Sithe New Boston LLC & Boston Edison Co. v. Board of Assessors of the City of Boston (December 11, 2001)

COMMONWEALTH OF MASSACHUSETTS
APPELLATE TAX BOARD

SITHE NEW BOSTON LLC &		v.	  BOARD OF ASSESSORS OF
BOSTON EDISON CO. 			       THE CITY OF BOSTON
						   
Docket No. F255649			 	  Promulgated: 
		  					  December 11, 2001


This is an appeal filed under the formal procedure pursuant to G.L. c. 59, §§ 64 and 65, from the refusal of the appellee to abate transition payments under G.L. c. 59, § 38H, assessed to the appellants pursuant to G.L. c. 59, §§ 75 and 76, for fiscal year 1999.  
Chairman Burns heard the appellants' motion for judgment and was joined in the decision for the appellants by Commissioners Scharaffa, Gorton, Egan and Rose.
These findings of fact and report are made at the request of the appellee pursuant to G.L. c. 58A, § 13 and 831 CMR 1.32.

	John M. Lynch, Esq. and Stephen W. DeCourcey, Esq. for the appellants.
	
Jeffrey Austin, Esq. for the appellee.



FINDINGS OF FACT AND REPORT
On the basis of the uncontroverted facts of record in this appeal, the Appellate Tax Board ("Board") made the following findings of fact.
On January 1, 1998, Boston Edison Co. ("BECO") was the owner of the real and personal property located at 610 E. First Street and known as the New Boston Generating Facility ("New Boston").  Sithe New Boston LLC ("Sithe") acquired title to New Boston on or about May 15, 1998.  The Board of Assessors of the City of Boston ("Assessors") mailed New Boston's fiscal year 1999 real estate tax bill on December 31, 1998.  The tax bill valued New Boston's real property at $53,265,700 and its personal property at $236,021,862, and assessed tax in the amounts of $1,972,961.53 and $8,742,249.77, respectively.  BECO  timely paid the taxes assessed.  On June 18, 1999, the Assessors issued an additional tax bill of $3,021,315 for so-called "transition payments," which they alleged to be the difference between New Boston's tax assessments in fiscal years 1997 and 1999. 
The Assessors issued this transition payment tax bill by means of an "omitted/revised assessment" pursuant to G.L. c. 59, §§ 75 and 76.  The Assessors did not return to the Commissioner of Revenue ("Commissioner"), by June 30, 1999, a statement showing the amount of additional taxes so assessed by means of the omitted/revised assessment, as required by G.L. c. 59, §§ 75 and 76.  The omitted/revised tax was paid timely, and on September 16, 1999, the appellants each applied in writing to the Assessors for an abatement of the omitted/revised tax.  On December 20, 1999, the Assessors issued a notice of their December 14, 1999 decision granting a partial abatement of the omitted/revised tax in the amount of $1,690,717.  The appellants timely appealed this decision to the Board.  On the basis of these facts, the Board found that it had jurisdiction over this appeal.
The appellants alleged in their motion for entry of judgment that the Assessors' failure to file a report of the subject omitted/revised assessment with the Commissioner provided a sufficient basis for the Board to render a decision in the appellants' favor.  For the reasons stated in the Opinion which follows, the Board found that the Assessors did not make a proper omitted/revised assessment of New Boston, because they did not return to the Commissioner by June 30, 1999 a statement showing the amount of additional taxes assessed by means of the omitted/revised assessment, as required by G.L. c. 59, §§ 75 and 76.  The Board found that this requirement was a condition precedent to the validity of an omitted/revised assessment.  The Assessors' failure to meet this requirement rendered the omitted/revised assessment void.  
Moreover, the Assessors failed to establish a factual predicate for the imposition of either an omitted or revised assessment in this appeal.  They failed to show that any real or personal property was "unintentionally omitted from the annual assessment of tax," or that any property had been unintentionally "valued or classified in an incorrect manner."  Even assuming for purposes of this motion that the Assessors' failure to include a transition payment charge in its original assessment was "unintentional" and was due to a "clerical, data processing or other good faith reason," such failure did not amount to an omission of property from the original assessment or an incorrect valuation or classification of property.  Therefore, the assessment failed to satisfy the fundamental requirements of either § 75 or § 76.  Accordingly, the Board allowed the appellants' motion for judgment and granted them an abatement in the full amount of the transition payment for fiscal year 1999.

OPINION
	At issue in this appeal is the liability of the appellants for so-called "transition payments" for fiscal year 1999.  In 1997, the Legislature passed the Electric Utility Restructuring Act, Chapter 164 of the Acts of 1997, which restructured the electric utility industry in Massachusetts by separating the generation of electricity from its transmission and distribution.  While transmission and distribution of electricity is still performed by local electric utilities subject to government regulations, the generation of electricity is now performed by independent, non-utility producers who are able to compete in a deregulated environment.  See Department of Revenue ("DOR") Informational Guideline Release No. 98-403, September 1998.  
Because the deregulation of the electric utility industry was expected to result in the devaluation for tax purposes of electric generating plants, the Act created transition payments, which will temporarily allow the communities that host electric generating plants to receive property tax revenues at levels equivalent to their previous revenues from a base year, fiscal year 1997, before the electric industry restructuring.  Starting in fiscal year 2001, these transition payments will gradually decrease until they phase out in fiscal year 2010.  At that time, tax revenues from generating plants will be based on their actual full and fair cash value.  See G.L. c. 59, § 38H.
The issue raised by this motion is whether the Assessors, who failed to include the transition payment in the annual assessment of tax for fiscal year 1999, may resort to the omitted and revised assessment provisions under G.L. c. 59, §§ 75 and 76, particularly in light of their failure to file with the Commissioner the statement of additional amounts thereby assessed, as required under those provisions.  
As a preliminary matter, the Board notes that it treated the appellants' motion for judgment as a motion under Rule 22 of the Rules of Practice and Procedure of the Appellate Tax Board, 831 CMR 1.22.  Pursuant to Rule 22, "[i]ssues sufficient in themselves to determine the decision of the Board or to narrow the scope of the hearing may be separately heard and disposed of in the discretion of the Board."  Where, as here, there are no material issues of fact in dispute with respect to a particular issue, and resolution of that issue entitles a party to judgment, the Board may separately hear and decide the dispositive issue and render judgment in the appeal based on the resolution of that issue.  See Fredyma v. Commissioner of Revenue, 2001 ATB Adv. Sh. 629, 632-33 (August 28, 2001)(citing Omer v. Commissioner of Revenue, 1999 ATB Adv. Sh. 586, 591 (November 2, 1999)).    
The Assessors argue that their failure to report to the Commissioner should not invalidate the tax, because the appellants cannot show that the failure resulted in "substantial prejudice" to them.  "To justify invalidating an assessed tax, a taxpayer must show substantial prejudice."  Wakefield Ready-Mixed Concrete Co., Inc. v. Board of Assessors of the Town of Billerica, 17 Mass. App. Tax Bd. Rep. 101, 104 (1995) (citing Canron, Inc. v. Assessors of Everett, 366 Mass. 634 (1975)).  See also McManus v. City of Boston, 320 Mass. 585, 587 (1947) ("It has always been held that a non-compliance by the assessors with the strict requirements of the statutes, if it does not affect the rights of the tax-paying citizen, does not render the tax invalid.") (quoting Bemis v. Caldwell, 143 Mass. 299, 300-301 (1887)).  The Assessors assert that the appellants here cannot show that the failure to report to the Commissioner has resulted in substantial prejudice, because a taxpayer's rights are secured by the abatement and appeal process, not by the Assessors' filing of a report with the Commissioner. 
	While it is true that the normal rule is that "[t]he assessment of taxes is not strictissimi juris" (McManus, 320 Mass. at 587), the Board found and ruled that this principle does not apply to omitted or revised assessments pursuant to G.L. c. 59, §§ 75 or 76, respectively.  These assessments are not in the normal course of the annual taxation of real and personal property, but rather, they are allowed by specific statutory remedies available to assessors in carefully defined circumstances.  Therefore, taxing authorities must adhere to the specific requirements of the statutes granting the right to make these additional assessments:  "In the statute as to assessment of local taxes, there is special provision for additional assessments upon property earlier omitted.  G.L. c. 59, § 75.  But for this special enactment, there could be no remedy for such omission."  Cabot v. Commissioner of Corp. and Tax'n, 267 Mass. 338, 341 (1929).  	
	"The 'right to tax must be found within the letter of the law; it is not to be extended by implication.'"  Commissioner of Revenue v. Destito, 23 Mass. App. Ct. 997 (1987) (quoting Curtis v. Commissioner of Corp. & Tax'n, 340 Mass. 169, 173 (1959)).  With respect to omitted/revised assessments, the "letter of the law" prescribes that:
If any parcel of real property or the personal property of a person has been unintentionally omitted from the annual assessment of taxes due to clerical or data processing error or other good faith reason, the assessors shall in accordance with such rules, regulations and guidelines as the commissioner may prescribe, assess such person for such property; provided, however, that in no event shall such assessment be made later than June twentieth of the taxable year . . . and that the assessors shall annually, not later than June thirtieth of the taxable year . . . return to the commissioner a statement showing the amounts of additional taxes so assessed.

G.L. c. 59, § 75 (emphasis added).  Applying the plain language doctrine to this section, the Board found and ruled that the definitive phrase, "provided, however, that in no event," indicates that the times for making the assessment and returning the statement to the Commissioner are both conditions precedent to the validity of an omitted/revised assessment.  See Sisk v. Assessors of Essex, 426 Mass. 651, 654 (1998) ("Following well-established principles of interpretation, we give effect to the 'usual and ordinary' meaning of words in a statute.") (citing Horst v. Commissioner of Revenue, 389 Mass. 177, 179 (1983)).  
Accordingly, the Board need not reach the issue of substantial prejudice unless the threshold requirements of § 75 and § 76 were satisfied.  The Board has previously indicated that assessors need to satisfy the specific conditions of § 75 in order to validly make an omitted or revised assessment.  See Wakefield Ready-Mixed Concrete, 17 Mass. App. Tax Bd. Rep. at 103-104 (where, before analyzing whether the taxpayer had shown substantial prejudice, the Board reviewed the dates on which the assessors made the revised assessment and the report to the Commissioner, and ruled that "that there was no defect in the assessment").  Cf. New England Deaconess Association v. Board of Assessors of the Town of Concord, 23 Mass. App. Tax Bd. Rep. 65, 68 (1997)(finding that an omitted assessment was invalid when the omission was not unintentional and, therefore, "the threshold qualifying conditions of § 75" were not met).  
In the instant appeal, the Assessors failed to satisfy the threshold statutory requirements of filing a report with the Commissioner prior to June 30, and accordingly, the Board did not need to reach the substantial prejudice issue.  "It is to be kept in mind that tax laws are to be strictly construed.  The right to tax is not to be implied, but must be plainly conferred."  DeBlois v. Commissioner of Corp. & Tax'n, 276 Mass. 437, 438-39 (1931) (citing Cabot, 267 Mass. at 340).  Because the Assessors did not file with the Commissioner the report required under § 75, they failed to meet one of the conditions precedent to the validity of an omitted/revised assessment.  Accordingly, the Board found and ruled that the assessment was invalid.  
Moreover, the Assessors failed to establish the proper factual basis for invoking the provisions of either § 75 or § 76 in the circumstances of this appeal.  Section 75 allows for an additional assessment after the normal annual assessment for a fiscal year "[i]f any portion of the real or personal estate of a person . . . has been omitted from the annual assessment of taxes . . . ."  G.L. c. 59, § 75.  Similarly, § 76 allows the assessors a second chance to value or classify property which was "not properly valued or classified . . . ." by the assessors in the original assessment.  G.L. c. 59, § 76.  
In this appeal, however, there is no evidence that the Assessors made an error that was either an omission of a part of the real or personal property of New Boston from the annual assessment of taxes or an improper valuation or classification of that property.  Rather, the Assessors simply neglected to include a transition payment in the appellants' tax bill.  The omitted or revised assessment is only permissible to correct the particular errors as specified in those statutes.  See, e.g., New England Deaconess Ass'n, 23 Mass. App. Tax Bd. Rep. at 68 (because the error "resulted from an intentional and considered decision by the assessors at the time the fiscal year's assessments were committed," the error does not meet the specifications of the statute and "an omitted assessment is not authorized under § 75").  Because the Assessors failed to satisfy either of these "threshold qualifying conditions," the assessment is therefore void under both sections.  Id.     
Accordingly, the Board entered a judgment for the appellants in this appeal and granted an abatement of tax in the amount of $1,330,598 for fiscal year 1999.

	    APPELLATE TAX BOARD	
							
By:____________________________
					    Abigail A. Burns, Chairman




A true copy:



Attest: _____________________
	    Clerk of the Board

 	The Petition Under Formal Procedure filed by the appellants lists December 31, 1999 as the date for the mailing of the tax bills.  However, this date seems to be a typographical error, considering that the omitted/revised assessment was issued on June 18, 1999, and the appellants filed for an abatement of tax on September 16, 1999. 
 	"Transition payments" are provided for under G.L. c. 59, § 38H, which became law in 1997 as part of the Electric Utility Restructuring Act.  See St. 1997, c. 164, § 71.  Transition payments and the Electric Utility Restructuring Act are discussed in more detail in the Opinion, which follows.
 	Both parties refer to the subject assessment as an "omitted/revised assessment."  Omitted and revised assessments are governed by related but separate statutes, which allow assessors, under certain circumstances and subject to the conditions of the applicable provision, a second chance to assess property which was either not assessed (omitted assessment) or was incorrectly valued or classified (revised assessment) during the normal annual assessment of property.  For omitted assessments, G.L. c. 59, § 75 requires that the property "has been unintentionally omitted" from the original assessment, while for revised assessments, § 76 requires that the property subject to taxation was "not properly valued or classified."  For the reasons that follow, the Board found that whether the assessors attempted to use the "omitted" or "revised" assessment provisions was immaterial, because the assessment was invalid under either provision.
    Pursuant to the purchase and sale agreement between BECO and Sithe, Sithe assumed BECO's obligations for transition payments assessed pursuant to the Electric Utility Restructuring Act.
   Because the issue raised by the parties is whether the Assessors properly assessed a transition payment liability pursuant to G.L. c. 59, §§ 75, 76, the Board assumed for purposes of this motion that there was an otherwise valid transition payment liability for New Boston under G.L. c. 59, § 38H.  
 	The doctrine of "strictissimi juris" is defined to mean "of the strictest right of law," or according to strict law.  Black's Law Dictionary, 1422 (6th ed., 1990).
   These requirements also apply to revised assessments.  Section 76 provides that revised assessments shall be assessed "in the manner and within the time provided by section seventy-five and subject to its provisions."  G.L. c. 59, § 76.
 	The Assessors in New England Deaconess Association had argued that "the intent of the Legislature in amending § 75 was to liberalize the authority of municipalities to make omitted assessments . . . ."  Id. at 69.  However, the Board found the Assessors' argument to be "misplaced," because "the liberalization of authority referenced in the report [DOR's legislative recommendations to the General Court] related to removal of the requirement that assessors obtain prior approval from the Commissioner before making an omitted assessment.  It had nothing to do with the requirement, inserted by the 1989 amendment, that the omission be unintentional."  Id.  
In this appeal, the Assessors also appealed to the "liberalization" of their authority pursuant to § 75 and § 76 as a justification for their making an omitted/revised assessment without filing a report to the Commissioner by June 30.  However, as in New England Deaconess Ass'n, the Board in this appeal found that the requirement for obtaining the Commissioner's prior approval "had nothing to do with the [other] requirement[s]" specified in § 75, in particular the requirement pertaining to making the report to the Commissioner.  Accordingly, as in New England Deaconess Ass'n, the Board in this appeal rejected the Assessors' argument. 

ATB 2001-943