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Working Draft
Regulation

Regulation 830 CMR 63.38Q.1: Massachusetts Brownfields Tax Credit (WORKING DRAFT)

Date: 03/09/2020
Organization: Massachusetts Department of Revenue
Regulatory Authority: Massachusetts General Laws
Official Version: Published by the Massachusetts Register

830 CMR:  DEPARTMENT OF REVENUE
830 CMR 63.00:  TAXATION OF CORPORATIONS
830 CMR 63.00 is amended by adding the following section:
830 CMR 63.38Q.1:  Massachusetts Brownfields Tax Credit

Table of Contents

(1) Statement of Purpose, Outline of Topics, Effective Date

(a)  Statement of Purpose.  830 CMR 63.38Q.1 explains the provisions of the brownfields tax credit for environmental response actions, as set out in M.G.L. c. 62, § 6(j) and M.G.L c. 63, § 38Q. Under these statutes, an Eligible Person that remediates certain contaminated properties may be eligible for a credit against their Massachusetts personal income tax or corporate excise liability equal to a percentage of the Net Response and Removal Costs incurred for such remediation in compliance with M.G.L. c. 21E.  

830 CMR 63.38Q.1 explains who qualifies as an Eligible Person for purposes of the credit and what costs are Eligible Costs for purposes of the credit, as well as the limitations on how much credit may be claimed in any tax year.

Additionally, 830 CMR 63.38Q.1 sets out rules pertaining to the carryforward of unused credits, the procedure to transfer, sell or assign unused credits, the circumstances under which a credit will be recaptured, and the appeals process in instances where the credit is fully or partially denied.

(b)  Outline of Topics.  830 CMR 63.38Q.1 is organized as follows:

(1)  Statement of Purpose; Outline of Topics, Effective Date
(2)  Definitions
(3)  General Rule
(4)  Net Response and Removal Costs; 15% of Assessed Value Requirement
(5)  Eligible Costs
(6)  Application Process
(7)  Limitations, Claiming and Carry Forward of Credit
(8)  Transfer of the Credit
(9)  Allocation of Credit Among Partners, Members or Owners
(10) Ordering, Non-refundability of Credit
(11) Recapture; Payments in Error
(12) Appeal Process for Denial or Partial Denial of Applications for Credit

(c)  Effective Date. 830 CMR 63.38Q.1 applies to applications received on or after [the date the draft is circulated for public and practitioner comment].

(2) Definitions

For purposes of 830 CMR 63.38Q.1, the following terms shall have the following meanings.

Activity and Use Limitation (AUL), as defined in the MCP.

Assessed Value, as defined in 830 CMR 63.38Q.1(4)(c).

Contaminated Groundwater, as defined in the MCP.

Contaminated Media, as defined in the MCP.

Contaminated Sediments, as defined in the MCP.

Contaminated Soil, as defined in the MCP.

Contaminated Surface Water, as defined in the MCP.

Commissioner, the Commissioner of Revenue, or the Commissioner’s duly authorized representative.

Department, the Department of Revenue.

Department of Environmental Protection (DEP), the state agency within the Executive Office of Energy and Environmental Affairs tasked with enforcement of the Massachusetts Oil and Hazardous Material Release Prevention and Response Act, M.G.L. c. 21E.

Economically Distressed Area (EDA), as defined in pertinent part in M.G.L. c. 21E, § 2.

Eligible Costs, as identified in 830 CMR 63.38Q.1(5)(a).

Eligible Person, as defined in M.G.L. c. 21E, § 2, an owner or operator of a site or a portion thereof from or at which there is or has been a Release of OHM who would be liable under M.G.L. c. 21E solely pursuant to M.G.L. c. 21E, § 5(a)(1), and who did not cause or contribute to the Release of OHM from or at the site and did not own or operate the site at the time of the Release.

Immediate Response Action (IRA), as defined in the MCP.

Licensed Site Professional (LSP), as defined in the MCP.

Massachusetts Contingency Plan (MCP), the Department of Environmental Protection’s Regulation 310 CMR 40.0000 pursuant to which a credit applicant must have submitted a Permanent Solution Statement or Remedy Operation Status submittal to DEP prior to filing an application for the credit with the Department.

Net Response and Removal Costs, as identified in 830 CMR 63.38Q.1(4)(b).

Oil and/or Hazardous Material (OHM), as defined in the MCP.

Permanent Solution, as defined in the MCP.  The term “Permanent Solution” includes both a “Permanent Solution With Conditions” and a “Permanent Solution Without Conditions.”

Permanent Solution Statement, as defined in the MCP.

Release, as defined in M.G.L. c. 21E, § 2 and the MCP.

Release Abatement Measure (RAM), as defined at 310 CMR 40.0893 in the MCP.

Remedy Operation Status, as defined in M.G.L. c. 21E, § 2 and the MCP.

Response Action, as defined in M.G.L. c. 21E, § 2 and the MCP.

(3) General Rule

A credit is allowed to Eligible Persons under M.G.L. c. 62, § 6(j) and M.G.L c. 63, § 38Q for certain costs incurred for the purposes of remediation of contaminated property located in an Economically Distressed Area. The credit is generally equal to either 25% (if an AUL is in place) or 50% of the applicant’s Net Response and Removal Costs incurred in the remediation of such a property. To be eligible for the credit with respect to a property, an applicant must commence and diligently pursue an environmental Response Action on or before the date listed in M.G.L. c. 62, § 6(j) or M.G.L c. 63, § 38Q, and must achieve and maintain a Permanent Solution or Remedy Operation Status in compliance with M.G.L. c. 21E, § 2 and the MCP.  In addition, the applicant may not be subject to any enforcement action under M.G.L. c. 21E and must be an Eligible Person with an ownership or leasehold interest in the property. The credit may be transferred but is not refundable.

(4) Net Response and Removal Costs; 15% of Assessed Value Requirement

(a)  In general.  An applicant may apply to the Department for a credit equal to either 25% (if an AUL is in place) or 50% of the Net Response and Removal Costs incurred by an applicant with respect to a particular property, in compliance with M.G.L. c. 21E. The applicant will not be entitled to any credit unless the Net Response and Removal Costs are equal to or greater than 15% of the Assessed Value of the property.

(b)  Net Response and Removal Costs.  An applicant’s Net Response and Removal Costs are the applicant’s total Eligible Costs less any reimbursement received or anticipated by the applicant for these costs.  Reimbursement received or anticipated may include, but is not limited to, the amount of any state financial assistance received from the Redevelopment Access to Capital Program established pursuant to section 60 of chapter 23A, or from the Brownfields Redevelopment Fund, established pursuant to section 29A of chapter 23G of the General Laws, or any recovery or damages received by the applicant as a result of any lawsuit against any person or entity on the grounds that such person or entity was responsible for a Release. 

(c)  15% of Assessed Value Requirement.  The applicant will not be entitled to any credit unless the Net Response and Removal Costs are equal to or exceed 15% of the Assessed Value of the property.  For purposes of this requirement, the Assessed Value of the property shall be the January 1st valuation that applies to the municipal fiscal year during which Net Response and Removal Costs begin to be incurred.  For example, if remediation commenced in February 2018 (i.e., during fiscal year 2018), the Assessed Value of the property prior to remediation would be the Assessed Value as of January 1, 2017. If remediation commenced in August 2018 (i.e., during fiscal year 2019), the Assessed Value of the property prior to remediation would be the Assessed Value as of January 1, 2018.

(d)  Multiple Releases. In cases where one or more applications has been submitted and/or approved with respect to a Permanent Solution or Remedy Operation Status achieved on a property, and an additional Release is discovered with respect to that property, an applicant may apply for additional credit in connection with subsequent Net Response and Removal Costs incurred in obtaining a Permanent Solution or Remedy Operation Status with respect to such additional Release.  The additional Net Response and Removal Costs associated with each such additional Release must independently equal or exceed 15% of the Assessed Value of the property.  However, if a Permanent Solution or Remedy Operation Status is achieved within one year of another Permanent Solution or Remedy Operation Status, an applicant may aggregate the Net Response and Removal Costs of all such Permanent Solutions and Remedy Operation Statuses achieved within a one-year period for purposes of determining whether the costs equal or exceed 15% of the Assessed Value of the property.

(e)  Costs incurred to remove an AUL. In cases where an application has been submitted and approved by the Department with a Permanent Solution or Remedy Operation Status that required an AUL to be placed on a property, an applicant may apply for additional credit in connection with subsequent Net Response and Removal Costs incurred to remove that AUL.  The additional Net Response and Removal Costs associated with the removal of the AUL must independently equal or exceed 15% of the Assessed Value of the property, and the resulting Permanent Solution or Remedy Operation Status must be free of an AUL.

(5) Eligible Costs

(a)  In general.  Eligible Costs are costs incurred by an Eligible Person in performing Response Actions for the purposes of achieving a Permanent Solution or Remedy Operation Status that are (1) reasonable; (2) a direct and necessary part of attaining such Permanent Solution or Remedy Operation Status; (3) incurred with respect to property that is located within an Economically Distressed Area as defined in M.G.L. c. 21E, § 2; (4) incurred with respect to property that the applicant owned or leased for business purposes; (5) incurred during the time that the applicant owned or leased such property; (6) incurred by the applicant after August 1, 1998, but on or before the date listed in M.G.L. c. 62, § 6(j) or M.G.L. c. 63, § 38Q; and (7) incurred by the applicant before the Permanent Solution or Remedy Operation Status was achieved.

(b)  Costs incurred by persons who do not yet own or lease the property.  Costs incurred by persons who do not yet own or lease a property are not Eligible Costs. For example, a developer or other person with a development agreement may incur costs with respect to a property during a time when they do not yet own or lease the property. Such costs are not eligible costs.  A developer’s right to enter a property for surveys, test borings, engineering and architectural studies or other limited purposes does not rise to the level of a leasehold or ownership interest required for eligibility for the credit. 

(c)  Types of costs eligible for the credit. The following costs of performing Response Actions are generally eligible for the credit, provided that such costs are reasonable and meet the other requirements in 830 CMR 63.38Q.1(5)(a):

1.  Costs incurred for assessment activities that identify an obligation to notify DEP;

2.  Costs incurred for any assessment, containment, or removal action;

3.  Costs incurred for the preparation of all submittals (plans, reports, completion statements, status reports and/or remedial monitoring reports);

4.  Costs incurred for the assessment, containment, treatment, removal, transport, storage, reuse, recycling and/or disposal of Contaminated Media;

5.  Costs associated with treatment systems such as vapor migration systems, active ventilation systems, passive ventilation systems, impermeable vapor barriers or waterproofing, as long as the Permanent Solution or Remedy Operation Status requires such treatment system to be in place;

6.  Costs associated with a cap or engineered barrier, as long as the Permanent Solution or Remedy Operation Status requires such cap or engineered barrier to be in place, and as long as such cap or engineered barrier is in compliance with the MCP, 310 CMR 40.0442(4), where applicable;

7.  Costs associated with the removal of either asbestos or lead paint to the extent such asbestos or lead paint has been released into the environment and such Release has been reported to DEP;

8.  Costs incurred for development and implementation of assessment and remediation plans, including pilot testing and treatability tests;

9.  Costs incurred for environmental testing;

10. Costs incurred for hydrogeologic/aquifer tests;

11. Costs incurred in provisions for the temporary and/or permanent replacement or treatment of potable drinking water supply contaminated by OHM;

12. Costs incurred for installation of test pits, test borings, monitoring wells, recovery wells, and/or gaseous injection or extraction wells;

13. Attorney fees for compliance assistance in the preparation of submittals documenting response actions; and

14. Permit fees, and cost of paid police details and security details required during eligible activities.

(d)  Costs not eligible for the credit. Any costs that are not a direct and necessary part of attaining a Permanent Solution or Remedy Operation Status are not Eligible Costs, including generally the following:

1.  Costs incurred for retro-fitting, relining or replacing underground storage tank systems;

2.  Loss of business revenue because of shutdown of business due to a Release or the performance of response actions;

3.  Landscaping expenses including expenses related to the loss, replacement, or installation of trees, shrubs, or signs;

4.  Costs incurred for replacement or repair of blacktop or concrete unless they are necessary to create a cap that is required to be in place by a Permanent Solution or Remedy Operation Status;

5.  Costs incurred for assessment, containment, treatment, removal, transport, storage, reuse, recycling and/or disposal of groundwater or surface water that does not contain OHM at or above a release notification threshold for which notification is required by 310 CMR 40.0300 and 310 CMR 40.1600, unless (a) these costs were necessary to achieve or approach background at the site, (b) it was feasible to achieve or approach background at the site within the meaning of DEP Policy #WSC-04-160, (c) the applicant did in fact achieve or approach background with respect to the site, and (d) the LSP certified to DEP as part of the Permanent Solution Statement or Remedy Operation Status that background had been achieved or approached at the site;

6.  Costs incurred for assessment, containment, treatment, transport, storage, reuse, recycling and/or disposal of soils or sediments that do not contain OHM at or above a release notification threshold for which notification is required by 310 CMR 40.0300 and 310 CMR 40.1600, unless (a) these costs were necessary to achieve or approach background at the site, (b) it was feasible to achieve or approach background at the site within the meaning of DEP Policy #WSC-04-160, (c) the applicant did in fact achieve or approach background with respect to the site, and (d) the LSP certified to DEP as part of the Permanent Solution Statement or Remedy Operation Status that background had been achieved or approached at the site;

7.  Costs incurred for removal of soils or sediments that do not contain OHM at or above a release notification threshold for which notification is required by 310 CMR 40.0300 and 310 CMR 40.1600, unless such removal is necessary to remove Contaminated Media under such soils or sediments, or unless (a) the costs of removal were necessary to achieve or approach background at the site, (b) it was feasible to achieve or approach background at the site within the meaning of DEP Policy #WSC-04-160, (c) the applicant did in fact achieve or approach background with respect to the site, and (d) the LSP certified to DEP as part of the Permanent Solution Statement or Remedy Operation Status that background had been achieved or approached at the site;

8.  Demolition costs pertaining to existing buildings and structures, unless, prior to any such demolition, it has been determined that such demolition is necessary to remove Contaminated Media under such buildings or structures.

9.  All federal, state, local and other governmental oversight fees;

10. Compliance fees, punitive damages, civil or administrative penalties, and criminal fines;

11. Interest payments or any finance charges;

12. Costs incurred for small tools;

13. Except as specifically provided in 830 CMR 63.38Q.1(5)(c)1., costs that are incurred prior to notifying DEP of the Release and the receipt of a DEP tracking number;

14. Ordinary business expenses or capital improvements, including (a) expenses that would have been incurred in the ordinary course of development of the property in the absence of contamination, (b) oil and hazardous materials management, and/or (c) replacement of tanks;

15. Insurance costs associated with remediation;

16. Costs attributable to the time and expense of an owner, operator, or principal;

17. Costs associated with the removal of asbestos, lead paint, or other hazardous materials from buildings or structures on the property, regardless of whether such removal is part of demolition that is necessary to remove Contaminated Media under that building or structure; and

18. Costs of replacing or relocating stormwater systems or existing utilities.

Example 1. Company A undertakes to redevelop a site containing an existing building, and intends to demolish that building as part of the redevelopment.  Prior to the demolition of the building, Company A has its LSP conduct tests to see if the soil under the building contains OHM at concentrations equal to or greater than a release notification threshold established by 310 CMR 40.0300 and 40.1600.  The LSP determines that some of the soil under the building is Contaminated Soil, and reports this result to DEP.  In compliance with a Release Abatement Measure Plan, Company A then demolishes the building and excavates, transports and disposes of the soil below the building that contained OHM in excess of reportable concentrations.  Because Company A undertook to demolish the building for the purposes of achieving a Permanent Solution, its costs of demolishing the building are Eligible Costs.  Furthermore, to the extent they relate to the soil under the building that contained OHM equal to or greater than reportable concentrations, Company A’s costs of excavating, transporting and disposing of such soil are Eligible Costs.

Example 2. Assume the same facts as in Example 1, except that when the LSP tests under the building prior to demolition, no soil is discovered with OHM equal to or above reportable concentrations.  After demolition has started, as the ground-level slab of the building is being demolished, visual and olfactory evidence of contamination is encountered in the soil below the building.  Company A again has the soil below the building tested again by its LSP, who now determines that some of that soil is Contaminated Soil and reports this result to DEP.  In compliance with a RAM Plan, Company A then excavates, transports and disposes of the Contaminated Soil located below the building.  Because Company A did not undertake to demolish the building for the purposes of achieving a Permanent Solution or Remedy Operation Status, and because it demolished the building prior to any report of a Release to DEP, its costs of demolishing the building are not Eligible Costs.  However, Company A’s costs of excavating, transporting and disposing soil with OHM equal to or greater than reportable concentrations are Eligible Costs.

Example 3. Assume the same facts as in Example 2, except that Company A conducted no tests of the soil prior to demolition.  After finding visual and olfactory evidence of contamination during demolition, Company A has the soil tested by the LSP, who determines that some of that soil contains OHM above reportable concentrations. The LSP reports this result to DEP.  Company A’s costs of demolishing the building are not Eligible Costs.  However, to the extent they relate to Contaminated Soil that had been located under the building prior to demolition, Company A’s costs of excavating, transporting and disposing of such soil are Eligible Costs.

Example 4. Company B undertakes to redevelop a site containing an existing building, and intends to demolish that building as part of the redevelopment.  Prior to the demolition of the building, Company B has its LSP conduct tests to see if the soil under the building contains OHM at or above reportable concentrations.  The LSP determines that some of the soil under the building contains OHM above reportable concentrations, and reports this result to DEP via a Release Notification Form that lists the detected contaminants.  Company B now undertakes to achieve a Permanent Solution with respect to the Contaminated Soil, and determines in conjunction with its LSP that demolition of the building is a direct and necessary part of achieving such a Permanent Solution.  The LSP reports to DEP in the RAM Plan that demolition of the building and excavation, transportation and disposal of the soil above reportable concentrations are among the planned RAM activities.  The RAM Plan lists which of the OHM equaled or exceeded reportable concentrations, and asbestos was not present in that list.  The building to be demolished does contain asbestos that needs to be abated, but none of that asbestos has been the subject of a Release within the meaning of the MCP.  In compliance with the RAM Plan, Company B then abates the asbestos within the building at a cost of $300,000, demolishes the building at a cost of $200,000 and excavates, transports and disposes of the Contaminated Soil below the building at a cost of $100,000.  Company B’s costs of $200,000 for demolition of the building, and its costs of $100,000 for removal of the Contaminated Soil are Eligible Costs.  Company B’s costs of $300,000 with respect to asbestos abatement within the building are not Eligible Costs.

Example 5.  Company C discovers OHM on its property that exceeds reportable concentrations, and its LSP reports this to DEP.  The LSP creates a RAM Plan that requires that a cap be placed on the site.  Company C creates this cap in part by paving over the site and creating a parking lot.  The LSP submits a Permanent Solution with Conditions with an AUL that requires a cap to be maintained and an AUL to be placed on the property.  Because the paving is necessary to create a cap that is required to be in place by the Permanent Solution and the accompanying AUL, Company C’s costs of paving are Eligible Costs.

Example 6.  Company D discovers OHM on its property that exceeds reportable concentrations, and its LSP reports this to DEP.  The LSP creates a RAM Plan that removes all Contaminated Media from the site.  As part of the construction accompanying the remediation, Company D paves over the site and creates a parking lot.  The LSP submits a Permanent Solution without Conditions, which does not require a cap to be maintained or an AUL to be placed on the property.  Because the paving is not necessary to create a cap that is required to be in place by the Permanent Solution, Company D’s costs of paving are not Eligible Costs.

Example 7.  Company E discovers OHM that exceeds reportable concentrations in two locations on property that it owns, and its LSP reports this to DEP.  The LSP researches the origin of the two Releases and determines they occurred at different times.  One Release occurred prior to the purchase of the property by Company E, while the other occurred after Company E had purchased the property.  With respect to any costs incurred to remediate the first Release, which occurred prior to the purchase of the property, Company E may qualify as an Eligible Person.  With respect to any costs incurred to remediate the second Release, which occurred during the period that Company E owned the property, Company E is not an Eligible Person.

(e)  Timing of Costs.

For a remediation to be eligible for the credit, it must begin on or after August 1, 1998.  Except as specifically provided in 830 CMR 63.38Q.1(5)(c)1., costs must be incurred after notifying DEP of the Release and after the receipt of a DEP tracking number.  Costs must be incurred prior to the submittal of a Permanent Solution Statement or Remedy Operation Status to DEP to be eligible for the credit. Costs for actions or expenses that have occurred prior to the submittal of a Permanent Solution Statement or Remedy Operation Status to DEP, but are billed to and paid by an applicant after such submittal, will still be eligible, provided they meet all other requirements of 830 CMR 63.38Q.1(4) and are billed and paid prior to the Brownfields Credit Application being submitted to the Department.

Example. Company X performs work on a site for Owner Y in June. Owner Y achieves a Permanent Solution in July of the same year.  Company X does its billing quarterly and does not issue an invoice until September. As long as the work or expense to which the invoice relates was done before the Permanent Solution was achieved, the expense is billed and paid before the credit application is submitted, and it meets all the other criteria for expenses, such expense will generally be allowed as an Eligible Cost.

(f)  Verification of Costs.

An applicant must provide a listing of all Eligible Costs including invoice dates and numbers, the name of the vendor and a brief description of the services provided. The Department may require proof of payment (e.g., cancelled checks) or additional information regarding the nature of the services provided with respect to any cost items. The Commissioner may request additional records or otherwise take such steps necessary to verify the appropriateness and accuracy of the costs submitted.

(g)  Denial or Proration of Certain Costs.

The Commissioner may deny a credit application or portion thereof for any ineligible or unreasonable costs. Costs that serve a dual purpose may be prorated, unless proration is not representative of the relative costs. For example, costs related to excavation of soil may be prorated based upon the depth of soil needed to be removed for remediation purposes.

Example 1. An applicant plans to erect a new building on the property requires digging of a foundation of 15 feet.  Based on information from its LSP, the applicant determines that excavation of ground soil to a depth of 10 feet is necessary for remediation.  The Commissioner may disallow 5/15ths or 33% of the costs associated with excavation and removal of the soil.

Example 2. Assume the same facts as above except that erection of a new building on the site requires digging a foundation of 100 feet and the use of bracing and other support measures to complete the digging.  In this circumstance direct proration (i.e., allowance of 10/100ths or 10% of the costs) would not be representative of the costs necessary for excavation down to 10 feet.  In such a case, the Commissioner may allow a lesser percentage of the excavation costs, based on further evaluation of the facts.

Costs that are allocable to both eligible and ineligible expenses, also known as “soft” costs, will also generally be prorated.  Soft costs may include such items as general conditions, general requirements, police details, and similar costs.  The proration of soft costs will generally be done by determining the percentage of “hard” costs (i.e., all items that are not soft costs) that are eligible, and multiplying that percentage by the soft costs.

(6) Application Process

(a)  Once an applicant has completed its remediation work and submitted evidence that it has achieved a Permanent Solution or Remedy Operation Status to DEP, it may apply to the Department for a credit by utilizing Form BCA: Brownfields Credit Application or such other form as the Commissioner may prescribe. Such application must be filed 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 brownfields credit

(b)  Required Documentation.  Along with a completed application, an applicant must furnish the Department with the following documentation:

1.  Documentation showing the Assessed Value of the property;

2.  The applicant’s deed or lease agreement for the property;

3.  A description of the business purpose for which the property is owned or leased, i.e., the current business activity that is taking place on this site;

4.  A copy of the construction plan for the property or site including a cross-sectional diagram if available;

5.  Weekly field reports and soil hauling logs;

6.  A detailed statement of contamination history, 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);

7.  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;

8.  A representation 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 Remedy Operation Status was achieved; (e) that all statements contained within the application are accurate; and (f) that all reimbursements received or anticipated by the applicant with respect to its Eligible Costs have been reported in the application; and

9.  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)  Additional Documentation.  An applicant must furnish any additional information or documentation that the Department deems necessary to determine and to verify the eligibility of costs. As noted in 830 CMR 63.38Q.1(5)(f) above, the Department reserves the right to request all invoices and proof of payment thereof.

(d)  Duty to Report Changes in Circumstances.   After an application has been submitted, an applicant has the duty to report any subsequent material changes to its application to the Department, including, but not limited to, the following instances:

1.  The applicant receives a reimbursement with respect to any of its Eligible Costs that was not already reported on its application, regardless of whether such reimbursement was anticipated;

2.  The Permanent Solution or Remedy Operation Status is revoked by DEP; or

3.  The applicant or its Power of Attorney becomes aware that any statement contained within its application was not accurate at the time it was made, or is no longer accurate.

(e)  Credit Certificate. If an application is approved, the Department will issue a notice of credit approval and a “Form BCC – Brownfields Credit Certificate”, indicating a certificate number, the expiration date of the credit, and the amount of credit approved.  The expiration date of the credit shall be the same as the date by which an application must be filed as set out in 830 CMR 63.38Q.1(6)(a), plus the time that has elapsed between the date the application was filed and the date the certificate is issued.  The applicant may use the credit for any tax year ending on or before  the expiration date on the tax certificate, in accordance with 830 CMR 63.38Q.1(7)(b).

(7) Limitations; Claiming and Carryforward of Credit

(a)  Limitations on use of the Credit.

1.  Fifty-percent Limitation for Personal Income Taxpayers.  Pursuant to M.G.L. c. 62, § 6(j)(3) the maximum amount of credit that may be taken may not exceed fifty percent (50%) of the claimant’s personal income tax liability for the taxable year.

2.  Fifty-percent Limitation for certain Business Corporations.  Pursuant to M.G.L. c. 63, § 38Q(c) the maximum amount of credit that may be taken may not exceed fifty percent (50%) of the claimant’s corporate excise liability for the taxable year.  This limitation does not apply to financial institutions and insurance companies that are subject to the financial institution excise or the insurance premium excise, respectively, set out in M.G.L. c. 63.

3.  Minimum Excise Limitation.  Pursuant to M.G.L. c. 63, § 38Q(e) the credit may not be used to reduce the tax liability of business corporations below the minimum excise.  Pursuant to M.G.L. c. 63, § 2(b) the credit may not be used to reduce the financial institution excise liability of banks and related entities below the minimum excise.

(b)  Claiming and Carryforward of Credit. A taxpayer may claim the credit for the tax year in which the credit is generated.  A taxpayer may also carry over the portion of those credits, as reduced from year to year, that it was unable to claim based upon the limitations set out in M.G.L. c. 63, § 38Q(c) and (e) and M.G.L. c. 62, § 6(j)(3), and claim them against its tax liability for any subsequent taxable year ending on or before the expiration date on the certificate. For purposes of this section, the year in which the credit is generated is the year in which the Permanent Solution or Remedy Operation Status is achieved.  If an applicant does not claim the credit on its original return for any such year, such applicant may claim the credit by filing an amended return with respect to any year ending on or before the expiration date of the certificate, as long as the statute of limitations is still open for filing an amended return for that tax year. The period of time for filing an amended tax return is set forth in M.G.L. c. 62C, § 37. However, in no event may an applicant claim the credit in any taxable year in which it has ceased to maintain the Remedy Operation Status or the Permanent Solution for which the credit was granted.

Example.  Company A achieves a Permanent Solution in 2013.  It must apply for the credit on or before December 31, 2018, as set out in 830 CMR 63.38Q.1(6)(a).  It applies for the credit on June 1, 2014.  Thirteen months later, on July 1, 2015, it is awarded a credit certificate for $1 million.  For purposes of determining in which years the credit may be used, the year in which the credit is generated is 2013.  The certificate has an expiration date of January 31, 2020, as set out in 830 CMR 63.38Q.1(6)(e).   Company A may claim the credit for its 2013 tax year (by filing an amended return) or in any of the years that end on or before the expiration date on the certificate (2014, 2015, 2016, 2017, or 2018, or 2019).  Company A does not claim the credit on any of its original returns for any of these tax years.  Company A’s 2019 tax return is filed on September 15, 2020, and shows a tax liability of $500,456.  On February 15, 2023, after the statute of limitations for filing an amended return has expired for all of Company A’s tax years except tax year 2019, Company A files an amended return for the tax year 2019 and claims the $1 million credit for the first time.  $500,000 of the claimed credit will reduce Company A’s tax liability for 2019 to $456, but the remaining $500,000 of the credit will expire unused.

(8) Transfer of the Credit

(a)  Transfer, Sale or Assignment of the Credit.  A recipient of a credit seeking to transfer, sell or assign the credit, or any unused portion thereof, must complete and submit to the Department a transfer application on the form prescribed by the Commissioner before making a transfer.  The recipient must submit the transfer application to the Commissioner on or before the expiration date of the credit certificate that it seeks to transfer.  The transfer application requires a statement describing the amount of the credit available for transfer, sale or assignment.  A transferor may also be required to acknowledge the transfer and its amount on a form prescribed by the Commissioner.  If the transfer is approved, the Department will issue a certificate to the transferee stating the amount of the credit transferred.  The new certificate to the transferee will have the same expiration date as the original certificate for such credits.

(b)  Claiming the Credit as a Transferee.  Any transferee of the credit may, subject to the requirements and limitations of 830 CMR 63.38Q.1, apply such credit to either the tax imposed under M.G.L. c. 62 or the excise imposed under M.G.L. c. 63.  Transferring, selling or assigning a credit does not extend the carryforward period.  A transferee may claim the credit for any year in which it could have been claimed by the original credit recipient as set out in 830 CMR 63.38Q.1(7)(b), as long as the transfer application was submitted on or before the expiration date on the credit certificate, and as long as the statute of limitations is still open for filing an amended return for that tax year. The period of time for filing an amended tax return is set forth in M.G.L. c. 62C, § 37.  

(c)  Gain from Sale or Transfer of Credit.  Generally, the granting of a credit to a taxpayer is not considered income to the taxpayer to the extent the credit is used to actually offset a tax owed by that taxpayer.  However, the sale of a credit to a transferee is a taxable event that could trigger gain to the original credit recipient. Additionally, a nonprofit organization that receives income from the sale of a credit may be required to report such income as unrelated business income.  See 830 CMR 63.38T.1: Taxation of Unrelated Business Income of Exempt Organizations.

(9) Allocation of Credit Among Partners, Members or Owners

Credits allowed to a partnership, a limited liability company taxed as a partnership or multiple owners of property shall be passed through to the persons designated as partners, members or owners, respectively, pro rata or pursuant to an executed agreement among such persons designated as partners, members or owners documenting an alternative allocation method.

(10) Ordering; Non-refundability of Credit

(a)  Ordering of Credits.  The credit may be applied in combination with other credits allowed under M.G.L. c. 62 in any order.  Similarly, the credit may be applied in combination with other credits allowed under M.G.L. c. 63 in any order.

(b)  Combined Group Members.  A taxpayer that participates in the filing of a Massachusetts combined report under M.G.L. c. 63, § 32B may apply the credit against the portions of the combined group’s excise liability attributable to the taxpayer, and may share the credit with the other taxable members of the combined group in accordance with the provisions of 830 CMR 63.32B.2(9).

(c)  Credit Non-refundable.  The credit is non-refundable.

(11) Recapture; Payments in Error

(a)  In general.  If a credit recipient ceases to maintain the Remedy Operation Status or the Permanent Solution in violation of the MCP prior to its sale of the property or the termination of the lease, the recipient shall add back as additional taxes due the difference between the credit taken and the credit allowed for maintaining the remedy. The recipient shall report such amounts on its return for the year the recipient fails to maintain the Remedy Operation Status or Permanent Solution.  As set out in M.G.L. c. 63, § 38Q(b) and M.G.L. c. 62, § 6(j)(2), the amount of the credit allowed for maintaining the remedy shall be determined by multiplying the original credit by the ratio of the number of months the remedy was adequately maintained over the number of months of useful life of the property.  For the purposes of M.G.L. c. 63, § 38Q(b) and M.G.L. c. 62, § 6(j)(2), the useful life of the property shall be the same as that used by corporations for depreciation purposes when computing federal income tax liability; provided, however, that in the case of real property that is not depreciable, the useful life shall be deemed to be 12 months.

(b)  Recapture where a credit has been transferred.  For purposes of determining the amount of recapture following a transfer of the credit, a credit recipient who transfers, sells or assigns all or a portion of its credit generally will be treated as having used the credit or portion thereof that has been transferred prior to the transfer. In the absence of fraud, where a credit recipient ceases to maintain the property in compliance with the MCP prior to the sale, transfer or assignment of a credit or portion thereof, the Department may seek recapture against the transferor rather than the transferee.

(c)  Credits Allowed in Error.  Where the Department allows all or part of a credit in error, the Department is authorized to recover such amounts as “payments in error” pursuant to M.G.L. c. 62C, § 36A.  If the Department has made a "payment in error," has demanded return of that payment, and the full amount has not been repaid within 30 days, the amount demanded is considered a tax assessed under M.G.L. c. 62C. A demand for repayment may be made at any time within three years from the date of the payment in error. However, if it appears that all or any part of a payment in error was induced by fraud or misrepresentation of a material fact, a demand for repayment may be made at any time within six years from the date of the payment in error. Misrepresentation of a material fact includes failure to disclose a material fact or to correct the Commissioner's misunderstanding of such a fact.  Where a credit has been transferred, the Commissioner may seek recovery of the payment in error from the original applicant (i.e., the transferor) but, in the absence of fraud, will not seek recovery from the transferee.

(12) Appeal Process for Denial or Partial Denial of Applications for Credit

(a)  Written Notification of a Proposed Denial or Partial Denial.  If the Department proposes to deny an application for the credit, in whole or in part, as submitted on the credit application form, the Department will send written notification to the applicant of its proposed denial.  The written notification will explain that the applicant has the right to file a written appeal of such proposed denial or partial denial. In the case of a proposed partial denial, the applicant may request that the Department issue a credit certificate with respect to the proposed approved credit amount pending an appeal, provided that any such tentatively approved credit amount is subject to adjustment pursuant to the appeals process, as described in 830 CMR 63.38Q.1(12)(b).

(b)  Appealing a Proposed Denial or Partial Denial.

1.  Requesting an Appeal.  Upon receipt of notification of a proposed denial or partial denial of a credit, an applicant may make a written request for a conference with the Department’s Office of Appeals.  Such request must be filed with and received by the Department within 30 days of the date set forth in the notification of proposed denial or partial denial and must include a statement as to the reason or reasons why a specific amount of credit that has been proposed to be denied should be approved, as well as supporting documentation.  

2.  Appeals Process.  The appeal of a proposed denial or partial denial is a de novo proceeding.  The appeals officer will review the entire application, including any part that the Department did not propose to deny. As part of this review, the appeals officer may require the applicant to provide additional information relevant to the application.  The Office of Appeals will schedule a conference and notify the applicant in writing of the date and time of such conference and of any disputed issues to be addressed at the conference.   The conference shall be an adjudicatory hearing conducted in the manner provided by chapter 30A of the General Laws.

3.  Decision by the Office of Appeals.  The Office of Appeals will notify the applicant as to its decision by a letter of determination, which will explain the reasons for the decision. If the Office of Appeals in its letter of determination approves the applicant’s credit application, in whole or in part, the Department will send the applicant a credit certificate with the amount of approved credit eligible for the applicant’s own use and/or for transfer, sale, or assignment, to the extent that a certificate was not previously issued for such amount.  If the credit amount approved pursuant to the letter of determination is less than the amount reflected on any credit certificate previously issued with respect to the credit application, the applicant is responsible for repayment of any excess credit previously issued. 

4.  Time Period for Appeals Requests. An appeal of a proposed denial or partial denial must be made within the 30-day period set forth in 830 CMR 63.38Q.1(12)(b)1. Subsequent claims for costs previously denied will not be considered. 

(c)  Proposed Denials Not Appealed by the Applicant.  If the Department does not receive a written request for conference within 30 days of the date set forth in the notification of proposed denial, it will issue a notice of credit denial.

(d)  Proposed Partial Denials Not Appealed by the Applicant.  Once the Department has notified the applicant of its proposal to deny the application in part, the applicant may notify the Department in writing that the applicant does not wish to file an appeal of the partial denial.  If the Department receives such a written notice, or if the Department does not receive a written request for a conference with the Department’s Office of Appeals within 30 days of the date set forth in the notification of proposed partial denial, the Department will send the applicant a credit certificate with the amount of approved credit eligible for the applicant’s own use and/or for transfer, sale, or assignment.         

 

REGULATORY AUTHORITY

830 CMR 63.38Q.1: M.G.L. c. 62, §§ 6(j) and M.G.L. c. 63, § 38Q (St. 1998, c. 206, §§ 34, 35 and 44; as amended by St. 2000, c. 159, §§ 120-121, 124-125, 498; St. 2003, c. 141, §§ 20, 28; St. 2006, c. 123, §§ 49-50 and 63-64; St. 2008, 173, §§ 79-80; St. 2010, c. 240, §§ 113-114, 127-128; and St. 2013 c. 38, §§ 53-54, 68-69).

 

WORKING DRAFT FOR PRACTITIONER COMMENT – 3/9/2020

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