The Manufacturer's Life Insurance Company, Inc. v. Commissioner of Revenue (November 5, 2009)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD


THE MANUFACTURER'S LIFE      v.	 COMMISSIONER OF REVENUE
INSURANCE COMPANY, INC.


Docket Nos. C276919	& C276920		 Promulgated:
		  C282740 & C287495		 November 5, 2009							 


These are appeals under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 62C, § 39 from the refusal of the appellee Commissioner of Revenue ("Commissioner" or "appellee") to grant an abatement of corporate excise sought by the appellant for the tax years 2002, 2003 and 2004 ("tax years at issue").    
Commissioner Rose heard these appeals. Commissioners Scharaffa, Egan, and Mulhern joined him in the decisions for the appellee in Docket Nos. C276919 (tax year 2002), C276920 (tax year 2003), C282740 (tax year 2003), and in a decision for the appellant in Docket No. C287495 (tax year 2004).  Chairman Hammond took no part in the deliberation or decision of these appeals.  
These findings of fact and report are made at the request of the parties pursuant to G.L. c. 58A, § 13 and 831 CMR 1.32.
J. Thomas Price, Esq. and William A. Hazel, Esq. for the appellant.

Daniel A. Shapiro, Esq. for the appellee.

FINDINGS OF FACT AND REPORT
Based on the Statement of Agreed Facts and accompanying exhibits, the Appellate Tax Board ("Board") made the following findings of fact:
	The appellant, Manufacturer's Life Insurance Co. (U.S.A.), Inc. ("Manulife" or "appellant"), is a Michigan corporation registered to do business in Massachusetts as a life insurance company.  For each of the tax years at issue, Manulife was subject to the foreign premium excise tax under G.L. c. 63, § 23 ("§ 23").  The issue in these appeals involves the application of the Economic Opportunity Area Credit ("EOAC" or the "credit") under  G.L. c. 63, § 38N ("§ 38N").  The Commissioner disallowed the credit claimed by the appellant for each year except 2004, and for that year, limited the credit to 50% of the total excise.  
The relevant procedural history, as agreed to in the stipulated facts, is set forth below.
	On March 3, 2003, the appellant filed its 2002 premium excise return.  The total excise of $565,515 reported on the return was paid in full.  The appellant did not claim an EOAC on the original return.
	On October 28, 2003, the appellant timely filed an Application for Abatement with the Commissioner, claiming an EOAC of $288,942 and requesting an abatement and refund of that amount.  On May 7, 2004, the appellant filed a revised abatement application, increasing its EOAC claim from $288,942 to $566,312 and seeking an abatement and refund in that amount.  By notice dated August 26, 2004, the Commissioner denied the appellant's abatement application.   The appellant filed its appeal with the Board on October 25, 2004.
	On March 3, 2004, the appellant filed its 2003 premium excise return, reporting an excise of $701,835 before credits and claiming a $350,918 EOAC.  The appellant had paid a total excise of $432,653 for 2003 and requested that a $92,851 claimed overpayment be applied to the 2004 tax year.  On May 7, 2004, the appellant filed an amended premium excise return for tax year 2003, increasing its claimed EOAC from $350,918 to $691,517 and requesting an abatement of $339,802 and a refund of the entire 2003 excise paid of $432,653.  By notice dated August 26, 2004, the Commissioner denied the appellant's abatement application.  The appellant filed its appeal with the Board on October 25, 2004.  
	The Commissioner issued a Notice of Intent to Assess dated November 6, 2004, proposing an additional excise in the amount of $350,918 for tax year 2003, plus interest, based on the disallowance of the EOAC claimed on the appellant's original 2003 premium excise return. On December 15, 2004, the Commissioner issued a Notice of Assessment for $350,918, plus interest, for tax year 2003.  On January 20, 2005, the appellant filed an abatement application with the Commissioner, requesting an abatement in the amount of $350,918 for tax year 2003.  By letter dated January 13, 2006, the appellant withdrew its consent for the Commissioner to act upon its January 2005 abatement application more than six months after the filing thereof, and the application was therefore deemed denied.  The appellant filed its appeal with the Board on January 18, 2006.  
	The appellant timely filed its 2004 premium excise return on March 15, 2005, reporting excise before credits in the amount of $876,710 and claiming an EOAC of $877,366.  On July 9, 2006, the Commissioner issued a Notice of Intent to Assess in the amount of $439,011, plus interest.  On August 17, 2006, the Commissioner issued a Notice of Assessment in the amount of $439,011, plus interest.  The assessment was based on the Commissioner's position that the appellant's EOAC credit was subject to the 50% limitation found in G.L. c. 63, § 32C ("§ 32C").  
	The appellant timely filed an abatement application on August 23, 2006. By Notice of Abatement Determination dated September 7, 2006, the Commissioner denied the appellant's abatement request.  The appellant timely filed its appeal with the Board for tax year 2004 on October 6, 2006.
	On the basis of these facts, the Board found and ruled that it had jurisdiction to hear and decide these appeals. 	
	The material facts are not in dispute.  The resolution of these appeals turns on whether, and in what amount, the appellant can claim EOAC credits for the tax years at issue.  Section 38N was enacted to provide a tax incentive for corporations to locate their business in specified "economic opportunity areas" as a means of stimulating the surrounding economy and job market.  It provides a credit against the excise imposed by Chapter 63 for a percentage of the cost of property "used exclusively in a certified project within the economic opportunity area."  Further, in order to qualify for the credit under § 38N, property must also qualify under G.L. c. 63, § 31A ("§ 31A"), which requires that property be "depreciable under section 167 ("§ 167") of the Internal Revenue Code ("I.R.C." or "Code")."  
	In 2000, the appellant began plans to build a new United States headquarters building ("building") in South Boston.  In 2001, the appellant entered into a lease agreement with the Massachusetts Port Authority, which owned the land on which the appellant intended to construct the building.  The lease was for a period of 95 years.  
	Between 2001 and 2003, the appellant took the appropriate steps to qualify the building as a certified project in an economic opportunity area so that expenditures associated with the project could be claimed as an EOAC.  On June 26, 2003, the Economic Assistance Coordinating Council ("EACC") approved Manulife's building as a certified project.  The appellant incurred costs related to the project in 2001, 2002, 2003 and 2004.  The total expenditures related to the project were $141,880,885 before the application of a rental adjustment.  After adjustment, the total expenditures related to the project were $140,084,247.   
	The building was under construction through    December 31, 2003 and was first occupied by the appellant in 2004, when the appellant was issued a Certificate of Use and Occupancy by the Massachusetts Department of Public Safety.  The appellant did not take depreciation deductions on the building for federal income tax purposes until 2004, the year in which the building was "placed in service," as required by the regulations enacted under § 167.  Both parties agreed that for federal tax purposes, the appellant could not take depreciation deductions for the building until 2004.  In contrast, there is no explicit "placed in service" requirement in § 38N.  Property is eligible for the EOAC if it is "used exclusively in a certified project" and "depreciable under [§ 167]."  Thus, the outcome of these appeals turns in part on the meaning of the term "depreciable," which is not defined within § 38N or § 167. 
 It was the appellant's position that, for the purposes of the EOAC, the building was "depreciable" for each of the tax years at issue because "depreciable" means capable of being depreciated.   The Commissioner argued, on the other hand, that "depreciable" means property which is currently eligible for depreciation under § 167, or in other words, property which has been placed in service.  
As will be further explained in the Opinion below, based on its usage in regulations and elsewhere, the Board agreed with the appellant and found that the term "depreciable" means property capable of being depreciated.  Nevertheless, the Board found that the appellant was not entitled to take the EOAC until 2004.  Section 31A also requires that the property upon which the EOAC is based must be "used exclusively in a certified project."  As will also be further explained in the Opinion below, the Board found that the appellant did not use the building until 2004, and therefore the appellant was not eligible for the EOAC until 2004.  
With respect to the amount of the credit available in 2004, the Board found that the 50% limitation imposed under sections 38N(b) and 32C applies only to excise imposed under §§ 32 and 39 of chapter 63.  The appellant pays excise under § 23 of chapter 63.  Accordingly, the 50% credit limitation did not apply and the appellant was entitled to take 100% of the available credit beginning in 2004.
Accordingly, based on these findings of fact and as discussed further in the Opinion below, the Board issued decisions for the appellee in Docket Nos. C276919, C276920, and C282740 and a decision for the appellant in Docket No. C287495.  
OPINION
The Building was "Depreciable" for the Purposes of 
   § 38N.  

Section § 38N provides that corporations
may take a credit against the excise imposed by this chapter in an amount equal to five percent of the cost of any property that qualifies for the credit allowed by section thirty-one A if such property is used exclusively in a certified project within the economic opportunity area as defined in said section three A of said chapter twenty-three A.

Property "qualifies for the credit" under § 31A if it is: 
tangible personal property and other tangible property including buildings and structural components of buildings acquired for purchase, . . . used by the corporation in the commonwealth; situated in the commonwealth on the last day of the taxable year; and which (1) is depreciable under section one hundred and sixty-seven of said Code and has a useful life of four years or more, or (2) is considered recovery property under section one hundred and sixty-eight of said Code.

The parties did not dispute that the appellant's building in South Boston was a certified project located within an economic opportunity area for the purposes of    § 38N.  The primary issue before the Board is when the appellant's certified project became qualifying property within the meaning of § 31A.    The regulations under § 167 require that depreciable property must be "placed in service" before a depreciation deduction may be claimed.  "The period for depreciation of an asset shall begin when the asset is placed in service[.]"  Treas. Reg. 1.167(a)-10.  In light of this requirement, the Commissioner argued that because property must be placed in service before a depreciation deduction may be taken under § 167, it must also be placed in service to be "depreciable" property for the purposes of §§ 31A and 38N.   The Board disagreed.  
Qualifying property is, among other things, "depreciable under [§ 167]."  G.L. c. 63, § 31A.  The term "depreciable" is not defined within § 31A or within § 167, so the Board looked to other sources to ascertain its meaning.  Words that are not defined in a statute should be given their usual and accepted meanings, provided that those meanings are consistent with the statutory    purpose.  Seideman v. City of Newton, 452 Mass. 472,     478 (2008)(citations omitted). "We derive the words 'usual and accepted meanings from sources presumably known to the statute's enactors, such as their use in other legal contexts and dictionary definitions'." Id.  Here, the relevant "legal context" is § 167.  
Though the term "depreciable property," is not defined within § 167, its use within the corresponding regulations provides insight into its meaning.  Treas. Reg. 1.167(a)11(c)(2)(e) states: "The rules of paragraph (c)(2)(iv)(c) of this section do not apply to depreciable property placed in service after November 14, 1979, and the rules in paragraph (c)(2)(iv)(d) do not apply to depreciable property placed in service after February 21, 1981."  Further, Treas. Reg. 1.168(d)-1 provides that, "[t]he half-year convention applies to depreciable  property . . . placed in service during a taxable year, unless the mid-quarter convention applies to the property."  The regulation provides further that "if the depreciable property is placed in service during a taxable year that consists of three months or less, the mid-quarter convention applies to the property." Treas. Reg. 1.167(a)11(c)(2)(e).  As used within these regulations, the term "depreciable" means the type of property which may be depreciated.  Moreover, as used within these regulations, the terms "depreciable" and "placed in service" are independent concepts.  While the "placed in service" requirement is a pre-requisite to claiming a depreciation deduction, it is a requirement that goes primarily to timing.  Being "placed in service" is something that happens to "depreciable property," not something that is part and parcel of it.  
The Commissioner has recognized this distinction in another context.  In Directive 02-11, which addresses the treatment of construction work in progress ("CWIP"), the Commissioner stated: "Effective prospectively from the date of this directive, however, real or tangible personal property of a type that is not depreciable under § 167, or, if depreciable under § 167, not placed in service within the meaning of Treas. Reg. 1.167(a)-1-(b), is presumed to be used directly or exclusively for the production of business income."  (emphasis added).  Contrary to the position taken by the Commissioner in these appeals, the Commissioner's previous written pronouncement reflects the fact that "depreciable under § 167" does not necessarily mean property which has been placed in service.  
In addition, if the term "depreciable" encompassed the "placed in service" requirement, as the Commissioner argued, then the language in the above-referenced regulations under § 167 would be redundant, as both terms are used consecutively or nearly consecutively.  Such an interpretation is contrary to the canons of statutory construction.  "'[W]herever possible, we give meaning to each word in the legislation [at issue]; no word in a statute should be considered superfluous.'" RHI Holdings, Inc. v. Commissioner of Revenue, 51 Mass. App. Ct. 681,  685 (2001), (quoting International Org. of Masters, Mates & Pilots v. Woods Hole, Martha's Vineyard & Nantucket S.S. Authy, 392 Mass. 811, 813 (1984)); see also Chatham Corp. v. State Tax Commn., 362 Mass. 216, 219 (1972) ("every word in a legislative enactment, including a tax statute, is to be given force and effect.").  The Board therefore rejected the Commissioner's argument.  
Moreover, the use of the term "depreciable property" elsewhere in the Code indicates that it refers to property which is capable of being depreciated, rather than that which is currently being depreciated.  For example, § 179 provides an election to expense, rather than depreciate, certain "depreciable property."  Thus, § 179 recognizes that "depreciable property" is not necessarily property which has been placed in service and is currently being depreciated, as it may be expensed rather than depreciated.  Similarly, § 453(f)(7) of the Code defines "depreciable property" as "property of a character which (in the hands of the transferee) is subject to the allowance for depreciation provided in section 167."  Accordingly, property may be depreciable, even if the transferor never depreciated it. See also Bill DeLuca Enterprises, Inc. vs. Commissioner of Revenue, 431 Mass. 314, 321 (2000) ("The I.R.C. sections providing for the taxation of gains realized on the disposition of depreciable property do not distinguish between property for which a depreciation deduction was taken and property for which no deduction was taken.").  
While "depreciable" is not explicitly defined in section 167, its usage in the regulations promulgated under that section, as well as in the Code in general and elsewhere, is consistent with the plain meaning indicated by its suffix:  capable of being depreciated.  There is nothing in the Code or regulations thereunder to suggest that property may be deemed "depreciable" only if it has been placed in service and is currently being depreciated.  On the contrary, the Board found and ruled that the "placed in service" requirement is a separate and explicit prerequisite to a depreciation deduction.  Accordingly, based on the usage of the term "depreciable," in the Code and the regulations thereunder, the Board found and ruled that, for the purposes of § 31A, "depreciable" property is property of a type which is capable of being depreciated.  
The Building was not Used in a Certified Project Until 2004

In addition to the "depreciable [under § 167]" requirement, § 38N also requires that qualifying property be "used exclusively in a certified project." Although there was no dispute that the building was first "placed in service" in 2004, when Manulife occupied the building, Manulife argued that it began "using" the building at the time it commenced construction in 2001.  The Board disagreed.
"Used" is not defined within § 38N.  "Words and phrases shall be construed according to the common and approved usage of the language; but technical words and phrases and such others as may have acquired a peculiar and appropriate meaning in law shall be construed and understood according to such meaning."  G.L. c. 4, § 6, Third.  The Board has, in the past, rejected the ordinary meaning of the term "used" as too general for application in tax cases, and instead considered it a technical, legal term.  New England Power Company v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports 1991-1, 22, aff'd, 411 Mass. 418 (1991) (considering whether, for the purpose of calculating the property factor of the taxpayer's apportionment formula, the taxpayer, a power company, was using power plants while those plants were under construction).  Viewing the term "used" as a technical tax term, the Board reached the conclusion that Manulife was not using the building while it was under construction.
Tax law has long recognized that a building's ultimate owner is not "using" the building materials or the building itself until the completion of the building's construction. For the purposes of the use tax imposed under G.L. c. 64I, § 2, contractors - rather than the ultimate owners of the real property - are regarded as the consumers of items of tangible personal property which are being incorporated into real property during the course of construction:  

If a construction contractor performs services that include the incorporation of items of tangible personal property into real property, then the contractor is responsible for payment of sales or use tax as a consumer of the materials or supplies that will be used in fulfilling its construction contract. 

PPC Constructors, Inc. v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports, 2001-310, 320   (citing Lawrence-Lynch Corp. v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports 1997-853, 902) ("For sales and use tax purposes, 'contractors are deemed consumers of building materials used in the construction of buildings and other facilities.'") (other citations omitted); see also The Anthony Galluzzo Corp. v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports 1997-271, 279.  The Board found no reason to depart from this well-established concept of use in the instant appeals. 
Further, statutory language should be interpreted so as to further, not stifle, the General Court's intent in enacting it.  See CFM Buckley/North, LLC v. Bd. of Assessors of Greenfield, 453 Mass. 404, 409 (2009).   Section 38N was enacted to promote the revitalization of economically challenged geographic areas by encouraging development and investment in those areas which would bring people, jobs and money to them.  Chapter 23A, § 3D sets forth the criteria for qualification as an economic opportunity area.  For example, a geographic area can qualify if it was the site of a military base which has closed, or has a high unemployment rate, or a high poverty rate.  Additionally and more importantly, a geographic area can qualify if it has a commercial vacancy rate of greater than 20%.  Because high commercial vacancy rates were among the economic afflictions that the legislation was intended to redress, the Board concluded that the mere construction of a vacant building would not further the purpose of the statute.  Construing the terms of the statute in light of the legislative intent behind its enactment, the Board found and ruled that Manulife was not using the vacant building in 2001, 2002 or 2003 for the purposes of the credit.  
Moreover, the appellant's argument that the credit was available as soon as it began incurring expenses related to its building was undercut by the clear and unambiguous language of § 38N.  Section 38N states, in relevant part, "A credit allowed under this section may be taken only after the taxpayer completes a report signed by an authorized representative of the corporation, and files the report with the EACC within 2 years after the initial project certification by the EACC and annually thereafter."  Contrary to the appellant's argument, the clear and unambiguous language of § 38N indicates that the credit may not be taken immediately upon the expenditure of costs relating to a project, but only after the project has been certified and the taxpayer has filed the required reports with the EACC.   
In support of its position, the appellant argued that because, under § 31A, property eligible for the credit includes "structural components of buildings," such buildings need not be completed before the credit can be taken.  The Board did not find this argument to be persuasive.  The credit in § 31A is based largely on the federal investment tax credit.  See Gillette Company v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports 2007-1064, 1079, aff'd, 454 Mass. 72, 79 (2009).  Under the federal provisions, the credit is not allowed for "buildings and structural components thereof."  Treas. Reg. § 1.48-1(e).  In implementing § 31A, the Massachusetts Legislature essentially borrowed the language and concepts of the federal statute, but unlike the federal statute, allowed the credit for "buildings and structural components of buildings."  Because § 31A is based on its federal counterpart, the Board looked to federal case law for guidance on the meaning of its language.  
By and large, the federal case law on this issue involved taxpayers who claimed that certain items were not buildings or structural components of buildings, but were instead tangible personal property eligible for the credit.  See L.L. Bean v. Commissioner of Internal Revenue, 145    F. 3d 53, 57-58  (1998) (holding that reserve storage facility was not tangible personal property); Morrison Incorporated, et al. v. Commissioner of Internal Revenue, 891 F. 2d 857, 861-63 (1990) (holding that cooler, freezer and garbage room floors, sanitary walls and floor tiles were structural components of building); Ponderosa Mouldings, Inc. v. Commissioner of Internal Revenue, 53 T.C. 92, 96 (1969) (holding that overhead sprinkler systems were structural components of building).  A review of the federal case law reveals that the phrase "structural components of buildings" addresses the issue of which property is eligible for the credit, not when it becomes eligible.  In addition, as the appellee argued, the phrase "structural components of buildings" does not necessarily imply that the credit is available for construction in progress, as "structural components of buildings" could also be items of property added to existing buildings or used in the renovation of an existing building.  The Board therefore found and ruled that the phrase "structural components of buildings" found in § 31A identifies a certain type of property and does not involve temporal concepts.  Accordingly, the Board rejected the appellant's argument on this point.  
In further support of its position, the appellant cited two Supreme Judicial Court decisions, Commissioner of Revenue v. Exxon Corporation, 407 Mass. 17 (1990) and Commissioner of Revenue v. New England Power Company,    411 Mass. 418 (1991).  In those cases, the Court held that CWIP and undeveloped land owned by Exxon Corp. and New England Power Company were being "used" for the purposes of determining the property factor for the calculation of the corporate excise under chapter 63.   Both cases involved taxpayers engaged in the energy industry and in both cases, the Court's decisions hinged on the fact that energy companies have specific and unique land use needs.  
 Indeed in Exxon, the Court noted that unused acreage held for eventual oil and gas exploration by Exxon Corporation was "essential to the conduct of its business," much in the same way "a manufacturer must invest in research and development of new products."  Exxon Corporation, 407 Mass. at 22.  Similarly, in New England Power Company, the Court recognized that the nature of electricity production entails unique property demands.  The Court reiterated the Board's findings that electricity cannot be stored on a massive scale and therefore, electric companies must, in order to meet future demand, maintain standby facilities.  New England Power Company, 411 Mass. at 422.  Furthermore, then-applicable Federal Energy Regulatory Commission regulations required energy companies to engage in such future forecasting and related construction projects to provide for future demand.      New England Power Company, Mass. ATB Findings of Fact and Reports 1991-1, 18, aff'd, 411 Mass. 418 (1991).  Certain of New England Power Company's property was dedicated to future power plants, and therefore, was not presently and directly engaged in the production of its income.  Nevertheless, the Court held that the existence of this property "contributed to NEP's over-all revenue production" and was therefore being "used" by the taxpayer.          New England Power Company, 411 Mass. at 423.
The factual basis for the Court's decisions in Exxon and New England Power Company was absent from the present appeals.  Unlike the taxpayers in those cases, Manulife was not engaged in the continuous exploration and development of undeveloped property in the ordinary course of its business.  Moreover, the issue of "use" in those cases was being considered for the purposes of the determination of the property factor, which is one part of a formula aimed at calculating a rough and fair approximation of a taxpayer's taxable income.  In the instant appeals, it is a credit which is at issue.  "'Tax deductions, exemptions and credits are . . . matter[s] of legislative grace and . . . the taxpayer [seeking them] . . . must bring [it]self clearly within the statutory provisions . . . .'"  These standards are particularly stringent in the case of a tax credit which is a "'deduction from the tax . . . itself.'"  Erving Paper Mills Corp. and Subsidiaries v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports     1997-302, 330, aff'd, 49 Mass. App. Ct. 14 (2000), (quoting Whiteside v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports, 1984-92, 97-98, aff'd 394 Mass. 206 (1985)).  In the instant appeals, the Board found and ruled that the appellant failed to show that it "used" the building as contemplated by § 38N at any time prior to 2004.  Accordingly, the Board found and ruled that the appellant was not entitled to the EOAC for tax years prior to 2004.  
The 50% Credit Limitation
General Laws c. 63, § 38N(b), provides that "the credit allowed by this section shall be subject to the provision of section thirty-two C."
	Section 32C, in turn, provides that
Notwithstanding the provisions of sections thirty-one A and thirty-eight E and section eleven of chapter seven hundred and fifty-two of the acts of nineteen hundred and seventy-three, the maximum amount of credits, otherwise allowable in any one taxable year to a corporation, shall not exceed fifty  percent of its excise imposed by section thirty-two or thirty-nine. Any corporation may carry over and apply to its excise for any subsequent taxable year the portion of those credits, as reduced from year to year, which were not allowed by this section.

The Commissioner argued that the EOAC available to the appellant was subject to the 50% statutory limitation found in § 32C.  However, the appellant is subject to the excise imposed under § 23.  The appellant does not pay excise under §§ 32 or 39, the sections which are specified in section 32C.  
When interpreting a statute, "it is our duty to ascertain and implement the intent of the Legislature."  Rosenbloom v. Kokofsky, 373 Mass. 778, 780 (1977).  When the language of a statute is unambiguous, the statutory language is the intent of the legislature.  Absent some ambiguity in the statute, outside aides or authority "are unavailable" for use in the interpretation of the statute.   Id.  The Board found that there was no ambiguity in the language of § 32C.  Based on the clear and unambiguous language of § 32C, the Board found and ruled that the 50% limitation on the credit applies only to excise paid under sections 32 or 39.
The Commissioner argued that the 50% limitation was intended to apply to all credits allowed under chapter 63 and suggested that the appellant was "parsing language" in the statutes to achieve an unintended windfall.  The Board found this argument unavailing.  The flaw in the Commissioner's argument is perhaps best expressed in the words of Justice Holmes: "No one knows better than the intelligent counsel for [the government] the vanity of the suggestion that a tax may be sustained as within the spirit of a statute, if it is not covered by the words."  City National Bank v. Charles Baker Co., 180 Mass. 40,         41 (1901); see also Commissioner of Revenue v. Oliver,   436 Mass. 467, 471 (2002).  The Commissioner's regulation, cited by the Commissioner in support of her position, falls short for much the same reason.  830 CMR 63.38N.1(7)(a), states  
The maximum amount of credits otherwise allowable in any taxable year shall not 
exceed fifty percent of the excise imposed by M.G.L. c. 62 or c. 63.  For purposes of applying the fifty percent limitation, excise liability is determined before the application of any credits.  For corporations subject to tax under M.G.L. c. 63, § 32 or § 39, the corporate excise liability includes amounts due under both the income and non-income measures of the corporate excise.

The Board found and ruled that the Commissioner's regulation imposed limitations on the EOAC greater than those authorized by the express language of the statute and was therefore invalid.   
To the extent that the regulation seeks to impose restrictions... [where the statute] itself neither contains nor permits such restrictions -- the regulation is invalid. [A]n administrative board or officer has no authority to promulgate rules and regulations which are in conflict with the statutes or exceed the authority conferred by the statutes by which such board or office was created.

Electronics Corp. of America v. Commissioner of Revenue, 402 Mass. 672, 676-77 (1988) (quoting Bureau of Old Age Assistance of Natick v. Commissioner of Pub. Welfare,    326 Mass. 121, 124 (1950)).   

Because the Board found and ruled that the Commissioner's regulation was invalid, it gave no weight to that regulation and the Commissioner's arguments relating thereto.  On the basis of all of the evidence, the Board found and ruled that the 50% limitation on the credit applies only to excise paid under §§ 32 or 39.  Accordingly, the Board found and ruled that the appellant was entitled to take the credit against 100% of the excise imposed under § 23 for tax year 2004.  
CONCLUSION
	Based on the foregoing, the Board found and ruled that, for tax years 2002 and 2003, the appellant was not entitled to take the EOAC against the excise assessed under § 23.  Although the building was property of the type depreciable under § 167, it was not "used" by the appellant as required by § 38N until tax year 2004.  Accordingly, the Board issued decisions for the appellee in Docket Nos. C276919, C276920, and C282740.  













In addition, the Board found and ruled that for tax year 2004, the appellant was entitled to take the credit against 100% of the excise imposed under § 23 because the 50% limitation imposed by §§ 38N (b) and 32C did not apply to excise imposed under § 23. Accordingly, the Board issued a decision for the appellant in Docket No. C287495.  Pursuant to the parties' joint Rule 33 computation, the Board ordered an abatement for tax year 2004 in the amount of $439,011.  

						THE APPELLATE TAX BOARD

	By: _________________________________
    	    	 James D. Rose, Commissioner

A true copy,

Attest: ______________________________
  	         Clerk of the Board 

 The parties waived the hearing and submitted these appeals on a Statement of Agreed Facts and accompanying exhibits.  
 Subsequently, the Commissioner issued a Notice of Abatement Determination, dated February 3, 2006, denying the appellant's abatement application for the tax year 2003.
 Additionally, the Board found that the earliest period which the appellant could have qualified for the credit was 2003.  Section 38N requires the property to be "used exclusively in a certified project."  According to the stipulated facts, the appellant's building was approved as a certified project by the EACC on June 26, 2003.  
 It was undisputed that Manulife was not issued a certificate of Use and Occupancy by the Commonwealth until 2004 and that it did not occupy the subject building until then.  Even construing the term "used" according to its "natural and ordinary meaning," Chatham Corp., 362 Mass. at 219, the Board found and ruled that Manulife was not using the building until its completion in 2004.  
 While it is true that the construction of a building requires a major commitment from a taxpayer, the Board did not find that this fact demanded the conclusion that the credit should become available before a building's completion.  A taxpayer could commence and then abandon its construction project, leaving a vacant building in its wake.  Such action would do nothing to further the legislative intent of the statute.  Moreover, the Legislature accounted for this fact by providing a comparatively lengthy, ten-year carry-over provision for unused credits.  Compare, G.L. c. §§ 38Q(f) and 38R(b)(2)(5), which provide five-year carry-overs for environmental credits and historic rehabilitation credits, respectively.

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	ATB 2009-1031