August 23, 2010

You have requested a ruling on behalf of ********************************************* (hereinafter, "the Taxpayer"), a foreign limited liability company that operates a material recovery facility in ***************, MA. In particular, you inquire as to the Taxpayer's eligibility for the Brownfields Tax Credit and the applicability of the Credit to solid waste management facilities generally.

I. FACTS

The following is a statement of facts you have provided and upon which this letter ruling is premised. The Taxpayer's principal business is the operation of a 44,000 square foot material recovery facility which sorts and diverts recyclable materials from mixed construction debris waste streams. Most of the property on which the facility is located had been operated as a landfill, i.e., for the purpose of disposing of municipal solid waste, until 1976. Following the cessation of disposal activity no environmental site assessments were performed. A final soil-based capping system was partially installed on the unlined landfill. A portion of the site was leased to the Taxpayer by ******************************************* in 1996. Within the limits of the landfill a five acre parcel has been developed as a solid waste handling facility and permitted to receive 800 tons of construction debris material per day.

Subsequently, a permit application was filed on behalf of the Taxpayer for the purpose of installing a post-closure capping system on the landfill and to develop the site for commercial purposes. Groundwater testing indicated several instances of excessive reportable concentrations for groundwater.

On February 9, 2004, the Department of Environmental Protection (DEP) issued a provisional Corrective Action Design permit which required that the solid waste contained within a portion of the five acre parcel was to be excavated and relocated to an adjacent seven acre area of the landfill designated the "Waste Consolidation Area." On June 2, 2005 DEP inspectors observed violations of solid waste regulations and requirements contained in the provisional permit. On or about May 25, 2006 an administrative consent order with penalties was entered into by representatives of the Taxpayer and DEP. The order provided for a schedule of compliance which required, in part, environmental assessment activities and submittal and implementation of corrective action plans so as to achieve compliance with the applicable regulations and the provisional permit.

Subsequent to the execution of the administrative consent order, DEP conditionally issued an initial site assessment/comprehensive site assessment scope of work. This specified that, in order to obtain approval, a complete delineation of the lateral limits of the waste around the landfill perimeter was required along with implementation of an environmental monitoring network consisting of ground water monitoring wells, surface water monitoring stations and soil gas probes. On or about September 26, 2006 the Taxpayer submitted a Phase 1 Corrective Action Plan to the provisional permit to DEP as required by the administrative consent order. The plan contained arrangements for the overall remediation of the landfill including capping of the Waste Consolidation Area, creation of a storm water control system, restoration of affected wetlands, and establishment of a comprehensive monitoring system. DEP thereafter approved the Taxpayer's submittal. On December 29, 2006 and March 28, 2007 respectively, DEP approved Phase II and Phase III Corrective Action Plans which had been required by the administrative consent order.

On October 26, 2007 the Taxpayer submitted a final Comprehensive Site Assessment Report. DEP issued preliminary findings citing two principal areas of deficiency with respect to this submission. The Taxpayer submitted a supplemental report on March 6, 2009 addressing the noted deficiencies. On or about October 6, 2009, DEP approved the final Comprehensive Site Assessment Report.

By application dated October 29, 2009, the Taxpayer applied for the Brownfields tax credit citing $2,370,000 in net response and removal costs incurred at the landfill site. By letter dated June 23, 2010, the application was denied. The Taxpayer was informed that "[i]n order to be eligible, a project must achieve and maintain 'a permanent solution or remedy operation status in compliance with chapter 21E and the regulations adopted under that chapter.' G.L. c. 62, § 6(j); G.L. c. 63, § 38Q. In this case that has not occurred."

II. RULING REQUESTED

Assuming that the other criteria have been satisfied, does completion of a response action pursuant to the solid waste management regulations at 310 CMR 19.000 et seq. render the Taxpayer eligible for the Brownfields tax credit provided in G.L. c. 62, § 6(j) or G.L. c. 63, § 38Q?

III. RULING

No. The Brownfields credit is only available to an eligible person who commences and diligently pursues an environmental response action on or before August 5, 2013 [1] and achieves and maintains a permanent solution or remedy operation status in compliance with chapter 21E and the regulations adopted under that chapter.

IV. DISCUSSION

The Taxpayer has not complied with the provisions of G.L. c. 63, § 38Q because it has not achieved and maintained a permanent solution or remedy operation status in compliance with chapter 21E and the regulations adopted under chapter 21E, ( i.e., 310 CMR 40.000, the Massachusetts contingency plan). Pursuant to G.L. c. 63, § 38Q [2]:

A business corporation which commences and diligently pursues an environmental response action on or before August 5, 2013 and which achieves and maintains a permanent solution or remedy operation status in compliance with chapter 21E and the regulations adopted under that chapter which includes an activity and use limitation shall, at the time the permanent solution or remedy operation status is achieved, be allowed a base credit of 25 per cent of the net response and removal costs incurred between August 1, 1998 and January 1, 2012 for any property it owns or leases for business purposes and which is located within an economically distressed area as defined in section 2 of chapter 21E, if these costs are not less than 15 per cent of the assessed value of the property before remediation, and if the site was reported to the department of environmental protection. A credit of 50 per cent of these costs shall be allowed for a corporation which achieves and maintains a permanent solution or remedy operation status in compliance with chapter 21E and the Massachusetts contingency plan provided in 310 CMR 40.00 which does not include an activity and use limitation. Only a business corporation that is an eligible person as defined by section 2 of chapter 21E, and not subject to any enforcement action brought under chapter 21E, shall be allowed a credit.

G.L. c. 63, § 38Q(a) (Emphasis supplied).

The Taxpayer cites G.L. c. 21E, § 3 for the proposition that DEP may promulgate regulations that waive or limit the applicability of chapter 21E with respect to any matter that the DEP determines to be adequately regulated by another program or government agency. This provision does not override or obviate the language of G.L. c. 63, § 38Q and G.L. c. 62, § 6(j) specifically requiring achievement of a permanent solution or remedy operation status in compliance with the regulations adopted pursuant to G.L. c. 21E, however. Solid waste facilities including landfills are governed by DEP's Solid Waste Management Regulations, 310 CMR 19.000. [3] The Solid Waste Management Regulations were adopted under G.L. c. 21A and not G.L. c. 21E. The Taxpayer has not provided any evidence or information from DEP indicating that projects that have been completed under G.L. c. 21A are deemed to have achieved and maintained a permanent solution or remedy operation status in accordance with G.L. c. 21E.

The Taxpayer notes that response actions performed by persons other than DEP at solid waste facilities "shall be deemed adequately regulated for purposes of 310 CMR 40.0000, provided the person undertaking such response action does so in compliance with the terms and conditions of any such permit, order or approval." 310 CMR 40.0114. (Emphasis supplied). Again, however, being deemed adequately regulated for purposes of the Massachusetts contingency plan cannot be equated with achieving and maintaining a permanent solution or remedy operation status in compliance with chapter 21E and the Massachusetts contingency plan for purposes of the Brownfields tax credit. [4] The Taxpayer's assertion to the contrary, i.e., that "[t]he comparable Chapter 21E requirements would deem the actions to have achieved a 'permanent solution' requiring no Activity and Use Limitations on the Site" is conclusory and unsupported in its submission. [5] Moreover, entitlement to a tax credit, as with any deduction or exemption, must be strictly construed. As stated by the Supreme Judicial Court:

"We have frequently recognized that an exemption from taxation 'is a matter of special favor or grace,' and that statutes granting exemptions from taxation are therefore to be strictly construed." South Boston Sav. Bank v. Commissioner of Revenue , 418 Mass. 695, 698 (1994), citing State Tax Comm'n v. Blinder , 336 Mass. 698, 703 (1958) ("an exemption [is] ... to be recognized only where the property falls clearly and unmistakably within the express words of a legislative command"). "The burden is on the taxpayer to demonstrate entitlement to an exemption claimed." South Boston Sav. Bank v. Commissioner of Revenue, supra .

Macy's East, Inc. v. Commissioner of Revenue , 441 Mass. 797, 804 (2004).

V. CONCLUSION

Because the taxpayer has not achieved and maintained a permanent solution or remedy operation status in compliance with Chapter 21E and the regulations adopted under that chapter, it is not entitled the Brownfields tax credit. The regulatory provision which deems solid waste facilities "adequately regulated" for purposes of the Massachusetts contingency plan does not equate with or rise to the level of compliance with that plan for purposes of the Brownfields tax credit.

Very truly yours,

/s/Navjeet K. Bal

Navjeet K. Bal
Commissioner of Revenue

NKB:MTF:ds

LR 10-5



[1] This deadline was extended from August 5, 2011 by the provisions of St. 2010, c. 240, § 127

[2] G.L. c. 62, § 6(j) contains virtually identical provisions for personal income tax filers.

[3] 310 CMR 19.000 shall apply to all solid waste management activities and facilities including, without limitation, landfills, dumping grounds, transfer stations, solid waste combustion facilities, solid waste processing and handling facilities, recycling facilities, refuse composting facilities and other works or sites for the storage, transfer, treatment, processing or disposal of solid waste and the beneficial use of solid waste. 310 CMR 19.003

[4] We note in this regard that 310 CMR 40.0007(8) states that "[n]o provision of 310 CMR 40.0000 shall be construed to relieve any person of the necessity of complying with all other applicable federal, state or local laws."

[5] See Licensed Site Professional Opinion Report prepared by *************************** dated October 8, 2009 at p. 6.