Wb & T Mortg. Co. v. Board of Assessors

• Decision Date: 02 July 2008
• Docket Number: SJC-09940.
• Citation: 451 Mass. 716,889 N.E.2d 404
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: WB & T MORTGAGE COMPANY, INC. v. BOARD OF ASSESSORS OF BOSTON.

889 N.E.2d 404

451 Mass. 716

WB & T MORTGAGE COMPANY, INC. v. BOARD OF ASSESSORS OF BOSTON.

SJC-09940.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued March 3, 2008.

Decided July 2, 2008.

Daniel J. Brown for the taxpayer.

Adam Cederbaum for the Board of Assessors of Boston.

Martha Coakley, Attorney General, & Kenneth W. Salinger, Assistant Attorney General, for the Commonwealth, amicus curiae, submitted a brief.

Present: MARSHALL, C.J., GREANEY, IRELAND, SPINA, COWIN, CORDY, & BOTSFORD, JJ.

MARSHALL, C.J.

For more than 300 years, "proportionable and reasonable assessments, rates and taxes" have been imposed and levied on the Commonwealth's inhabitants and residents, and the estates lying within its borders. 1691 Charter of the Province of the Massachusetts Bay.¹,² Among the properties now exempted by statute from those levies are those that are owned or held in trust by charitable and other organizations that serve a public purpose. See, e.g., G.L. c. 59, § 5, Third (appearing in similar form in Rev. St. [1836], c. 7, § 5, Second).

At issue in this case is the immediate consequence of the termination of that exemption when exempt property is sold to a nonexempt buyer. We consider the constitutionality of G.L. c. 59, § 2C (a),³ which employs, as an interim measure, a method for assessing taxes on real property purchased from a tax-exempt entity different from the method imposed on other real property pursuant to G.L. c. 59, § 2A (a).⁴ By a divided panel, the Appellate Tax Board (board) denied the nonexempt taxpayer's request for an abatement of that pro forma tax computed and assessed under G.L. c. 59, § 2C, for the portion of fiscal year 2000 that came after the property was purchased on December 17, 1999.

The board concluded that § 2C is not unconstitutional on its face, and that the taxpayer failed to meet its burden of demonstrating that § 2C was unconstitutional as applied to it, because the taxpayer failed to produce substantial evidence of the fair cash valuation of the property as of the relevant valuation date, January 1, 1999.⁵ The taxpayer appealed, pursuant to G.L. c. 58A, § 13, arguing that the statute is both facially unconstitutional and unconstitutional as applied. We transferred the appeal to this court on our own motion, and now affirm the board's decision on different grounds.⁶

Background. The case was submitted to the board on a statement of agreed facts, and we briefly summarize the board's findings. United Church of Religious Science v. Assessors of Attleboro, 372 Mass. 280, 281, 361 N.E.2d 1254 (1977) (decision of Appellate Tax Board final as to findings of fact). On December 17, 1999 (midway through the 2000 fiscal year), WB & T Mortgage Company, Inc. (WB & T or taxpayer), purchased two parcels of land in Boston, adjacent to property it already owned, from the Roman Catholic Archdiocese of Boston (Archdiocese) for a total sales price of $4,500,000.⁷ The Archdiocese a religious organization, was not subject to real estate tax on the parcels.

For purposes of taxation, valuation of most nonexempt real and personal property is established as of the January 1 preceding the applicable fiscal year. G.L. c. 59, §§ 2A, 18. Sixteen months after WB & T's purchase of the property, in April, 2001, the board of assessors of Boston (city) issued tax bills to WB & T for fiscal year 2001 (July 1, 2000, to June 30, 2001), reflecting that it had assigned a "total full valuation" of $3,281,600 to the property as of January 1, 2000.

Thereafter, on November 21, 2001, the city issued a tax bill for fiscal year 2000 (July 1, 1999, to June 30, 2000) to WB & T pursuant to G.L. c. 59, § 2C, in the amount of $82,861.11. That amount was based on the sales price of $4,500,000, a tax rate of $34.21 per thousand and, according to the "pro forma" tax bill, a total of 197 days during fiscal year 2000 (i.e., December 17, 1999, to June 30, 2000) that WB & T owned the property.⁸ WB & T paid the tax on December 20, 2001, without interest, and applied for an abatement the following day. The application was deemed denied (by operation of statute, due to the assessors' inaction) on March 21, 2002, G.L. c. 59, § 63, and the taxpayer filed its appeal within ninety days, on June 21, 2002. See G.L. c. 58A, § 13.

Discussion. 1. Preliminary considerations. Although not disputed by the parties on appeal, a threshold issue is whether G.L. c. 59, § 2C, imposes a tax, rather than an excise or other governmental exaction, and must therefore satisfy the constitutional requirement of proportionality. Part II, c. 1, § 1, art. 4, of the Constitution of the Commonwealth. See Thomson Elec. Welding Co. v. Commonwealth, 275 Mass. 426, 429, 176 N.E. 203 (1931); Portland Bank v. Apthorp, 12 Mass. 252, 255-256, 1815 WL 913 (1815). While § 2C uses the phrases "a pro rata amount ... in lieu of taxes" and "pro forma tax" to describe the obligation, we determine the nature of such an assessment "by its operation rather than its specially descriptive phrase," Emerson College v. Boston, 391 Mass. 415, 424, 462 N.E.2d 1098 (1984), quoting Thomson Elec. Welding Co. v. Commonwealth, supra at 429, 176 N.E. 203, respecting the Legislature's intent in drafting the statute. Associated Indus. of Mass, Inc. v. Commissioner of Revenue, 378 Mass. 657, 667-668, 393 N.E.2d 812 (1979).

The board concluded, and we agree, that the statute exacts a tax. Among other things, G.L. c. 59, § 2C, provides that "[s]ums received under this section ... shall be credited to the general fund of the city or town." That the revenue obtained by operation of § 2C is destined for the "general fund" rather than for a particular purpose "while not decisive, is of weight in indicating that the charge is a tax." Emerson College v. Boston, supra at 427, 462 N.E.2d 1098, quoting P. Nichols, Taxation in Massachusetts 7 (3d ed.1938). Further, the § 2C rubric approximates the property tax that would have been due if the property had been transferred by a nonexempt grantor, and is specifically referred to as "in lieu of taxes that would have been due" if the property had been owned by a nonexempt purchaser on January 1. Finally, unlike contractually-agreed payments "in lieu of taxes," Anderson St. Assocs. v. Boston, 442 Mass. 812, 817-818, 817 N.E.2d 759 (2004), there is no "voluntary act" or "privilege" for which the § 2C amount is levied. Emerson College v. Boston, supra at 428, 462 N.E.2d 1098. See German v. Commonwealth, 410 Mass. 445, 448, 574 N.E.2d 336 (1991), quoting Opinion of the Justices, 393 Mass. 1209, 1216, 471 N.E.2d 1266 (1984) (tax is "revenue-raising exaction imposed through generally applicable rates to defray public expense").

2. Constitutionality of G.L. c. 59, § 2C. The preeminent issue before us is whether, by authorizing a "pro forma tax" based on purchase price and date rather than fair cash valuation as of January 1, G.L. c. 59, § 2C, imposes an unconstitutional disproportionate or discriminatory tax on purchasers of real property from tax-exempt entities. We start from the premise that "[a] tax measure is presumed valid and is entitled to the benefit of any constitutional doubt, and the burden of proving its invalidity falls on those who challenge the measure." Opinion of the Justices, 425 Mass. 1201, 1203-1204, 681 N.E.2d 857 (1997), citing Daley v. State Tax Comm'n, 376 Mass. 861, 865, 383 N.E.2d 1140 (1978). See Sylvester v. Commissioner of Revenue, 445 Mass. 304, 308, 837 N.E.2d 662 (2005), cert. denied, 547 U.S. 1147, 126 S.Ct. 2288, 164 L.Ed.2d 813 (2006); Andover Sav. Bank v. Commissioner of Revenue, 387 Mass. 229, 235, 439 N.E.2d 282 (1982). A statute survives such scrutiny if it "may reasonably be applied in ways that do not violate constitutional safeguards." Route One Liquors, Inc. v. Secretary of Admin. & Fin., 439 Mass. 111, 117, 785 N.E.2d 1222 (2003), quoting Opinion of the Justices, supra at 1218, 668 N.E.2d 738.

The board ruled that G.L. c. 59, § 2C, is not facially unconstitutional, but that it would be unconstitutional as applied if the purchase price on which the § 2C calculation was based exceeded the "fair cash valuation," G.L. c. 59, § 38, the standard applied to taxation of other real property. Giving deference to the board's expertise in interpretation of the tax laws of the Commonwealth, Northeast Petroleum Corp. v. Commissioner of Revenue, 395 Mass. 207, 213, 479 N.E.2d 163 (1985), citing French v. Assessors of Boston, 383 Mass. 481, 482, 419 N.E.2d 1372 (1981) (we defer to "expertise of the board in tax matters involving interpretation of the laws of the Commonwealth"), but applying our independent judgment as to both law and facts on the constitutional issues, Opinion of the Justices, 328 Mass. 679, 686-687, 106 N.E.2d 259 (1952), we conclude that the statute is constitutional, both on its face and as applied to this taxpayer.

a. Facial challenge. Under the Constitution of the Commonwealth, the Legislature may "impose and levy proportional and reasonable assessments, rates, and taxes, upon all the inhabitants of, and persons resident, and estates lying, within the ... Commonwealth." Part II, c. 1, § 1, art. 4, of the Constitution of the Commonwealth. By addressing the absence of any tax assessment on property transferred from a tax-exempt entity for the period before the established proportionate system of taxation begins, G.L. c. 59, § 2C (a), is a proper exercise of that power of proportional taxation, ensuring that nonexempt properties do not benefit from an unintended tax exemption, and that disproportionate taxation is reduced generally. C & S Wholesale Grocers, Inc. v. Westfield, 436 Mass. 459, 463, 766 N.E.2d 63 (2002).

Among the fundamental rights afforded by the Massachusetts Declaration of Rights is the right to enjoyment of "property." Art. 10 of the Massachusetts Declaration of Rights. That right, however, is not unfettered and comes with an attendant obligation:

"Each individual of the society...