Administrative Procedure AP 636: Application and Appeal Process for Massachusetts Brownfields Tax Credit (effective for credit applications received by the Department on or after July 9, 2021)
Table of Contents
(a) Effective Date.
This revised version of AP 636 is effective for all Brownfields Credit applications received by the Department on or after July 9, 2021. The prior version of AP 636 remains in effect for all applications received by the Department prior to July 9, 2021.
(b) Massachusetts Brownfields Tax Credit.
A nonprofit organization or taxpayer subject to G.L. c. 62 or G.L. c. 63 that meets the eligibility requirements of G.L. c. 62, § 6(j) or G.L. c. 63, § 38Q (“Applicant”) may apply for the Massachusetts Brownfields Tax Credit (“MBTC”), which provides a credit of either 25 percent or 50 percent of certain net environmental response and removal costs incurred to remediate contaminated property owned or leased for business purposes and located within an economically distressed area.
636.2. Application and Review Process for Massachusetts Brownfields Tax Credit
(a) Submitting an Application.
The provisions of G.L. c. 62, § 6(j) and G.L. c. 63, § 38Q state that an applicant shall be allowed a MBTC “at the time” that a “permanent solution or remedy operation status is achieved.” To apply to the Department of Revenue (the “Department”) for a MBTC, an applicant must complete “Form BCA – Brownfields Credit Application” (“Form BCA”) and submit the Form BCA and supporting documentation (as discussed further in AP 636.2(b)) to the Department’s Audit Division, 200 Arlington Street, Room 4300, Chelsea, MA 02150, Attention: Credit Unit. The applicant may submit Form BCA once it has completed its remediation work and submitted evidence that it has achieved a Permanent Solution or Remedy Operation Status (“ROS”) to the Massachusetts Department of Environmental Protection. The Form BCA must be submitted, at the latest, on or before December 31st of the fifth year after the year in which the Permanent Solution or Remedy Operation Status is achieved or the applicant will not be eligible for the MBTC.
(b) Required Documentation.
A completed application must include the following documentation, information, and representations:
1. A detailed narrative written by a qualified environmental professional in support of the submitted costs explaining (a) why they should be considered to have been taken for the purpose of achieving a Permanent Solution or ROS, (b) why they were reasonable and (c) why they were a direct and necessary part of achieving a permanent solution or ROS.
2. Documentation showing the Assessed Value of the property;
3. The applicant’s deed or lease agreement for the property;
4. A description of the business purpose for which the property is owned or leased, i.e., the business activity taking place on this site once the Permanent Solution was achieved;
5. A copy of the construction plan for the property or site, including a cross-sectional diagram if available;
6. Daily or weekly field reports or field log books prepared by contractors and/or onsite engineering oversight personnel that describe the activities related to the performance of Response Actions;
7. Soil transportation logs (or their equivalent, such as bills of lading or manifests) if soil was transported as part of the remediation;
8. A detailed statement of the property’s contamination history to the extent known or discoverable by the applicant, including dates of the Release(s), identification of the person(s) who caused the Release(s), and identification of the person(s) who owned, leased or operated the property at the time of the Release(s);
9. A complete list of all Eligible Costs, submitted electronically in a standard database spreadsheet format, that includes with respect to each item the invoice date, the invoice number, the vendor, the amount of the cost and a brief description of the service(s) provided;
10. With respect to any general requirements or general conditions payment item claimed as an Eligible Cost on the application, an itemized breakdown of the costs that are included in such general requirements or general conditions payment item;
11. A representation by the applicant or an officer of the applicant, provided under the pains and penalties of perjury, that all requirements of 830 CMR 63.38Q.1 have been met, including without limitation (a) that the applicant is an Eligible Person; (b) that the property is located in an Economically Distressed Area; (c) that only Eligible Costs are claimed in the application; (d) that all of the claimed costs relate to one of the release tracking numbers for which a Permanent Solution or ROS was achieved; (e) that, to the best of the applicant’s knowledge, all statements contained within the application are accurate; (f) that all reimbursements received or that will be received by the applicant with respect to its Eligible Costs have been reported in the application; (g) an acknowledgement that the applicant has a duty to notify the DOR of any reimbursements it may receive in the future other than those disclosed in the application; and (h) an acknowledgement that if the applicant does receive any such reimbursement not disclosed in the application and the applicant has received a credit that was attributable to costs that were ultimately reimbursed, the applicant has a duty to pay back to the DOR the corresponding (whether 25% or 50%) amount of credit attributable to the amount of the reimbursement; and
12. A site investigation report, pre-characterization report or other similar report of the location of Contaminated Media as determined prior to or during remedial activities.
(c) Review Process.
Once the Department receives the applicant’s completed Form BCA and supporting documentation, the Credit Unit will conduct a review to verify eligibility. The examiner assigned to review the application will contact the applicant within 30 days of the Department’s receipt of the completed Form BCA to notify the applicant of who has been assigned to the case and to outline the application review process.
The examiner will again contact the applicant when the audit review of the application begins. As the review of the application proceeds, the examiner will request any additional documentation or information from the applicant that the examiner deems necessary to process the application. The Credit Unit will provide the applicant with 14 days to respond to these requests for information. If additional time is necessary, the applicant may request up to 30 days to respond. If the applicant’s initial answer to the request for information is not fully responsive, or if additional clarification is needed, the examiner may issue additional requests for documentation or information from the applicant. The examiner will also give the applicant another opportunity to submit additional documentation or information when the preliminary determination is communicated to the applicant (as discussed further in AP 636.4). Throughout the audit review stage process, the examiner will contact the applicant at least once every 60 days to provide a status update.
An applicant need not be represented in any proceeding before the Department regarding its Form BCA. An applicant that wishes to be represented before the Department regarding its Form BCA must submit a completed “Form M-2848 – Power of Attorney and Declaration of Representative,” designating the individual(s) who may act on the Applicant’s behalf.
636.3. Expedited Review Process for Massachusetts Brownfields Tax Credit
If an application requests a MBTC of $250,000 or less, the Credit Unit will review the application under its Expedited Review Process. To be considered complete, applications of $250,000 or less must still include all the documentation, information, and representations listed in AP 636.2(b) above. Under the Expedited Review Process, an examiner will contact the applicant within 7 days of receipt of the application to request any additional documentation or information that the examiner needs to process the application. The Credit Unit will provide the applicant with 7 days to respond to these requests for information. If additional time is necessary, the applicant may request up to 14 days to respond. If the applicant’s initial answer to the request for information is not fully responsive, or if additional clarification is needed, the examiner may issue additional requests for documentation or information from the applicant. The examiner will also give the applicant another opportunity to submit additional documentation or information when the preliminary determination is communicated to the applicant (as discussed further in AP 636.4). Throughout the expedited audit review stage process, the examiner will contact the applicant at least once every 30 days to provide a status update.
At any time during its review of the application, if the Credit Unit determines that (i) the application presents an issue that is factually, legally, or technically complex and requires more extensive review, (ii) the applicant has not cooperated with the Credit Unit’s review of the application, or (iii) the application is otherwise not suitable for resolution through the Expedited Review Process, the Credit Unit may review the application under its normal procedures. In such cases, the Credit Unit will contact the applicant to explain that the application will be reviewed under the Unit’s normal procedures.
636.4. Approval, Partial Denial, or Denial of an Application for Massachusetts Brownfields Tax Credit
When the examiner completes the audit review of the application, and the review has been approved by the examiner’s supervisor, but before final approval by the Credit Unit, the examiner will contact the applicant. The examiner will inform the applicant that a preliminary determination has been reached that the application should be approved, partially denied, or denied in full.
If the examiner’s preliminary determination is that the Form BCA should be partially denied or denied in full, the examiner will provide the applicant with the specific expenses that have been denied, along with the reasons why these expenses were not eligible for the MBTC. The examiner will then provide the applicant with 10 days to submit any additional documentation or information that has not previously been provided to the Department that the applicant believes would be relevant to the Credit Unit’s determination. The examiner and supervisor will review any additional information provided by the applicant, make a final recommendation based upon all available information and submit that recommendation for final approval by the Credit Unit. If this final review takes more than 30 days, the examiner will contact the applicant at least once every 30 days to provide a status update. Upon final approval, the Credit Unit will issue a determination letter to the applicant informing it that the application has been approved, partially denied, or approved in full. If the application is denied or partially denied, the determination letter will include an explanation of the reasons why the denied costs were not eligible for the MBTC. If a denial, in part or in full, is based upon a determination as to the eligibility of the applicant, the determination letter will make clear that a full review of the expenses was not conducted, and that if the applicant were subsequently determined to be eligible, the expenses would have to be reviewed at that time before a MBTC would be approved.
If the Credit Unit determines that the Form BCA should be approved, it will send the applicant a notice of credit approval and a “Form BCC – Brownfields Credit Certificate” (“Form BCC”), indicating a certificate number and the amount of MBTC approved. (If the Credit Unit determines that the Form BCA should be denied in part, the Credit Unit will send the Applicant a Form BCC with the amount of approved MBTC.) Upon receipt of the Form BCC, the Applicant may use the approved MBTC against its own tax liability and/or transfer, sell, or assign the approved MBTC to a taxpayer with a liability under G.L. c. 62 or G.L. c. 63, or to a nonprofit organization. If the Applicant wishes to transfer the approved MBTC, in whole or in part, it must file a “Form BCTA – Brownfields Credit Transfer Application” with the Department.
636.5. Appeal Process for Partial Denial or Denial of an Application for Massachusetts Brownfields Tax Credit by the Credit Unit
(a) Filing an appeal.
Upon receipt of a denial or partial denial, the applicant may submit a written request for a conference to the Department’s Office of Appeals, P.O. Box 9551, Boston, MA 02114-9551. Such request must be filed with and received by the Office of Appeals within 30 days of the date set forth in the denial or partial denial. A completed appeal must ultimately include all the information and documentation listed in AP 636.5(b); however, the applicant will have an additional 60 days after the appeal is filed to supplement its initial appeal.
(b) Required documentation.
A completed appeal must include the following information and documentation:
1. Identifying information for the appeal, including:
a. Applicant name;
b. FEIN or SS#;
c. Mailing address;
d. Contact person;
e. Address of property;
f. All release tracking numbers associated with the application; and
g. Date the Permanent Solution or ROS was achieved for each such release
2. A copy of the denial letter or partial approval letter from which the applicant is appealing.
3. A spreadsheet of the disputed expenses that shows, with respect to each expense, the following columns:
a. The vendor;
b. Services provided or category of expense;
c. Invoice number;
d. Invoice date;
e. Invoice total;
f. Any reimbursement received for this expense;
g. Amount claimed as Net Response & Removal Costs;
h. Amount denied by Credit Unit;
i. Amount denied that the applicant is contesting; and
j. Justification for why this expense should be restored.
4. A Statement of Reasons that identifies the facts, documents, and law that supports the applicant’s position that:
a. Each contested expense was incurred for the purposes of achieving a
Permanent Solution or ROS;
b. Each such contested expense was a direct and necessary part of a response
c. Each such contested expense was reasonable.
5. Any documentation necessary to support the restoration of the denied expenses.
(c) Initial Scheduling Letter; Appeals Timeline.
Within 30 days of the Office of Appeals’ receipt of the appeal, the appeals officer assigned to the case will issue an initial scheduling letter to the applicant and the Credit Unit to notify them of who has been assigned to the case, to schedule an opening conference, and to outline the appeals timeline, which consists of the following eight stages, each with its own timeframe:
1. Appeal is Initiated. This occurs when the Office of Appeals receives the appeal.
2. Initial Scheduling Letter Sent. This is to occur within 30 days of Stage 1.
3. Complete Appeal Filed by Applicant. A complete appeal includes all of the items listed in AP 636.5(b). This is to occur within 60 days of Stage 1.
4. Opening Conference Held. This is to occur within 90 days of Stage 1.
5. Information and Document Requests issued and answered. These are to be issued by the Appeals Officer within 60 days of the Opening Conference (Stage 4) and are to be answered by the Applicant within 30 days after they were issued.
6. Formal Scheduling Letter sent (if no settlement has been reached). This is to occur within 60 days after all IDR’s have been answered.
7. Formal Hearing Held. This is to occur no later than 60 days after the Formal Scheduling Letter has been issued.
8. Formal Letter of Determination Issued. This is to occur 60 days after the Formal hearing. If the appeal is complicated, this stage may be extended by an additional 90 days.
At any point within the appeals timeline, the applicant may ask for more time before moving to the next stage, but this stops the clock in terms of determining the age of the case. Parties may enter a settlement at any stage of the Appeals Process. In exceptional circumstances, the Office of Appeals may extend the timeline.
(d) Opening Conference.
Within 90 days of the initial appeal, the appeals officer will conduct the opening conference, which will include the applicant and a representative from the Credit Unit. The opening conference will be an informal information-gathering session for the appeals officer and will provide the parties with a general overview of the appeals process. The appeals officer, with the help of the parties, will identify issues in dispute, review documentation, and determine whether the matter is appropriate for expedited resolution.
(e) Information and Document Requests.
Within 60 days of the opening conference, the appeals officer will issue a written request for documentation and information to the applicant, with a response due within 30 days. If necessary, the appeals officer may grant the applicant additional time to produce the requested information. The appeals officer may ask the Credit Unit to review any newly submitted information. The applicant may also submit a settlement offer at this time.
(f) Formal Scheduling Letter.
Once the appeals officer’s requests have been answered, the appeals officer and applicant may attempt to resolve the issues in dispute without proceeding to a formal hearing. If the parties are unable to resolve the appeal after 60 days, the appeals officer will issue a letter to the applicant scheduling a formal hearing and listing the issues and expenses in dispute.
(g) Formal Hearing.
The appeals officer will conduct the hearing within 60 days of the issuance of the formal scheduling letter. At the hearing, the applicant may submit technical reports and may bring attendees to provide additional information to the appeals officer. Representatives from the Credit Unit or technical experts from the Department may also attend the hearing. If necessary, the appeals officer may hold the hearing open to allow the applicant to submit additional information or documentation.
(h) Letter of Determination.
Within 60 days of the formal hearing, the appeals officer will issue a letter of determination based on the relevant law and on the facts, documentation, and explanations provided before, during, or after the hearing. The letter of determination will explain the basis for any issues that are denied. If the appeals officer finds that the case is complex and requires more extensive review, the letter of determination may be issued up to 150 days after the formal hearing.
636.6. Appeal Remedies Upon Final Determination by the Department on an Application for Massachusetts Brownfields Tax Credit
If an Applicant disagrees, in whole or in part, with the Department’s final determination with respect to the Applicant’s application for MBTC as submitted on its Form BCA, it may have appeal remedies outside the Department. An appeal from the denial or partial denial of an application by the Department is not specifically enumerated within the statutory jurisdiction granted to the Appellate Tax Board under the provisions of G.L. c. 58A, § 6. The Department recommends that an Applicant consult with an attorney to determine the proper venue and procedure for appeal of a denial of an application for Brownfields Tax Credit as submitted on a Form BCA, keeping in mind statutory limitations on time periods for filing any such appeals.