October 4, 1994

You have requested a ruling on behalf of *************** ("Taxpayer"), a Massachusetts limited partnership, concerning the application of the urban redevelopment excise, G.L. c. 121A, § 10. Your question is whether that excise applies to any part of the proceeds received from Taxpayer's sale of the *************** ("Project"), a project which had been previously approved for tax classification under c. 121A.

I. FACTS

In 1975 Taxpayer filed an application for approval of the Project under c. 121A, pursuant to St. 1960, c. 652, § 13, as amended. This application was approved by the Boston Redevelopment Authority ("BRA") in 1978.

On November 22, 1993, the Project was conveyed by Taxpayer to *************** ("Buyer"). This transfer had been previously approved by the BRA pursuant to St. 1960, c. 652, § 13A. [1]

II. DISCUSSION

Chapter 121A was enacted in 1945 to stimulate the investment of private capital in "blighted open, decadent or sub-standard areas." See G.L. c. 121A, § 2. To accomplish this end, c. 121A provides certain incentives, including a tax scheme which is applied to the owner of a c. 121A project in lieu of the general tax provisions set forth in chapters 59-60 and 62-63. See G.L. c. 121A, § 10 (stating the general exemption from Massachusetts tax, with certain specific, limited exceptions).

The excise payable under c. 121A, § 10 is comprised of two components, a property tax component and an income tax component. It is the latter component which is the focus here. The income tax component of the § 10 excise is five percent of the project owner's "gross income ... from all sources." Section 10 states, with respect to the definition of "gross income," that "[f]or the purpose of this section, 'gross income' shall mean payments actually made by persons for the right to reside in or occupy any portion or all of a project ... [excluding certain governmental subsidies]." [2] See G.L. c. 121A, § 15 (providing for additional tax where the gross receipts "from the operation of [a chapter 121A] project" exceed certain totals). In light of the pertinent authority, proceeds received in exchange for a c. 121A project are not taxable under c. 121A, § 10, since these proceeds do not constitute the type of operating income which is taxable under that section.

III. CONCLUSION

Chapter 121A, § 10 does not apply to proceeds received in exchange for the sale of a project which has been approved for classification under c. 121A. Thus, c. 121A, § 10 does not apply to the proceeds received by Taxpayer in exchange for the Project. These proceeds are subject to tax, not under c. 121A, but under the general tax provisions of Massachusetts law (i.e., c. 62 or c. 63, as the case may be).

Very truly yours,

/s/Mitchell Adams

Mitchell Adams
Commissioner of Revenue

MA:HMP:mtf

LR 94-7



[1] Given this approval, Buyer was to have "all of the powers, rights, privileges, benefits and exemptions and ... [to] be subject to all the duties of a corporation organized under chapter one hundred and twenty-one A of the General Laws..." See St. 1960, c. 652, § 13A.

[2] This language was added in 1975. See St. 1975, c. 827, § 7.