § 5, Third (Clause Third).¹ The assessors denied NEFF's application, and NEFF appealed to the board. The board likewise denied the application on the basis that NEFF had failed to carry its burden to show that it occupied the land in Hawley for a charitable purpose within the meaning of Clause Third. NEFF again appealed, and both NEFF and the assessors filed applications for direct appellate review. We granted the parties' applications, and we reverse the board's decision.²

1. Background. The taxpayer, NEFF, is a Massachusetts nonprofit corporation organized under G.L. c. 180, and it has received tax-exempt status from the Federal government under 26 U.S.C. § 501(c)(3) (2006). NEFF was incorporated in 1944 and pursues the mission of “providing for the conservation and ecologically sound management of privately owned forestlands in New England, throughout the Americas and beyond.” NEFF is dedicated to several activities in furtherance of this mission including “[e]ducating landowners, foresters, forest product industries, and the general public about the benefits of forest stewardship and multi-generational forestland planning”; “[p]ermanently protecting forests through gifts and acquisitions of land for the benefit of future generations”; “[a]ctively managing [f]oundation lands as demonstration and educational forests”; “[c]onservation, through sustainable yield forestry, of a working landscape that supports economic welfare and quality of life”; and “[s]upporting the development and implementation of forest policy and forest practices that encourage and sustain private ownership.” In its 2010 restated articles of organization, NEFF described its charitable purposes in part as to “create, foster, and support conservation, habitat, water resource, open space preservation, recreational, and other activities” by “promoting, supporting, and practicing forest management policies and techniques to increase the production of timber in an ecologically and economically prudent manner,” to utilize “best management practices ... to protect habitat, water, and other natural resources,” and to “support and engage in and advance scientific understanding of environmental issues through research.” As one of the largest land conservation organizations in Massachusetts, NEFF owns over 23,000 acres of land in five States and holds conservation easements on over one million additional acres across seven States. Of NEFF's land holdings, approximately 7,500 acres are located in Massachusetts in thirty-nine municipalities.

The property at issue in this case is a 120–acre parcel of forested land known as the Stetson–Phelps Pine Ridge Farm (Hawley forest). NEFF purchased the forest as part of a larger tract of land in 1999 from private landowners, Muriel Shippee and her brother, Harold Phelps. According to NEFF, the farm and its surrounding land had been in Shippee's family for generations, and she sold the land to NEFF in order to ensure that it would not be developed. After NEFF purchased the entire tract, it subdivided the land and sold a portion containing a house and barns and approximately twenty acres of open field to private landowners with no connection to the organization. However, NEFF retained a conservation restriction over the property to ensure that it is not developed in the future. The remainder of the land, owned by NEFF, constitutes the Hawley forest and is abutted on two sides by the Kenneth Dubuque Memorial State Forest, which is owned and maintained by the Department of Conservation and Recreation.

Soon after acquiring the forest from Shippee and Phelps, NEFF hired an independent licensed forester to develop a “forest management plan” for the maintenance of the forest.³ The first round of activities recommended by the plan was carried out in 2000, and included such actions as removal of “mature and poor quality white pine and spruce saw logs” to “release good quality growing stock”; “[c]ombination strip cuts and patch cuts for wildlife and softwood regeneration,” and the layout of a “loop demonstration trail” near “old growth type hemlocks” taking into consideration “erosion on fragile soils.” In 2009, the plan was updated, and a tree inventory of the forest was conducted. The 2009 plan recommended that NEFF conduct a patch harvest of approximately sixty-five acres in 2010 and a harvest of a second patch in 2016.

Prior to tax year 2010, NEFF had applied for and received forest-land classification for the Hawley forest under G.L. c. 61, § 2. Chapter 61 sets forth a reduced-taxation scheme for private landowners who hold forest land in an undeveloped state and manage the land according to a forest management plan issued by a licensed State forester. G.L. c. 61, §§ 1–8. Accordingly, for tax year 2010, property tax on the Hawley forest was assessed to NEFF at a reduced rate totaling less than $200, despite the land's $96,000 value. In a letter to the assessors, NEFF explained that it subsequently applied for a full property tax exemption under Clause Third, rather than accepting the reduced taxation under G.L. c. 61, due in part to the administrative costs of preparing for and filing for G.L. c. 61 status on all its properties because G.L. c. 61, § 2, requires renewal every ten years.

NEFF submitted its application for a Clause Third property tax exemption in November, 2009. Clause Third provides that the real property of a charitable organization is exempt from taxation if the land is occupied by the charitable organization or its officers for the purposes for which it was organized. In April, 2010, the assessors deemed NEFF's application denied as of February, 2010, on the basis that NEFF had failed to provide sufficient information to enable the assessors to make a decision regarding its application for exemption within the three-month period required by statute. See G.L. c. 59, § 64.

NEFF appealed to the board under formal adjudication procedures set forth in G.L. c. 58A, § 7, and G.L. c. 59, §§ 64 and 65. Following an adjudicatory hearing, the board issued a thorough, written opinion including findings of fact and conclusions of law. The board denied NEFF's request for an exemption on the basis that NEFF had failed to carry its burden to show that it occupied the land in Hawley for a charitable purpose within the meaning of Clause Third. Specifically, the board concluded that NEFF was not carrying out a charitable purpose within the meaning of the statute because forest management is not a traditional charitable purpose and because the benefits of NEFF's activities in the Hawley forest do not inure to a sufficiently large and fluid class of persons due in part to NEFF's insufficient efforts to promote the use of the land by the public. The board further concluded that NEFF did not occupy the Hawley forest in furtherance of its claimed charitable purposes because it offered “at best vague testimony” regarding what it termed “active management” of the land, and provided evidence of only one planned educational activity to take place in the Hawley forest. Additionally, the board concluded that a Clause Third exemption was not available to NEFF because the tax reduction scheme for forest land under G.L. c. 61 demonstrates that the Legislature intended only to reduce the tax burdenon forest land, not to eliminate it completely. Although the board's findings of fact are supported by substantial evidence, we conclude that the board erred in denying NEFF a charitable tax exemption under Clause Third.

2. Application of G.L. c. 59, § 5, Third. As a threshold matter, the assessors argue, as the board held, that a Clause Third exemption is not available to NEFF in part because the Legislature intended G.L. c. 61 to be the extent of the tax benefit afforded to private landowners holding undeveloped forest land. Similarly, the assessors now argue that Clause Third does not apply to land conservation organizations like NEFF because the Legislature intended for The Trustees of Reservations to be the only private, nonprofit entity permitted to hold conservation land completely free from property taxes. Neither of these arguments is availing.

a. General Laws c. 61, “Classification and Taxation of Forest Land and Forest Products.” General Laws cc. 61, 61A, and 61B, together set forth a reduced-taxation scheme for land privately held as forest, agricultural, or recreational land. The assessors argue that the enactment of this statutory scheme demonstrates a legislative intent to provide for...