COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

23 SOUTH STREET REALTY TRUST, v. BOARD OF ASSESSORS OF

CHARLES E. MONCY, TRUSTEE THE TOWN OF PLYMOUTH

Docket No. F296783 Promulgated:

January 4, 2010

This is an appeal filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65 from the refusal of the appellee to abate a tax on real estate in the Town of Plymouth, owned by and assessed to the appellant under G.L. c. 59, §§ 11 and 38, for fiscal year 2008.

Commissioner Rose heard the appeal. Chairman Hammond and Commissioners Scharaffa, Egan and Mulhern joined him in the decision for the appellee.

These findings of fact and report are made pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.

Charles E. Moncy, pro se, for the appellant.

Catherine Salmon, assessor, for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of the evidence and testimony offered into evidence at the hearing of this appeal, the Appellate Tax Board (“Board”) made the following findings of fact.

On January 1, 2007, Charles E. Moncy, Trustee, 23 South Street Realty Trust (“appellant”) was the assessed owner of a 0.60-acre parcel of real estate located at 23 South Street in the Town of Plymouth (“subject property”). For fiscal year 2008, the Board of Assessors of the Town of Plymouth (“assessors”) valued the subject property at $738,000 and assessed a tax thereon at the rate of $10.33 per thousand in the amount of $7,737.89.[1] The appellant timely paid the tax due without incurring interest. On January 31, 2008, in accordance with G.L. c. 59, § 59, the appellant filed an Application for Abatement with the assessors, which they denied on April 8, 2008. On June 18, 2008, in accordance with G.L. c. 58A, § 7 and c. 59, §§ 64 and 65, the appellant seasonably filed an appeal with the Board. On this basis, the Board found and ruled that it had jurisdiction over this appeal.

The subject property is improved with a three-story, eight-unit apartment building. Each unit has a total of three rooms, including one bedroom, and also one bathroom. In support of his argument that the subject property was overvalued for fiscal year 2008, the appellant used an income-capitalization analysis based on the subject property’s actual income and expenses for calendar year 2006, as reported to the assessors pursuant to G.L. c. 59, § 38D. The appellant testified that seven of the units are Section 8 apartments with rents ranging from $895 per month to $1020 per month, and that the eighth apartment is rented by the appellant, and occupied by his son, for $780 per month. The total rental income for calendar year 2006 was $87,564. Mr. Moncy deducted operating expenses totaling $57,791, which included $31,140 for “cleaning services” and also a $1,163 management fee paid to his son. Mr. Moncy then applied a vacancy rate deduction calculated at 4% of gross income and also a reserve for replacement deduction calculated at 2% of gross income, to arrive at a net operating income of $23,914.[2]

Finally, Mr. Moncy applied a capitalization rate of 8.5% to arrive at an estimated fair market value of $281,342. The appellant further testified that he would be amenable to “split the difference” between the subject property’s fiscal year 2008 assessed value and his calculated fair market value and “accept” a fair market value of $468,171.

In support of their assessment, the assessors relied on the testimony of Catherine Salmon, the Plymouth Assessor. Ms. Salmon offered into evidence an income-capitalization analysis based on the subject property’s reported income and expense figures for calendar year 2006 and also a listing of market averages. Based on this information, the assessors used a gross income of $84,000, a vacancy factor of 5%, an expense deduction of 15%, and also a reserve for replacement allowance of 2%. Finally, the assessors applied a capitalization rate of 8.5% which resulted in an estimate of value for the subject property of $779,224.

Ms. Salmon also offered into evidence a market analysis of six properties that sold during the period April 2005 through December 2007 with sale prices that ranged from $121,800 per unit to $198,750 per unit. Based on these sales, Ms. Salmon estimated a fair market value of $800,000, or $100,000 per unit. All of these properties however included fewer units than the subject property and most were two-bedroom and three-bedroom units compared to the subject property’s one-bedroom units. The Board therefore found that the assessors chosen properties were not comparable to the subject property and gave little weight to the assessors’ market analysis.

The Board found that the income-capitalization approach was the proper method for valuing the subject property. Although the appellant relied solely on the subject property’s actual reported income, the Board found that it was reflective of the market as demonstrated by the assessors’ evidence. The Board also found that the appellant’s vacancy factor, reserve for replacement and capitalization rate were reflective of the market. The Board further found, however, that the appellant’s operating expenses, which totaled nearly 60% of rental income, were excessive. In particular, the Board found that the more than $30,000 for “cleaning services” and the management fee paid to the appellant’s son were questionable and unreliable. Therefore, the Board found that the appellant grossly understated the subject property’s net-operating income and resulting fair market value.

On this basis, the Board found and ruled that the appellant failed to meet his burden of proving that the subject property was overvalued for fiscal year 2008. Accordingly, the Board issued a decision for the appellee in this appeal.

OPINION

“All property, real and personal, situated within the commonwealth . . . shall be subject to taxation.” G.L. c. 59, § 2. The assessors have a statutory obligation to assess real estate at its fair cash value. G.L. c. 59, § 38. Fair cash value is defined as the price on which a willing seller and a willing buyer in a free and open market will agree if both of them are fully informed and under no compulsion. Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).

The taxpayer has the burden of proving that the property has a lower value than that assessed. Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974). The Board is entitled to presume that the valuation made by the assessors is valid unless the taxpayer proves to the contrary. Id. The taxpayer must demonstrate that the assessed valuation of its property was improper. Foxborough Associates v. Board of Assessors of Foxborough, 385 Mass. 679, 691 (1982) (citing Schlaiker, 365 Mass. at 245). The taxpayer may sustain this burden by introducing evidence of fair cash value, or by proving that the assessors erred in their method of valuation. General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 600 (1984).

A taxpayer “‘may present persuasive evidence of overvaluation either by exposing flaws or errors in the assessors’ method of valuation, or by introducing affirmative evidence of value which undermines the assessors’ valuation.’” General Electric Co. v. Assessors of Lynn, 393 Mass. at 600 (quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983)).

Generally, real estate valuation experts, Massachusetts courts, and this Board rely upon three approaches to ascertain the fair cash value of property: income capitalization; sales comparison; and cost of reproduction. Correia v. New Bedford Redevelopment Authority, 375 Mass. 360, 362 (1978). Regardless of which method is employed to determine fair cash value, the Board must determine the highest price which a hypothetical willing buyer would pay to a hypothetical willing seller in an assumed free and open market. Irving Saunders Trust v. Board of Assessors of Boston, 26 Mass. App. Ct. 838, 845 (1989). The validity of a final estimate of market value depends largely on how well it can be supported by market data. The Appraisal Institute, The Appraisal Of Real Estate 134 (12^th Ed. 2001).

“The Board is not required to adopt any particular method of valuation.” Pepsi-Cola Bottling Co. v. Assessors of Boston, 397 Mass. 447, 449 (1986), but the income- capitalization method is “frequently applied with respect to income-producing property.” Taunton Redev. Assocs. v. Assessors of Taunton, 393 Mass. 293, 295 (1984). In applying this method, the income stream used must reflect the property’s earning capacity or market rental value. Pepsi-Cola Bottling Co. v. Assessors of Boston, 397 Mass. 447, 451 (1986). Imputing rental income to the subject property based on fair market rentals from comparable properties is evidence of value if, once adjusted, they are indicative of the subject property’s earning capacity. See Correia v. New Bedford Redevelopment Authority, 5 Mass. App. Ct. 289, 293-94 (1977), rev’d on other grounds, 375 Mass. 360 (1978); Library Services, Inc. v. Malden Redevelopment Authority, 9 Mass. App. Ct. 877, 878 (1980) (rescript); AVCO Manufacturing Corporation v. Assessors of Wilmington, ATB Findings of Fact and Reports 1990-142. It is the earning capacity of real estate, rather than its actual income, which is probative of fair market value. Assessors of Quincy v. Boston Consolidated Gas Co., 309 Mass. 60, 64 (1941). In order to prove the fair cash value of property through its earning capacity, one must calculate a gross potential income based on market rents, reduce that amount by vacancy and rent losses, deduct the landlord’s approximate market expenses, and then apply a capitalization rate. See, e.g., Alstores Realty Corp. v. Assessors of Peabody, 391 Mass. 60, 62-71 (1984); General Electric, 393 Mass. at 610.

In the present appeal the appellant relied on an income-capitalization analysis to prove that the subject property was overvalued for the fiscal year at issue. The Board found that although the appellant’s gross rent, vacancy factor, reserve for replacement and capitalization rate appear to be indicative of the market, the appellant substantially overstated the subject property’s operating expenses and therefore grossly understated the subject property’s net-operating income and corresponding fair market value.

“The [b]oard [can] accept such portions of the evidence as appear to have the more convincing weight. The market value of the property [can] not be proved with mathematical certainty and must ultimately rest in the realm of opinion, estimate, and judgment . . . . The [b]oard [can] select the various elements of value as shown by the record and from them form . . . its own independent judgment.” Assessors of Quincy v. Boston Consolidated Gas Company, 309 Mass. 60, 72 (1941). See also, North American Philips Lighting Corp. v. Assessors of Lynn, 392 Mass. 296, 300 (1984); New Boston Garden Corp. v. Board of Assessors of Boston, 383 Mass. 456, 473 (1981); Jordan Marsh Co. v. Assessors of Malden, 359 Mass. 106, 110 (1971).

Based on the foregoing facts, the Board found that the appellant failed to meet his burden of proving that the subject property was overvalued for fiscal year 2008. Accordingly, the Board entered a decision for the appellee in this appeal.

THE APPELLATE TAX BOARD

By: ___________________________________

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: ____________________________

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

ANGELO and ALICE ARENA v. COMMISSIONER OF REVENUE

Docket No. C287804 Promulgated:

January 15, 2010

This is an appeal 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”), to abate personal income tax for the calendar years 2002, 2003, 2004, and 2005 (“tax years at issue”).

On December 15, 2008, the Appellate Tax Board (“Board”) issued a decision for the appellants. Based on a Supplemental Statement of Agreed Facts submitted by the parties after the Board’s December 15, 2008 Decision, the Board issued a revised decision for the appellants simultaneously with these Findings of Fact and Report.

Commissioner Rose heard this appeal. Chairman Hammond and Commissioners Scharaffa, Egan, and Mulhern joined him in the revised decision for the appellants. These findings of fact and report are made pursuant to a request by the appellee under G.L. c. 58A, § 13 and 831 CMR 1.32.

Walter J. Flowers, Esq. for the appellants.

Celine E. Jackson, Esq. and John J. Connors, Jr., Esq. for the appellee.

FINDINGS OF FACT AND REPORT

Based on the testimony and exhibits offered into evidence at the hearing of this appeal, the Appellate Tax Board (“Board”) made the following findings of fact.

At issue in this appeal is whether appellants Angelo and Alice Arena were domiciled in Massachusetts during the tax years at issue and therefore properly subject to Massachusetts personal income tax as residents.

Tax years 2002 and 2003

The appellants timely filed Massachusetts Nonresident/Part Year Resident personal income tax returns for tax years 2002 and 2003. The tax reported and paid on the 2002 return was $33 and the tax reported and paid on the 2003 return was $115. On January 13, 2006, the Commissioner issued to the appellants a Notice of Intent to Assess (“NIA”), proposing to assess $40,037.85 of personal income tax plus interest for the tax years 2002 and 2003 based on her determination that the appellants were domiciled in Massachusetts during both of those tax years.

On February 27, 2006, the Commissioner received a Special Consent Form Extending the Time for Assessment of Taxes signed by the appellants, as well as a request from the appellants for a conference. A conference regarding the NIA was held on April 19, 2006. After the conference, the Commissioner maintained that the appellants were domiciled in Massachusetts for the tax years 2002 and 2003. The Commissioner thus issued to the appellants a Notice of Assessment (“NOA”) on August 29, 2006, in the amount of $42,193.14 in personal income tax for the tax years 2002 and 2003.

The appellants timely filed an abatement application on October 2, 2006. On December 8, 2006, the Commissioner issued a Notice of Abatement Determination denying the appellants’ request for abatement. On February 6, 2007, the appellants seasonably filed their petitions with the Board for tax years 2002 and 2003. On the basis of these facts, the Board found and ruled that it had jurisdiction over the appeals for tax years 2002 and 2003.

Tax years 2004 and 2005

The appellants timely filed, pursuant to an extension of time to file, a Massachusetts Nonresident/Part Year Resident personal income tax return, claiming nonresident status for tax year 2005. The tax reported due on the 2005 return was $14,840.00. On May 13, 2006, the Commissioner issued a notice to the appellants indicating a discrepancy between the Commissioner’s records and the $25,800 refund that the appellants claimed for tax year 2004 and applied as a credit on the 2005 tax return. On May 28, 2006, the Commissioner issued an NOA to the appellants in the amount of $15,079.33 in personal income tax and interest for tax year 2005, based on her determination that the appellants were domiciled in Massachusetts and that the appellants were not entitled to the $25,800 credit.

The appellants timely filed their abatement application for the tax years 2004 and 2005 on December 28, 2007. On January 24, 2008, the Commissioner issued to the appellants a Notice of Abatement Determination denying their request for an abatement. Because the issues relevant to the tax year 2004 and 2005 assessments were the same as those at issue in the tax year 2002 and 2003 appeals, the appellants filed an assented-to Motion to Consolidate all four tax years in this appeal, which the Board allowed on February 19, 2008.

Findings of fact for all tax years at issue

Angelo Arena was born and raised in Lynn, Massachusetts. He attended Lynn public schools and then the Massachusetts Institute of Technology in Cambridge, Massachusetts. After receiving his college degree, Mr. Arena worked for one year at General Electric Company in Lynn. He then attended Columbia University Graduate School of Business in New York City. After graduation, Mr. Arena began working for Federated Department Store in Brooklyn, New York. He then enrolled in the United States Air Force for a two-year, active-service tour of duty. After completing his military service, Mr. Arena resumed his employment with Federated Department Store in California, where he met and married Mrs. Arena, a native of California. During the course of his employment, Mr. Arena and his family moved to Dallas, Chicago and Baltimore.

Alice Arena was raised in California. She attended school in Los Angeles. After graduating from college, Mrs. Arena pursued employment with Broadway Department Store in Los Angeles. After marrying Mr. Arena, Mrs. Arena’s activities focused on raising their five children, maintaining their various homes, and being involved with charitable boards.

The appellants bought their first home in Massachusetts in 1976. Mr. Arena testified that he purchased this home, which was located in Marblehead, “strictly as a summer residence.” Because their first Marblehead home became too small to accommodate the appellants’ five children, the appellants sold this home and purchased their current home in Marblehead in 1981. When Mr. Arena was working and the appellants’ children were young, Mrs. Arena spent the summers in Marblehead with their children. The appellants continued to use the Marblehead home as a summer home after Mr. Arena’s retirement.

The appellants purchased their first home in Florida in 1987. Mr. Arena explained that the appellants were considering “where we would want to retire” in the future, so they purchased a small, two-bedroom condominium to see if they liked the Naples area. Mr. Arena testified that he retired in late 1990 or early 1991. At that time, the appellants were living in Baltimore. Upon Mr. Arena’s retirement, the appellants sold their small Naples condominium, as well as their home in California, and purchased a home in Naples for retirement.

During the tax years at issue, the appellants owned and maintained three residences: (1) a condominium in New York City; (2) a single-family home in Naples, Florida, purchased in 1991 and consisting of 4,800 square feet, with three bedrooms and four bathrooms; and (3) a single-family home in Marblehead, purchased in 1981 and consisting of 6,000 square feet, with four bedrooms and five bathrooms. Mr. Arena testified that the appellants spent approximately three months a year in Massachusetts — from about the end of May or beginning of June until around Labor Day — about a month to six weeks a year in New York, about six and a half months in Florida, and two to four weeks traveling, including visiting their children, who reside in California and Tennessee. Both Mr. and Mrs. Arena testified that they considered their Naples residence to be their “home.”

Mr. Arena further testified that the appellants and their children typically spent the Christmas holiday in Massachusetts. He explained, however, that after the Christmas holiday, the appellants would “shut down” the Marblehead property by turning off the water and the hot water heaters, draining the pipes, and taking precautions against freezing like putting antifreeze in the heating system and wrapping electrical coils. Mr. Arena explained that the appellants began shutting down their Marblehead home for the winter after 1994 when, at a time when the appellants were not occupying the Marblehead home, a flood resulted in a sewage backup. The problem was discovered by the people who would “look after” the home for them while it was unoccupied, but not before it had “caused an awful lot of damage” which “took us a good year or more to even get repaired.” After this incident, the appellants removed the Marblehead home from the town sewer system and began to shut down the home for the winter months. Mr. Arena testified that the shut-down process “basically renders the house uninhabitable. You couldn’t really go there because you couldn’t use a toilet or anything like that.”

Mr. Arena testified that, unlike his Marblehead home, his Naples home was habitable all year round. He explained that, even though the appellants spent their summers in Marblehead, he would spend some time in Florida every month during the tax years at issue, even during the summertime, partly because he had investments in Florida and partly because he was being treated for melanoma by a doctor in Naples and he required quarterly checkups. Mr. Arena explained that Florida was “hurricane prone,” so he used hurricane shutters to safeguard that home during the summer months. However, he explained that when he went to the Naples home during the summer months, he was able to open the home in about a half an hour, simply by opening the shutters, and that the home’s air conditioning systems stayed on all year. Therefore, he concluded that, while he took some precautions, the Naples home remained habitable during the summer.

During the tax years at issue, Mr. Arena’s father resided in Massachusetts and two of the appellants’ daughters attended graduate schools in Massachusetts. The appellants contracted for a cellular phone family plan with a 617 area code during the tax years at issue. The plan included five telephones, one for each of the appellants, one for Mr. Arena’s father, and one for each daughter attending school in Massachusetts. Mr. Arena testified that the appellants entered into the cellular phone contract for a term of three years, primarily so that his father, who was about 90 years old, would have an emergency telephone with him. After the contract expired, the appellants’ children were working in California, so the appellants discontinued those telephones, retained the father’s 617 area code telephone and switched the appellants’ telephone numbers to a Florida area code.

Mr. Arena admitted that he had much of the appellants’ mail sent to the Marblehead home, particularly bank statements and monthly bills. He explained that the appellants often traveled between their three homes or a vacation destination, and his father was retired and “loved something to do, so we gave him a project.” The father would collect and send the mail to the appellants wherever they happened to be.

Mr. Arena was diagnosed with prostate cancer in 2003 and, after researching various treatment techniques, he decided to pursue treatment with a doctor practicing at Dana Farber, Brigham and Women’s Hospital, in Boston, Massachusetts. He explained that he had a procedure performed sometime in March or April, 2004 and following the procedure, he had some follow-up appointments during that summer. Mr. Arena conceded that his health insurance throughout his cancer treatments was Blue Cross and Blue Shield of Massachusetts. As of the hearing, Mr. Arena stated that he visited the doctor annually for follow-up appointments; “I just schedule it so it’s in a time period when I’m here.”

In addition to their residential properties, the appellants have owned various investment properties in Massachusetts as well as in Florida. Financing documents pertaining to investment properties in Marblehead and Lynn list Mr. Arena’s Marblehead address as his home address. The Massachusetts investment properties were primarily residential, while the Florida properties were commercial. Mr. Arena admitted that the residential properties required more management time than the commercial properties, but he explained that he hired a manager to perform these services for him. Mr. Arena testified that the total value of the appellants’ Florida investment properties was roughly three times the total value of their Massachusetts investment properties.

Mr. Arena is also listed as a manager and signatory of two Massachusetts limited liability companies (“LLCs”), Area Realty, which was formed in 1999, and Area Realty Two, which was formed in 2002. Mr. Arena testified that Area Realty was formed for the purpose of buying commercial properties that would be owned by his children and the children of his partner, Eyk Van Otterloo, who resides in Marblehead. Mr. Arena explained that the investment was with his children’s money, and his role was to advise his children to help them make purchases of real estate. He had no equity interest in the company.

After Area Realty had acquired three commercial properties, Mr. Arena discovered an opportunity to purchase two additional commercial properties. Mr. Arena and Mr. Van Otterloo decided to form a second LLC, Area Realty Two, to purchase these properties. The equity of Area Realty Two was also owned by the children of Mr. Arena and Mr. Van Otterloo, but Mr. Arena and Mr. Van Otterloo had loaned money to this LLC to make the purchases. Upon the advice of accountants, Mr. Arena and Mr. Van Otterloo took preferred stock payments as repayment of the loan. Mr. Arena reported these stock payments (which he refers to as “phantom income”) on his Massachusetts income tax return for the tax years at issue.

Mrs. Arena was also engaged in limited business activities in Massachusetts. She explained that in around 1991, about the time of Mr. Arena’s retirement, she obtained her real estate license in Baltimore. Mrs. Arena testified that she was fairly active with her license in Baltimore. At the suggestion of a friend who had her own real estate company in Marblehead, Mrs. Arena then obtained her real estate license in Massachusetts. Mrs. Arena served as a part-time realtor during the summer months in Marblehead. Mrs. Arena testified that she partnered with her friend to sell one multi-million dollar property in Marblehead. On the Internet website containing the listing, Mrs. Arena described herself as a “Marblehead resident for over 25 years” and that she and her husband “served on multiple boards including the House of Seven Gables, the Junior League of Boston and the North Shore Medical Center.” However, Mrs. Arena explained that she made this statement for business purposes, “because it would have been difficult to say that I was a resident of Florida when I was marketing to Massachusetts buyers.” She also explained that she was not actually serving on a board at the time that she made the statement. Mrs. Arena testified that this listing was a one-time advertisement and that, aside from this one multi-million dollar business venture with her friend, she was not significantly involved in any business activity as a broker. Mrs. Arena’s income from this activity was not a substantial source of income for the appellants, and she eventually let her license expire “[b]ecause I just wasn’t working at it anymore.”

Mr. and Mrs. Arena both testified to the various social organizations to which they belonged. First, Mr. Arena testified that during the tax years at issue, he was a member of social clubs in both Florida and Massachusetts. He admitted that he was a member of a yacht club and a golf club in Massachusetts. However, he explained, these memberships were used during the summer months. He testified that he was also a member of “say, three or four clubs in Naples,” including a country club, a yacht club, and a tennis resort club. He testified that he used his memberships at the Naples clubs more frequently than those at his Massachusetts clubs “because I’m there that much more.” The club in which he considered himself the most involved was the Royal Point Siena club in Naples, which he considered an all-inclusive country club, offering a golf course, a swimming pool and tennis courts, as well as many social activities. Mr. Arena also testified that he attended churches in Naples, Marblehead and New York City; “Obviously, depends on where we are.”

Mrs. Arena testified that she was involved in a limited number of social clubs in Massachusetts: “[o]nly when it related to good friends who would say come help do the flowers for the garden club or something of that nature.” She explained that she was on the board for the House of Seven Gables for about a year but that “when it became apparent that I missed most of the meetings,” she resigned so that her spot could be filled by “someone who could spend more time and devote more time . . . instead of me.” She testified that, by contrast, she was “very involved” in a social club in Florida by organizing bridge games and playing on the tennis team. She also testified that she volunteers at a migrant worker facility in Florida, and she entertains often at her Naples home. When asked to compare the importance of social and civic activities in Massachusetts versus Florida, Mrs. Arena responded:

Well, my civic I would say are far more tied to Naples where I really do get involved with some things, and socially I get involved with issues.

Massachusetts, it’s strictly seeing our friends and, you know, having dinner and playing tennis and golf, and that’s primarily it.

Both Mr. and Mrs. Arena testified that they are registered to vote in Florida and that they have never voted in Massachusetts. Mr. Arena has not held a Massachusetts driver’s license since the 1940s, and Mrs. Arena has never held a Massachusetts driver’s license. The appellants had their first will and testament prepared when they were living in Chicago during the 1970s. Mr. Arena testified that the will was since updated to reflect the appellants’ Naples address. The first and third pages of the will were submitted into evidence, and Mr. Arena testified that he had not since changed the declaration of residence which appears at the beginning of the will. The will is held in a safe deposit box in Naples. The appellants had three Massachusetts bank accounts during the tax years at issue, but they did not maintain a safe deposit box in Massachusetts. Upon his retirement, Mr. Arena began drawing Social Security payments, which he has directly deposited to his bank in Florida.

Mr. Arena testified that he owned a boat in Massachusetts and one in Florida. He testified that the Florida boat was a larger boat, intended for cruising, which was complete with sleeping accommodations, while the Massachusetts boat was smaller in capacity and designed primarily for fishing and other small excursions. Mr. Arena also testified that he owned and registered two vehicles in Massachusetts and four vehicles in Florida, which included two so-called “active” cars and two so-called “collectors” cars.

The appellants submitted into evidence their credit card statements for the tax years at issue. According to restaurant charges on those statements, the appellants estimated that they were present in Massachusetts the following number of days:

Tax Year	Approximate number of days in Massachusetts	Percentage of time in Massachusetts
2002	106	29%
2003	81	22%
2004	153	42%
2005	95	26%

As evidenced above, the restaurant charges indicated that the appellants spent the most time in Massachusetts during tax year 2004, the year in which Mr. Arena was being treated for cancer and their daughter was being treated in a Massachusetts hospital.

The appellants filed a Massachusetts Resident income tax return for the tax year ended December 31, 2001. Mr. Arena testified that he had been unaware at the time that he signed the return that it was a resident income tax return, because comparing the returns side-by-side, the resident return looked identical to the nonresident return except for a single line of normal-size type that designated it as a resident return. Mr. Arena testified that the filing of a resident return for that year must have been unintentional on the part of his accountant, because the accountant also prepared for the appellants an intangible property tax return for Florida, which was required only of Florida residents. Mr. Arena further explained that his accountant had prepared his returns since 1965 and that his accountant simply must have “picked up the wrong form in 2001,” indicating that the accountant did not use computer software to prepare the appellants’ 2001 return. The address on the 2001 tax return was the appellants’ Florida address.

The Board found that both Mr. and Mrs. Arena were credible witnesses with respect to all topics covered by their testimonies.

On the basis of these findings, the Board found and ruled that Florida was the center of the appellants’ social, civic and family life during the tax years at issue. While Mr. Arena was a native of Lynn, Massachusetts, and some of his family members, particularly his elderly father, resided in Massachusetts during the tax years at issue, the appellants nevertheless always considered their Marblehead home to be a summer residence. In their opinion, the Marblehead home, which they had purchased back in 1981,[3] was furnished like a summer residence. By contrast, the appellants specifically purchased the Naples home as they were preparing for Mr. Arena’s retirement, and their prized furnishings, which had traveled with them throughout their moves during their married life, went to their Naples home. Moreover, the appellants took active steps to close the Marblehead home for the winter by shutting off utilities, thereby rendering the home uninhabitable. The Board found credible Mr. Arena’s explanation that he took these precautions to prevent another flood during his prolonged absence for the winter months. By contrast, the Naples home, while in a hurricane-prone area, was nonetheless habitable when the appellants were not present there; Mr. Arena could “open” the home in minutes simply by opening hurricane shutters, which he did about every month during the years at issue, including the summer months. Furthermore, Mr. Arena testified that the appellants filed a declaration of homestead on their Naples home, sometime in the early 1990s, further demonstrating their intent to make Naples their home.

The Commissioner pointed to the cell phone plan contracted in Massachusetts and the fact that the appellants directed their mail to their Marblehead residence as determinative of where the appellants considered their home. However, the Board found that the appellants gave credible explanations for these ties to Massachusetts. Under the facts of these appeals, the cell phone plan was a logical convenience, considering that the appellants, although not residents themselves, had two daughters and an aging father living in Massachusetts. With respect to the mail, the appellants, who lead a very active lifestyle of travel, were often not in any one place, including Massachusetts, for long periods of time. The Board found credible Mr. Arena’s explanation of wanting to give his aging father, who would know of his son’s whereabouts, an activity and a sense of purpose.

As for the business activities of the appellants, these were not so steady and involved as to require the appellants’ consistent presence in Massachusetts. Mr. Arena’s Massachusetts investment properties required active management, but he did not manage them himself, instead hiring a manager to take care of this for him. As for his LLC duties, the Board found that Mr. Arena was an advisor to his children, and his activities hardly involved day-to-day active management as would full-time employment within Massachusetts. Mrs. Arena also was not significantly involved in a Massachusetts business; her involvement in selling real estate was sporadic at best.

Furthermore, the appellants’ social, civic and family ties to Florida were stronger than those to Massachusetts. The appellants attended churches and played sports such as tennis and golf wherever they happened to be. However, both Mr. and Mrs. Arena indicated that they were more involved in their social clubs in Naples. Mrs. Arena particularly was involved in organizing bridge games and charitable activities in Naples, yet she resigned from a Massachusetts charitable board because she felt that she was missing too many meetings. Both Mr. and Mrs. Arena held Florida drivers’ licenses and voted in Florida; they have never voted in Massachusetts. Moreover, the appellants filed a homestead exemption on their Naples home and they had their will updated to reflect their Naples home as their permanent residence.

On the basis of all of the findings, the Board found that the appellants intended to make Florida, not Massachusetts, their home for the present and foreseeable future during the tax years at issue. Therefore, to the extent that it is a finding of fact, the Board found that the appellants were domiciled in Florida.

Further, the Board found, on the basis of restaurant charges which, given the appellants’ lifestyle, were reliable indicators of days present in Massachusetts, together with the credible testimony of the appellants, that the appellants spent fewer than 183 days physically present in Massachusetts during each of the tax years at issue. Therefore, as will be explained in the following Opinion, the Board found that the appellants’ physical presence in Massachusetts was insufficient to subject them to tax as residents for purpose of G.L. c. 62, § 1(f).

Accordingly, the Board issued a revised decision for the appellants in this appeal.

OPINION

(1) any natural person domiciled in the commonwealth, or (2) any natural person who is not domiciled in the commonwealth but who maintains a permanent place of abode in the commonwealth and spends in the aggregate more than one hundred eighty-three days of the taxable year in the commonwealth, including days spent partially in and partially out of the commonwealth.

G.L. c. 62, § 1(f). The issue presented in these appeals is whether the appellants were domiciled in Massachusetts or, if not, spent over 183 days in Massachusetts and, therefore, were taxable as residents of Massachusetts.

The Supreme Judicial Court has recognized that a person may have a residence in one place and a permanent home (i.e., a domicile) in another. See, e.g., Hopkins v. Commissioner of Corps. & Tax’n, 320 Mass. 168, 173 (1946); Horvitz v. Commissioner of Revenue, 51 Mass. App. Ct. 386, 393 (2001). Having more than one residence can lead to factors on more than one side of the “domicil ledger.” See Reiersen v. Commissioner of Revenue, 26 Mass. App. Ct. 124, 127 (1988). Therefore, a determination of domicile depends upon a comprehensive facts-and-circumstances analysis:

“No exact definition can be given of domicile; it depends upon no one fact or combination of circumstances, but from the whole taken together it must be determined in each particular case . . .; and it may often occur, that the evidence of facts tending to establish the domicile in one place, would be entirely conclusive, were it not for the existence of facts and circumstances of a still more conclusive and decisive character, which fix it, beyond question, in another.”

Horvitz v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports 2002-252, 257, aff’d, 60 Mass. App. Ct. 1103 (2003) (quoting Tax Collector of Lowell v. Hanchett, 240 Mass. 557, 561 (1922)(cite omitted)). While a person may have ties to more than one location, the standard of domicile is that it is “‘the place where a person dwells and which is the center of his domestic, social and civil life.’” Reiersen, 26 Mass. App. Ct. at 125 (emphasis added)(cite omitted).

In the instant appeal, the Commissioner contended that, because the appellants had filed a Massachusetts Resident tax return for tax year 2001, the appellants admitted that they were domiciled in Massachusetts for 2001. The Commissioner then argued that, since the time for amending that tax return has expired, the appellants are precluded from protesting that they were domiciled in Massachusetts for tax year 2001. Therefore, the Commissioner concluded, if the appellants now wish to assert that they were not domiciled in Massachusetts during the tax years at issue, they have the burden of proving that a change of domicile had occurred between 2001 and the tax years at issue. See Horvitz, 51 Mass. App. Ct. at 394.

The Commissioner’s argument is flawed in several respects. First, the information contained on a tax return, while perhaps a factor to consider, is certainly not decisive in determining domicile. See Reiersen, 24 Mass. App. Ct. at 130-31 (finding that, where a resident of the Philippines had used a Massachusetts address on a tax return, “[t]he addresses which appeared on the Reiersens’ tax returns, to which the board gave some weight, are in this case an extremely uncertain guide.”). Secondly, the Board found credible Mr. Arena’s testimony that he unwittingly filed a Massachusetts Resident return for 2001. Facts which established the lack of intent to file a resident return include: the return was prepared by an accountant rather than by Mr. Arena himself; the accountant also filed an intangible property return for Florida, which would only be required of a resident of Florida; the accountant apparently did not use computer software, which would have generated the proper return for Mr. Arena to file; and, when Mr. Arena compared the Resident and Nonresident/Part Year Resident returns side-by-side, they were nearly identical. Because it is unclear whether the return was prepared properly, the Board found that the 2001 return did not conclusively establish anything, including domicile in Massachusetts.

The appellants have owned a home in Marblehead since 1976 and have always treated it to a large extent as a summer home, furnishing it with their less-prized possessions and, with the exception of some time at the Christmas holidays, the appellants tended not to stay there after Labor Day and before Memorial Day.[4] The appellants filed a homestead exemption on their Naples home. While the appellants owned two cars and a boat registered in Massachusetts, they also owned four cars and a larger boat registered in Florida, and both appellants held Florida drivers’ licenses. Both appellants voted in Florida, not Massachusetts, and in fact have never voted in Massachusetts. While the appellants had bank accounts in Massachusetts, they also have an account in Florida, to which they have their social security check automatically deposited, and they also maintained a safe deposit box in Florida, not Massachusetts.

The appellants were active wherever they happened to be; they had friends and were involved in social and activity clubs in both Massachusetts and Florida. However, the Board found that both appellants were more involved in their clubs in Naples, particularly Mrs. Arena, who organized bridge games and participated in charitable endeavors. By contrast, Mrs. Arena was not readily available to the same extent for Massachusetts activities. In fact, Mrs. Arena resigned from the board of the House of Seven Gables because she was not present in Massachusetts to attend the meetings with regularity. Moreover, even while Mr. Arena’s father was living in Marblehead and their two daughters were studying in Massachusetts, the appellants as a couple preferred to spend their time in Naples together. On the basis of the above findings, the Board found and ruled that the center of appellants’ social, civic and family lives was Florida, not Massachusetts, during the tax years at issue.

Furthermore, Mr. Arena’s passive activities with respect to his investment properties and his advisory role in the two LLCs did not require him to spend substantial time in Massachusetts engaging in these activities. Mrs. Arena also did not substantially engage in her Massachusetts real estate activities.

On the basis of the Board’s findings, the Board found and ruled that Massachusetts was not the center of the appellant’s social, family, civic or family life and therefore, the appellants were not domiciled in Massachusetts during the tax years at issue.

Further, based on the appellants’ credit card restaurant charges and other credible evidence of record, the Board also found that, in each of the taxable years at issue, the appellants spent fewer than the requisite 183 days which would establish residency in Massachusetts pursuant to G.L. c. 62, § 1(f). Therefore, the Board found and ruled that the appellants’ physical presence in Massachusetts was insufficient to subject them to tax as residents for purposes of G.L. c. 62, § 1(f).

On the basis of all of the evidence in the instant appeal, the Board thus found and ruled that the appellants were not domiciled in Massachusetts, nor were they otherwise taxable as residents of Massachusetts, during the tax years at issue. Accordingly, the Board issued a revised decision, based primarily on the parties’ Supplemental Statement of Agreed Facts, for the appellants in this appeal and ordered abatements as follows: $20,006, along with associated interest and penalties, for tax year 2002; $14,386, along with associated interest and penalties, for tax year 2003; $11,779 of tax assessed and paid for tax year 2004; and no abatement for tax year 2005.

APPELLATE TAX BOARD

By: _____ ____ Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: _____

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

RANDOLPH A. COTTER v. COMMISSIONER OF REVENUE

Docket No. C293719 Promulgated:

January 15, 2010

This is an appeal filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 62C, § 39, from the refusal of the Commissioner of Revenue (“Commissioner” or “appellee”) to abate personal income tax assessed to the appellant, Randolph A. Cotter (“Mr. Cotter” or “appellant”) for tax years 2003 and 2004 (“tax years at issue”).

Commissioner Scharaffa heard this appeal. Chairman Hammond and Commissioners Egan, Rose, and Mulhern joined him in a decision for the appellee.

These findings of fact and report are made pursuant to requests by the appellant and appellee under G.L. c. 58A, § 13 and 831 CMR 1.32

Bartholomew P. Molloy, Esq. for the appellant.

Celine E. Jackson, Esq. and Benson V. Solivan, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of a Statement of Agreed Facts and testimony and exhibits offered during the hearing of this appeal, the Appellate Tax Board (“Board”) made the following findings of fact.

On April 10, 2004, Mr. Cotter filed a Massachusetts part-year resident income tax return for the tax year 2003, reporting part-year Massachusetts income tax due of $9,678.00. On that return, Mr. Cotter indicated that he was a Massachusetts resident from January 1, 2003 through May 7, 2003. On April 2, 2005, Mr. Cotter filed a Massachusetts non-resident income tax return for all of tax year 2004, reporting no Massachusetts income tax due.

By a Notice of Intention to Assess dated April 30 2006, the Commissioner proposed to assess $13,248.45 and $14,308.05 of personal income tax plus interest for the tax years 2003 and 2004, respectively, based on her determination that Mr. Cotter was domiciled in Massachusetts during the tax years at issue. By a Notice of Assessment dated October 18, 2006, the Commissioner assessed personal income tax in the amount of $13,807.20 and $14,911.49 for the 2003 and 2004 tax years, respectively.[5] On or about November 9, 2006, Mr. Cotter paid the outstanding tax liabilities for the tax years at issue.

Mr. Cotter filed an Application for Abatement for the tax years at issue with the Commissioner on March 14, 2007. On August 22, 2007, the Commissioner issued to Mr. Cotter a Notice of Abatement Determination denying his request for abatement for the tax years at issue. On October 3, 2007, Mr. Cotter timely filed his appeal for the tax years at issue with the Board. Based on the above facts, the Board found that it had jurisdiction to hear and decide this appeal.

At issue in this appeal is whether Mr. Cotter was a Massachusetts resident for purposes of personal income tax for the tax years at issue. Mr. Cotter was a Massachusetts domiciliary for a number of years prior to the tax years at issue. He was raised in Saugus and obtained degrees from Wentworth Institute and Northeastern University in Boston. Subsequently, Mr. Cotter was employed by a number of companies in Massachusetts, except for a ten-year period when he was employed in New York City. He returned to Massachusetts in April, 1979.

1. The appellant’s personal and family connections.

It is undisputed that, prior to the tax years at issue, Mr. Cotter’s primary residence was a single-family home located in Lynnfield, Massachusetts (“Lynnfield property”), which he kept furnished during the tax years at issue. One of Mr. Cotter’s witnesses, Karen Gallagher, a Massachusetts resident, described the Lynnfield property as an upscale home with multiple bedrooms and good landscaping. During the tax years at issue, Mr. Cotter also owned a single-family home in Gloucester, Massachusetts (“Gloucester property”). Mr. Cotter testified that he had owned the Gloucester property since the mid-1990s and used it primarily as a summer beach house.

Mr. Cotter first acquired property in Florida in the mid-1990s, when he purchased a condominium in Fort Lauderdale, Florida (“Unit 238”) for the purpose of visiting during the winter. The two-bedroom unit was located in the middle of its complex with no ocean or lake view. Mr. Cotter testified that during the years that he owned Unit 238, he considered his Lynnfield property to be his primary residence. Mr. Cotter sold Unit 238 at or around the end of 2001. In November, 2001, Mr. Cotter purchased a three-bedroom condominium (“Unit 291”) in the same development. After purchasing Unit 291, Mr. Cotter and his companion, Judy, renovated and refurnished the unit so that it was ready for occupancy by the fall of 2002.

Mr. Cotter testified that it was some time late in 2002 that he formulated his intent to change his domicile from Massachusetts to Florida. In an attempt to accomplish this goal, Mr. Cotter consulted with Attorney Ronald N. Stetler of Pepe & Hazard in Boston. Mr. Cotter stated that a warmer climate and social activities, like fishing, were some of the reasons for his decision to change his domicile. However, Mr. Cotter’s testimony revealed that a fundamental motivation for changing his domicile to Florida was tax relief:

Q. What was the purpose of retaining Mr. Stetler of Pepe & Hazard?

A. I needed a tax attorney, not a civil attorney, because I had a lot of money and I had to make decisions on what I did correctly and I didn’t want to make any mistakes. So, that’s why I hired a tax attorney.

Q. After consulting with Mr. Stetler what, if anything, did you understand were the tax benefits of being domiciled in Florida as opposed to Massachusetts?

A. Multiple. And he listed them up for me.

Number 1, there was no inheritance tax in Florida as there was in Massachusetts.

Number 2, there was no state income tax in Florida as there was in Massachusetts.

If I become a Florida resident, it also gave me the ability to homestead. So the pluses far outweighed the minuses. And that’s when we made the decision to go forward . . . .

Mr. Cotter described the process he undertook to establish his domicile in Florida: “They gave me a check list; these are the things that you have to do because the state watches out for these things. Florida requires these things. And that’s what we did.”

Mr. Cotter detailed his efforts to change his domicile to Florida. He testified that he listed his Lynnfield property for sale around October, 2002. However, Mr. Cotter continued to own the Lynnfield property during the tax years at issue. His explanation was that he listed the Lynnfield property for $999,500 but, because the real estate market was depressed at that time, he did not sell it until 2005.

Mr. Cotter testified that Mr. Stetler also advised him to take a number of actions, including obtaining a Florida driver’s license, registering to vote in Florida, filing Florida Intangible Property Tax Returns, filing a Declaration of Domicile in Florida, and residing outside of Massachusetts for more than 183 days a year. Mr. Cotter testified that he met all of these objectives. Documentation submitted into evidence indicated that Mr. Cotter registered to vote in Florida on May 5, 2003. Mr. Cotter testified that he changed his will to reflect his Florida address, but that he did not execute it until late 2003. The evidence also showed that when Mr. Cotter first obtained a Florida driver’s license in 2003, he applied for and received a seasonal driver’s license; he did not acquire a full-year Florida driver’s license until March 11, 2004 and did not register a vehicle in Florida until he registered his primary vehicle, a Lexus, on April 20, 2004. In the meantime, Mr. Cotter renewed his Massachusetts driver’s license on June 25, 2004, on which he listed his Lynnfield property as his address. Moreover, he owned and maintained multiple automobiles, motorcycles, and a trailer registered in Massachusetts during the tax years at issue. Finally, Mr. Cotter testified that he filed a Declaration of Domicile in Florida on May 5, 2003, but he did not produce a copy of the declaration.

Mr. Cotter joined various organizations in Florida, including the Lago Mar Beach Club, the Florida chapter of the American Offshore Marina, the International Game Fishing Association, and the American Society of Mechanical Engineers. He also received his captain’s license and became a merchant marine officer. However, Mr. Cotter was also a member of the Heron Way Marina in Gloucester, where he participated in boating and fishing activities with his Massachusetts friends during the tax years at issue. Also during the tax years at issue, Mr. Cotter registered a boat in Florida, but he also maintained two boats registered in Massachusetts, in Quincy and in Gloucester.

Mr. Cotter had no family in Florida during the tax years at issue. Mr. Cotter had four children, three of whom lived in Massachusetts and one who lived in Maine. All of Mr. Cotter’s grandchildren resided in Massachusetts, as did his brother. Mr. Cotter testified that he spent the Christmas and Thanksgiving holidays with his family in Massachusetts during the tax years at issue.

Mr. Cotter submitted documentation of his credit card and ATM card transactions in an attempt to establish the number of days he was physically present in Florida during the tax years at issue. At the hearing, Mr. Cotter presented a calendar on which he circled the dates on which he had used his credit card or bank card within Florida. By counting the number of dates circled on the calendar, Mr. Cotter calculated that he was physically present in Florida at least 201 days in 2003 and at least 193 days in 2004.

However, the Board found several inconsistencies between Mr. Cotter’s calendars and the records of his credit card and banking transactions. For example, Mr. Cotter had circled the dates January 25 and 27, 2003 as dates which he could confirm that he was in Florida. However, First USA credit card statements indicate charges in Massachusetts for gas, retail stores, and a parking garage on January 25 through 28. The Board found that the gas and parking garage charges in particular indicated that Mr. Cotter was actually present in Massachusetts instead of Florida on those dates. The Board thus found that Mr. Cotter’s calendars were inconsistent and unreliable and therefore not credible evidence of his physical presence outside of Massachusetts.

At the hearing, Mr. Cotter’s witnesses, called to testify about his ties to Florida, consisted of his son, Randolph, and two friends, all of whom were Massachusetts residents. Randolph testified that he was very close to his father, and that the appellant was very close to his grandchildren, who enjoyed spending time at “Papa’s house” in Gloucester. Frank Armstrong, a friend of the appellant’s, testified that he enjoyed motorcycling with Mr. Cotter in Massachusetts. The appellant had not transferred registration of his motorcycles to Florida.

Mr. Cotter retained his Massachusetts wireless telephone number during the tax years at issue. He also maintained his Sovereign Bank account in Massachusetts and did not change the Massachusetts address on his personal checks. The bank continued to forward his statements to his Lynnfield property. Mr. Cotter also continued to receive a substantial amount of mail at his Lynnfield property during the tax years at issue, including: federal tax Forms 1098 and 1099 from Countrywide Home Mortgage; 2003 and 2004 Tax Reporting Statements from Merrill Lynch; combined tax statements from The Savings Bank, a Massachusetts bank; federal forms 1099 for both tax years at issue from Mony State St. Withholding Fund; a Valley Forge Life Insurance Company payment notice; a National Grange Mutual Insurance Company premium statement for 2003; ITT Industries Investment and Savings Plan statements for both tax years at issues; federal form 1099 from ITT Industries for tax year 2003; mortgage statements from Chase regarding the mortgage of Unit 291 for both tax years at issue; and First USA and Bank One credit card statements for both tax years at issue. When asked why he did not change his mailing address on his accounts, Mr. Cotter responded:

A: . . . . The system said to do all of these things. The system never said, make sure that you change your mailing address.

Q: What system?

A: When I worked with Ron Stetler of Pepe & Hazard. He was very specific of the things I had to do to become a Florida resident.

Furthermore, when Mr. Cotter filed a petition with the Gloucester Board of Appeals regarding his Gloucester property on November 14, 2005, he provided his Lynnfield address as the return address on the petition. Moreover, his vehicle excise bills were sent to him at his Lynnfield property for both tax years at issue, as was his boat excise bill for 2003. Finally, when Mr. Cotter won a sum of money from a Florida casino, he signed a receipt on November 1, 2003, six months after purportedly changing his domicile to Florida, declaring under the pains and penalty of perjury that his address for income tax purposes was his Lynnfield property.

2. The appellant’s Massachusetts business connections.

In 1979, the appellant founded Cotter Corporation, which built custom-process skid systems for biopharmaceutical and biotech companies. Cotter Corporation’s final location was 8 South Side Road in Danvers (the “Danvers property”). The Danvers property was owned by the Cotter Realty Trust, a Massachusetts real estate trust, which the appellant established in 1995 with himself as trustee and, along with his children, a beneficiary. On April 17, 2001, Mr. Cotter sold the assets of Cotter Corporation to ITT Industries, which changed the name of the company to Pure Flo Cotter, Division of ITT Industries (“Pure Flo Cotter”). Mr. Cotter remained the President of Cotter Corporation until November 10, 2004, the date that Cotter Corporation received its final payment from ITT Industries and was officially dissolved.

Pure Flo Cotter continued to operate the business at the Danvers property, which at the time of sale was within the ownership and control of the Cotter Realty Trust. According to a Trustee’s Certificate entered into evidence, the Cotter Realty Trust “remain[ed] in full force and effect” as of July 19, 2004, the date of that certificate’s signing, and the appellant never suggested that the Cotter Realty Trust was dissolved at any time during the tax years at issue. The Board thus found that the Cotter Realty Trust continued to own and operate the Danvers Property, and that Pure Flo Cotter leased the Danvers property from Cotter Realty Trust during the tax years at issue.

As part of the sale, Mr. Cotter signed a four-year non-competition contract and a two-year employment contract to work as a consultant for Pure Flo Cotter. However, Mr. Cotter’s consulting relationship was terminated in October, 2002. Pure Flo Cotter continued to pay Mr. Cotter until April 17, 2003. Mr. Cotter’s sons, Randolph, Jr. (“Randolph”) and Timothy, then formed Cotter Brothers Corporation, a direct competitor of Pure Flo Cotter, in July, 2003. Mr. Cotter testified that he had no business dealings with Cotter Brothers Corporation until after his non-competition contract expired in April, 2005, and that he was not a member of the Cotter Brothers Corporation board of directors until 2007.

As explained above, Pure Flo Cotter continued to lease the Danvers property from the Cotter Realty Trust, of which Mr. Cotter was the trustee during the tax years at issue. Mr. Cotter and Randolph both testified that Mr. Cotter was given a corner office in the back of the building occupied by Cotter Brothers Corporation. Mr. Cotter testified that the corner office was reserved for him because of his work as the trustee of the Cotter Realty Trust, which leased the Danvers property to Pure Flo Cotter during the tax years at issue. Moreover, Mr. Cotter was also the President and Secretary of a Massachusetts corporation during the tax years at issue called Ultra-Pure Stainless, Inc. (“Ultra-Pure Stainless”), organized on October 30, 1991 and with its principal place of business at the Danvers property. The Board thus found that Mr. Cotter had an office and continued to perform business duties at the Danvers property during the tax years at issue.

Mr. Cotter also established a Massachusetts realty trust for his children’s benefit, the Skipper Way Realty Trust, which owned the Gloucester property during the tax years at issue. He also established a charitable trust fund sometime in 2004 in honor of his late sister. The Elizabeth Cotter Trust was originally managed by a charitable foundation in Boston until Mr. Cotter transferred management of the fund to the Broward Foundation in Florida sometime in 2005. Finally, in May, 2003, the appellant established Cotter Consulting Group, a Delaware corporation with its principal place of business at Unit 291. In July, 2003, Mr. Cotter registered Cotter Consulting Group with the Massachusetts Secretary of State as a foreign company registered to do business in Massachusetts. The listed Registered Agent was Attorney Stetler, Mr. Cotter’s attorney from Massachusetts.

3. The Board’s ultimate findings.

The appellant readily admitted that tax savings was a primary motivation for him to change his domicile to Florida and that he received a “check list” from a tax attorney to establish a basis for claiming a change of domicile. While he enjoyed pastimes like going to the beach and fishing, it was undisputed that the core of Mr. Cotter’s family and social life was in Massachusetts during the tax years at issue. Mr. Cotter retained his upscale Lynnfield property, which he kept furnished, and the vast majority of Mr. Cotter’s family, with whom he was very close and with whom he spent much time, remained in Massachusetts during the tax years at issue. Mr. Cotter also enjoyed his pastimes of boating and fishing in Massachusetts through his involvement with the Heron Way Marina social club and his maintenance and use of two boats registered in Massachusetts, as well as his motorcycling in Massachusetts.

The appellant also kept multiple vehicles registered in Massachusetts. The only vehicle he registered in Florida was his Lexus, which he did not register in Florida until April 20, 2004, beyond the 2003 tax year and well into the 2004 tax year. When he first obtained a driver’s license in Florida sometime in early 2003, he applied for and received only a seasonal license; he did not obtain a full-time Florida license until March 11, 2004, and even then he renewed his Massachusetts license on June 25, 2004. While Mr. Cotter testified that he obtained a seasonal license in Florida and renewed his Massachusetts license in error, the Board was not persuaded that Mr. Cotter would take such actions unwittingly, particularly when he did not register any vehicles in Florida until April 20, 2004, and he maintained multiple vehicles in Massachusetts during the tax years at issue. Instead, the Board regarded all of the above factors as establishing that Mr. Cotter’s family and societal ties were stronger in Massachusetts than in Florida during the tax years at issue.

Moreover, Mr. Cotter retained much of his personal financial business in Massachusetts during the tax years at issue. He maintained a Massachusetts checking account, and he never changed his Massachusetts address on that account nor on the checks associated with that account. The appellant also received a substantial amount of mail at his Lynnfield property; he periodically filed change of address forms with the Post Office, but the appellant never changed his address to reflect his “new” domicile on his important financial accounts, including life insurance accounts, the mortgage account for Unit 291, his ITT retirement account, and his First USA credit card account. Therefore, his important Federal Forms 1098 and 1099 were directed to his Lynnfield property. Moreover, on November 1, 2003, after his alleged move to Florida, he made a sworn statement on a gambling winnings tax form, for a casino located in Florida, that his address for income tax purposes was his Lynnfield property.

In addition, Mr. Cotter’s in-state business activities with Skipper Way Realty Trust, Ultra-Pure Stainless, Cotter Consulting, and Cotter Realty Trust, which owned and leased the Danvers property during the tax years at issue, indicated that the appellant’s business network remained strongly rooted in Massachusetts during the tax years at issue. Mr. Cotter also maintained charitable activities in Massachusetts as trustee of the Elizabeth Cotter Trust, which was established in Massachusetts in 2004 and which he managed in Massachusetts until after the tax years at issue. The Board found that all of the above facts established that Mr. Cotter’s business and financial ties were stronger in Massachusetts than in Florida during the tax years at issue.

Therefore, on the basis of the evidence presented in this appeal, the Board found that the appellant’s legal filings in Florida were performed under the direction of his tax attorney and extended no further than what the tax attorney’s “system” dictated. These filings established a mere superficial relationship with Florida. However, the center of Mr. Cotter’s physical, business, social and civic activities remained in Massachusetts during the tax years at issue. Therefore, the Board found that Mr. Cotter demonstrated an intent to retain Massachusetts as his domicile during the tax years at issue.

Because the Board found that Mr. Cotter was domiciled in Massachusetts, it was not required to find that Mr. Cotter spent less than 183 days in Massachusetts. See G.L. c. 62, § 1(f). However, the Board examined Mr. Cotter’s evidence on this point because his physical presence in Massachusetts was a factor to be considered in determining whether Mr. Cotter was domiciled in Massachusetts during the tax years at issue. The Board found that Mr. Cotter’s statements on his own calendars and his testimony at the hearing were inconsistent with his credit card and banking records and thus adversely impacting his credibility and the credibility of the evidence he offered. The Board thus found that Mr. Cotter failed to produce evidence sufficient to establish that he was absent from Massachusetts as often as he claimed and instead indicated that he maintained a strong physical presence in Massachusetts during the tax years at issue.

Accordingly, and for the reasons stated more fully in the Opinion, the Board ruled that Mr. Cotter was a Massachusetts resident during the tax years at issue. The Board, therefore, issued a decision for the appellee in this appeal.

OPINION

G.L. c. 62, § 1(f). The issue presented in this appeal is whether the appellant was domiciled in Massachusetts or, if not, spent over 183 days in Massachusetts and, therefore, is taxable as a resident of Massachusetts.

The Supreme Judicial Court and Massachusetts Appeals Court have recognized that a person may have a residence in one place and a permanent home (i.e., domicile) in another. See, e.g., Hopkins v. Commissioner of Corps. & Tax’n, 320 Mass. 168, 173 (1946); Horvitz v. Commissioner of Revenue, 51 Mass. App. Ct. 386, 393 (2001). Having more than one residence can lead to factors on more than one side of the “domicil[e] ledger.” See Reiersen, 26 Mass. App. Ct. at 127. Therefore, a determination of domicile depends upon a comprehensive facts-and-circumstances analysis:

Horvitz v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports 2002-252, 257, aff’d, 60 Mass. App. Ct. 1103 (2003) (quoting Tax Collector of Lowell v. Hanchett, 240 Mass. 557, 561 (1922)(citation omitted)); see also Roarke v. Hanchett, 240 Mass. 557, 561 (1922) (finding that proof of domicile “depends upon no one fact or combination of circumstances, but from the whole taken together it must be determined in each particular case.”). While a person may have ties to more than one location, the standard of domicile is that it is “‘the place where a person dwells and which is the center of his domestic, social and civil life.’” Reiersen, 26 Mass. App. Ct. at 125 (citation omitted).

Once a party has established a domicile, the burden of proving a change is upon the party seeking to establish the change. Horvitz, 51 Mass. App. Ct. at 394; Mellon Natl. Bank & Trust Co. v. Commissioner of Corps. & Tax’n, 327 Mass. 631, 638 (1951); Commonwealth v. Bogigian, 265 Mass. 531, 538 (1929). In the present appeal, it is undisputed that Mr. Cotter was a Massachusetts domiciliary for most of his life, including the twenty-three years preceding the tax years at issue. Since Mr. Cotter was the party asserting that he changed his domicile to Florida, Mr. Cotter had the burden of proving that he was no longer domiciled in Massachusetts during the tax years at issue.

Massachusetts follows the common law rule that a person with legal capacity is considered to have changed his or her domicile by satisfying two elements: the establishment of physical residence in a different state and the intent to remain at the new residence permanently or indefinitely. McMahon v. McMahon, 31 Mass. App. Ct. 504, 505 (1991). The interpretation of intent goes beyond merely accepting the taxpayer’s expression of intent and instead requires an analysis of the facts closely connected to the taxpayer’s major life interests, including family relations, business connections, and social and extracurricular activities in order to determine his true intent. See Reiersen, 26 Mass. App. Ct. at 125 (“A change of domicile occurs when a person with capacity to change his domicile is physically present in a place and intends to make that place his home for the time at least; the fact and intent must concur.” (citing Hershkoff v. Board of Registered Voters of Worcester, 366 Mass. 570, 576-577 (1974))). Moreover, while the determination of intent is subjective in nature, if a person’s driving motivation for establishing the new domicile is to reduce a possible tax liability, the claimed domicile will be more closely scrutinized. Davis, 284 Mass. at 50 (“A man cannot elect to make one place his home for the general purpose of life, and another place his home for the general purpose of taxation.”).

The Board first examined the evidence of Mr. Cotter’s physical presence in Massachusetts. While the appellant enjoyed pastimes like going to the beach and fishing in Florida, he also enjoyed those pastimes in Massachusetts through his involvement in the Heron Way Marina social club and his maintenance and use of two boats in Massachusetts. Additionally, he enjoyed motorcycling in Massachusetts, and he never transferred his motorcycles to Florida. The Board also found that the appellant’s testimony and calendars contradicted his credit card and banking transaction records, thus undermining his credibility on the issue of the number of days he spent in Massachusetts. On the basis of all of the evidence, the Board thus found and ruled that the appellant failed to prove that he was physically absent from Massachusetts as often as he claimed, and instead actually indicated that he maintained a strong physical presence in Massachusetts during the tax years at issue.

Mr. Cotter also had strong family ties in Massachusetts, where three of his children and his grandchildren resided and where he spent the Christmas and Thanksgiving holidays, as well as his summers, during the tax years at issue. Mr. Cotter admitted to having no family in Florida. Moreover, Mr. Cotter registered multiple vehicles in Massachusetts and renewed his Massachusetts license during the tax years at issue; by contrast, he did not register a vehicle in Florida until April, 2004, and he did not obtain a permanent Florida driver’s license until March 2004. On the basis of these facts, the Board found and ruled that Mr. Cotter’s family and societal ties to Massachusetts were stronger than those to Florida during the tax years at issue.

Moreover, Mr. Cotter’s maintenance of Massachusetts bank accounts, the fact that he did not change his address on key financial accounts, including his bank accounts, life insurance accounts, and even his mortgage account for Unit 291, and his statement to the Florida casino on November 1, 2003 that his address for income tax purposes was his Lynnfield property, all established that Mr. Cotter’s financial ties to Massachusetts outweighed those to Florida during the tax years at issue. The fact that Mr. Cotter did not change his address on these accounts simply because “the system never said, change your mailing address” established that the appellant was more interested in making a superficial show to establish the appearance of domicile “because I had a lot of money and I had to make decisions on what I did correctly and I didn’t want to make any mistakes,” rather than genuinely changing his domicile to Florida.

Additionally, Mr. Cotter maintained significant business ties to Massachusetts during the tax years at issue through his involvement with Skipper Way Realty Trust, Ultra-Pure Stainless, Cotter Consulting, and Cotter Realty Trust, which owned and leased the Danvers property during the tax years at issue, as well as his charitable activities as trustee of the Elizabeth Cotter Trust. The Board found and ruled that Mr. Cotter’s business ties to Massachusetts were stronger than those to Florida during the tax years at issue.

On the basis of the facts in evidence, the Board thus found and ruled that the appellant’s family, social, personal and business ties established that he had no intent to abandon his Massachusetts domicile and change his domicile to Florida during the tax years at issue. Therefore, the Board found and ruled that the appellant failed to meet his burden of proving that he was not domiciled in Massachusetts during the tax years at issue. Accordingly, the Board issued a decision for the appellee in this appeal.

APPELLATE TAX BOARD

By: _____ __

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: ____

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

BENJAMIN BIRNIE v. BOARD OF ASSESSORS OF THE TOWN OF STOCKBRIDGE

Docket No. F298541 Promulgated: January 15, 2010

This is an appeal filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65 from the refusal of the appellee to abate real estate tax on certain real estate in the Town of Stockbridge owned by and assessed to Frank Birnie, Trustee of the 1999 Restatement of 1990 Trust Declaration, under G.L. c. 59, §§ 11 and 38, for fiscal year 2008.

Commissioner Mulhern heard this appeal. Chairman Hammond and Commissioners Scharaffa and Rose joined him in a decision for the appellant.

These findings of fact and report are made pursuant to requests by both the appellant and the appellee under G.L. c. 58A, § 13 and 831 CMR 1.32.

Benjamin Birnie, pro se, for the appellant.

Thomas J. Harrington, Esq. and Michael Blay, assessor, for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of testimony and exhibits offered at the hearing of this appeal, the Appellate Tax Board (“Board”) made the following findings of fact.

On January 1, 2007, Frank Birnie, Trustee of the 1999 Restatement of 1990 Trust Declaration (“the trust”), was the assessed owner of a parcel of real estate located at 20 Prospect Hill Road in the Town of Stockbridge (“subject property”). The parcel contains approximately 1.40 acres of land and is improved with a one-story modern/contemporary-style dwelling. The dwelling contains 2,106 square feet of living area, which includes a total of six rooms, including three bedrooms, and also two full bathrooms. The home has central air conditioning and an oil-fired heating system. The subject dwelling also includes a 208-square-foot enclosed porch, a 276-square-foot open porch, a 554-square-foot garage, and a 1,620-square-foot unfinished basement. The exterior of the dwelling is sided with clapboard, and its roof is finished with asphalt shingles. The subject dwelling is in excellent condition.

For fiscal year 2008, the Board of Assessors of Stockbridge (“assessors”) valued the subject property at $825,400 and assessed a tax thereon, at the rate of $6.92 per thousand, in the amount of $5,862.36.[6] On March 8, 2008, Frank Birnie executed a limited power of attorney granting Benjamin Birnie (“appellant”), his son, authority to act on his behalf with respect to the subject property. On March 26, 2008, the Stockbridge Collector of Taxes mailed the second-half fiscal year 2008 tax bills, with a payment due date of May 1, 2008. The tax due was timely paid without incurring interest. On April 7, 2008, in accordance with G.L. c. 59, § 59, the appellant timely filed an Application for Abatement with the assessors. The assessors denied the appellant’s abatement application on May 27, 2008. The appellant seasonably filed his appeal with the Board on August 11, 2008. On the basis of these facts, the Board found and ruled that it had jurisdiction to hear this appeal.

The appellant argued that the subject property was overvalued for fiscal year 2008 because the assessors based the subject assessment on calendar year 2005 sales, which they also used to arrive at the subject property’s fiscal year 2007 assessment. In support of his claim, the appellant offered into evidence the testimony of Michael Blay, assessor for Stockbridge, and also numerous exhibits, including the subject property’s property record card listing both the fiscal year 2007 and 2008 assessments; the assessors’ “Parcel Detail by Style,” which identified the sales used by the assessors to determine the fiscal year 2008 assessments; the assessors’ land curve schedule; and the property record cards for several properties located in Stockbridge.

Mr. Blay testified that to complete the valuation for fiscal year 2008, the assessors had to analyze sales of properties in the town within a given time period to derive the final assessment values, which were submitted to the Massachusetts Department of Revenue (“DOR”) for certification. Mr. Blay further testified that the subject property is categorized as a modern/contemporary-style dwelling and that there were no sales of this style dwelling in calendar year 2006. Therefore, the assessors relied on three sales of modern/contemporary-style properties that sold during calendar year 2005. Mr. Blay further testified that the assessors also used these sales to determine the subject property’s fiscal year 2007 assessment of $744,900, which represented an 8.3% increase above the subject property’s fiscal year 2006 assessment. Mr. Blay conceded that there were no significant improvements made to the subject property during calendar year 2006. However, relying on the same 2005 sales used to determine the subject property’s fiscal year 2007 assessment, the assessors determined that the subject property’s fiscal year 2008 assessed value had increased by an additional 10.8% percent from fiscal year 2007.

The appellant also argued that the subject property was disproportionately assessed for fiscal year 2008. Specifically, the appellant argued that because the first two acres of a parcel of real estate in Stockbridge were assessed at $36,000 per acre, with adjustments for condition and influence, and each additional acre was assessed at $4,500 per acre, the subject property, which includes a relatively small amount of land, was assessed at a much higher per-acre value than other properties in Stockbridge.

In support of his argument, the appellant relied solely on two sales of vacant land which occurred during calendar year 2006. Sale number one, located on Glendale Road, is a 2.86-acre parcel of real estate which sold on March 10, 2006 for $150,000. For fiscal year 2008, this parcel was assessed at $155,200. Sale number two is a 15.75-acre parcel of real estate located at 4 Glendale Road, which sold on July 10, 2006 for $600,000. This property was assessed at $303,300 for fiscal year 2008. Based on these sales, Mr. Birnie contended that the assessors’ underestimated the market value of “excess residual acreage” in Stockbridge and, as a result, the subject property was assessed at a disproportionately higher rate relative to other properties with acreage far in excess of the subject property. Mr. Birnie did not, however, offer any evidence of the subject property’s fair market value nor did he offer any assessment or sales data of comparable properties. The assessors offered no evidence of value but instead rested on their assessment.

Based on the evidence presented and the reasonable inferences drawn therefrom, the Board found that the appellant met his burden of proving that the subject property was overvalued for fiscal year 2008, but failed to prove disproportionate assessment. With respect to the appellant’s claim of overvaluation, the Board found that the underlying data and methodology which the assessors employed to value the subject property for fiscal year 2008 was flawed and unreliable. The record revealed no sales of comparable property in calendar year 2006, and no significant improvements to the subject property. Further, there was no evidence concerning market appreciation between the relevant assessment dates for fiscal year 2007 and fiscal year 2008. Accordingly, the Board found that the fair cash value of the subject property for fiscal year 2008 was its fiscal year 2007 assessed value, $744,900.

With respect to the appellant’s claim of disproportionate assessment, the Board found that the appellant’s sole reliance on two sales of vacant land was insufficient to prove that he was the victim of a deliberate scheme of discriminatory, disproportionate assessment.

Accordingly, the Board found that assessors had overvalued the subject property for fiscal year 2008, but had not disproportionately assessed the subject property. The Board, therefore, decided this appeal for the appellant and granted an abatement in the amount of $573.77.

OPINION

The assessors have a statutory and constitutional obligation to assess all real property at its full and fair cash value. Part II, c. 1, § 1, art. 4, of the Constitution of the Commonwealth; art. 10 of the Declaration of Rights; G.L. c. 59, §§ 38, 52. See Coomey v. Assessors of Sandwich, 367 Mass. 836, 837 (1975)(citations omitted). Fair cash value means fair market value, which is defined as the price on which a willing seller and a willing buyer will agree if both of them are fully informed and under no compulsion. Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).

In an appeal before this Board, a taxpayer “may present persuasive evidence of overvaluation either by exposing flaws or errors in the assessors’ method of valuation, or by introducing affirmative evidence of value which undermines the assessors’ valuation.” General Electric, 393 Mass. at 600 (quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983)).

With respect to “exposing flaws or errors in assessors’ method of valuation,” taxpayers do not conclusively establish a right to abatement merely by showing that their land, or a portion of it, is overvalued. “The tax on a parcel of land and the building thereon is one tax . . . although for statistical purposes they may be valued separately.” Assessors of Brookline v. Prudential Insurance Co., 310 Mass. 300, 316-17 (1941). In abatement proceedings, “the question is whether the assessment for the parcel of real estate, including both the land and the structures thereon, is excessive. The component parts, on which that single assessment is laid, are each open to inquiry and revision by the appellate tribunal in reaching the conclusion whether that single assessment is excessive.” Massachusetts General Hospital v. Belmont, 238 Mass. 396, 403 (1921). See also Buckley v. Assessors of Duxbury, Mass. ATB Findings of Fact and Reports 1990-110, 119; Jernegan v. Assessors of Duxbury, Mass. ATB Findings of Fact and Reports 1990-39, 48-49; Everhart v. Assessors of Dalton, Mass. ATB Findings of Fact and Reports 1985-49, 54.

In the present appeal, the appellant argued that the underlying data and methodology which the assessors used to assess the subject property for fiscal year 2008 were significantly flawed and unreliable. The appellant maintained that to the extent calendar year 2005 sales reflected an increase in the subject property’s fair market value, it was properly accounted for in the appellant’s fiscal year 2007 assessment. The Board concurs. The record revealed no sales of comparable property in calendar year 2006, and no significant improvements to the subject property. Further, there was no evidence concerning market appreciation between the relevant assessment dates for fiscal year 2007 and fiscal year 2008. Accordingly, the Board found that the fair cash value of the subject property for fiscal year 2008 was its fiscal year 2007 assessed value, $744,900.

The appellant also alleged that the subject property was disproportionately assessed in fiscal year 2008. A taxpayer is entitled to an abatement for disproportionate tax assessment if the taxpayer can prove “an intentional policy or scheme . . . of valuing properties or classes of property at a lower percentage of fair cash value than that percentage in fact applied to the taxpayer’s own property.” Shoppers’ World, Inc. v. Assessors of Framingham, 348 Mass. 366, 377-78 (1965). A taxpayer seeking to establish disproportionate assessment bears the burden of proving that the assessors employed a “deliberate scheme” of disproportionate and discriminatory assessment whereby they “systematically assessed properties or a class of properties at a lower percentage of fair cash value than the percentage applied to the taxpayer’s property.” Stilson v. Assessors of Gloucester, 385 Mass. 724, 727-28 (1982).

If a taxpayer successfully demonstrates improper assessment of such a number of properties to establish an inference that such a scheme exists, the burden of going forward to disprove such a scheme shifts to the assessors. Shoppers’ World, 348 Mass. at 377. “The ultimate burden of persuasion, of course, will remain upon the taxpayer.” First National Stores, 358 Mass. 554, 562 (1970). Where the taxpayer proves improper assessment of such a number of properties as to justify an inference that a scheme of disproportionate assessments exists, the assessors have the burden of going forward to disprove the existence of such a scheme. Beardsley v. Assessors of Foxborough, 369 Mass. 855, 858 (1976). The number of properties and the pattern of assessments to fair cash value must have sufficient statistical validity, however, to warrant the inference. Id. at 859 n. 6.

In the present appeal, the appellant relied solely on two sales of vacant land to prove that the subject property was disproportionately assessed. The appellant did not, however, offer any evidence that the assessors engaged in a scheme of disproportionate assessment nor any evidence of comparable assessments indicating that the subject property was assessed at a higher percentage of fair cash value. See Smith v. Assessors of Marion, Mass. ATB Findings of Fact and Reports 2005-219, 233 (discussing that a finding of a widespread scheme would require far more data and analysis between classes of property than the minimal assessment information and analysis offered by the appellants). Accordingly, the Board ruled that the appellant failed to meet his burden of proving that a deliberate scheme of disproportionate assessment existed in this appeal.

Based on all the evidence, the Board found that the subject property was overvalued for fiscal year 2008, but that it was not disproportionately assessed. Accordingly, the Board issued a decision for the appellant and granted an abatement in the amount of $573.77.

THE APPELLATE TAX BOARD

By: __________________________________

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: _____

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

BRIDGEWATER STATE v. BOARD OF ASSESSORS OF

COLLEGE FOUNDATION THE TOWN OF BRIDGEWATER

Docket Nos.: F287957-F287962 (07)

F293903-F293905 (08)

F294589-F294591 (08) Promulgated:

February 4, 2010

These appeals, which involve fiscal years 2007 and 2008 (“fiscal years at issue”), concern certain real property located in Bridgewater owned by and assessed to the Bridgewater State College Foundation (“BSCF” or “appellant”). Docket Nos. F287957-F287962, which are fiscal year 2007 appeals, and Docket Nos. F293903-F293905, which are fiscal year 2008 appeals, are appeals under G.L. c. 59, §§ 64 and 65, from the refusal of the assessors to abate the taxes assessed on that real property. Docket Nos. F294589-F294591, which are fiscal year 2008 appeals, are appeals under G.L. c. 59, § 5B, from the determination of the assessors that the real property was not eligible for exemption under G.L. c. 59, § 5, Third (“Clause Third”).

Commissioner Rose heard these appeals. Chairman Hammond and Commissioners Scharaffa, Egan, and Mulhern joined him in the decisions for the appellant.

These findings of fact and report are made at the request of the appellee pursuant to G.L. c. 58A, § 13 and 831 CMR 1.32.

Richard C. Dailey, Esq. and Amy L. Hanson, Esq. for the appellant.

Mark C. Gildea, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of the Statement of Agreed Facts, briefs, and exhibits entered into the record in these appeals[7], the Appellate Tax Board (“Board”) made the following findings of fact.

On January 1, 2006 and January 1, 2007, the relevant assessment dates for the fiscal years at issue, BSCF was the owner of six parcels of land (collectively, the “subject property” or “parcels at issue”) in Bridgewater, all of which were contiguous to the Bridgewater State College (“BSC”) campus. The parcels at issue include 25 Park Terrace, 29 Park Terrace (together, the “Park Terrace parcels”), 180 Summer Street, and also three undeveloped parcels located on Plymouth Street (collectively, the “Plymouth Street parcels”).

25 Park Terrace is known as the Davis Alumni Center. It houses BSCF’s offices and BSC’s Alumni Office. 180 Summer Street houses the BSC political science department. 29 Park Terrace was formerly the residence of BSC’s president, but during the fiscal years at issue, it was not occupied by the college president. During that time, it was used for BSC and BSCF receptions and donor events. The Plymouth Street parcels, which were acquired by BSCF in 1992, were undeveloped. During the fiscal years at issue, they were used for recreational purposes by BSC students and student clubs.

BSCF leased 180 Summer Street and 25 Park Terrace to BSC for five years, beginning July 1, 2003, for a nominal fee of $1.00 per year for each building. No lease agreements for 29 Park Terrace or the Plymouth Street parcels were ever executed. BSC used these parcels for free with BSCF’s permission.

For fiscal year 2007, the parcels at issue were taxed at a rate of $9.60 per thousand. The assessed value and total tax assessed for each of the parcels at issue for fiscal year 2007 is set forth in the following table[8]:

25 Park

Terrace

180 Summer

Street

29 Park

Terrace

Plymouth

Street

(Parcel 1)

Plymouth

Street

(Parcel 2)

Plymouth

Street

(Parcel 3)

Assessed

Value

$773,000

$421,300

$630,700

$97,000

$215,400

$84,400

Total

Tax

$7,569.22

$4,106.17

$6,156.61

$931.20

$2,090.00

$810.24

The appellant timely filed its Forms 3ABC and PC for fiscal year 2007. The appellant timely paid the tax due on each of the parcels and timely filed its Applications for Abatement on November 1, 2006. The assessors denied the Applications for Abatement on January 30, 2007, and the appellant timely filed its petitions with the Board on March 12, 2007.

For fiscal year 2008, the parcels at issue were assessed at a rate of $10.35 per thousand. The assessed value and total tax assessed for each of the parcels at issue for fiscal year 2008 is set forth in the following table:

25 Park

Terrace

180 Summer

Street

29 Park

Terrace

Plymouth

Street

(Parcel 1)

Plymouth

Street

(Parcel 2)

Plymouth

Street

(Parcel 3)

Assessed

Value

$742,200

$404,600

$634,400

$93,600

$208,600

$81,000

Total

Tax

$7,835.41

$4,250.66

$6,566.04

$968.76

$2,159.01

$838.35

For fiscal year 2008, the assessors’ records indicated that the appellant’s fiscal year 2008 Forms 3ABC and PC were filed late. However, the appellant submitted an affidavit of its Director of Foundation Administration, in which she stated that she hand-delivered the fiscal year 2008 Forms 3ABC and PC on or before the due date, as was her customary practice. The assessors presented no evidence to rebut this sworn statement or otherwise dispute its accuracy. Based on the foregoing, the Board found that the appellant timely filed its fiscal year 2008 Forms 3ABC and PC.

For fiscal year 2008, the appellant failed to pay the tax due on all of the parcels at issue. The tax assessed on three of those parcels (Docket Nos. F294589-F294591) was less than $3,000, and thus the failure to timely pay the tax in full was not an impediment to the Board’s jurisdiction to hear those appeals. G.L. c. 59, § 64. The tax due on each of the three remaining parcels (Docket Nos. F293903-F293905) exceeded $3,000. However, because BSCF was aggrieved by the assessors’ determination that its property was not eligible for exemption under Clause Third, it chose to take a direct appeal to the Board under G.L. c. 59, § 5B, obviating the need to timely pay the tax at issue to preserve the Board’s jurisdiction. See Trustees v. Board Assessors of Windsor, Mass. ATB Findings of Fact and Reports 1991-225, 234. Based on the foregoing, the Board found and ruled that it had jurisdiction to hear and decide these appeals.

BSCF is a Massachusetts charitable foundation created in 1984 under G.L. c. 15A, § 37 (“§ 37”).[9] It is
“organized and operated exclusively for the benefit of” BSC. G.L. c. 15A, § 37. BSC is a “public institution of higher learning” created pursuant to G.L. c. 15A, § 5. BSCF’s operating agreement (“operating agreement”) with BSC, dated June 28, 2000, provides that “[BSC] exists to provide education and related services and benefits to the citizens of the Commonwealth; and [BSCF], being a foundation within the meaning of [§ 37], of the General Laws of the Commonwealth, is organized and operated exclusively for the benefit of the College.”

The operating agreement further provides that:

[BSCF] shall hold, manage and invest its moneys and other assets, including any endowment or endowments, in accordance with the Uniform Management of Institutional Funds Law (chapter 180A of the General Laws, as amended from time to time), and, in accordance with such provisions, with the provisions of [§ 37], and with the provisions of this Agreement, it shall expend and apply such moneys and other assets solely for the benefit of [BSC] and not otherwise. (emphasis added).

BSCF is exempt from Federal income taxes under Internal Revenue Code § 501(c)(3). It has no shareholders or capital stock. No part of its income inures to the benefit of anyone associated with the appellant, nor is its income used for anything other than its charitable purposes.

BSCF’s activities include the oversight of BSC’s annual fund, the creation of an endowment for the benefit of BSC, administration of BSC’s scholarship programs and assistance with other activities related to BSC’s educational mission.

The parties did not dispute, and the Board found, that the subject property was owned by BSCF, which was a charitable organization within the meaning of Clause Third. Further, the Board found that BSCF’s sole charitable purpose was to support the advancement of BSC’s educational mission. The assessors’ primary argument was that the subject property was not exempt under Clause Third because it was not “occupied” by a charitable organization; rather, they argued, it was occupied by BSC, which, as a governmental entity, cannot be a charitable organization within the meaning of Clause Third. The assessors also argued that the Plymouth Street parcels, which were acquired by BSCF in 1992, remained unoccupied by BSCF more than two years after their acquisition, and therefore, were not exempt under Clause Third.

On the contrary, the Board found that each of the parcels at issue was occupied by BSCF for its charitable purpose during the fiscal years at issue. With respect to the Plymouth Street parcels, the Board found that they were occupied by BSC students and student groups for recreational purposes. The Board found that this use promoted the “physical training, and the social, moral and aesthetic advancement” of the students of BSC and was consistent with the charitable purpose of BSCF, which was the support of BSC’s educational mission. Emerson v. Trustees of Milton Academy, 185 Mass. 414, 417 (1904). As for the remaining parcels, the evidence established that 25 Park Terrace was occupied in part by BSCF for its offices and in part by BSC’s Alumni Office, while 180 Summer Street housed BSC’s Political Science Department. 29 Park Terrace, the former president’s residence, was used by both BSC and BSCF for fundraising events and receptions. The Board found that each of these uses advanced the charitable educational mission of BSC, which was the sole purpose of BSCF’s organization and operations. Thus, the Board found that the parcels at issue were exempt under Clause Third as they were owned and occupied by a charitable organization in furtherance of its charitable purpose.

Accordingly, the Board issued decisions for the appellant in these appeals, and ordered abatements in the following amounts:

Docket No.	Abatement	Docket No.	Abatement
F287957	$7,569.22	F293903	$6,676.66
F287958	$931.20	F293904	$4,250.66
F287959	$4,106.17	F293905	$7,835.41
F287960	$2,090.00	F294589	$838.35
F287961	$810.24	F294590	$968.76
F287962	$6,156.61	F294591	$2,181.49

OPINION

I. The Subject Property was Exempt Under Clause Third

Clause Third provides an exemption for “real estate owned by or held in trust for a charitable organization and occupied by it or its officers for the purposes for which it is organized or by another charitable organization or organizations or its or their officers for the purposes of such other charitable organization or organizations.” G.L. c. 59, § 5, Third. A taxpayer claiming exemption under Clause Third therefore must demonstrate that the property is owned by a charitable organization and occupied by a charitable organization to further its charitable purpose. See Jewish Geriatric Services, Inc. v. Longmeadow, Mass. ATB Findings of Fact and Reports 2002-337, 351, aff’d, 61 Mass. App. Ct. 73 (2004) (citing Assessors of Hamilton v. Iron Rail Fund of Girls Club of America, 367 Mass. 301, 306 (1975)). For the purposes of Clause Third, a “charitable organization” is “(1) a literary, benevolent, charitable or scientific institution or temperance society incorporated in the commonwealth, and (2) a trust for literary, benevolent, charitable scientific or temperance purposes.” G.L. c. 59, § 5, Third.

In the present appeals, the subject property was owned by BSCF, which is a charitable foundation organized under § 37. The parties did not dispute, and the Board found and ruled, that the subject property was owned by a charitable organization for purposes of Clause Third. The dispute between the parties lies in the occupation of the parcels at issue and the nature of the entity occupying those parcels. First, the assessors contended that the Plymouth Street parcels were not exempt under Clause Third because that clause exempts property purchased by a charitable organization for such organization’s “removal thereto” for only two years from the date of its purchase. The assessors argued that the Plymouth Street parcels, which were acquired by BSCF in 1992, remained unoccupied during the fiscal years at issue and were therefore not exempt. Second, the assessors claimed that none of the parcels at issue was occupied for charitable purposes because they were predominantly occupied not by a charitable organization, but by an instrumentality of the government. The Board disagreed on both counts.

The Plymouth Street Parcels were Occupied for the Purposes of Clause Third During the Fiscal Years at Issue

The assessors argued that the Plymouth Street parcels were not exempt under Clause Third because that clause exempts property “purchased by a charitable organization with the purpose of removal thereto, until such removal, but not for more than two years after such purchase.” G.L. c. 59, § 5, Third. The assessors contended that because the Plymouth Street parcels were purchased by BSCF in 1992, but remained unoccupied as of the fiscal years at issue, they were not exempt under Clause Third.

However, the two-year removal provision is not the only mechanism for exemption in Clause Third. That provision merely contains an additional mechanism for the exemption of property owned by charitable organizations, and states an exception to the general rule of Clause Third, which is that property must be occupied in order to be exempt.

Occupancy for purposes of Clause Third means use for the purpose for which the charity is organized. See Babcock v. Leopold Morse Home for Infirm Hebrews and Orphanage, 225 Mass. 418, 421 (1917); Emerson, 185 Mass. at 415. The decision of a charitable organization concerning how to occupy its property in connection with its charitable mission is entitled to a substantial degree of deference upon judicial review. Emerson, 185 Mass. at 415. Strict necessity is not the guidepost. Id. at 418. Moreover, in the context of educational institutions, a long line of cases demonstrates that the range of uses which has qualified property for exemption is broad.

In Emerson, at issue were three large parcels of land owned by an educational institution, some of which consisted of “low and swampy” or wooded land, and some of which housed athletic fields, among other things. Emerson, 185 Mass. at 417. The evidence in that case showed that “pupils [did] in fact constantly use the unimproved parts of the fields . . . as recreation grounds, walking and roaming over them, playing games that do not require grounds to be improved.” Id. The Court held that the parcels were occupied for the purposes of the exemption, because it was within the charitable purposes of an educational institution to “provide liberally for the physical training, and the social, moral and aesthetic advancement of the pupils who are entrusted to its charge.” Id. at 418.

Similarly, in Wheaton College v. Town of Norton, 232 Mass. 141, 148 (1919), land containing an “unenclosed grove” of pine trees and “a few benches,” which was used by students who wished to “walk, stroll or saunter” therein, was found to be occupied for the purposes of the exemption because it supported the charitable purpose of the college. See also Assessors of Dover v. Dominican Father Province of St. Joseph, 334 Mass. 530, 538 (1956).

In the present appeals, the record established that, much like the property at issue in Emerson and Wheaton College, the Plymouth Street parcels were used for recreational purposes by BSC students and student clubs. The Board found that this use promoted the “physical training, and the social, moral and aesthetic advancement” of the students of BSC, and therefore was a use which furthered the charitable purpose of BSCF. Emerson, 185 Mass. at 417. Accordingly, the Board found and ruled that the Plymouth Street parcels were occupied for the purposes of Clause Third during the fiscal years at issue and were therefore eligible for exemption under the general provisions of Clause Third. The Board therefore rejected the assessors’ argument.

The Subject Property was Occupied by BSCF in Furtherance of its Charitable Purpose

Having determined that each of the parcels at issue was occupied for the purposes of Clause Third, the Board next considered by whom they were occupied and for what purposes. Again, occupancy for the purposes of Clause Third means use for the purpose for which the charity is organized. See Babcock, 225 Mass. at 421 (“Occupancy means . . . appropriation to the immediate uses of the charitable cause for which the owner was organized.”) Further, “‘it is the character of the use to which property is put, and not of the party who uses the property, that settles the question of exemption from taxation.’” Assessors of Boston v. Boston R.B. & L.R. Co., 319 Mass. 378, (1946) (quoting Milford Water Co. v. Hopkinton, 192 Mass. 491, 495-97 (1906)). Thus, the fact that the property at issue may be inhabited or used by individuals or an entity other than a charitable organization does not defeat the claim for exemption, so long as such inhabitation or use is consistent with the purpose of the charitable organization that owns the property.

In M.I.T. Student House, Inc. v. Board of Assessors of Boston, the property at issue was a rooming house inhabited by “needy” students attending the Massachusetts Institute of Technology (“M.I.T.”), but owned by a charitable corporation. M.I.T. Student House, Inc. v. Board of Assessors of Boston, 350 Mass. 539, 539 (1966). Despite the fact that the rooming house was physically inhabited by M.I.T. students, the Court ruled that the property was exempt because it was being used to further the corporation’s charitable purpose. Id. at 541. The resolution of the issue of occupation, therefore, requires a close examination of the purpose of the charitable organization at issue.

The evidence established that BSCF’s sole purpose was to support the educational mission of BSC. There is no doubt that the provision of education is a charitable purpose. It has long been “settled [that] educational institutions of a public charitable nature are within the class of ‘literary, benevolent, charitable and scientific institutions’ which are exempt from taxation under” Clause Third. Assessors of Boston v. Garland School of Home Making, 296 Mass. 378, 392-93 (1937). See also Assessors of Dover, 334 Mass. at 538. Further, as a foundation created under § 37, BSCF was “organized and operated exclusively for the benefit of” BSC, and was required by statute to be “certified by the board of trustees of [BSC] to be operating in a manner consistent with the goals and policies of [BSC].” G.L. c. 15A, § 37. Accordingly, the Board found and ruled that, much like the corporation in M.I.T. Student House, which existed to provide housing for needy M.I.T. students, BSCF’s charitable purpose was to provide for BSC’s institutional needs. There was no evidence in the record indicating that the parcels at issue were used for any purpose other than to further BSC’s charitable educational mission.

The record revealed that the parcels at issue were used: as offices for BSC’s political science department; as BSC’s alumni office; as BSCF’s office; for BSCF and BSC donor events and receptions; for recreational use by BSC students and student clubs; and for possible future development by BSC. Uses similar to these uses have been held to constitute charitable uses. See Trustees v. Board of Assessors of Windsor, Mass. ATB Findings of Fact and Reports 1991-225, 228, 242 (finding that use of “main house” on an expansive farm property for occasional meetings and community social functions was a qualifying use by the charitable organization in question) (citations omitted)). See also Emerson, 185 Mass. at 417. Moreover, the Board found and ruled that each of these uses was consistent with BSCF’s charitable purpose, which was the advancement of BSC’s charitable educational mission.

The argument advanced by the assessors in the present appeals was contrary to the established legal precedent. Under Clause Third “occupation and use . . . [are] determinative of whether particular real estate should be exempt.” Town of Milton v. Ladd, 348 Mass. 762, 765 (1965). Indeed, the Court has employed a “functional analysis” to determine eligibility for a variety of the exemptions granted under G.L. c. 59, § 5. For example, in H-C Health Services, Inc. v. Assessors of S. Hadley, the Court focused on the “‘declared purposes and actual work performed’” by the organization in question in ruling that real property owned by a business corporation, but which was occupied by a nursing facility for the elderly and infirm, qualified for the exemption in Clause Third. H-C Health Services, Inc. v. Assessors of S. Hadley, 42 Mass. App. Ct. 596, 599 (1997) (quoting Assessors of Boston v. Vincent Club, 351 Mass. 10, 12 (1966)). See also Brown, Rudnick Freed & Gesmer v. Assessors of Boston, 389 Mass. 298, 302-03 (1983); Middlesex Retirement System, LLC v. Assessors of Billerica, 453 Mass. 495, 502 (2009). In the present appeals, the assessors did not analyze the occupation of the subject property in the context of the purposes of BSCF, and their conclusion that the subject property was not exempt merely because much of it was being used by BSC was erroneous.

Additionally, the assessors’ argument as to the occupancy of the subject property was flawed because occupancy for purposes of Clause Third has a broader meaning than that suggested by the assessors. In M.I.T. Student House, although the rooming house at issue was physically inhabited by M.I.T. students, the Court stated that “‘[t]he occupation of the property is that of the corporation itself, and not of those to whom it affords a home, just as the occupation of a college dormitory or refectory is that of the institution of learning rather than that of its students.’” M.I.T. Student House, 350 Mass. at 542 (quoting Franklin Square House v. Boston, 188 Mass. 409, 411 (1905)). This interpretation of the term “occupied” gives effect to the intent of the Legislature, as the statutory language suggests that all of the real property of a charitable organization should be exempt as long as it is used to further the organization’s charitable purpose. Using this interpretation of the term “occupied,” the Board found and ruled that the occupation of the subject property was that of BSCF itself, for its charitable purpose. To hold otherwise would be to narrow the scope of the exemption in a way not intended by the Legislature.

Moreover, bearing in mind the legislative intent behind Clause Third, the Board found and ruled that this construction of the term “occupied” is particularly appropriate in the present appeals. It has been held that the reason for the charitable exemption is that charitable organizations ‘“lessen[] the burdens of government’” in that they provide services for which the government would otherwise be responsible. Western Massachusetts Lifecare Corporation v. Board of Assessors of Springfield, 434 Mass. 96, 102 (2001) (quoting Boston Chamber of Commerce v. Assessors of Boston, 315 Mass. 712, 716 (1944)) (other citations omitted). In the present appeals, the subject property was being used directly to support the mission of a governmental institution. To deny the exemption in these appeals would wholly frustrate the purpose of the statute.

Accordingly, the Board found and ruled that the parcels at issue were exempt under Clause Third because they were owned and occupied by BSCF in furtherance of its charitable purpose during the fiscal years at issue.

Conclusion

On the basis of all of the evidence, the Board found and ruled that, during the fiscal years at issue, the subject property was owned by BSCF and occupied by BSCF for its charitable purpose, which was the support and advancement of BSC’s educational mission. The Board therefore found and ruled that the subject property was exempt under Clause Third.

Accordingly, the Board issued decisions for the appellant in these appeals, and ordered abatements in the following amounts:

Docket No.	Abatement	Docket No.	Abatement
F287957	$7,569.22	F293903	$6,676.66
F287958	$931.20	F293904	$4,250.66
F287959	$4,106.17	F293905	$7,835.41
F287960	$2,090.00	F294589	$838.35
F287961	$810.24	F294590	$968.76
F287962	$6,156.61	F294591	$2,181.49

APPELLATE TAX BOARD

By:________________________________

Thomas W. Hammond, Jr., Chairman

A true copy:

Attest: ___________________________

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

TRUSTEES OF BOSTON COLLEGE v. BOARD OF ASSESSORS OF

THE CITY OF BOSTON

Docket Nos. F278832, F278833 Promulgated:

F284965, F288657 February 4, 2010

These are appeals filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65, from the refusal of the Board of Assessors (“assessors” or “appellee”) of the City of Boston (“City” or “Boston”) to abate taxes on certain real estate located in Boston owned by and assessed to the Trustees of Boston College (“Boston College” or “appellant”) for fiscal years 2005, 2006 and 2007 (“fiscal years at issue”).

Commissioner Rose heard these appeals. Chairman Hammond and Commissioners Scharaffa, Egan and Mulhern joined him in decisions for the appellant.

These findings of fact and report are made pursuant to a request by the appellee under G.L. c. 58A, § 13 and 831 CMR 1.32.

Neal C. Tully, Esq. for the appellant.

Saul A. Schapiro, Esq. and Laura Caltenco, Esq. for the assessors.

FINDINGS OF FACT AND REPORT

On the basis of the Statement of Agreed Facts and attached documents, and the testimony and exhibits offered into the record in the hearing of these appeals, the Appellate Tax Board (“Board”) made the following findings of fact.

I. Assessments and Jurisdiction

On January 1, 2004, January 1, 2005, and January 1, 2006, the relevant assessment dates for the fiscal years at issue, Boston College was the assessed owner of the three parcels at issue (“subject property” or “parcels at issue”) in these appeals. For fiscal year 2005, the assessors valued Parcel 22-05267-000 (“Commonwealth Avenue parcel”) at $10,168,400, and assessed a tax thereon, at the rate of $32.68 per $1,000, in the total amount of $332,303.31. Also for fiscal year 2005, the assessors valued Parcel 22-04960-001 (“Foster Street parcel”) at $3,002,000, and assessed a tax thereon, at the rate of $32.68 per $1,000, in the total amount of $98,105.36.

Beginning in fiscal year 2006, the Foster Street parcel was combined with another parcel to form a new tax parcel, and the assessors exempted that parcel for fiscal years 2006 and 2007. The Commonwealth Avenue parcel was also reconfigured beginning in fiscal year 2006, and was combined with other parcels to form Parcel 22-05267-010 (“Residence parcel”). For fiscal year 2006, the assessors valued the Residence parcel at $9,598,500, and assessed a tax thereon, at a rate of $30.70 per $1,000, in the total amount of $294,673.95. For fiscal year 2007, the assessors valued the Residence parcel at $10,561,500, and assessed a tax thereon, at a rate of $26.87 per $1,000, in the total amount of $283,787.51.

Boston’s Collector of Taxes sent out the actual tax bills for the fiscal years at issue on the following dates: December 30, 2004 for fiscal year 2005; December 30, 2005 for fiscal year 2006; and December 29, 2006 for fiscal year 2007. Boston College timely paid the assessed taxes, without incurring interest, for each of the parcels at issue for each of the fiscal years at issue.

For fiscal year 2005, Boston College filed its Applications for Abatement with the assessors on January 28, 2005. The abatement applications were deemed denied on April 28, 2005, and Boston College timely filed its petitions with the Board on May 31, 2005.

For fiscal year 2006, Boston College filed its Application for Abatement with the assessors on February 1, 2006. That abatement application was denied on
May 1, 2006, and Boston College timely filed its petition with the Board on June 13, 2006.

For fiscal year 2007, Boston College filed its Application for Abatement on January 31, 2007. That application was denied on February 28, 2007, and Boston College timely filed its petition with the Board on May 17, 2007.

In addition, Boston College timely filed its Forms 3 ABC and Forms PC for each of the fiscal years at issue. Based on the foregoing, the Board found and ruled that it had jurisdiction to hear and decide these appeals.

II. The Merits

A. Introduction

Boston College[10] is a non-profit, educational institution organized in 1863 under the laws of Massachusetts. According to evidence entered into the record, its mission is to “pursue the highest standards of teaching and research” and “to foster a just society . . . by fostering intellectual development and the religious, ethical and personal formation of its students.” At all times relevant to these appeals, Boston College served a student population of approximately 14,500 students, including graduate and undergraduate students, at two different campuses. The main campus is the Chestnut Hill campus, which consists of 117 acres situated partially in Boston and partially in Newton. The main campus features numerous classroom buildings, residence halls, dining facilities, a library, parking facilities, and athletic facilities – including a football stadium – among other improvements. The Newton campus, which consists of approximately 40 acres, is the site of the Law School and also contains undergraduate dormitories, athletic fields, and alumni facilities. The parcels at issue in these appeals lie across Commonwealth Avenue from the main campus, and are part of a large tract of land which was owned by the Archdiocese of Boston (“Archdiocese”) prior to the fiscal years at issue. During the time it was owned by the Archdiocese, the subject property was exempt from tax.

B. Boston College’s Acquisition of the Subject Property

In September of 2003, Boston College commenced a strategic planning initiative, which was meant to assess its strengths and weaknesses as an institution and to identify goals and an overall vision for the college for the coming years. A Phase I report released by the strategic initiative committee some months later identified “a number of weaknesses” relating to space and facilities at the college. Specifically, the Phase I report stated “[m]ore land would open the way for possible new space-intensive academic programs, more conferences and faculty interaction, more student housing, and more space for intramural and intercollegiate athletics programs.”

In December of 2003, the Archdiocese announced its intention to sell its Brighton property, which consisted of approximately 65 acres of land improved with several parking lots, driveways and buildings. Those buildings include an Italianate mansion which had historically been the Archbishop’s residence (“Archbishop’s residence”), a gymnasium, a garage, and several other buildings belonging to the Archdiocese, including a building known as St. Clement’s Hall.

Since 1991, Boston College had leased a portion of St. Clement’s Hall from the Archdiocese for use as administrative offices. The lease included the exclusive use of a 74-vehicle parking lot located directly across from St. Clement’s Hall on Foster Street. Boston College entered into a renewed lease for St. Clement’s Hall in 2001, for a period of 40 years. The terms of the 2001 lease continued the exclusive use of the Foster Street parking lot and also expanded the portion of St. Clement’s Hall available for the college’s use. Throughout both lease terms, the property was treated as exempt by the assessors.

On April 19, 2004, following several months of discussions and negotiations, Boston College and the Archdiocese reached an agreement-in-principle for the sale of the subject property. On June 25, 2004, the transaction was closed, with the Archdiocese conveying to Boston College 43.37 acres of land for $99,400,000. This transaction was the first of several between Boston College and the Archdiocese involving the Archdiocese’s Brighton property. Boston College purchased additional land from the Archdiocese in 2006 and 2007. In all, Boston College acquired a total of nearly 65 acres of land. However, the parcels at issue in these appeals were all conveyed in the initial transaction on June 25, 2004. Those parcels are described in further detail below.

C. The Foster Street Parcel (Fiscal Year 2005)

The Foster Street parcel contains approximately 200,000 square feet. It is located on the easterly side of Foster Street, directly across from St. Clement’s Hall. To the south and east, it abuts residential neighborhoods in Brighton. The vast majority of the Foster Street parcel is heavily forested, undeveloped land. Its only improvement
is a 24,000 square foot parking lot that accommodates approximately 74 vehicles.

Prior to its acquisition by Boston College, the Foster Street parcel was exempt from tax. Although Boston College’s use of the Foster Street parcel did not change, it was taxed by the assessors for fiscal year 2005. Beginning in fiscal year 2006, the assessors combined the Foster Street parcel with a residential lot and exempted the newly configured parcel from tax for fiscal years 2006 and 2007. Therefore the only question before the Board with respect to the Foster Street parcel is whether it was exempt in fiscal year 2005.

D. The Commonwealth Avenue Parcel (Fiscal Year 2005)

The Commonwealth Avenue parcel contains approximately 5.6 acres of land and is located on Commonwealth Avenue, with frontage also on Greycliff Road. The parcel dissects a small portion of the Archbishop’s residence and its improvements also include a driveway leading to the residence. The remainder of the parcel contains undeveloped land, including a large meadow and an apple orchard. It abuts other parcels previously owned by the Archdiocese and residential neighborhoods in Brighton.

E. The Residence Parcel (Fiscal Year 2006 and 2007)

Beginning in fiscal year 2006, the assessors created a new tax parcel – the Residence parcel – by combining the Commonwealth Avenue parcel with other parcels. After reconfiguration, the Residence parcel included all of the Archbishop’s residence, a gymnasium, a garage, the Commonwealth Avenue parcel, and additional land. The Residence parcel also contains a driveway and two parking lots.

F. Boston College’s Campus Planning Process

and Proposed Uses of the Subject Property

Boston College offered the testimony of Patrick Keating, Executive Vice President of Boston College, Peter McKenzie, Financial Vice President and Treasurer of Boston College, and Jeanne Levesque, Director of Government Relations within Boston College’s Office of Governmental and Community Affairs. These three individuals testified mainly about the college’s campus planning process, including the acquisition of the subject property, and its filings and interactions with various governmental agencies and community groups. The Board found their testimony to be credible.

The testimony of Mr. Keating, Mr. McKenzie and Ms. Levesque, along with the stipulated facts and documents, revealed that campus planning at Boston College is a closely monitored, nearly continuous activity. As an educational institution within Boston, Boston College is required by Article 80 of the Boston Zoning Code to file an Institutional Master Plan (“IMP”) with the Boston Redevelopment Authority (“BRA”). The IMP must set out the institution’s use of existing property, planned future use of property and planned acquisition of property for at least a ten-year period. Once an IMP is approved by the BRA, it is submitted for additional approval by the Boston Zoning Commission. The City will not issue a certificate of use or occupancy for a building unless the building/use is consistent with the plans articulated in an IMP. Prior to its acquisition of the subject property, Boston College had last filed an IMP in 2000. The 2000 IMP was to expire in 2005.

In late 2004, following its acquisition of the subject property, Boston College filed an Institutional Master Plan Notification Form (“IMPNF”) with the BRA, seeking to renew and extend its previous IMP. The IMPNF stated that the strategic planning initiative, originally commenced by the college in 2003, would be reconsidered in light of the recent land acquisition in order to “engage in meaningful planning for future physical needs, including the future uses of the [subject property].” The IMPNF identified as potential future uses of the subject property: a School of Theology and Ministry, a multi-disciplinary center for the study of aging, and a center for the study of complex materials. Subsequently, in early 2005, Boston College submitted a revised IMPNF, outlining possible future uses of the subject property which included conference and meeting facilities, graduate student housing, and open space for informal recreation as well as intramural and intercollegiate athletics programs.

In May of 2005, the BRA notified Boston College that it would grant conditional approval of a two-year extension of its IMP to allow the college additional time to formulate plans for the use of the subject property and incorporate those plans into its IMP. The condition was that during the two-year extension period, Boston College must use the subject property only for the temporary/existing uses for which it had already been approved. Those uses included: the use of St. Clement’s Hall, club sports, student and neighborhood recreational uses, parking on the Foster Street parcel, and for overflow parking during home football games. In April of 2006, Boston College sought an extension of its IMP to allow more time for planning the future uses of the subject property and also sought approval from the BRA to use the Archbishop’s residence, in the interim, for meetings and conferences.

In addition to the approval of the BRA and Boston Zoning Commission, the evidence revealed that Boston College’s campus planning process required the approval and involvement of numerous groups. Boston College had a Buildings and Properties Committee, which assisted in the planning of new development at the college. For example, the Buildings and Properties Committee vetted potential architectural firms and reviewed proposals by firms bidding on college projects. Further, major building and planning initiatives required the approval of the college’s Board of Trustees, which was required to approve all expenditures exceeding one million dollars.

Finally, the college regularly engaged in discussions regarding its campus planning with the Allston-Brighton Boston College Community Task Force (“Community Task Force”). The Community Task Force is a group installed by the Mayor of Boston to represent the interests of the Allston-Brighton community. According to Ms. Levesque, the college met on a monthly basis with the Community Task Force to address neighborhood concerns. Ms. Levesque stated that during the period immediately prior to Boston College’s acquisition of the subject property up to the time of the hearing of these appeals, Boston College held over 200 meetings with the Community Task Force in order to receive feedback on the proposed uses of the subject property. According to Ms. Levesque, much of that feedback involved the Community Task Force’s concern about the lack of open space in the community.

Ms. Levesque’s testimony on this point was supported by an August 24, 2005 letter from the Chair of the Community Task Force to Boston College’s Associate Vice President for Government and Community Affairs. In that letter, the Chair urged the college to use the subject property in the following manner: for faculty and administrative offices and practice fields; as a buffer zone to protect the residential character of the abutting properties; and as open, green space.

Additional evidence in the record indicated that, consistent with its representations to the BRA, Boston College continued to examine potential future uses of the subject property throughout the fiscal years at issue. In 2004, Boston College began the search for an architectural firm to assist in the creation of a campus master plan. In June of 2005, Sasaki Associates was chosen to develop the IMP. During the remainder of 2005 and 2006, numerous meetings were held and presentations made for the purpose of developing the IMP. In September of 2006, a final presentation of the proposed master plan was made to Boston College’s Board of Trustees, who approved the plan in principle. An additional firm, Vanasse, Hangen, Brestlin, Inc., was hired to assist Sasaki Associates in the preparation of a new IMP. In 2007, a new IMPNF was filed with the BRA.

Throughout this period, the proposed future uses of the subject property remained fairly consistent, with specific details changing from time to time. For example, the Archbishop’s residence had been targeted for use as a conference and meeting facility which offered dining services, but there was disagreement among the involved parties as to whether that conference center would include overnight accommodations and also as to the type of dining services that would be provided. Also during this time period, reunification with the Weston School of Theology – which was affiliated with Boston College but which had been physically located in Cambridge – was proposed, and plans for its relocation to the subject property continued to evolve during the fiscal years at issue.

G. The Actual Use of the Subject Property During the Fiscal Years at Issue

Following its acquisition of the Foster Street parcel on June 25, 2004, Boston College continued to use the Foster Street parcel to accommodate the parking needs of administrative staff working at St. Clement’s Hall. The rest of the parcel remained in an undeveloped state. Subsequent to fiscal year 2005, Boston College undertook a substantial renovation of St. Clement’s Hall, and in September of 2006, the Information Technology department moved its operations to the north wing of St. Clement’s Hall.

The evidence revealed that the Commonwealth Ave. and Residence parcels were used for a variety of purposes following their acquisition by Boston College. Peter Jednak, the Director of Facility Services for Boston College, testified regarding some of the uses of those parcels. The Board found his testimony to be credible.

Mr. Jednak stated that the area behind the Archbishop’s residence was used to dump excess snow in the winter and also as a staging area for dumpsters during move-in and move-out periods for the college. He stated that the paved areas were used for periodic overflow parking, including during home football games, of which there are between five and seven per year, and also during the college’s commencement exercises in the spring. Further, Mr. Jednak testified that on a daily basis, individuals can be seen using the meadow and open areas for sunbathing, walking, studying, and informal recreational activity such as wiffle ball or frisbee.

Mr. Jednak stated that he has observed the college’s track and rugby teams using the parcels for training purposes. In the wintertime, because of the hilly topography, Mr. Jednak stated that students, and possibly neighborhood residents, used the land for sledding. Mr. Jednak also testified that he frequently observed individuals who he believed to be neighborhood residents walking dogs on the subject property. It was Boston College’s practice to allow neighborhood residents access to the property, and the parties stipulated that neighborhood residents in fact used the subject property for recreational purposes. Mr. Jednak stated that college maintenance crews actively maintained the property, including pruning trees, mowing the grass, removing snow, repairing potholes and performing other maintenance as necessary.

Mr. Jednak’s testimony was supported by the stipulated facts, which highlighted many of the same uses of the property that Mr. Jednak related in his testimony. In addition, the parties stipulated to the fact that Boston College granted parking permits to students with special needs for the 22-space parking lot adjacent to the gymnasium on the Residence parcel. The parties also stipulated to the following uses of the subject property: during fiscal year 2005, the Commonwealth Avenue parcel was used for overflow parking and other purposes during parent’s weekend; during fiscal year 2006, the residence was used for two Board of Trustee’s meetings and for a fundraising event during parent’s weekend; and during fiscal year 2007, the residence was used for four Board of Trustees’ meetings.

H. The Board’s Ultimate Findings of Fact

On the basis of all of the evidence, the Board found and ruled that Boston College was a charitable organization within the meaning of G.L. c. 59, § 5, Clause Third (“Clause Third”), and that it owned the subject property on the relevant dates for the determination of exemption for each of the fiscal years at issue.

The Board found that, as of July 1, 2004, the relevant date for the determination of exemption for fiscal year 2005, Boston College used the Foster Street parcel to accommodate the parking needs of its administrative staff located at St. Clement’s Hall. The Board found that Boston College made the same use of the Foster Street parcel in fiscal year 2005 as it did both before and after that fiscal year, during which time the parcel was exempt from tax. The Board further found that this use facilitated the overall operation of the college, and therefore furthered its charitable purpose.

With respect to the Commonwealth Avenue/Residence parcels,[11] the Board found that, as of July 1, 2004, July 1, 2005, and July 1, 2006, the relevant dates for the determination of exemption for the fiscal years at issue, Boston College used the Commonwealth Avenue/Residence parcels to provide passive recreational opportunities for its students, including walking, jogging, reading, sunbathing, sledding, frisbee and wiffle ball. The parcels were also used by certain student athletic teams for training purposes. The Board found that such uses promoted the “physical training, and the social [and] moral” advancement of Boston College’s students and accordingly, constituted the occupation of the property in furtherance of its charitable purpose. Emerson v. Trustees of Milton Academy, 185 Mass. 414, 418, (1904).

In addition, the Board found that Boston College used the Commonwealth Avenue/Residence parcels to accommodate extraordinary parking needs during several weekends each year, including parent’s weekend, commencement activities, several home football games each season, and for parking for students with special needs. Boston College also used the Archbishop’s residence for Board of Trustees’ meetings and fundraising events. The Board found that each of these uses facilitated the overall operation of Boston College and therefore constituted the occupation of the property for its charitable purpose.

Further, the Board found that, during each of the fiscal years at issue, Boston College used the Foster Street parcel and the Commonwealth Avenue/Residence parcels in order to maintain open, green space and ensure an adequate buffer from the surrounding residential neighborhood. The evidence established that the preservation of open, green space was a priority in Boston College’s campus planning efforts because of its desire to maintain a classic collegiate aesthetic for its campus. The preservation of open, green space in the Allston-Brighton area and the maintenance of an adequate buffer between institutional, private and residential property were also of great importance to the Community Task Force. Each of the parcels at issue was used by Boston College during the fiscal years at issue for these purposes. The Board found that Boston College’s use of the subject property as open, green space promoted the “aesthetic advancement” of the college, and as such, constituted an occupation of the subject property in furtherance of its charitable purpose. Emerson, 185 Mass. at 418. Furthermore, the Board found that Boston College had a legitimate interest in minimizing so-called “town-gown” conflict. The Board found and ruled that Boston College’s use of the subject property as a buffer between institutional and private, residential property was a reasonable means to further that interest, and as such, constituted the use of the subject property for the college’s charitable purpose.

Accordingly, on the basis of these findings of fact, the Board found and ruled that, for each of the fiscal years at issue, the subject property was owned and occupied by a charitable organization in furtherance of its charitable purpose, and as such, was exempt under Clause Third. The Board therefore issued decisions for Boston College in these appeals. For fiscal year 2005, the Board ordered an abatement of $332,303.31 for the Commonwealth Avenue parcel and an abatement of $98,105.36 for the Foster Street parcel. For the Residence parcel, the Board ordered an abatement of $294,673.95 for fiscal year 2006 and an abatement of $283,787.31 for fiscal year 2007.

OPINION

Clause Third provides an exemption for “real estate owned by or held in trust for a charitable organization and occupied by it or its officers for the purposes for which it is organized or by another charitable organization or organizations or its or their officers for the purposes of such other charitable organization or organizations.” G.L. c. 59, § 5, Third. Clause Third also provides an exemption for “real estate purchased by a charitable organization with the purpose of removal thereto, until such removal, but not for more than two years after such purchase.” G.L. c. 59, § 5, Third. Property owned by a charitable organization, therefore, is exempt provided that it is occupied by that, or another, charitable organization to further its charitable purpose. See Jewish Geriatric Services, Inc. v. Longmeadow, Mass. ATB Findings of Fact and Reports 2002-337, 351, aff’d, 61 Mass. App. Ct. 73 (2004) (citing Assessors of Hamilton v. Iron Rail Fund of Girls Club of America, 367 Mass. 301, 306 (1975)). Further, property purchased by a charitable organization for the purposes of “removal thereto” will be exempt, even if unoccupied, for up to two years after its purchase.

Thus, there were two potential bases of exemption for the subject property presented for the Board’s consideration in these appeals: the subject property could qualify for exemption if it were occupied by Boston College for its charitable purpose during the fiscal years at issue; additionally and alternatively, the subject property could qualify for exemption for up to two years following the date of its purchase, even if it were unoccupied, provided that Boston College purchased it for the purpose of “removal thereto.” As discussed further below, the Board found and ruled that the subject property was exempt because it was owned by Boston College, which was a charitable organization, and occupied by Boston College for its charitable purpose. Because the Board found and ruled that the subject property was exempt for this reason, it did not have to reach the issue of whether or when Boston College had removed its operations to the subject property.

Occupancy for the purposes of Clause Third means use for the purpose for which the charity is organized. See Babcock v. Leopold Morse Home for Infirm Hebrews and Orphanage, 225 Mass. 418, 421 (1917); Emerson, 185 Mass. at 417. The decision of a charitable organization concerning how to occupy its property in connection with its charitable mission is entitled to a substantial degree of deference upon judicial review. Emerson, 185 Mass. at 415. (“So long as [it] act[s] in good faith and not unreasonably in determining how to occupy and use the real estate of the corporation, [its] determination cannot be interfered with by the courts.”) Strict necessity is not the guidepost. Id. at 418. In the context of educational institutions, a long line of cases demonstrates that the range of uses which has qualified the property at issue for exemption is broad.

In Emerson, at issue were three large parcels of land owned by an educational institution, some of which consisted of “low and swampy” or wooded land, and some of which contained athletic fields, among other things. Emerson, 185 Mass. at 417. The evidence in that case showed that “pupils [did] in fact constantly use the unimproved parts of the fields . . . as recreation grounds, walking and roaming over them, playing games that do not require grounds to be improved.” Id. The Court held that the parcels were occupied for the purposes of the exemption, because it was within the charitable purposes of an educational institution to “provide liberally for the physical training, and the social, moral and aesthetic advancement of the pupils who are entrusted to its charge.” Id. at 418. See also Assessors of Dover v. Dominican Father Province of St. Joseph, 334 Mass. 530, 538 (1956).

Similarly, in Wheaton College v. Town of Norton, 232 Mass. 141, 146 (1919), a tract of land used by Wheaton College to open a road to provide more direct access to its power house for the efficient “hauling of coal and other heavy articles,” was found by the Court to be occupied for the college’s charitable purpose. In that same case, “ordinary and wild woodland” belonging to the college, which was favored by students for walking, as well as an “unenclosed grove” of land used by “students and townspeople” alike, containing tall pine trees and “a few benches,” were found to be exempt because they promoted the charitable purpose of the college. Id. at 148-49.

In the present appeals, the evidence established that Boston College made a variety of uses of the subject property during the fiscal years at issue. Boston College students used the subject property for informal recreational activity, such as walking, jogging, sledding, sunbathing, reading, frisbee and wiffle ball, while college athletic teams, such as the rugby and track teams, used the subject property for training purposes. The Board found and ruled that these uses promoted the “physical training, and the social [and] moral” advancement of the students of Boston College, and as such, constituted the occupation of the subject property for Boston College’s charitable purpose. Emerson, 185 Mass. at 417.

With respect to the Residence/Commonwealth Avenue parcels, the evidence established that Boston College used the Archbishop’s residence for at least one fundraising event and several Board of Trustees’ meetings during the fiscal years at issue. Uses similar to these uses have been held to constitute charitable uses. See Trustees v. Board of Assessors of Windsor, Mass. ATB Findings of Fact and Reports 1991-225, 228, 242 (finding that use of “main house” on an expansive farm property for occasional meetings and community social functions was a qualifying use by the charitable organization in question) (citations omitted). See also Emerson, 185 Mass. at 417. The Board therefore found and ruled that each of these uses was in furtherance of Boston College’s charitable purpose.

In addition, Boston College used the various parking lots on the subject property throughout the fiscal years at issue. The Foster Street parcel was used to accommodate the daily parking needs of Boston College employees working at St. Clement’s Hall, while the Commonwealth Avenue/Residence parcels were used to accommodate extraordinary parking needs, including overflow parking during commencement activities, parent’s weekend, home football games and for students with special needs. The Board found that these uses facilitated the overall operation of the college and therefore contributed to its charitable educational purpose. See Wheaton College, 232 Mass. at 146.

Finally, Boston College used the subject property to provide a buffer from its residential neighbors in the Allston-Brighton community, and to ensure that its campus would have an adequate amount of open, green space so as to maintain a classic collegiate aesthetic. An educational institution has broad discretion to determine the most advantageous uses of its property and how best to execute its overall educational mission. See Emerson, 185 Mass. at 415. The Board found and ruled that the preservation of open, green space on its campus promoted the “aesthetic advancement” of the college, and therefore, found and ruled that Boston College’s use of the subject property towards that end promoted its charitable purpose. Id. at 418. Similarly, the Board found and ruled that the minimization of so-called “town-gown” conflict was a legitimate institutional goal, and Boston College’s use of the subject property as a buffer zone was a reasonable means of accomplishing that goal. See Massachusetts General Hospital v. Inhabitants of Somerville, 101 Mass. 319, 321 (1869) (ruling that land held by a hospital for the insane “to prevent too near proximity of buildings and use which might be deleterious to the hospital” was used for the taxpayer’s charitable purpose). The Board therefore found and ruled that Boston College’s use of the subject property as a buffer was a use which furthered its charitable purpose.

The assessors advanced several arguments as to why the subject property was not exempt, but the Board found none of them persuasive. The assessors emphasized in particular the fact that, as of the time of the purchase of the subject property and through the fiscal years at issue, Boston College had no certain, fixed plans for the subject property. While this argument was presumably advanced to dispel the notion that Boston College had purchased the property for the purposes of “removal thereto”, the Board found that the property was in fact used by Boston College for its charitable purposes. Accordingly, because the Board did not base its decision on the two-year removal provision of Clause Third, the Board rejected this argument.

The record indicated that Boston College made a variety of uses of the subject property in furtherance of its charitable purpose during the fiscal years at issue, and the Board based its finding that the subject property was exempt on that evidence. The fact that these uses may have been temporary, or that Boston College’s future plans for the subject property continued to evolve during the fiscal years at issue, did not warrant a finding to the contrary.

Additionally, the assessors argued that, to the extent that Boston College made any use of the subject property, such use was trivial and incidental to its charitable purpose, and therefore did not justify an exemption under Clause Third. In support of this argument, the assessors cited Babcock, a case in which the real property at issue was a house owned by a charitable organization which had been used as a home for orphaned children and the elderly. Babcock, 225 Mass. at 421. Prior to the fiscal years at issue in that case, the charitable organization in question transferred its income to another charitable organization, and appears from the record to have ceased active operation. In any event, during the fiscal years at issue, the real property at issue was not being used as a home for orphaned children or the elderly, but instead was being used as a residence for a caretaker and for the storage of furniture. Id. There was some evidence in the record that approximately one Board of Trustees’ meeting was held at the home each year, but other evidence in the record contradicted that fact. Id. In ruling that the property was not exempt, the Court stated:

[O]ccupancy means something more than that which results from simple ownership and possession. It signifies an active appropriation to the immediate uses of the charitable cause for which the owner was organized. The extent of the use, although entitled to consideration, is not decisive. But the nature of the occupation must be such as to contribute immediately to the promotion of the charity and physically to participate in the forwarding of its beneficent objects.

Id. at 421-22.

The facts in Babcock are distinguishable from those of the present appeals. In Babcock, it was virtually impossible for the use of the home at issue to advance the charitable purposes of the organization in question, as that organization had ceased active operation. In the present appeals, Boston College did not cease operation and vacate property it had formerly used in connection with its charitable purpose. Rather, it acquired new property, and used that property to facilitate and expand its charitable educational mission.

Further, the charitable mission of the taxpayer in Babcock involved a more narrow scope of services – the provision of a home for orphaned children and the elderly. In contrast, Boston College is a university which provides graduate and undergraduate education for some 14,500 students. On its two campuses, Boston College has numerous dormitories, classroom buildings, administrative buildings, dining halls, libraries, and athletic and research facilities. Its operations are necessarily more complex than those of the taxpayer in Babcock, and the scope of uses which support its charitable purpose is correspondingly greater. Moreover, in making its ruling, the Babcock court emphasized that “[t]he extent of the use, although entitled to consideration, is not decisive.” Id. at 421-22. The decisive factor is whether the use of the property advances the charitable purpose of the organization. In the present appeals, the Board found and ruled that the uses of the subject property, which included use for parking, Board of Trustees’ meetings, fundraising events, informal recreation, team athletic training, as a buffer from abutting residential properties, and as open, green space for the maintenance of campus aesthetics, were uses which advanced the charitable purpose of Boston College. The Board therefore found the assessors’ arguments to be without merit.

The assessors also argued that the exemption should be denied on public policy grounds, citing the growing number of charitable organizations within Boston and the concomitant diminution to the City’s tax base.[12] Specifically, the assessors stated that “[t]he deterioration and destruction of the tax base for [Boston], by exempting large parcels of land without an accompanying public benefit . . . serves to handicap the City.” Public policy arguments are for the Legislature’s consideration. See Raytheon Company v. Commissioner of Revenue, 455 Mass. 334, 345 (2009),(citing Joslyn v. Chang, 445 Mass. 344, 352 (2005)) (“if there are any inconveniences or hardships growing out of . . . a [court’s statutory] construction, it is for the legislature.”) (other citations omitted). The Board therefore rejected the assessors’ arguments.

CONCLUSION

On the basis of all of the evidence, the Board found and ruled that each of the parcels at issue was owned and occupied by a charitable organization, Boston College, in furtherance of its charitable purpose as of the relevant dates for the determination of exemption for the fiscal years at issue in these appeals.
Accordingly, the Board decided these appeals for Boston College, and, for fiscal year 2005, ordered abatements in the amount of $332,303.31 for the Commonwealth Avenue parcel and $98,105.36 for the Foster Street parcel. For fiscal years 2006 and 2007, the Board ordered abatements of $294,673.95 and $283,787.31, respectively, for the Residence parcel.

APPELLATE TAX BOARD

By: _____ ____

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: ______ _____

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

WESTON PARTNERS REALTY TRUST v. BOARD OF ASSESSORS OF

THE TOWN OF WESTON

Docket Nos. X297803-X297868 (FY 06) F290545-F290610 (FY 07) Promulgated:

February 11, 2010

These are appeals pursuant to G.L. c. 59, §§ 64 and 65, from the refusal of the Board of Assessors of the Town of Weston (“assessors” or “appellee”) to abate taxes on certain real estate owned by and assessed to the Weston Partners Realty Trust (“WPRT” or “appellant”) for fiscal years 2006 and 2007 (“fiscal years at issue”). The fiscal year 2006 appeals were filed under the informal procedure pursuant to G.L. c. 58A, § 7A, and the fiscal year 2007 appeals were filed under the formal procedure. The appeals were subsequently consolidated for hearing.

Commissioner Egan heard these appeals. Chairman Hammond and Commissioners Scharaffa and Rose joined her in decisions for the appellee.

These findings of fact and report are made pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.

Robert E. McLaughlin, Sr., Esq. and Robert E. McLaughlin, Jr., Esq. for the appellant.

Ellen M. Hutchinson, Esq. for the assessors.

FINDINGS OF FACT AND REPORT

I. Introduction and Jurisdiction

On the basis of the testimony and exhibits offered into the record in the hearing of these appeals, and on the basis of the view taken by the Appellate Tax Board (“Board”) of the real property at issue in these appeals, the Board made the following findings of fact.

On January 1, 2005 and January 1, 2006, the relevant assessment dates for the fiscal years at issue, WPRT was the assessed owner of sixty-six condominium units (“subject property” or “subject condominiums”) located in Weston. The subject condominiums were part of a ninety-nine unit apartment complex constructed in the 1970s. The complex was purchased by the appellant on July 20, 2004 and the units were converted from rental apartments to condominiums, known as the Stonegate Condominiums (“Stonegate Condominiums”).

On December 27, 2005, the Collector of Taxes for Weston mailed the actual fiscal year 2006 tax bills.[13] The appellant timely paid the tax due for each condominium without incurring interest. The appellant filed its Applications for Abatement on January 24, 2006, which were denied by the assessors on March 28, 2006.[14] The appellant timely filed its petitions with the Board on June 27, 2006.

On December 27, 2006, the Collector of Taxes for Weston mailed the actual fiscal year 2007 tax bills. The appellant timely paid the tax due for each condominium without incurring interest.[15] The appellant filed its Applications for Abatement on January 22, 2007, which were deemed denied on April 22, 2007.[16] The appellant timely filed its petitions with the Board on June 15, 2007. On the basis of these facts, the Board found and ruled that it had jurisdiction to hear and decide these appeals.

II. The Appellant’s Purchase and Sales of the Subject Condominiums

The Stonegate Condominium complex is comprised of approximately 28.2 acres of land improved with twenty-two individual buildings. The buildings give the appearance of one and two-story, single-family homes built in the Royal Barry Wills style. The buildings have wooden exteriors. Interior finishes include drywall and ceramic tile and hardwood floors. Each unit has central air conditioning and comes with one deeded, uncovered parking space, but buyers have the option to purchase an additional and/or covered parking space. Some of the units have outdoor patios.

Stonegate Condominiums are available in five different floor plans. “Type A” units are one-bedroom, one-bathroom, Cape-style units; “Type B” units are two-bedroom, two-bathroom, Cape-style units; “Type C” units are two-bedroom, two-bathroom, townhouse-style units; “Type D” units are three-bedroom, two-bathroom, Cape-style units; and “Type E” units are one-bedroom, one-bathroom, one-level units, which are smaller in square footage than the “Type A” one-bedroom units.

WPRT purchased the Stonegate Condominiums on July 20, 2004 for $29 million. It financed this purchase through a $27.1 million mortgage from Merrill Lynch Capital, which was due on July 31, 2007, just over three years later. The mortgage was later amended and the loan amount increased to $31.4 million.

Following its purchase of the Stonegate Condominiums, WPRT entered into an aggressive marketing campaign to sell the units. As part of its marketing campaign, WPRT also promised to make numerous exterior improvements at the Stonegate Condominiums, including new paving, siding, landscaping and other improvements to the common areas of the condominium complex. Potential buyers had the option to buy the units “as is” or to purchase an additional package of interior improvements, including updated kitchen and bathroom finishes.

Curtis Kemeny testified for the appellant at the hearing of these appeals. In 2003, Mr. Kemeny joined the T.H. Niles Real Estate Group, a property management firm which managed the Stonegate Condominiums. In 2004, Mr. Kemeny formed Boston Residential Group, another property management company which assumed all of the management contracts of the T.H. Niles Real Estate Group, including the contract for the subject property.

Mr. Kemeny testified that when WPRT purchased the Stonegate complex, it believed it would be able to sell the subject condominiums within three years, at most. Mr. Kemeny stated that WPRT held a marketing event for the existing tenants of the units at a local community center, featuring brochures and other marketing materials. One such marketing document – a listing sheet of the prices for the various unit models, dated October 7, 2004 – was entered into evidence. That listing sheet recited the following price ranges for each unit type:

Unit Type “As-Is” Price Renovated Price

A $426,000-$429,000 $509,000

B $552,000-$562,500 $635,000-$644,000

C $482,500-$515,000 $585,000-$614,000

D $635,000-$650,000 $749,000

E $360,000-$389,000 $459,000-$464,000

According to Mr. Kemeny, there was substantial interest among the existing tenants of the units and others in the Weston community in purchasing the condominiums. Deeds for twenty of the condominiums were signed and recorded in 2004. Deeds for another thirteen condominiums were signed in 2004, but not recorded until 2005. The remaining sixty-six condominiums in the Stonegate Condominium complex are the subject of these appeals.[17]

Following the initial thirty-three transactions, sales of the Stonegate Condominiums declined. The deed for only one unit was signed in 2005,[18] while 2006 saw only a slight increase in sales activity. Faced with sluggish sales, WPRT took out a construction loan on March 29, 2006, to complete the capital improvements it had undertaken. The loan, from Citizen’s Bank, was in the amount of $19 million.

WPRT also enlisted a new broker, Coldwell Banker, in an effort to spur more sales. According to Mr. Kemeny, the brokers at Coldwell Banker advised WPRT that the units were overpriced, and recommended that they reduce the asking price of each unit. WPRT heeded this advice and reduced the asking prices of the remaining condominiums. For example, of the initial thirty-three sales, fourteen were Type “B” units. The sale prices of those units ranged from $512,000 to $650,000. In contrast, sales deeds recorded in 2007 for Type “B” units reflected sale prices ranging from $400,000 to $530,000. Similarly, of the initial thirty-three sales, three were Type “A” units. The sale prices of those units ranged from $424,000 to $560,000. Sales deeds recorded in 2007 for Type “A” units reflected sale prices ranging from $265,000 to $360,000. As a result of the reduction in prices, sales increased dramatically. Fifty-seven units were sold in 2007.

III. The Date of Sale of the Condominiums at Issue

The sales deeds for the subject condominiums were entered into the record in these appeals. Those deeds – and other evidence entered into the record – revealed a pattern of irregularities surrounding the sales of the condominiums at issue. In some instances, purchase and sale agreements were executed after the signing of the deeds. In numerous instances, the deeds were signed months, and in same cases more than a year, before they were recorded in the Registry of Deeds. Mr. Kemeny testified that, because of the fast pace of the initial sales, he signed deeds in “batches” and returned them to WPRT’s attorney. He also acknowledged that in many instances, the condominiums for which he had signed deeds in 2004 did not close until well after the date the deeds were signed. Mr. Kemeny testified that the delay in closings occurred for a variety of reasons, including that some of the purchasers wanted to wait to close until the work on the common areas had been completed.

A major dispute between the parties was whether the date of signature or the date of recordation of the deeds should be regarded as the date of sale. The assessors used the date of recordation as the date of sale, while the appellant’s expert appraiser, Robert LaPorte, Jr., considered the date of signature of the deeds to be the date of sale, because, in his opinion, that was the date that the parties entered into a binding agreement. Mr. LaPorte considered there to be thirty-three sales in 2004, one in 2005, and fourteen in 2006. Using the recordation date, the assessors, by contrast, considered there to be twenty sales in 2004, thirteen in 2005, and four in 2006. Both parties agreed that, following a reduction in price, fifty-seven units were sold in 2007.

IV. Valuation of the Subject Condominiums

The appellant called three witnesses to testify at the hearing of these appeals. In addition to the testimony of Mr. Kemeny, WPRT called Eric Josephson, the principal assessor for Weston, to testify. However, the appellant relied primarily on the testimony and report of its real estate appraiser, Mr. LaPorte. Based on his education, experience and certifications, the Board qualified Mr. LaPorte as an expert real estate appraiser.

To value the subject condominiums, Mr. LaPorte and the assessors used basically the same valuation methodology. Like the assessors, Mr. LaPorte considered the highest and best use of the subject property to be its continued use as a residential condominium development. Both the assessors and Mr. LaPorte considered the comparable-sales approach to be the most reliable method of valuing the subject property. Also like the assessors, Mr. LaPorte employed a two-step valuation process. First, he selected a representative unit for each of the five types of units available at Stonegate, and used the comparable-sales approach to value each representative unit. Both Mr. LaPorte and the assessors used the initial thirty-three sales of Stonegate Condominiums as comparable sales for the purposes of their comparable-sales analyses. Next, both Mr. LaPorte and the assessors used a mass appraisal methodology to arrive at fair cash values for the remaining condominium units. That is where the similarities ended.

Despite using identical comparable-sales properties and the same basic valuation methodology, Mr. LaPorte and the assessors arrived at markedly different fair cash values because of the adjustments to value that each made. In particular, Mr. LaPorte made considerable adjustments in value to many of the condominiums at issue to account for differences in date of sale, while the assessors did not. This discrepancy was, in part, the result of the difference of opinion between the parties as to the actual dates of sale for each of the condominiums at issue and the comparable-sales properties.

Because of the decrease in sales following the sales of the initial thirty-three units, Mr. LaPorte did not believe that the sales prices of those units were an accurate reflection of the fair cash value of the subject condominiums during the fiscal years at issue. Accordingly, he looked at all sales of Stonegate Condominiums between 2004 and 2006 and calculated median annual sales prices for each unit type.[19] Mr. LaPorte then extrapolated from those median sales prices average annual declines in value for each unit type and used those figures to make adjustments to his comparable-sales properties for market conditions, or in other words, for differences in date of sale.

The assessors did not present a case and instead rested on the assessments.

V. The Board’s Ultimate Findings of Fact

The Board, like the parties, found that the highest and best use of the subject property was its continued use as residential condominiums. The Board also found that the sales-comparison approach was the most reliable method for valuing the subject property.

On the basis of all of the evidence, the Board found that the appellant did not meet its burden of proving that the fair cash values of the subject condominiums were lower than their assessed values. The appellant presented its case-in-chief primarily through the testimony and report of its expert appraiser. During the course of his testimony, Mr. LaPorte admitted that there were many errors in his appraisal report. On several occasions, Mr. LaPorte admitted that he did not know how he calculated certain adjustments that he made to the sales prices of his comparable-sales properties.

Further, the adjustments Mr. LaPorte made to his comparable-sales properties for differences in date of sale were simply untenable. For fiscal year 2006, to calculate his adjustment for date of sale for Type “B” condominiums, Mr. LaPorte first calculated the average annual decline in median sales prices between 2004 and 2006. That average annual decline was $110,000. He then made downward adjustments in that amount for three Type “B” condominiums which sold, in his opinion, in October of 2004. Therefore, although those three Type “B” condominiums had sold, in his opinion, less than two months prior to the relevant assessment date, he made a six-figure downward adjustment to account for the difference in date of sale. Using this same methodology, Mr. LaPorte made downward adjustments in the amount of $80,000 for three Type “A” units which had sold, in his opinion, in October, November, and December of 2004, less than three full months from the relevant date of assessment for fiscal year 2006. The Board found these adjustments to be erroneous for a multitude of reasons.

As an initial matter, the Board did not agree with Mr. LaPorte that the date of the signing of the deed should be considered the date of sale. Although Mr. Kemeny signed many of the deeds in 2004, he testified only that he returned the signed deeds to WPRT’s attorney. Therefore, there was no evidence as to when the deeds were delivered to and accepted by the purchasers. Moreover, Mr. Kemeny testified that the deeds for many of the units were signed but the sales did not close until later for a variety of reasons, including that some of the purchasers wanted to wait until the common area improvements had been completed. Thus, in spite of the fact that the deeds were signed on certain dates, there was no evidence that the grantor intended to effectuate a transfer on those dates, nor was there evidence that the grantees accepted the conveyance of the deeds on those dates. Additional evidence in the record indicated that the sales were not finalized on the date of the signing of the deeds, including the fact that, in some instances, the purchase and sale agreements were executed after the deeds were signed. The Board therefore found that Mr. LaPorte’s adjustments for date of sale were flawed because, among other reasons, they were premised upon incorrect dates of sale.

Furthermore, Mr. LaPorte adjusted for differences in date of sale by first calculating average annual declines in median sales prices for each condominium type. Mr. LaPorte considered the initial thirty-three sales to have taken place in 2004. Because the relevant dates of assessment were January 1, 2005 and January 1, 2006, Mr. LaPorte deducted the average annual decline amount from the sale prices of the comparable properties. However, rather than prorating that figure to reflect the difference between the actual date of sale and the relevant assessment date, Mr. LaPorte simply deducted the average annual decline amount in its entirety from the sale price. In some instances, this approach resulted in adjustments in the range of $80,000 to $110,000 for sales which occurred within weeks of the relevant dates of assessment. The Board found that the market data entered into the record did not support adjustments of that magnitude.

In sum, the Board found that Mr. LaPorte’s valuation contained errors and was unsupported by the evidence. It therefore placed little weight on Mr. LaPorte’s opinions of value.

In contrast, the Board found that there was substantial evidence in the record to support the assessments at issue. The Board noted that, in the months leading up to January 1, 2005, the appellant was able to sell numerous condominiums at prices well in excess of the fiscal year 2006 assessed values. The Board found this to be compelling evidence that the assessed values of the subject condominiums did not exceed their fair cash values for fiscal year 2006.

Further, the Board rejected Mr. LaPorte’s contention that the 2007 sales prices of the subject condominiums were probative evidence of their fair cash values on either January 1, 2005 or January 1, 2006. Indeed, the Board inferred from the circumstances surrounding the brisk sales of the subject condominiums in 2007 that the greatly reduced sales prices were more of a reflection of the tremendous pressure that WPRT was under to sell the condominiums and pay off its loans, rather than a reflection of the fair cash values of the subject condominiums. Mr. Kemeny testified that WPRT had purchased the subject condominiums in July of 2004 with the expectation to sell them over a three-year period, at most. Instead, it was left holding the majority of the condominiums into 2007. WPRT had financed the original purchase of the subject condominiums with a loan that was due in 2007, and further, took out an additional $19 million construction loan. WPRT needed to sell the remaining condominiums to pay those loans. For these reasons, the Board did not find the 2007 sales prices to be persuasive evidence of the fair cash values of the subject condominiums on either January 1, 2005 or January 1, 2006. Because Mr. LaPorte used the 2007 sales data, in part, in forming his opinions of fair cash value for the subject condominiums, and because of the numerous aforementioned errors in his methodology, the Board placed little weight on his opinions of value.

Accordingly, the Board found that the appellant failed to meet its burden of proving that the fair cash values of the subject condominiums were lower than their assessed values for fiscal years 2006 and 2007. It therefore issued decisions for the appellee in these appeals.

OPINION

“All property, real and personal, situated within the commonwealth . . . shall be subject to taxation.” G.L. c. 59, § 2. The assessors are required to assess real estate at its fair cash value determined as of the first day of January of each year. G.L. c. 59, §§ 2A and 38. Fair cash value is defined as the price on which a willing seller and a willing buyer in a free and open market will agree if both of them are fully informed and under no compulsion. Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).

The appellant has the burden of proving that the subject properties had a lower value than that assessed. “‘The burden of proof is upon the petitioner to make out its right as [a] matter of law to [an] abatement of the tax.’” Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974) (quoting Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47, 55 (1922)). “[T]he board is entitled to ‘presume that the valuation made by the assessors [is] valid unless the taxpayer[] sustain[s] the burden of proving the contrary.’” General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 598 (1984) (quoting Schlaiker, 365 Mass. at 245). In appeals before this Board, a taxpayer “‘may present persuasive evidence of overvaluation either by exposing flaws or errors in the assessors’ method of valuation, or by introducing affirmative evidence of value which undermines the assessors’ valuation.’” General Electric Co., 393 Mass. at 600 (quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983)).

In the present appeals, the evidence offered by the appellant consisted mainly of the testimony and appraisal report of its expert appraiser. The Board found and ruled that the appellant’s expert’s sales-comparison analysis was flawed, and it therefore did not provide reliable evidence of the fair cash values of the subject condominiums. On several occasions during the course of his testimony, the appellant’s expert acknowledged errors in his report, and, further, could not explain the basis of the calculations behind some of his adjustments to value. The Board did not find his testimony or appraisal report to be reliable evidence of the fair cash values of the subject condominiums.

In particular, the Board found that Mr. LaPorte’s adjustments for differences in date of sale were not supported by the market data. His adjustments to the sale prices of his comparable properties were based upon average annual declines in median sales prices of each condominium type. However, he did not prorate the annual decline amount to correlate to the actual differences in date of sale. Instead, he deducted the average annual decline amount, in its entirety, from the sale price of the comparable property.

Moreover, the Board found and ruled that Mr. LaPorte’s adjustments for differences in date of sale were premised upon incorrect sale dates. “Delivery of a deed is essential to its validity, and the deed becomes effective only at the time of its delivery . . . Delivery occurs where the grantor intends the deed to effect a present transfer of the property conveyed, and the grantee assents to the conveyance.” Graves v. Hutchinson, 39 Mass. App. Ct. 634, 639-40, (1996) (internal citations omitted). Mr. LaPorte considered the sale date to be the date of signature of the deeds. Although Mr. Kemeny signed many of the deeds in 2004, he testified only that he returned the signed deeds to WPRT’s attorney. Therefore, there was no evidence as to when the deeds were delivered to and accepted by the purchasers. Further, additional evidence in the record indicated that there was no intent to “effect a present transfer of the property” on the deed- signature date. Id. Rather, there was evidence in the record that the sales were not closed on those dates, but instead were delayed for various reasons, including the purchasers’ desire to have the work on the common areas completed before closing on the condominiums. In addition, many of the purchase and sale agreements were executed after the signing of the deeds, which was further evidence that the transactions were not final as of the date of the signing of the deeds. The Board therefore found and ruled that Mr. LaPorte’s adjustments for differences in date of sale were flawed because, among other reasons, they were premised upon incorrect dates of sale.

Based on the evidence presented, the Board found and ruled that the appellant did not meet its burden of proving that the assessed values of the subject condominiums exceeded their fair cash values for the fiscal years at issue. Accordingly, the Board issued decisions for the appellee in these appeals.

APPELLATE TAX BOARD

By: ________________________________

Thomas W. Hammond Jr., Chairman

A true copy,

Attest: ____________________________

Clerk of the Board

APPENDIX A

Fiscal Year 2006

Docket Number	Address	Assessment

X-297803	2 Jericho Rd	$604,700
X-297804	4A Jericho Rd	$332,600
X-297805	4B Jericho Rd	$333,100
X-297806	4C Jericho Rd	$331,100
X-297807	4D Jericho Rd	$331,100
X-297808	14 Jericho Rd	$448,200
X-297809	16 Jericho Rd	$433,500
X-297810	17 Jericho Rd	$507,400
X-297811	18 Jericho Rd	$505,800
X-297812	19 Jericho Rd	$448,000
X-297813	21 Jericho Rd	$448,800
X-297814	23 Jericho Rd	$451,300
X-297815	25 Jericho Rd	$507,400
X-297816	31 Jericho Rd	$446,900
X-297817	33 Jericho Rd	$446,400
X-297818	34 Jericho Rd	$424,100
X-297819	36A Jericho Rd	$332,200
X-297820	36B Jericho Rd	$332,200
X-297821	36C Jericho Rd	$331,500
X-297822	36D Jericho Rd	$330,400
X-297823	41 Jericho Rd	$448,600
X-297824	43 Jericho Rd	$446,600
X-297825	44 Jericho Rd	$447,100
X-297826	46 Jericho Rd	$446,900
X-297827	53A Jericho Rd	$333,700
X-297828	53B Jericho Rd	$332,200
X-297829	56 Jericho Rd	$448,400
X-297830	59 Jericho Rd	$575,400
X-297831	60 Jericho Rd	$576,200
X-297832	61 Jericho Rd	withdrawn
X-297833	63 Jericho Rd	$447,300
X-297834	66 Jericho Rd	$446,600
X-297835	68 Jericho Rd	$446,400
X-297836	70 Jericho Rd	$502,600
X-297837	71 Jericho Rd	$447,300
X-297838	73 Jericho Rd	$456,300
X-297839	74 Jericho Rd	$506,100
X-297840	75 Jericho Rd	$507,900
X-297841	76 Jericho Rd	$451,100
X-297842	78 Jericho Rd	$448,600
X-297843	79 Jericho Rd	$506,100
X-297844	80 Jericho Rd	$447,300
X-297845	81 Jericho Rd	$447,800
X-297846	83 Jericho Rd	$447,800
X-297847	85 Jericho Rd	$508,200
X-297848	86 Jericho Rd	$507,900
X-297849	88 Jericho Rd	$446,600
X-297850	89 Jericho Rd	$501,800
X-297851	90 Jericho Rd	$446,600
X-297852	91 Jericho Rd	$448,200
X-297853	92 Jericho Rd	$505,500
X-297854	93 Jericho Rd	$447,800
X-297855	95 Jericho Rd	$502,100
X-297856	98 Jericho Rd	$446,900
X-297857	99 Jericho Rd	$382,000
X-297858	100 Jericho Rd	$447,300
X-297859	101 Jericho Rd	$447,100
X-297860	103 Jericho Rd	$447,300
X-297861	106 Jericho Rd	$507,600
X-297862	109 Jericho Rd	$505,500
X-297863	110 Jericho Rd	$448,600
X-297864	111 Jericho Rd	$446,600
X-297865	112 Jericho Rd	$446,900
X-297866	113 Jericho Rd	$445,700
X-297867	114 Jericho Rd	withdrawn
X-297868	119 Jericho Rd	$505,000

Fiscal Year 2007

Docket Number	Address	Assessment

F-290545	2 Jericho Rd	withdrawn
F-290546	4A Jericho Rd	$339,700
F-290547	4B Jericho Rd	$340,100
F-290548	4C Jericho Rd	$316,600
F-290549	4D Jericho Rd	withdrawn
F-290550	14 Jericho Rd	$428,100
F-290551	16 Jericho Rd	$465,100
F-290552	17 Jericho Rd	$485,000
F-290553	18 Jericho Rd	$483,500
F-290554	19 Jericho Rd	$481,100
F-290555	21 Jericho Rd	$428,700
F-290556	23 Jericho Rd	$484,700
F-290557	25 Jericho Rd	$485,000
F-290558	31 Jericho Rd	$414,400
F-290559	33 Jericho Rd	$479,500
F-290560	34 Jericho Rd	$438,500
F-290561	36A Jericho Rd	$339,200
F-290562	36B Jericho Rd	$317,600
F-290563	36C Jericho Rd	$317,000
F-290564	36D Jericho Rd	$337,400
F-290565	41 Jericho Rd	$428,500
F-290566	43 Jericho Rd	$567,900
F-290567	44 Jericho Rd	$543,500
F-290568	46 Jericho Rd	$463,600
F-290569	53A Jericho Rd	$319,100
F-290570	53B Jericho Rd	$317,600
F-290571	56 Jericho Rd	$481,600
F-290572	59 Jericho Rd	withdrawn
F-290573	60 Jericho Rd	withdrawn
F-290574	61 Jericho Rd	withdrawn
F-290575	63 Jericho Rd	$543,700
F-290576	66 Jericho Rd	withdrawn
F-290577	68 Jericho Rd	$479,500
F-290578	70 Jericho Rd	$480,500
F-290579	71 Jericho Rd	$427,200
F-290580	73 Jericho Rd	$435,800
F-290581	74 Jericho Rd	$516,700
F-290582	75 Jericho Rd	$485,500
F-290583	76 Jericho Rd	$430,800
F-290584	78 Jericho Rd	$481,800
F-290585	79 Jericho Rd	$516,700
F-290586	80 Jericho Rd	$480,400
F-290587	81 Jericho Rd	$480,900
F-290588	83 Jericho Rd	$480,900
F-290589	85 Jericho Rd	$485,800
F-290590	86 Jericho Rd	$485,500
F-290591	88 Jericho Rd	withdrawn
F-290592	89 Jericho Rd	$512,300
F-290593	90 Jericho Rd	$542,900
F-290594	91 Jericho Rd	$544,800
F-290595	92 Jericho Rd	$483,300
F-290596	93 Jericho Rd	$544,300
F-290597	95 Jericho Rd	$512,600
F-290598	98 Jericho Rd	$426,800
F-290599	99 Jericho Rd	withdrawn
F-290600	100 Jericho Rd	$480,400
F-290601	101 Jericho Rd	$480,200
F-290602	103 Jericho Rd	$480,400
F-290603	106 Jericho Rd	$626,900
F-290604	109 Jericho Rd	$483,300
F-290605	110 Jericho Rd	$545,300
F-290606	111 Jericho Rd	withdrawn
F-290607	112 Jericho Rd	$543,200
F-290608	113 Jericho Rd	withdrawn
F-290609	114 Jericho Rd	withdrawn
F-290610	119 Jericho Rd	$515,600

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

BLACK ROCK GOLF CLUB, LLC v. BOARD OF ASSESSORS OF

THE TOWN OF HINGHAM

Docket Nos. F284357, F288545 Promulgated:

March 1, 2010

These are appeals filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65 from the refusal of the appellee to abate real estate taxes assessed to the appellant under G.L. c. 59, §§ 11 and 38 by the Town of Hingham for fiscal years 2006 and 2007.

Commissioner Mulhern heard these appeals. Chairman Hammond and Commissioners Scharaffa and Rose joined him in the decisions for the appellant.

These findings of fact and report are made pursuant to a request by the appellee under G.L. c. 58A, § 13 and 831 CMR 1.32.

Robert E. Brooks, Esq. for the appellant.

Ellen M. Hutchinson, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

I. Jurisdiction

On January 1, 2005 and January 1, 2006, the appellant, The Black Rock Golf Club, LLC (“Black Rock”), was the assessed owner of Unit One, also known as the golf unit, of the Black Rock Condominiums located at 19 and 25 Clubhouse Drive in the Town of Hingham (“subject property”).

As of January 1, 2005 and January 1, 2006, the Board of Assessors of Hingham (“assessors”) valued the subject property at $20,000,000 and $18,600,000, respectively. The assessors assessed taxes thereon at the rate of $9.20 per $1,000 for fiscal year 2006 and $9.00 per $1,000 for fiscal year 2007, resulting in tax assessments of $184,000, plus a Community Preservation Act (“CPA”) surcharge of $2,760, for fiscal year 2006 and $167,400, plus a CPA surcharge of $2,511, for fiscal year 2007. In accordance with G.L. c. 59, § 57C, the appellant timely paid each fiscal year’s taxes without incurring interest.

On January 30, 2006 and January 31, 2007, in accordance with G.L. c. 59, § 59, the appellant timely filed an Application for Abatement with the assessors for fiscal years 2006 and 2007, respectively. The assessors denied the appellant’s abatement application for fiscal year 2006 on March 6, 2006, and denied the appellant’s abatement application for fiscal year 2007 on February 12, 2007. In accordance with G.L. c. 58A, § 7 and c. 59, §§ 64 and 65, the appellant seasonably appealed these denials by filing Petitions Under Formal Procedure with the Appellate Tax Board (“Board”) on June 5, 2006 for fiscal year 2006, and on May 11, 2007 for fiscal year 2007. On the basis of these facts, the Board found and ruled that it had jurisdiction to hear and decide these appeals.

II. Witnesses

A. Appellant

The appellant presented its case-in-chief through the testimony of three witnesses: Richard Partridge, assessor for the town of Hingham; George McGoldrick, founder and president of Black Rock; and Jeffrey R. Dugas, a licensed real estate appraiser. Mr. Dugas is a Member of the Appraisal Institute (“MAI”) and has appraised over 1,000 golf courses nationwide, include 130 in Massachusetts. He has testified before numerous state courts and boards. Based on his education and experience, the Board qualified Mr. Dugas as a real estate valuation expert. The appellant also introduced several exhibits including Mr. Dugas’ self-contained appraisal report and an article entitled “Private Golf Club Memberships: Real or Personal Property?” written by Laurence A. Hirsh.[20]

B. Assessors

In defense of their assessments, the assessors presented one witness: Emmet T. Logue, whom the Board qualified as a real estate valuation expert. Mr. Logue testified that he had appraised golf courses over the past few years. The assessors also offered into evidence numerous exhibits, including copies of the deeds for four sales of golf courses which occurred during the period December 2005 and August 2007, a listing of the Black Rock construction costs, Black Rock financial statements for the calendar years ended 12/31/2003, 12/31/2004 and 12/31/2006, an appraisal report prepared by Mr. Dugas in September 2004 for purposes of valuing the owner’s interests, and also a copy of the Purchase & Sale Agreement of the members’ interests in Black Rock, dated January 1, 2005.

On the basis of all the evidence, the Board made the following findings of fact.

III. Subject Property Description

Black Rock Condominiums was initially developed by George McGoldrick and James L. Read as a golf and residential community, which was scheduled to contain a total of 138 housing units in addition to an 18-hole private golf course, with various other recreational and social amenities. In 2004, Mr. McGoldrick and Mr. Reed agreed to sell their respective interests in the golf course and the residential development of Black Rock to one another; Mr. McGoldrick purchased Mr. Reed’s interest in the golf course and Mr. Reed purchased Mr. McGoldrick’s interest in the residential development. The golf course, golf club and amenities are currently known as Unit 1 of the Black Rock Condominiums.

Entrance to Black Rock Condominiums is via a guarded security gate on Black Rock Drive, which is accessible off Ward Street, a paved town road that services residential areas along the west side of Hingham. The entire site contains 357.308 acres of land. The subject property includes a championship 18-hole private golf course, a four-level clubhouse, a recreation center, an outdoor pool, and 5 outdoor tennis courts, as well as other site improvements such as parking lots, maintenance buildings, landscaping, and walkways.

The golf course was designed by Brian Silva, a well-known golf course architect. The course was completed and opened for play on July 4, 2002. The golf course measures approximately 6,960 yards from the back tees with a par of 71. The design of the course is known as a core golf course, which is designed with the front nine holes going out from the clubhouse and the back nine holes returning to the clubhouse. The course provides a variety of open and wooded areas, and many holes display the rock and ledge found on the property in the form of sheer cut rock walls, stone walls, and outcroppings. There are several bridges used to cross wetlands. The course features 107 bunkers of various sizes and shapes situated around the greens and strategically placed in fairways.

The golf course irrigation system has 1,700 sprinkler heads and four deep wells that feed into two large holding ponds that can store up to 20 million gallons of water. These two large ponds come into play as water hazards on the course. A practice area and driving range are located across the driveway near the clubhouse. Some of the features include a large practice putting green, short game center and grass tees. The overall quality level of the course and its layout are consistent with a high-end private facility.

Paved roads throughout the site service the golf course, clubhouse and recreation center. The clubhouse is an excellent quality steel and wood-frame structure with two full stories plus a third floor mezzanine, over a partial basement. The total building area, including basement, is 41,827 square feet. The design of the clubhouse is that of an Adirondack lodge structure. The building was completed in 2003 and is in excellent physical condition as of the relevant dates of assessment. The clubhouse was constructed on an embankment so that the first floor is at grade to the rear, and below grade at the front of the building; therefore the main public access to the building is via the second floor formal entry.

The first floor, ground level, contains a pro shop, mens and womens locker rooms, a member services area for golf bag storage, laundry and shoe shining, an employee break room, and mechanical and storage rooms. There are a number of entrances at grade and via stairways from the golf course area. The first floor is accessible to the main level via two stairways and an elevator.

The second floor, which is the main level of the clubhouse, is accessible via the principal entrance which includes a driveway and carport off Clubhouse Drive. This level contains the formal entry foyer, a formal sitting room, a large function room, the Grill Room for member dining, a private conference room, public restrooms and the kitchen. There are fireplaces in both the sitting room and the Grill Room. The total indoor seating capacity is approximately 300 people. There is additional dining space on the large wrap-around terrace which overlooks the golf course.

Flooring in the clubhouse is primarily carpet, with concrete floors in the kitchen and the basement, and vinyl tile in the employee locker rooms and first floor offices. The interior walls are primarily painted gypsum board with cherry woodwork and trim. Ceilings are finished with a mix of acoustic ceiling tile and painted gypsum board. There are cathedral ceilings in the main floor function room and dining room, with painted sheetrock finish in the function room and knotty pine with steel beams in the dining room.

The subject property is also improved with a multi-purpose recreation center, which is a one-story, steel and wood-frame building, also Adirondack in style, with a gross building area of 8,937 square feet. Built in 2002, the recreation center includes an entrance lobby with lounge, juice bar and office, mens and womens shower, locker and washroom areas, a multi-purpose/childcare center, aerobics room, weight room and tennis pro shop. The building is of good to excellent quality construction and is in excellent physical condition. The recreation complex also contains a large heated in-ground pool plus a separate “kiddy” pool, and five outdoor tennis courts. There are multiple entrances including a double door entrance and vestibule at the front of the building, accessible from the Clubhouse Drive parking lot, an entrance from the pool area to the locker rooms and showers, a separate entrance between the tennis pro shop and the outside tennis courts, and a rear entrance to the aerobics room.

The maintenance complex consists of two adjacent buildings containing a total gross building area of approximately 8,500 square feet. These buildings are used to provide a working shop area, a maintenance office, an employee lounge, and equipment storage.

IV. Membership

Black Rock Country Club is a private, members-only club. Membership is a contractual privilege by which designated persons receive a revocable license which allows them to enter onto the country club premises for the purpose of using and enjoying the available facilities. Memberships are “non-equity,” which means that a member cannot sell his or her interest but would receive a share of the proceeds upon sale of the club. There are three categories of memberships: full golf membership, which includes full golf course, clubhouse and recreational complex access; single golf membership, which is full golf access for one person; and recreational and residential memberships,[21] which is access only to the non-golf recreational facilities. Pursuant to the membership bylaws, the club may issue a maximum of 325 full-golf memberships. Beginning in 2004, single-golf memberships were offered, with a cap of 25, which does not count against the 325 full-golf membership maximum.

To become a member, an individual is required to pay an initiation fee, annual dues, and also meet club minimum spending requirements in the dining facilities. Each membership has a refundable and non-refundable initiation fee component. For the fiscal years at issue, the membership type, initiation fee, and refundable and non-refundable portions were as follows:

Membership	FY 2006 Fee	Non-Refund	Refund	FY 2007 Fee	Non-Refund	Refund
Full-Golf	$125,000	$35,000	$90,000	$125,000	$35,000	$90,000
Single-Golf	$125,000	$35,000	$90,000	$125,000	$35,000	$90,000
Recreation	$ 42,000	$10,000	$32,000	$ 42,000	$12,000	$30,000
Resident	$ 35,000	$10,000	$25,000	$ 35,000	$10,000	$25,000

Membership history charts reported a total of 310 members as of January 1, 2005, 281 of whom were golf members and 29 were recreational/residential members, and 343 members as of January 1, 2006, of whom 299 were golf members and 44 were recreational/residential members. Initially, there were 11 “founding” members who paid a fully refundable fee of $100,000. The Club started selling memberships, before local zoning or approvals were granted. During the period of December 1999 through January 2000 the Club sold 73 fully refundable memberships at the initial price of $65,000. Subsequently, during the period February 2000 through April 2002, memberships were sold as follows: 61 memberships at $75,000; 23 memberships at $80,000; 37 memberships at $90,000; 19 memberships at $95,000; 32 memberships at $100,000; and 20 memberships at $115,000.

In May 2002, the initiation fee was increased to its current level of $125,000. The evidence presented suggests that of the total number of golf memberships, only 86 were sold at the current rate of $125,000. The evidence also indicates that during calendar years 2004 and 2006, two memberships were sold at the substantially lower rates of $65,000 and $70,000, the latter of which was non-refundable. Further, it appears that during calendar years 2005 and 2006 some members were not required to pay an initiation fee but rather received their membership as an incentive for the purchase of one of the residential condominiums.

In addition to the initiation fee, all members are required to pay annual dues of $8,295 for full-golf memberships, $6,640 for single-golf memberships, and $5,400 for recreational and residential memberships, as of January 1, 2005, and $8,710, $6,970, and $5,670, respectively, as of January 1, 2006. Also, members were required to meet annual food expenditure minimums of $1,200 for full-golf and recreational memberships and $600 for single-golf memberships for both of the fiscal years at issue.

According to membership documents, the refundable component of the initiation fee was required to be repaid to a resigned member only after three new members had joined the club. During the time period that the member was awaiting the return of his refundable amount, the member was required to pay annual dues and meet club minimum spending requirements in the dining facility, until his fee was refunded, but for no longer than one year from his resignation. No interest accrued on the individual’s refundable deposit amounts and Black Rock was not required to segregate the refundable deposits to assure availability to a resigning member.

V. Appellant’s Case

The appellant’s first witness was Lane Partridge, assessor for Hingham. Mr. Partridge testified that he was personally responsible for setting the values for the subject property for each of the fiscal years at issue. He further testified that at the time there was no set methodology in place for valuing golf courses. Through conversations with various appraisers, including Mr. Logue, Mr. Partridge was directed to the Board’s recent decision in The Willows at Westborough v. Board of Assessors of the Town of Westborough, Mass. ATB Findings of Fact and Reports 2008-469, 506 (“The Willows”) aff’d 441 Mass. 1108 (2004), which involved the valuation of real estate associated with an assisted living facility. In The Willows, residents were required to pay a “one-time entrance fee that [was] 90% refundable (without any interest accruing)” in addition to their monthly service fees. Id. at 2002-475. In that case, the Board agreed with the assessors’ real estate expert, Emmet T. Logue, and also a healthcare industry consultant, Mr. Gregory T. Walsh, that “interest income should be imputed on the 90% refundable portion . . . and included in the income aggregation of the income capitalization methodology” used to value the real estate associated with The Willows. Id. at 2002-513. Based on their determination that the entrance fees in The Willows were similar to the Black Rock initiation fees in the instant appeals, the assessors determined that the methodology used in The Willows was the appropriate method to use to value the subject property for the fiscal years at issue. Mr. Partridge conceded, however, that he was not aware of any professional appraisal articles which gave validation to The Willows concept of valuation for valuing a golf course.

Next, the appellant presented the testimony of its real estate valuation expert, Jeffery Dugas. Mr. Dugas valued the subject property based on its current use as a golf course.[22] To value the subject property, Mr. Dugas considered the cost, sales-comparison and income-capitalization methodologies. He determined that the cost approach was not reliable for valuing the subject property, given the difficulty in estimating economic and functional depreciation associated with the improvements. He noted that the sales-comparison approach is generally considered a reliable method of estimating the market value of a going-concern golf operation, but this approach is not as reliable when valuing only the real estate component as in the present appeal. Therefore, Mr. Dugas valued the subject property using an income approach based on the fair rental value of the golf course. Mr. Dugas testified that, as with most commercial property, the best way to estimate the value of the subject property is to determine the fair market rent that the property would generate. In arriving at his estimate of value, Mr. Dugas relied on the article written by Laurence A. Hirsh, which opined that “membership interests are like stock in a company that owns property. The value of the property is not impacted by the value of the stock, and thus the membership interest would not be included as real property value.” Laurence A. Hirsch, Private Golf Club Memberships: Real or Personal Property?, Journal of Property Tax Assessment & Adnubustratuib, Vol. 4, Issue 3 at 72.

To begin his income capitalization approach, Mr. Dugas first determined the gross revenue for each of the golf course’s four profit centers: golf, merchandise sales, food and beverage, and other. Included in the golf revenue were membership dues, green fees, carts and tournaments.
Mr. Dugas concluded that the actual revenues reported by the appellant for these line items for calendar years 2005 and 2006 were reasonable.

Also included in golf revenue were new member initiation fees. For this line item, however, Mr. Dugas opted to use a higher stabilized amount than that reported by the appellant. To estimate the appropriate value, Mr. Dugas first noted that refunds of so-called refundable initiation fees were “few and far between.” As a result, he determined that the subject property is more appropriately valued assuming a non-refundable membership fee. Based on a review of non-refundable initiation fees of comparable golf courses, Mr. Dugas concluded that non-refundable membership fees are, generally speaking, one-half of refundable fees. Therefore, for purposes of valuing the subject property, he assumed a non-refundable initiation fee of $60,000 based on the actual refundable initiation fee of $125,000. After reviewing historic trends at the golf club, he further assumed an attrition rate of about 5%, or 15 members, per year. He therefore concluded that the club would generate approximately $900,000 ($60,000*15) annually in new membership initiation

fees.[23] With that amount added to the annual membership fees, green fees, carts and tournament fees, Mr. Dugas calculated total golf revenue of $4,628,252 and $4,970,810, for fiscal years 2006 and 2007, respectively.

Actual reported merchandise sales for 2005 and 2006 were $266,015 and $334,223, respectively. Mr. Dugas testified that merchandise sales for a club of this kind generally range from $15 to $20 per round. Black Rock hosted about 19,000 rounds in 2005 and 2006, which equates to merchandise sales that range between $285,000 and $380,000. Because the actual merchandise revenue was market supported, Mr. Dugas relied on Black Rock’s actual merchandise revenue in his analysis.

After reviewing data from several for-profit country clubs with clubhouses that have seating capacities that range from 327 to 990 and have large banquet operations, Mr. Dugas found a correlation between food and beverage sales and seating capacity. Based on these comparables, Mr. Dugas determined that the average food and beverage sales ranged from $5,500 to $7,000, per seat. Further, he determined that the subject property is able to charge a significant premium because of the physical quality of the club and the service and quality of the food served. Therefore, Mr. Dugas estimated food and beverage sales at the club at the higher end of the range. Using $6,500 per seat for the 300 indoor seats at the club, he arrived at an estimate of $1,950,000. Actual food and beverage sales were $2,014,359 and $1,915,882 for 2005 and 2006, respectively. Accordingly, Mr. Dugas determined that the actual food and beverage sales reported by the appellant were indicative of the market and were used in his analysis.

Finally, Mr. Dugas relied on the appellant’s actual income of $281,175 in 2005 and $318,667 in 2006 for the “other” category, which included pool and tennis fees, camps and clinics, babysitting and rentals. Mr. Dugas’ total gross revenue for 2005 and 2006 is as follows:

2005 2006

Golf $4,628,252 $4,970,810

Merchandise $ 266,015 $ 334,233

Food & Beverage $2,014,359 $1,915,882

Other $ 477,055 $ 502,729

Gross Revenue $7,385,681 $7,723,644

Mr. Dugas testified that, generally speaking, golf course rents are based on fixed percentages of the gross revenue generated by the various departments and that the rent payable by the lessee is the real property owner’s net operating income (“NOI”). Therefore, to estimate the subject property’s NOI, Mr. Dugas reviewed several rental comparables in the Northeast region with similar climates, as well as labor and utility costs, as the subject property. Mr. Dugas testified that most of his rental comparables are public golf courses, which generally operate at slightly better profit margins and theoretically “could rent for a higher percentage.” Therefore, he adjusted downward slightly for the subject property because it was a private club. Based on the rental data, Mr. Dugas determined that market rents were approximately 22% of golf revenue, 6% of merchandise sales, 10% of food and beverage, and 5% of other. He applied these percentages to the subject property’s departmental revenues to calculate the subject property’s NOI for 2005 and 2006. The following table summarizes Mr. Dugas’ calculations.

Department Revenue	Percentage Rent	2005 Revenue	2005 Rent Payable	2006 Revenue	2006 Rent Payable
Golf	22.0%	$4,628,252	$1,018,215	$4,970,810	$1,093,578
Merchandise	6.0%	$ 266,015	$ 15,961	$ 334,223	$ 20,053
Food &Beverage	10.0%	$2,014,359	$ 201,436	$1,915,882	$ 191,588
Other	5.0%	$ 477,055	$ 23,853	$ 502,729	$ 25,136
Total		$7,385,681	$1,259,465	$7,723,644	$1,330,356

Finally, Mr. Dugas derived a capitalization rate from a band-of-investment, mortgage-equity analysis. He established his rate by using a 70/30 loan-to-value ratio and an amortization period of twenty years. His mortgage loan rate was 7.0%, resulting in a mortgage constant of 6.51%.

To determine his equity rate, Mr. Dugas reviewed rates published in the spring 2004 PriceWaterhouseCoopers Korpacz Real Estate Investor Survey (“Korpacz Survey”) for going-concern golf properties, which ranged from 4.90% to 21.20%, with an average of 10.98%. According to the spring 2005 Korpacz Survey, the rates for golf properties narrowed slightly to between 5.02% and 17.10%, with an average of 10.77%. Mr. Dugas noted that although the subject property is of generally good quality and is within a major metropolitan market, it is weather dependent and industry figures have been declining since 2001. As a result, he determined that an appropriate equity capitalization rate would be 15.0%, which resulted in an equity component of 0.045. Based on the mortgage and equity components, Mr. Dugas calculated an overall capitalization rate of 11.01%. He further determined that a capitalization rate as applied to real estate rent is typically lower than that which would be applied to a going-concern operating income. For this reason, Mr. Dugas selected a capitalization rate of 10.0% for the subject property. Mr. Dugas then added a tax factor to arrive at his overall capitalization rates of

10.996% for fiscal year 2006 and 10.920% for fiscal year 2006.[24]

Relying on these capitalization rates, Mr. Dugas estimated the value of the subject property using the income-capitalization approach for fiscal year 2006 to be $11,500,000, and for fiscal year 2007 to be $12,200,000.`

To further support his estimate of value using the income-capitalization method, Mr. Dugas also presented a simplified sales-comparison approach that cited five sales of golf courses that occurred during the period December 15, 2005 through August 31, 2007, with sale prices that ranged from $7.25 million to $13.1 million. Four of the five comparables were private clubs located in Massachusetts; the fifth was a semi-private club located in Pennsylvania. Mr. Dugas testified that although three of the sales occurred in 2007, almost two years after the latest date of assessment, the market was soft and stagnant in revenue, rounds and values for the past several years and, therefore, he determined that no adjustment for timing or market conditions was warranted. He did, however, adjust for location and physical condition, and also personal property and business value associated with the sale of a going-concern golf course. Based on his chosen sales, Mr. Dugas determined a “range of value” for the subject property, using the sales-comparison approach, between $10,000,000 and $11,000,000, which, he opined, supported his estimates of value using the income-capitalization approach.

The appellant’s last witness was George McGoldrick, president of Black Rock Country Club. Mr. McGoldrick testified that in January 1999, he and Jim Reed formed a partnership for the development of Black Rock Condominiums. Mr. McGoldrick testified that at that time, there was no available bank financing for golf courses such as the subject property and, therefore, as a means of financing the construction of the golf course and the club amenities, the appellant opted to sell memberships. Initially, there were eleven “Founding” members who each paid $100,000. Subsequently, traditional non-equity memberships were sold ranging in price from $65,000 in December 1999 to $125,000 as of May 2002. Prior to 2002, the full amount of the initiation fee, less an administrative fee, was refundable upon resignation. As of January 1, 2005, the appellant had sold 286 full golf memberships. According to the appellant’s membership sales’ history, only 21 memberships sold for $125,000. The majority of memberships sold for considerably less.

Mr. McGoldrick testified that in their sales’ negotiations, he and Mr. Reed did not impute an interest value attributable to the membership initiation fees. He testified that the membership deposits were “not sitting in a bank” but were used to “build and operate the business.” Therefore, they did not consider those dollars in the transaction.

VI. Assessors’ Case

The assessors’ valuation expert, Mr. Logue, also relied on the income-capitalization approach to estimate the value of the subject property for the fiscal years at issue because of the income-generating characteristics of the property and also the availability of actual revenue and expense data for the subject property for calendar years 2003 through 2006. He did not use the sales-comparison approach due to the limited number of arms’-length sales for golf course properties with similar quality, dues, initiation fees and overall ownership structure. He also excluded the cost approach due to the subject property’s recent construction and excellent condition, and also the fact that the subject property is a condominium unit within a larger development. He determined that allocating the cost of site improvements and the underlying land value for the entire development to the subject property would be speculative and unreliable. Mr. Logue determined that the highest and best use for the subject property was its present use.

To arrive at his estimates of value for the subject property for the fiscal years at issue, Mr. Logue performed a traditional income-capitalization approach and deducted the operating expenses, excluding real estate taxes, from the annual gross revenues and then deducted reserves for replacements of short-lived realty items and furniture, fixtures, and equipment (“FF&E”), as well as a business enterprise/entrepreneurship return to reach his estimates of NOI attributable to the real estate. He capitalized the resulting NOI using an overall rate plus a tax factor to reach his opinion of value of $19,900,000 and $20,900,000 for fiscal years 2006 and 2007, respectively.

In developing his income-capitalization approach, Mr. Logue relied on the income and expense information provided by the appellant for calendar years 2003 through 2006 in order to reconstruct stabilized estimates of income and expenses as of the effective dates of valuation. To calculate his estimates of the subject property’s gross revenue as of the relevant assessment dates, Mr. Logue included amounts for membership dues, food and beverage sales, pro-shop merchandise sales, tournaments, guest fees, lessons and clinics, cart rentals, child care, equipment rental and repair, clubhouse rental, and other miscellaneous income.

Based on the actual number and trend of memberships, Mr. Logue determined that the average food and beverage sales for calendar years 2004 and 2005 was the most realistic stabilized amount for fiscal year 2006. Because pro shop sales fluctuated in a somewhat irregular pattern between $269,000 and $374,000 during calendar years 2003 through 2006, Mr. Logue stabilized pro shop merchandise sales, for both fiscal years at issue, at the average of the four preceding calendar years. He stabilized tournament income for fiscal year 2006 at the average for calendar years 2004, 2005 and 2006. After noting that guest fees for 2003 were $342,000 but by 2006 had declined to $300,000, Mr. Logue concluded that a stabilized annual amount for fiscal year 2006 was the approximate average for calendar years 2004 and 2005. He stabilized income from lessons and clinics, cart rentals, child care, and equipment rental and repair at annual amounts based on the average for calendar years 2004 through 2006. Mr. Logue noted that there was a minimal amount of clubhouse rental income for calendar years 2003 and 2004 because the clubhouse had recently opened, and, therefore, he concluded that the most realistic stabilized clubhouse rental income for his analysis was the average for calendar years 2005 and 2006. Finally, he determined an amount for other/miscellaneous income based on the average annual revenue for calendar years 2004 through 2006.

For fiscal year 2007, he stabilized membership dues and food and beverage revenues at somewhat higher levels than for fiscal year 2006 revenues due to increased membership and greater use of the clubhouse and other facilities. He stabilized guest fees, lessons and clinics, and miscellaneous revenues at slightly lower amounts than for fiscal year 2006 to better reflect the historical trends in these items of revenue, particularly for calendar years 2005 and 2006.

Mr. Logue also included in gross revenue a stabilized income amount attributable to the non-refundable component of the membership initiation fees. Mr. Logue conceded that although the annual non-refundable initiation fee revenue from new members during the time from initial ramp-up to full membership will likely decline as the membership at Black Rock stabilizes and reaches capacity, revenue from this source would continue on an annual basis as a result of turnover from resigned to new members who will pay an initiation fee. Based on the number of memberships for each category as of January 1, 2005, and the applicable membership initiation fees as of the same date, Mr. Logue determined that total non-refundable membership deposits amounted to $ 11,180,000.[25]

Membership Number of Initiation Non-Refundable Total

Type Members Fee Portion Non-Refundable

________________1/1/05 __________1/1/05______________________________________

Full golf 286 $125,000 $35,000 $10,010,000

Single golf 24 $125,000 $35,000 $ 840,000

Recreation 21 $ 42,000 $10,000 $ 210,000

Residential 12 $ 35,000 $10,000 $ 120,000

Total 343 $11,180,000

Mr. Logue then calculated an annual turnover rate of 4.4% for fiscal year 2006, based on membership records which indicated that between 10 and 15 members resign each year. Assuming that the same number of new members join Black Rock each year, Mr. Logue applied his estimated 4.4% annual turnover rate to the total non-refundable deposits of $11,180,000, and estimated the stabilized annual revenue from non-refundable initiation deposits at $491,920 for fiscal year 2006.

For fiscal year 2007, Mr. Logue calculated total non-refundable membership deposits at $11,905,000 as follows:

Membership Number of Initiation Non-Refundable Total

Type Members Fee Portion Non-Refundable

________________1/1/06__________1/1/06______________________________________

Full golf 299 $125,000 $35,000 $10,465,000

Single golf 26 $125,000 $35,000 $ 910,000

Recreation 34 $ 42,000 $10,000 $ 340,000

Residential 19 $ 35,000 $10,000 $ 190,000

Total 378 $11,905,000

Again, assuming that 15 members per year resign, Mr. Logue determined an annual turnover rate of 4.0% for fiscal year 2007. Applied to his total non-refundable deposits, he calculated annual revenue from non-refundable initiation deposits at $476,200 for fiscal year 2007.

The last component of Mr. Logue’s gross revenue was imputed interest on both the non-refundable and refundable portions of the membership deposits. Relying on the total number of club memberships for each category as of the relevant dates of assessment, as detailed supra, and the existing initiation fees of $125,000 for full-golf and single-golf memberships, $42,000 for recreation memberships and $35,000 for residential memberships, Mr. Logue calculated the total value of the initiation deposits at $40,052,000 for fiscal year 2006 and $42,718,000[26] for fiscal year 2007.

Mr. Logue testified that the membership deposits are monies paid to the club which can be used for whatever purposes the club decides and that the imputed interest reflects the non-interest bearing nature of these funds. To account for the appellant’s use of the deposits and to convert the deposit value into an income stream, Mr. Logue attributed what he determined to be a safe rate of interest of 4.23% for fiscal year 2006 and 4.37% for fiscal year 2007 applied to both the refundable and non-refundable membership deposits, to calculate total imputed interest income of $1,694,200 and $1,341,940, for fiscal years 2006 and 2007, respectively.[27] Neither Mr. Logue nor the assessors commented on or introduced evidence attempting to establish a relationship or correlation between the initiation fees and the annual dues.

Next, Mr. Logue deducted stabilized operating expenses, based on a review of the actual expenses reported for calendar years 2003 through 2005, plus a management fee of 3.5%, from the annual gross revenue to reach his estimate of NOI for each of the fiscal years at issue. Relying on the subject property’s projected budgets for calendar years 2004 through 2008, and also the National Golf Market segment of the Korpacz Survey, Mr. Logue determined that an allowance of 3% of total income, excluding imputed interest, would be a realistic allowance for reserve for replacement of short-lived real estate and FF&E.

Finally, Mr. Logue allowed a deduction for entrepreneurship return. He testified that in estimating the value of the Black Rock property for assessment purposes, he is valuing the real estate only and therefore it is appropriate to make a deduction for the business enterprise value. Based on his review of the subject property and also published information, he determined that a deduction of 4% of total gross income, including imputed interest, was realistic.

Mr. Logue reviewed the Korpacz survey, golf supplement, and also prepared a mortgage equity analysis and arrived at a capitalization rate of 9.5%, which is 0.590 less than that used by Mr. Dugas. Adding the appropriate tax factors for fiscal years 2006 and 2007, Mr. Logue arrived at overall capitalization rates of 10.42% and 10.40%, respectively, which he applied to the net real estate income to estimate the value of the subject property for the fiscal years at issue.

A summary of Mr. Logue’s income capitalization methodology is contained in the following table.

	Fiscal Year 2006	Fiscal Year 2007
Revenue
Membership (“Memb.”) Dues	$ 2,705,000	$ 2,990,000
Food and Beverage	$ 1,850,000	$ 1,965,000
Pro Shop Merchandise Sales	$ 330,000	$ 330,000
Tournament Income	$ 392,000	$ 410,000
Guest Fees	$ 330,000	$ 310,000
Lessons and Clinics	$ 196,000	$ 190,000
Cart Rentals	$ 124,000	$ 124,000
Child Care Income	$ 22,000	$ 22,000
Equipment Rental and Repair	$ 6,100	$ 6,100
Clubhouse Rental	$ 73,000	$ 73,000
Other/Misc.	$ 182,000	$ 182,000
Amortization of Non-Refundable Memb. Deposits	$ 491,920	$ 476,200
Imputed Interest on Non-Refundable Memb. Deposits	$ 472,914	$ 520,249
Imputed Interest on Refundable Memb. Deposits	$ 1,221,288	$ 1,346,528[28]
Gross Revenue	$ 8,396,220	$ 8,945,077

Operating Expenses
Food and Beverage	$ 1,700,000	$ 1,990,000
General and Administrative	$ 975,000	$ 1,045,000
Building Maintenance	$ 680,000	$ 665,000
Golf Course Maintenance	$ 870,000	$ 918,000
Golf Operations	$ 520,000	$ 527,000
Fitness, Pool and Tennis	$ 502,000	$ 548,000
Pro Shop	$ 240,000	$ 208,000
Child Care	$ 60,000	$ 50,000
Management* 3.5%	$ 234,571	$ 247,741

Total Operating Expenses	$ 5,781,571	$ 6,198,741

Net Operating Income	$ 2,614,649	$ 2,746,337

Reserves for Replacement* 3.0%	$ 201,061	$ 212,349

Entrepreneurship Return** 4.0%	$ 335,849	$ 357,803

Net Real Estate Income to be Capitalized	$ 2,077,740	$ 2,176,184

Capitalization Rate	9.50%	9.50%
Tax Factor	0.920%	0.900%
Overall Rate	10.420%	10.400%

Indicated Fair Cash Value	$19,939,922	$20,924,850`

Rounded Fair Cash Value	$19,900,000	$20,900,000

*Based on % of gross revenue excluding imputed interest.

**Based on % of total gross revenue.

VII. Board’s Valuation Findings

Both the parties’ real estate valuation experts valued the subject property using an income-capitalization analysis. Their methodologies, however, differed. Mr. Dugas estimated the value of the subject property based on a “market rent” analysis. Applying this methodology, Mr. Dugas first determined the gross income from each of the golf course’s four profit centers and then determined an appropriate percentage representing the appellant’s rent payable, or net operating income, for each category. He then divided the results by the capitalization rates he thought appropriate to yield the estimated market value of the subject property for each of the fiscal years at issue.

In contrast, Mr. Logue valued the subject property by deducting the country club’s operating expenses from its annual gross revenues and then deducting reserves for replacements for FF&E, as well as a business enterprise/entrepreneurship return, to reach his estimates of NOI attributable to the real estate. He then capitalized the resulting NOIs to arrive at his opinion of fair market value for the fiscal years at issue.

Mr. Logue attempted to justify his income-capitalization approach by stating that it was similar to the methodology used by the Board in valuing the real estate associated with a senior congregate housing facility in The Willows. Based on overwhelming evidence, including the testimony of Gregory Walsh, a healthcare consultant, industry-wide entrance fee and monthly service fee payment schedules, and also the owner’s pricing charts, the Board found in The Willows that the amount of monthly service fees and the amount of entrance fees “are directly related to the overall amount charged to a resident for the right or privilege to live there. They are both components of the cost of occupancy at the facility.” The Willows at 505. In the present appeals, however, the record is devoid of any evidence correlating the initiation deposit to a lower annual dues.

Furthermore, in The Willows the Board found, based on extensive evidence, that the entrance deposits were “part and parcel of the monthly service fees.” Id. at 508. The amount of the entrance fees and the monthly service fees were directly, although inversely, related because monthly service fees were higher where entrance fees were lower or non-existent and visa versa. The entrance and service fees were, therefore, directly related to the “earning capacity” of the real estate and appropriate considerations in determining the value of the real estate. See Pepsi-Cola Bottling Co. v. Assessors of Boston, 397 Mass. 447, 451 (1986). In contrast, in the present appeals, the Board did not find any of “The Willows” type correlations between the entrance or initiation fees and the annual dues.

Moreover, assuming arguendo that the Board adopted the methodology used in The Willows in the present appeals, Mr. Logue’s computations were flawed. First, Mr. Logue’s imputed interest income was based on the full amount of the initiation fees, both refundable and non-refundable, whereas in The Willows imputed interest was applied only to the non-refundable portion of the resident deposit. Furthermore, in deriving the imputed income, Mr. Logue applied the initiation fees of $125,000 for full and single golf memberships to the full compliment of club members as of the relevant date of assessment despite the fact that he had not related them to the market and the evidence showed that a majority of members had paid significantly lower initiation fees.

Initially, there were 11 “founding” members who paid a fully refundable fee of $100,000. During the period of December 1999 through January 2000 the Club sold 73 fully refundable memberships at the initial price of $65,000. Further, during the period of February 2000 through April 2002, memberships were sold as follows: 61 memberships at $75,000; 23 memberships at $80,000; 37 memberships at $90,000; 19 memberships at $95,000; 32 memberships at $100,000; and 20 memberships at $115,000. In May 2002, the initiation fee was increased to its current level of $125,000.

The evidence presented, however, suggested that of the total number of golf memberships, only 86 were sold at the current rate of $125,000. Moreover, during calendar years 2004 and 2006, two memberships were sold at the substantially lower rates of $65,000 and $70,000, the latter of which was non-refundable. Further, it appears that during calendar years 2005 and 2006 some members were not required to pay an initiation fee but rather received their membership as an incentive for the purchase of one of the residential condominiums. Therefore, the Board found that Mr. Logue’s calculation of imputed interest income was likely overstated and so inflated his estimates of value as to render them unreliable.

The Board further found, under the circumstances present in these appeals and for the reasons more fully explained in the following Opinion, that Mr. Dugas’ market-rental approach is the more appropriate methodology to value the subject golf course and country club. Employing Mr. Dugas’ market-rental methodology, the Board first determined the gross revenue for each of the golf course’s four profit centers: golf revenue; food and beverage; pro shop sales; and other. Noting the similarities in the parties’ gross revenues, excluding Mr. Logues’ imputed interest income and including Mr. Dugas’ market adjusted new member initiation fees, the Board estimated gross revenue for the four profit centers as follows:

	FY 2006 Revenue	FY 2007 Revenue
Golf Revenue
Dues	$2,860,000	$3,115,000
Guest Fee	$ 320,000	$ 320,000
Cart Rental	$ 128,000	$ 150,000
Tournament Fees	$ 400,000	$ 400,000
New Member Initiation Fees	$ 900,000	$ 900,000
Total Golf Revenue	$4,608,000	$4,885,000
Food/Beverage	$2,000,000	$2,000,000
Merchandise	$ 325,000	$ 325,000
Other	$ 478,100	$ 495,000

Based on the subject property’s increased earning capacity attributable to the country club and recreational facilities, the Board determined that 25%, the higher end of Mr. Dugas’ rental range, was the more appropriate rental rate applicable to the golf revenue. The Board further found that Mr. Dugas’ market rental percentages applicable to food and beverage, merchandise and other income were reasonable and appropriate. Finally, the Board found that based on the subject property’s high quality new construction and also the increased earning capacity attributable to the function and recreation facilities, a capitalization rate of 9.5%, plus the applicable tax factor, was appropriate. A summary of the Board’s market-rental approach is contained in the following table.

	FY 2006 Revenue	FY 2006 NOI	FY 2007 Revenue	FY 2007 NOI
Golf Revenue 25%	$4,608,000	$1,152,000	$4,885,000	$1,221,250
Food/Beverage 10%	$2,000,000	$200,000	$2,000,000	$200,000
Merchandise 6%	$ 325,000	$19,500	$ 325,000	$19,500
Other 5%	$ 478,100	423,905	$ 495,000	$24,750
Total Net Operating Inc.		$1,395,405		$1,465,500

Capitalization Rate		9.5%		9.5%
Tax Factor		0.92%		0.90%
Total Capitalization Rate		10.42%		10.40%
Indicated Fair Market Value		$13,391,603		$14,091,346
Fair Cash Value		$13,390,000		$14,090,000

On the basis of these findings, the Board found that the appellant met its burden of proving that the subject property was overvalued for fiscal years 2006 and 2007. The Board determined that the fair cash value of the subject property was $13,390,000 for fiscal year 2006 and $14,090,000 for fiscal year 2007. Accordingly, the Board decided these appeals for the appellant and granted abatements of $61,724.18 for fiscal year 2006 and $41,198.85 for fiscal year 2007.[29]

OPINION

“Prior to valuing the subject property, its highest and best use must be ascertained, which has been defined as the use for which the property would bring the most.” Tennessee Gas Pipeline Co. v. Assessors of Agawam, Mass. ATB Findings of Fact and Reports 2000-859, 875 (citing Conness v. Commonwealth, 184 Mass. 541, 542-43 (1903)); Irving Saunders Trust v. Assessors of Boston, 26 Mass. App. Ct. 838, 843 (1989) and the cases cited therein. A property’s highest and best use must be legally permissible, physically possible, financially feasible, and maximally productive. Appraisal Institute, The Appraisal of Real Estate 305-308 (12^th ed., 2001). See also Skyline Homes, Inc. v. Commonwealth, 362 Mass. 684, 87 (1972); DiBaise v. Town of Rowley, 33 Mass. App. Ct. 928 (1992). In determining the property’s highest and best use, consideration should be given to the purpose for which the property is adapted. The Appraisal of Real Estate at 315-16; Tennessee Gas Pipeline Co., supra at 235. In the present appeals, both parties’ valuation experts and this Board valued the subject property based on its existing use as a golf course and country club.

Generally, real estate valuation experts, the Massachusetts courts, and this Board rely upon three approaches to determine the fair cash value of property: income-capitalization, sales-comparison, and cost reproduction. See Correia v. New Bedford Redevelopment Authority, 375 Mass. 360, 362 (1978). The courts and the appraising community as well as some state legislatures have adopted varying methods or combination of methods for valuing golf courses for ad valorem tax purposes. While some relatively older cases rely exclusively upon the cost approach, see, e.g., Old Oaks Country Club v. State, 35 AD2d 71, aff’d 30 NY2d 611; Matter of County of Suffolk [Great River], 70 Misc. 2d 232, that method is now usually given weight only in a reconciliation of values derived by other means, see, e.g., Russell L. Wenkstern Trust/Burl Golf Course v. County of Hennepin, 1990 Minn. Tax LEXIS 225, *6-9, or is used to establish a maximum value, see, e.g., Matter of River House-Bronxville v. Gallaway, 79 AD2d 990.

Exclusive use of the sales-comparison or market approach is ordinarily limited to those situations when there either is no data to support the use of income-capitalization methodology, see, e.g., Salem Country Club v. Assessors of Peabody, Mass. ATB Decision Docket No. 166714, etc. (December 8, 1994), or the data underpinning it is so flawed that it renders the values derived from that income approach unreliable. See, e.g., Golf Course Properties, LLC v. Tyrone Township, Michigan Tax Tribunal Docket No. 301974, p. 15 (November 17, 2006). Otherwise, and primarily because golf course properties rarely sell as real estate alone, reliance on the sales-comparison or market approach, like the cost approach, is now usually limited to those instances when it serves as a check on, or in a reconciliation of values derived using, other methodologies. See, e.g., Minnetonka Country Club Association, Inc. v. County of Hennepin, 1990 Minn. Tax LEXIS 203, *13.

Further, some state legislatures and administrative bodies recognize the difficulty in valuing golf courses and have attempted to codify standardized approaches. See, e.g., Neveda Department of Taxation. Golf Course Open-Space Classification and Valuation Manual. 9/11/2006. A.R.S. 42-13152 (Arizona’s uniform assessment measures for golf courses).

In Massachusetts, the preferred method for valuing income-producing property, like a golf course, is the income-capitalization approach. The income-capitalization method “is frequently applied with respect to income-producing property.” Taunton Redev. Assocs. v. Assessors of Taunton, 393 Mass. 293, 295 (1984). Other jurisdictions concur. See e.g. Deschutes County Assessors and Dept. of Revenue v. Broken Top Club, LLC, Oregon Tax Court BV: 15 OTR Advance Sheets 2002 #3; Russell L. Wenkstern Trust/Burl Golf Course v. Country of Hennepin, 1990 Minn. Tax LEXIS 203, *13. The market-rental approach, which Mr. Dugas employed in these appeals, is one of the court-approved income-capitalization methods for valuing the real estate improved with a golf course and country club. See Ardsley Country Club v. Assessor of the Town of Greenburgh, 879 N.Y.S.2d 319, 324 (2009) (citing Mill River Club v. Board of Assessors, 847 N.Y.S.2d 670 (2007)). In Mill River Club, the taxpayer challenged the real property tax assessments of four parcels of real estate which the taxpayer owned and operated as a private golf course and country club. Id. at 672. The New York Appellate Court found that “because most golf courses are run by specialized companies under operating leases, the net income a course’s owner is likely to derive corresponds to the rent a tenant-operator will be willing to pay and that rent, in turn, depends on the revenue the golf course is likely to produce.” Id. at 673. “Once that revenue was estimated, it would be converted into a ‘hypothetical rent,’” based on a “percentage of the revenue derived from each source.” Id. at 674-75. The resulting net-operating income is then capitalized using an appropriate capitalization rate to estimate the subject property’s fair market value. Id. at 673; Ardsley Country Club, 879 N.Y.S.2d at 325.

Under the circumstances present in these appeals, the Board found that Mr. Dugas’ market-rental, income-capitalization analysis was the more appropriate valuation methodology to use to value the subject property. It is an accepted method for valuing real property improved with a golf course (see e.g., Mill River Club, supra, and Ardsley Country Club, supra) and most closely measures the earning capacity of the real property. See, e.g., Marketplace Center II Limited Partnership v. Assessors of Boston, Mass. ATB Findings of Fact and Reports 2000-258, 266; see also Pepsi-Cola, 397 Mass. at 451. The Board further found that with the exception of Mr. Logue’s imputed interest income and Mr. Dugas’ market adjusted initiation deposits, the parties’ revenues attributable to the four profit centers were similar. The Board also found that the capitalization rate used by the assessors’ real estate valuation expert were more appropriate given the earning capacity of the subject property and also the subject property’s excellent quality and construction.

In addition, the Board found that Mr. Logue did not demonstrate that his income-capitalization approach, based on the approach adopted by the Board in The Willows at Westborough v. Board of Assessors of the Town of Westborough, Mass. ATB Findings of Fact and Reports 2008-469, 506 (“The Willows”) aff’d 441 Mass. 1108 (2004), which dealt with real estate associated with a senior congregate housing facility and included imputed interest income for the residents’ entrance fees, was the more appropriate valuation methodology in the present appeals. In The Willows, there was a direct and proven correlation, albeit inverse, between the entrance fee paid and the resident’s monthly service therefore suggesting that the entrance fee was in fact a disguised occupancy payment. In the present appeals, however, the Board found that the record is devoid of any evidence correlating the initiation deposit to a lower annual dues. Moreover, the Board found that Mr. Logue’s estimate of imputed interest was unreliable. In the Board’s view, it is Mr. Dugas’ approach that more closely reflects the earning capacity of the subject property here and is therefore the more appropriate method to determine fair cash value in these appeals. Pepsi-Cola Bottling Co., 397 Mass. at 451 (finding that it is the earning capacity of real estate that is relevant for determining fair cash value under the income approach).

The mere qualification of a person as an expert does not endow his testimony with any magic qualities. Boston Gas Co., 334 Mass. at 579.

The board [is] not required to believe the testimony of any particular witness but it [can] accept such portions of the evidence as appear to have the more convincing weight. The market value of the property [can] not be proved with mathematical certainty and must ultimately rest in the realm of opinion, estimate, and judgment . . . (citations omitted). The board [can] select the various elements of value as shown by the record and from them form . . . its own independent judgment.

Assessors of Quincy, 309 Mass. at 72. See also North American Philips Lighting Corp. v. Assessors of Lynn, 392 Mass. 296, 300 (1984); New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456, 473 (1981); Jordan Marsh Co. v. Assessors of Malden, 359 Mass. 106, 110 (1971).

The burden of proof is upon the appellant to make out its right as a matter of law to an abatement of the tax. Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974). “By holding that the assessment is entitled to a presumption of validity, we are only restating that the taxpayer bears the burden of persuasion of every material fact necessary to prove that its property has been overvalued.” General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 599 (1984). In appeals before this Board, a taxpayer “may present persuasive evidence of overvaluation either by exposing flaws or errors in the assessors’ method of valuation, or by introducing affirmative evidence of value which undermines the assessors’ valuation.” Id. at 600 (quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983)).

Accordingly, the Board decided these appeals for the appellant and granted abatements of $61,724.18 for fiscal year 2006 and $41,198.85 for fiscal year 2007.[30]

APPELLATE TAX BOARD

By: _________________________________

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: _____________________________

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

JUDITH C. & ANNE M. v. THE BOARD OF ASSESSORS

PISTORIO OF THE CITY OF BOSTON

Docket Nos. F291785 Promulgated:

F299097 March 10, 2010

These are appeals under the formal procedure, pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65, from the refusal of the Board of Assessors of the City of Boston (“assessors” or “appellee”) to abate taxes on certain real estate in Boston owned by and assessed to Judith C. and Anne M. Pistorio (together, “appellants”) under G.L. c. 59, §§ 11 and 38 for fiscal years 2007 and 2009 (“fiscal years at issue”).

Commissioner Egan heard these appeals. Chairman Hammond and Commissioners Scharaffa, Rose, and Mulhern joined her in a decision for the appellee in Docket No. F291785 and in a decision for the appellants in Docket No. F299097.

These findings of fact and report are made at the request of the appellants pursuant to G.L. c. 58A, § 13 and 831 CMR 1.32.

Judith C. Pistorio and Anne M. Pistorio, pro se, for the appellants.

Nicholas Ariniello, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of testimony and exhibits introduced at the hearing of these appeals, the Appellate Tax Board (“Board”) made the following findings of fact.

On January 1, 2006, and January 1, 2008, the relevant dates of assessment for the fiscal years at issue, the appellants were the assessed owners of a 1,002 square-foot parcel of land improved with a four-story, brick apartment building, located at 72 North Margin Street in Boston (“subject property”).

For the fiscal years at issue, the assessors valued the subject property and assessed taxes thereon as follows.

Docket

No.

Fiscal

Year

Assessed Value

Tax

Assessed

F291785

2007

$590,500

$6,489.60

F299097

2009

$597,500

$6,351.43

Boston’s Collector of Taxes mailed the fiscal year 2007 actual tax bills on December 29, 2006. The appellants paid the assessed taxes without incurring interest and timely filed an Application for Abatement on February 1, 2007. The assessors denied that abatement application on March 22, 2007 and gave notice of their denial to the appellants on March 27, 2007. The appellants timely filed their petition with the Board on June 21, 2007.

Boston’s Collector of Taxes mailed the fiscal year 2009 actual tax bills on December 31, 2008. The appellants paid the assessed taxes without incurring interest and timely filed an Application for Abatement on February 2, 2009.[31] The assessors denied the abatement application on February 19, 2009 and gave notice of their denial to the appellants on February 24, 2009. The appellants timely filed their petition with the Board on March 11, 2009. Based on the foregoing, the Board found and ruled that it had jurisdiction to hear and decide these appeals.

The subject property was originally constructed in 1900 and was renovated in 1974. It contains four one-bedroom apartments, which range in size from 450 square feet to 550 square feet. One unit is occupied by Anne M. Pistorio and the other three are rental units. In 2005, the appellants collected rent in the total amount of $35,700. In 2007, the appellants collected rent in the total amount of $36,362.50. The subject property also features a 440 square-foot courtyard to the rear of the property.

Both appellants testified at the hearing of these appeals. They advanced several arguments as to why the subject property was overvalued for the fiscal years at issue. First, the appellants contended that the land component of the subject property was excessive because the lot was not a buildable lot, and also because the subject property’s land valuation was not in line with the valuations of other, nearby properties. The appellants specifically cited the land value of 70 North Margin Street, which they claimed was approximately the same size as the subject property. The appellants testified that the land value of 70 North Margin Street was assessed at $192,500 for fiscal year 2007, while the subject property’s land assessment was $223,100 for fiscal year 2007. However, no property record cards or other relevant assessing documents for 70 North Margin Street were entered into the record.

In addition, the appellants contended that the property directly across the street from the subject property – 51 North Margin Street – was an “eyesore” that detracted from the value of the subject property by virtue of its proximity. Several photographs of 51 North Margin Street were entered into the record. The photographs show that it is a brick building, painted black, with partially boarded-up windows and a dilapidated fire escape.

Further, in May of 2007, a new business – The Dogfather – opened its doors at 51 North Margin Street. The Dogfather provides dog daycare, grooming, walking and other dog-related products and services. According to the appellants, the Dogfather generates a considerable amount of noise and foot traffic – both human and canine – in the area. In their opinion, it has had an adverse impact on the quality of life in the neighborhood, because of the noise and also because dog droppings are frequently left behind. In fact, the appellants testified that because of the additional noise and traffic, they had to decrease their asking rent for one newly renovated unit from $1,700 per month to $1,375 in 2007, and they could not raise the rents for the other two units. The appellants also stated that in 2008, two of the rental units were vacated because of the additional noise and traffic generated by The Dogfather.

The assessors rested on the assessments for both of the fiscal years at issue.

On the basis of all of the evidence, the Board found that, for fiscal year 2007, the appellants failed to demonstrate that the fair cash value of the subject property was less than its assessed value. The appellants’ primary contention with respect to the fiscal year 2007 assessment was that the land component of the subject assessment was too high in relation to other, nearby properties. However, the appellants did not introduce property record cards or other relevant assessing documents to show the actual size or assessed values of any nearby properties. The Board therefore found that the evidence did not support the appellants’ assertion that the land component of the subject assessment was excessive, nor was there any evidence to indicate that the overall assessment exceeded the fair cash value of the subject property. Accordingly, the Board issued a decision for the appellee in Docket No. F291785.

However, the appellants introduced substantial, credible evidence documenting the deleterious effect that the arrival of The Dogfather at 51 North Margin Street had upon the value of the subject property. Photographs entered into the record showed the extremely narrow width of North Margin Street and the close proximity of the buildings on it, as well as the unattractive facade of 51 North Margin Street, which directly faces the subject property. Given the narrowness of North Margin Street and the close proximity of all of the buildings on it, the Board found credible the appellants’ testimony that the increase in traffic, noise, and dog droppings had a negative impact on the quality of life in the neighborhood, and in turn, a negative impact on the rental value of the subject property’s apartment units.

The Board found that the assessors failed to take into consideration the state of the building across the street from the subject property and the increase in noise and traffic on North Margin Street in setting the fiscal year 2009 assessment. The Board therefore accounted for the negative influences on the subject property’s value by adjusting the assessed value downward by approximately ten percent, thereby finding that the fair cash value of the subject property for fiscal year 2009 was $537,500. Accordingly, the Board issued a decision for the appellants in Docket No. F299097, and granted an abatement of $637.80.

OPINION

Assessors are required to assess real estate at its fair cash value as of the first day of January preceding the fiscal year at issue. G.L. c. 59, § 38. Fair cash value is defined as the price upon which a willing buyer and a willing seller will agree if both are fully informed and under no compulsion. Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).

For fiscal year 2007, the appellants contended that the land component of the subject assessment was excessive, especially in comparison to the land assessments for nearby, similar properties. However, the appellants failed to introduce reliable evidence documenting the actual size and/or land assessments of any neighboring properties. The appellants’ “reliance on the assessed values of nearby properties as indicators of the value of the subject property was entitled to less weight because [they] failed to offer substantiating information about the proposed comparable assessments, such as the property record cards.” See Hinds v. Assessors of Manchester-by-the-Sea, Mass. ATB Findings of Fact and Reports 2006-771, 779-80. Further, “reliance on unadjusted assessments of assertedly comparable properties [is] insufficient to justify a value lower than that” assessed. Antonino v. Assessors of Shutesbury, Mass. ATB Findings of Fact and Reports 2008-54, 71.

Moreover, even had the appellants introduced appropriate evidence to show that the land value of the subject assessment was excessive, such evidence alone would not have carried the day. “[A] taxpayer does not conclusively establish a right to an abatement merely by showing that his land is overvalued. ‘The tax on a parcel of land and the building thereon is one tax . . . although for statistical purposes they may be valued separately.’” Hinds, Mass. ATB Findings of Fact and Reports at 2006-778, (quoting Assessors of Brookline v. Prudential Insurance Co., 310 Mass. 300, 317 (1941)). The Board therefore found and ruled that the appellants’ evidence “challenging the value of the land component of the subject assessment” failed to demonstrate “that the overall assessment of the subject property exceeded its fair cash value as of the relevant assessment date.” Hinds, Mass. ATB Findings of Fact and Reports at 2006-779. Accordingly, the Board issued a decision for the appellee in Docket No. F291785.

However, for fiscal year 2009, the Board found and ruled that the appellants introduced ample, credible evidence that the subject property’s fair cash value was less than its assessed value. Specifically, the Board found persuasive the appellants’ testimony and other evidence regarding the property and business located directly across the street from the subject property at 51 North Margin Street. The evidence showed that the unsightly facade of the building at 51 North Margin Street directly faced the subject property. The evidence also established that the 2007 arrival of The Dogfather, a business which provided dog daycare, walking, grooming and other services, resulted in increased noise and foot traffic in the subject property’s immediate neighborhood. The Board further found that given the narrow width of North Margin Street and the close proximity of all of the buildings on it, this increase in noise and foot traffic had a negative impact upon the value of the subject property. The Board found credible the appellants’ testimony that the increase in activity at 51 North Margin Street led to increased vacancies and decreased rental values at the subject property. As it has in similar appeals, the Board

concluded it was appropriate to take into `consideration the detrimental impact from the activities taking place on the adjacent property. Appellant[s’] property was affected by the . . . activities which took place on the abutting land. The Board found that, as a result of those activities, the price at which a willing buyer and seller would agree upon for the sale of the property would be less than the price for that same property in the absence of the described on-going activities.

Nita R. Boyer v. Board of Assessors of the Town of Brookline, Mass. ATB Findings of Fact and Reports 1999-1, 9. Based on the foregoing, the Board determined that a downward adjustment in value of $60,000 was appropriate.

“In reaching its opinion of fair cash value in this appeal, the Board was not required to believe the testimony of any particular witness or to adopt any particular method of valuation . . . . Rather, the Board could accept those portions of the evidence that the Board determined had more convincing weight.” Foxboro Associates v. Board of Assessors of Foxborough, 385 Mass. 679, 683 (1982); New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456, 473, 469 (1981); Assessors of Lynnfield v. New England Oyster House, Inc., 362 Mass. 696, 701-02 (1972).

The Board need not specify the exact manner in which it arrived at its valuation. Jordan Marsh v. Assessors of Malden, 359 Mass. 196, 110 (1971). The fair cash value of property cannot be proven with “mathematical certainty and must ultimately rest in the realm of opinion, estimate and judgment.” Assessors of Quincy v. Boston Consol. Gas Co., 309 Mass. 60, 72 (1941). “The credibility of witnesses, the weight of evidence, the inferences to be drawn from the evidence are matters for the Board.” Cummington School of the Arts, Inc. v. Assessors of Cummington, 373 Mass. 597, 605 (1977).

The Board applied these principles in reaching its determination that the assessors overvalued the subject property for fiscal year 2009. Accordingly, The Board issued a decision for the appellants in Docket No. F299097 and granted an abatement of $637.80. The Board issued a decision for the appellee in Docket No. F291785.

THE APPELLATE TAX BOARD

By: ____________________________________

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: _____________________________

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

PHEBE D. HAM v. BOARD OF ASSESSORS OF

THE TOWN OF CONCORD

Docket No. F298270 Promulgated:

March 10, 2010

This is an appeal filed under the informal procedure[32] pursuant to G.L. c. 58A, § 7A and G.L. c. 59, §§ 64 and 65, from the refusal of the Board of Assessors of the Town of Concord (“appellee” or “assessors”), to abate taxes on certain real estate in the Town of Concord, owned by and assessed to Phebe D. Ham (“appellant” or “Ms. Ham”) under G.L. c. 59, §§ 11 and 38 for fiscal year 2008 (“fiscal year at issue”).

Commissioner Egan heard this appeal. Chairman Hammond and Commissioners Scharaffa, Rose and Mulhern joined her in the decision for the appellant.

These findings of fact and report are made pursuant to requests by the appellant and appellee under G.L. c. 58A, § 13 and 831 CMR 1.32.

Phebe D. Ham, pro se, for the appellant.

Kevin D. Batt, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

A. Introduction and Jurisdiction

On the basis of the exhibits and testimony offered into evidence at the hearing of this appeal, the Appellate Tax Board (“Board”) made the following findings of fact. On January 1, 2007, the appellant was the owner[33] of a 43,587 square-foot parcel of land, improved with a wood-framed, single-family home, located at 80 Musterfield Road in Concord, Massachusetts (“subject property”). For the fiscal year at issue, the assessors valued the subject property at $992,600 and assessed a tax thereon, at the rate of $10.72 per $1,000, in the total amount of $10,784.20.[34] On February 28, 2008, the Collector of Taxes for Concord mailed out the actual fiscal year 2008 tax bills. The appellant timely paid the tax due without incurring interest. On March 31, 2008,[35] the appellant timely filed an abatement application with the assessors, which they denied on April 10, 2008. On June 30, 2008, the appellant timely filed her appeal with the Board. Based on the foregoing, the Board found and ruled that it had jurisdiction to hear and decide this appeal.

The dwelling on the subject property is a one and one-half story structure built in what is known as the “Acorn style” in 1972. It has a concrete foundation, vertical wood siding, and an asphalt-shingled roof. The house has four rooms, including one bedroom, as well as one bathroom. Interior features include vaulted ceilings, a ceramic-tiled fireplace, and hardwood and linoleum flooring. The house has baseboard, electric heating, an electric hot water tank, and a 200-amp circuit breaker electrical system. There is also an unfinished basement. The total finished living area of the home is approximately 837 square feet.

B. Prior Proceeding Concerning the Fiscal Year 2007 Assessment of the Subject Property

For fiscal year 2007, the fiscal year immediately preceding the fiscal year at issue, the assessors valued the subject property at $725,400. Ms. Ham filed an application for abatement with the assessors contesting the assessed value of the subject property. When that abatement application was denied, she filed an appeal under the informal procedure with the Board. On the basis of the evidence of record in the fiscal year 2007 appeal, the Board found that the fair cash value of the subject property was $597,900, and therefore, issued a decision for the appellant in that appeal.[36]

C. The Assessors’ Case-in-Chief

Because the assessors increased the subject property’s assessment over the value determined by the Board for the preceding fiscal year, the burden of proof shifted to the assessors to show that an increase in value was warranted. See G.L. c. 58A, § 12A. To meet that burden, the assessors called three witnesses to testify on their behalf. Those witnesses were Evelyn Masson, the Assessor for Concord; John Minty, the Building Commissioner for Concord; and John Neas, a certified real estate appraiser. The Board found each of them to be credible. Based on his education and experience, the Board qualified Mr. Neas as an expert residential real estate appraiser. Mr. Neas’ Summary Appraisal Report was also entered into the record.

Ms. Masson testified that the assessors conducted a town-wide revaluation process in setting the fiscal year 2008 assessments. Evidence entered into the record showed that the median value of a single-family residence in Concord increased from $718,550 in fiscal year 2007 to $735,650 in fiscal year 2008. In addition, evidence was entered into the record establishing that the assessed value of the subject property had, in the past, been reduced to account for the parcel’s slightly odd configuration. Ms. Masson testified that the mass appraisal system used by the assessors no longer considered that criteria in setting the value of the subject property, and therefore, the same depreciation factor was not applied to the land value of the subject property for fiscal year 2008.

Mr. Minty, who inspected the subject property and met with Ms. Ham prior to testifying at the hearing of this appeal, testified that the dwelling at 80 Musterfield Road was much smaller than the majority of the homes in the Nashawtuc Hill neighborhood of Concord, where the subject property is located. Mr. Minty testified that, under applicable zoning requirements, the parcel could accommodate a house with over 4,000 square feet of living area, akin to the home on the adjacent lot at 74 Musterfield Road. Mr. Minty substantiated this assertion by introducing a document with a plot plan of the subject property, onto which he superimposed a cut-out of the footprint of the home at 74 Musterfield Road. Mr. Minty also testified that he conducted a similar exercise using footprints of other, larger, homes in the subject’s neighborhood to show that local zoning would allow for the parcel to be developed to accommodate those homes. Accordingly, Mr. Minty concluded that the subject property’s dimensional constraints would not preclude the construction of a home much larger than the home on the subject parcel.

Mr. Neas, who inspected the subject property as part of his appraisal, testified that Nashawtuc Hill is surrounded by three rivers, which limit vehicular access to the neighborhood. Mr. Neas noted that, because of its setting, Nashawtuc Hill enjoys a tranquility and natural beauty, yet is conveniently located close to the town center, commercial shops, and transportation. Mr. Neas opined that Nashawtuc Hill is one of the most desirable neighborhoods in Concord.

Mr. Neas found the highest and best use of the subject property to be its use as a newly constructed, single-family residence, comparable to other, larger residences in the Nawshatuc Hill neighborhood. In valuing the subject property, Mr. Neas considered the three usual approaches to value, but concluded that the sales-comparison analysis was the most appropriate method with which to value the subject property.

Mr. Neas initially selected sales of fourteen different properties for comparison, but ultimately focused on seven sales, all of which took place in Concord between September 15, 2005 and September 14, 2007. The following tables contain the relevant data for those seven sales as well as Mr. Neas’ adjustments thereto:

MR. NEAS’ SALES-COMPARISON PROPERTIES ONE THROUGH FOUR

	Subject Property	118 FairhavenRoad	Adj.($)	24SouthfieldRoad	Adj.($)	236GarfieldRoad	Adj.($)	162Indepen-denceRoad	Adj. ($)
Sale Date	N/A	9/2005		11/2005		8/2007		4/2007
Sale Price ($)	N/A	511,750		530,000		680,000		778,000
Apprec. ($)	N/A		-31,984		-29,150		23,800		11,670
Location	Very Good	Good	255,875	Good	212,000	Good	136,000	Good	155,600
Lot Size(sq. ft.)	43,587	21,020	25,000	14,600	35,000	1.43 acres	-25,000	22,047	25,000
View	Good	Good		Good		Good		Good
Design	Contemp.	Ranch		Cape/Ranch		Contemp.		Ranch
Quality	Good	Good		Good		Good		Good
Year Built	1972	1954		1958		1976		1950
Condition	Average	Good	-25,000	Average		Average		Average
Rooms/BedsBaths	4/1/1	5/2/1		4/2/1		5/3/1.5	-5,000	5/2/2	-10,000
Living Area	1,008[37]	1,110		884		861		1,213	-20,500
Basement	Unfinished	Playroom	-5,000	None	25,000	Finished	-25,000	Unfinished
Heating/Cooling	Electric/None	Hot Water/None		Hot Water/None		Hot Water/None		Hot Air/None
Garage	None	2-car detach.	-20,000
Porch/Patio/Deck	Deck Area	Patio		Screen Porch	-2,500	ScreenPorch	-2,500	Screen Porch	-2,500
Fireplace	Fireplace	Fireplace		Fireplace		Fireplace		Fireplace
Total Adjustment			198,891		240,350		97,300		149,270
Indicated Value ($)		710,641		770,350		777,300		927,270

	Subject Property	63 Revolutionary Road	Adj. ($)	201 IndependenceRoad	Adj. ($)	291MusterfieldRoad	Adj. ($)
Sale Date	N/A	4/2007		5/2006		9/2007
Sale Price ($)	N/A	831,000		875,000		1,575,000
Apprec.($)	N/A		12,465		-26,250		-55,125
Location	Very Good	Good	166,200	Good	175,000	Very Good
Lot Size(sq. ft.)	43,587	20,000	25,000	2.39 acres	-75,000	2.6 acres	-75,000
View	Good	Good		Good		Good
Design	Contemp.	Cape/Ranch		Ranch		Contemp.
Quality	Good	Good		Good		Good
Year Built	1972	1955		1943		1976
Condition	Average	Good	-25,000	Average		Good	-100,000
Rooms/Beds/Baths	4/1/1	6/3/2	-10,000	6/2/2	-10,000	9/3/2.5.5	-20,000
Living Area	1,008	1,390	-38,200	1,653	-64,500	3,493	-248,500
Basement	Unfinished	Playroom	-5,000	None	25,000	2 Finished Rooms	20,000
Heating/Cooling	Electric/None	Hot Water/None		Hot Water/None		Hot Air/Central Air	20,000
Garage	None	2-Car Attached	20,000	1-Car Detached	10,000	2-Car Attached	20,000
Porch/Patio/Deck	Deck	Screen Porch	-2,500	Screen Porch	-2,500	Deck
Fireplace	Fireplace	Two Fireplaces	-$5,000	Fireplace		Two Fireplaces	-$5,000
Total Adjustments			97,965		11,750		-453,375
Indicated Value		928,965		886,750		1,121,625

MR NEAS’SALES-COMPARISON PROPERTIES ONE THROUGH FOUR

Based on his sales-comparison analysis, Mr. Neas’ opinion of the fair cash value for the subject property for fiscal year 2008 was $950,000, or $42,600 less than its assessed value.

D. The Appellant’s Case-in-Chief

Ms. Ham testified on her own behalf at the hearing of this appeal and also offered the testimony of James Doherty, a real estate appraiser, who assisted Ms. Ham in presenting her case.

In addition to the testimony of these two witnesses, Ms. Ham offered several exhibits into evidence at the hearing of this appeal. Those documents included: a Town of Concord Proposed Budget Summary for Fiscal Year 2010; a plot plan of the subject property with building footprint; two documents entitled “FY08 Qualified Sales – Single Family Residences, Concord, MA”; various property record cards for the subject property and other properties in Concord; and, finally, a sales-comparison analysis featuring three properties in addition to the subject property, along with the property record cards and/or MLS sales information for the three sales-comparison properties.

The sales-comparison properties offered by Ms. Ham were all single-family residences in Concord which sold between February and August of 2006, with sale prices ranging from $625,000 to $765,000. However, no adjustments were made to the sale prices of these properties to account for differences with the subject property. For example, although the appellant’s sales-comparison chart acknowledged that the subject property had a superior location to each of the sales-comparison properties, no adjustment was made to account for the difference in location.

Ms. Ham opined that the highest and best use of the subject property was its continued use as a single-family residence. Ms. Ham’s opinion of value for the subject property for fiscal year 2008 was $625,000.

E. The Board’s Ultimate Findings of Fact

On the basis of all of the evidence, the Board found and ruled that the highest and best use of the subject property was its continued use as a single-family residence. Because the fiscal year 2008 assessed value of the subject property exceeded its fair cash value as determined by the Board for fiscal year 2007, the assessors had the burden to show that the increase was warranted in the present appeal. The Board found that the assessors presented substantial, credible evidence to show that the fair cash value of the subject property was in excess of the value determined by the Board for the previous fiscal year.

The Board found Mr. Neas’ testimony and sales-comparison analysis to be highly probative evidence of the subject property’s fair cash value. Mr. Neas selected a number of comparable properties and made appropriate adjustments to account for differences between those properties and the subject property.

Specifically, the Board found Mr. Neas’ analysis of three properties in Concord – 236 Garfield Road, 162 Independence Road, and 63 Revolutionary Road – to be highly persuasive. Those three properties sold for between $680,000 and $831,000 in 2007, and the dwellings on each property were raised for the construction of newer, larger homes. Mr. Neas considered the location of those three properties “good,” while he considered the subject property’s location “very good.” Moreover, the lot size of 162 Independence Road, which sold for $778,000, was nearly half the size of the subject property’s lot. The Board found that the sale prices of these comparable properties provided strong support for the land valuation of the subject property, which was $895,400, and also provided persuasive evidence of the overall fair cash value of the subject property.

Further, the Board found that evidence in the record concerning other properties on Musterfield Road provided strong support for Mr. Neas’ opinion of value. 291 Musterfield Road was purchased for $1,575,000 in 2007. Although the dwelling was not demolished following the purchase, significant renovations and an addition were added to the dwelling thereafter. In addition, although he did not use it in his sales-comparison analysis, Mr. Neas included information in his appraisal report about 191 Musterfield Road. That property sold for $1,775,000 in January of 2007, almost simultaneously with the relevant date of assessment for the fiscal year at issue in this appeal. 191 Musterfield Road was demolished for the construction of a new home with over 10,000 square feet of gross living area.

Finally, the property record card for 74 Musterfield Road, which abuts the subject property, was entered into the record. For fiscal year 2008, the assessed land value of 74 Musterfield Road was $1,126,200 for a lot size of 1.79 acres. This valuation was generally consistent with the subject’s land valuation, which was $895,400 for approximately 43,587 square feet of land. The Board found that this evidence, regarding the property directly adjacent to the subject property, supported both the assessed land value of the subject property, which was $895,400, as well as Mr. Neas’ overall opinion of value for the subject property.

Accordingly, the Board agreed with Mr. Neas’ well-supported opinion of value, and found that the fair cash value of the subject property for fiscal year 2008 was $950,000.

Although the assessors had the burden of proof in the present appeal, the burden of persuasion remained with the appellant. The appellant’s opinion of the subject property’s fair cash value for fiscal year 2008 was $625,000. However, the evidence offered by the appellant failed to successfully rebut the evidence presented by the assessors or otherwise establish that the fair cash value of the subject property was $625,000.

The sales-comparison analysis offered by the appellant made no adjustments to account for differences between the sales-comparison properties and the subject property. In particular, although the appellant acknowledged that the location of the subject property was superior to that of her comparable properties, she made no adjustments to account for this difference. Mr. Neas stated in his report, and the Board found, that the value of real property in Concord was greatly impacted by its location. Moreover, there was substantial, credible evidence that the subject property’s Nawshatuc Hill neighborhood was among the most prestigious locations in Concord. The Board therefore found that the appellant’s failure to account for the subject property’s superior location significantly undermined the reliability of her sales-comparison analysis.

On the basis of all of the evidence, the Board found and ruled that the fair cash value of the subject property for fiscal year 2008 was $950,000. Because the assessed value of the subject property for fiscal year 2008 was $992,600, the Board decided this appeal for the appellant, and ordered an abatement of $463.52.

OPINION

If, however, within the two preceding fiscal years, the Board has determined the fair cash value of the subject property and the assessment at issue exceeds the Board’s prior determination, then “the burden shall be upon the [assessors] to prove that the assessed value was warranted.” G.L. c. 58A, § 12A. The Board took judicial notice of its fiscal year 2007 decision and finding of value and ruled in this appeal that the burden of justifying the increase in the assessment from the previous fiscal year was on the assessors. See generally Beal v. Assessors of Boston, 389 Mass. 648 (1983); see also Cressey Dockham & Co., Inc. v. Assessors of Andover, Mass. ATB Findings of Fact and Reports 1989-72, 86-87 (“Once a prior determination of the Board of the fair cash value of the same property [for one of the prior two fiscal years] has been placed in evidence . . . the statute requires the [assessors] to produce evidence to ‘satisfy the Board that the increased valuation was warranted.’”)

The fair cash value of property may be determined by recent sales of comparable properties in the market. McCabe v. Chelsea, 265 Mass. 494, 496 (1929). Actual sales generally “furnish strong evidence of market value, provided they are arm’s-length transactions and thus fairly represent what a buyer has been willing to pay for the property to a willing seller.” Foxboro Associates v. Assessors of Foxborough, 385 Mass. 679, 682 (1982); New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456, 469 (1981); First National Stores, Inc. v. Assessors of Somerville, 358 Mass. 554, 560 (1971).

In the present appeal, the assessors offered the testimony and report of their expert appraiser, John Neas, which featured an analysis of seven comparable properties that sold in Concord between September 15, 2005 and September 14, 2007. The Board found that Mr. Neas made appropriate adjustments to account for differences between those seven properties and the subject property. The adjusted sales prices of those properties ranged from $710,641 to $1,121,625, and his opinion of value of the subject property, $950,000, was in the middle of that range.

The Board found particularly persuasive evidence regarding the sales of 236 Garfield Road, 162 Independence Road, and 63 Revolutionary Road in Concord. Those properties were sold in 2007 for prices ranging from $680,000 to $831,000, and the dwellings on each property were demolished following the sale for the construction of a newer, larger home. Although the sales prices of these three properties were lower than the assessed value of the subject property for fiscal year 2008, the Board noted that the three properties were located in less desirable neighborhoods than the subject property, and, at least one of those properties had a lot size which was approximately half that of the subject property.

In addition, sales and assessment data regarding several properties located on the same street as the subject property provided strong support for Mr. Neas’ opinion of value. 291 Musterfield Road sold for $1,575,000 in September of 2007. Although it was not demolished following its sale, it underwent a substantial renovation, including a large addition to the dwelling. 191 Musterfield Road sold for $1,775,000 in January of 2007, and was demolished for the construction of a home with over 10,000 square feet of living area. These properties were located on the same street as the subject property and were sold close to the relevant date of assessment. The Board found this data to be probative evidence of the fair cash value of a parcel similar in location to the subject property.

Finally, the property record card for 74 Musterfield Road, which abuts the subject property, was entered into evidence. For fiscal year 2008, the land value of 74 Musterfield Road was $1,126,200 for a lot size of 1.79 acres. The Board found that this valuation was consistent with the subject’s land valuation, which was $895,400 for approximately 43,587 square feet of land. Further, the Board found that this evidence also provided support for Mr. Neas’ valuation of the subject property. Based on the foregoing, the Board adopted Mr. Neas’ well-supported opinion of value and found and ruled that the fair cash value of the subject property for fiscal year 2008 was $950,000.

Notwithstanding the shift in the burden of production in the present appeal, the burden of persuasion on the issue of fair cash value remained on the appellant. See Johnson v. Assessors of Lunenburg, Mass. ATB Findings of Fact and Reports 1992-1, 8; Cressey Dockham, Mass. ATB Findings of Fact and Reports 1989 at 86-87. “In appeals before this Board, a taxpayer may present persuasive evidence of overvaluation either by exposing flaws or errors in the assessors’ method of valuation, or by introducing affirmative evidence of value which undermines the assessors’ valuation.” General Electric Co., 393 Mass. at 600 (quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983)). The Board found and ruled in the present appeal that the appellant failed to present sufficient evidence of value to rebut the evidence presented by the assessors.

The evidence introduced by the appellant did not support the conclusion that the subject’s land valuation was excessive, nor did it convince the Board that the subject property’s overall fair cash value was less than $950,000. The vast majority of the subject assessment lay in its land value, which was $895,400. The Board found and ruled that there was substantial evidence in the record to support that valuation, particularly the evidence regarding 236 Garfield Road, 162 Independence Road, and 63 Revolutionary Road, as well as the other properties located on the same street as the subject.

In her testimony and documentary submissions in this appeal, Ms. Ham emphasized the modesty of her four-room home. Assessed value, however, is based upon a property’s fair market value, or in other words, the price the property would command if it were put on the market. See generally Boston Gas Co., 334 Mass. at 566. The evidence of recent sales of comparable properties in Concord, including sales of properties on Musterfield Road, established that the fair market value of the subject property was $950,000.

THE APPELLATE TAX BOARD

By: __________________________________

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: ________________________________

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

WILLOWDALE LLC v. BOARD OF ASSESSORS OF

THE TOWN OF TOPSFIELD

Docket Nos. F288893 (07) Promulgated:

F297036 (08) March 15, 2010

These are appeals filed under the formal procedure pursuant to G.L. c. 59, §§ 64 and 65 from the refusal of the Board of Assessors of the Town of Topsfield (“appellee”) to abate taxes assessed on certain property, located in Topsfield, owned by the Commonwealth of Massachusetts and assessed to Willowdale LLC (“Willowdale” or “appellant”) under G.L. c. 59, §§ 2B, for fiscal years 2007 and 2008.

Commissioner Rose heard these appeals and was joined by Chairman Hammond and Commissioners Scharaffa and Egan in decisions for the appellee.[38]

These findings of fact and report are promulgated at the request of the appellant pursuant to G.L. c. 58A, § 13 and 831 CMR 1.32.

Kevin J. Joyce, Esq. for the appellant.

Richard P. Bowen, Esq. and Jeffrey T. Blake, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

The issue in the present appeals is whether the Topsfield Board of Assessors (“assessors”) properly assessed a real estate tax on certain property owned by the Commonwealth but leased to and operated by a private, for-profit entity. On the basis of an Agreed Statement of Facts and Briefs submitted by the parties, the Appellate Tax Board (“Board”) made the following findings of fact.

In 1994 the Massachusetts State Legislature authorized the Department of Environmental Management (“DEM”) to lease all of the twenty-three historic real properties enumerated in § 44 of c. 85 of the Acts of 1994 (as amended by § 50, c. 15 of the Acts of 1996) (collectively the “Enabling Act”), to any person or organization to ensure that the properties are adequately preserved and maintained for the purpose of providing public access to the historic qualities of the properties for present and future generations. Palmer Mansion, located at 28 Asbury Street in Bradley Palmer State Park, Topsfield (“Palmer Mansion” or “subject property”) is a historic property, which is enumerated in the Enabling Act. Subsequently, the DEM established the historic curator program to further the objectives of the Enabling Act.

On September 24, 1999, pursuant to the authority of the historic curator program, the Department of Conservation and Recreation (“DCR”), the legal successor in interest to the DEM, and Willowdale entered into a lease agreement for Palmer Mansion. The lease agreement provides for a term of fifty years with a right to one extension for an additional term of ten years. The lease agreement limits Willowdale’s legal usage of Palmer Mansion to only “reuse and rehabilitation of the structures and grounds.” The lease agreement further provides that Willowdale’s use of Palmer Mansion shall be “limited to operation of an inn and/or bed and breakfast, operation of a conference center, rooms for functions and/or classes, gift shop and restaurant.” Willowdale did not dispute that it used Palmer Mansion “in connection with a business conducted for profit” for purpose of the relevant taxing statute at issue, G.L. c. 59, § 2B.

Willowdale is required to bear the sole cost for restoring Palmer Mansion in compliance with the historic standards and building plans that have been approved by the Massachusetts Historical Commission and DCR. However, Willowdale is entitled to a credit toward the rental payments due under the lease equal to the value of improvements, maintenance and management services it provides. Further, the lease agreement provides that “in the event real estate taxes or property taxes shall be levied on the Premises or any part therefore for any reason, Lessee agrees to pay such taxes when and as due.”

From September 24, 1999 to August 28, 2007, Willowdale was in the process of rehabilitating Palmer Mansion. Accordingly, during the fiscal year 2007 period of July 1, 2006 through June 30, 2007, Willowdale earned no income from the use of the subject property. Notwithstanding the ongoing renovations, on July 7, 2007, July 12, 2007 and August 25, 2007, Willowdale held wedding events at Palmer Mansion for which it received fees.

On August 28, 2007, the Commonwealth of Massachusetts issued a Certificate of Use and Occupancy for Palmer Mansion. Since that time, the appellant has consistently operated Palmer Mansion for use as a bed-and-breakfast style inn with related uses of conferences, special events, functions and educational workshops.

During fiscal year 2008, Palmer Mansion was the site of numerous weddings and social events. Fees for use of Palmer Mansion ranged from $3,000 to $6,500 for a typical five-hour wedding, and $2,000 to $3,000 for a three-hour block of time for other social events. Business and corporate events were priced individually and there was no charge for community events and public tours. Also, individuals could access other areas of Palmer State Park independently without going through Palmer Mansion. During the fiscal year 2008 period of July 1, 2007 through June 30, 2008, the appellant received $180,000 in gross revenue from fifteen wedding events held at the Palmer Mansion.

For fiscal years 2007 and 2008, the assessors valued the subject property at $1,406,700 and $1,323,500, respectively. The assessors assessed taxes at the rate of $11.57 per $1,000 for fiscal year 2007 and $12.02 per $1,000 for fiscal year 2008, resulting in tax assessments of $16,275.52 for fiscal year 2007 and $15,908.47 for fiscal year 2008. In accordance with G.L. c. 59, § 57C, the appellant timely paid each fiscal year’s taxes without incurring interest.

On January 30, 2007 and January 30, 2008, in accordance with G.L. c. 59, § 59, the appellant timely filed an Application for Abatement with the assessors for fiscal years 2007 and 2008, respectively. The appellant’s fiscal year 2007 abatement application was denied on March 2, 2007, and the appellant’s fiscal year 2008 abatement application was deemed denied on April 30, 2008. In accordance with G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65, the appellant seasonably appealed these denials by filing Petitions Under Formal Procedure with the Board on May 29, 2007 for fiscal year 2007 and on June 23, 2008 for fiscal year 2008. On the basis of these facts, the Board found and ruled that it had jurisdiction to hear these appeals.

For the reasons more fully explained in the following Opinion, the Board found that Willowdale was subject to real estate tax under G.L. c. 59, § 2B because the subject property was leased or occupied for other than public purposes and was used in connection with a business conducted for profit and was not used in a manner reasonably necessary to the public purpose of a park. Accordingly, the Board issued decisions for the appellee in these appeals.

OPINION

G.L. c. 59, § 2B provides for the taxation of real estate owned or held in trust for the benefit of the Commonwealth or a city or town, if such property is “used in connection with a business conducted for profit or leased or occupied for other than public purposes.” It is undisputed that Palmer Mansion is used in connection with a business conducted for a profit within the meaning of § 2B.

However, § 2B goes on to provide that, “[t]his section shall not apply to a use, lease or occupancy which is reasonably necessary to the public purpose of a public airport, port facility, Massachusetts Turnpike, transit authority or park, which is available to the use of the general public . . . .” (Emphasis added). The issue in the present appeals is whether the appellant’s use, lease and occupancy of Palmer Mansion is reasonably necessary to the public purpose of a park.

There is “no precise and widely accepted definition of ‘park’.” Cohen v. City of Lynn, 33 Mass. App. Ct. 271, 278 (1992), In general,

the term ‘park’ usually signifies an open or inclosed tract of land set apart for the recreation and enjoyment of the public; or, ‘in the general acceptance of the term, a public park is said to be a tract of land, great or small, dedicated and maintained for the purposes of pleasure, exercise, amusement, or ornament; a place to which the public at large may resort to for recreation, air, and light.’

Salem v. Attorney General, 344 Mass. 626, 630 (1962) (quoting King v. Sheppard, 157 S.W.2d 682, 685 (Tex. Civ. App. 1941) (emphasis added).

In support of its argument that the subject property was exempt from taxation, the appellant cited MCC Management Group, Inc. v. Assessors of New Bedford, Mass. ATB Findings of Fact and Reports 2000-886. In MCC Management, the Board found and ruled that a skating rink, which was located on state-owned land and leased to a for-profit corporation, was a “park” within the meaning of G.L. c. 59, § 2B. MCC Management, Mass. ATB Findings of Fact and Reports at 2000-902.

In MCC Management, the Board found that the Legislature authorized the DEM to appropriate funding for the construction and development of skating rinks which were to be held and administered in accordance with G.L. c. 132A, § 2A as a state park. MCC Management, Mass. ATB Findings of Fact and Reports at 2000-896, 897. Accordingly, the Board found and ruled that the “Massachusetts Legislature intended to include ice skating rinks under the rubric of public parks.” Id. Furthermore, the Board found and ruled that the term “‘park’ . . . must be defined broadly so as to include a wide variety of recreational activities with respect to land,” which “may include indoor recreational facilities” such as, swimming pools, bathhouses, concession stands, and winter sports facilities, among others. MCC Management, Mass. ATB Findings of Fact and Reports at 2000-900, 901 (citations omitted). Ultimately, a “park” is a “pleasure ground set apart for recreation of the public, to promote its health and enjoyment.” Id. (quoting Rivet v. Burdick, 6 N.Y.S.2d 79, 83 (1938)).

The present appeals, however, are distinguishable from MCC Management. First, the Enabling Act does not provide that the subject property is to be held and administered as a state park pursuant to the provisions of G.L. c. 132A, § 2A. Furthermore, Palmer Mansion is leased and occupied by Willowdale to be operated as a bed-and-breakfast style inn with related uses of conferences, special events, functions and educational workshops. It is not occupied or operated for any recreational uses. Accordingly, although Palmer Mansion is located within the Palmer State Park, the Board found that the Palmer Mansion is not itself a park under the meaning of G.L. c. 59, § 2B.

Further, the Board found that the use of Palmer Mansion is not “reasonably necessary to the public purpose of the park.” Pursuant to the lease entered into by Willowdale and DCR, the subject property may be used for the “operation of an inn and/or bed and breakfast, operation of a conference center, rooms for functions and/or classes, gift shop and restaurant.” For each of these uses Willowdale charges a fee which ranges from $3,300-$6,500 for a five-hour block of time and $2,000-$3,000 for a three-hour block of time. Moreover, the Board found that individuals were able to access and use other areas of Palmer State Park without the involvement of Willowdale and its operations at Palmer Mansion. Accordingly, the appellant’s use, lease and occupancy of the Palmer Mansion is not reasonably necessary to the public purpose of Palmer State Park.

“Property owned by a municipality may serve a public purpose even though it is managed or operated by a private, for-profit entity, and even though the private entity charges admission to the facility.” MCC Management, Mass. ATB Findings of Fact and Reports at 2000-903 (citing Miller v. Commissioner of the Department of Environmental Management, 23 Mass. App. Ct. 968, 969-70 (1987). In Miller, the Commonwealth entered into a “limited exclusive use permit” with a private for-profit entity, Snowmass, to “operate a cross country skiing program in the State forest.” Miller, 23 Mass. App. Ct. at 968-969. The Appeals Court found that the “aim is clearly to enhance the use of the trails in the State forest for a legislatively approved recreational purpose” and that a “private entity experienced in making artificial snow and managing cross country skiing facilities is an appropriate party to operate such a facility.” Miller, 23 Mass. App. Ct. at 969-970.

Similarly, in MCC Management, the Board found that the ice skating rink “served the public for recreational purposes.” MCC Management, Mass. ATB Findings of Fact and Reports at 2000-903. Relying on the court’s decision in Miller, the Board found that MCC’s management of the ice skating rink was “necessary to achieve the public purpose of the state-owned property, because MCC was experienced in the operation and management of an ice skating rink. This experience enabled DEM to maintain the Hetland Arena as a state park.” MCC Management, Mass. ATB Findings of Fact and Reports at 2000-904.

The present appeals, however, are distinguishable from both Miller and MCC Management. In the present appeals, the appellant has been granted a lease to operate a bed-and-breakfast style inn and conference center which are not recreational activities for the “‘amusement, pleasure, and entertainment’” of the general public. See MCC Management, Mass. ATB Findings of Fact and Reports 2000-904 (quoting In re Spectrum Arena, Inc., 330 F.Supp. 125, 127 (E.D. Pa. 1971)). Therefore, the Board found that while the subject property is located within a State Park, appellant’s occupancy and use of the subject property was not reasonably necessary to the public purpose of Palmer State Park.

It is well settled that the burden of proof is on the party seeking an abatement. “‘The burden of proof is upon the petitioner to make out its right as [a] matter of law to [an] abatement of the tax.'” Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974) (quoting Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47, 55 (1922)). Further, an even greater burden rests on a party claiming an exemption from taxation. “‘Exemption from taxation is a matter of special favor or grace. It will be recognized only where the property falls clearly and unmistakably within the express words of a legislative command.’” New England Legal Foundation v. City of Boston, 423 Mass. 602, 609 (1996) (quoting Massachusetts Medical Soc’y v. Assessors of Boston, 340 Mass. 327, 331 (1960).

Accordingly, the Board found and ruled that the Willowdale was subject to real estate tax under G.L. c. 59, § 2B because the subject property was leased or occupied for other than public purposes and was used in connection with a business conducted for profit and was not used in a manner reasonably necessary to the public purpose of a park and, therefore, decided these appeals for the appellee.

THE APPELLATE TAX BOARD

By: ___________________________________

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: ____________________________

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

SIDNEY W. & JUDITH H. SWARTZ v. COMMISSIONER OF REVENUE

Docket No. C287671 Promulgated:

April 1, 2010

On March 31, 2009, the Appellate Tax Board (“Board”) issued a decision for the appellee. Based on the Statement of Agreed Facts submitted by the parties,[39] the Board issued a revised decision, granting an abatement of late payment penalties to the appellants, simultaneously with these Findings of Fact and Report.

Commissioner Scharaffa heard this appeal. Chairman Hammond and Commissioners Egan, Rose and Mulhern joined him in the revised decision for the appellants. These findings of fact and report are made pursuant to a request by the appellee under G.L. c. 58A, § 13 and 831 CMR 1.32.

Philip S. Olsen, Esq. and Natasha N. Varyani, Esq. for the appellants.

John J. Connors, Jr. Esq. and Christopher Glionna, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

Based on the Statement of Agreed Facts and testimony and exhibits offered into evidence at the hearing of this appeal, the Appellate Tax Board (“Board”) made the following findings of fact.

The appellants timely filed, pursuant to a validly-executed extension, a 2004 Massachusetts Nonresident/Part-Year Resident Income Tax Return, Form 1-NR/PY. The Commissioner issued to the appellants a Notice of Intention to Assess dated April 2, 2006 and a Notice of Assessment dated May 19, 2006, notifying the appellants of an additional assessment in the amount of $826,917, plus interest in the amount of $63,186.54. On June 13, 2006, the appellants filed an abatement application, which the Commissioner denied by a Notice of Abatement Determination dated September 30, 2006. On November 13, 2006, the appellants seasonably filed their appeal with the Board. On the basis of the foregoing, the Board found and ruled that it had jurisdiction to hear and decide this appeal.

The appellants recognized two capital gains during the tax year at issue on the sale of stock in Timberland Company (“Timberland”), one on October 28, 2004 and the other on November 1, 2004. The issue presented in this appeal is whether the appellants had changed their domicile from Massachusetts to Florida prior to October 28, 2004 or prior to November 1, 2004, the dates upon which they recognized the capital gains at issue in this appeal. It is not disputed that the capital gains which the appellants recognized on October 28, 2004 and November 1, 2004 were subject to Massachusetts income tax if the appellants were Massachusetts residents at the time that they recognized the capital gains.

Personal history of appellants

Sidney Swartz was born in Lynn and was raised in Dorchester, Swampscott and Newton. He attended Boston University for one year and subsequently joined the Army as part of the 101^st field artillery unit of the Massachusetts National Guard. Judith Swartz was born in Boston and raised in Newton and West Newton. She graduated from Boston University and married Sidney Swartz in 1958. The couple lived in Cambridge, Brookline and Newton. Around the time of the birth of their youngest of three children, in 1968, the appellants moved to Andover, where they raised their three children. Sidney testified that they chose Andover because it was a convenient commute for him when he was working in Southern New Hampshire. After their children had grown and left home, the appellants decided to sell their home in Andover and buy a home near the ocean.

On July 28, 1987, the appellants purchased a residence in Marblehead, at 33 Bradlee Road, which they continued to own during the tax year at issue. The residence had five bedrooms, five-and-one-half bathrooms, and was located on 1.5 acres of land with a view of the ocean.

The appellants purchased their first Florida residence in 1983, an apartment in Boca Raton, which they subsequently sold. By the tax year at issue, the appellants owned two residences in Florida, one in Delray Beach, which they had purchased in April, 1997, and the other, a condominium, in Boca West, which they had purchased in May, 2001. Judith testified that they purchased the home in Delray Beach — with six bedrooms, five bathrooms, a three-car garage, and a pool – because it was spacious enough to accommodate the appellants’ children and grandchildren when they visited Florida.[40] Sidney testified that the appellants purchased the condominium in Boca West for the included golf privileges at the Boca West Country Club. Judith testified that her twin sister, Joan, and her husband resided at the Boca West condominium during the winter months.

During the tax year at issue, two of the appellants’ children were living in Massachusetts. Their son, Jeffrey Swartz, with his wife and children, lived in Newton, and their daughter, Julie, lived in Boston. The other child, David, also lived in the Northeast, in New York City. Three of Judith’s siblings, Herman, Lawrence, and Audrey, lived in Massachusetts, while her twin sister, Joan lived in neighboring West Hartford, Connecticut. Sidney’s brother, Herman, lived in Boston and also spent time in Boca Raton.

The appellants testified that, during the tax year at issue, on October 13, 2004, they purchased a condominium in Brookline to be closer to their children who lived in Boston and Newton. The deed for the purchase of this home, executed on October 13, 2004, described the appellants as being “of 33 Bradlee Road, Marblehead, Massachusetts.” The appellants testified that they resided at the Brookline home when they were in Massachusetts. The appellants continued to own their Marblehead home during the tax year at issue. Sidney testified that the appellants had put the Marblehead home on the market sometime in 2005, but as of the date of the hearing, June 24, 2008, they continued to own that property.

Judith testified that the appellants have spent time in Florida since the 1980s, vacationing there for several weeks at a time while Sidney was still working, and then spending longer periods of time there after his retirement in 1998. Both of the appellants’ parents had lived in Florida since the late 1960s, and the appellants went to visit their parents on a regular basis. Judith testified that the appellants had been making friends in Florida since they purchased their home in Boca Raton in 2001. According to their Domicile Questionnaire and Judith’s testimony, the appellants have, for the tax year at issue and for at least the prior five years, routinely stayed in Massachusetts from May to October and in Florida from October to May. Judith testified that their cars and jewelry traveled back and forth with them between Massachusetts and Florida and that they had art work in both Florida and Massachusetts.

The appellants filed Declarations of Domicile on October 13, 2004, declaring their Delray Beach home as their principle residence. The appellants signed these Declarations on October 1, 2004 before a Massachusetts notary. The appellants were issued Florida driver’s licenses on December 27, 2004. Sidney registered to vote in Florida on October 14, 2004, while Judith registered in Florida on December 8, 2004. Judith voted in the November, 2004 presidential election by means of an absentee ballot in Marblehead, Massachusetts. The address on file for their 2004 cellular telephone bills was the Delray Beach residence. However, the appellants’ statement from the Boca West Golf club was addressed to their Marblehead home, as were Sidney’s Visa and the couple’s American Express credit card statements. Their Palm Beach County, Florida real estate tax bill for 2004 was also addressed to their Marblehead home. The appellants employed the services of a law firm to prepare estate planning documents which reflected a Florida domicile. However, these documents were executed in Florida on May 27, 2005, after the tax year at issue.

The appellants participated in religious, social and civic activities in both Massachusetts and Florida during the tax year at issue. The appellants were members of a synagogue in Newton as well as a synagogue in Boca Raton. The appellants testified that they have participated in various events and classes at the Florida synagogue since at least 2003. They also participated in a study class at the Florida synagogue for approximately six years. Sidney, an avid golfer, was a member of the Boca West Country Club and the Banyon Country Club in Florida, with full privileges, as well as the Belmont Country Club in Massachusetts, with full privileges. The appellants had friends in both Massachusetts and Florida, and they had doctors in both Massachusetts and Florida. Judith testified that they had also enrolled in continuing education courses for retirees at Florida Atlantic University since around 2001 or 2002, and they had season tickets to the ballet, Kravitz (a variety of concerts and performances) and the Symphony in Florida. However, Judith also purchased a membership to the Museum of Fine Arts in Massachusetts in September, 2004.

Business and charitable activities

Sidney had spent his career with Timberland, the family business. Timberland is a Delaware corporation with its principle office in Stratham, New Hampshire. Sidney had been Chairman of the Board of Directors, President, Chief Executive Officer and a director of Timberland from June, 1986 to June, 1998. He retired in 1998 and his son, Jeffrey, assumed control of Timberland. Sidney remained a director and the Chairman of the Board of Directors. According to Sidney’s testimony, the Board of Directors meetings were held in New Hampshire, Boston and sometimes out of state. During the tax year at issue, Sidney was also the President and a Director of Timberland Retail, Inc. (“Timberland Retail”), a Delaware corporation with its principle office in Stratham, New Hampshire, in the same building as Timberland.

Additionally during the tax year at issue, Sidney was the Resident Agent of Bilsidial Partners, Limited Partnership (“Bilsidial”), a Massachusetts limited partnership with its principle office listed as the appellants’ residence at 33 Bradlee Road, Marblehead. Sidney testified that Bilsidial was a small investment partnership that he started with a friend in order to enable his friend to invest some money with Goldman Sachs. He claimed that, although he was listed as the managing partner for Bilsidial, he did not actually perform any services on behalf of Bilsidial.

Judith’s primary work outside of her home was her volunteer endeavors with Hadassah, a Jewish women’s volunteer organization, which is involved in education and advocacy projects in the United States as well as charitable and volunteer projects in Israel. Judith has been involved in Hadassah since graduating from Boston University, where she became a study group member.
Throughout her membership, Judith rose through the ranks in Massachusetts and New England as the President of the Greater Lawrence Chapter of Hadassah, a member of the New England Regional Board, the fundraising coordinator of the New England Regional Board, the President of the New England Region, and the President of the Northern New England region. After serving as a Region President, Judith was re-elected to continue to serve on the National Board of Hadassah, and by 2004, she had earned tenure and a permanent spot on the National Board of Hadassah. Some time in 1998, Judith became the National Chair of the Society of Major Donors, and since about 2000, she has hosted an annual reunion event in Florida to benefit Hadassah.

Judith testified that she also volunteered in the local community in Florida, particularly in public kindergarten classrooms. She was unclear in her testimony as to the exact time when she volunteered, but she mentioned that, as she became more involved in Hadassah, she reduced her volunteer activities within the school system. Judith also testified that she was involved, through Hadassah, in supporting and educating legislators in Florida, particularly with respect to legislation relating to stem cell research. She testified that she was not as politically involved in Massachusetts. However, as previously mentioned, Judith did not register to vote in Florida until December, 2004, and she voted in the 2004 Presidential Election by absentee ballot in Marblehead, Massachusetts.

Time spent in Massachusetts

As will be explained further in the following Opinion, a Massachusetts resident is defined as a person who is domiciled in the Commonwealth or who maintains a permanent residence and spends more than 183 days in the Commonwealth. G.L. c. 62, § 1(f). Citing their airline records and credit card statements, the appellants contended that they each spent fewer than 183 days in Massachusetts during the tax year at issue. The Commissioner did not challenge their evidence nor dispute their contention. The appeal, therefore, centers upon whether the appellants changed their domicile from Massachusetts to Florida during the tax year at issue.

The Board’s Findings of Fact

On the basis of the above evidence of record, the Board found that the appellants’ lifestyle did not change significantly prior to either dates of sale of Timberland stock at issue. As they had since Sidney’s 1998 retirement, the appellants spent about half the tax year at issue in Florida and were active in social, religious, cultural and volunteer activities there. The appellants had been gradually building ties to the area even before the tax year at issue, beginning in approximately 1998 with Sydney’s retirement. The Board thus found that the appellants’ social and civic ties to Florida were no stronger prior to the two dates of sale than in previous years when they filed Massachusetts Resident income tax returns.

If anything, the biggest changes occurring during the tax year at issue were (1) the appellants’ recognition of significant capital gains from the sale of Timberland stock, and (2) the appellants’ purchase of an additional Massachusetts property, the condominium in Brookline, which the appellants purchased to be closer to their two children and grandchildren who lived in the Boston area. The Board thus found that the appellants’ family ties were stronger in Massachusetts than in Florida prior to the two dates of sale of Timberland stock.

The Board also found that, while the appellants made some modest ministerial changes in an attempt to reflect a change of domicile to Florida – including changing their voter registrations, drivers’ licenses, and estate plan – these changes were not effective until after the dates of sale of the Timberland stock.[41] As of the dates of the stock sales, the appellants still owned their Marblehead home and they used that as the address of record on important documents and files, including, but not limited to, their credit card statements and even their Florida real estate tax bill. Further, the appellants purchased another Massachusetts residence, a condominium in Brookline, approximately two weeks prior to the first sale of the Timberland stock. The Board thus found, on the basis of all of the evidence of record, that Massachusetts continued to be the center of the appellants’ personal, including their financial, lives prior to the two dates of sale of Timberland stock.

As will be explained more fully in the following Opinion, the Board thus found that the appellants did not abandon their Massachusetts domicile as of the dates of the sales of Timberland stock giving rise to the income at issue. Accordingly, the Board denied the abatement of the income tax at issue, but in accordance with the parties’ Statement of Agreed Facts, the Board issued a
revised decision for the appellants in this appeal, abating the late payment penalties which had accrued since the filing of the abatement application.

OPINION

Under G.L. c. 62 § 2, Massachusetts residents are taxed, with certain limitations not relevant here, on all of their income from whatever sources derived. In contrast, Massachusetts taxes non-residents only on income from Massachusetts sources. See G.L. c. 62, § 5A. Accordingly, if the appellants were domiciled in Massachusetts prior to the dates when they recognized the disputed income, the disputed income is subject to tax in Massachusetts regardless of whether the income was from a Massachusetts source. A “resident” for Massachusetts tax purposes is defined as:

(1) any natural person domiciled in the Commonwealth, or (2) any natural person who is not domiciled in the commonwealth but who maintains a permanent place of abode in the commonwealth and spends in the aggregate more than one hundred eighty-three days of the taxable year in the commonwealth, including days spent partially in and partially out of the commonwealth.

G.L. c. 62, § 1(f). The Commissioner does not contest the appellants’ assertion that they spent fewer than 183 days in Massachusetts during the tax year at issue. The issue presented in this appeal, therefore, is whether the appellants were domiciled in Massachusetts at the time of the sales of stock and, therefore, were taxable as residents on the capital gains recognized from the two sales of Timberland stock.

Domicile has been defined as “the place of actual residence with intention to remain permanently or for an indefinite time and without any certain purpose to return to a former place of abode.” McMahon v. McMahon, 31 Mass. App. Ct. 504, 505 (1991). A person’s domicile is primarily a question of fact, but the elements to be considered in locating a domicile present a question of law. Reiersen v. Commissioner of Revenue, 26 Mass. App. Ct. 124, 124-25 (1988). While domicile may be a difficult concept to define precisely, the hallmark of domicile is that it is “‘the place where a person dwells and which is the center of his domestic, social and civil life.’” Id. at 125 (citing Restatement (Second) of Conflict of Laws § 12 (1969)). When a taxpayer has multiple residences, the Board must weigh the evidence and determine where it is that the taxpayer has his “home,” that is, the center of the major facets of the taxpayer’s life. See id. Having more than one residence can lead to factors on more than one side of the “domicil[e] ledger.” Id. at 127. Therefore, a determination of domicile depends upon a comprehensive facts-and-circumstances analysis. See, e.g, Roarke v. Hanchett, 240 Mass. 557, 561 (1922) (finding that proof of domicile “depends upon no one fact or combination of circumstances, but from the whole taken together it must be determined in each particular case.”).

“A change of domicile occurs when a person with capacity to change his domicile is physically present in a place and intends to make that place his home for the time at least; the fact and intent must concur.” Id. (citing Hershkoff v. Board of Registered Voters of Worcester, 366 Mass. 570, 577 (1974)). Moreover, “[i]t is a general rule that the burden of showing a change of domicil is upon the party asserting the change.” Mellon Nat’l Bank & Trust Co. v. Comm’r of Corporations and Taxation, 327 Mass. 631, 638 (1951); Horvitz v. Commissioner of Revenue, 51 Mass. App. Ct. 386, 394 (2001). See also Commonwealth v. Davis, 284 Mass. 41, 49 (1933) (“The burden of proof that his domicil was changed rested on the defendant because he is the one who asserted that such change had taken place.”).

In the instant appeal, the appellants had the means to establish residences for themselves in both Florida and Massachusetts. See Horvitz v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports 2002-252, 256 (“Because of Horvitz’s considerable financial resources, he was able to create two locations in each of which he carried on important parts of his life.”). However, only one of those locations can be the appellants’ domicile for purposes of taxation. Therefore, the Board must weigh the evidence and determine whether the appellants actually abandoned their Massachusetts domicile in favor of a new domicile in Florida before recognizing gain from the sales of Timberland stock in question.

Massachusetts follows the common law rule that a person with legal capacity is considered to have changed his or her domicile by satisfying two elements: the establishment of physical residence in a different state and the intent to remain at the new residence permanently or indefinitely. McMahon, 31 Mass. App. Ct. at 505. The determination of intent goes beyond merely accepting the taxpayer’s expression of intent and instead requires an analysis of the facts closely connected to the taxpayer’s major life interests, including family and social relations, business connections, and civic and religious activities in order to determine his true intent. See Reiersen, 26 Mass. App. Ct. at 125 (citing Hershkoff v. Board of Registered Voters of Worcester, 366 Mass. 570, 576-577 (1974)). Moreover, while the determination of intent is subjective in nature, if a person’s driving motivation for establishing the new domicile is to reduce a possible tax liability, the claimed domicile will be more closely scrutinized. Davis, 284 Mass. at 50 (“A man cannot elect to make one place his home for the general purpose of life, and another place his home for the general purpose of taxation.”).

In the instant appeal, the Board found substantial evidence of the appellants’ familial ties to Massachusetts. Two of their children lived in Massachusetts, as did all of their grandchildren, as well as almost all of their siblings; their remaining child and sibling lived in neighboring states in the Northeast. In fact, the appellants purchased an additional residence in Massachusetts, the Brookline condominium, to be closer to their children and grandchildren. While each appellant had a sibling who spent considerable time in Florida, the Board found and ruled that, when weighing the evidence, the appellants’ familial ties to Massachusetts were stronger than those to Florida during the time prior to the two dates of sale of Timberland stock.

The Board also found that the appellants’ efforts to reflect a change of domicile to Florida – including changing their voter registrations, drivers’ licenses, and estate plan – were merely ministerial acts which were not even effective until after the sales of the Timberland stock; moreover, the appellants continued to use their Marblehead home as the address of record on important documents and files. The Board thus found and ruled that the appellants’ business and personal financial ties were stronger to Massachusetts than to Florida during the time prior to and including the two dates of sale of Timberland stock.

The appellants filed Massachusetts resident income tax returns prior to the tax year at issue, and they were gradually building social and civic ties to Florida since 1998 when Sidney retired and they began to spend approximately half the year in Florida each year. However, the appellants failed to meet their burden of proving that their social, civic or other ties to Florida were stronger during the tax year at issue than in previous years. The Board thus found and ruled that there was no meaningful change in their activities between those prior tax years and the tax year at issue except for the appellants’ recognition of the significant capital gains and the purchase of another Massachusetts residence.

On the basis of the facts in evidence, the Board thus found and ruled that the appellants’ family, social and personal ties established that they did not have the requisite intent to abandon their Massachusetts domicile and change their domicile to Florida before either of the sales of Timberland stock.

“It is a general rule that the burden of showing a change of domicil is upon the party asserting the change.” Mellon Nat’l Bank, 327 Mass. at 638. In addition, the burden of proof is on the taxpayers to prove that they are entitled to an abatement. See, e.g., William Rodman & Sons, Inc. v. State Tax Commission, 373 Mass. 606, 610 (1977); Stone v. State Tax Commission, 363 Mass. 64, 65-66 (1973); Commissioner of Corp. & Tax. v. Filoon, 310 Mass. 374, 376 (1941); Staples v. Commissioner of Corp. & Tax., 305 Mass. 20, 26 (1940). In the instant appeal, the Board found and ruled that the appellants failed to meet their burden of proving that they had abandoned their Massachusetts domicile in favor of a domicile in Florida prior to either sale of Timberland stock. Therefore, the Board found and ruled that the appellants were Massachusetts residents for tax purposes on the dates that they recognized the income at issue.

Accordingly, the Board did not grant an abatement of the income tax at issue, but in accordance with the parties’ Statement of Agreed Facts, the Board issued a revised decision for the appellants in this appeal, abating only the late pay penalties which had accrued since the filing of the abatement application.

APPELLATE TAX BOARD

By: ______________

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: ______ _____

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

MICHAEL F. & JUDITH A. MEE v. COMMISSIONER OF REVENUE

Docket Nos. C287787, C293547 Promulgated:

April 12, 2010

These are appeals filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 62C, § 39, from the refusal of the Commissioner of Revenue (“Commissioner” or “appellee”) to abate personal income taxes assessed to Michael F. Mee and Judith A. Mee (jointly the “appellants”), for tax years 2004 and 2005 (tax years at issue”).

Commissioner Scharaffa heard these appeals. Chairman Hammond and Commissioners Egan, Rose, and Mulhern joined him in decisions for the appellants.

These findings of fact and report are made pursuant to a request by the appellants under G.L. c. 58A, § 13 and 831 CMR 1.32.

William E. Halmkin, Esq., David J. Nagle, Esq., Judith G. Edington, Esq. and Jill Tenley Oldak, Esq. for the appellants.

Christopher Glionna, Esq., Celine E. Jackson, Esq., Bensen V. Solivan, Esq. and Mireille T. Eastman, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

Based upon the Agreed Statement of Facts and testimony and exhibits offered into evidence at the hearing of these appeals, the Appellate Tax Board (“Board”) made the following findings of fact.

On June 30, 2005, the appellants filed a joint 2004 Massachusetts Nonresident/Part-Year Resident Tax Return. After an audit, the Commissioner issued a Notice of Intent to Assess dated November 13, 2005 proposing to assess a tax of $151,707 plus interest for the 2004 tax year. By Notice of Assessment dated September 19, 2006, the Commissioner notified the appellants of a deficiency assessment of personal income taxes of $151,707, plus interest, for the 2004 tax year. On November 17, 2006, the appellants timely filed an abatement application, which the Commissioner denied on December 7, 2006. On January 29, 2007, the appellants seasonably filed their appeal with the Board, requesting an abatement of $151,707, plus interest. On the basis of the foregoing, the Board found and ruled that it had jurisdiction over the 2004 appeal.

On July 12, 2006, the appellants filed a joint 2005 Massachusetts Nonresident/Part-Year Resident Tax Return. After an audit, by Notice of Intent to Assess dated January 12, 2007, the Commissioner proposed to assess income tax of $105,193, plus interest and penalty, for tax year 2005. By Notice of Assessment dated February 27, 2007, the Commissioner notified the appellants of a deficiency assessment of personal income taxes of $105,193, plus interest and an unspecified penalty, for the 2005 tax year. On April 23, 2007, the appellants timely filed an abatement application with respect to the February 27, 2007 Notice of Assessment, which the Commissioner denied by two separate Notices of Abatement Determination, one dated July 16, 2007 and the second dated August 12, 2008. The appellants filed their original Petition Under Formal Procedure with respect to tax year 2005 on September 12, 2007, requesting an abatement in the amount of $105,193 plus interest and penalty. On August 18, 2008, the appellants seasonably filed a Consented-To Amended Petition under Formal Procedure requesting an abatement in the amount of $105,193 plus interest and penalty, and an additional amount of $2,055, plus interest and penalty, for the 2005 tax year.[42] On the basis of the foregoing, the Board found and ruled that it had jurisdiction over the 2005 appeal.

The issue in these appeals is whether the appellants were domiciled in Massachusetts during the tax years at issue. Michael and Judith Mee were married individuals who were both born and raised in Massachusetts. Judith grew up in Arlington, Massachusetts and Michael grew up in the Roxbury-Jamaica Plain corridor. However, the appellants had spent much of their adult lives outside of Massachusetts, moving to several locations because of Michael’s work. The appellants returned to Massachusetts and settled in Concord, Massachusetts in 1985, after being out of the state for 20 years.

In 1994, nine years after returning to Massachusetts, Mr. Mee accepted a new position in New York City. The appellants decided that the family would not move to New York City so as not to disrupt the last two years of their daughter’s high school experience. Instead, Mr. Mee took an apartment during the week and returned to the Concord residence on the weekends. Mr. Mee remained with the job in New York City until his retirement in 2003.

On August 28, 1997, after their daughter finished high school, the appellants purchased their first condominium in Jupiter, Florida. The appellants testified that they had been vacationing in Florida since the 1980s, but with the purchase of the condominium, they began to spend more time there, particularly for long weekends and holidays. Less than a year after the purchase, in April and May of 1998, the appellants sold the Jupiter condominium and purchased a larger unit nearby.

The appellants sold their Concord, Massachusetts residence in 1999. Mrs. Mee testified that, with her children grown and out of the house, her friends retired and relocated, and Mr. Mee still working in New York City, she felt too isolated in the wooded area of Concord. Therefore, on January 29, 1999, Mrs. Mee purchased a residence near the ocean in Osterville, Massachusetts. Mrs. Mee testified that the Osterville residence had six levels with stairs between each level. Mrs. Mee also testified that, while the Osterville residence was lovely, it had certain drawbacks, including the small kitchen without air conditioning, the many stairs and levels of the residence, and the laundry room located in the basement. The appellants had made changes to one of the residence’s bathrooms but had not otherwise bothered to renovate the Osterville residence; moreover, the appellants twice passed on the opportunity to purchase a neighboring parcel of land which would have increased their lot size. Mr. Mee explained that the appellants were not willing to make this commitment to Massachusetts and the Osterville residence because of “our feelings and our commitment to Florida, it made no sense to me so we have passed.”

In 2001, Mr. Mee purchased Unit 30-A, a large condominium at 1 Avery Street in Boston at the Ritz Carlton (“Unit 30-A”). Mr. Mee testified that he viewed this purchase as an investment. The appellants did not, however, rent Unit 30-A; instead, they used it as a stopover when traveling between Jupiter and Osterville, or for overnight stays when traveling to Boston, for example, for Fourth of July celebrations.

The appellants purchased their current Florida residence, a large condominium, in May of 2002. Mr. Mee explained the events leading to the purchase of the larger condominium. He testified that after he was passed over for a promotion in 2001, he began to work with the company in an advisory role that would enable him to phase into retirement. With a reduced work schedule and no children residing in Massachusetts, the appellants began to spend more time in Florida, and on June 30, 2003, days before his sixty-first birthday, Mr. Mee retired from his job in New York.

The Florida residence contained about 2,500 square feet of living space. It fronted both the intercoastal waterway and the Atlantic Ocean, with views of both from the balconies positioned beyond three of the four walls of the residence. The residence was located on the eighth floor of the complex and was accessible by two key-operated elevators that open directly into the residence. The residence featured two bedrooms, a den and three full bathrooms, as well as an air-conditioned garage. The appellants made extensive renovations to the Florida residence, including gutting and re-flooring the residence, hiring a professional decorator, and purchasing all new furniture and fixtures. During the tax years at issue, the appellants kept their valuable china and silverware with them in Florida. They stored a Toyota in the garage at the Boston condominium, but maintained their other cars which they owned at various times during the tax years at issue (a Chevrolet Corvette, a Toyota Solaris and a Jaguar) in Florida.

On April 22, 2005, Mr. Mee purchased a second condominium, located at Two Avery Street, Unit 29C, in Boston (“Unit 29C”). Mr. Mee purchased Unit 29C as an investment property and rented it to an individual tenant for between $12,000 and $13,000 a month. Mr. Mee subsequently sold Unit 29C, after the tax years at issue, for a substantial profit.

Mrs. Mee had two sisters, Patricia Bibby and Lillian Marshall. Patricia resided in Melrose, Massachusetts, while Lillian resided in Fort Myers, Florida. Mr. Mee had three living siblings — Paul Mee, who lived in Amelia Island, Florida; David Mead, who lived in Maryland; and a sister who lived in Detroit, Michigan. Mr. Mee testified that he was unsure whether one of his daughters may have resided in Massachusetts during the tax years at issue; he explained that she may have resided in Boston for a short period while en route from New York to Ann Arbor, Michigan. With this possible exception, none of the appellants’ children lived in Massachusetts during the tax years at issue.

The appellants testified as to their social ties to Florida and Massachusetts. Mrs. Mee testified that the appellants were members of the Jupiter Hills Golf Club, located about seven minutes away from their Florida residence. Both Mr. and Mrs. Mee testified that they played golf about four times a week, and they also attended other social events at the club, including Mrs. Mee’s involvement in two marathon bridge clubs about four or five times a week and the appellants’ participation in golf tournaments and dinner functions. The appellants also socialized extensively with friends at the club, attending lunches, dinners and other functions with friends. Mrs. Mee testified that she belonged to a ladies’ group that attended theater outings and other social events. Mrs. Mee also testified that, during the tax years at issue, the appellants attended church services regularly in Florida, at St. Jude’s Church and St. Christopher’s Church.

The appellants both testified that, when in Massachusetts during the tax years at issue, they golfed at Cape Cod National Club, located about thirty-five minutes from their Osterville residence. Mrs. Mee explained that she would have liked to golf four times a week, but because of the distance of the club from their residence, she usually golfed about two or three times a week during her stay in Osterville during the tax years at issue. Mrs. Mee also testified that the appellants did not have a network of friends in Osterville; they instead socialized with friends who visited them at their Osterville residence. Mrs. Mee also testified that the appellants did not attend church services in Osterville.

Other witnesses corroborated the appellants’ testimony regarding their social ties to Florida. Patricia Bibby, Mrs. Mee’s sister, and Ms. Bibby’s friend, Joseph Paglia, both testified that, based on their observations of the appellants when they visited them in Florida during the tax years at issue, the appellants had a large circle of friends with whom they socialized in Florida. Ms. Bibby and Mr. Paglia both recalled parties that they have attended with the appellants and their many friends in Florida. By contrast, both witnesses testified that the appellants did not have such a circle of friends, nor were they socially active, in Osterville. Ms. Bibby also corroborated Mrs. Mee’s testimony that the appellants spent the Thanksgiving holiday at their residence in Florida. Mr. Mee’s brothers, Paul Mee and David Mead, as well as Jack Russell Kelble, a friend of Mr. Mee’s who lived near the appellants in Florida, also testified as to the appellants’ active social lives in Florida.

Paul Mee further testified as to what he believed to be the appellants’ plans for retirement, based on his recollection of conversations with the appellant. Paul Mee explained that, since about 1999, his brother, Michael, had been planning to retire to Florida, because he enjoyed the warmer climate, more conservative social and political demographic, and the availability of year-round outdoor activities, particularly golf. Paul Mee also testified that he has spent the Thanksgiving, Christmas and New Year’s holidays with the appellants in Florida. Paul Mee and David Mead further corroborated the appellants’ and other witnesses’ testimonies that the appellants had a large circle of friends in Florida, as compared to Osterville. Mr. Mead and Mr. Kelble also testified that, based on their recollections of separate conversations with Mr. Mee, the appellants had expressed a desire to retire to Florida, citing their enjoyment of the warmer weather and the more conservative political climate than that of Massachusetts.

Further, credible evidence of record supported the appellants’ argument that their decision to establish a Florida domicile was not driven by tax savings. Mr. Kelble testified that, despite Florida’s lack of a personal income tax, Mr. Mee believed that the overall cost of living in Florida was not less than in Massachusetts:

[Mr. Kelble]: I considered moving to many places and certainly looked at the tax structure to see whether I was going to be paying more or less taxes. I, I concluded very quickly – in fact, Michael – we talked about retirement many times because we were both in similar type of management positions . . . and both on kind of a parallel track to start thinking about retirement around 2000 or so, and planning what we would do for retirement, and I found and he pointed out to me that the cost of living in Florida, although it’s advertised to be low is actually quite high relative to tax structure, sales tax is higher than Massachusetts and about equal with California, and that the property tax is quite high, . . .

(emphasis added).

The appellants obtained healthcare services in both Florida and Massachusetts during the tax years at issue. In Massachusetts, the appellants saw a cardiologist, and Mr. Mee saw an urologist. Mr. Mee testified that Mrs. Mee was diagnosed with breast cancer on two separate occasions, sometime between 2003 and 2005, to the best of his recollection. Because she was in Massachusetts when it was discovered, Mrs. Mee had surgeries performed in Massachusetts. However, Mrs. Mee received her radiation treatments in Florida after her Massachusetts surgeries. Additionally, Mr. Mee testified that Mrs. Mee’s oncologist, orthopedic surgeon and OB/GYN physician were located in Florida, as were Mr. Mee’s general practitioner, dentist, orthopedic surgeon and internist, as well as the dermatologist for both appellants.

The Commissioner contended that the appellants used their Osterville address as the address of record on important filings, particularly several 1099 tax statements and their New York Non-resident and Part-Year Resident return, filed on June 22, 2005. However, Mrs. Mee testified that the mail was forwarded to them in Florida, and that their accountant was the one who had prepared and signed the New York tax documents.

The appellants registered to vote in Palm Beach County on May 11, 2004; on that same day, they applied for the Florida Homestead exemption for their home at 425 Beach Road, Jupiter Island. They voted in the 2004 Presidential Election in Florida. The appellants obtained Florida driver’s licenses on May 14, 2004.

On the basis of the above evidence, the Board made the following findings. The Board found that the appellants were both actively involved with the Jupiter Hills Golf Club, where Mrs. Mee regularly participated in bridge activities and Mr. Mee participated in golf outings and tournaments, and both appellants attended dinner and social functions. The appellants also had an extensive network of friends in Florida with whom they socialized, as testified to by the appellants and corroborated by their several witnesses. All the witnesses agreed that, while they enjoyed golfing at Cape Cod National Club, the appellants lacked a social network in Osterville comparable to that in Florida. The appellants also testified, and the Board found credible, that they were members of two churches and attended church services regularly when in Florida, but they were not members of, nor did they attend, a church during their summer stays in Osterville.

Moreover, the Board found credible the testimonies of Mr. Mead and Mr. Kelble, who, based on their recollections of separate conversations with Mr. Mee prior to the tax years at issue, vouched for the appellants’ desire to retire to Florida, based at least in part on the appellants’ enjoyment of the warmer weather and more conservative political climate. The Board thus found that the appellants’ social ties were stronger in Florida than they were in Massachusetts during the tax years at issue.

The Board also found that, aside from Mrs. Mee’s sister, Ms. Bibby, and the possible exception of one of their daughters — who, if she was in Massachusetts during the tax years at issue, was only there for a brief time while en route to another destination — the appellants lacked strong family ties to Massachusetts during the tax years at issue. On the other hand, the appellants each had a sibling who lived in Florida during the tax years at issue — Mr. Mee’s brother, Paul Mee, and Mrs. Mee’s sister, Lillian Marshall. The Board thus found that the appellants’ family ties to Massachusetts were minimal, while their family ties to Florida were significantly stronger during the tax years at issue.

The Board further found that the appellants’ Florida residence reflected their commitment to the Jupiter area. The Board found that this residence –- with 2,500 square feet of living space and with key-operated elevator access into the main living room — was more spacious and more conducive to retirement-living than the multi-leveled Osterville residence with its many stairs and basement-level laundry room. The Board also found that the appellants actively made a commitment to the Jupiter area by making extensive home renovations, purchasing all new furnishings and moving their valuable possessions, like china, silverware and expensive cars, to the Florida residence. Moreover, the majority of the appellants’ healthcare providers are located in Florida. Even though the appellants did not obtain Florida drivers’ licenses, apply for the Florida Homestead exemption, or register to vote in Florida until May of 2004, the Board found that the appellants produced strong evidence that they had formed the requisite intent to make Florida their domicile before the start of the 2004 tax year.

By contrast, the Board found that the appellants did not make a similar commitment to their Osterville residence, as evidenced particularly by their failure to renovate the residence aside from making updates to one bathroom and twice rejecting an offer to purchase adjoining land that would have increased the lot size of their Osterville residence. Therefore, while the appellants may not have changed their Osterville address on some brokerage and tax accounts, they nonetheless made life-style commitments to their Florida residence. Furthermore, while the appellants owned other Massachusetts properties, namely Unit 30-A and Unit 29C, the appellants rented out Unit 29C and they stayed only sporadically at Unit 30-A. The Board thus found these properties to be more in the nature of investments for the Mees and not reflective of the appellants’ commitment to Massachusetts during the tax years at issue. Moreover, the appellants did not claim a residential property tax exemption for any of their Massachusetts properties during the tax years at issue.[43]

Therefore, for the reasons which will be explained further in the following Opinion, the Board found that the appellants met their burden of proving that they had changed their domicile to Florida before the beginning of the tax years at issue. Accordingly, the Board issued decisions for the appellants granting an abatement in the amount of $151,707 for the 2004 tax year and $105,193 for the 2005 tax year, plus all statutory additions for both tax years.

OPINION

G.L. c. 62, § 1(f). The appellants contend, and the Commissioner does not challenge, that the appellants did not spend more than 183 days in Massachusetts during the tax years at issue. The issue presented in these appeals, therefore, is whether the appellants were domiciled in Massachusetts and, therefore, were taxable as residents during the tax years at issue.

Domicile is commonly defined as “the place of actual residence with intention to remain permanently or for an indefinite time and without any certain purpose to return to a former place of abode.” Commonwealth v. Davis, 284 Mass. 41, 50 (1933). While domicile may be a difficult concept to define precisely, the hallmark of domicile is that it is “‘the place where a person dwells and which is the center of his domestic, social and civil life.’” Reiersen v. Commissioner of Revenue, 26 Mass. App. Ct. 124, 125 (1988) (citing Restatement (Second) of Conflict of Laws § 12 (1969)). In the instant appeals, the appellants do not dispute that their domicile had been Massachusetts for approximately 19 years before the tax years at issue. The appellants contend that they had changed their domicile to Florida before the beginning of the tax years at issue.

Massachusetts follows the common law rule that a person with legal capacity is considered to have changed his or her domicile by satisfying two elements: the establishment of physical residence in a different state and the intent to remain at the new residence permanently or indefinitely. McMahon, 31 Mass. App. Ct. at 505. The determination of intent goes beyond merely accepting the taxpayer’s expression of intent and instead requires an analysis of the facts closely connected to the taxpayer’s major life interests, including family relations, business connections, and social and extracurricular activities in order to determine his true intent. See Reiersen, 26 Mass. App. Ct. at 125 (“A change of domicile occurs when a person with capacity to change his domicile is physically present in a place and intends to make that place his home for the time at least; the fact and intent must concur.” (citing Hershkoff v. Board of Registered Voters of Worcester, 366 Mass. 570, 576-577 (1974)). “It is a general rule that the burden of showing a change of domicil is upon the party asserting the change.” Mellon Nat’l Bank & Trust Co. v. Comm’r of Corporations and Taxation, 327 Mass. 631, 638 (1951); Horvitz v. Commissioner of Revenue, 51 Mass. App. Ct. 386, 394 (2001). See also Commonwealth v. Davis, 284 Mass. 41, 49 (1933) (“The burden of proof that his domicil was changed rested on the defendant because he is the one who asserted that such change had taken place.”).

Moreover, the Supreme Judicial Court and the Massachusetts Appeals Court have recognized that a person may have a residence in one place and a permanent home (i.e., domicile) in another. See, e.g., Hopkins v. Commissioner of Corps. & Tax’n, 320 Mass. 168, 173 (1946); Horvitz v. Commissioner of Revenue, 51 Mass. App. Ct. 386, 393 (2001). Having more than one residence can lead to factors on more than one side of the “domicil[e] ledger.” See Reiersen, 26 Mass. App. Ct. at 127. Therefore, a determination of domicile depends upon a comprehensive facts-and-circumstances analysis:

‘No exact definition can be given of domicile; it depends upon no one fact or combination of circumstances, but from the whole taken together it must be determined in each particular case . . .; and it may often occur, that the evidence of facts tending to establish the domicile in one place, would be entirely conclusive, were it not for the existence of facts and circumstances of a still more conclusive and decisive character, which fix it, beyond question, in another.’

Horvitz v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports 2002-252, 257, aff’d, 60 Mass. App. Ct. 1103 (2003) (quoting Tax Collector of Lowell v. Hanchett, 240 Mass. 557, 561 (1922)(citation omitted)); see also Roarke v. Hanchett, 240 Mass. 557, 561 (1922) (finding that proof of domicile “depends upon no one fact or combination of circumstances, but from the whole taken together it must be determined in each particular case.”). While a person may have ties to more than one location, the standard of domicile is that it is “‘the place where a person dwells and which is the center of his domestic, social and civil life.’” Reiersen, 26 Mass. App. Ct. at 125 (citation omitted).

In the instant appeals, the appellants had the means to establish residences for themselves in both Florida and Massachusetts. See Horvitz v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports 2002-252, 256 (“Because of Horvitz’s considerable financial resources, he was able to create two locations in each of which he carried on important parts of his life.”). However, only one of those locations could be the appellants’ domicile. Therefore, the Board must weigh the evidence and determine whether the appellants met their burden of proving that they had changed their domicile to Florida before the beginning of the tax years at issue.

The appellants’ continuing ties to their Massachusetts residence do not automatically foreclose a finding of change of domicile: “such change does not require that a taxpayer divest himself of all remaining links to the former place of abode, or stay away from that place entirely.” Horvitz, Mass. ATB Findings of Fact and Reports at 2002-259 (citing Gordon v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports 1988-367, 375)). Yet notwithstanding the presence of considerable evidence on both sides of the domicile ledger, certain ties are particularly probative and entitled to greater weight. In particular, strong social ties to a particular location are indicative of a taxpayer’s domicile. See, e.g., Reiersen, 26 Mass. App. Ct. at 130 (“[Reiersen’s] was not a temporary mission. In the Philippines he had found business and social success he had not enjoyed in Worcester. There he had made friends and joined clubs.”).

The Board has previously decided appeals where a taxpayer enjoyed regular, prolonged stays at a Massachusetts summer residence, which the taxpayer retained after moving to Florida. In these situations, the Board has been guided by the principle that “mere absences from home even for somewhat prolonged periods” are not conclusive evidence in the determination of a taxpayer’s domicile. See McMahon, 31 Mass. App. Ct. at 506. For example, like the appellants in the instant appeals, the appellants in Salah v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports 1997-842, retained their Massachusetts residence, to which they returned every summer for several months at a time. Despite the length and regularity of the taxpayers’ return to Massachusetts, however, the Board focused on facts which established that the center of the taxpayers’ domestic, social and personal life had shifted to Florida, including but not limited to: the taxpayers registered to vote in Florida and correspondingly removed themselves from the voter registry in Massachusetts; the taxpayers received Florida driver’s licenses and surrendered their Massachusetts driver’s licenses; the taxpayer’s Massachusetts business activities were reduced to occasional consultation on isolated matters and his attendance at annual meetings; and the taxpayers’ social ties to Florida, including their memberships in a social club and a church. Id. at 1987-856,857.

In the instant appeals, the Board found and ruled that the testimony of the appellants, as corroborated by their several credible witnesses, established that the appellants’ ties – certainly their social ties and even their family ties – were stronger in Florida than in Massachusetts during the tax years at issue. The Board found credible that the appellants weighed the warmer climate, convenient access to a golf club, and more conservative political culture in their decision to change their domicile to Florida upon Mr. Mee’s retirement. These reasons, and not tax savings, were the predominant motivations for the appellants’ decision to live in Florida; in fact, the Board found credible Mr. Kelble’s testimony that Mr. Mee believed that the overall cost of living in Florida was not less expensive than the cost of living in Massachusetts, even with the Massachusetts income tax. The Board also found and ruled that, even though they did not apply for Florida drivers’ licenses or register to vote in Florida until May of 2004, the appellants had already made the commitment to change their domicile to Florida by, for example, extensively renovating and refurbishing their Florida residence and insuring their more expensive vehicles in Florida, and registering to vote in Florida. See, e.g., Rosenthal v. Commissioner, Mass. ATB Findings of Fact and Reports 1997-859, 872-73 (in finding the appellants met their burden of proving they changed their domicile to Florida, the Board considered that the appellants made a substantial investment in a Florida condominium, surrendered their Massachusetts drivers’ licenses and Massachusetts vehicle registrations to obtain Florida licenses and registrations, registered to vote, and joined several social organizations in Florida). Moreover, the appellants were far more socially active in Florida, attending many golf, bridge, and social events, and attending two different churches. In Massachusetts, the appellants had only casual acquaintances, they attended few social functions and golfed far less frequently, and they did not attend church services during their summer stays.

On the basis of the evidence of record, the Board found and ruled that the appellants had formed the requisite intent to make Florida their home before the beginning of tax year 2004. The Board thus found and ruled that the appellants met their burden of proving that Massachusetts was not the center of their social, family or civic life, and therefore, the appellants were not domiciled in Massachusetts during the tax years at issue. Accordingly, the Board issued decisions for the appellants, granting an abatement in the amount of $151,707 for the 2004 tax year and $105,193 for the 2005 tax year, plus all statutory additions for both tax years.

APPELLATE TAX BOARD

By: _____ ____ Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: _____

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

ROBERT D. and v. BOARD OF ASSESSORS OF

JUDITH S. KRUMME THE TOWN OF CONCORD

Docket No. F298669 Promulgated:

April 13, 2010

This is an appeal filed under the formal procedure[44] pursuant to G.L. c. 58A, § 7A and G.L. c. 59, §§ 64 and 65, from the refusal of the Board of Assessors of the Town of Concord (“appellee” or “assessors”) to abate taxes on certain real estate in Concord, owned by and assessed to Robert D. and Judith S. Krumme (together, “appellants”) under G.L. c. 59, §§ 11 and 38 for fiscal year 2008 (“fiscal year at issue”).

Commissioner Egan heard this appeal. Chairman Hammond and Commissioners Scharaffa, Rose and Mulhern joined her in the decision for the appellants.

These findings of fact and report are made pursuant to a request by the appellee under G.L. c. 58A, § 13 and 831 CMR 1.32.

Robert D. Krumme, pro se, for the appellants.

Kevin Batt, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of the testimony, the stipulated facts and documents, and the other exhibits entered into evidence at the hearing of this appeal, the Appellate Tax Board (“Board”) made the following findings of fact.

On January 1, 2007, the relevant date of assessment for the fiscal year at issue in this appeal, the appellants were the assessed owners of a 3.35-acre parcel of land, improved with a two-story, Colonial-style dwelling, located at 349 Simon Willard Road in Concord, Massachusetts (“subject property”). Originally constructed in 1978, the dwelling on the subject property has a concrete foundation, wood clapboard and brick exterior, and an asphalt shingle roof. It has nine rooms, including four bedrooms, as well as two full bathrooms and one half bathroom, with a total finished living area of 3,375 square feet. Interior features include hardwood, carpet and ceramic tile flooring, granite and formica countertops, and two fireplaces. The basement is unfinished. The subject property also has a screened porch and a four-car garage.

The subject property is located in the Nashawtuc Hill neighborhood of Concord. The evidence revealed that the Nashawtuc Hill neighborhood is one of the most desirable neighborhoods in Concord. Situated on a hill, it is surrounded by three rivers and offers scenic vistas and abundant natural beauty. However, additional evidence entered into the record revealed that the subject property was located towards the back of the hill, and did not enjoy enhanced views.

For the fiscal year at issue, the assessors valued the subject property at $2,145,500 and assessed a tax thereon, at the rate of $10.72 per $1,000, in the total amount of $23,328.68.[45] On February 28, 2008, the Collector of Taxes for Concord mailed out the actual fiscal year 2008 tax bills. The appellants timely paid the tax due without incurring interest. On May 1, 2008, the appellants timely filed an Application for Abatement with the assessors.[46] The abatement application was denied by vote of the assessors on May 15, 2008. The appellants timely filed their appeal with the Board on August 1, 2008. Based on the foregoing, the Board found and ruled that it had jurisdiction to hear and decide this appeal.

A. The Appellants’ Case-in-Chief

The appellants presented their case-in-chief primarily through the testimony of Mr. Krumme and the introduction of their sales-comparison analysis, which featured four sales-comparison properties. The following tables substantially reproduce the appellants’ sales-comparison analysis.[47]

Appellants’ Sales-Comparison Properties One and Two

	Subject Property	306 Musketaquid Road	Adjust.($)	291 Musterfield Road	Adjust.($)
Sale Price ($)	N/A	1,625,000		1,575,000
Sale Date	N/A	5/31/2007		9/14/2007
Proximity to Subject		3 Properties by Walking		2 Properties by Walking
Sale/Time Adjustment		1.25%	20,300	2.38%	37,406
Site (acres)	3.35[48]	2.83		2.60
Neighborhood	Same	Same		Same
Year Built	1978	1985		1976
Design/Style	Colonial	Colonial		Contem/Mod
Construction Quality	Good	Good		Good
Rooms/Baths	9/2.5	10/3.5	-20,000	10/3	-15,000
Living Area (sq. ft.)	3,375	3,002	27,975	3,493	-8,850
Heating/Cooling	FHW/CA	FA/CA		FA/CA
Garage	4	2	15,000	2	15,000
Fireplaces	2	2		2
Pool	None	None		None
Porch/Patio	Screen Porch	Enclosed Porch/Patio	-5,000	Deck/EnclosedPatio	-5,000
Special Improvements		New Kitchen	-30,000	N/A	N/A
Adjusted Sale Price			1,633,275		1,598,556

Appellants’ Sales-Comparison Properties Three and Four

	Subject Property	398 SimonWillard Road	Adjust. ($)	87 ParkLane	Adjust. ($)
Sale Price ($)	N/A	1,616,250		1,549,000
Sale Date	N/A	1/22/2008		6/29/2006
Proximity to Subject		2 Propertiesby Walking		4 Propertiesby Walking
Sale/Time Adjustment		3%	48,488	0
Site (acres)	3.35	2.08		1.04
Neighborhood	Same	Same		Adjacent	154,900
Year Built	1978	1978		1952
Design/Style	Colonial	Contem/Mod		Colonial
Construction Quality	Good	Good		Good
Rooms/Baths	9/2.5	9/4	-15,000	10/3	-15,000
Living Area (sq. ft.)	3,375	3,165		3,930	-41,625
Heating/Cooling	FHW/CA	FA/CA		FHW/CA
Garage	4	2	15,000	2	15,000
Fireplaces	2	3	-5,000	3	-5,000
Pool	None	Pool	-23,700	None
Porch/Patio	ScreenPorch	Deck and Patio	-5,000	Deck and Patio	-5,000
Special Improvements		N/A	N/A	N/A
Adjusted Sale Price			1,631,038		1,652,275

In Mr. Krumme’s opinion, 306 Musketaquid Road was the property most comparable to the subject property. According to Mr. Krumme, both properties were constructed as developer “spec houses” around the same time, and the total gross living areas of both dwellings were similar. Unlike the other sales-comparison properties, 306 Musketaquid Road and the subject property lacked curb appeal, in Mr. Krumme’s opinion, because they could not be seen from a primary access road.

However, Mr. Krumme contended that 306 Musketaquid Road possessed certain advantages over the subject property, including a renovated kitchen and a lot which was more conducive to additional residential expansion. Mr. Krumme’s assertions regarding the subject property’s lot were corroborated by the stipulated facts. The parties stipulated that the subject property had an irregular shape, which Mr. Krumme characterized as a “pork chop” shape. Further, the parties stipulated that the land towards the rear of the subject property was encumbered by utility easements as well as a forty-foot-wide right-of-way reserved by Concord. Based on these stipulated facts, the Board found that 306 Musketaquid had a superior lot to the subject property. However, the Board found that there was not enough detail or evidence in the record to support Mr. Krumme’s assertions about the state of the kitchen at 306 Musketaquid Road in comparison to the subject property’s kitchen.

Based on their sales-comparison analysis, with particular reliance on the sale of 306 Musketaquid Road, the appellants’ opinion of value for the subject property as of January 1, 2007 was $1,625,000.

B. The Assessors’ Case-in-Chief

The assessors presented their case-in-chief primarily through the testimony and Summary Appraisal Report of certified real estate appraiser John H. Neas. Based on his experience, the Board qualified Mr. Neas as an expert residential real estate appraiser.

Mr. Neas considered the highest and best use of the subject property to be its continued use as a single-family residential property. Mr. Neas considered the three usual approaches to value, but ultimately relied on the sales-comparison approach to value the subject property. Mr. Neas used data from seven sales which took place in Concord in 2006 and 2007 in forming his sales-comparison analysis, which is substantially reproduced in the following tables:

Mr. Neas’ Sales-Comparison Properties One through Four

	Subject Property	291Muster-field Road	Adj.($)	306Musketa-quid Road	Adj.($)	383Simon WillardRoad	Adj.($)	1200Monument Street	Adj.($)
Sale Date	N/A	9/2007		5/2007		6/2007		7/2006
Sale Price ($)	N/A	1,575,000		1,625,000		1,825,000		2,092,000
Apprec.($)	N/A		55,125		32,500		36,500		-52,300
Location	NH[49]	NH		NH		NH		Monument Street
Lot Size	3.35acres	2.6acres	35,000	2.83acres	25,000	1.57acres	100,000	2.4acres	50,000
View	Good	Good		Good		Good		Good
Design	Colonial	Contemp.		Colonial		Cape		Colonial
Quality	Good	Good		Good		Good		Good
Year Built	1978	1978		1985		1979		1994
Condition	Good	Good		Good		Good		Good
Rooms/BedsBaths	9/4/2.5	9/3/2.5.5		10/4/3.5	-10,000	12/5/4.5	-20,000	10/4/3.5	-10,000
LivingArea	3,375	3,493		2,964[50]	82,200	5,000	-162,500	5,222	-184,700
Basement	NotFinished	2 FinishedRooms	-20,000	NotFinished		Playroom	-10,000	NotFinished
Heating/Cooling	HW/CA	HA/CA		HA/CA		HW/CA		HA/CA
Garage	4 Car Attached	2 CarAttached	20,000	2 carAttached	20,000	2 CarAttached	20,000	3 carAttached	10,000
Porch/Patio/Deck	ScreenPorch	Deck		Porch		Porch/Deck		Patio
Fireplaces	Two	Two		Two		Two		Two
Total Adjustment			90,125		149,700		-36,000		-187,000
Indicated Value ($)		1,665,125		1,774,700		1,789,000		1,905,000

Mr. Neas’ Sales-Comparison Properties Five through Seven

	Subject Property	168NashawtucRoad	Adj.($)	65AttawanRoad	Adj.($)	350MusketaquidRoad	Adj.($)
Sale Date	N/A	2/2007		12/2006		6/2006
Sale Price ($)	N/A	2,220,000		2,275,000		2,575,000
Apprec.($)	N/A		22,200				-77,250
Location	NH	NH		NH		NH
Lot Size	3.35 acres	40,298sq. feet	125,000	1.48 acres	100,000	41,544Sq. feet	125,000
View	Good	Good		Good		Good
Design	Colonial	Contemporary		Colonial		Contemporary
Quality	Good	Good		Good		Good
Year Built	1978	1974/Renovated		1983/Renovated		1900/Renovated
Condition	Good	Very Good	-200,000	Very Good	-200,000	Very Good	-200,000
Rooms/Beds/Baths	9/4/2.5	8/4/4.5	-20,000	11/4/3.5	-10,000	12/5/4.5	-20,000
Living Area	3,375	3,208		3,200		6,470	-309,500
Basement	Not Finished	Finished	-100,000	Playroom	-10,000	2 FinishedRooms	-50,000
Heating/Cooling	HW/CA	HW/CA		HA/CA		HA/CA
Garage	4 CarAttached	2 CarAttached	20,000	2 CarAttached	20,000	3 CarAttached	10,000
Porch/Patio/Deck	Screen Porch	Porch/Deck/Patio		None		Porch/Patio
Fireplace	Two	Three	-10,000	Two		Two
Total Adjustments			-162,800		-100,000		-521,750
Indicated Value		2,057,200		2,175,000		2,053,250

Based upon his sales-comparison analysis, which yielded indicated values ranging from $1,665,125 to $2,175,000, Mr. Neas concluded that the fair cash value of the subject property as of January 1, 2007 was $2,000,000, which was $145,500 less than its assessed value for the fiscal year at issue.

C. The Board’s Ultimate Findings of Fact

On the basis of all of the evidence, the Board found and ruled that the highest and best use of the subject property was its continued use as a single-family residence. Like the parties, the Board found that the sales-comparison analysis was the most reliable method of valuing the subject property, because of the availability of comparable sales in close proximity to both the subject property and the relevant date of assessment. The Board also found and ruled that the appellants possessed sufficient familiarity with their property, as well as the surrounding properties, to meaningfully express their opinion of value of the subject property.

The Board largely adopted the appellants’ sales-comparison analysis, which it found to be more probative of the fair cash value of the subject property than the analysis conducted by Mr. Neas. Both parties used 306 Musketaquid Road and 291 Musterfield Road as sales-comparison properties, but there was no overlap in the remaining sales-comparison properties. To the extent that they differed from the properties selected by Mr. Neas, the Board found that the properties selected by the appellants were more similar to the subject property in gross living area, year of construction, and other pertinent details. The appellants made net adjustments of less than $25,000 to three of their four sales-comparison properties, while a net adjustment of $103,275 was made to the fourth property. In contrast, Mr. Neas made net adjustments of more than $100,000 to four of his seven sales-comparison properties, and he made a net adjustment of over $500,000 to a fifth property. The Board found that the sales-comparison properties selected by Mr. Neas were less comparable to the subject property than those selected by the appellants, as evidenced by the magnitude of his net adjustments. The Board, therefore, used the same sales-comparison properties as the appellants in conducting its sales-comparison analysis.

Similarly, the Board adopted the appellants’ methodology of adjusting for differences in date of sale. The appellants used a factor of 0.25% per month to account for differences in date of sale, based on an assumed annual decline of 3%. The appellants’ assumption was based on a document created by the assessors stating that there was a “slight decrease in sale prices from 2006 to 2007” in Concord. In contrast, Mr. Neas used a 5% annual decline rate to account for differences in date of sale, which he based on data published by the Federal Reserve Bank of Boston. The Board found that the 3% figure used by the appellants was more specific to and reflective of sales activity in Concord, and therefore, was more reliable than the data used by Mr. Neas.

However, the Board’s sales-comparison analysis departed from that of the appellants in certain respects. According to the appellants, prior to 2002, the assessors considered the subject property as having only 2.13 acres for assessment purposes, rather than its actual 3.35 acres, because of its odd configuration and the various easements towards the rear of the property. Therefore, for the purposes of their sales-comparison analysis, the appellants treated the subject property as having only 2.13 acres. Because 2.13 acres was closer in size to the lots of their sales-comparison properties, the appellants made no adjustments to account for differences in lot size.

In contrast, Mr. Neas made adjustments to account for differences in lot size based on a value of $50,000 per acre, which he arrived at after conducting a paired-sales analysis. The Board found that Mr. Neas’ adjustments for differences in lot size were better supported by the evidence, and therefore, adopted his adjustment factor of $50,000 per acre. In addition, as discussed above, the Board declined to make a positive adjustment in the amount of $30,000 to the sales price of 306 Musketaquid Road to account for what the appellants claimed was an updated kitchen, as there was neither enough detail nor evidence in the record to support such an adjustment.

Based upon these findings of fact, the Board determined that the appellants’ sales-comparison analysis, as modified by the Board, resulted in adjusted-sales prices ranging from $1,631,587 to $1,768,275. Based on this range and on all of the evidence in the record, the Board found that the fair cash value of the subject property as of January 1, 2007 was $1,700,000.

Accordingly, the Board decided this appeal for the appellants and granted an abatement in the amount of $4,847.40.

OPINION

The appellant has the burden of proving that the property has a lower value than that assessed. “‘The burden of proof is upon the petitioner to make out its right as [a] matter of law to [an] abatement of the tax.‘” Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974) (quoting Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47, 55 (1922)). “[T]he Board is entitled to ‘presume that the valuation made by the assessors [is] valid unless the taxpayers . . . prove the contrary.'” General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 598 (1984) (quoting Schlaiker, 365 Mass. at 245). In appeals before this Board, a taxpayer “‘may present persuasive evidence of overvaluation either by exposing flaws or errors in the assessors’ method of valuation, or by introducing affirmative evidence of value which undermines the assessors’ valuation.’” General Electric Co., 393 Mass. at 600 (quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983)). “[S]ales of property usually furnish strong evidence of market value, provided they are arm’s-length transactions and thus fairly represent what a buyer has been willing to pay for the property to a willing seller.” Foxboro Associates v. Board of Assessors of Foxborough, 385 Mass. 679, 682 (1982). Sales of comparable realty in the same geographic area and within a reasonable time of the assessment date generally contain probative evidence for determining the value of the property at issue. Graham v. Assessors of West Tisbury, Mass. ATB Findings of Fact and Reports 2008-321, 400 (citing McCabe v. Chelsea, 265 Mass. 494, 496 (1929)), aff’d, 73 Mass. App. Ct. 1107 (2008).

In the present appeal, the appellants offered substantial, credible evidence showing that the assessed value of the subject property was greater than its fair cash value. Specifically, the appellants offered a highly persuasive sales-comparison analysis showing that the adjusted sales prices of nearby, comparable properties were significantly lower than the assessed value of the subject property. An owner of property is entitled to express his opinion of its value during the relevant time period if he is experienced in dealing with the property, is familiar with its characteristics, and recognizes its proper uses or potential uses. Menici v. Orton Crane & Shovel Co., 285 Mass. 499, 503-504 (1934), and the cases cited therein. Accord Correia v. New Bedford Redevelopment Authority, 5 Mass. App. Ct. 289, 295 (1977), rev’d on other grounds, 375 Mass. 360 (1978). In this appeal, the Board found and ruled that the appellants possessed the requisite familiarity and knowledge about their property, as well as the surrounding properties, to express meaningfully their opinion of its value. The Board found that the appellants’ opinion of the subject property’s value, in conjunction with the other evidence which they introduced, provided persuasive evidence of the subject property’s fair cash value.

Conversely, “the mere qualification of a person as an expert does not endow his testimony with any magic qualities.” Boston Gas Co. v. Assessors of Boston, 334 Mass. at 579. In this appeal, the Board found that the opinion of value formed by Mr. Neas lacked probative force. As evidenced by the comparatively large net adjustments he made to those properties, the Board found that many of the sales-comparison properties used by Mr. Neas were not sufficiently comparable to the subject property to provide reliable evidence of the fair cash value of the subject property.

Although the Board found the appellants’ valuation analysis highly persuasive, it did not adopt their opinion of value of the subject property. Market value is a matter of judgment; the Board must make its decision on evidence presented but need not adopt the valuation of any particular witness. Assessors of Quincy v. Boston Consol. Gas Co., 309 Mass. 60 (1941). In evaluating the evidence before it, the Board may select among the various elements of value and form its own independent judgment of fair cash value. North American Philips Lighting Corp. v. Assessors of Lynn, 392 Mass. 296, 300 (1984).

In the present appeal, the Board adopted those portions of the appellants’ sales-comparison analysis which it found to be supported by the evidence. However, with respect to adjustments for differences in lot size, the Board found that the data used by Mr. Neas was better supported by the evidence. It therefore adopted Mr. Neas’ $50,000-per- acre adjustment to account for differences in lot size. Further, the Board declined to make an adjustment to 306 Musketaquid Road to account for its supposedly updated kitchen, as the appellants had, because there was not enough detail or evidence in the record to support such an adjustment.

Therefore, the Board formed its own opinion of value of the subject property, and found and ruled that its fair cash value was $1,700,000 for fiscal year 2008. Accordingly, the Board decided this appeal for the appellants, and granted an abatement of $4,847.40.

APPELLATE TAX BOARD

By: _____ ___

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: __

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

145 SUMNER AVENUE, L.P. v. BOARD OF ASSESSORS OF and RUSSELL L. SEELIG THE CITY OF SPRINGFIELD

Docket Nos. F288512-13 Promulgated:

F294152 April 13, 2010

F294218

These are appeals filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65 from the refusal of the Board of Assessors of the City of Springfield (“assessors” or “appellee”) to abate real estate tax on certain real estate in the City of Springfield, owned by and assessed to Russell L. Seelig and/or 145 Sumner Avenue L.P. (together, “appellants”) under G.L. c. 59, §§ 11 and 38 for fiscal years 2007 and 2008 (“fiscal years at issue”).

Commissioner Rose heard these appeals. Chairman Hammond and Commissioners Scharaffa, Egan and Mulhern joined him in issuing decisions for the appellants.

These findings of fact and report are made pursuant to a request by the appellants under G.L. c. 58A, § 13 and 831 CMR 1.32.

Robert M. Finkel, Esq. and Diana Espanola, Esq. for the appellants.

Patricia Bobba Donovan, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of the Statement of Agreed Facts and attached documents, testimony, and other exhibits offered into evidence in the hearing of these appeals, the Appellate Tax Board (“Board”) made the following findings of fact.

On January 1, 2006 and January 1, 2007, the relevant dates of assessment for the fiscal years at issue, appellant Russell L. Seelig was the assessed owner of a 10,454 square-foot parcel of land located at 290 Sumner Avenue in Springfield. 290 Sumner Avenue was improved with a four-story, brick apartment building containing twenty units, twelve of which were one-bedroom, one-bathroom apartments, and eight of which were two-bedroom, two-bathroom apartments. For fiscal year 2007, the assessors valued 290 Sumner Avenue at $845,200, and assessed a tax thereon, at a rate of $16.04 per $1,000, in the total amount of $13,557.01. For fiscal year 2008, the assessors valued 290 Sumner Avenue at $922,500, and assessed a tax thereon, at a rate of $16.03 per $1,000, in the total amount of $14,787.68.

On January 1, 2006 and January 1, 2007, appellant 145 Sumner Avenue L.P. was the assessed owner of a 26,276 square-foot parcel of land located at 145 Sumner Avenue in Springfield.[51] 145 Sumner Avenue was improved with a four-story, brick apartment building containing forty units, twenty-four of which were one-bedroom, one-bathroom apartments and sixteen of which were two-bedroom, two-bathroom apartments. For fiscal year 2007, the assessors valued 145 Sumner Avenue at $1,690,400 and assessed a tax thereon, at the rate of $16.04 per $1,000, in the total amount of $27,114.02. For fiscal year 2008, the assessors valued 145 Sumner Avenue at $1,844,900 and assessed a tax thereon, at a rate of $16.03 per $1,000, in the total amount of $14,787.68.

The appellants timely paid the taxes due for 290 Sumner Avenue and 145 Sumner Avenue (together, the “subject properties”), for both of the fiscal years at issue, without incurring interest. The appellants timely filed their Applications for Abatement for fiscal year 2007 with the assessors on January 23, 2007. By vote of the assessors, those abatement applications were denied on April 10, 2007, and notice of the denial was given to the appellants on April 13, 2007. The appellants timely filed their petitions with the Board on May 10, 2007.

The appellants timely filed their Applications for Abatement for fiscal year 2008 with the assessors on January 10, 2008. The abatement applications were denied on March 4, 2008. The appellants timely filed their petitions with the Board on April 1, 2008. On the basis of the foregoing, the Board found and ruled that it had jurisdiction to hear and decide these appeals.

In challenging the assessments at issue, the appellants initially raised both overvaluation and disproportionate assessment claims. However, subsequent to the hearing of these appeals, but prior to the Board’s decisions, the parties stipulated to the fair cash value of the subject properties. The fair cash values stipulated to by the parties were lower than the assessed values of the subject properties, and the parties’ stipulation therefore resulted in decisions for the appellants. Following that stipulation, the issue of valuation was no longer before the Board and the only issue remaining for the Board’s consideration was the disproportionate assessment claim.

The Appellants’ Disproportionate Assessment Claim

During the course of pre-trial litigation in these appeals, the appellants sought information in discovery regarding approximately 150 properties in Springfield, each of which, the appellants alleged, hosted cell towers, antennae, or billboards. It was the appellants’ position that the assessors engaged in a deliberate scheme of undervaluing properties hosting such structures (“host properties”), both by improperly using the cost-reproduction methodology rather to value the cell towers, antennae, and billboards, and also by failing to consider income generated by the structures in determining the value of the host properties. The appellants alleged that this practice resulted in discrimination against the appellants, because the subject properties, which were not host properties, were assessed at their full, fair cash value, while approximately 150 host properties in Springfield were not.

The assessors, in turn, filed a Motion in Limine with the Board, asking the Board to issue an Order precluding the introduction of any evidence relating to the sale, valuation, or assessment of cell towers, antennae, or billboards, or of host properties, among other things. It was the assessors’ position that such evidence was wholly irrelevant to the issues before the Board. For reasons discussed more fully in the Opinion below, the Board allowed the assessors’ Motion in Limine, and issued an Order precluding the introduction of evidence or testimony regarding the sale, valuation, or assessment of cell towers, antennae, billboards, or host properties in Springfield, as it related to appellants’ claims of disproportionate assessment. The Board issued this Order based on its finding that the allegations made by the appellants, even if true, would not show that the assessors intentionally and deliberately engaged in a discriminatory scheme of disproportionate assessment. Rather, the Board found and ruled that the appellants’ allegations, if proven, could at best show that the assessors made an error or honest mistake in assessing the host properties. Accordingly, the Board found and ruled that the appellants could not and did not prove that the assessors engaged in an intentional scheme of discrimination in setting the assessments at issue or in assessing any other properties or class of properties in Springfield during the fiscal years at issue.

In accordance with the parties’ stipulated fair cash values, which the Board adopted, the Board decided these appeals for the appellants and ordered abatements in the following amounts:

Property	Fiscal Year	Assessed Value	Fair Cash Value	Over-valuation	Abatement
290 Sumner Avenue	2007	$845,200	$770,000	$75,200	$1,206.21
290 Summer Avenue	2008	$922,500	$820,000	$102,000	$1,643.08
145 Sumner Avenue	2007	$1,690,400	$1,565,000	$125,400	$2,011.42
145 Summer Avenue	2008	$1,844,900	$1,650,000	$194,900	$3,124.25

OPINION

A taxpayer aggrieved by the assessment of his property may appeal to the Board for an abatement of the tax. Taxpayers have two avenues by which to pursue a claim for abatement. First, a taxpayer may challenge the valuation of his property “either by exposing flaws or errors in the assessors’ method of valuation, or by introducing affirmative evidence of value which undermines the assessors’ valuation.” General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 600 (1984), (quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983)). In addition, “[i]f the taxpayer can demonstrate in an appeal to the board that he has been a victim of a scheme of discriminatory, disproportionate assessment, he ‘may be granted an abatement . . . which will make . . . [his] assessment proportional to other assessments, on a basis which reaches results as close as is practicable to those which would have followed application by the assessors of the proper statutory assessment principles.’” Coomey, 367 Mass. at 838, (quoting Shoppers’ World, Inc. v. Assessors of Framingham, 348 Mass. 366, 377-78 (1965)).

Regardless of the route chosen by the taxpayer, “the board is entitled to ‘presume that the valuation made by the assessors [is] valid unless the taxpayer[] . . . prov[es] the contrary.’” General Electric Co., 393 Mass. at 598, (quoting Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974). In appeals before this Board, “[t]he burden of proof is upon the petitioner to make out its right as [a] matter of law to [an] abatement of the tax.’” Schlaiker, 365 Mass. at 245, (quoting Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47, 55 (1922)). As with claims of overvaluation, the burden of proof as to existence of a scheme of discriminatory, disproportionate assessment is on the taxpayer. See First National Stores, Inc. v. Board of Assessors of Somerville, 358 Mass. 554, 559 (1971); see also Schlaiker, 365 Mass. at 245.

The appellants originally raised both overvaluation and disproportionate assessment claims with respect to the subject properties for both of the fiscal years at issue. Subsequent to the hearing of these appeals, but prior to the Board’s decisions, the parties stipulated to the fair cash values of the subject properties, and the Board adopted those values. Therefore, the only issue to be determined by the Board was the issue of disproportionate assessment.

In their filings with the Board, the appellants contended that their property was disproportionately assessed because the assessors failed to assess approximately 150 host properties in Springfield at their full, fair cash value. The appellants asserted that the assessors improperly undervalued the cell towers, antennae and billboards by using the cost-reproduction method to value them instead of the income-capitalization and/or sales-comparison approach. Further, the appellants contended that the assessors undervalued the host properties by failing to include the rental income generated by the cell towers, antennae and billboards in calculating the fair cash value of the host properties. The Board found and ruled that, even if these allegations were true, they would not prove that the subject properties were disproportionately assessed. The Board notes that the open-ended and voluminous discovery requested by the appellants would have done nothing to advance a claim of disproportion. The record before the Board indicated that neither the subject apartment buildings nor any apartment buildings in Springfield had billboards, cell towers or antennae. The appellants’ attempts to arbitrarily construct a subclass of commercial property based on a limited cluster of income-producing measures[52], with no adjustments for comparability, could not give rise to a general scheme of disproportionate assessment where the only issue contested was the methodology that was utilized by the assessors.

To make out a claim of disproportionate assessment, the appellants must show that a “statistically significant number” of properties have been valued at lower assessment-to-fair-cash-value ratios than the subject property. Graham v. Assessors of West Tisbury, Mass. ATB Findings of Fact and Reports 2007-321, 391, aff’d, Graham v. Assessors of West Tisbury, 73 Mass. App. Ct. 1107 (2008). The appellants must also show that the assessors engaged in an “intentional widespread scheme of discrimination.” Graham, Mass. ATB Findings of Fact and Reports at 207-405 (quoting Stilson v. Assessors of Gloucester, 385 Mass. 724, 727-28 (1982)). To proceed to trial, the appellants must “make specific allegations . . . as would, if proved, establish . . . the precise nature of the lack of uniformity in assessments which he expects to prove and the circumstances indicating that it was intentionally discriminatory, rather than caused by inadvertence, mistake, or incompetence.” Stone v. City of Springfield, 341 Mass. 246, 249 (1960). “Except upon clear allegation of specific facts showing a widespread scheme of intentional discrimination rather than merely isolated, inadvertent lack of uniformity . . . an inquiry [is] not required of the Appellate Tax Board.” Id. at 251.

The Board found and ruled that the appellants’ allegations, even if true, would not support the finding that a deliberate scheme of disproportionate assessment was undertaken by the assessors. The appellants alleged no facts that would prove that the assessors deliberately and intentionally assessed host properties more favorably than other types of property in Springfield so as to discriminate against those other properties. Moreover, in their filings with the Board, the appellants acknowledged the difficulty of valuing structures such as cell towers, antennae, and billboards, given the lack of a market for them and the concomitant dearth of comparable sales. Industry publications corroborate the difficulties inherent in valuing such structures and the real properties hosting them. See The Reenstierna Associates Report, “Billboards,” Eric Reenstierna Associates, 1998. Given these difficulties, the Board found that, to the extent the appellants could show that the assessors undervalued any cell towers, antennae and billboards in Springfield, or properties hosting them, such valuations were more “‘consistent with honest mistake or oversight on the part of the assessors’ as opposed to a ‘deliberate scheme of disproportionate assessment.’” Gargano v. Board of Assessors of Barnstable, Mass. ATB Findings of Fact and Reports at 2003-22 (quoting Stilson, 385 Mass. at 728).

With respect to their claim that the assessors improperly used the cost-reproduction methodology rather than the income-capitalization or sales-comparison methodology to value the antennae, billboards and cell towers, the Board found and ruled that this allegation, even if true, was insufficient to prove a scheme of disproportionate assessment. The “use of differing valuation methodologies, without substantially more, will not support a finding of disproportionate assessment. Rather, there must be substantial evidence demonstrating that a class or subclass of properties is valued so that it is shouldering more than its fair share of the property tax, irrespective of methodology.” Bell v. Board of Assessors of the City of Boston, Mass. ATB Findings of Fact and Reports 2006-754, 767-68, (citing Stilson, 385 Mass. at 728; Ecker v. Assessors of Chatham, Mass. ATB Findings of Fact and Reports 2003-81, 88-90; Brown v. Assessors of Brookline, Mass. ATB Findings of Fact and Reports 1996-1.)

“Trial judges have broad discretion to control the proceedings before them.” Commonwealth v. Jonathan Stockhammer, 409 Mass. 867, 882 (1991). “The purpose of a motion in limine is to prevent irrelevant, inadmissible or prejudicial matters from being admitted in evidence . . . and in granting such a motion, a judge has discretion similar to that which he has when deciding whether to admit or exclude evidence . . . .” Commonwealth v. Paul Hood, 389 Mass. 581 , 594, (1983) (citations omitted). In the present appeals, the Board found and ruled that the evidence which the appellants sought to admit was irrelevant because it could not support their argument that the subject properties were disproportionately assessed. Moreover, the Board determined that allowing the appellants to conduct factual inquiries involving the valuation of 150 host properties would require a tremendous expenditure of resources for no benefit. The Board therefore allowed the appellee’s Motion in Limine and declined to permit the appellants to introduce evidence relating to their disproportionate assessment claims.

In accordance with the parties’ stipulated fair cash values, the Board decided these appeals for the appellants and ordered abatements in the following amounts:

Property	Fiscal Year	Assessed Value	Fair Cash Value	Over-valuation	Abatement
290 Sumner Avenue	2007	$845,200	$770,000	$75,200	$1,206.21
290 Summer Avenue	2008	$922,500	$820,000	$102,000	$1,643.08
145 Sumner Avenue	2007	$1,690,400	$1,565,000	$125,400	$2,011.42
145 Summer Avenue	2008	$1,844,900	$1,650,000	$194,900	$3,124.25

APPELLATE TAX BOARD

By: ____________

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: ______ _____ _____

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

MICHAEL J. MCTYGUE & v. COMMISSIONER OF REVENUE

ANN M. MCTYGUE

Docket No. C287781 Promulgated:

April 20, 2010

This is an appeal filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 62C, § 39, from the refusal of the Commissioner of Revenue (“Commissioner” or “appellee”) to abate personal income tax assessed to Michael J. McTygue (“Mr. McTygue”) and Ann M. McTygue (jointly, “appellants”), for tax years 2002, 2003, 2004, and 2005 (“years at issue”).

Commissioner Scharaffa heard this appeal. Chairman Hammond and Commissioners Egan, Rose, and Mulhern joined him in a decision for the appellee.

These findings of fact and report are made pursuant to requests by the appellants and the appellee under G.L. c. 58A, § 13 and 831 CMR 1.32.

Roger J. Brunelle, Esq., for the appellants.

Celine E. Jackson, Esq. and Sean M. Fontes, Esq., for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of a Statement of Agreed Facts and exhibits offered by the parties, the Appellate Tax Board (“Board”) made the following findings of fact.

As a result of an audit that was initiated during April of 2005, the Commissioner issued a Notice of Intent to Assess personal income tax to the appellants on December 20, 2005 for tax years 2002, 2003 and 2004. The Commissioner subsequently issued a Notice of Assessment dated August 22, 2006, notifying the appellants that she had assessed tax, plus interest, in the amounts of $3,725.19, $6,953.78, and $5,959.88 for the 2002, 2003 and 2004 tax years, respectively. On September 14, 2006, the appellants filed an Application for Abatement for tax years 2002, 2003, and 2004 with the Commissioner. On December 1, 2006, the Commissioner denied the appellants’ abatement application.

On December 23, 2006, the Commissioner issued a Notice of Intent to Assess personal income tax for tax year 2005. By Notice of Assessment dated February 7, 2007, the Commissioner notified the appellants that she had assessed tax, plus interest, in the amount of $15,059.95 for tax year 2005. The appellants filed an abatement application for tax year 2005 with the Commissioner on December 28, 2007, which the Commissioner denied on June 13, 2008.

On January 26, 2007, the appellants timely filed an appeal with the Board relating to tax years 2002, 2003, and 2004. The appellants filed a motion for leave to amend their petition to include tax year 2005, which the Board allowed on August 5, 2008. On the basis of the foregoing, the Board found that it had jurisdiction to hear and decide this appeal.

In 1974, Mr. McTygue, then a Massachusetts resident, founded a construction/real-estate development business, which was organized as a Massachusetts subchapter C corporation called Builders Systems, Inc. (“BSI”). Mr. McTygue was the sole shareholder of BSI, owning all 500 outstanding shares of the corporation.

Having owned and operated BSI in Massachusetts for almost thirty years, Mr. McTygue sold his entire ownership interest in the company to three of his employees (“Buyers”) pursuant to an agreement between Mr. McTygue and the Buyers dated June 28, 2002 (“Agreement”). The Agreement provided that Mr. McTygue would receive $2,500,000 in exchange for his 500 shares, $500,000 of which the Buyers paid in a lump sum at the time of the closing to redeem 100 shares. The $2,000,000 balance, representing payment for the remaining 400 shares, was to be made by the Buyers pursuant to a promissory note also dated June 28, 2002 (“Note”), which provided for payment of principal and accrued interest over a period of ten years. Mr. McTygue maintained a security interest in all of the shares acquired by the Buyers until the Note was paid in full.

On the same day that the Agreement and the Note were executed, Mr. McTygue entered into an employment agreement with BSI (“Employment Agreement”), which explicitly provided that “as a condition to the consummation of the Acquisition, [Mr. McTygue] is to remain employed by the Company.” (emphasis added). Pursuant to the Employment Agreement, Mr. McTygue reported directly to BSI’s Board of Directors and was responsible “for the development and implementation of business plans, business development, providing management advice and developing budgets for the Company’s business.” The Employment Agreement also provided that Mr. McTygue would work for BSI for five years, starting June 28, 2002, with a base annual salary of $50,000, and that Mr. McTygue would receive bonus compensation at a rate of 50% of any bonus compensation paid to the Buyers. Further, Mr. McTygue was eligible to participate, at the company’s expense, in any medical or health plan that may have been provided by the company for its executive employees. He was entitled to sick leave, sick pay and disability benefits, and he was provided with “furnished suitable office and conference facilities with secretarial and drafting help as needed,” as well as a company car. Moreover, Mr. McTygue was granted “full and complete access to the financial books, records, statements and materials” pertaining to BSI until the Note was paid in full.

At issue in this appeal is the taxation of interest on the Note received by Mr. McTygue during the years at issue. For federal tax purposes, the appellants elected to pay tax on the capital gain from the sale of BSI on an installment basis over the term of the Note, pursuant to Internal Revenue Code § 453(b). The appellants included the interest income from the Note as ordinary income on their federal income tax returns for the years at issue.

For Massachusetts purposes, the appellants did not elect installment sale treatment, effectively realizing the capital gain on the sale of BSI stock in the year of sale. However, the appellants owed no Massachusetts tax on the capital gain under then-prevailing law because Mr. McTygue had owned the stock for more than six years at the time of sale. See G.L. c. 62, § 2(b)(3), as amended by St. 1994, c. 195, §§ 10 and 20; see also Peterson v. Commissioner of Revenue, 441 Mass. 420 (2004). For each of the years at issue, the appellants filed Massachusetts Nonresident/Part Year Resident Income Tax Returns as nonresidents,[53] including the income received pursuant to the Employment Agreement in Massachusetts source income, but excluding the interest income from the Note.[54]

On the basis of all of the evidence, the Board made the following additional findings of fact. Pursuant to the Employment Agreement, Mr. McTygue actively participated in the operation of BSI’s business in Massachusetts during the years at issue. Given that the Employment Agreement was executed “as a condition to the consummation of the Acquisition,” the Board also found that the sale of Mr. McTygue’s stock was contingent upon his continued employment with BSI. Moreover, the responsibilities borne by Mr. McTygue under the Employment Agreement, including “development and implementation of business plans, business development, providing management advice and developing budgets for the Company’s business,” were central to the successful operation of BSI’s business. Accordingly, the Board found that BSI’s financial success and ability to fulfill its obligations under the Note were dependent, at least in part, upon Mr. McTygue’s ongoing provision of services to the company.

The Board further found that the interest income at issue was directly and solely traceable to Mr. McTygue’s sale of his 100-percent ownership interest in BSI. Based on the foregoing, and for the reasons more fully explained in the following Opinion, the Board found and ruled that the interest income at issue was derived from or effectively connected with Mr. McTygue’s Massachusetts trade or business and therefore was subject to taxation as gross income from sources within the Commonwealth.

Accordingly, the Board issued a decision for the appellee in this appeal.

OPINION

The issue in the instant appeal is the taxability of interest income which Mr. McTygue received during the years at issue according to the terms of the sale of his ownership interest in his Massachusetts business. The sale was completed while the appellants were domiciled in the Commonwealth, but Mr. McTygue received the interest at issue when the appellants were Florida domiciliaries.

Tax Year 2002

General Laws c. 62, § 5A(a), in effect for tax year 2002, limited the taxation of nonresidents’ income to “items of gross income from sources within the commonwealth.” Section 5A further provided that “[i]tems of gross income from sources within the commonwealth are items of gross income derived from or effectively connected with . . . any trade or business, including any employment carried on by the taxpayer in the commonwealth.”[55] Such income is also known as Massachusetts source income. See 830 CMR 62.5A.1 (2).

On June 28, 2002, Mr. McTygue sold his interest in his Massachusetts business, BSI, to the Buyers. On the same day, Mr. McTygue entered into the Employment Agreement, which by its own terms established that the sale was contingent upon Mr. McTygue’s ongoing employment with the company. More specifically, the Employment Agreement provided that “as a condition to the consummation of the Acquisition, [Mr. McTygue] is to remain employed by the Company.” (emphasis added).

Pursuant to the Employment Agreement, Mr. McTygue would, for a period of five years, receive base compensation, bonuses, and various executive-level benefits. Moreover, in his new role, Mr. McTygue was “responsible for the development and implementation of business plans, business development, providing management advice and developing budgets for the Company’s business.” By their very nature, these duties were central to the operation of BSI’s business and its continued financial success. Mr. McTygue filled this role throughout the years at issue, and as the appellants’ Massachusetts nonresident income tax returns for these years reflect, was compensated for his efforts. In light of these facts, the Board found that Mr. McTygue actively participated in BSI’s business during the years at issue and that BSI’s ability to fulfill its obligations under the Note was dependent, at least in part, on this participation. Accordingly, the Board found and ruled that for tax year 2002, the interest at issue qualified as “gross income from sources within the commonwealth” within the meaning of § 5A because it was “derived from or effectively connected with . . . [a] trade or business” conducted by Mr. McTygue in Massachusetts. The Board thus found and ruled that the income was taxable to the appellants pursuant to § 5A.

The appellants do not dispute that Mr. McTygue remained employed by BSI during the years at issue, nor do they dispute that the interest income paid pursuant to the terms of the Note was part of the proceeds of the sale of BSI. Rather, the appellants contend that the interest income was not sufficiently connected to Mr. McTygue’s ongoing involvement in the business of BSI to qualify as Massachusetts source income within the meaning of § 5A. In support of their position, the appellants cite Department of Revenue Letter Ruling 83-23 and Commissioner of Revenue v. Dupee, 423 Mass. 617, 621 (1996).

In Dupee, the Supreme Judicial Court considered the taxability of a nonresident taxpayer’s capital gain realized from the disposition of his interest in the Boston Celtics. The Court agreed with the Board’s prior holding that the income was not subject to tax in Massachusetts where the taxpayer “‛did not actively, regularly, or continuously participate in any capacity in the activities constituting the regular operations of [the corporation],’ nor did he maintain any offices, employees, or place of business in Massachusetts, or purchase goods or services in connection with a trade or business in Massachusetts.” Dupee, 423 Mass. at 618 (citing Paul R. Dupee, Jr. and Lizbeth Schiff v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports 1994-103, 107). Similarly, in Letter Ruling 82-23, the Commissioner found that a nonresident’s long-term capital gain realized from the sale of stock in a Massachusetts corporation was not taxable by the Commonwealth where the taxpayer had performed no services for the corporation.

Consistent with Dupee and Letter Ruling 82-23, the Board and the Supreme Judicial Court have, on several occasions, ruled that income generated from the disposition of an interest in, or otherwise received from, a Massachusetts corporation is not includible in the Massachusetts source income of a nonresident if the nonresident did not actively participate in the corporation’s business when the income was received. See Gaston v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports 1997-332, 352-53 (ruling that gain from a nonresident’s sale of shares in a Massachusetts subchapter S corporation was not Massachusetts source income where the taxpayer did not perform employment services in Massachusetts in connection with ownership of the shares); Gersh v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports 1997-502, 522-23 (ruling that a nonresident’s income under a non-competition agreement related to the sale of a Massachusetts corporation was not Massachusetts source income where the taxpayer no longer acted as an officer or director of the company and did not perform any other services in Massachusetts for the company); Commissioner of Revenue v. R. Bruce Oliver, 436 Mass. 467 (2002) (affirming the Board’s ruling that a nonresident was not subject to tax on nonqualified pension payments made by his former Massachusetts employer where the taxpayer did not carry on a trade or business in Massachusetts during the years he received the payments).

By contrast, Mr. McTygue founded and built a Massachusetts business, and when he sold that business agreed, as a condition of the sale, to continue to participate in its operation in a strategic role that was central to the company’s ongoing success. The interest income at issue, which comprised part of the proceeds of the sale, was paid to Mr. McTygue while he performed this service. The Board thus found that Mr. McTygue’s continued participation in BSI’s business rendered Letter Ruling 83-23 and Dupee, as well as Gaston, Gersh and Oliver, inapplicable to the instant appeal.

Finally, any argument that the interest income at issue did not bear an adequate connection to Mr. McTygue’s sale of his interest in BSI is simply not supported by the record in this appeal. In Horst v. Commissioner of Revenue, 389 Mass. 177 (1983), a nonresident sold Massachusetts real estate at a gain, receiving as consideration cash and an interest-bearing note. In concluding that “the interest on the note was derived from an interest in ownership in real property within the meaning of § 5A”[56] (Horst, 389 Mass. at 181) and viewing the interest as “income directly and solely traceable to the sale of such property” (id. at 183), the Court stated that:

[t]he taxpayer seeks to divorce his interest income from the category of “such income as is derived from those sources.” He asserts that its intangible nature as interest on a note takes it out of the realm of income taxable to nonresidents. The taxpayer . . . would have the interest viewed as somehow disembodied from the sale transaction. We think that such a view strains the definition of income derived from the ownership of property.

Id. at 182-83.

While the Court in Horst considered whether interest income received in connection with the sale of real property was “derived from” Massachusetts property for purposes of § 5A, the reasoning in Horst is equally applicable to the interest income received in connection with Mr. McTygue’s sale of his Massachusetts business. As in Horst, the appellants’ interest income is “derived from” one of the three sources delineated in § 5A; in this case, a trade or business carried on in Massachusetts.

Accordingly, for all of the forgoing reasons, the Board found and ruled that the interest income which Mr. McTygue received under the note was derived from or effectively connected with a Massachusetts trade or business personally conducted by Mr. McTygue. The Board therefore ruled that the interest income at issue was taxable to the appellants pursuant to § 5A(a) for tax year 2002.

Tax Years 2003 through 2005

Section 5A was amended, effective for tax years beginning on or after January 1, 2003, to expand the definition of Massachusetts source income. Section 5A, as amended, provides in part that:

[i]tems of gross income from sources within the commonwealth are items of gross income derived from or effectively connected with . . . any trade or business, including any employment carried on by the taxpayer in the commonwealth, whether or not the nonresident is actively engaged in a trade or business or employment in the commonwealth in the year in which the income is received. (emphasis added).

Section 5A was further amended to explicitly define “gross income derived from or effectively connected with any trade or business” as follows:

[f]or purposes of this section, gross income derived from or effectively connected with any trade or business, including any employment, carried on by the taxpayer in the commonwealth shall mean . . . the income that results from, is earned by, is credited to, accumulated for or otherwise attributable to either the taxpayer’s trade or business in the commonwealth in any year or part thereof, regardless of the year in which that income is actually received by the taxpayer and regardless of the taxpayer’s residence or domicile in the year it is received. It shall include, but not be limited to, gain from the sale of a business or of an interest in a business, distributive share income, separation, sick or vacation pay, deferred compensation and nonqualified pension income not prevented from state taxation by the laws of the United States and income from a covenant not to compete. (emphasis added).

As a preliminary matter, the Board found and ruled that the amended version of § 5A determined the taxability of the interest income received by the appellants after January 1, 2003. While the sale of Mr. McTygue’s interest in BSI occurred in 2002, prior to the effective date of the amendment to § 5A, applying the statute to interest income recognized in tax years 2003 through 2005 is appropriate and does not constitute retroactivity. See Johnson v. Department of Revenue, 387 Mass. 59, 64 (1982) (citing, inter alia, DuBois v. Director, Div. of Taxation, 4 N.J. Tax 11 (Tax Ct. 1981), aff’d, 470 A.2d 446 (1983) (“The taxable event is receipt of the installments. Since this is a current event, there is no retroactivity.”) (other citations omitted).

Under the version of § 5A effective for tax year 2002, the appellants were taxable on the interest income at issue because, as detailed above, the interest income was derived from or effectively connected with the Massachusetts trade or business Mr. McTygue was conducting at the time he received the income. Although Mr. McTygue would still be taxable on the disputed interest income for the subsequent tax years under this version of § 5A for the same reason, the amendment to § 5A provides further grounds for taxing the income.

First, amended § 5A removes the requirement, developed through case law, that a nonresident individual be actively engaged in a trade or business in Massachusetts in a year in which income is received for that income to be derived from or effectively connected with a trade or business. Further, unlike the prior version of § 5A, which did not define “derived from or effectively connected with any trade or business,” the amended statute incorporates an exceedingly broad definition of the phrase. This definition includes income “that results from, is earned by, is credited to, accumulated for or otherwise attributable to” a trade or business in the Commonwealth and specifically enumerates several sources of taxable income including “gain from the sale of a business or of an interest in a business.”

Rather than attempt to argue that the disputed interest income somehow did not “result from” or was not “otherwise attributable to” Mr. McTygue’s trade or business under amended § 5A, the appellants argue that income resulting from the sale of Mr. McTygue’s BSI stock is not Massachusetts source income because BSI was a subchapter C corporation. The appellants cite for this proposition the Commissioner’s regulation interpreting taxation of the “[s]ale of a business or an interest in business.” 830 CMR 62.5A.1 (3)(c)(8) provides that:

[t]his rule generally applies to the sale of an interest in a sole proprietorship, general partnership, limited liability partnership, a general or limited partner’s interest in a limited partnership (subject to the exception in the following sentence), or an interest in a limited liability company. It generally does not apply to the sale of a limited partner’s interest in a publicly traded limited partnership, or to the sale of shares of stock in a C or S corporation, to the extent that the income from such gain is characterized for federal income tax purposes as capital gains. (emphasis added).

The meaning of “generally,” as it applies to the present appeal can be inferred from the regulation’s illustrative examples, and in particular the example that relates to acquisition and sale of shares in a C corporation. More specifically, example (3)(c)(8.4) depicts a hypothetical investor who is an employee of “NationalCorp,” a C corporation that does business in Massachusetts. The investor, who works in the corporation’s Massachusetts offices, purchased stock of the corporation “as an ordinary investment unrelated in any way to his compensation.” The example concludes that the gain on the investor’s sale of stock is not Massachusetts source income.

From this example, the Board inferred that the Commissioner intended to exclude from Massachusetts source income those items of income which were essentially passive in nature and unrelated to an individual’s employment by or active participation in the entity that was the source of the income. The Board found, therefore, that given the statutory language of § 5A, 830 CMR 62.5A.1(3)(c)(8) could not be read to exclude gains such as those at issue in the present appeal from Massachusetts source income.

The Board is also guided by the familiar principle that tax statutes are to be construed according to their plain meaning. Commissioner of Revenue v. Franchi, 423 Mass. 817, 822 (1996). See also Massachusetts Broken Stone Co. v. Weston, 430 Mass. 637, 640 (2000)(“Where the language of a statute is clear, courts must give effect to its plain and ordinary meaning and the courts need not look beyond the words of the statute itself.”). The plain and unambiguous nature of the statute in question, which includes in Massachusetts source income “gain from the sale of a business or of an interest in a business,” compels the conclusion that the interest income at issue, which was part of the gain realized by Mr. McTygue from his sale of BSI, is subject to taxation under amended § 5A. Further, as previously noted, amended § 5A removes the requirement that a nonresident individual be actively engaged in a trade or business in Massachusetts in a year in which income is received for that income to be effectively connected with a trade or business. Thus, even had the Board found that Mr. McTygue was not so engaged during tax years 2003 through 2005, the income at issue would have been taxable under amended § 5A.

Conclusion

Mr. McTygue actively participated in a Massachusetts trade or business during the years at issue. For tax year 2002, the Board found and ruled that Mr. McTygue actively participated in the business of BSI such that the interest income he received, which comprised part of the proceeds of the sale of BSI, was income derived from or effectively connected with a Massachusetts trade or business and was therefore Massachusetts source income taxable to the appellants pursuant to § 5A.

For tax years 2003 through 2005, the Board found and ruled that § 5A, as amended, determined the taxability of the interest income at issue. For these tax years, the Board further found and ruled that amended § 5A was substantially more inclusive than its predecessor and provided additional bases on which to conclude that the disputed interest income was taxable as income derived from or effectively connected with a Massachusetts trade or business.

Accordingly, the Board issued a decision for the appellee in this appeal.

APPELLATE TAX BOARD

By: ______ _____

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: ______ _____

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

DIANA M. & JAMES L. HENRY, v. BOARD OF ASSESSORS OF

TRUSTEES[57] THE CITY OF NEW BEDFORD

Docket No. F297367 Promulgated:

April 27, 2010

This is an appeal filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65 from the refusal of the Board of Assessors of the City of New Bedford (“assessors” or “appellee”) to abate taxes on certain real estate located in New Bedford owned by and assessed to the appellants under G.L. c. 59, §§ 11 and 38, for fiscal year 2008.

Commissioner Mulhern heard the appeal. Chairman Hammond and Commissioners Scharaffa and Rose joined him in the decision for the appellant.

These findings of fact and report are made pursuant to a request by the appellee under G.L. c. 58A, § 13 and 831 CMR 1.32.

Diana M. & James L. Henry, Trustees, pro se, for the appellants.

Burton Peltz, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

On January 1, 2007, Diana M. and James L. Henry, Trustees, (“appellants”) were the assessed owners of a 18,034 square-foot parcel of real estate improved with a single-family dwelling, located at 78 Orchard Street in the City of New Bedford (“subject property”). For fiscal year 2008, the assessors valued the subject property at $655,400 and assessed a tax thereon, at a rate of $10.55 per thousand, in the amount of $6,914.48, which the appellants paid timely. The appellants timely filed an abatement application with the assessors on January 31, 2008, which the assessors denied on March 27, 2008. On June 27, 2008, the appellants seasonably filed a Petition Under Formal Procedure with the Board. Based on these facts, the Board found and ruled that it had jurisdiction to hear and decide this appeal.

The subject dwelling was built in approximately 1882. It is a three-story colonial-style structure, which contains a total living area of approximately 6,059 square feet. The exterior of the home is wood shingles and it has an asphalt gable roof. The dwelling is heated by a two-zone, forced-hot-water, gas-heating system, and there is also a two-zone, central air-conditioning system. The dwelling has a total of fourteen rooms, including six bedrooms, and also three full bathrooms and one half bathroom. Other features of the home include eight fireplaces, leaded glass cabinets, hardwood floors, detailed moldings, raised panel wood doors, and also large covered front and rear porches. There is also an undersized two-car detached garage and a 351 square-foot carport. No major repairs are needed. However, some deferred maintenance exists due to water seepage in the basement. Overall the subject dwelling is in average condition.

The subject property is located in an historically significant neighborhood and is within walking distance to local shopping, public schools, and parks, and is within one mile of highway access.

In support of their contention that the subject property was overvalued for the fiscal year at issue, the appellants presented the testimony of James L. Henry and Diana M. Henry, the property owners, and also Arthur C. Larrivee, a certified real estate appraiser. Based on his education, experience and certification, the Board qualified Mr. Larrivee as an expert real estate appraiser. The appellants also offered into evidence the subject property’s property record cards for fiscal year 2001, which listed the finished living area as 5,359 square feet, and fiscal year 2006, which listed the finished living area at 6,319 square feet. The appellants also offered a copy of the Board’s fiscal year 2007 decision involving the subject property, Diana M. & James L. Henry v. Assessors of the City of New Bedford, Mass. ATB Findings of Fact and Reports 2008-1143 (“Henry I”), in which the Board determined that the appellants failed to meet their burden of proving that the subject property was overvalued for fiscal year 2007.

Mr. Larrivee used the sales-comparison methodology to value the subject property. He first inspected both the interior and exterior of the dwelling. He did not, however, measure the subject property’s square footage. Instead, he relied on the fiscal year 2001 property record card, which listed a finished living area of 5,352 square feet. Mr. Larrivee further testified that for fiscal year 2001, there was unfinished attic space of approximately 300 square feet. He deducted the attic space from the 5,352 square feet reported on the fiscal year 2001 property record card to arrive at a finished living area of 5,031 square feet for purposes of his valuation.

In his analysis, Mr. Larrivee primarily relied on three sales of properties that he deemed to be comparable to the subject property, all improved with older, historic, colonial-style dwellings and located within a one-mile radius of the subject property.

Sale number one, located at 114 Hawthorne Street, is a 10,160 square-foot parcel improved with a 110-year-old, colonial-style, single-family dwelling. The dwelling has a total of 16 rooms, including six bedrooms, and also three full bathrooms and one half bathroom, with a total living area of 5,003 square feet. Like the subject property, this property has eight fireplaces and central air conditioning. This property also has a detached three-car garage and a third-floor “in-law” apartment. The property sold for $470,000 on July 22, 2005.

Sale number two, located at 100 Hawthorne Street, is a 11,848 square-foot parcel improved with an historic, Colonial-style, single-family dwelling with a total living area of 6,709 square feet. The dwelling has a total of sixteen rooms including ten bedrooms, as well as four full bathrooms and one half bath. This property has only four fireplaces and no central air conditioning. It does have a partially finished basement and an in-ground swimming pool. The property sold for $450,000 on May 9, 2006.

Sale number three, located at 691 County Street, is a 4,345 square-foot parcel also improved with an historic Colonial-style dwelling, built circa 1893, with a total living area of 4,345 square feet. The dwelling has a total of twelve rooms, including eight bedrooms, as well as four full bathrooms. There are six fireplaces and no central air conditioning. The property sold for $405,000 on October 5, 2006.

Mr. Larrivee testified that the New Bedford real estate market had reached its highest point in the summer of 2006 and that property values then began to decline. He further testified that the older stately dwellings in New Bedford, such as the subject property, did not incur exactly the same market fluctuations as the less expensive properties and that these types of properties tend to increase and decrease at a slower pace compared to other less expensive residential properties. Therefore, Mr. Larrivee determined that no time adjustments were necessary. He did, however, make adjustments to account for differences in lot size, the number of bedrooms and bathrooms, the number of fireplaces, finished basement, overall functional utility and the existence of central air conditioning, a carport, a pool, and an in-law apartment.[58]

Mr. Larrivee’s sales-comparison analysis yielded adjusted sale prices that ranged from $402,000 to $467,000. Based on this analysis, his final opinion of the value of the subject property for fiscal year 2008 was $450,000.

In support of their assessment for fiscal year 2008, the assessors relied on the testimony of Carlos Amado, city appraiser for the City of New Bedford. Mr. Amado offered into evidence a comparable-sales analysis and supporting documentation. The assessors’ comparable-sales analysis included five purportedly comparable properties located within three-quarters of a mile of the subject property. The assessors’ purportedly comparable properties’ lot sizes ranged from 5,785 square feet to 12,796 square feet, with finished living area sizes that ranged from 2,761 square feet to 5,353 square feet. All but one of the comparable properties has less than 40% of the finished living area of the subject property.

The properties sold during the period August 1, 2005 through November 21, 2006, with sale prices that ranged from $412,000 to $520,000. The assessors made adjustments to account for differences in location, age, condition, lot size, finished living area, and special features. The assessors also made time adjustments to account for the dates of the purportedly comparable properties’ sales and the relevant date of assessment for the fiscal year at issue. The assessors based their time adjustments on the argument that the New Bedford real estate market continued to appreciate throughout 2006. In support of their assertion, the assessors offered into evidence a time adjustment report of fourteen properties that sold in 2005 and resold in 2006. Thirteen of the fourteen properties were in the sales-price range of $150,000 to $300,000. Further, three of the properties experienced a decline in sale price and one remained unchanged.

The assessors’ comparable-sales analysis yielded adjusted sale prices that ranged from $343,242 to $628,842. Based on these sales, Mr. Amado’s final opinion of value for the subject property for fiscal year 2008 was $678,600.

Based on all of the evidence, the Board found that the appellants met their burden of proving that the subject property was overvalued for the fiscal year at issue. In so doing, however, the Board found that Mr. Larrivee’s determination of finished living area was erroneous and that his reliance on the subject property’s fiscal year 2001 property record card was unwarranted and inappropriate.

The Board further found that the best evidence of the subject property’s fair market value as of January 1, 2007, was the sale of 100 Hawthorne Street, which occurred approximately six months prior to the assessment date, for $450,000. The Board noted that the property at 100 Hawthorne Street has a smaller lot size than the subject property and that a premium would be paid for the subject property’s larger lot considering the size of the home. Therefore, the Board found that an upward adjustment of $50,000 was warranted.

The Board noted that, in their fiscal year 2007 appeal, the appellants also relied on the sales at 100 Hawthorne Street, as well as 114 Hawthorne Street, to support their claim that the subject property was overvalued for fiscal year 2007. Henry I Mass. ATB Findings of Fact and Reports 2008-1145. However, despite the differences between the subject property and the cited comparables’ lot size, finished living area or the number of rooms, bathrooms, and bedrooms, the appellants made no adjustments to their comparable sales in their fiscal year 2007 appeal. Id. Accordingly, based on the evidence presented in Henry I, the Board found that the appellants failed to meet their burden of proving that the subject property was overvalued for fiscal year 2007.

In contrast, the Board found in the present appeal that the appellants’ real estate expert made adjustments to the sales at 100 Hawthorne Street and 114 Hawthorne Street, which supported a finding that the subject property was overvalued.

With respect to the assessors’ comparable-sales analysis in the present appeal, the Board found that both the lot sizes and finished living areas of the assessors’ purportedly comparable properties were significantly smaller than the subject property and, therefore, lacked comparability. Further, the Board found that the assessors’ time-adjustment report, which cited only properties selling for $335,000 and less, was unreliable.

Based on all of the evidence, the Board found that the subject property was overvalued by $155,400 for the fiscal year at issue. Accordingly, the Board found that the subject property’s fair cash value for fiscal year 2008 was $500,000 and granted an abatement of $1,639.47.

OPINION

Assessors are required to assess real estate at its fair cash value as of the first day of January preceding the fiscal year at issue. G.L. c. 59, §§ 11 and 38. The fair cash value of property is defined as the price upon which a willing buyer and a willing seller would agree if both are fully informed and under no compulsion. Boston Gas. Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).

The burden of proof is upon the taxpayer to make out a right to an abatement. Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974). The assessment is presumed to be valid unless the taxpayer meets its burden of proving otherwise. Id. A right to an abatement can be proven by either introducing evidence of fair cash value, or by proving that the assessors erred in their method of valuation. General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 600 (1984).

Generally, real estate valuation experts, the Massachusetts courts, and this Board rely upon three approaches to determine the fair cash value of property: income capitalization, sales comparison, and cost reproduction. Correia v. New Bedford Redevelopment Authority, 375 Mass. 360, 362 (1978). “The board is not required to adopt any particular method of valuation.” Pepsi-Cola Bottling Co. v. Assessors of Boston, 397 Mass. 447, 449 (1986). In the present appeal, both the appellants and the assessors relied on the sales-comparison method to value the subject property for fiscal year 2008.

The appellants’ expert advanced a comparable-sales analysis in an attempt to prove that the subject property had a lower value than that assessed. Sales of comparable realty in the same geographic area and within a reasonable time of the assessment date generally contain probative evidence for determining the value of the property at issue. Graham v. Assessors of West Tisbury, Mass. ATB Findings of Fact and Reports 2008-321, 400, aff’d, Graham v. Assessors of West Tisbury, 73 Mass. App. Ct. 1107 (2008).

“Evidence of the sale prices of ‘reasonably comparable property’ is the next best evidence to the sale of the property in question.” Lupacchino v. Assessors of Southborough, 42 Mass. 205, 216 (2004). Required are “fundamental similarities” between the subject property and the comparison properties. Id. at 216. The appellant bears the burden of “establishing the comparability of . . . properties [used for comparison] to the subject propert[ies].” Fleet Bank of Mass. v. Assessors of Manchester, Mass. ATB Findings of Fact and Reports 1998-546, 554. Accord New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456, 470 (1981). “Once basic comparability is established, it is then necessary to make adjustments for the differences, looking primarily to the relative quality of the properties, to develop a market indicator of value.” New Boston Garden Corp., 383 Mass. at 470.

Based on all of the evidence, the Board found that the sale at 100 Hawthorne Street, the appellants’ comparable sale number two, was the most comparable to the subject property. The Board further found that a premium would be paid for the larger lot size of the subject property given the size of the existing improvement, therefore requiring an upward adjustment to the sale price of 100 Hawthorne Street. Moreover, the Board found that the assessors failed to establish comparability between their purportedly comparable sales and the subject property.

Based on the foregoing facts and findings, the Board found and ruled that the appellants met their burden of proving that the subject property was overvalued for fiscal year 2008. Accordingly, the Board issued a decision for the appellants in this appeal and granted an abatement in the amount of $1,639.47.

THE APPELLATE TAX BOARD

By: ____________________________________

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: _________________________________

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

MASSPCSCO

COMMISSIONER OF REVENUE Docket Nos. C278479

C284149

C288621

MASSPCSCO

BOARD OF ASSESSORS

OF THE CITY OF WOBURN Docket Nos. F283510

F293338

MASSPCSCO

BOARD OF ASSESSORS

OF THE CITY OF SPRINGFIELD Docket Nos. F282451

F287119

Promulgated: May 7, 2010

Commissioner Scharaffa heard these appeals. Chairman Hammond and Commissioners Egan, Rose, and Mulhern joined him in the decisions for the appellant in the appellant’s appeals against the Commissioner of Revenue (“Commissioner”) (Docket Nos. C278479 (2005), C284149 (2006), and C288621 (2007)) and the decisions for the appellees in the appellant’s appeals against The Board of Assessors of the City of Springfield (“Springfield Assessors”) (Docket Nos. F282451 (FY 2005) and F287119 (FY 2006)) and in the appellant’s appeals against The Board of Assessors of the City of Woburn (“Woburn Assessors”) (Docket Nos. F283510 (FY 2006) and F293338 (FY 2007)).

The appellant’s appeals against the appellee, Commissioner, were filed under the formal procedure pursuant to G.L. c. 58A, §§ 6 and 7 and G.L. c. 58, § 2, from the refusal of the Commissioner to include the appellant on her annual lists under G.L. c. 63, § 30 of domestic and foreign corporations subject to an excise for 2005 through 2007 (the “Corporations Books”).

The appellant’s appeals against the appellees, Springfield Assessors and Woburn Assessors (collectively, the “Assessors”), were filed under the formal procedure pursuant to G.L. c. 58A, §§ 6 and 7 and G.L. c. 59, §§ 64 and 65, from the refusal of the Assessors to abate taxes on certain personal property in the Cities of Springfield and Woburn, respectively, owned by and assessed to the appellant under G.L. c. 59, §§ 11 and 38, for fiscal years 2005 and 2006 with respect to the Springfield appeals and for fiscal years 2006 and 2007 with respect to the Woburn appeals.

These findings of fact and report are made pursuant to requests by the appellant and the appellees, Commissioner and Assessors, under G.L. c. 58A, § 13 and 831 CMR 1.32.

John S. Brown, Esq., Matthew D. Schnall, Esq., Darcy A. Ryding, Esq., and Shu-Yi Oei, Esq. for the appellant.

Kevin M. Daly, Esq. and Daniel Shapiro, Esq. for the appellee Commissioner.

Richard P. Bowen, Esq. and Jeffrey T. Blake, Esq. for the appellee Woburn Assessors.

John M. Lynch, Esq. and Stephen W. DeCourcey, Esq. for the appellee Springfield Assessors.

FINDINGS OF FACT AND REPORT

I. Introduction

This matter involves seven appeals brought by MASSPCSCO,[59] a Delaware statutory trust that leases wireless telephone network equipment to one of its affiliates. By order dated April 11, 2006, the Appellate Tax Board (“Board”) denied a motion to consolidate certain of the appeals. Later, in a series of orders dated October 25, 2007, April 8, 2008, April 17, 2008, and June 24, 2008, the Board ordered these appeals consolidated for purposes of a hearing on all issues other than valuation. Appeals involving MASSFONCO, an affiliate of MASSPCSCO, were severed in the June 24, 2008 order. On August 13, 2008, MASSPCSCO withdrew three petitions involving the Board of Assessors of the City of Newton that had been consolidated with these appeals. On September 10, 2009, the Board scheduled a pretrial conference to establish a date for the completion of the hearing regarding the remaining valuation issues relating to MASSPCSCO’s appeals involving the Board of Assessors of the City of Boston (Docket Nos. F282536 (FY 2005) and F283668 (FY 2006)), which had been consolidated and partly heard with the above-captioned appeals.[60]

The Board conducted a two-day hearing for these appeals, beginning on September 8, 2008. At the hearing, three witnesses testified for MASSPCSCO: Michael Heaton, the Director of Property Tax for Sprint/United Management Company (“SUMC”), the company that, at all relevant times, performed certain management, bookkeeping, and accounting services for various Sprint affiliates including MASSPCSCO; Brian Jurgensmeyer, the Director of Accounting and Operations for SUMC; and Melinda Ordway, a Senior Program Manager and Fiscal Analyst in the Commissioner’s Division of Local Services.

On the basis of the testimony and exhibits introduced at the hearing of these appeals, together with the parties’ extensive and detailed Statement of Agreed Facts with eighty-one attached exhibits, the Board made the following findings of fact.

(A) Issues

The two principal issues in these appeals are: (1) whether MASSPCSCO was a foreign corporation within the meaning of G.L. c. 63, § 30 (“Section 30”) and entitled to be classified as such by the Commissioner for 2005, 2006, and 2007; and (2) whether MASSPCSCO was entitled to the “stock-in-trade” exemption under G.L. c. 59, § 5, cl. 16(2) (“Clause 16(2)”), which would require a full abatement of the tax assessments placed on its personal property by the Assessors. The Board decided that MASSPCSCO was entitled to be so classified as a foreign corporation but was not entitled to the “stock-in-trade” exemption.

(B) Jurisdiction

(1) Commissioner

On April 25, 2005, the Commissioner issued her 2005 Corporations Book pursuant to G.L. c. 58, § 2.[61] On May 18, 2005, in accordance with G.L. c. 58, § 2, MASSPCSCO timely filed its Petition Under Formal Procedure with the Board claiming to be aggrieved by the Commissioner’s failure to include it in her 2005 Corporations Book as a for-profit corporation subject to taxation in Massachusetts.

On May 9, 2006, the Commissioner issued her 2006 Corporations Book. On June 1, 2006, in accordance with G.L. c. 58, § 2, MASSPCSCO timely filed its Petition Under Formal Procedure with the Board claiming to be aggrieved by the Commissioner’s failure to include it in her 2006 Corporations Book as a for-profit corporation subject to taxation in Massachusetts.

On April 23, 2007, the Commissioner issued her 2007 Corporations Book. On May 16, 2007, in accordance with G.L. c. 58, § 2, MASSPCSCO timely filed its Petition Under Formal Procedure with the Board claiming to be aggrieved by the Commissioner’s failure to include it in her 2007 Corporations Book as a for-profit corporation subject to taxation in Massachusetts.

On the basis of these facts, the Board found and ruled that it had jurisdiction over MASSPCSCO’s appeals against the Commissioner.

(2) Springfield Assessors

For fiscal year 2005, MASSPCSCO did not file its form of list with the Springfield Assessors on or before March 1, 2004, but instead filed it on September 27, 2004 in response to a September 8, 2004 request from the City’s Law Department written on behalf of the Springfield Assessors.[62] The Springfield Assessors valued the property, as of January 1, 2004, at $250,500 and assessed personal property taxes thereon, at the rate of $33.36 per thousand, in the amount of $8,356.68. The tax bill was issued on December 31, 2004 and, on March 29, 2005, a payment of $4,286.06 was made on behalf of MASSPCSCO.[63]

On January 26, 2005, in accordance with G.L. c. 59, § 59, MASSPCSCO timely applied to the Springfield Assessors for abatement of the tax. The Springfield Assessors did not act on the abatement application and did not send out notice of their inaction. On July 28, 2005, in accordance with G.L. c. 59, § 65C, MASSPCSCO timely filed a Petition for Late Entry with the Board. By Order dated August 24, 2005, the Board allowed MASSPCSCO’s Petition for Late Entry, and, on September 1, 2005, MASSPCSCO seasonably filed its Petition Under Formal Procedure with the Board.

On the basis of these facts, the Board found and ruled that it had jurisdiction over this appeal.

For fiscal year 2006, in accordance with G.L. c. 59, § 29, a form of list was timely filed with the Springfield Assessors on behalf of MASSPCSCO on February 23, 2005. The Springfield Assessors valued the property, as of January 1, 2005, at $250,500 and assessed personal property taxes thereon, at the rate of $33.03 per thousand, in the amount of $8,271.51. The tax bill was issued on March 31, 2006. Payments had been made previously on behalf of MASSPCSCO in the amount of $2,089.17 on August 1, 2005 and in the amount of $2,089.17 on November 1, 2005.

On April 4, 2006, in accordance with G.L. c. 59, § 59, MASSPCSCO timely applied to the Springfield Assessors for abatement of the tax. The Springfield Assessors denied the request for abatement on July 3, 2006, and, on July 27, 2006, in accordance with G.L. c. 59, §§ 64 and 65, MASSPCSCO seasonably filed its Petition Under Formal Procedure with the Board.

On the basis of these facts, the Board found and ruled that it had jurisdiction over this appeal.

(3) Woburn Assessors

For fiscal year 2006, in accordance with G.L. c. 59, § 29, a form of list was timely filed with the Woburn Assessors on behalf of MASSPCSCO on February 23, 2005. The Woburn Assessors valued the property, as of January 1, 2005, at $15,380,600 and assessed personal property taxes thereon, at the rate of $21.50 per thousand, in the amount of $330,682.90. The tax bill was issued on January 4, 2006 and on May 3, 2006, a payment was made on behalf of MASSPCSCO as follows:[64]

Tax Paid	Interest Paid	Total Paid
$165,341.45	$5,517.40	$170,858.85

On January 30, 2006, in accordance with G.L. c. 59, § 59, MASSPCSCO timely applied to the Woburn Assessors for abatement of the tax. Because the Woburn Assessors did not act on MASSPCSCO’s request for abatement, it was deemed denied three months later. On May 5, 2006, in accordance with G.L. c. 59, §§ 64 and 65, MASSPCSCO seasonably filed its Petition Under Formal Procedure with the Board.

On the basis of these facts, the Board found and ruled that it had jurisdiction over this appeal.

For fiscal year 2007, in accordance with G.L. c. 59, § 29, a form of list was timely filed with the Woburn Assessors on behalf of MASSPCSCO on February 21, 2006. The Woburn Assessors valued the property, as of January 1, 2006, at $9,813,700 and assessed personal property taxes thereon, at the rate of $21.96 per thousand, in the amount of $215,508.85. The tax bill was issued on December 31, 2006 and payments were made on behalf of MASSPCSCO as follows:[65]

Date	Tax Paid
July 21, 2006	$ 52,748.64
October 17, 2006	$ 52,748.64
January 16, 2007	$ 2,257.15

On February 1, 2007, in accordance with G.L. c. 59, § 59, MASSPCSCO timely applied to the Woburn Assessors for abatement of the tax. Because the Woburn Assessors again failed to act on MASSPCSCO’s request for abatement, it also was deemed denied three months later. On July 30, 2007, in accordance with G.L. c. 59, §§ 64 and 65, MASSPCSCO seasonably filed its Petition Under Formal Procedure with the Board.

On the basis of these facts, the Board found and ruled that it had jurisdiction over this appeal.

II. Underlying Facts

(A) The Companies

Sprint Nextel Corporation, formerly known as Sprint Corporation (“Sprint”), was, at all relevant times, a Kansas corporation that was mainly a holding company with its operations principally conducted by its subsidiaries.

Sprint Spectrum Holding Company, L.P., formerly known as MajorCo, L.P. (“Holdings”), and MinorCo, L.P. (“MinorCo”) were, at all relevant times, Delaware limited partnerships. Since November, 1998, all of the partnership interests in Holdings and MinorCo have been owned by direct or indirect subsidiaries of Sprint.

Sprint Spectrum L.P. (“Sprint Spectrum”) was, at all relevant times, a Delaware limited partnership. Holdings was the 99% general partner of Sprint Spectrum and MinorCo was the 1% limited partner of Sprint Spectrum.

Sprint Spectrum Equipment Company L.P. (“EquipmentCo”) was, at all relevant times, a Delaware limited partnership. Substantially all of the partnership interests in EquipmentCo were owned by Sprint Spectrum.

MASSPCSCO was, at all relevant times, a Delaware statutory trust formed on December 19, 2003. One-hundred percent of the beneficial interest in MASSPCSCO was owned by EquipmentCo.

SUMC was, at all relevant times, a Kansas corporation, and was an indirect wholly-owned subsidiary of Sprint.

The relationship among the foregoing entities is summarized in the following diagram and further discussed below.

(B)

Lease

MA leased

PCS Equipment

Contribute

MA leased

PCS Equipment

Sprint Spectrum and Its National Wireless NetworkSprint Spectrum was formed as a Delaware limited partnership on March 28, 1995. Sprint Spectrum was originally named “MajorCo Sub, L.P.”, and changed its name to “Sprint Spectrum L.P.” on February 29, 1996. At all relevant times, the partnership interests in Sprint Spectrum have been held by Holdings, as the 99% general partner and MinorCo, as the 1% limited partner. Holdings and MinorCo, in turn, were formed as partnerships among subsidiaries of four independent companies: Sprint, Telecommunications, Inc. (“TCI”), Comcast Corporation (“Comcast”) and Cox Communications, Inc. (“Cox”). The purpose of the joint venture among Sprint, TCI, Comcast and Cox was to establish Sprint Spectrum as a leading provider of wireless communications products and services in the United States by various means, including acquisition and operation, directly through subsidiaries, of a national wireless communications network (the “Network”). On June 3, 1996, Sprint Spectrum registered with the Secretary of the Commonwealth of Massachusetts (“Secretary”) as a foreign limited partnership.

EquipmmentCo was formed as a Delaware limited partnership on May 15, 1996 to own and lease to Sprint Spectrum certain personal property that would be used in the Network. EquipmentCo registered with the Secretary as a foreign limited partnership on July 19, 1996. In August 1996, Sprint Spectrum, together with an affiliate, Sprint Spectrum Finance Corporation, issued $250,000,000 aggregate principal amount of 11% Senior Notes and $500,000,000 aggregate principal amount of 12½% Senior Discount Notes (collectively, the “Notes”) to fund capital expenditures, including build out of the Network, to fund working capital as required, to fund operating losses and for other partnership purposes. At the time of the issuance of the Notes, Sprint Spectrum and its direct and indirect subsidiaries, including EquipmentCo, had not commenced commercial operations and had no revenue from operations.

Sprint Spectrum also obtained financing from equipment vendors (the “Vendor Financing”). The terms of the Vendor Financing required that all “Personal Property assets” (as defined in the vendors’ commitment letters), which included equipment, be acquired in or transferred to a separate, wholly-owned, single-purpose partnership subsidiary of Sprint Spectrum. That subsidiary was EquipmentCo.

Since August 1996, Sprint Spectrum has been engaged in the business of providing wireless communications services over the Network in the Commonwealth and in other markets across the United States. Using funds that it borrowed, earned, or received as capital contributions, EquipmentCo purchased property to be used in the Network and leased all of its Network property to Sprint Spectrum. The lease payments due from Sprint Spectrum to EquipmentCo under the leases were determined by applying a lease factor to the costs of the various assets leased.

During the second quarter of 1998, Sprint announced that it had entered into a restructuring agreement with TCI, Comcast and Cox to buy out those companies’ interests in Sprint Spectrum (i.e., their partnership interests in Holdings and MinorCo), in exchange for an equity interest in Sprint. The buyout was completed in November, 1998. After the buyout, Sprint loaned approximately $2.9 billion to Sprint Spectrum, and Sprint Spectrum used those funds in part to retire the Vendor Financing.

(C) Taxation of the Network from 1999 through 2002

From 1999 through 2002, Sprint Spectrum filed returns

with the Commissioner pursuant to G.L. c. 59, § 41. In conformity with the Commissioner’s instructions, because it owned no underground conduits, poles, wires or pipes, Sprint Spectrum limited the property reported on the Forms 5941 to machinery used in manufacture, namely, electric generators. The aggregate valuation certified by the Commissioner for the personal property reported by Sprint Spectrum was $330,800 for fiscal year 2000, $330,800 for fiscal year 2001, $1,703,000 for fiscal year 2002, and $1,762,900 for fiscal year 2003. On January 13, 2003, in response to an order of the Board in RCN-BecoCom, LLC v. Commissioner of Revenue, Docket Nos. F253495 & F257397 (order dated August 1, 2002) (RCN-BecoCom Order”),[66] the Commissioner announced that filers of Form 5941 organized as partnerships or limited liability companies that filed federal returns as partners or as disregarded entities would, beginning with the fiscal year 2004 returns due on March 1, 2003, be required to report “all machinery, including switching equipment, used for telephone and telegraph purposes” that it owned.

After Sprint Spectrum filed a fiscal year 2004 Form 5941, on February 28, 2003, reporting all of the machinery and equipment located in the Commonwealth that it leased from EquipmentCo and used in the Network, the Commissioner certified an aggregate taxable value of $172,899,300, nearly a 100-fold increase over the fiscal year 2003 certified value.

(D) The Formation and Operation of MASSPCSCO

As a result of the change in the Commissioner’s interpretation of the Massachusetts property tax law resulting from the RCN-BecoCom Order, Sprint undertook a review of Massachusetts property tax law, and sought advice from outside professionals at Deloitte & Touche LLP (“Deloitte & Touche”). Sprint had previously considered shifting its Massachusetts tangible personal property to certain utility corporations that operate within the Sprint business structure, but Sprint determined that such a restructuring was inadvisable. In a memorandum dated December 10, 2003, Deloitte & Touche advised Sprint to restructure by creating, among other things, MASSPCSCO:

The crux of the restructuring is to place otherwise taxable Massachusetts assets in an entity that is recognized as a corporation for purposes of the relevant property tax exemptions in Massachusetts, while being disregarded for federal income tax purposes so as to avoid the creation of federal income tax issues.

In the memorandum, Deloitte & Touche also recommended that MASSPCSCO “be structured, if possible, to engage in third party transactions”; and that profits be directed to “defend against any assertion of a sham transaction theory” and to “protect against any change in the state’s position that a federally disregarded entity does not have gross income for state tax purposes.” Deloitte & Touche further recommended that leases from MASSPCSCO to Sprint Spectrum be at “arms’ length prices.”

In a follow-up memorandum regarding Sprint’s “Property Tax Restructuring Profile,” Deloitte & Touche summarized the purposes of the restructuring:

For business, legal and tax purposes, Sprint will undergo an internal organizational restructuring strategy that enables the Company to qualify for certain personal property tax exemptions for its switching equipment and other personal property in Massachusetts without requiring the assets to be placed in corporate solution for federal income tax purposes. Specifically, the use of a federally disregarded Delaware Business Trust (“DBT”) for holding Massachusetts assets permits Sprint to take advantage of differences in state and federal entity classification rules, and obtain certain corporate property tax exemptions without federal income tax consequences, and with acceptable state income and sales tax impacts.

Mr. Heaton’s direct testimony also confirmed that MASSPCSCO’s creation was “undertaken with a view toward Massachusetts property taxes.” On cross-examination, he even went so far as to agree with his interrogator that MASSPCSCO’s creation was done solely for tax purposes.

EquipmentCo executed a Trust Agreement forming MASSPCSCO as a Delaware statutory trust and filed a certificate of Trust with the Delaware Secretary of State. All of the beneficial interests in MASSPCSCO were owned, at all relevant times, by EquipmentCo. MASSPCSCO did not file an election to be treated as an association taxable as a corporation for federal tax purposes. MASSPCSCO filed corporate excise tax returns on Forms 355 with the Commissioner which the Commissioner received on the following dates:

Tax Year	Return Received
2003 & 2004	June 6, 2005
2005	September 15, 2006
2006	July 18, 2007

Sprint’s tax compliance group had apparently inadvertently neglected to file an automatic six-month extension for tax years 2003 and 2004. The Commissioner neither audited nor declined to accept any of MASSPCSCO’s corporate excise tax returns, and therefore did not make any adjustment to the amounts of tax reported on them.

By a document executed on December 22, 2003, EquipmentCo transferred all of its tangible personal property located in Massachusetts, including towers, antennas, switches and related software, and other equipment, to MASSPCSCO as a contribution to capital valued at net book cost and without any other consideration. MASSPCSCO then became the owner of that Network property. No sales tax was paid in connection with that transfer. On December 23, 2003, Sprint Spectrum and EquipmentCo executed a Lease Termination Agreement pursuant to which they terminated, as of December 31, 2003, the lease of that property from EquipmentCo. On December 23, 2003, Sprint Spectrum and MASSPCSCO executed a lease agreement. EquipmentCo retained its property located outside Massachusetts and continued to lease that property to Sprint Spectrum.

Since December 2003, MASSPCSCO has performed activities similar to those previously conducted by EquipmentCo with respect to the Network assets located in Massachusetts. MASSPCSCO has held existing assets that are leased to Sprint Spectrum, has had new assets purchased on its behalf using funds that were borrowed, earned, or received as capital contributions and has leased those assets to Sprint Spectrum, and retired obsolete assets.

At all relevant times, Sprint Spectrum paid rent to MASSPCSCO on a monthly basis for the leased property. Mr. Heaton testified that the lease factors were calculated to produce a rate of return of 9%, presumably on the net book cost of the leased property. This same rate of return was used from 1996 through at least 2006 and was applied to all categories of leased property. There was no evidence showing how this rate of return was calculated or determined or demonstrating its relationship to a market rate of return. Contrary to advice from the accounting firm of Ernst & Young, MASSPCSCO did not implement, during the relevant time period, a lease factor schedule which would have assigned different lease factors to different types and categories of property and likely more accurately reflected market values. At all relevant times, sales taxes were collected and paid on a monthly basis on the lease payments made by Sprint Spectrum. For purposes of paying over sales taxes to the Commissioner, SUMC made the payments by checks drawn on a bank account in the name of SUMC. Each of the payments was contemporaneously charged to the account of MASSPCSCO.

At all relevant times, MASSPCSCO had no employees. All functions and services necessary or desirable for the management, administration and operation of MASSPCSCO’s business, as required or requested by MASSPCSCO, were performed by employees of SUMC, under a services agreement dated December 14, 2004. In return for its services, MASSPCSCO reimbursed SUMC by a fixed payment of $2,000 per month for a total of $24,000 per year on revenues between $23,000,000 and $41,700,000 for calendar years 2004 through 2006 and property, plant, and equipment valued at $211,000,000 to $328,000,000 for those same years. MASSPCSCO did not as of January 1, 2005, January 1, 2006 or January 1, 2007, hold any assets other than property leased to Sprint Spectrum.

During calendar years 2004 through 2006, MASSPCSCO did not lease, or seek or attempt to lease, property to any person or entity other than Sprint Spectrum. During calendar years 2004 through 2006, MASSPCSCO did not consider or conduct any regular business activities other than those incident to the purchase, ownership and leasing of Network equipment to Sprint Spectrum. Any repairs to the equipment leased were the responsibility of the lessee, not MASSPCSCO. MASSPCSCO did not purchase the equipment it leased to Sprint Spectrum; instead Sprint Spectrum purchased the equipment and marked the purchase against MASSPCSCO’s account on a common ledger. Sprint Spectrum and MASSPCSCO did not maintain separate bank accounts. The lease payments made by Sprint Spectrum to MASSPCSCO were implemented by ledger entries transferring amounts to MASSPCSCO’s account in Sprint’s books. MASSPCSCO was not compensated for any services it performed for any person or entity. During calendar years 2004 through 2006, MASSPCSCO did not lease or occupy any office space or real estate, except that certain inventory of MASSPCSCO was stored, prior to delivery to Sprint Spectrum sites, in facilities shared with other affiliates of Sprint.

At all relevant times, the administrative trustee of MASSPCSCO was an employee of SUMC and was authorized only to take action as directed by EquipmentCo. EquipmentCo was empowered to remove or appoint any trustee without cause at any time. The nominal trustee, Wilmington Trust Company, was not entitled to exercise any powers under the trust or control over MASSPCSCO; it was appointed for the limited purpose of fulfilling certain requirements under Delaware law.

(E) The Commissioner’s Treatment of MASSPCSCO

Pursuant to G.L. c. 58, § 2, the Commissioner, through the Division of Local Services Municipal Data Management & Technical Assistance Bureau (“Data Management”), prepares an annual list of for-profit corporations known to the Commissioner to be liable for Massachusetts corporate excise, local property, or motor vehicle excise taxes as of January first of each year. The Commissioner “forwards” this annual list to the boards of assessors of the Commonwealth’s cities and towns. The publication is officially known as Massachusetts Domestic and Foreign Corporations Subject to an Excise, but is commonly, and in this Findings of Fact and Report, referred to as the “Corporations Book.”

The information compiled for the Corporations Book derives from two sources, the Commissioner’s internal database of taxpayers qualifying as “active” corporations under chapter 63 and the Secretary’s new corporations database. The Commissioner’s internal database is referred to as MASSTAX and includes all active taxpayers filing as for-profit corporations.[67] The Secretary’s database is a compilation of newly registered corporations doing business in Massachusetts that is communicated to the Commissioner for inclusion in the Corporations Book.

Despite being organized in 2003, MASSPCSCO’s 2003 and 2004 Forms 355, Corporate Excise Returns, were not filed on its behalf by Sprint with the Commissioner until June 6, 2005. Extensions of time to file those returns were not requested, either. Previously, MASSPCSCO had registered with the Secretary as a trust, and the Secretary had classified MASSPCSCO as a trust. Consequently, MASSPCSCO was not among the entities listed in either the Secretary’s new corporations list or the MASSTAX corporations database for 2005. Pursuant to established procedures, the Commissioner compiled her 2005 Corporations Book by supplementing the prior year’s list with: information from a list obtained from the Secretary of new corporation filings; a list of entities that had filed corporate excise tax returns; and applications for manufacturing corporation status. MASSPCSCO was not included in any of those data sources. As a result, the 2005 Corporations Book, which was published on April 25, 2005, did not contain MASSPCSCO among its listing of corporations.

After MASSPCSCO’s June 6, 2005 filings and tax payments, the Commissioner’s MASSTAX database recognized MASSPCSCO as an active foreign corporation in its database. Its listing did not represent, however, a studied determination by the Commissioner as to MASSPCSCO’s proper filing status. The Commissioner left MASSPCSCO out of her 2006 and 2007 Corporations Books, on advice of counsel, because of the pending litigation involving this matter’s 2005 appeals before the Board and the perceived position of local boards of assessors that MASSPCSCO was not entitled to recognition as a for-profit corporation for purposes of local property tax exemptions. Notwithstanding these omissions, the Commissioner issued two letters to local boards of assessors – one prior to and one subsequent to the publication of the 2005 Corporations Book – stating that MASSPCSCO was a foreign corporation, and explaining that its failure to be listed in the Corporations Book resulted from the administrative procedures used in compiling the Corporations Book.

(F) Abatement Amounts at Issue

The parties stipulated that if MASSPCSCO is properly classified as a “foreign corporation” within the meaning of Section 30 and if the personal property that MASSPCSCO leases to its affiliates is “stock in trade” that is exempt under Clause 16(2), then MASSPCSCO is entitled to abatements in the following amounts:

Assessors

Fiscal Year

Abatement Amounts

at Issue

Springfield 2005 $ 8,356.68Springfield 2006 $ 8,271.51Woburn 2006 $ 330,682.90Woburn 2007 $ 215,508.85

III. Board’s Ultimate Findings of Fact

(A) MASSPCSCO Was a Foreign Corporation Within the Meaning of Section 30

Based on all of the evidence and its subsidiary findings above, and as explained more fully in its Opinion below, the Board ultimately found that, at all relevant times, MASSPCSCO was a foreign corporation within the meaning of Section 30 and entitled to be classified as such by the Commissioner for 2005, 2006, and 2007. The Board found that MASSPCSCO’s omission from the Commissioner’s 2005 Corporations Book resulted solely from the fact that MASSPCSCO was not included in any of the data sources that the Commissioner consulted in preparing the Corporations Book. The omission did not reflect a determination by the Commissioner concerning MASSPCSCO’s status as a foreign corporation. The Board found that, at all relevant times, the Commissioner did not, in preparing the annual Corporations Book, make any substantive determinations concerning the status of any entity, except with respect to entities that had applied for classification as manufacturing corporations, which MASSPCSCO did not do.

With respect to MASSPCSCO’s omission from the 2006 and 2007 Corporations Books, the Board found that MASSPCSCO’s omission resulted solely from advice of counsel because of the pendency of this litigation before the Board regarding MASSPCSCO’s prior omission from the 2005 Corporations Book and the perceived position of local boards of assessors that MASSPCSCO was not entitled to recognition as a for-profit corporation for purposes of local property tax exemptions. In omitting MASSPCSCO from the 2006 and 2007 Corporations Books, the Board found that the Commissioner again did not make any substantive determination regarding MASSPCSCO’s status as a foreign corporation and, admittedly, deviated from her usual practice and procedures, which, but for the deviation, would have resulted in MASSPCSCO’s inclusion. Moreover, in letters to boards of assessors, following MASSPCSCO’s omission from her 2005 Corporations Book, the Commissioner referred to MASSPCSCO as a foreign corporation.

The Board found that, at all relevant times, MASSPCSCO satisfied the definition of a foreign corporation contained in Section 30 because it was an association or organization established, organized and chartered under Delaware law; it was organized for the ostensible purpose of owning property and leasing it to an affiliate, a purpose for which corporations could be organized under Chapter 156B and, after July 1, 2004, under Chapter 156D; and it had privileges, powers, rights and immunities not possessed by individuals or partnerships, including perpetual existence, freely transferable shares, centralized management through its administrative trustee and officers, and limited liability on the part of its beneficial owner, even if the owner chose – as permitted under MASSPCSCO’s trust agreement and applicable Delaware law – to participate in the management of MASSPCSCO’s business.

Accordingly, the Board found that the MASSPCSCO’s omission from the 2005, 2006, and 2007 Corporations Books was not determinative of, or necessarily germane to, MASSPCSCO’s status as a foreign corporation under Section 30 and that MASSPCSCO met the definition of a foreign corporation under Section 30. The Board, therefore, decided that MASSPCSCO was a foreign corporation within the meaning of Section 30 for the years at issue and was entitled to be classified as such by the Commissioner.

(B) MASSPCSCO Was Not Entitled to the “Stock-in-Trade” Exemption under Clause 16(2)

Based on all of the evidence and its subsidiary findings above, and as explained more fully in its Opinion below, the Board ultimately found that, at all relevant times, MASSPCSCO was not entitled to the “stock-in-trade” exemption under Clause 16(2). The Board found that MASSPCSCO’s activities were not undertaken for the purpose of profit or gain and MASSPCSCO was not operated for a predominantly business purpose. In addition, the Board found that MASSPCSCO’s original transaction with EquipmentCo, transferring Massachusetts property from EquipmentCo to MASSPCSCO, as well as MASSPCSCO’s continuing lessor-lessee relationship with Sprint Spectrum lacked economic substance.

The Board further found that MASSPCSCO was created for the predominant and essentially sole purpose of avoiding taxation in the form of personal property taxes for its personal property located in Massachusetts. MASSPCSCO’s assertions that its organization served to enhance Sprint’s cash flow and its future ability to borrow were without merit. With respect to enhancing cash flow, the Board determined that enhanced cash flow was unlikely, or even fictional, in a scenario where payments were mere ledger adjustments between affiliates. With respect to enhanced borrowing power, the Board determined that it too was unlikely, or even fictional, because during the relevant time period, there was no evidence of any vendor or lender requirements placed on MASSPCSCO, or for that matter on EquipmentCo,[68] or even on Sprint Spectrum, requiring the existence of a separate entity, like MASSPCSCO, to finance the purchase of needed property and equipment. Furthermore, the Board found that MASSPCSCO was not engaged in the ordinary course of the leasing business or engaged in any substantive business at all. Accordingly, the Board found that MASSPCSCO was not entitled to the “stock-in-trade” exemption under Clause 16(2).

OPINION

I. MASSPCSCO Was a Foreign Corporation within the Meaning

of Section 30

Clause 16(2) provides that “[a] foreign corporation . . . as defined in section thirty of chapter sixty-three” is exempt under clause 16(2) on all property other than “real estate, poles, underground conduits, wires and pipes, and machinery used in the conduct of the business.” G.L. c. 59, § 5, cl. 16(2). Numerous cases link the corporate tax terminology used in Clause 16 with the same meaning that has attached to the corresponding terms in applying the taxes imposed by Chapter 63. See, e.g., Bell Atlantic Mobile Corp. v. Commissioner of Revenue, 451 Mass. 280, 285-86 (2008) (“Bell Atlantic Mobile Corp.”) (describing analysis of utility exemption as turning on construction of G.L. c. 63, § 52A); RCN-BecoCom, LLC v. Commissioner of Revenue, 443 Mass. 198, 206 (2005) (“RCN-BecoCom”)(recognizing that entity must be subject to taxation under Chapter 63 in order to qualify for exemption); Assessors of Holyoke v. State Tax Commission, 355 Mass. 223, 225-26 (1969)(resolving question of classification for purposes of clause 16(3) by reference to Chapter 63 definition of “manufacturing corporation”); In re MCI Consolidated Central Valuation Appeals, Mass. ATB Findings of Facts and Reports 2008-255, 358-59 (“MCI”)(applying utility exemption to “foreign corporations subject to annual corporate utility franchise tax under G.L. c. 63, § 52A”), aff’d in pertinent part, 454 Mass. 635 (2009).

During the years at issue, paragraph 2 of Section 30 defined a foreign corporation, subject to certain exclusions not relevant here, as a:

[C]orporation, association or organization established, organized or chartered under laws other than those of the commonwealth, for purposes for which domestic corporations may be organized under chapter 156, chapter 156A, chapter 156B, chapter 156D or section 19F to 19W, inclusive, of chapter 175, or chapter 180 which has privileges, powers, rights or immunities not possessed by individuals or partnerships.

G.L. c. 63, § 30(2), as in effect prior to St. 2008, c. 173, § 38. As described in greater detail below, the Board found and ruled that, at all relevant times, MASSPCSCO satisfied this definition. The Board found that MASSPCSCO was an association or organization established, organized and chartered under Delaware law; it was organized for the ostensible purpose of owning property and leasing it to an affiliate, a purpose for which corporations could be organized under Chapter 156B and, after July 1, 2004, under Chapter 156D; and it had privileges, powers, rights and immunities not possessed by individuals or partnerships, including perpetual existence, freely transferable shares, centralized management through its administrative trustee and officers, and limited liability on the part of its beneficial owner, even if the owner chose – as permitted under MASSPCSCO’s trust agreement and applicable Delaware law – to participate in the management of MASSPCSCO’s business.

Furthermore, and for essentially those same reasons, the Commissioner concluded in Letter Ruling 91-2 that Delaware business trusts formed under 12 Del. C. § 3801, et seq., were properly treated as foreign corporations within the meaning of Section 30. The trusts in Letter Ruling 91-2 were organized to operate mutual funds. The Commissioner concluded that they were associations formed under Delaware law that were “so far clothed with the functions and attributes of a corporation as to come within the just application of principles relating to corporations.” (Citations omitted.)

MASSPCSCO was formed partly in reliance on Letter Ruling 91-2, and for each year at issue, MASSPCSCO filed a corporate excise tax return as a foreign corporation. Despite the late filing of the 2004 return, for which the Board found Sprint’s tax compliance group inadvertently neglected to file an automatic six-month extension, as they had for EquipmentCo’s Massachusetts return, MASSPCSCO fully complied with all of its obligations as a foreign corporation for these purposes. As of the close of the hearing, the Board found that the Commissioner had made no adjustments to MASSPCSCO’s corporate excise tax filings and her records indicated that MASSPCSCO was an eligible filer for the corporate excise.

Finally, and as discussed in greater detail below, the Board found that while MASSPCSCO’s operations were limited to leasing property to a related party, that limitation did not alter MASSPCSCO’s status as a foreign corporation under Section 30. For Section 30 purposes, the Board found that MASSPCSCO’s status should be determined by its governing trust instrument and the terms of the statute, without reference to the business activities that it undertook during the relevant time period.

For all of these reasons, which are discussed in greater particularity below, the Board found and ruled that MASSPCSCO was a foreign corporation within the meaning of Section 30.

(A) MASSPCSCO Was an Association or Organization

Established, Organized or Chartered under Laws

Other Than Those of Massachusetts and Was Not a

Foreign LLC

Both Section 30 and the Commissioner’s corporate excise tax regulations recognize that the term “foreign corporation” includes certain unincorporated associations. The statute refers disjunctively to a “corporation, association or organization established, organized or chartered” under the laws of another jurisdiction. (Emphasis added.) The regulations refer to “a form of organization recognized in Massachusetts as that of a foreign corporation under [Section 30], whether or not the entity is described as a corporation by the state under whose laws the entity is organized.” 830 CMR 63.39.1(2) (emphasis added).

A Delaware statutory trust is by definition an “unincorporated association” that is created by a trust instrument “under which property is or will be held, managed, administered, controlled, invested, reinvested and/or operated . . . by a trustee or trustees or as otherwise provided in the governing instrument for the benefit of such person or persons as are or may become beneficial owners or as otherwise provided in the governing instrument.” 12 Del. C. § 3801(g). In contrast to a Massachusetts business trust, which is a contractual entity recognized as a matter of common law, see Minkin v. Commissioner of Revenue, 425 Mass. 174, 178 (1997), the status of a Delaware statutory trust as a separate legal entity is governed by statute. See, e.g., 12 Del. C. § 3801(g). The statutory trust has no existence as a separate entity until an instrument is filed with the Delaware Secretary of State. 12 Del. C. § 3810(a)(2). As the Commissioner concluded in Letter Ruling 91-2, the Board ruled here that when a statutory trust makes the required filing with the Delaware Secretary of State, it becomes “an association or organization established, organized or chartered under the laws of Delaware.”

On December 19, 2003, EquipmentCo executed a trust agreement for MASSPCSCO conforming to the terms of 12 Del. C. § 3801(g). That same day, MASSPCSCO filed a certificate of trust with the Delaware Secretary of State in compliance with 12 Del. C. § 3801(a)(1). Upon filing of the certificate, MASSPCSCO became an unincorporated association organized under Delaware law. 12 Del. C. § 3801(a)(2). MASSPCSCO was not a “limited liability company” under Delaware law because that term is limited to entities formed under the Delaware Limited Liability Company Act, 6 Del. C. § 18-101, et seq. MASSPCSCO was formed instead under the Delaware Statutory Trust Act, and the Board, therefore, ruled that, at all relevant times, it was a statutory trust under Delaware law, not an LLC.

The Board further ruled that the characterization of MASSPCSCO under Delaware law is conclusive for purposes of its status as a non-LLC under Section 30 because the provisions of Section 30 adopt the definition from the Massachusetts LLC statute, which in turn relies on the name given to an entity under the laws of the state in which the entity was organized. See Section 30(2)(referring to “a foreign limited liability company as defined in section 2 of chapter 156C”); G.L. c. 156C, § 2 (defining a foreign limited liability company as “a limited liability company formed under the laws of any state other than the commonwealth or the laws of any foreign country or other foreign jurisdiction and denominated as such under laws of such state or foreign country or other foreign jurisdiction”)(emphasis added). Because MASSPCSCO was not an LLC under Delaware law, the Board ruled that it was not an LLC for purposes of Section 30.

(B) MASSPCSCO Was Established for the Ostensible Purposes for Which a Corporation May Be Organized under Massachusetts Law

Section 30 limits foreign corporations to those entities organized “for purposes which domestic corporations may be organized” under the general corporate provisions of Massachusetts law, principally, Chapter 156B and, for periods after July 1, 2004, Chapter 156D. That limitation distinguishes corporations subject to the general corporate excise from those subject to special excise or tax regimes, such as financial institutions (G.L. c. 63, § 2) and utilities (G.L. c. 63, § 52A), which are likewise subject to different corporate laws and regulations. The general Massachusetts corporate statutes, Chapter 156B, as in effect prior to July 1, 2004, and Chapter 156D, as in effect beginning July 1, 2004, apply to:

All domestic corporations having capital stock whether established before or after [the effective date of the statute], either by general or special law, for the purpose of carrying on business for profit except corporations organized for the purpose of carrying on the business of a bank, savings bank, co-operative bank, trust company, credit union, surety or indemnity company, or safe deposit company, or for the purpose of carrying on within the commonwealth the business of an insurance company, railroad, electric railroad, street railway or trolley motor company, telegraph or telephone company, gas or electric light, heat or power company, canal, aqueduct or water company, cemetery or crematory company, any other corporation which on October 1, 1965 have or may thereafter have the right to take land within the commonwealth by eminent domain or to exercise franchises in public ways granted by the commonwealth or by any county, city or town, and corporations subject to chapter 157 [agricultural and other cooperatives] and corporations subject to chapter 157A [employee cooperatives].

G.L. c. 156D, § 17.01(1); G.L. c. 156B, § 3 (emphasis added).

Although those statutes contain a long list of types of businesses excluded from statutory coverage, the Board ruled that, at all relevant times, none of the exclusions applied to MASSPCSCO, a professed lessor of wireless communications equipment. The only exclusion that possibly could have applied by its terms was the exclusion for telephone companies. In Bell Atlantic Mobile Corp., however, both the Board and the Supreme Judicial Court determined that a company engaged in the wireless telephone business is not a “telephone company” within the meaning of G.L. c. 59, § 39, G.L. c. 63, § 52A, and G.L. c. 166. Bell Atlantic Mobile Corp., Mass. ATB Findings of Fact and Reports at 2008-184; 451 Mass. at 281, 288. The term “telephone company” should be given the same construction under Chapters 156B and 156D that it has under Chapter 166, because those statutes – together with the statutory regimes regulating other types of utilities and financial institutions – are designed to partition the universe of corporations for regulatory purposes. Cf. Chandler v. County Commissioners, 437 Mass. 430, 436 (2002) (“[a] term appearing in different portions of a statute is to be given one consistent meaning”); Arnold v. Commissioner of Corporations & Taxation, 327 Mass. 694, 700 (1951)(“It is a general rule of statutory construction that ordinarily a term appearing in different portions of a statute is to be given the same meaning.”). Accordingly, even if MASSPCSCO could otherwise be considered a telephone company because of the nature of the equipment that it leased, the Board ruled that that conclusion was foreclosed by Bell Atlantic Mobile Corp.

In determining whether MASSPCSCO was established for purposes for which a domestic corporation might be organized under Chapters 156B and 156D, the Board also found and ruled that, at all relevant times, MASSPCSCO was a for-profit company. MASSPCSCO’s trust agreement provides that it is a for-profit company. Moreover, every Delaware statutory trust is a for-profit company unless the trust instrument specifically provides otherwise, because the statute gives the beneficial owners the right (unless overridden by the trust instrument) to “share in all profits and losses of the statutory trust.” 12 Del C. § 3805(a).

The fact that MASSPCSCO’s business was limited during the years at issue to the leasing of property to an affiliate would not have prevented it from being organized under Chapter 156B or Chapter 156D. In Brown, Rudnick, Freed & Gesmer v. Assessors of Boston, 389 Mass. 298 (1983) (“Brown Rudnick”), the Supreme Judicial Court recognized that a domestic corporation could be organized, under Chapter 156B, for the purpose of leasing property to an affiliate. Id. at 302. The Board found and ruled that, under the circumstances here, it is entirely logical and consonant to apply that proposition to a foreign entity, like MASSPCSCO.

(C) MASSPCSCO Has Corporate Privileges, Powers, Rights and Immunities

The primary issue in determining whether an unincorporated association is a foreign corporation under Section 30 is the question of whether the association “has privileges, powers, rights or immunities not possessed by individuals or partnerships.” The Commissioner has interpreted that phrase as requiring an analysis similar to the federal entity classification regulations in effect prior to 1997 (the “Kintner regulations,” Treas. Reg. § 301.7701-2, as in effect prior to January 1, 1997). See LR 01-7 (Sept. 4, 2001); LR 99-13 (June 24, 1999); LR 97-2 (May 23, 1997); LR 95-8 (July 12, 1995); LR 91-2; see also TIR 97-8 (June 16, 1997)(noting that the replacement of the Kintner regulations by the federal “check-the-box” regulations did not alter the Massachusetts rules for classifying unincorporated business entities other than LLCs). The factors considered in the federal regulations and in the Massachusetts rulings as pointing toward corporate status include: (1) perpetual life (Treas. Reg. § 301.7701-2(a)(1), (d); LR 01-7; LR 97-2; LR 95-8); (2) transferable equity interests (Treas. Reg. § 301.7701-2(a)(1), (e); LR 01-7; LR 97-2; LR 95-8); (3) centralized management (Treas. Reg. § 301.7701-2(a)(1), (c); LR 99-13; LR 95-8); (4) limited liability for debts of the entity on the part of the equity owners who participate in management (Treas. Reg. § 301.7701-2(a)(1), (d); LR 99-13; LR 91-2); (5) the ability to merge or consolidate with corporations and other entities (LR 91-2); and (6) the imposition of conditions on the ability to maintain a derivative action (LR 91-2).

The Board found and ruled that Delaware statutory trusts in general, and MASSPCSCO in particular, have all of those privileges, powers, rights and immunities, and more. As the Commissioner observed in Letter Ruling 91-2,[69] unless the trust provides otherwise: a Delaware statutory trust has perpetual life, and will not terminate or dissolve upon the death, incapacity, dissolution, termination or bankruptcy of a beneficial owner, 12 Del C. § 3808(a)-(b); the beneficial interests in the trust are freely transferable, 12 Del. C. § 3805(d); the trust is managed by the trustees and officers, 12 Del. C. § 3806(a), (i); the beneficial owners are entitled to limited liability whether or not they participate in management, 12 Del. C. §§ 3803(a)-(b), 3806(a), 3808(e); the trust has the power to merge or consolidate with business entities organized under Delaware law or the law of any other jurisdiction, 12 Del. C. § 3815; the trust can sue or be sued in its own name and under the same title principles applicable to corporations, 12 Del. C. § 3804(a); and derivative actions are governed by provisions substantially identical to those governing corporations, 12 Del. C. § 3816. MASSPCSCO’s trust agreement does not eliminate any of those privileges, powers, rights and immunities. Rather, the Board found that the trust agreement specifically confirms the applicability of several of those statutory provisions. The agreement also specifically permits MASSPCSCO’s beneficial owner, EquipmentCo, to participate directly in the management of the trust. Under Massachusetts common law, vesting the owner with that degree of control would cause EquipmentCo to have unlimited liability for MASSPCSCO’s debts, see, e.g., Frost v. Thompson, 219 Mass. 360 (1914)(holding that an association in which the shareholders control the trustees is properly regarded as a partnership in which the shareholders are personally liable to third-party creditors), but under Del C. § 3806(a), EquipmentCo is shielded from such liability.

Accordingly, the Board ruled that, under the Kintner regulations and the Commissioner’s rulings, an entity is classified as a corporation if it possesses a majority of the previously delineated corporate characteristics. The Board therefore found and ruled here that because MASSPCSCO possessed all of these relevant characteristics, it too should be regarded as a corporation under Section 30.

(D) Summary

On this basis, the Board found and ruled that, at all relevant times, MASSPCSCO was a foreign corporation within the meaning of Section 30 and was entitled to be classified as such by the Commissioner because it was an “association . . . established, organized or chartered under laws other than those of the commonwealth, for purposes for which domestic corporations may be organized under chapter 156, chapter 156A, chapter 156B, chapter 156D or section 19F to 19W, inclusive, of chapter 175, or chapter 180 which has privileges, powers, rights or immunities not possessed by individuals or partnerships.” G.L. c. 63, § 30.

II. MASSPCSCO Is Not Entitled to the “Stock-In-Trade”

Exemption under Clause 16(2)

The general rule in Massachusetts is that “all property, real and personal, situated within the Commonwealth, and all personal property of the inhabitants of the Commonwealth wherever situated, unless expressly exempt, shall be subject to taxation.” G.L. c. 59, § 2. General Laws c. 59, § 18, commences with the preamble, “All taxable personal estate within or without the commonwealth shall be assessed to the owner in the town where he is an inhabitant on January first, except as provided in chapter sixty-three and in the following [seven] clauses of this section . . . .” All tangible personal property is taxable under G.L. c. 59, § 18, clause first. RCN-BecoCom, Mass. ATB Findings of Fact and Reports at 2003-410, aff’d, 443 Mass. 198 (2005). General Laws c. 59, § 18, clause first states: “First, All tangible personal property, including that of persons not inhabitants of the commonwealth, except ships and vessels, shall, unless exempted by section five, be taxed to the owner in the town where it is situated on January first.”

MASSPCSCO alleged that, at all relevant times, it was the owner of personal property in Woburn and Springfield, but claimed that it was entitled to an exemption from local property taxes, pursuant to Clause 16(2), because it leased its personal property to an affiliated entity. Thus, MASSPCSCO claimed that its property was “stock in trade” within the meaning of that clause. The following emphasized language of Clause 16(2) exempts from local property tax:

In the case of (a) domestic business corporation or (b) a foreign corporation, both as defined in section thirty of chapter sixty-three, all property owned by such corporation other than the following: – real estate, poles, underground conduits, wires and pipes, and machinery used in the conduct of the business, which term, as used in this clause, shall not be deemed to include stock in trade or any personal property directly used in connection with dry cleaning or laundering processes or in the refrigeration of goods or in the air-conditioning of premises or in any purchasing, selling, accounting or administrative function. (Emphasis added.)

“An exemption is a matter of special favor or grace and to be recognized only where the property falls clearly and unmistakenly within the express words of a legislative command.” Southeastern Sand & Gravel, Inc. v. Commissioner of Revenue, 384 Mass. 794, 796 (1981) (citing Children’s Hospital Medical Center v. Assessors of Boston, 353 Mass. 35, 43 (1967)).

This principal has explicitly been made applicable to claims for exemptions under the stock-in-trade provision of Clause 16(2). “‘[T]he burden of proof is upon the one claiming an exemption from taxation to show clearly and unequivocally that he comes within the terms of the exemption.’” Brown Rudnick, 389 Mass. at 304(quoting Boston Symphony Orchestra, Inc. v. Assessors of Boston, 294 Mass. 248, 257 (1936)). A claim of exemption must fail if the operative facts merely cast doubt on the claim of exemption. Boston Symphony Orchestra, Inc., 294 Mass. at 257. “[T]he proof must be such as leaves the question free from doubt.” Trustees of Boston University v. Assessors of Brookline, 11 Mass. App. Ct. 325, 331 (1981)(citations omitted). Accordingly, the Board ruled that to prevail, MASSPCSCO must prove clearly and unequivocally that, at all relevant times, it came within the terms of the stock-in-trade exemption under Clause 16(2).

(A) MASSPCSCO Failed to Qualify for the Stock-In-Trade Exemption under the Test Established in Brown Rudnick

The leading case dealing with the applicability of the stock-in-trade exemption to non-arm’s-length leasing situations is Brown Rudnick. In Brown Rudnick, the Supreme Judicial Court considered the issue of whether a domestic business corporation organized under G.L. c. 156B, which was wholly owned by a related partnership, for the stated purpose of engaging in the business of leasing personal property, and whose only business activity was leasing personal property to the related partnership, was not a “domestic business corporation” for purposes of the stock-in-trade exemption under Clause 16(2). In holding that the Board correctly ruled that the corporation was not entitled to the exemption, the Court found that the fact that an entity was organized as a “domestic business corporation” within the meaning of Clause 16(2) was not the end of the inquiry. To end the analysis there, the Court found, would “elevate form over substance.” Brown Rudnick, 389 Mass. at 303. Drawing an analogy to the many cases dealing with charitable exemptions under G.L. c. 59, § 5, cl. 3, the Court stated:

We think that a similar inquiry is appropriate here to determine whether a corporation claiming exemption under G.L. c. 59, Section 5, Sixteenth (2), is operated for dominantly business purposes. We think, also, that the definition of business used by the board, “an activity which occupies the time, attention and labor of men for purposes of livelihood, profit or gain” is apt. Whipple v. Commissioner of Corps. & Taxation, 263 Mass. 476, 485-486 (1928).

In other words, the Supreme Judicial Court placed the burden of proof on the taxpayer in Brown Rudnick – just as it is on MASSPCSCO here – to show “clearly and unequivocally” that, at all relevant times, it was “in fact engaged in business.” Brown Rudnick, 389 Mass. at 303, 304 (quoting Boston Symphony Orchestra, 294 Mass. at 257.

The Court ruled that the Board had correctly recognized and applied the reasoning of Higgins v. Smith, 307 U.S. 473 (1940), that “transactions, which do not vary control or change the flow of economic benefits, are to be dismissed from consideration.” Id. at 476. The Court also quoted with approval the language of Judge Learned Hand in National Investors Corp. v. Hoey, 144 F.2d 466 (2d Cir. 1944):

“[T]o be a separate jural person for purposes of taxation, a corporation must engage in some industrial, commercial, or other activity besides avoiding taxation: in other words, that the term ‘corporation’ will be interpreted to mean a corporation which does some ‘business’ in the ordinary meaning; and that escaping taxation is not ‘business’ in the ordinary meaning.”

Id. at 468.

After examining the formation and activities of MASSPCSCO, the Board found and ruled that MASSPCSCO could not meet this Brown Rudnick standard.

(1) MASSPCSCO Was Formed for the Predominant Purpose of Avoiding Massachusetts Personal Property Taxes

MASSPCSCO was formed by Sprint in response to the Board’s and the Supreme Judicial Court’s decisions in RCN-BecoCom, which held, among other things, that limited liability companies classified as telephone companies were not exempt from taxation of their personal property under Clause 16, because Clause 16’s exemption provisions applied only to corporations, not to limited liability companies. Beginning with fiscal year 2004, the Commissioner informed telephone and telegraph filers that partnerships and LLCs filing as partnerships or disregarded entities would be valued by the Commissioner on all poles, wires, underground conduits, wires and pipes situated in the Commonwealth, and all machinery, including switching equipment, used for telephone or telegraph purposes. For LLCs, like Sprint Spectrum, which had previously reported to the Commissioner only generators, this ruling greatly expanded the property deemed reportable to the Commissioner under G.L. c. 59, § 41, for central valuation purposes. In Sprint Spectrum’s case, the Commissioner’s certified central valuation increased from $1,762,900 for fiscal year 2003 to $172,899,300 for fiscal year 2004.

Faced with a one-hundred fold increase in its property taxes in Massachusetts, Sprint consulted Deloitte & Touche for advice on how to mitigate it. Deloitte & Touche issued a memorandum dated December 10, 2003 purporting to describe “a restructuring strategy that can enable Sprint to qualify for certain personal property tax exemptions for its switching and other personal property in Massachusetts. The proposed structure creates eligibility for the exemptions without requiring assets to be placed in corporate solution for federal income tax purposes.” Sprint had previously considered shifting its Massachusetts tangible personal property to certain utility corporations that operate within the Sprint business structure, but Sprint determined that such a restructuring was inadvisable. Deloitte & Touche concluded, based partly on the Commissioner’s LR 91-2, that a “Delaware Business trust,” now known as a Delaware statutory trust, would be recognized as a “corporation” for Massachusetts property tax purposes, but could be disregarded for federal income tax purposes. Deloitte & Touche further concluded that the Delaware business trust would not be taxed on its income for Massachusetts purposes, and that all of the trust’s income would be treated as that of the parent Sprint’s limited partnerships. Deloitte & Touche explained that “[t]his flow-through of income occurs because the Massachusetts definitions of gross income and net income applicable to business corporations tie to the Code” and that “[i]n other situations involving federally disregarded entities that are treated as separate corporate entities for Massachusetts purposes, the [Commissioner] has ruled that, because of [sic] the entities are disregarded for federal income tax purposes and therefore have no federal taxable income, the entity has no taxable income for Massachusetts income tax purposes.” (Footnote and citations omitted).

Subsequent to the Deloitte & Touche memorandum and follow-up memorandum, Sprint formed MASSPCSCO for the admitted purpose of avoiding local property taxes in Massachusetts. However, the Board found that some of the “legitimizing” strategies suggested in the Deloitte & Touche memoranda were not followed by Sprint. For example, MASSPCSCO did not engage in any leasing activities with third parties despite Deloitte & Touche’s recommendation to do so. The Board found that, at all relevant times, MASSPCSCO did not lease, or attempt to lease, any property to any person other than Sprint Spectrum. The Board also found that MASSPCSCO did not conduct any regular business activities other than those incident to the purchase, ownership and leasing of Network equipment to Sprint Spectrum.

Deloitte & Touche also recommended that the leases from MASSPCSCO to Sprint Spectrum be at “arms’ length prices.” The Board found that MASSPCSCO did not produce credible evidence in support of this proposition. Rather, it appeared that the net book values at which the Network equipment was transferred from EquipmentCo to MASSPCSCO, and not market values, likely formed the basis for the rent charged Sprint Spectrum by MASSPCSCO. In addition, MASSPCSCO did not introduce any credible evidence demonstrating that the lease factors that were used to calculate rent were premised on fair market rates. Moreover, it appeared that Sprint Spectrum and MASSPCSCO did not implement the lease factors schedule suggested by their professional advisors. Consequently, there was insufficient evidence in the record to allow the Board to determine if the purported lease payments payable by Sprint Spectrum to MASSPCSCO were consistent with the relevant marketplace.

Recognizing the identity of management and control between MASSPCSCO and Sprint Spectrum and Sprint’s ability to direct profit among its subsidiaries, Deloitte & Touche stated that while MASSPCSCO should recognize a profit “to defend against any assertion of a sham transaction theory, nevertheless we recommend that this profit be kept low to protect against any change in the state’s position that a federally disregarded entity does not have gross income for state tax purposes.” The Board found that this recommendation not only supported the supposition that MASSPCSCO was formed for tax avoidance purposes, but also helped to demonstrate that MASSPCSCO did not operate independently from Sprint or Sprint Spectrum and the notion of “profit,” as it pertained to MASSPCSCO, was illusory.

(2) MASSPCSCO Did Not Operate as a Business

Independent of Sprint Spectrum

At all relevant times, Sprint Spectrum, a subsidiary of Sprint, operated a wireless communications system. Holdings was the 99% general partner and MinorCo was the 1% limited partner of Sprint Spectrum. All of the partnership interests in Holdings and MinorCo were held by direct and indirect subsidiaries of Sprint giving Sprint complete ownership and control over Sprint Spectrum.

This identity of ownership and control was carried forward to MASSPCSCO. All of the beneficial interests in MASSPCSCO were held, at all relevant times, by EquipmentCo. The sole administrative trustee of MASSPCSCO was an employee of SUMC, another wholly-owned Sprint subsidiary. Under the terms of the trust creating MASSPCSCO, the administrative trustee is authorized to take all actions necessary or incidental, in his reasonable discretion, to the conduct of the business of MASSPCSCO, but only as directed by EquipmentCo. Virtually all of the partnership interests in EquipmentCo were owned by Sprint Spectrum. Thus, Sprint Spectrum, the lessee under the lease with MASSPCSCO, completely controlled, through EquipmentCo, MASSPCSCO, the nominal lessor under the lease. EquipmentCo also had the control to appoint or remove MASSPCSCO’s administrative trustee at any time. The “Delaware trustee” of MASSPCSCO, Wilmington Trust Company, was, at all relevant times, a trustee for the sole and limited purpose of fulfilling the requirements of Delaware law and was not entitled to exercise any powers under the trust. Because the formation of MASSPCSCO was not a transaction which varied control or changed the flow of economic benefits between the two entities, the Board found and ruled that it was justified in examining the true nature of the relationship between them and whether the activities of MASSPCSCO were in the nature of a business. See Brown Rudnick, 389 Mass. at 304-305 (citing Higgins v. Smith, 308 U.S. at 476).

(3) MASSPCSCO Did Not Engage in Business within

the Brown Rudnick Test

The Board found that, at all relevant times, MASSPCSCO did not conduct any regular business activities other than those incident to the purchase, ownership and leasing of equipment to Sprint Spectrum. Sprint Spectrum, through its ownership of EquipmentCo, MASSPCSCO’s sole beneficiary, owned and controlled MASSPCSCO.

The Board found that, at all relevant times, neither Sprint Spectrum nor MASSPCSCO maintained separate bank accounts, and any lease payments made by Sprint Spectrum to MASSPCSCO were implemented by ledger entries transferring amounts to MASSPCSCO’s account on Sprint’s books. Sprint, the publically traded parent holding company of Sprint Spectrum, and all other Sprint subsidiaries, issued consolidated financial statements, which included the operations of all of its subsidiaries. Formal financial statements were not prepared in the ordinary course of MASSPCSCO’s business, although informal ones were prepared for purposes of this litigation. Therefore, at the Sprint level, the Board determined that these ledger entries had little economic substance.

The Board further found that, at all relevant times, MASSPCSCO had no employees. All functions and services necessary or desirable for the management, administration and operation of MASSPCSCO’s business were performed by employees of SUMC, another Sprint subsidiary, under a services agreement dated December 14, 2004, almost one year after the formation of MASSPCSCO. In return for its services, MASSPCSCO reimbursed SUMC $2,000 per month for a total of $24,000 per year on revenues between $23,000,000 and $41,700,000 for calendar years 2004 through 2006 and property, plant, and equipment valued at $211,000,000 to $328,000,000 for those same years. There was no credible evidence to establish, and the Board doubted, that this charge approximated fair cash value.

The Board also found that, at all relevant times, MASSPCSCO did not hold any assets other than property leased to Sprint Spectrum, nor did it lease property to anyone other than Sprint Spectrum. It did not even attempt to lease property to any other person or entity. MASSPCSCO was not compensated for any services it performed for any person or entity. MASSPCSCO did not lease or occupy any office space or real estate, except that certain inventory of MASSPCSCO was stored prior to delivery to Sprint Spectrum sites, in facilities shared with other affiliates of Sprint. MASSPCSCO had no dealings with third parties other than those incident to its ownership, maintenance and dealings with respect to its property including the lease of that property to Sprint Spectrum.

Given the identity of interests between MASSPCSCO and Sprint Spectrum, and the fact that MASSPCSCO did not engage in any transactions other than those incident to the non-arm’s-length leases with its ultimate owner, Sprint Spectrum, the Board found and ruled that, at all relevant times, MASSPCSCO did not engage in any real business other than escaping taxation. Accordingly, the Board found and ruled that it failed to show, even by a preponderance of the evidence, that it was “operated for dominantly business purposes.” Brown Rudnick, 389 Mass. at 303.

(4) The Brown Rudnick Test Applies to MASSPCSCO

Even Though It Was a Foreign Corporation and Not a Massachusetts Business Corporation

MASSPCSCO contended that the holding in Brown Rudnick does not apply to foreign corporations as that term is used in Clause 16(2). Nothing in the Court’s reasoning supports this distinction. The Clause 16(2) stock-in-trade exemption applies to (a) “domestic business corporations” and (b) “foreign corporations,” both defined in Section 30. Brown Rudnick dealt with a case in which the entity that was organized to lease property to an affiliate was organized as a domestic corporation. In the present appeals, the entity that was organized to lease property to an affiliate was a Delaware statutory trust. The Board has found that MASSPCSCO, the Delaware statutory trust here, was, at all relevant times, a foreign corporation under Section 30. MASSPCSCO posited that the Brown Rudnick test should be confined to business corporations under Section 30 and not applied to Section 30 foreign corporations.

The definition of foreign corporation in Section 30 refers to corporations, associations and organizations established, organized or chartered under laws other than those of the Commonwealth, for which domestic corporations may be organized under, inter alia, G.L. c. 156B and, after July 1, 2004, under G.L. c. 156D. MASSPCSCO admitted that it was organized for the purpose of owning property and of leasing it to an affiliate, a purpose for which the Board has found and ruled a corporation could be organized under Chapters 156B and Chapter 156D. Chapters 156B and 156D apply to domestic corporations organized for the purpose of carrying on business for profit. Thus, the “for profit” standard of Chapters 156B and 156D have been carried into the definition of foreign corporations. The Board found and ruled that, under the circumstances, it strained credulity to suggest, as MASSPCSCO has, that the Legislature intended to treat a foreign corporation more leniently than a domestic business corporation for purposes of the stock-in-trade exemption.

Moreover, the Supreme Judicial Court’s analysis in Brown Rudnick did not focus merely on the word “business” in the phrase “business corporation.” Like MASSPCSCO, the corporation in Brown Rudnick claimed to have been organized for profit. As the Supreme Judicial Court ruled in Brown Rudnick, the stated purpose of the organization does not end the inquiry. “It still must be shown that the corporation was, in fact, engaged in business.” Brown Rudnick, 389 Mass. at 304. In other words, form does not control over substance.

(5) EquipmentCo’s Purported Business Purposes Cannot Be Imputed to MASSPCSCO

Prior to 2004, Sprint formed EquipmentCo to own and lease back to its affiliates the categories of personal property that are the subject of these appeals. Those property categories included towers, antennas, switches and related software. EquipmentCo was originally created at the request of Sprint’s vendors which, for financing purposes, required that all assets provided to Sprint be held by a separate entity. EquipmentCo’s primary purpose was to satisfy those vendors’ demands.[70] However, as Sprint grew and became an established business with significant assets, and once it retired that initial Vendor Financing, the vendor restriction requiring assets to be held in a separate company was no longer necessary.

By the time that MASSPCSCO was created, there were no longer any vendor restrictions in place. Consequently, the purported business reason for creating a separate entity to hold assets had expired. Accordingly, the Board found and ruled that EquipmentCo’s original “business purpose” could not be imputed to MASSPCSCO, and it did not even maintain any vitality for EquipmentCo. As the Board previously found, there were no other credible reasons, other than property tax avoidance, for MASSPCSCO’s creation. Therefore, the Board further found and ruled that, at all relevant times, MASSPCSCO did not “perform[] any function other than to shelter [Sprint] from personal property liability.” Brown Rudnick, 389 Mass. at 306.

(B) MASSPCSCO Has Failed to Show That It Was Formed for a Substantial Business Purpose or Actually Engaged in Substantial Business Activity and Therefore Was Not a Sham

The sham transaction doctrine focuses on whether a transaction, including a business reorganization that results in tax benefits, has practical economic effects beyond tax avoidance. “[F]or a business reorganization that results in tax advantages to be respected for tax purposes, the taxpayer must demonstrate that the reorganization is ‘real’ or ‘genuine,’ and not just form over substance. Stated otherwise, the entity resulting from the reorganization must be one which is ‘formed for a substantial business purpose or actually engage[s] in substantial business activity.” The Sherwin-Williams Company v. Commissioner of Revenue, 438 Mass. 71, 84 (2002)(“Sherwin-Williams Co.”)(quoting Northern Ind. Pub. Serv. Co. v. Commissioner of Internal Revenue, 115 F.3^rd 506, 511 (7^th Cir. 1997)); see also Bass v. Commissioner of Internal Revenue, 50 TC 595, 600 (1968).

Sherwin-Williams Co. involved a reorganization in which wholly owned subsidiaries entered into genuine obligations with unrelated third parties in furtherance of the subsidiaries’ claimed corporate purposes, and the subsidiaries, among other things, maintained their own bank accounts, hired employees, set their own investment policies, invested assets for their own accounts, and hired and paid professionals. Sherwin-Williams Co., 438 Mass. at 85-87. The Supreme Judicial Court found that the subsidiaries were “viable business entit[ies] engaged in substantive business activity rather than in a ‘bald and mischievous fiction,’” and, therefore, were entitled to be respected for tax purposes. Sherwin-Williams Co., 438 Mass. at 89 (quoting Moline Props. v. Commissioner of Internal Revenue, 319 U.S. 436, 439 (1943)).

In the instant matter, the Board found that MASSPCSCO not only ignored advice from Deloitte & Touche to enter into leasing agreements with third parties, but otherwise failed to operate independently and evidence a legitimate and viable business purpose. Unlike EquipmentCo, MASSPCSCO was not created to facilitate and comply with vendor financing requirements, which had been retired in 1999. Rather, the Board found that the dominant, and essentially sole, reason for its organization was for tax avoidance purposes.

The Board found that, at all relevant times, MASSPCSCO had no employees. All functions and services necessary or desirable for the management, administration and operation of MASSPCSCO’s business, were performed by employees of SUMC, under an apparently non-arm’s length service agreement dated almost a year after MASSPCSCO was organized. MASSPCSCO was required to reimburse SUMC for those services by a fixed payment of only $2,000 per month. Sprint Spectrum and MASSPCSCO did not maintain separate bank accounts. The lease payments made by Sprint Spectrum to MASSPCSCO were implemented by ledger entries transferring amounts to MASSPCSCO’s account in Sprint’s books. MASSPCSCO was not compensated for any services that it performed for any person or entity. MASSPCSCO did not even purchase the equipment it leased to Sprint Spectrum; instead Sprint purchased the equipment and marked the purchase against MASSPCSCO’s account on a common ledger that was maintained by Sprint. No evidence was introduced to substantiate that any interest was charged or paid on this “loan,” or that there was a fixed repayment schedule. Moreover, the Board found that it was unclear from the evidence if MASSPCSCO was ever required to repay the debt. See The TJX Companies, Inc. v. Commissioner of Revenue, 2009 Mass. App. Unpub. LEXIS 168, *12-13 (April 3, 2009)(“TJX Companies”)(upholding the Board’s disallowance of interest payments on loans which the Board determined were not bona fide because, among other reasons, they simply constituted a circular flow of funds without appropriate documentation, interest rates, or repayment schedules).

MASSPCSCO did not hold any assets other than property leased to Sprint Spectrum. MASSPCSCO did not lease property to any person other than Sprint Spectrum. MASSPCSCO did not conduct any regular business activities other than those incident to the purchase, ownership and leasing of Network equipment to Sprint Spectrum. There was no evidence presented at the hearing of these appeals showing that the transactions between Sprint and MASSPCSCO were at market rates or that the leases were arm’s-length transactions. At the time the assets were originally transferred from EquipmentCo to MASSPCSCO, “for simplification purposes, the fixed assets [were] transferred at net book value rather than fair market value through investment and subsidiary accounts.” In addition, the leases between EquipmentCo and MASSPCSCO were signed by Sprint’s Assistant Vice President for State and Local Taxation, as both the lessee and the lessor. The Board further found that there was no credible evidence that the rents or lease factors were at market rates. MASSPCSCO did not even implement the lease factor schedules prepared by Ernst & Young.

Lastly in this regard, the Board found that Sprint assured itself of complete control over MASSPCSCO. At all relevant times, the administrative trustee was an employee of SUMC and was authorized only to act as directed by EquipmentCo, a subsidiary of Sprint. EquipmentCo was empowered to remove the administrative trustee at any time for any reason. The nominal trustee, Wilmington Trust Company, was appointed merely for the sole and limited purpose of fulfilling requirements under Delaware law and was not entitled to exercise any powers under the trust.

In sum, at all relevant times, MASSPCSCO had no employees; did not maintain separate bank accounts; did not independently invest any of its profits; did not do business with any other parties other than what was incidental to its leasing of equipment to its parent; did not attempt to lease any property to third parties; did not maintain any office space or real estate; was unable to exercise any independent control; did not purchase any of its equipment; and was not shown to be dealing with affiliates in an arm’s-length manner or to be responsible for any debt incurred as a result of any purchases of equipment or property on its behalf.

Accordingly, the Board found and ruled that the reorganization of Sprint and, more particularly, EquipmentCo, by creating MASSPCSCO as the repository for property and equipment located in Massachusetts, and the lease agreements between Sprint Spectrum and MASSPCSCO did not “vary control or change the flow of economic benefits between . . . entities.” Brown Rudnick, 389 Mass. at 305. The Board further found and ruled that MASSPCSCO did not perform any corporate function other than to attempt to shelter Sprint from personal property tax liability in Massachusetts. Id. at 306. MASSPCSCO evidenced virtually none of the examples of economic substance or substantive business activity embraced by the Supreme Judicial Court in Sherwin-Williams Co., 438 Mass. at 85-88. Based on the subsidiary findings developed from a review and analysis of the entire record, the Board found and ruled here that MASSPCSCO’s purported business dealings with Sprint Spectrum and its affiliates were without economic substance and that MASSPCSCO was not a viable business entity engaging in substantial business activity. The Board further found and ruled that MASSPCSCO’s acquisition of its equipment and property and its leasing transactions had no “practical economic benefit beyond the creation of tax benefits.” Id. at 85. The Board therefore ruled that the transfer of property and equipment to MASSPCSCO and MASSPCSCO’s subsequent leasing of it to Sprint Spectrum were shams.

(C) The Assessors Properly Assessed MASSPCSCO as the Owner of the Subject Property

MASSPCSCO claimed that if the Board disregarded the transfer of the subject personal property to MASSPCSCO for purposes of eligibility for the Clause 16(2) exemption, then the Board should completely disregard MASSPCSCO for all purposes, including assessment purposes. MASSPCSCO proposed that if the Board were to find that MASSPCSCO was not the owner of the subject personal property for purposes of Clause 16(2), then the Assessors should have assessed the personal property taxes to either EquipmentCo, as the transferor of the subject personal property to MASSPCSCO, or Sprint Spectrum, as the default owner of the subject personal property. The Board noted that, under G.L. c. 59, § 18, Second, the Assessors presumably could have assessed all or some of the subject personal property to Sprint Spectrum, instead of MASSPCSCO, as the “person having possession of the same on January first.”

“While the courts recognize that tax avoidance or reduction is a legitimate goal of business entities, the courts have, nonetheless, invoked a variety of doctrines . . . to disregard the form of a transaction where the facts show that the form of the transaction is artificial and is entered into for the sole purpose of tax avoidance and there is no independent purpose for the transaction.” Falcone v. Commissioner of Revenue, Mass. ATB Findings of Fact and Reports 1996-727, 734-35. The sham transaction doctrine is one such judicially created doctrine for preventing the misuse of the tax code. Horn v. Commissioner of Internal Revenue, 968 F.2d 1229, 1236 (D.C. Cir. 1992).

Massachusetts recognizes the sham transaction doctrine and, accordingly, has given the taxing authorities the ability to disregard, for taxing purposes, transactions that have no economic substance or business purpose other than tax avoidance. Sherwin-Williams Co., 438 Mass. at 79. Furthermore, this doctrine prevents taxpayers from claiming the tax benefits of transactions that, although within the language of the tax code, are not the type of transaction the law intended to favor with the benefit. Syms Corp. v. Commissioner of Revenue, 436 Mass. 505, 510 (2002). MASSPCSCO offered no direct authority for the proposition that a taxing authority is authorized under this doctrine to divest an entity of ownership of property simply because it has been determined that it does not qualify for a statutory exemption.

In its application for abatement and pleadings to this Board, MASSPCSCO admitted that it was the owner of the Network property located in Springfield and Woburn. Pursuant to G.L. c. 59, § 18, the Assessors, relying on filings made by MASSPCSCO or its affiliates, fulfilled their statutory duty and assessed the subject property to MASSPCSCO. The Board found and ruled that MASSPCSCO may not now claim that it was not the owner of the subject property because the Board found and ruled that it was not qualified or eligible for the stock-in-trade exemption under Clause 16(2). The Board’s findings here are focused on MASSPCSCO’s qualifications or eligibility for the exemption under Clause 16(2). The Board did not find or rule that another entity was, at all relevant times, the owner of the subject property for other purposes, such as personal property tax assessments under Section 18. Rather, the Board found and ruled the MASSPCSCO was the owner for personal property assessment purposes. Unlike the situation in TJX Companies, where “the fruits of a sham transaction [were] appropriately [and necessarily] disregarded and reapportioned to the parent,” 2009 Mass. App. Unpub. LEXIS 168 at *14, the Board ruled here that there was no need for “reattribution” of gain or income “to the parent” to properly redress the ill-begotten fruits from the subject sham transaction because disallowance of the exemption was enough, and all that was required, to remedy the tax mischief created by the scheme.

Accordingly, the Board found and ruled that its findings and rulings here that MASSPCSCO did not qualify for the Clause 16(2) exemption did not vitiate or negate MASSPCSCO’s ownership of the property for purposes of property tax assessment and Section 18.

(D) Summary

The Board found and ruled that MASSPCSCO failed to qualify for the stock-in-trade exemption under Clause 16(2) because it did not pass the test established in Brown Rudnick. The Board also found and ruled that MASSPCSCO was formed for the predominant and essentially sole purpose of avoiding Massachusetts personal property taxes; MASSPCSCO did not operate as a business independent from Sprint Spectrum; MASSPCSCO did not engage in business as defined in Brown Rudnick; the Brown Rudnick test applied to MASSPCSCO even though, at all relevant times, it was a foreign corporation and not a domestic business corporation; and EquipmentCo’s original business purpose could not be imputed to MASSPCSCO. The Board also found and ruled that MASSPCSCO failed to show that the subject reorganization and transactions had economic substance or a legitimate business purpose. Finally, the Board found and ruled that MASSPCSCO was properly assessed by the Assessors for the personal property taxes at issue.

III. Conclusion

On this basis, the Board decided that: (1) MASSPCSCO was a foreign corporation within the meaning of Section 30 and entitled to be classified as such by the Commissioner for 2005, 2006, and 2007; but (2) MASSPCSCO was not entitled to the “stock-in-trade” exemption under Clause 16(2).

APPELLATE TAX BOARD

By: ________________________________

Thomas W. Hammond, Jr., Chairman

A true copy

Attest: _________________________

Clerk of the Board

KEVIN A. SPELLMAN v. BOARD OF ASSESSORS OF

THE TOWN OF MARSHFIELD

Docket No. F294260 Promulgated:

April 30, 2010

This is an appeal filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65, from the refusal of the Board of Assessors of the Town of Marshfield (“appellee” or “assessors”), to abate taxes on certain real estate located in Marshfield, owned by and assessed to the appellant under G.L. c. 59, §§ 11 and 38, for fiscal year 2008.

Commissioner Egan (“Presiding Commissioner”) heard this appeal and issued a single-member decision for the appellee in accordance with G.L. c. 58A, § 1 and 831 CMR 1.20. These Findings of Fact and Report are made pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.

Kevin A. Spellman, pro se, for the appellant.

Elizabeth Bates, assessor, for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of testimony and exhibits offered into evidence at the hearing of this appeal, the Presiding Commissioner made the following findings of fact.

On January 1, 2007, Kevin A. Spellman (“appellant”) was an assessed owner of an improved parcel of real estate located at 20 Chickatawbut Avenue in Marshfield (“subject property”). For fiscal year 2008, the assessors valued the subject property at $366,000 and assessed a tax thereon, at a rate of $8.72 per $1,000, in the amount of $3,191.52. Marshfield’s Collector of Taxes mailed the fiscal year 2008 tax bills on December 31, 2007. In accordance with G.L. c. 59, § 57C, the appellant paid the tax due without incurring interest and in accordance with G.L. c. 59, § 59, the appellant timely filed an Application for Abatement on January 22, 2008. Having inspected the subject property on February 12, 2008, the assessors granted a partial abatement in the amount of $67.14 on February 29, 2008, reducing the subject property’s valuation to $358,300. On April 15, 2008, the appellant seasonably filed an appeal with the Appellate Tax Board (“Board”). On the basis of these facts, the Presiding Commissioner found and ruled that the Board had jurisdiction to decide this appeal.

The subject property consists of a 0.138-acre parcel of real estate located approximately 290 feet from Massachusetts Bay and improved with a single-family, ranch-style home containing approximately 640 square feet of finished living area. The dwelling has four rooms, including two bedrooms, as well as one full bathroom.

The appellant, a certified residential real estate appraiser whom the Presiding Commissioner qualified as an expert in residential real estate appraisal, argued that the subject property was overvalued for fiscal year 2008. The appellant testified in support of his argument and offered into evidence his self-prepared appraisal report.

To arrive at his estimate of the subject property’s fair cash value, the appellant performed a comparable-sales analysis incorporating sales of six purportedly comparable properties. The properties’ sale dates ranged from March 31, 2006 to December 1, 2006, and their sale prices from $275,000 to $369,250. Five of the six properties were improved with ranch-style dwellings containing two bedrooms and one bathroom, similar to the subject property. One property, which among the appellant’s chosen comparables was most proximate to the subject property but still more than twice the distance from the beach, featured a five-room Cape-Cod-style dwelling containing two bedrooms and two bathrooms. The appellant made adjustments to his chosen comparables for various factors including living area, condition, time of sale and parcel size. Having taken these factors into consideration, the appellant arrived at adjusted sale prices for the properties ranging from $288,500 to $312,200, and an indicated value for the subject property of $295,000.

Notably, the appellant made an adjustment relating to location for only one of his chosen comparables, notwithstanding that all of the properties were significantly farther from the beach than the subject property. More specifically, the properties whose sale prices were not adjusted for location were situated approximately 500 to 1300 feet from Massachusetts Bay, while the subject property is located less than 300 feet from the Bay.[71] The Presiding Commissioner found that the appellant failed to adequately adjust for the comparables’ greater distance from the water, thereby substantially diminishing the probative value of the appellant’s appraisal.

Elizabeth Bates, assessor for Marshfield, testified on behalf of the assessors and presented a comparable-sales analysis which included three properties that sold between March 14, 2006 and August 28, 2006, at sales prices which ranged from $355,000 to $430,000. The properties were all improved with cottage-style dwellings and were located between 320 and 430 feet from the beach. Having accounted for various differences between the comparable properties and the subject property, the assessors concluded that these sales supported the assessed value of the subject property for fiscal year 2008. The assessors also introduced assessment data for three properties, two of which abut the subject property, and all of which were similar to the subject property in relevant respects. These properties’ assessed values were between $353,700 and $370,900 for fiscal year 2008. The Presiding Commissioner found Ms. Bates’ testimony and the assessors’ comparable-sales analysis credible and, along with the assessed values of the neighboring properties, supportive of the subject property’s 2008 assessed value.

Having concluded that the appellant’s appraisal was not sufficiently probative to establish the fair cash value of the subject property on the relevant assessment date, the Presiding Commissioner found and ruled that the appellant failed to sustain his burden of persuading the Board that the subject property was overvalued for fiscal year 2008. Moreover, the Presiding Commissioner found that the assessors produced credible evidence demonstrating that the subject property was not overvalued. On this basis, the Presiding Commissioner decided this appeal for the assessors.

OPINION

Assessors have a statutory obligation to assess real estate at its fair cash value as of the first day of January of the year preceding the fiscal year at issue. G.L. c. 59 §§ 11 and 38. The definition of fair cash value is the price upon which a willing buyer and a willing seller would agree if both were fully informed and neither was under compulsion. Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).

The burden of proof is upon the taxpayer to make out a right to an abatement as a matter of law. Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974). An assessment is presumed to be valid unless the taxpayer is able to sustain his or her burden of proving otherwise. Id. The taxpayer may sustain this burden by introducing affirmative evidence of fair cash value, or by proving that the assessors erred in their method of valuation. General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 600 (1984). “The introduction of ample and substantial evidence in this regard may provide adequate support for abatement.” Chouinard v. Assessors of Natick, Mass. ATB Findings of Fact and Reports 1998-299, 307-308 (citing Garvey v. Assessors of West Newbury, Mass. ATB Findings of Fact and Reports 1995-129, 135-36; Swartz v. Assessors of Tisbury, Mass. ATB Findings of Fact and Reports 1993-271, 279-80).

“[S]ales of property usually furnish strong evidence of market value, provided they are arm’s-length transactions and thus fairly represent what a buyer has been willing to pay for the property to a willing seller.” Foxboro Associates v. Assessors of Foxborough, 385 Mass. 679, 682 (1982). Sales of comparable realty in the same geographic area and within a reasonable time of the assessment date generally contain probative evidence for determining the value of the property at issue. Graham v. Assessors of West Tisbury, Mass. ATB Findings of Fact and Reports 2008-321, 400 (citing McCabe v. Chelsea, 265 Mass. 494, 496 (1929)), aff’d, 73 Mass. App. Ct. 1107 (2008). When comparable sales are used, however, allowances must be made for various factors which would otherwise cause disparities in the comparable property’s sale prices. See Pembroke Industrial Park Co., Inc. v. Assessors of Pembroke, Mass. ATB Findings of Fact and Reports 1998-1072, 1082. “Adjustments for differences in the elements of comparison are made to the price of each comparable property . . . . The magnitude of the adjustment made for each element of comparison depends on how much that characteristic of the comparable property differs from the subject property.” THE APPRAISAL INSTITUTE, THE APPRAISAL OF REAL ESTATE 322 (13^th ed., 2008).

In the present appeal, the appellant argued that the subject property was overvalued for fiscal year 2008, and relied upon his appraisal of the property to support this argument. To value the subject property, the appellant performed a comparable-sales analysis citing sales of several purportedly comparable properties and making adjustments to their sale prices to account for differences between the properties and the subject property. The appellant failed, however, to adequately account for the differences in proximity to Massachusetts Bay between his chosen comparables and the subject property. In light of this failure, and mindful of the substantial importance of location to the value of property in close proximity to the Bay, the Presiding Commissioner found and ruled that the appellant’s analysis was not sufficiently probative to establish the subject property’s fair cash value. In contrast, the assessors presented testimony and a comparable-sales analysis, as well as comparably assessed properties, that the Presiding Commissioner found credible and supportive of the contested assessment.

The Presiding Commissioner thus found and ruled that the appellant failed to meet his burden of persuading the Board that the subject property was overvalued for fiscal year 2008 and decided this appeal for the appellee.

APPELLATE TAX BOARD

By:______________________________

Nancy T. Egan, Commissioner

A true copy:

Attest: _________________________

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

JEFFREY J. COHEN, TRUSTEE v. BOARD OF ASSESSORS OF

THE TOWN OF WESTON

Docket Nos. F280819, F284377 Promulgated:

F292415, F294465 May 11, 2010

These are appeals filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65, from the refusal of the appellee, Board of Assessors of the Town of Weston (“assessors”), to abate taxes on certain real estate located in the Town of Weston, owned by and assessed to the appellant under G.L. c. 59, §§ 11 and 38, for fiscal years 2005, 2006, 2007 and 2008.

Commissioner Egan heard these appeals. Chairman Hammond and Commissioners Scharaffa, Rose, and Mulhern joined her in decisions for the appellee in Dockets F280819 and F294465 (fiscal years 2005 and 2008, respectively) and in decisions for the appellant in Dockets F284377 and F292415 (fiscal years 2006 and 2007, respectively).

These findings of fact and report are made pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.

Mark F. Murphy, Esq. for the appellant.

Ellen M. Hutchinson, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of the testimony and exhibits offered into evidence at the hearing of these appeals, the Appellate Tax Board (“Board”) made the following findings of fact.

On January 1, 2004, January 1, 2005, January 1, 2006 and January 1, 2007, Jeffrey J. Cohen, Trustee of the Winsor Meadow Realty Trust (“appellant”) was the assessed owner of a certain parcel of real estate located at 50 Winsor Way in the Town of Weston (“subject property”).[72] For fiscal year 2005, the assessors valued the subject property at $5,719,400 and assessed a tax thereon, at the rate of $9.46 per $1,000, in the total amount of $54,105.52. The appellant timely paid the tax in full without incurring interest. On January 10, 2005, the appellant timely applied to the appellee for an abatement, claiming that the subject property was overvalued. The appellee denied the appellant’s request on April 5, 2005. The appellant seasonably filed his petition with the Board on June 27, 2005. Accordingly, the Board found and ruled that it had jurisdiction to hear and decide the appeal for fiscal year 2005.

For fiscal year 2006, the appellee valued the subject property at $6,952,000 and assessed a tax thereon, at the rate of $9.95 per $1,000, in the total amount of $69,172.40. The appellant timely paid the tax in full without incurring interest. On January 26, 2006, the appellant timely applied to the appellee for an abatement, claiming that the subject property was overvalued. The appellee denied the appellant’s request on March 21, 2006. The appellant seasonably filed his petition with the Board on June 6, 2006. Accordingly, the Board found and ruled that it had jurisdiction to hear and decide the appeal for fiscal year 2006.

For fiscal year 2007, the appellee valued the subject property at $6,898,800 and assessed a tax thereon, at the rate of $10.26 per $1,000, in the total amount of $70,781.68. The appellant timely paid the tax in full without incurring interest. On February 1, 2007, the appellant timely applied to the appellee for an abatement, claiming that the subject property was overvalued.

The appellant’s application was deemed denied on May 1, 2007.[73] The appellant seasonably filed his petition with the Board on July 12, 2007. Accordingly, the Board found and ruled that it had jurisdiction to hear and decide the appeal for fiscal year 2007.

For fiscal year 2008, the appellee valued the subject property at $7,033,500 and assessed a tax thereon, at the rate of $10.67 per $1,000, in the total amount of $77,298.87. The appellant timely paid the tax in full without incurring interest. On February 1, 2008, the appellant timely applied to the appellee for an abatement, claiming that the subject property was overvalued. The appellee denied the appellant’s request on March 4, 2008. The appellant seasonably filed his petition with the Board on April 25, 2008. Accordingly, the Board found and ruled that it had jurisdiction to hear and decide the appeal for fiscal year 2008.

The appellant presented his appeal through the testimony of three witnesses: (1) Stephen Ozahowski, whom the Board qualified as an expert in real estate valuation; (2) the appellant; and (3) Eric Josephson, the Principal Assessor for the Town of Weston. The appellee did not call any witnesses but cross-examined each of these witnesses.

The Town of Weston (“Weston”) is a desirable suburban community, located west of Boston, which contains many luxury homes and estate properties. The subject property is located in a neighborhood in Weston that has among the highest property values in the Town and also abuts a golf course. The subject property has excellent access to Routes 16, 9, 20, 27, 30, Interstate 90 (Massachusetts Turnpike) and Interstate 95. The subject property contains 2.23 acres of land.[74]

The appellant purchased the subject property in July, 2001 for $2,000,000. The appellant demolished the older home that was on the subject site and began construction of the home that is currently on the site in September, 2001. The property record cards submitted into evidence indicate that, on the date of purchase, the subject property’s address was 299 Meadowbrook Road. The subject property’s address changed to 50 Winsor Way on April 9, 2003.

After construction was completed in April, 2008, the subject home contained 9,839 square feet of living space. The home is a two-story, modern, Colonial-style home with a stucco-on-wood exterior and a wood-shingle gable/hip roof. The home is heated by forced air and radiant heating and is equipped with a custom HVAC system, which includes central air conditioning. The home also features a central vacuum system. The subject property has public water and a septic system, because there is no public sewer in Weston.

The home has seventeen rooms, including five bedrooms, as well as seven full bathrooms, three half bathrooms and four fireplaces. The master bathroom includes high-end fixtures, marble tile, and a large shower area with a separate whirlpool tub. The main entrance opens to a grand reception hall foyer, with two coat closets and a half bathroom, which leads to a living room with a fireplace, a library with a fireplace, a conservatory, a gallery, a two-story family room with a fireplace, a dining room and a gourmet kitchen with commercial-grade appliances, an adjoining butler’s pantry, and a separate breakfast/informal dining area. Additional rooms on the first floor include the master bedroom suite, which contains a master bedroom with a fireplace and the master bathroom, a laundry room, a mud room, and an exercise room. The first floor has hardwood flooring, with the exception of the master bathroom and two half bathrooms, which have marble tiling. Additionally, the grand reception hall foyer and the conservatory have honed limestone flooring. The ceiling height on the first floor is approximately 10 feet, and the ceilings in the gallery are vaulted.

The second floor hall has a view overlooking the grand reception hall foyer and a door opening to an exterior balcony overlooking the private backyard grounds. The second floor has four bedrooms, each with its own private bathroom and closet; two of the bedrooms have their own separate dressing closet. Additional rooms on the second floor include the second floor laundry room, a half bathroom, a small media room, a sitting room, and a billiards room with a cathedral ceiling. The second floor living space is carpeted.

Eighty percent of the basement is finished; the remainder is a small area for utility and storage. The basement includes a large family room, a recreation room with a wet bar, a walk-in wine cellar, a custom home theater, two full bathrooms, and a sauna. The utility and storage area includes a large walk-in luggage storage closet.

The home includes a 1,102 square-foot patio with an outside fireplace/barbeque, a 56 square-foot porch, a 256 square foot deck, and an attached four-car finished and heated garage. The grounds are professionally landscaped.

The appellant’s real estate valuation witness, Mr. Ozahowski, testified that the subject property is a “luxury” home, and that luxury homes are characterized by many amenities like custom cabinetry, high-end workmanship, commercial-grade appliances, extra rooms like wine cellars and home theaters, and many finishes completed to the taste of the owner. Mr. Ozahowski also testified that as of the first relevant assessment date of these appeals, the subject property’s neighborhood was beginning to change. Older “estate” properties – properties that include large parcels of land and older homes built in the early 1900s – were being sold, and the older homes were being demolished and replaced with much larger luxury homes like the subject home.

The following details the evidence of record concerning the state of construction of the subject home and the evidence of value presented by the witnesses for each fiscal year at issue.

Fiscal year 2005

Mr. Cohen testified to the condition of the home as of June 30, 2004.[75] He explained that, as of the relevant assessment date, the subject home was still under construction. The home was weather-tight, the interior drywall, blueboard and skimcoating had been installed, utilities were mostly installed, and the kitchen and bathroom cabinetry and fixtures were on site. However, many rooms remained incomplete. In particular, the library, the rooms over the garage, and the basement rooms were incomplete. Mr. Cohen also explained that some of the features of the home’s construction were defective and in need of repair, particularly the exterior stucco, many of the interior floors and trim, and the HVAC system.

Mr. Ozahowski performed a comparable-sales analysis.[76] Mr. Ozahowski testified that he selected the properties to include in his analysis by reviewing Multiple Listing Service (“MLS”) data and choosing the highest valued sales in Weston. For fiscal year 2005, Mr. Ozahowski selected five purportedly comparable sales in Weston – 32 Cart Path Road, 41 Skating Pond Road, 445 Concord Road, 18 Stonecroft Circle, and 22 Pelham Road. The closest comparable-sale property was one block away and the farthest was 3.5 miles from the subject property. The comparable-sale properties ranged in size from 2.02 acres to 3.52 acres and were improved with luxury homes ranging in gross living area from 5,165 square feet to 11,274 square feet. After applying his adjustments, the adjusted sale prices for these five sales yielded a range from $4,264,700 to $4,983,700. Mr. Ozahowski did not review the deeds for his comparable-sale properties, relying instead solely upon the MLS listings. However, the sale prices for two of his comparable-sale properties – 41 Skating Pond Road and 445 Concord Road – were incorrectly listed on the MLS listings.

Mr. Ozahowski made a $500,000 adjustment to each of his comparable-sale properties for functional utility, to take into account the incomplete state of the subject home. Mr. Ozahowski based his $500,000 functional utility adjustment on a 2004 an earlier appraisal of the subject property prepared on behalf of Citizens Bank for financing purposes. The Addendum to this appraisal gave a range of $500,000 to $750,000 for the cost to complete the various items listed. Based on the adjusted sale prices of his comparable properties, Mr. Ozahowski testified that the subject property’s value as of the relevant assessment date was $4,500,000, which was about the median of his adjusted sale prices for his comparable-sale properties.

Mr. Josephson, Weston’s assessor, inspected the subject home on June 30, 2004, and using a construction checklist, he determined that the home was 79 percent completed. Mr. Josephson’s report details a comparable-sale analysis using three comparable sales in Weston – 41 Skating Pond Road, 4 Nottingham Lane, and 22 Pelham Road. The comparable-sale properties ranged in size from 2.35 acres to 5.84 acres and were improved with luxury homes ranging in gross living area from 7,512 square feet to 8,947 square feet. The closest comparable-sale property was one block away and the farthest was 2.25 miles from the subject property. Two of his comparable-sale properties – 41 Skating Pond Road and 22 Pelham Road – were also used by Mr. Ozahowski as comparable-sale properties. After applying his adjustments, the adjusted sale prices for Mr. Josephson’s three comparable sales yielded a range from $4,899,900 to $5,960,800. Based upon his comparable-sale analysis and his determination of the home’s completion, Mr. Josephson concluded that the subject property’s assessed value for fiscal year 2005 should be $5,719,400. The property record card on file indicates that the fiscal year 2005 assessment accounted for the fact that the property was about 79 percent completed for fiscal year 2005.

Fiscal year 2006

Mr. Cohen testified to the condition of the subject home as of June 30, 2005.[77] He explained that the subject home was nearing completion, but many items still remained incomplete, and defects in the original construction of the home had become evident. Repairs to the construction, estimated at about $200,000, needed to be completed on the subject home. In particular, the HVAC system was inadequate, moisture was entering the home and creating mold, the walls were cracking even after they were repaired, the floors were defective, cabinets were still not installed, some lighting fixtures still needed installation, trim and stairways were being repaired, and the exterior stucco had been installed incorrectly. Painting inside the home also was not completed. Mr. Cohen testified that the subject home was a “work zone,” with some rooms closed off with plastic sheeting. Mr. Cohen also testified that he and his family vacated the subject home during the summer so that the builders could complete repairs. The family moved back to the subject home in September, 2005.

Mr. Ozahowski performed a comparable-sale analysis for fiscal year 2006.[78] He selected five purportedly comparable properties in Weston – 1 Dogwood Road, 36 Love Lane, 211 Westerly Road, 103 Rolling Lane, and 66 Doublet Hill Road. The closest comparable-sale property was 0.25 miles and the farthest was 2.5 miles from the subject property. The comparable-sale properties ranged in size from 1.44 acres to 4.29 acres and were improved with luxury homes ranging in gross living area from 6,590 square feet to 10,168 square feet. After applying his adjustments, the adjusted sale prices for these five sales yielded a range from $4,468,700 to $6,030,600. For two of his comparable-sale properties, Mr. Ozahowski applied over $1,000,000 in adjustments to the sale prices. Based on the adjusted sale prices of his comparable properties, Mr. Ozahowski concluded that the subject property’s value as of the relevant assessment date was $5,750,000.

Again, Mr. Ozahowski applied a functional utility adjustment to all of his comparable-sale prices, this time in the amount of $200,000, to each of his comparable properties. In his appraisal report, Mr. Ozahowski stated that the appellants were completing a punch list of items that were either not complete or defectively installed in the subject home, including interior painting, trim and moldings, two rooms and one bathroom in the basement which needed to be completed, and the defective exterior stucco. Mr. Ozahowski’s report stated that the owners estimated that $300,000 to $400,000 worth of work would be required to complete the subject home, but that Mr. Ozahowski considered a more reasonable estimate to be $200,000.

The assessors valued the subject property at $6,952,000 for fiscal year 2006. Mr. Josephson’s report details a comparable sales analysis using four purportedly comparable sales in Weston: 148 Highland Street, 103 Rolling Lane, 16 Sanderson Lane, and 4 Willow Road. The closest comparable property was 0.25 miles from the subject property and the farthest comparable property was 2 miles from the comparable property. One of the properties was in the same neighborhood as the subject property and two others were in the immediately adjacent neighborhood. The comparable properties ranged in size from 1.45 acres to 6.33 acres and were improved with luxury homes ranging in gross living area from 6,798 square feet to 11,228 square feet. One of Mr. Josephson’s comparable-sale properties required adjustments of over $1,000,000. After applying his adjustments, Mr. Josephson’s comparable properties ranged in adjusted sale prices from $6,353,000 to $7,465,700.

Mr. Josephson admitted in his testimony that his photographs of the subject property and his descriptions of the subject home’s interior in each of his four reports (one for each fiscal year at issue) were based on his last inspection of the subject property, which occurred on June 30, 2004. The property record card for fiscal year 2006, like the one for fiscal year 2005, stated that, in the opinion of the assessors, the subject property was about 79 percent completed for fiscal year 2005, and that a temporary certificate of occupancy had been issued on September 16, 2004. The Board found that, based on Mr. Josephson’s admission and the lack of relevant information as to the state of construction of the subject home as of the relevant assessment date, the assessors did not inspect the property during the relevant assessment period for fiscal year 2006.

Fiscal year 2007

Mr. Cohen testified that, as of the relevant assessment date, many of the items on the punch list were still not completed. The basement rooms, particularly the home theater and wine cellar, were still not completed. Moreover, the walls were bulging because they were installed improperly, the hardwood floors were still not repaired properly, the trim and molding were still not repaired, and the driveway and landscaping were not complete. The stucco also was still defective.

Mr. Ozahowski performed a comparable-sale analysis for fiscal year 2007.[79] He selected three purportedly comparable properties in Weston – 103 Rolling Lane, 148 Highland Street, and 16 Sanderson Lane. The closest comparable-sale property was 0.5 miles and the farthest was 2.5 miles from the subject property. The comparable properties ranged in size from 1.45 acres to 2.51 acres and were improved with luxury homes ranging in gross living area from 6,798 square feet to 10,168 square feet. After applying his adjustments, the adjusted sale prices for these three sales yielded a range from $5,850,800 to $6,395,600. Based on the adjusted sale prices of his comparable-sale properties, Mr. Ozahowski stated that the subject property’s value as of the relevant assessment date was $6,000,000.

Again, Mr. Ozahowski applied a functional utility adjustment, this time in the amount of $100,000, to each of his comparable properties. In his appraisal report, Mr. Ozahowski noted that, as of the relevant assessment date, interior painting was not complete, two of the four rooms and one of the two bathrooms in the basement were not yet complete, and negotiations were underway to remedy the exterior stucco. Mr. Cohen also testified that much work was performed in the home during the Fall of 2006 and the Winter of 2007, after the relevant assessment date for fiscal year 2007, to complete the home theater and wine cellar. Mr. Ozahowski believed that, as of the relevant assessment date, a reasonable estimate to complete the property was $100,000.

The assessors valued the subject property at $6,898,800. Mr. Josephson’s report details a comparable- sales analysis using four comparable-sale properties in Weston — 140 Meadowbrook Road, 180 Highland Street, 100 Meadowbrook Road, and 103 Rolling Lane – all of which were between 0.125 and 0.25 miles from the subject property. The comparable-sale properties ranged in size from 1.96 acres to 3 acres and were improved with luxury homes ranging in gross living area from 6,562 square feet to 10,168 square feet. Both Mr. Ozahowski and Mr. Josephson selected as a comparable-sale property 103 Rolling Lane, which Mr. Josephson had also selected for the previous fiscal year. After applying his adjustments, Mr. Josephson’s comparable-sale properties ranged in adjusted sale prices from $6,734,000 to $7,821,400.

As described earlier, Mr. Josephson admitted in his testimony that his descriptions of the subject home’s interior in his report were based on his last inspection of the subject property, which occurred on June 30, 2004. The property record card for fiscal year 2007 indicates that, in the opinion of the assessors, the subject property was about 79 percent completed for fiscal year 2005, and that a temporary certificate of occupancy had been issued on September 16, 2004. The Board found that, based on Mr. Josephson’s admission and the lack of relevant information as to the state of construction of the subject home as of the relevant assessment date, the assessors did not inspect the subject property during the assessment period for fiscal year 2007.

Fiscal year 2008

Mr. Cohen testified that the subject’s home theater was completed by the end of January, 2007, and the wine cellar was completed sometime in January or February, 2007.[80] The appellant also presented a punch list, prepared sometime in March, 2007, by the engineering firm of Simpson Gumpertz Heger, Inc., with input from the appellant and his wife, which contained over one thousand items to be completed. Mr. Cohen testified that the builders completed construction of the subject home sometime in April of 2008, and while some of the items on the punch list were still not completed, he and his wife had grown “construction weary” and decided to cease further work to the home.

Mr. Ozahowski prepared a comparable-sales analysis.[81] Mr. Ozahowski’s report cited six purportedly comparable-sale properties in Weston – 5 Winsor Way, 180 Highland Street, 36 Love Lane, 60 Nobscot Road, 451 Wellesley Street, and 38 Winsor Way. The closest comparable-sale property abutted the subject property and the farthest was 3 miles from the subject property. The comparable-sale properties ranged in size from 1.38 acres to 6.28 acres and were improved with luxury homes ranging in gross living area from 5,650 square feet to 17,802 square feet. After applying his adjustments, the adjusted sale prices for these six sales yielded a range from $5,080,500 to $7,235,500. Based on the adjusted sale prices of his comparable-sale properties, Mr. Ozahowski stated that the subject property’s value as of the relevant assessment date was $6,000,000.

Again, as he had for the previous fiscal years, Mr. Ozahowski applied a functional utility adjustment, in the amount of $100,000, to his comparable properties. Mr. Ozahowski’s appraisal indicates that the subject home was “complete and occupied” as of the relevant assessment date. However, the appraisal notes that the exterior stucco was still found to be defective as of January 1, 2007. His appraisal reports that the stucco was remedied during the summer of 2007,[82] at a cost of $150,000.

The assessors valued the subject property at $7,033,500. Mr. Josephson performed a comparable-sale analysis, citing the same four comparable-sale properties which he had cited for fiscal year 2007: 140 Meadowbrook Road, 100 Meadowbrook Road, 180 Highland Street, and 103 Rolling Lane. These properties were all within 0.25 miles of the subject. The comparable properties ranged in size from 1.96 acres to 3 acres and were improved with luxury homes ranging in gross living area from 6,562 square feet to 10,168 square feet. After applying his adjustments, Mr. Josephson’s comparable properties ranged in adjusted sale prices from $6,734,000 to $7,821,400.

The comparable-sale properties which the Board found to be most similar to the subject property was 140 Meadowbrook Road, located only 0.125 miles from the subject property and in the same neighborhood for assessment purposes as the subject property.[83] This property consists of a 1.96-acre parcel of land improved with a Colonial-style home with a gross living area of 9,569 square feet. It contains a total of ten rooms, including five bedrooms, as well as five full bathrooms and three half bathrooms. The comparable property includes a finished basement containing one recreation room, and extra amenities include an attached three-car garage as well as six fireplaces. The comparable property sold on February 4, 2005 for $7,480,000. Mr. Josephson arrived at an adjusted sales price as detailed below:

140 Meadowbrook Road

Adjustments: Appellee’s values

Above grade room count: $100,000

Gross living area: $ 81,000

Rooms below grade: $150,000

Garage size $ 20,000

Fireplaces –$ 9,600

Net adjustment: $341,400

Adjusted sale price: $7,821,400

On the basis of the above facts submitted into evidence, the Board made the following findings of fact for each of the fiscal years at issue.

Fiscal year 2005

The Board was not persuaded by Mr. Ozahowski’s comparable-sales analysis. First, Mr. Ozahowski did not review the deeds for his comparable-sale properties, and two of his comparable-sale properties’ sale prices were incorrectly listed on the MLS upon which he relied for his sales figures. Moreover, the Board found that his $500,000 functional utility adjustment was too high and not supported by the actual state of the subject home as of the relevant assessment date for fiscal year 2005. Mr. Ozahowski admitted that he simply extrapolated the $500,000 figure from a previous appraisal performed for financing purposes by a third-party appraiser who was not present at the hearing of these appeals to explain how he arrived at this adjustment.

By contrast, Mr. Josephson inspected the home on June 30, 2004, and using a construction checklist, he determined that the home was 79 percent completed. The property record card for fiscal year 2005 also indicates that the assessment for fiscal year 2005 accounted for the fact that the subject home was 79 percent completed. The Board found that Mr. Josephson’s method of using a construction checklist was a reliable and accepted means of measuring the degree of completion of the home, and the property record card reflected that the assessors took the degree of completion into account in valuing the home for fiscal year 2005. The Board also found that Mr. Josephson’s comparable-sale properties were sufficiently similar to the subject property to be probative evidence of the subject property’s fair market value.

The Board thus found that the appellant failed to establish that the home’s degree of completion was not taken into account in the subject assessment. Therefore, the Board found that the appellant failed to meet his burden of proving that the subject property’s assessed value was in excess of its fair market value. Accordingly, the Board issued a decision for the appellee for fiscal year 2005.

Fiscal year 2006

The Board was not persuaded by Mr. Ozahowski’s comparable-sales analysis by which he determined a fair market value for the subject property of $5,750,000. Two of Mr. Ozahowski’s comparable-sale properties required over $1,000,000 in adjustments to their sale prices, thus rendering them insufficiently comparable to the subject property to be probative evidence of the subject property’s fair market value. However, the Board found that Mr. Cohen and Mr. Ozahowski documented and proved that defects in the subject home as of the relevant assessment date would cost $200,000 to repair before an owner could sell the subject property on the open market for the prices suggested by Mr. Josephson’s comparable-sales analysis. Further, the assessors failed to inspect the home after June, 2004 and were, therefore, unaware of the state of completion of the home and its defects as of the relevant assessment date for fiscal year 2006. The Board, therefore, found that, because the fiscal year 2006 assessment did not take into account the state of completion or significant defects, the appellant’s $200,000 functional utility deduction to the assessed value of the subject property was warranted. The Board thus deducted $200,000 from the fiscal year 2006 assessment to arrive at a fair cash value for the subject property of $6,752,000 and issued a decision for the appellant abating $2,049.70 in tax for fiscal year 2006.

Fiscal year 2007

The Board was not persuaded by Mr. Ozahowski’s comparable-sales analysis by which he determined a fair market value of $6,000,000. The Board found that two of the sales that Mr. Ozahowski selected – 148 Highland Street and 16 Sanderson Lane – were selected because they were lower in value than other comparable-sale properties in Weston. As revealed by the sale of 103 Rolling Lane, as well as the three other sales selected by Mr. Josephson -– 140 Meadowbrook Road, 180 Highland Street, and 100 Meadowbrook Road, which were located in the same or immediately adjoining neighborhood to the subject property – sales of comparable properties in Weston were higher than Mr. Ozahowski portrayed them to be in his comparable-sale analysis. The Board found that by neglecting to include these comparable-sale properties, which were located in the same or adjoining neighborhood to the subject property, Mr. Ozahowski’s comparable-sale analysis was incomplete, skewed towards the lower end of the range of comparable property sales, and therefore insufficient to provide probative evidence of the subject property’s fair market value. By contrast, the Board found that Mr. Josephson’s comparable-sales analysis was more complete, his sales were in very close proximity to the subject property, and therefore, his analysis was more reliable than Mr. Ozahowski’s comparable-sale analysis. The Board also found that that the subject’s assessed value of $6,925,000 was well within the range of $6,734,000 to $7,821,400, which Mr. Josephson determined in his comparable-sales analysis.

However, the Board found that Mr. Cohen and Mr. Ozahowski documented and proved that defects in the subject home’s stucco as of the relevant assessment date would cost $100,000 to repair before an owner could sell the property on the open market for the prices suggested by Mr. Josephson’s comparable-sales analysis. Further, the assessors failed to inspect the home after June, 2004, and were, therefore, unaware of the state of completion of the home and its defects as of the relevant assessment date for fiscal year 2007. The Board, therefore, found that the fiscal year 2007 assessment did not take into account the state of completion or significant defects. The Board thus found that the appellant’s $100,000 functional utility deduction to the assessed value of the subject property was warranted. Accordingly, the Board valued the subject property at $6,798,800 and issued a decision for the appellant abating $1,056.78 in tax for fiscal year 2007.

Fiscal year 2008

As indicated in Mr. Ozahowski’s appraisal report, the subject home was essentially complete as of the relevant assessment date. The only issue which the appellant supported with documentation was the exterior stucco, which was remedied during the summer of 2007.

The Board found that, at $7,033,500, the subject’s assessed value was well within the range of adjusted sales prices of Mr. Josephson’s comparable-sale properties, which were all located in the same neighborhood or immediately adjoining neighborhood as the subject and all contained new or almost-new luxury homes.[84] The Board also found that 140 Meadowbrook Road, cited by the appellee, was particularly comparable to the subject property. It was located within 0.125 miles of the subject property, in the same neighborhood for assessment purposes, and many of its features were very similar to those of the subject property: a 1.96-acre parcel of land, as compared with the subject’s 2.23-acre parcel of land; a Colonial-style home with a gross living area of 9,569 square feet, as compared with the subject’s Colonial-style home with a gross living area of 9,839 square feet; and the comparable property’s five bedrooms, five full bathrooms and three half bathrooms, as compared with the subject’s five bedrooms, seven full bathrooms and three half bathrooms. The Board also found that Mr. Josephson made appropriate adjustments for differences between the two properties, including number of bathrooms, rooms below grade, and extras like fireplaces and size of the garages. The Board thus found that Mr. Josephson established comparability between his comparable property and the subject property. The Board found that the comparable-sale property’s adjusted value of $7,821,400 supported an assessed value of at least $7,033,500 for the subject property for fiscal year 2008, even considering the defective state of the stucco on the subject home. The Board thus found that the appellant failed to prove that the fair cash value of his property was less than its assessed value for fiscal year 2008. Accordingly, the Board issued a decision for the appellee for fiscal year 2008.

OPINION

The assessors are required to assess real estate at its fair cash value. G.L. c. 59, § 38. Fair cash value is defined as the price on which a willing seller and a willing buyer will agree if both of them are fully informed and under no compulsion. Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956). Generally, real estate valuation experts and the Massachusetts courts rely upon three approaches to determine fair cash value of property: income capitalization, sales comparison, and cost reproduction. Correia v. New Bedford Redevelopment, 375 Mass. 360, 362 (1978). “The board is not required to adopt any particular method of valuation.” Pepsi-Cola Bottling Co. v. Assessors of Boston, 397 Mass. 447, 449 (1986).

The appellant has the burden of proving that the property has a lower value than that assessed. “‛The burden of proof is upon the petitioner to make out its right as [a] matter of law to [an] abatement of the tax.’” Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974) (quoting Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47, 55 (1922)). “[T]he board is entitled to ‛presume that the valuation made by the assessors [is] valid unless the taxpayers . . . prov[e] the contrary.’” General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 598 (1984) (quoting Schlaiker, 365 Mass. at 245). In appeals before this Board, a taxpayer “‛may present persuasive evidence of overvaluation either by exposing flaws or errors in the assessors’ method of valuation, or by introducing affirmative evidence of value which undermines the assessors’ valuation.’” General Electric Co., 393 Mass. at 600 (quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983)).

When comparable sales are used, however, allowances must be made for various factors which would otherwise cause disparities in the comparable property’s sale prices. See Pembroke Industrial Park Co., Inc. v. Assessors of Pembroke, Mass. ATB Findings of Fact and Reports 1998-1072, 1082 (and the cases cited therein). Functional utility is an allowance made to account for “an impairment of the functional capacity of a property or building according to current market tastes and standards.” The Appraisal Institute, the appraisal of real estate (13^th ed. 2008) 262. An assessment’s failure to account for functional defects will warrant a reduction in assessed value to account for the costs to cure the defects. See, e.g., Hughes v. Board of Assessors of the City of Quincy, Mass. ATB Findings of Fact and Reports 2005-420, 424-25, 428 (finding that assessment was excessive because the assessors failed to consider documented deficiencies in subject property).

For fiscal years 2006 and 2007, the subject property’s assessed values were within the range of adjusted sale prices in Mr. Josephson’s comparable-sales analyses, which the Board found to be based upon comparable sale properties that were sufficiently similar to the subject property to be probative of the subject property’s fair cash value.

However, Mr. Ozahowski and Mr. Cohen accurately documented that the subject home had several serious defects – particularly the HVAC system, exterior stucco, and interior flooring, stairs and millwork – that substantially reduced the subject property’s fair market value. The Board found and ruled that Mr. Ozahowski considered the state of completion of the subject home, including the many defects in workmanship and utilities, during the relevant assessment periods, and the reasonable costs to cure these defects. By contrast, the Board found that the assessors were not aware of, nor did they take into account, the state of completion of the subject home or its defects in the subject assessments. Therefore, the Board found and ruled that the appellant exposed flaws in the assessors’ method of valuation and introduced affirmative evidence that functional utility adjustments of $200,000 and $100,000 were warranted for fiscal years 2006 and 2007, respectively. Accordingly, the Board found and ruled that the appellant met his burden of proving overvaluation for fiscal years 2006 and 2007.

The Board was not persuaded by Mr. Ozahowski’s functional utility adjustment for fiscal year 2005. Mr. Ozahowski simply adopted an adjustment from a prior financing appraisal, prepared by a third-party appraiser who was not present to explain his adjustment. By contrast, Mr. Josephson inspected the property and used a construction checklist as an accurate measure of the state of completion of the subject home. The property record card documents that the subject assessment reflected the state of completion of the subject home during the relevant assessment period. The Board thus found and ruled that the appellant failed to expose meaningful flaws or errors in the assessors’ valuation. Therefore, the Board found and ruled that the appellant failed to meet his burden of proving overvaluation for fiscal year 2005.

Because the subject home was essentially completed as of the relevant assessment date for fiscal year 2008, the Board did not consider functional utility adjustments. The Board was most persuaded by Mr. Josephson’s analysis of 140 Meadowbrook Road, located within a very close proximity of the subject property. As previously explained, the Board found that Mr. Josephson established comparability between his comparable property and the subject property. On the basis of this comparable sale, the Board found and ruled that the comparable property’s adjusted sale price of $7,821,400 supported an assessed value of at least $7,033,500 for the subject property for fiscal year 2008, even considering the defective state of the stucco on the subject home. The Board, therefore, found and ruled that the appellant failed to meet his burden of proving that the subject property was overvalued for fiscal year 2008.

On the basis of the foregoing, the Board: (1) issued decisions for the appellant for fiscal years 2006 and 2007, reducing the subject assessments by $200,000 and $100,000 and granting abatements in the amounts of $2,049.70 and $1,056.78, respectively; and (2) issued decisions for the appellee for fiscal years 2005 and 2008.

APPELLATE TAX BOARD

By: __________________________________

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: _______________________________

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

W.A. WILDE COMPANY, INC. v. BOARD OF ASSESSORS OF

THE TOWN OF HOLLISTON

Docket Nos. F293416, F293417 Promulgated:

May 13, 2010

These are appeals filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65 from the refusal of the appellee Board of Assessors of the Town of Holliston (“appellee” or “assessors”) to abate taxes on real estate located in Holliston, owned by and assessed to Clinton Hill Holliston LLC, TC Equities Holliston LLC, and Cooperative Equities IV Holliston LLC, under G.L. c. 59, §§ 11 and 38, for fiscal year 2007. These appeals were brought by W.A. Wilde Company, Inc. (“appellant”) under G.L. c. 59, § 59, as a tenant paying rent and under an obligation to pay more than one-half of the taxes assessed.

Commissioner Egan heard these appeals. Chairman Hammond and Commissioners Scharaffa and Rose joined her in the decisions for the appellee. Commissioner Mulhern took no part in the deliberations or decisions relating to these matters.

These Findings of Fact and Report are made at the request of the appellant pursuant to G.L. c. 58A, § 13 and 831 CMR 1.32.

Matthew A. Luz, Esq. for the appellant.

James F. Sullivan, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

Based on oral arguments and exhibits offered at the hearing of these appeals, the Appellate Tax Board (“Board”) made the following findings of fact.

On January 1, 2006, the appellant was a lessee in possession of two parcels of real estate located at 200 and 201 Summer Street in Holliston (collectively, the “subject properties”). The subject properties are situated across the street from one another and are improved with buildings used for industrial and office purposes.

For fiscal year 2007, the assessors valued 200 Summer Street at $3,211,800 and 201 Summer Street at $5,012,300 and assessed a tax thereon, at the rate of $13.35 per $1,000, in the amounts of $43,520.69 and $67,917.92, respectively.[85] The assessors mailed the actual tax bills relating to the referenced assessments on or about March 22, 2007. In accordance with G.L. c. 59, § 57C, the appellant paid the taxes due without incurring interest and in accordance with G.L. c. 59, § 59, timely filed Applications for Abatement on March 28, 2007, which were denied by the assessors on June 28, 2007. On August 6, 2007, the appellant seasonably filed Petitions Under Formal Procedure with the Board. On the basis of these facts, the Board found and ruled that it had jurisdiction to hear and decide these appeals.

Prior to the current appeals, the subject properties’ assessed values for fiscal years 2005 and 2006 were contested before the Board, resulting in decisions for the assessors. See W.A. Wilde Co. & Wilde Acres Realty Corp. v. Assessors of the Town of Holliston, Mass. ATB Findings of Fact and Reports 2008-86 (“W.A. Wilde Co. I”). For both fiscal year 2005 and 2006, the assessors had valued 200 Summer Street at $3,162,000 and 201 Summer Street at $4,877,500, and the Board found that the appellants failed to meet their burden of proving that the subject properties had been overvalued. W.A. Wilde Co. I, Mass. ATB Findings of Fact and Reports at 2008-108. The Board made no determination of the properties’ fair cash value in W.A. Wilde Co. I.

In the present appeals, the appellant presented neither witnesses nor evidence to support its assertion that the subject properties were overvalued for fiscal year 2007. Rather, the appellant relied entirely on G.L. c. 58A, § 12A, which provides that if the Board has “determined the fair cash value” of property within the two fiscal years preceding an assessment that exceeds the Board’s determination, “the burden shall be upon the [assessors] to prove that the assessed value was warranted.” Id.

Having noted that assessors are required by statute to value property at its fair cash value for each fiscal year,[86] the appellant argued that “[w]hen the [Board] makes a decision, whether . . . it’s in favor of the appellant or the appellee, the [Board] is determining value. It’s a decision that determines [that] the fair cash value set by the assessors is the fair cash value.” For their part, the assessors, while disagreeing with the appellant’s legal argument, chose not to present evidence in support of the contested assessments.

For the reasons discussed in the following Opinion, the Board found and ruled that G.L. c. 58A, § 12A was not applicable to the current appeals. Thus, having declined to present evidence relating to the fair cash value of the subject properties, the appellant failed to sustain its burden of demonstrating that the properties were overvalued for fiscal year 2007. The Board, therefore, decided these appeals for the appellee.

OPINION

Assessors are required to assess real estate at its “fair cash value.” G.L. c. 59, § 38. Fair cash value is defined as the price on which a willing seller and a willing buyer will agree if both of them are fully informed and under no compulsion. Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).

The appellant has the burden of proving that the property has a lower value than that assessed. “‘The burden of proof is upon the petitioner to make out its right as a matter of law to abatement of the tax.’” Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974) (quoting Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47, 55 (1922)). “[T]he board is entitled to ‘presume that the valuation made by the assessors [is] valid unless the taxpayers . . . prov[e] the contrary.’” General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 598 (1984) (quoting Schlaiker, 363 Mass. at 245).

This allocation of burden is not, however, applicable in all circumstances. For example, G.L. c. 58A, § 12A (“§ 12A”) provides, in pertinent part:

If the owner of a parcel of real estate files an appeal of the assessed value of said parcel with the board for either of the next two fiscal years after a fiscal year for which the board has determined the fair cash value of said parcel and if the assessed value is greater than the fair cash value as determined by the board, the burden shall be upon the appellee to prove that the assessed value was warranted . . . .

The disputed assessments in these appeals fall within the temporal constraints of § 12A, as the fiscal year currently at issue immediately followed those considered by the Board in W.A. Wilde Co. I. See W.A. Wilde Co. I, Mass. ATB Findings of Fact and Reports at 2008-108. Moreover, the subject properties’ fiscal year 2007 assessments exceeded their fiscal year 2005 and 2006 assessments by slightly more than one percent. The dispositive issue, therefore, is whether the Board’s decision in W.A. Wilde Co. I constituted a determination of the fair cash value of the subject properties within the meaning of § 12A, thereby placing a burden on the assessors “to prove that the assessed value [for fiscal year 2007] was warranted.” The Board found and ruled that its decision in W.A. Wilde Co. I did not constitute such a determination.

Assuming that jurisdictional prerequisites have been satisfied, the Board may decide appeals brought by appellants who are aggrieved by the assessors’ valuations of real property. See G.L. c. 58A, § 6; G.L. c. 59, §§ 64 and 65. For each appeal, a decision is issued, and with exceptions not here relevant, either party may request a “findings and report”[87] that describes the facts relating to, and legal basis for, the decision. See G.L. c. 58A, § 13.[88]

For cases in which the appellant prevails and the Board has found that the fair cash value of the property is lower than its assessed value, the Board’s decision specifies the fair cash value of the property, and the consequent abatement due the appellant. See G.L. c. 58A, § 13; G.L. c. 59, §§ 64 and 65; see, e.g., Holyoke Shopping Center, LLC v. Assessors of the City of Holyoke, Mass. ATB Findings of Fact and Reports 2008-1185, 1196; Bodwell Extension, LLC v. Assessors of the Town of Avon, Mass. ATB Findings of Fact and Reports 2007-1257, 1265; Wayland Business Center Holdings, LLC and GRM Properties II, LLC v. Assessors of the Town of Wayland, Mass. ATB Findings of Fact and Reports 2005-557, 590-592. There is no statutory requirement that the Board determine a value in those appeals it decides in favor of assessors, and there is generally no practical need to do so because no abatement is calculated.

In W.A. Wilde Co. I, the Board concluded that the subject properties had not been overvalued and the decision relating to each appeal stated only that it was for the appellee. In the associated Findings of Fact and Report, the Board found only that the properties had not been overvalued. Regardless, and without citing supporting authority, the appellant in the present appeals argued that any decision issued by the Board necessarily constitutes a determination of the fair cash value of property within the meaning of § 12A.

The Board agreed that in those cases in which the appellant prevails and the Board has found the fair cash value of property, a determination of fair cash value has been made, thereby triggering possible application of § 12A. However, when a decision or Finding of Facts and Report states only that property has not been overvalued, there has been no such determination. Rather, the Board, based on all of the evidence before it, has found only that the taxpayer failed to meet its burden of proving that the fair cash value of the property is less than its assessed value.

In sum, the Board found and ruled that a decision for an appellee or a Findings of Fact and Report in which the Board does not provide its own separate calculation of fair cash value but finds only that the appellant failed to meet its burden of proving that its property was overvalued does not constitute an independent determination of the fair cash value of the property within the meaning of § 12A. In turn, the Board found and ruled that § 12A is not applicable to the present appeals.

Having concluded that § 12A does not apply to these appeals, the Board further found and ruled that by not presenting evidence relating to the fair cash value of the subject properties, the appellant failed to sustain its burden of demonstrating that the properties were overvalued for fiscal year 2007. On this basis, the Board decided these appeals for the appellee.

THE APPELLATE TAX BOARD

By:___________________________________

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: ____________________________

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

ROBERT JAMES CORKERY, TRUSTEE v. BOARD OF ASSSESSORS OF

OF THE R&M REALTY TRUST[89] THE TOWN OF CANTON

Docket Nos. F288608, F288609 Promulgated:

F294040, F294041 May 18, 2010

These are appeals under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65, from the refusal of the appellee to abate taxes on real estate located in the Town of Canton owned by and assessed to the appellant under G.L. c. 59, §§ 11 and 38, for fiscal years 2007 and 2008.

Commissioner Rose (“Presiding Commissioner”) heard the appeals and issued single-member decisions, under G.L. c. 58A, § 1A and 831 CMR 1.20, for the appellee in docket numbers 288609 and 294041, and revised single-member decisions, under G.L. c. 58A, § 1A and 831 CMR 1.20, for the appellant in docket numbers 288608 and 294040, which are promulgated simultaneously herewith. The revised decisions correct minor computational errors contained in the original decisions.

These findings of fact and report are made pursuant to requests by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.

Nicholas R. Corkery, Esq. for the appellant.

John Wieliczki, Assessor, for the appellee.

FINDINGS OF FACT AND REPORT

On January 1, 2006 and January 1, 2007, Robert James Corkery, Trustee of The R&M Realty Trust (“appellant”) was the assessed owner of two contiguous parcels of real estate located at 20 Industrial Drive (“Industrial Drive property”) and 868 Turnpike Street (“Turnpike Street property”) in the Town of Canton (collectively “subject properties”). When viewed together, the subject properties form the approximate shape of a mirror-imaged or reversed “L.” For fiscal year 2007, the Board of Assessors of Canton (“assessors”) valued the Industrial Drive property at $475,000 and assessed a tax thereon, at a rate of $17.94 per $1,000, in the amount of $8,521.50. The assessors valued the Turnpike Street property at $385,900 and assessed a tax thereon, at a rate of $17.94 per $1,000, in the amount $6,923.05. After December 31, 2006, Canton’s Collector of Taxes sent out the town’s actual real estate tax bills. In accordance with G.L. c. 59, § 57C, the appellant timely paid the taxes assessed on the subject properties without incurring interest.[90]

On or about April 17, 2007, in accordance with G.L. c. 59, § 59, the appellant filed Applications for Abatement with the assessors,[91] which they denied on May 7, 2007. On or about May 15, 2007, in accordance with G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65, the appellant seasonably appealed the assessors’ denials of the abatement applications by filing Petitions Under Formal Procedure with the Appellate Tax Board (“Board”). On this basis, the Presiding Commissioner found and ruled that the Board had jurisdiction over these two fiscal year 2007 appeals.

For fiscal year 2008, the assessors valued the Industrial Drive property at $475,000 and assessed a tax thereon, at a rate of $18.40 per $1,000, in the amount of $8,740.00. The assessors valued the Turnpike Street property at $385,900 and assessed a tax thereon, at a rate of $18.40 per $1,000, in the amount $7,100.56. On or about December 31, 2007, Canton’s Collector of Taxes sent out the town’s actual real estate tax bills. In accordance with G.L. c. 59, § 57C, the appellant timely paid the taxes assessed on the subject properties without incurring interest.

On or about January 7, 2008, in accordance with G.L. c. 59, § 59, the appellant filed Applications for Abatement with the assessors, which they denied on February 12, 2008. On or about March 4, 2008, in accordance with G.L. c. 58A, § 7 and c. 59, §§ 64 and 65, the appellant seasonably appealed the assessors’ denials of the abatement applications by filing Petitions Under Formal Procedure with the Board. On this basis, the Presiding Commissioner found and ruled that the Board had jurisdiction over these two fiscal year 2008 appeals.

The Industrial Drive property is composed of a 2.100-acre site improved with a 3,045-square-foot, two-bay garage, and a 240-square-foot shed. This property also contains 600 linear feet of six-foot-high chain-link fencing. The garage has a poured concrete foundation, and its siding and roof are made of metal-sheeting. Its interior is unfinished and without any plumbing or heating. All utilities are available to the site. For fiscal years 2007 and 2008, the assessors valued the Industrial Drive property’s land at $301,200 and its improvements at $173,800, for a total assessment of $475,000. The assessors’ total improvement assessment included the value of an antenna tower purportedly located on this property. The assessors separately valued each of the improvements as follows: garage – $44,300; fence – $2,500; shed – $32,600; and antenna tower – $94,400.

The Turnpike Street property is composed of a 2.020-acre site improved with a 1,288-square-foot, single-story general office building, some paving, a sign, a 185-foot-high antenna tower, and several small utility buildings. The general office building has a full concrete basement, metal and brick exterior siding, and metal and composite roofing surfaces. The interior walls are sheetrock, and the floors are concrete, carpet or tile. This building has plumbing, heating, and bathrooms. The antenna tower is secured to a poured concrete pad, on which two small buildings that house mechanical equipment, as well as a transformer, a generator, and some other related fixtures are affixed. For fiscal years 2007 and 2008, the assessors valued the Turnpike Street property’s land at $231,200 and its improvements at $154,700, for a total assessment of $385,900. The assessors separately valued each of the improvements as follows: general office building – $62,000; paving – $4,500; utility buildings – $16,900; sign – $1,200; and antenna tower – $70,100.

In challenging the assessments, the appellant argued that the assessors had not adequately considered drainage problems on the subject properties and had erroneously assessed an antenna tower to the Industrial Drive property. In support of his contentions, the appellant submitted a survey of the subject properties, a site grading plan for a neighboring Turnpike Street property, and several photographs depicting water accumulation on the subject properties. The appellant did not offer any estimates for remedying the subject properties’ drainage problems or attempt to quantify the effect of the drainage problems on the value of the subject properties. Further, the appellant did not introduce any substantive evidence attempting to demonstrate comparability between the neighboring Turnpike Street property and the subject properties.

The assessors contended that they had considered drainage problems associated with the subject properties in setting their assessments for the fiscal years at issue, but agreed with the appellant that they had erroneously included the value of an antenna tower in the Industrial Drive property’s assessment.

After considering all of the evidence, the Presiding Commissioner found that the appellant failed to sufficiently show any diminution in the subject properties’ values associated with the drainage problems. The Presiding Commissioner found that the absence of any bills or estimates for redressing this issue and the appellant’s inability to quantify any effect from the drainage problems on the subject properties’ values proved fatal to the appellant’s contention regarding the drainage problems. The Presiding Commissioner also found that the site drainage plan for a neighboring Turnpike Street property, without having established some degree of comparability to the subject properties, had little probative value. The Presiding Commissioner did find, however, that the appellant had adequately demonstrated through both his testimony and his documentary evidence that the assessors had erroneously assessed an antenna tower on the Industrial Drive property. After hearing the appellant’s presentation in this regard, the assessors agreed with him. Accordingly, the Presiding Commissioner found that the Industrial Drive property was over-assessed by the $94,400 value that the assessors had ascribed to the phantom antenna tower.

On this basis, the Presiding Commissioner found that the appellant failed to meet its burden of proving that the Turnpike Street property was overvalued for fiscal years 2007 and 2008 but did adequately show that the Industrial Drive property was overvalued by $94,400 for fiscal years 2007 and 2008. This latter finding resulted in a $94,400 reduction in the Industrial Drive property’s $475,000 assessment for fiscal years 2007 and 2008, thereby lowering its value to $380,600 for both fiscal years. As a result, the Presiding Commissioner granted tax abatements, at rates of $17.94 and $18.40 per $1,000, for fiscal years 2007 and 2008, respectively, in the amounts of $1,693.54 for fiscal year 2007 and $1,736.96 for fiscal year 2008. Accordingly, the Presiding Commissioner decided docket numbers F288609 and F294041, which pertain to the Turnpike Street property, for the appellee and docket numbers F288608 and F294040, which pertain to the Industrial Drive property, for the appellant.

OPINION

The assessors are required to assess real estate at its fair cash value. G.L. c. 59, § 38. Fair cash value is defined as the price on which a willing seller and a willing buyer in a free and open market will agree if both of them are fully informed and under no compulsion. Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).

In appeals before this Board, a taxpayer “‘may present persuasive evidence of overvaluation either by exposing flaws or errors in the assessors’ method of valuation, or by introducing affirmative evidence of value which undermines the assessors’ valuation.’” General Electric Co., 393 Mass. at 600 (quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983)).

In the Industrial Drive property appeals, the Presiding Commissioner found that the appellant met his burden of demonstrating that the Industrial Drive property was overvalued for fiscal years 2007 and 2008 by showing that the assessors had erroneously included the $94,400 value of an antenna tower in their assessment.

In abatement proceedings, “the question is whether the assessment for the parcel of real estate, including both the land and the structures thereon, is excessive. The component parts, on which that single assessment is laid, are each open to inquiry and revision by the appellate tribunal in reaching the conclusion whether that single assessment is excessive.” Massachusetts General Hospital v. Belmont, 238 Mass. 396, 403 (1921). See also Guernsey v. Assessors of Williamstown, Mass. ATB Findings of Fact and Reports 2006-158, 168; Buckley v. Assessors of Duxbury, Mass. ATB Findings of Fact and Reports 1990-110, 119; Jernegan v. Assessors of Duxbury, Mass. ATB Findings of Fact and Reports 1990-39, 48-9; Everhart v. Assessors of Dalton, Mass. ATB Findings of Fact and Reports 1985-49, 54. In the Industrial Drive property appeals, the Presiding Commissioner ruled that the excessive value attributed to the improvement component of the Industrial Drive property assessment, namely the phantom antenna tower, resulted in the assessors commensurately overvaluing the subject property as a whole.

The Presiding Commissioner further found that the appellant failed to sufficiently show any diminution in the subject properties’ values associated with the drainage issues. The Presiding Commissioner found that the absence of any bills or estimates for redressing this problem and the appellant’s inability to quantify the drainage issues effect on the subject properties’ values were fatal to this contention. See, e.g., Abuzahra v. Assessors of Rowley, Mass. ATB Findings of Fact and Reports 2008-1514, 1522 (ruling that “the appellants failed to meet their burden of showing that the subject property was overvalued . . . because they failed to quantify the effects of wetlands or topographical issues on the value of their lots.” (citation omitted)). The Presiding Commissioner also found that the site drainage plan for a neighboring Turnpike Street property, for which the appellant failed to show comparability, had little probative value. Accordingly, the Presiding Commissioner found and ruled that the appellant failed to meet his burden of proving that the Turnpike Street property was overvalued or that the Industrial Drive property was further overvalued.

“The board [is] not required to believe the testimony of any particular witness but [may] accept such portions of the evidence as appear to have the more convincing weight. Assessors of Quincy v. Boston Consol. Gas Co., 309 Mass. 60, 72 (1941). “The credibility of witnesses, the weight of evidence, and inferences to be drawn from the evidence are matters for the board.” Cummington School of the Arts, Inc. v. Assessors of Cummington, 373 Mass. 597, 605 (1977). “The market value of the property c[an] not be proved with mathematical certainty and must ultimately rest in the realm of opinion, estimate, and judgment . . . . The board [may] select the various elements of value as shown by the record and from them form . . . its own independent judgment.” Assessors of Quincy v. Boston Consol. Gas Co., 309 Mass. 60, 72 (1941) (citations omitted). See also North American Philips Lighting Corp. v. Assessors of Lynn, 392 Mass. 296, 300 (1984); New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456, 473 (1981); Jordan Marsh Co. v. Assessors of Malden, 359 Mass. 106, 110 (1971). Based on the evidence presented in this appeal, the Presiding Commissioner selected the most credible and probative evidence and exercised his independent judgment in finding and ruling that the Industrial Drive property was overvalued by the assessors for the two fiscal years at issue, but the Turnpike Street property was not.

On this basis, the Presiding Commissioner found and ruled that the fair cash value of the Industrial Drive property for fiscal years 2007 and 2008 was $380,600, and he, therefore, decided those appeals for the appellant and granted abatements in the amount of $1,693.54 and $1,736.96 for fiscal years 2007 and 2008, respectively.

On this basis, the Presiding Commissioner also decided the Turnpike Street property appeals for the appellee.

APPELLATE TAX BOARD

By: ____

James D. Rose, Commissioner

A true copy,

Attest: _______

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

CENTER FOR HUMAN v. BOARD OF ASSESSORS OF

DEVELOPMENT, INC. THE CITY OF SPRINGFIELD

Docket No. F293247 Promulgated:

May 20, 2010

This is an appeal under the formal procedure, pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65 from the refusal of the appellee Board of Assessors of the City of Springfield (“assessors” or “appellee”) to abate real estate taxes on certain real estate located in Springfield, owned by and assessed to the appellant, Center for Human Development, Inc., (“CHD” or “appellant”) under G.L. c. 59, §§ 11 and 38 for fiscal year 2007 (“fiscal year at issue”).

Commissioner Scharaffa heard this appeal. Chairman Hammond and Commissioners Egan, Rose and Mulhern joined him in the decision for the appellant.

These findings of fact and report are made pursuant to a request by the appellee under G.L. c. 58A, § 13 and 831 CMR 1.32.

Robert A. Gelinas, Esq. and Daniel J. Finnegan, Esq. for the appellant.

Patricia Bobba Donovan, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of the testimony and exhibits offered into evidence in the hearing of this appeal, the Appellate Tax Board (“Board”) made the following findings of fact. As of July 1, 2006, the relevant date for the determination of exemption for the fiscal year at issue, the appellant was the assessed owner of a 2.65-acre parcel of land improved with a 34,290 square-foot building and an asphalt parking lot, located at 50 Warehouse Street in Springfield (“subject property”). For the fiscal year at issue, the assessors valued the subject property at $824,700, and assessed a tax thereon, at a rate of $31.91 per $1,000, in the total amount of $26,316.18.

On February 24, 2006, in accordance with G.L. c. 59, § 5, Clause Third (“Clause Third”), the appellant timely filed with the assessors its Form 3ABC for the fiscal year at issue, with a copy of its Form PC attached. On December 31, 2006, the Collector of Taxes for Springfield mailed the fiscal year 2007 actual tax bills. The appellant timely paid the taxes due without incurring interest. On January 31, 2007, the appellant timely filed an Application for Abatement with the assessors, which was deemed denied on April 30, 2007.[92] The appellant timely filed its petition with the Board on July 27, 2007. Based on the foregoing facts, the Board found and ruled that it had jurisdiction to hear and decide this appeal.

The issue presented in this appeal was whether the subject property was exempt from tax under Clause Third. At all times relevant to this appeal, the subject property was owned by CHD. The parties did not dispute, and the Board found, that CHD was a charitable organization. CHD was a non-profit corporation, organized under Chapter 180 of the General Laws in 1972.[93] According to its articles of organization, CHD was formed for the purpose of

[t]he establishment of group residences to provide for the welfare and ‘in the community’ development of persons in need of supportive services; the establishment of educational facilities with power to award diplomas or certificates of accomplishment; the development of training programs for the staffs of the above mentioned and closely related facilities and the development of such other programs as shall be deemed appropriate by the Board of Directors.

As of the time of the hearing of this appeal, CHD was providing social services to approximately 4,000 children, adults and families through approximately 45 different programs in Massachusetts and Connecticut. CHD’s services included clinical and outreach therapeutic services, crisis assessment and stabilization, shelter and supported housing, substance abuse counseling, day treatment and vocational rehabilitative services. The population served by CHD consisted of individuals with histories of mental illness, substance abuse, and trauma.

In conjunction with its goal of providing vocational rehabilitation, CHD developed a curriculum which used furniture-making as a modality to deliver therapeutic and vocational rehabilitative services to persons with severe mental disabilities. In 1983, using that curriculum, CHD launched a program known as Riverbend Furniture (“Riverbend”). Marketing materials entered into evidence stated that the mission of the Riverbend program was “to provide meaningful work to individuals with mental illnesses by training them to produce high quality furniture.”

James Goodwin, the President of CHD, and Audrey Lee Highbee, the Director of Riverbend and Vice President for Mental Health Services for CHD, testified at the hearing of this appeal. The Board found their testimony to be credible. Mr. Goodwin and Ms. Highbee described the day-to-day operations of the Riverbend program, as well as its typical clientele and overall mission.

At the time of its inception, Riverbend served primarily people who had formerly resided at Northampton State Hospital. As Mr. Goodwin testified, these individuals had severe mental illnesses and it was optimal from a clinical perspective to keep them busy and occupied during the day. They began by building simple items, such as birdhouses or paper towel dispensers, but CHD soon recognized that they could benefit by taking on more complex projects, including furniture building. The program was successful, and therefore, it grew and expanded to four separate locations, two of which were focused on woodworking and two of which were focused on upholstery. In 2006, in an effort to streamline its operations and reduce expenses, CHD purchased the subject property, and consolidated all of the Riverbend operations at that location.

During the fiscal year at issue, CHD provided services to 75 individuals at Riverbend, all of whom were referred by the Massachusetts Department of Mental Health (“DMH”). CHD ran the Riverbend program in conjunction with DMH, and DMH contributed $622,436 to Riverbend’s budget, which was approximately 36% of the total budget. Many of the clients served at Riverbend lived in group residential homes or in their own apartments with support services provided by DMH or other non-profit agencies. The diagnoses of Riverbend clients included bi-polar disorder, schizophrenia, and post-traumatic stress disorder, among others. Each client had an individual service plan (“ISP”) coordinated by DMH which involved a spectrum of social services, and the Riverbend program provided the vocational rehabilitation component of each client’s ISP.

CHD employed staff to supervise clients at the Riverbend program. CHD employees working at Riverbend typically possessed knowledge of carpentry or furniture making, but some also had human services and psychology backgrounds. They received training in psycho-social rehabilitative skills, including special training about mental illness, medications for mental illness, and effective methodologies for supervising individuals with mental illness. Staff were required to make a vocational assessment of each client and develop vocational treatment plans to compliment the treatment plans received by each client in other support programs.

Clients at Riverbend worked in small teams. Typically, there were four to six clients per team, supervised by one Riverbend staff member. Clients worked approximately five hours each day, with a lunch break and other breaks as needed. Activities performed by clients at Riverbend included milling, machine work, assembly, finishing, and upholstery work. Ms. Highbee, who is a nurse by training and has worked at CHD for nearly 30 years, testified to the therapeutic benefits received by clients treated at Riverbend. Ms. Highbee testified that the sense of pride and accomplishment that the clients achieved while working on projects was extremely beneficial to their mental health and stability. Moreover, Ms. Highbee testified that the mental focus required to work on projects helped to reduce clients’ stress and overall symptoms.

Substance abuse counselors, social workers, and occupational therapists also frequented Riverbend. Duties assigned to clients were modified in the event that they were experiencing a flare in symptoms. Almost all of the clients required psychotropic and other medications. Although CHD staff working at Riverbend were trained in dispensing medications, clients typically took their medications at home or at another of the therapy programs which they attended. CHD provided transportation to and from Riverbend for its clients.

Riverbend clients were paid modest wages for their efforts. The wages were determined under Department of Labor standards and based on prevailing industry wages, which were then prorated to correspond to each person’s functional capacity. Because of their reduced functional capacities, the majority of Riverbend clients were paid less than minimum wage. Ms. Highbee testified that many of the clients used their wages to patronize area businesses during lunch break. According to Ms. Highbee, the receipt of the wages greatly boosted the self-esteem of clients as well as their ability to function independently in the community, which was one of CHD’s principal goals.

Because of their mental disabilities, many of the clients served at Riverbend received various forms of government assistance, including social security benefits, housing subsidies, fuel assistance, and/or food stamps. The wages received by the clients were used to offset these various other benefit payments. During the fiscal year at issue, wages paid to Riverbend clients offset a total of $18,657 of social security payments.

Clients at Riverbend produced office and lounge furniture, as well as dormitory dressers and beds. The furniture produced at Riverbend was primarily sold to other non-profit organizations or large institutions. Marketing materials introduced into evidence described Riverbend furniture as “quality products with a social purpose.”

In fiscal year 2007, Riverbend produced 7,000 pieces of furniture and had a total sales revenue of $956,000. However, even with the contributions made by DMH, Riverbend had an operating loss of $121,480. As explained by Mr. Goodwin, operating inefficiencies were the necessary result of the fact that the Riverbend program was focused on the delivery of therapeutic vocational training rather than the production of furniture. In fact, Mr. Goodwin testified that Riverbend used outdated tools and methods to produce its furniture, rather than the more advanced technology currently used at for-profit furniture businesses. Riverbend used such tools and methods because they facilitated the delivery of therapeutic benefits. The use of these more primitive methods not only taught Riverbend clients useful manual skills, but also required increased focus, which, in turn, was beneficial to the mental health of the clients. The evidence established that 75 clients were engaged in furniture-making at Riverbend in fiscal year 2007, yet Riverbend generated under $1,000,000 in sales revenue in that same period, a staff-to-sales volume ratio which Mr. Goodwin testified would be untenable in the for-profit world. Further, Ms. Highbee testified that Riverbend did not lay off or otherwise reduce the number of clients participating in the Riverbend program in the event of a downturn in furniture sales. As Mr. Goodwin stated, CHD was “in the mental health business, not in the furniture business.”

Based on these subsidiary findings, the Board made the following, ultimate findings of fact. The Board found that at all times relevant to this appeal, the subject property was owned by CHD, which was a charitable organization. The Board found that during the fiscal year at issue, CHD occupied the subject property by housing Riverbend, its vocational rehabilitation program, there. The Board found that this use of the subject property furthered CHD’s charitable purposes. The Board therefore found and ruled that that subject property was exempt under Clause Third for the fiscal year at issue, and, accordingly, issued a decision for the appellant in this appeal and granted a full abatement in the amount of $26,316.18.

OPINION

In the present appeal, the parties did not dispute that the subject property was owned by CHD, or that CHD was a charitable corporation within the meaning of Clause Third. The only dispute between the parties was whether CHD occupied the subject property for charitable purposes. Occupancy for purposes of Clause Third means use for the purpose for which the charity is organized. Babcock v. Leopold Morse Home for Infirm Hebrews and Orphanage, 225 Mass. 418, 421 (1917). (“Occupancy means . . . appropriation to the immediate uses of the charitable cause for which the owner was organized.”)

CHD’s charitable mission was the provision of social services to individuals with histories of mental illness, substance abuse, and trauma. CHD provided clinical and outreach therapeutic services, crisis assessment and stabilization, shelter and supported housing, substance abuse counseling, day treatment and vocational rehabilitative services to over 4,000 individuals through approximately 45 different programs. The Board found and ruled that Riverbend was but one of CHD’s many programs, and the use of the subject property to house Riverbend constituted the occupation of the subject property for CHD’s charitable purposes.

The assessors contended that the subject property was used purely for the production of furniture, which was a commercial, not charitable, activity. This argument was plainly contradicted by the evidence, which established that Riverbend was operated not as a commercial venture, but as a therapeutic vocational program.

Riverbend furniture was produced exclusively by individuals referred by DMH, each of whom had an ISP managed by DMH. No clients worked full-time, and the vast majority were paid considerably less than minimum wage. During the course of the working day, Riverbend clients were closely supervised by CHD staff. In addition, clients interacted with substance abuse counselors, social workers, and occupational therapists while at Riverbend. Duties assigned to clients were modified in the event that they were experiencing a flare in symptoms. CHD provided transportation to and from Riverbend for its clients. The tools and methods used at Riverbend to produce furniture were not geared towards the efficient or maximum production of furniture, but instead towards teaching vocational skills and providing other therapeutic benefits to Riverbend’s clients, such as increased concentration and self-esteem. In fact, Ms. Highbee testified that Riverbend did not lay off or otherwise reduce the number of clients participating in the Riverbend program in the event of a downturn in furniture sales. Despite the fact that a significant portion of its budget was provided by DMH, Riverbend operated at a loss. In sum, the Board found that Riverbend had none of the hallmarks of a commercial operation, but was clearly and unequivocally a vehicle for the delivery of CHD’s charitable services.

The cases cited by the assessors in support of their argument are distinguishable from the present appeal. In The Salvation Army v. Dept. of Revenue, the taxpayer was a charitable organization which operated adult rehabilitation centers (“ARCs”) and thrift stores. The Salvation Army v. Dept. of Revenue, 170 Ill. App. 3d 336 (1988). The issue in that case was whether the real estate at which the thrift stores were operated was exempt under a provision similar to Clause Third. The thrift stores employed some of the individuals receiving services at the ARCs, and their employment at the stores was regarded as vocational rehabilitation. Id. at 341. Nevertheless, the Court held that the real estate was not exempt, because it found that the primary purpose of the retail stores was to generate income to fund the ARCs, and the other charitable activities carried out at the stores, including the provision of rehabilitative opportunities, were incidental to the main purpose of generating revenue. Id. at 344.

In the present appeal, the Board found and ruled that the inverse was true. The primary purpose of the Riverbend program was the provision of vocational rehabilitation to its clients, and the generation of income through furniture sales was incidental to this primary purpose. “The distinction is between activities primarily commercial in character carried on to obtain revenue to be used for charitable purposes and activities carried on to accomplish directly the charitable purposes of the corporation, incidentally yielding income.” McKay v. Morgan Memorial Co-Op Industries and Stores, 272 Mass. 121, 124 (1930). See also Hairenek Association, Inc. v. City of Boston, 313 Mass. 274, 279-80 (1943); Harvard Student Agencies, Inc. v. Assessors of Cambridge, Mass. ATB Findings of Fact and Reports 2000-925, 933. The activities carried on at Riverbend directly accomplished the charitable purposes of CHD and were not merely a means of generating income to fund CHD’s charitable operations. The Board thus found and ruled that these activities constituted an “appropriation to the immediate uses of the charitable cause for which [CHD] was organized.” Babcock, 225 Mass. at 421.

CONCLUSION

The Board found and ruled that the subject property was owned by a charitable organization and occupied by that organization for its charitable purposes during the fiscal year at issue. The Board therefore found and ruled that the subject property was exempt under Clause Third, and, accordingly, issued a decision for the appellant in this appeal and granted a full abatement in the amount of $26,316.18.

THE APPELLATE TAX BOARD

By: ___________________________________

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: ____________________________

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

JOSEPH J. DELLA PORTA, ET AL v. BOARD OF ASSESSORS OF

THE TOWN OF SWAMPSCOTT

Docket No. F300655 Promulgated:

May 26, 2010

This is an appeal originally filed under the informal procedure[94] pursuant to G.L. c. 59, §§ 64 and 65 from the refusal of the appellee, Board of Assessors of the Town of Swampscott (“assessors” or “appellee”), to abate taxes on certain real estate located in the Town of Swampscott, owned by and assessed to the appellants under G.L. c. 59, §§ 11 and 38, for fiscal year 2009 (“fiscal year at issue”).

Commissioner Rose heard this appeal. Chairman Hammond and Commissioners Scharaffa, Egan and Mulhern joined him in a decision for the appellee.

These findings of fact and report are made pursuant to requests by the appellants and the appellee under G.L. c. 58A, § 13 and 831 CMR 1.32.

Joseph J. Della Porta, pro se, for the appellants.

Donna Champagne O’Keefe, Assistant Assessor, for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of the testimony and exhibits offered into evidence at the hearing of this appeal, the Appellate Tax Board (“Board”) made the following findings of fact.

On January 1, 2008, Joseph J. and Gladys A. Della Porta (“appellants”) were the assessed owners of a waterfront parcel of real estate located at 165 Puritan Road in Swampscott (“subject property”). For the fiscal year at issue, the assessors valued the subject property at $1,517,300 and assessed a tax thereon, at the rate of $14.34 per $1,000, in the total amount of $21,758.08. On December 30, 2008, the Collector of Taxes for Swampscott mailed the actual fiscal year 2009 tax bills. In accordance with G.L. c. 59, § 57C, the appellants timely paid the taxes due without incurring interest. On January 12, 2009, in accordance with G.L. c. 59, § 59, the appellants timely filed their Application for Abatement with the assessors, which the assessors denied on March 31, 2009. In accordance with G.L. c. 59, §§ 64 and 65, the appellants seasonably filed their appeal with the Board on April 16, 2009. On the basis of these facts, the Board found and ruled that it had jurisdiction to hear and decide this appeal.

Puritan Road is a public, paved road which provides access to two of the area’s public beaches on the Atlantic Ocean, Eiseman’s Beach, and Whale’s or New Ocean House Beach (hereinafter referred to as “Whale’s Beach”). The subject property is adjacent to Whale’s Beach. At the hearing of this appeal, the evidence submitted established that the appellants originally owned a large portion of beachfront property, but by means of a Settlement Agreement and Consent Order dated January 11, 1988, they made a gift of the majority of the land to the Town and retained a small portion for themselves. The subject property thus has access to its own small, private beach, located between two areas of ledge, marked by “private” signs and cordoned off with rope.

According to the property record card, the subject property consists of a 21,700-square-foot parcel of land improved with a single-family, Colonial-style home, which was built around 1975, with a primarily aluminum exterior and an asphalt roof cover. The subject home contains 2,457 square feet of finished living space with a total of seven rooms, including three bedrooms, as well as two full bathrooms and one half bathroom. The property record card on file with the assessors lists the subject home as in “very good” condition.

The appellants contend that the property record card’s 21,700-square-foot measurement of the subject property’s parcel includes tidal property beyond the seawall. They contend that the land above the seawall is only 8,944 square feet, and therefore, the subject assessment includes a tax on tidal property beyond the seawall. They further contend that no other properties with water frontage on Puritan Road were taxed on their tidal property beyond the seawall.

The appellants presented their case-in-chief through the testimony of Mr. Della Porta and the submission of numerous documents, including deeds for neighboring oceanfront properties along Puritan Road, the Settlement Agreement and Consent Order, a map of several properties along Puritan Road, and photographs of the subject property and subject beach. The appellants offered no evidence of comparable sales, comparable assessments or other affirmative valuation evidence.

The assessors presented their case-in-chief through the testimony of Donna Champagne O’Keefe, Assistant Assessor. Ms. O’Keefe offered a sales-comparison analysis of eight waterfront properties, which she deemed comparable to the subject property. The properties sold during the period May, 2006 through February, 2009, and ranged in size from 9,230 square feet to 91,420 square feet, with gross living areas that ranged from 2,627 square feet to 7,606 square feet. Ms. O’Keefe adjusted two of the sales for the timing of the sale. The adjusted sale prices yielded from her comparable sales ranged from $1,191,700 to $3,212,000. Ms. O’Keefe contended that these sales supported the subject property’s assessment of $1,517,300 for the fiscal year at issue.

Based on the evidence presented, the Board found that the appellants failed to meet their burden of proving that the subject property was overvalued for the fiscal year at issue. The Board found that the appellants failed to offer sufficient documentary evidence to support their claim that the subject assessment included the value of tidal property beyond the seawall. The Board further found that the appellants failed to offer relevant comparable sales, assessment, or any other affirmative evidence indicating that the subject property’s fair market value as of January 1, 2008 was less than the subject assessment.

Accordingly, the Board issued a decision for the appellee in this appeal.

OPINION

Assessors are required to assess all real property at its full and fair cash value. G.L. c. 59, § 38; Coomey v. Assessors of Sandwich, 367 Mass. 836, 837 (1975). Fair cash value is defined as the price on which a willing seller and a willing buyer will agree if both of them are fully informed and under no compulsion. Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1954).

The assessment is presumed valid unless the taxpayer sustains the burden of proving otherwise. Schlaiker v. Board of Assessors of Great Barrington, 356 Mass. 243, 245 (1974). Accordingly, the burden of proof is upon the appellant to make out his right as a matter of law to an abatement of the tax. Id. The appellant must show that the assessed valuation of his property was improper. See Foxboro Associates v. Board of Assessors of Foxborough, 385 Mass. 679, 691 (1982).

A taxpayer “‘may present persuasive evidence of overvaluation either by exposing flaws or errors in the assessors’ method of valuation, or by introducing affirmative evidence of value which undermines the assessors’ valuation.’” General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 600 (1984)(quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983)).

In the present appeal, the appellants argued that the subject assessment improperly included the value of land beyond the seawall. The appellants did not, however, provide sufficient documentary evidence to support their claim. Further, the appellants did not produce any comparable sales, assessment, or other affirmative evidence indicating that the subject property’s fair cash value as of January 1, 2008 was less than the subject assessment.

Based on the evidence presented, the Board found and ruled that the appellants failed to meet their burden of proving that the subject property was overvalued for the fiscal year at issue. Accordingly, the Board issued a decision for the appellee.

APPELLATE TAX BOARD

By: _____ ___

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: __

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

CATHLEEN L. MANNING v. BOARD OF ASSESSORS OF

THE TOWN OF WESTBOROUGH

Docket No. F300422 Promulgated:

May 27, 2010

This is an appeal originally filed under the informal procedure[95] pursuant to G.L. c. 59, §§ 64 and 65 from the refusal of the appellee to abate taxes on real estate located in the Town of Westborough, owned by and assessed to the appellant under G.L. c. 59, §§ 11 and 38, for fiscal year 2009 (“fiscal year at issue”).

Commissioner Rose (“Presiding Commissioner”) heard the appeal and, in accordance with G.L. c. 58A, § 1A, issued a single-member decision for the appellee.

These findings of fact and report are made pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.

Cathleen L. Manning, pro se, for the appellant.

Linda B. Swadel, Chief Assessor, for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of the exhibits and testimony offered into evidence during the hearing of this appeal, the Presiding Commissioner made the following findings of fact.

On January 1, 2008, Cathleen L. Manning was the assessed owner of a condominium unit located at 6 Ashley Way in Westborough (“subject property”). For fiscal year 2009, the Board of Assessors of the Town Westborough (“assessors”) valued the subject property at $413,700 and assessed a tax, at the rate of $15.50 per thousand, in the total amount of $6,412.35, which the appellant paid without incurring interest. On January 12, 2009, the appellant timely filed an abatement application with the assessors. The assessors denied the abatement application on January 27, 2009. On April 16, 2009, the appellant seasonably filed her appeal with the Appellate Tax Board (“Board”). On the basis of these facts, the Presiding Commissioner found and ruled that the Board had jurisdiction over this appeal.

The subject property is a one-unit condominium building built in 2000 with vinyl siding and an asphalt gable-style roof. The subject property has forced hot air gas heating and central air conditioning. The subject property contains 1,874 square feet of living space with six rooms, including two bedrooms, as well as two full bathrooms. Other features of the condominium include an unfinished basement, a 315-square-foot garage, an 89-square-foot open porch, and a 130-square-foot screened-in porch. The property record card on file with the appellee lists the subject property as being in “very good” condition.

The appellant presented her case through her testimony; she did not submit any documentary evidence. The appellant claimed that the subject property was overvalued and the subject assessment was disproportionate to thirty-five purportedly similar units in her condominium development. The appellant’s abatement application listed three of these purportedly comparable properties and their assessments for the fiscal year as follows:

8 Lenox	$396,800
3 Essex	$410,400
6 Shaker	$379,900

Based on this information, the appellant contended that the subject property should have been assessed at $375,000 to $380,000 for the fiscal year at issue. However, the appellant did not present the property record cards or any other information for her three comparables, nor did she offer any adjustments to her comparables to account for any differences between the comparables and the subject property. The appellant also did not offer any evidence of recent comparable sales.

Linda Swadel, Chief Assessor, testified on behalf of the appellee. She also offered evidence, including a comparable-sales analysis of three condominium units which had sold during 2007, together with their property record cards. The comparable properties were 6 Shaker Way, 8 Shaker Way, and 3 Essex Way; two of these, 6 Shaker Way and 3 Essex Way, were comparables used by the appellant. The comparables were all in close proximity to the subject, located within the same condominium complex, and the room counts for each comparable were the same as the subject property – six rooms, including two bedrooms, as well as two full bathrooms. Ms. Swadel made adjustments to her comparables for quality of construction, condition, differences in square footage of living space, size of basement, and size of garage. After adjustments, her three comparables yielded a range of adjusted sale price from $419,900 to $422,500.

On the basis of the evidence presented, the Presiding Commissioner found that the appellant failed to present evidence sufficient to meet her burden of proving that the subject assessment was too high or disproportionate. The appellant listed three purportedly comparable properties, but she failed to present a comparable-sale or comparable-assessment analysis which provided adjustments to the comparables. By contrast, Ms. Swadel provided an analysis which made adjustments to her comparables’ sales prices to account for the differences between the comparables and the subject, which the Presiding Commissioner found to be credible and appropriate. The Presiding Commissioner thus found that the appellant failed to meet her burden of proving that the subject property was overvalued. Moreover, the Presiding Commissioner found that the subject assessment was within the range of the adjusted sale prices of the three comparable-sale properties within the same condominium complex, which had sold less than a year before the relevant assessment date, and which the Presiding Commissioner found to be comparable to the subject based on the information provided by Ms. Swadel.

The appellant also argued that the subject property was disproportionately assessed. However, the appellant’s analysis did not contain any evidence or implication that a widespread scheme of intentional disproportionate assessment existed in Westborough or that the assessors were discriminating against her or her property in any way. The Presiding Commissioner thus found that the appellant failed to meet her burden of proving that the assessors were engaged in an intentional widespread scheme of disproportionate assessment and that they were discriminating against the appellant in their assessment of her property.

Accordingly, the Presiding Commissioner issued a decision for the appellee in this appeal.

OPINION

The assessment is presumed valid unless the taxpayer sustains the burden of proving otherwise. Schlaiker v. Board of Assessors of Great Barrington, 365 Mass. 243, 245 (1974). Accordingly, the burden of proof is upon the appellant to make out her right as a matter of law to an abatement of the tax. Id. The appellant must show that the assessed valuation of the property was improper. See Foxboro Associates v. Board of Assessors of Foxborough, 385 Mass. 679, 691 (1982). In appeals before this Board, a taxpayer “‛may present persuasive evidence of overvaluation either by exposing flaws or errors in the assessors’ method of valuation, or by introducing affirmative evidence of value which undermines the assessors’ valuation.’” General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 600 (1984) (quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983)).

Sales of comparable realty in the same geographic area and within a reasonable time of the assessment date generally contain probative evidence for determining the value of the property at issue. Graham v. Assessors of West Tisbury, Mass. ATB Findings of Fact and Reports 2008-321, 400 (citing McCabe v. Chelsea, 265 Mass. 494, 496 (1929)), aff’d, Graham v. Assessors of West Tisbury, 73 Mass. App. Ct. 1107 (2008). Evidence of comparable assessments may also be used to determine a property’s fair cash value. “At any hearing relative to the assessed fair cash valuation . . . of property, evidence as to the fair cash valuation . . . at which assessors have assessed other property of a comparable nature . . . shall be admissible.” G.L. c. 58A, § 12B. The properties used in a comparable-assessment analysis must be comparable to the subject property in order to be probative of the fair cash value. See Assessors of Lynnfield v. New England Oyster House, Inc., 362 Mass. 696, 703 (1972). The appellant bears the burden of “establishing the comparability of . . . properties [used for comparison] to the subject property.” Fleet Bank of Mass. v. Assessors of Manchester, Mass. ATB Findings of Fact and Reports 1998-546, 1998-554. Accord New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456, 470 (1981). “Once basic comparability is established, it is then necessary to make adjustments for the differences, looking primarily to the relative quality of the properties, to develop a market indicator of value.” New Boston Garden Corp., 383 Mass. at 470.

In the instant appeal, the appellant offered three comparable properties — condominium units located within the same complex as the subject property. However, the appellant failed to make any adjustments for differences between her comparable properties and the subject property. The Board thus found and ruled that the appellant failed to provide meaningful evidence of value. By contrast, Ms. Swadel’s comparable-sales analysis, which compared the subject property to three condominium units in the same complex, provided adjustments to account for key differences which would affect a property’s value, including quality of construction, age and condition of the unit, and gross living area. The subject assessment was within the range of the comparable properties’ adjusted sales prices. The Presiding Commissioner thus found and ruled that the appellant failed to meet her burden of proving that the subject property was overvalued for the fiscal year at issue.

Accordingly, the Presiding Commissioner issued a decision for the appellee in this appeal.

APPELLATE TAX BOARD

By: ______________________________

James D. Rose, Commissioner

A true copy,

Attest: _______________________

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

ERNEST OPANASETS v. BOARD OF ASSESSORS OF

THE TOWN OF PLYMOUTH

Docket No. F291889 Promulgated:

May 27, 2010

This is an appeal filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65 from the refusal of the appellee, Board of Assessors of the Town of Plymouth (“assessors” or “appellee”), to abate taxes on certain real estate located in the Town of Plymouth, owned by and assessed to the appellant under G.L. c. 59, §§ 11 and 38, for fiscal year 2007 (“fiscal year at issue”).

Commissioner Mulhern heard this appeal. Chairman Hammond and Commissioners Scharaffa, Egan and Rose joined him in a decision for the appellee.

These findings of fact and report are made pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.

Ernest Opanasets, pro se, for the appellant.

Cathy Salmon, Assessor, for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of the testimony and exhibits offered into evidence at the hearing of this appeal, the Appellate Tax Board (“Board”) made the following findings of fact.

On January 1, 2006, Ernest Opanasets (“appellant”) was the assessed owner of a waterfront parcel of real estate located at 137 West Long Pond Road in Plymouth (“subject property”). For the fiscal year at issue, the assessors valued the subject property at $618,600 and assessed a tax thereon, at the rate of $9.71 per $1,000, in the total amount of $6,096.71. On December 29, 2006, the Collector of Taxes for Plymouth mailed out the actual fiscal year 2007 tax bills. The appellant timely paid the taxes due without incurring interest. On January 29, 2007, in accordance with G.L. c. 59, § 59, the appellant timely filed his Application for Abatement with the assessors, which they denied on April 3, 2007. In accordance with G.L. c. 59, §§ 64 and 65, the appellant seasonably filed his appeal with the Board on June 25, 2007. On the basis of these facts, the Board found and ruled that it had jurisdiction to hear and decide this appeal.

The subject property, which is located on Long Pond, consists of a 2.60-acre parcel of land improved with a Colonial-style, multi-family home built circa 1920 with nine rooms and an attached one-car garage. The appellant purchased the subject property in an arm’s-length transaction in July, 2004 for $735,000.

The total assessment for the fiscal year at issue was $618,600. The appellant had previously appealed his fiscal year 2006 assessment of $643,600. On February 12, 2007, the Board issued a single-member decision in favor of the appellee.

The assessment for the fiscal year at issue is comprised of a land value of $447,100 and a building value of $171,500. The appellant contended that the land portion of the subject was too high and disproportionately assessed. To prove his case, the appellant presented spreadsheets of what he considered to be twelve comparable Long Pond waterfront properties and their assessments for the fiscal year at issue as well as for fiscal years 2005 and 2000. He also submitted spreadsheets listing the land-component assessments of his comparables from fiscal year 2007 back to fiscal year 1995. From this data, the appellant pointed out that the range of land-component assessments was much broader in fiscal year 2007, and that the more narrow range of land-component assessments from fiscal year 2000 was more in keeping with the actual fair market value of the land portion of the comparable properties and the subject property. From the land-component assessments which he presented, the appellant determined that the subject property’s land should be valued at $342,100.

To further his argument, the appellant presented a witness, Glen Bacevicious, a real estate appraiser. Mr. Bacevicious presented a series of Multiple Listing Service (“MLS”) listings of vacant parcels sold in Plymouth between June 11, 2003 and November 30, 2004. The sales ranged in value from $97,900 to $605,000; most of the sales were in the mid-$200,000 range. Based on his evidence, Mr. Bacevicious’ opinion of the fair market value of the subject land was $350,000.

On cross-examination by Cathy Salmon, the Assessor for Plymouth, Mr. Bacevicious conceded that the subject property sold in an arm’s-length transaction, about eighteen months prior to the relevant assessment date, for $735,000. He also conceded that his comparables were located in inferior locations, on smaller ponds, compared to the subject property. Ms. Salmon then asked Mr. Bacevicious for his analysis for formulating his opinion of value for the subject’s fair market land value. Mr. Bacevicious responded that he could not produce this analysis. Finally, Ms. Salmon asked Mr. Bacevicious for his opinion of the total fair market value of the subject property. Mr. Bacevicious stated that he did not have an opinion, as he had been instructed to appraise only the land component of the subject property.

On the basis of the evidence presented, the Board found that the appellant’s focus on the land values of his comparable properties failed to address whether the overall assessment of the subject property was excessive. The Board further found that the sale of the subject property — in an arm’s-length transaction, about eighteen months prior to the relevant assessment date –- was the most persuasive indicator of the subject property’s total fair market value. The Board found that the sale price of $735,000 in July, 2004 supported the subject property’s overall assessment of $618,600 for the fiscal year at issue. The Board, therefore, found that the appellant failed to meet his burden of proving that the subject property was overvalued for the fiscal year at issue.

The appellant also argued that the subject property was disproportionately assessed. However, he offered scant evidence to support this assertion. Of the thousands of residential properties in Plymouth, the appellant only “analyzed” the land values of twelve properties along Long Pond plus the subject. His analysis did not contain any evidence or implication that a widespread scheme of intentional disproportionate assessment existed in Plymouth. Therefore, the Board found that the appellant failed to meet his burden of proving that the assessors were engaged in an intentional widespread scheme of disproportionate assessment.

Accordingly, the Board issued a decision for the appellee in this appeal.

OPINION

The assessment is presumed valid unless the taxpayer sustains the burden of proving otherwise. Schlaiker v. Board of Assessors of Great Barrington, 365 Mass. 243, 245 (1974). Accordingly, the burden of proof is upon the appellant to make out his right as a matter of law to an abatement of the tax. Id. The appellant must show that the assessed valuation of the property was improper. See Foxboro Associates v. Board of Assessors of Foxborough, 385 Mass. 679, 691 (1982). In appeals before this Board, a taxpayer “‛may present persuasive evidence of overvaluation either by exposing flaws or errors in the assessors’ method of valuation, or by introducing affirmative evidence of value which undermines the assessors’ valuation.’” General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 600 (1984) (quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983)).

In the present appeal, the appellant asserted that the land component of the subject property was overvalued in comparison to the land-component valuations of neighboring parcels. However, a taxpayer does not establish the right to an abatement merely by showing that either the land or a building is overvalued; he must demonstrate that the overall assessment overstated the fair cash value of the subject property. See Anderson v. Assessors of Barnstable, Mass. ATB Findings of Fact and Reports 1999-596, 601. “The tax on a parcel of land and the building thereon is one tax . . . although for statistical purposes they may be valued separately.” Assessors of Brookline v. Prudential Insurance Co., 310 Mass. 300, 317 (1941). “In abatement proceedings, ‘the question is whether the assessment for the parcel of real estate, including both the land and the structures thereon, is excessive. The component parts, on which that single assessment is laid, are each open to inquiry and revision by the appellate tribunal in reaching the conclusion whether the single assessment is excessive.’” Anderson, Mass. ATB Findings of Fact and Reports at 1999-601-02 (quoting Massachusetts General Hospital v. Belmont, 238 Mass. 396, 403 (1921)). The Board found and ruled that the appellant’s evidence, which focused only on the land portion of the subject assessment, was insufficient to show that the overall assessment of the subject property exceeded its fair cash value.

Moreover, the Board found the sale of the subject property, within eighteen months of the assessment date, to be persuasive evidence of the subject property’s fair cash value. “[S]ales of property usually furnish strong evidence of market value, provided they are arm’s-length transactions and thus fairly represent what a buyer has been willing to pay for the property to a willing seller.” Foxboro Associates, 385 Mass. at 682. Actual sales of the subject are “very strong evidence of fair market value, for they represent what a buyer has been willing to pay to a seller for [the] particular property [under appeal].” New Boston Garden Corp. v. Board of Assessors of Boston, 383 Mass. 456, 469 (1981) (quoting First Nat’l Stores, Inc. v. Assessors of Somerville, 358 Mass. 554, 560 (1971)). In this appeal, the Board found and ruled that the sale of the subject property within eighteen months of the assessment date was reasonably proximate to the assessment date, and that the sale price of $735,000 supported the assessment of $618,600.

Based on this evidence, the Board found and ruled that the appellant failed to meet his burden of proving that the subject property was overvalued for the fiscal year at issue.

The appellant also raised a claim of disproportionate assessment. “In order to obtain relief on the basis of disproportionate assessment, a taxpayer must show that there is an ‘intentional policy or scheme of valuing properties or classes of properties at a lower percentage of fair cash value than the taxpayer’s property.’” Brown v. Assessors of Brookline, 43 Mass. App. Ct. 327, 332 (1997)(quoting Shoppers’ World, Inc. v. Assessors of Framingham, 348 Mass. 366, 377 (1965)). If the taxpayer can demonstrate in an appeal to the Board that he has been the victim of a scheme of discriminatory, disproportionate assessment, he “may be granted an abatement . . . which will make . . . his assessment proportional to other assessments, on a basis which reaches results as close as is practicable to those which would have followed application by the assessors of the proper statutory principles.” Coomey v. Assessors of Sandwich, 367 Mass. 836, 838 (1975) (quoting Shoppers’ World, 348 Mass. at 377-78).

In the present appeal, the appellant failed to introduce sufficient evidence to show that a policy or scheme of discriminatory, disproportionate assessment was employed by the assessors against any class of properties in Plymouth. The Board found and ruled that the evidence was virtually nonexistent to demonstrate, or even suggest, that the assessors engaged in an “intentional widespread scheme of discrimination.” Stilson v. Assessors of Gloucester, 385 Mass. 724, 727-28 (1982). Accordingly, the Board found and ruled that the appellant failed to meet his burden of proving that a deliberate scheme of disproportionate assessment existed in Plymouth for the fiscal year at issue.

In sum, the Board found and ruled that the appellant failed to show that the assessors’ methodology was faulty, that the assessment over-valued his property, or that a deliberate scheme of disproportionate assessment existed in Plymouth in fiscal year 2007. Accordingly, the Board decided this appeal for the appellee.

APPELLATE TAX BOARD

By: _________________________________

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: ________________________

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

DOROTHY C. CORNETTA v. BOARD OF ASSESSORS OF

THE TOWN OF TOPSFIELD

Docket No. F299411 Promulgated:

June 11, 2010

This is an appeal filed under the formal procedure pursuant to G.L. c. 59, §§ 64 and 65 from the refusal of the appellee to abate taxes on real estate located in the Town of Topsfield, owned by and assessed to the appellant under G.L. c. 59, §§ 11 and 38, for fiscal year 2009.

Commissioner Mulhern heard the appeal and, together with Chairman Hammond and Commissioners Scharaffa and Egan, issued a decision for the appellant.

These findings of fact and report are made pursuant to a request by the appellee under G.L. c. 58A, § 13 and 831 CMR 1.32.

Dorothy C. Cornetta, pro se, for the appellant.

Eldon Goodhue, assessor, for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of the exhibits and testimony offered into evidence during the hearing of this appeal, the Appellate Tax Board (“Board”) made the following findings of fact.

On January 1, 2008, Dorothy C. Cornetta (the “appellant”) was the assessed owner of a parcel of real estate improved with a single-family dwelling located at 50 Brookside Road in the Town of Topsfield (“subject property”). For fiscal year 2009, the Board of Assessors of Topsfield (“assessors”) valued the subject property at $613,600 and assessed a tax, at the rate of $12.88 per thousand, in the total amount of $7,903.17, which the appellant paid without incurring interest. On January 6, 2009, the appellant timely filed an abatement application with the assessors. The assessors denied the abatement application on April 1, 2009. On April 13, 2009, the appellant seasonably filed an appeal, under the formal procedure, with the Board. On the basis of these facts, the Board found and ruled that it had jurisdiction over this appeal.

The subject property is a 0.95-acre parcel of land, located in the Town of Topsfield, improved with a single-family, wood-frame, two-story, Colonial-style dwelling, built in 1975, with clapboard shingles and an asphalt, gambrel-style roof. The subject home contains 2,972 square feet of living area and has a total of nine rooms, including four bedrooms, as well as two full bathrooms and one half bathroom. The subject home also features central air conditioning, an attached two-car garage, a deck, and a fireplace.

The appellant presented her case through her own testimony and the submission of several documents. She contended that the subject property was overvalued for the following reasons: (1) real estate values in Topsfield were significantly depressed during the fiscal year at issue because of the national economic downturn; (2) the town’s water-delivery system to the subject property was faulty, thus compromising the delivery of clean water to the subject property; and (3) wetland conditions in the rear of the subject property negatively affected the subject property’s fair market value.

To support her contention that real estate values in Topsfield were depressed, the appellant cited three valuation sources that listed Essex County statistics for calendar year 2008. First, the Warren Group found that a 10.6% decline in Essex County property values had occurred between 2007 and 2008. Second, according to the S&P Case-Shiller Index, there was an 18% decline in property values for Essex County during 2008. Third, the on-line Trulia Report listed a 29.3% decline in valuations for Topsfield properties during 2008.

The appellant also presented a sales-comparison analysis, citing five examples of purportedly comparable properties that sold between March 16, 2007 and June 15, 2009. The sales-comparison data submitted by the appellant is reproduced in the following table:

Address	Valuation by Zillow[96]	Sale Date	Sale Price	% Value Decrease[97]	Living Space (sf)	BR/BA[98]
42 Averill St.	$477,000	6/15/07	$436,000	8.6	2,271	4/2.5
18 Candlewood Dr.	$624,000	3/16/07	$568,000	6.1	3,300	4/3.5
25 Brookside Rd.	$542,000	3/26/09	$514,000	5.2	nv[99]	4/nv
8 Meetinghouse	$477,500	6/18/08	$325,000	32	1,755	4/1.5
39 Averill St.	$544,000	5/30/08	$486,000	11	2,080	4/3

To support her contention that the water system to the subject property was faulty, the appellant explained in her testimony that public water to the subject property is contaminated by particulates and rust. To obtain clean water, appellant installed two filtration systems in the subject property, an electronic system and a “wet system”; the appellant and any subsequent property owner is responsible for the cost of the electronic system, and the Town supplies filtering materials for the “wet system.” Moreover, she explained that the water department must periodically enter the subject home, disconnect the water meter and “flush” the water line, a process which lasts between one to three days. The appellant submitted a photocopy of a photograph depicting the water filtration system located within the subject home. She also explained that the filtration system present at the subject property was not guaranteed to resolve the water issue in the absence of more elaborate repairs by the Town, and that the faulty water-delivery system would thus have to be disclosed to a potential buyer of the subject property.

Finally, to support her contention that the wetland conditions had negatively affected the fair market value of the subject property, the appellant testified that the Topsfield Conservation Commission forbids tree trimming in areas which abut wetlands, like the rear of the subject property. She explained that the inability to trim the trees has caused the wetland area to grow. The appellant submitted a photocopy of a picture of the rear of the subject property that depicted thick vegetation.

In defense of the subject assessment, the Assessor, Eldon Goodhue, presented a comparable-sales analysis using five purportedly comparable properties. One of the properties, 18 Candlewood Drive, was also a comparable-sale property used by the appellant. The five comparable-sale properties were all in the same neighborhood as the subject property, they were all improved with Colonial homes of reportedly “average” condition, with living spaces between 2,378 to 2,972 square feet, and they all sold during 2007 or 2008. After applying his adjustments for time, building differences and land size, Mr. Goodhue arrived at adjusted sale prices between $591,100 and $676,700. The subject assessment of $613,600 was towards the lower end of this range.

Mr. Goodhue acknowledged that the subject property was impacted by a faulty water-delivery system. Mr. Goodhue did not contend that any of his five purportedly comparable properties were likewise affected by a faulty water-delivery system. Mr. Goodhue also confirmed that Topsfield has an abundance of wetland property.

The Board ultimately found that the appellant’s evidence with respect to the economic downturn – including the Warren Group, Trulia Report and S&P/Case-Shiller Index statistics – was too broad and not specific to the fair cash value of the subject property. For reasons explained further in the Opinion, the Board found that arm’s-length comparable sales are more probative of a subject property’s fair cash value than general, regional statistics. The appellant did offer a comparable-sales analysis with five properties; however, she failed to show the comparability of her purportedly comparable properties and the subject property in key respects, including the specific neighborhood where her comparable properties were located and their conditions in comparison to the subject property. Furthermore, she failed to make adjustments for differences between the comparable properties and the subject property.

The Board also found that the appellee, by contrast, presented five sales of properties which Mr. Goodhue demonstrated to be sufficiently comparable to the subject property, and his analysis applied appropriate adjustments to these properties. Therefore, the Board found that his range of adjusted sale prices was probative evidence of the subject property’s fair market value for the fiscal year at issue.

However, the Board found that the appellant met her burden of proving that other factors, particularly the faulty water-delivery system and the overgrowth of wetlands to the rear of the subject property, negatively impacted the fair market value of the subject property. The Board found that the appellant’s testimony was credible and well substantiated, and Mr. Goodhue acknowledged the presence of these issues. Considering the range of values offered by Mr. Goodhue and the existence of the water and wetland issues, the Board found that the fair cash value of the subject property was $582,900, approximately a five-percent reduction in the assessed value for the fiscal year at issue.

Accordingly, the Board issued a decision for the appellant ordering an abatement of $395.42.

OPINION

Assessors are required to assess real estate at its fair cash value. G.L. c. 59, § 38. Fair cash value is defined as the price on which a willing seller and a willing buyer will agree if both of them are fully informed and under no compulsion. Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956). Generally, real estate valuation experts and the Massachusetts courts rely upon three approaches to determine fair cash value of property: income capitalization, sales comparison, and cost reproduction. Correia v. New Bedford Redevelopment, 375 Mass. 360, 362 (1978). “The board is not required to adopt any particular method of valuation.” Pepsi-Cola Bottling Co. v. Assessors of Boston, 397 Mass. 447, 449 (1986).

The Board has repeatedly found that sales of comparable realty in the same geographic area and within a reasonable time of the assessment date generally contain probative evidence for determining the value of the property at issue. E.g., Graham v. Assessors of West Tisbury, Mass. ATB Findings of Fact and Reports 2008-321, 400 (citing McCabe v. Chelsea, 265 Mass. 494, 496 (1929)), aff’d 73 Mass. App. Ct. 1107 (2008). The statistical data offered by the appellant in this appeal did not provide crucial factors for determining the comparability of individual properties to the subject property, such as the specific neighborhood where a purportedly comparable property is located, its gross living area, number of bathrooms, and its condition. In the instant appeal, the Board found that the appellant’s generalized statistical data from the Warren Group, the Trulia Report and the S&P/Case-Shiller Index was not sufficiently probative of the fair cash value of the subject property. The Board was thus not persuaded by the appellant’s statistical evidence.

The appellant did provide a comparable-sales analysis using five purportedly comparable properties. To be persuasive evidence of fair cash value, however, comparable-sales analyses must make allowances for various factors which would otherwise cause disparities in the comparable properties’ sale prices. See Pembroke Industrial Park Co., Inc. v. Assessors of Pembroke, Mass. ATB Findings of Fact and Reports 1998-1072, 1082 (and the cases cited therein). In this appeal, the appellant’s analysis failed to provide sufficient information with respect to key similarities and differences between the purportedly comparable properties and the subject property, such as location and condition. Moreover, the appellant failed to provide any adjustments for differences between her comparable properties and the subject property.

In contrast, the appellee provided a comparable-sales analysis using five properties which were shown to be within the same neighborhood as the subject and included homes of comparable styles, size and condition. The appellee further adjusted the comparables to account for key differences, thus yielding a range of adjusted sale prices which the Board found and ruled to be probative of the subject property’s fair market value. The subject assessment was at the lower end of this range. The Board thus found and ruled that the appellee’s comparable-sales analysis was probative evidence of the subject property’s fair market value.

However, an assessment’s failure to account for a property’s defects will warrant a reduction in assessed value to account for the impact on fair cash value of those defects. See, e.g., Hughes v. Board of Assessors of the City of Quincy, Mass. ATB Findings of Fact and Reports 2005-420, 424-5, 428 (finding an assessment to be excessive where the assessors had failed to consider documented deficiencies in the subject property). In the present appeal, the Board found credible the appellant’s evidence with respect to defects present at the subject property, specifically the faulty water-delivery system and the overgrowth of protected wetlands to the rear of the subject property. The Board found and ruled that the appellee erred by not considering these factors in the subject assessment.

The fair cash value of property cannot be proved with “mathematical certainty and must ultimately rest in the realm of opinion, estimate, and judgment.” Assessors of Quincy v. Boston Consol. Gas Co., 309 Mass. 60, 72 (1941). In evaluating the evidence before it, the Board may select among the various elements of value and form its own independent judgment of fair cash value. General Electric Co., 393 Mass. at 605; North American Philips Lighting Corp. v. Assessors of Lynn, 392 Mass. 296, 300 (1984). “The credibility of witnesses, the weight of the evidence, and inferences to be drawn from the evidence are matters for the board.” Cummington School of the Arts, Inc. v. Assessors of Cummington, 373 Mass. 597, 605 (1977). After considering the credibility of the appellant’s evidence with respect to the faulty water-delivery system and the overgrowth of wetlands abutting the rear of the subject property, and the effects of these factors on the value of the subject property as of the relevant assessment date, the Board found and ruled that the subject assessment should be reduced by approximately five percent, or $30,700.

Accordingly, the Board decided this appeal for the appellant and ordered an abatement of $395.42.

APPELLATE TAX BOARD

By: ____________

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: ______ _____ _____

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

BURGER KING STORE #4, INC. v. BOARD OF ASSESSORS OF

THE CITY OF MARLBOROUGH

Docket No. F298291 Promulgated:

June 14, 2010

This is an appeal filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65 from the refusal of the appellee to abate taxes on certain personal property in the City of Marlborough owned by and assessed to Burger King Store #4, Inc. (“Burger King Store #4” or “appellant”) under G.L. c. 59, §§ 2 and 18, for fiscal year 2008. This appeal is being prosecuted by Burger King Store #4 as the lessee of the subject personal property.

Commissioner Rose (“Presiding Commissioner”) heard the appeal and, in accordance with G.L. c. 58A, § 1 and 831 CMR 1.20, issued a single-member decision for the appellee.

These findings of fact and report are made pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.

Alfred L. Morin, pro se, for the appellant.

Anthony R. Trodella, assessor, for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of the exhibits and testimony offered into evidence during the hearing of this appeal, the Presiding Commissioner made the following findings of fact.

On January 1, 2007, the appellant, Burger King Store #4 was the assessed owner of personal property consisting of machinery and equipment (the “subject personal property”) situated in Marlborough. For fiscal year 2008, the Board of Assessors of the City of Marlborough (“assessors”) valued the subject personal property at $28,830. As detailed in the table below, the assessed values were derived by applying a depreciation deduction to the replacement cost of each item:

Property Details	Year New	Depreciation	Item Cost	Qty	Replacement Cost	Total Fair Market Value
Broiler	1996	55%	$10,300	1	$10,300	$ 5,670
Bun Warmer	1996	55%	$ 950	1	$ 950	$ 520
Warming Cabinet	1996	55%	$ 650	1	$ 650	$ 360
CO2 System	1996	55%	$ 6,700	1	$ 6,700	$ 3,690
Exhaust Hood	1996	55%	$ 90	16	$ 1,440	$ 790
Friolator Station	1996	55%	$ 8,800	1	$ 8,800	$ 4,840
Warmer (fry)	1996	55%	$ 3,100	1	$ 3,100	$ 1,710
Warmer (franchise)	1996	55%	$ 1,550	2	$ 3,100	$ 1,710
Ansul (avg)	1996	55%	$ 2,200	1	$ 2,200	$ 1,210
Microwave (commercial)	1996	55%	$ 800	4	$ 3,200	$ 1,760
Ice Maker (large)	1996	55%	$ 4,100	1	$ 4,100	$ 2,260
Coffee Machine	2000	75%	$ 950	1	$ 950	$ 710
Product Holding Unit	2003	90%	$ 1,100	3	$ 3,300	$ 2,970
Grand Total						$28,830

Based on the above fair market values, the appellee assessed a tax, at the rate of $24.58 per thousand, in the total amount of $708.64, which the appellant timely paid.

On January 31, 2008, the appellant timely filed an abatement application with the assessors. The assessors denied the abatement application on March 28, 2008. On June 26, 2008, the appellant seasonably filed an appeal, under the formal procedure, with the Appellate Tax Board (“Board”). On the basis of these facts, the Presiding Commissioner found and ruled that the Board had jurisdiction over this appeal.

At the hearing of this appeal, Alfred L. Morin, the owner of Burger King Store #4, testified on behalf of the appellant. His contention was that the subject personal property had been overvalued by about $21,080. He claimed that the appraisals furnished to the appellee by its valuation company were not supported by the market for like machinery and equipment. To support his contention, Mr. Morin submitted several computer print-out copies of postings from various websites, including Craigslist (http://www.Craigslist.com), ebay (http://www.ebay.com), and Live Auctioneers (http://www.Liveauctioneers.com) – advertising equipment and machinery which he claimed to be comparable to the subject personal property. He testified that he was able to find listings for property comparable to only three items of the subject personal property. His evidence is summarized in the following chart:

Subject Equipment	Advertising Details of Purportedly Comparable Equipment	Compar-able’s Asking Price	Compar-able’s Sale Price	TP’s Adjust-ments
Neico 980 Gas Broiler	“Neico Broiler”; “Used for broiling burgers and toasting bread in good condition”	$500	n/v	None
	“Nice Neico Automatic Broiler Model 200E”; “208 volt”	$250	n/v	None
	“Neico gas broiler. Good shape.”	$500	n/v	None
	“I have a Neico Chain Broiler for sale. It is approx. 15-20 yrs old. It works”; “It was used in a Dairy Queen, but I’ve seen the same type in a Burger King. It has 8 burners, 4 on top and 4 on the bottom. It also has a bun toaster on the bottom.”	$500	n/v	None
	“Neico Hamburger Conveyor Broiler Gas”; “complete with stand on casters”; broiler appears to be missing a cover		$200	None
Frymaster 250/350(5-tub fryer)	“Frymaster 3 Tub Deep Fryer”; “used”; “set up for natural gas but can be converted to propane”	$300	n/v[100]	$500(for 5-tub)

	“Real nice Frymaster triple deep fat fryer, Model MJH250BLCSC, Natural gas. Tested and it is in good working condition. Carefully used, well kept, and clean inside and out. Comes with 2 baskets, all the 3 wells have filters.”	Current bid – $600.01	n/v	$1,000 (for 5-tub)
	“Frymaster Triple bank frying system w/ attached filter system. Electronicly [sic] controled [sic] timers for each of the three fryers in the bank. We have never used and we purchased them from a restaurant open less than a year – Practicly [sic] new!”	$999.00	n/v[101]	$1655 (for 5-tub)
Hoshizaki B-990 SD Ice Maker	“Hoshizaki KM-630MRE commercial ice maker. makes 1000 lbs of ice a day. takes 4 lbs. 2 oz. of refrigeration (already charged and running). AC supply voltage 200-230/60/1 (3 wire with neutral for 115v). compressor 208-230v; 6 RLA; 311 RA. Pump 120v 5 FLA 10w. fan remote 120v 3A max. max fuse 15 amps; Manitawac water filter. Ice scoop and self bagger 2 cases of bags works great”	$850.00	n/v[102]	None

Mr. Morin also contended that the assessed value for the subject personal property was skewed because the depreciation deductions used by the appellee’s valuation company did not comport with those applied by the Internal Revenue Service (“IRS”), which assume a shorter class life for property used in distributive trades and services.

Finally, Mr. Morin cited examples of dispositions of purportedly comparable personal property from other Burger King franchises which had closed. His original petition to the Board included a copy of an electronic mail message, which he had received from a former Burger King franchise owner who sold equipment from a purportedly similar Burger King in April, 2008. The former franchise owner simply stated that the closing of that Burger King store “cost us $8,500,” which “was in kind as far as labor and disposing of miscellaneous equipment.”

At the hearing, Mr. Morin introduced into evidence a letter from a fellow Burger King franchise owner who had acquired equipment from another purportedly comparable Burger King restaurant located at an airport (“Airport Burger King”), which had closed in January, 2008. According to the letter, the franchise owner received the equipment from the demised franchise at no cost, as part of a bargain to relieve the demised franchise owner of the expense of removing the equipment from the premises. The letter continues:

If [the former owner] had offered us the option of removing only the equipment we wanted: the Neico broiler, Duke PHU’s, Taylor shake machine, main prep board, microwaves, ice maker, Douwe Egbert coffee machine, CO2 and soda system, Frymaster fry pots and fry station, and bun toasters, we would have offered him a total of $4,000 to $6,000 for these items.

No further documentation identifying any item’s exact make, model, or year purchased was submitted into evidence.

Anthony Trodella, Chairman of the appellee, testified in support of the subject personal property assessment. Mr. Trodella explained that, by presenting evidence of sales of equipment from closed stores, the appellant was equating market value with salvage value. Mr. Trodella then submitted as evidence a written explanation, which he explained had been provided by the appellee’s valuation company, which states in pertinent part:

Depreciation for the purposes of valuing personal property should not be confused with depreciation for IRS purposes, due to the fact that the personal property retains value as long as it is in service. . . . Personal property should bear normal and reasonable depreciation, but never fully depreciated as long as it is in use. Generally the minimum fair utility value should be around 30% condition, the converse of 70% depreciation.

The written explanation also states that the definition of “market value” as applied by the International Association of Assessing Officers (“IAAO”) is “the price that dealers in the goods are willing to receive and purchasers are willing to pay when goods are bought and sold in the ordinary course of trade.” Mr. Trodella contended that when property is sold from a demised franchise, it is not “in the ordinary course of trade,” but instead for salvage value. Mr. Trodella emphasized to the Board that the valuation company’s procedures are approved and certified by the Massachusetts Department of Revenue (“DOR”).

On the basis of the evidence presented, the Presiding Commissioner found that the appellant failed to present reliable evidence of the overvaluation of the subject property. First, Mr. Morin presented evidence relating to only three items of the subject personal property; he presented insufficient information as to any other personal property items. Moreover, the evidence that he submitted lacked adequate detail to be probative of the items’ fair market value. Many of the website listings which Mr. Morin submitted did not disclose pertinent information like the make and model of the listed item, its age, and its condition. When the listing did disclose the model numbers, they did not match, and Mr. Morin failed to explain whether the purportedly comparable items were, in fact, comparable to the subject personal property. Furthermore, Mr. Morin’s evidence consisted primarily of asking prices; he failed to demonstrate that any but one of his website sales were actually consummated. The copies of electronic mail messages that he submitted were even vaguer with respect to the identification of specific items of personal property being disposed – for example, $8,500 for “labor and disposing of miscellaneous equipment” — as well as their ages and conditions. The disposition of personal property from the Airport Burger King was admittedly not even a sale.

Therefore, the Presiding Commissioner found that the appellant failed to meet its burden of proving that the subject personal property had a fair market value less than the subject assessment. Accordingly, the Presiding Commissioner issued a decision for the appellee in this appeal.

OPINION

“All property, real and personal, situated within the commonwealth . . . shall be subject to taxation.” G.L. c. 59, § 2. “‛The burden of proof is upon the petitioner to make out his right as [a] matter of law to [an] abatement of the tax.’” Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974) (quoting Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47, 55 (1922)). “‛[T]he [B]oard is entitled to ‘presume that the valuation made by the assessors [is] valid unless the taxpayers . . . prov[e] the contrary.’” General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 598 (1984) (quoting Schlaiker, 365 Mass. at 245).

On the basis of all of the evidence, the Presiding Commissioner found that the appellant failed to proffer sufficient evidence comparing the purportedly comparable property to the subject personal property. Mr. Morin presented purportedly comparable property for only three items of the subject personal property. Of those three items, he failed to demonstrate sufficient similarity in make, model, age, and quality. Moreover, he presented mostly advertising posts or electronic mail messages pertaining to dispositions of equipment from closed Burger King franchises, as opposed to consummated arm’s-length sales. The Presiding Commissioner thus found and ruled that his analysis was insufficient to rebut the presumably valid assessment.

The Board has previously granted abatements of personal property assessments when the taxpayer has presented evidence of actual sales of property shown to be comparable to the subject personal property. See, e.g., Kabat v. Board of Assessors of Cummington, Mass. ATB Findings of Fact and Reports 2008-397 (granting abatement of real estate tax levied on a trailer assessed for $31,500, which the taxpayers had purchased for $8,000, where taxpayers present sufficient evidence of the market value for comparable trailers). By contrast, the appellant in the instant appeal failed to present adequate evidence of sales of personal property comparable to the subject personal property.

On this basis, the Presiding Commissioner found and ruled that the appellant failed to meet its burden of proving that the assessed value of the subject personal property for the fiscal year at issue exceeded its fair cash value. Accordingly, the Presiding Commissioner issued a decision for the appellee in this appeal.

APPELLATE TAX BOARD

By: ________________________________

James D. Rose, Commissioner

A true copy,

Attest: ______________________________

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

BILLY J. SMITH a/k/a v. BOARD OF ASSESSORS OF

B.J. SMITH THE CITY OF BOSTON

Docket Nos. F292473, 292474 Promulgated:

June 14, 2010

These are appeals filed under the formal procedure pursuant to G.L. c. 58A, § 7 and c. 59, §§ 64 and 65 from the refusal of the appellee to abate taxes on real estate located in the City of Boston, assessed to the appellant under G.L. c. 59, §§ 11 and 38, for fiscal year 2007.

Commissioner Rose (“Presiding Commissioner”) heard these appeals and, in accordance with G.L. c. 58A, § 1A, issued single-member decisions for the appellee.

These findings of fact and report are made pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.

Billy J. Smith, pro se, for the appellant.

Nicholas P. Ariniello, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of the exhibits and testimony offered into evidence during the hearing of these appeals, the Presiding Commissioner made the following findings of fact.

On January 1, 2006, the appellant was the assessed owner of two parcels of real estate located at 51 Savin Street and 53 Savin Street in the City of Boston. For fiscal year 2007, the Board of Assessors of the City of Boston (“assessors”) valued 51 Savin Street at $92,800 and valued 53 Savin Street at $25,100, and assessed taxes, at the rate of $10.99 per thousand, in the total amounts of $1,019.87 for 51 Savin Street and $275.85 for 53 Savin Street. On February 1, 2007, the appellant timely filed with the assessors an abatement application for each parcel. No payments of tax have been made for either parcel.[103] The assessors denied the abatement application for 53 Savin Street on March 9, 2007 and, in accordance with G.L. c. 59, § 59, the application for 51 Savin Street was deemed denied on May 1, 2007. On July 13, 2007, the appellant filed with the Appellate Tax Board (“Board”) an appeal for each parcel. On the basis of these facts, the Presiding Commissioner ruled that the Board had jurisdiction over the appeal for 51 Savin Street (Docket F292473). However, the petition for 53 Savin Street (Docket F292474) was not filed timely with the Board. Accordingly, the Presiding Commissioner issued a decision for the appellee in Docket No. F292474 because the Board lacked jurisdiction.

The property, located at 51 Savin Street in Boston, consists of a 5,428-square-foot parcel of land with no improvements (“subject property”). On October 19, 2004, the appellant transferred ownership of the subject property, together with 53 Savin Street, to Urban Ministries of Boston, Inc., for total consideration of $10.00. However, through an oversight by the City of Boston, the transfer of title was not made part of the City of Boston’s official assessing records. The appellant thus remained the assessed owner of the subject property for the fiscal year at issue.[104]

In his abatement application filed with the appellee, the appellant claimed that the subject property was statutorily exempt from taxes under G.L. c. 59, § 5, Clause Eleventh (house of worship), and under G.L. c. 59, § 5, Clause Third (property of a literary, benevolent, charitable, scientific, or temperance organization). However, in his appeal to the Board, the appellant contended that the subject property was overvalued because it was a “vacant nonbuildable lot.” At the hearing, the appellant contended simply that the subject property was nonbuildable. He offered no evidence of value, and he presented no exhibits or witnesses other than himself.

On the basis of the evidence presented at the hearing, and as will be further explained in the Opinion, the Presiding Commissioner found that the appellant failed to meet his burden of proving that the subject property was overvalued for the fiscal year at issue. Accordingly, the Presiding Commissioner issued a decision for the appellee in Docket No. F292473.

OPINION

G.L. c. 59, §§ 64 and 65 provide that a taxpayer may file an appeal with the Board “within three months after the date of the assessors’ decision on an application for abatement.” The appellee denied the appellant’s abatement application filed with respect to 53 Savin Street on March 9, 2007. The appellant did not file his petition to the Board until July 13, 2007, which was more than three months after the appellee denied the abatement application. Therefore, the Presiding Commissioner found and ruled that it lacked jurisdiction over Docket No. F292474.

The Board has only that jurisdiction conferred on it by statute. Stilson v. Assessors of Gloucester, 385 Mass. 724, 732 (1982). “Since the remedy of abatement is created by statute, the board lacks jurisdiction over the subject matter of proceedings that are commenced at a later time or prosecuted in a different manner from that prescribed by statute.” Nature Church v. Assessors of Belchertown, 384 Mass. 811, 812 (1981) (citing Assessors of Boston v. Suffolk Law School, 295 Mass. 489, 495 (1936). Adherence to the statutory prerequisites is essential “to prosecution of appeal from refusals to abate taxes.” New Bedford Gas & Edison Light Co. v. Assessors of Dartmouth, 368 Mass. 745, 747 (1975). “[A] statutory prerequisite to jurisdiction cannot be waived by any act of the assessors.” Assessors of Boston v. Suffolk Law School, 295 Mass. at 494; Old Colony R. Co. v. Assessors of Quincy, 305 Mass. 509, 511-12 (1940). Like the assessors, the Board also cannot waive jurisdictional requirements. Id. Accordingly, the time limit provided for filing the petition is jurisdictional and a failure to comply with it must result in dismissal of the appeal. Doherty v. Assessors of Northborough, Mass. ATB Findings of Fact and Reports 1990-372, 373 (citing Cheney v. Inhabitants of Dover, 205 Mass. 501 (1910); Assessors of Boston v. Suffolk Law School, 295 Mass. 489 (1936)); see also Berkshire Gas Co. v. Assessors of Williamstown, 361 Mass. 873 (1972).

In the instant appeal, the appellant offered no evidence of overvaluation. Although he claimed that the subject property was an unbuildable lot, he offered no evidence to show that the subject assessment exceeded the fair cash value of the subject property. Therefore, the Presiding Commissioner found and ruled that the appellant failed to meet his burden of proving that the valuation made by the assessors exceeded the subject property’s fair cash value.

Accordingly, the Presiding Commissioner issued a decision for the appellee in Docket No. F292474, because the Board lacked jurisdiction, and for the appellee in Docket No. F292473, because the appellant failed to meet his burden of proving a fair cash value less than the subject assessment.

APPELLATE TAX BOARD

By: ____________

James D. Rose, Commissioner

A true copy,

Attest: ______ _____ _____

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

SHAWN K. & CYNTHIA M. AHEARN v. BOARD OF ASSESSORS OF

THE TOWN OF WESTMINSTER

Docket No. F299057 Promulgated:

June 25, 2010

This is an appeal filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65, from the refusal of the Board of Assessors of the Town of Westminster (“assessors”), to abate taxes on certain real estate located in the Town of Westminster, owned by and assessed to the appellants under G.L. c. 59, §§ 11 and 38, for fiscal year 2009.

Commissioner Rose (“Presiding Commissioner”) heard this appeal and issued a single-member decision for the assessors in accordance with G.L. c. 58A, § 1 and 831 CMR 1.20. These Findings of Fact and Report are made pursuant to a request by the appellants under G.L. c. 58A, § 13 and 831 CMR 1.32.

Sean K. Ahearn, pro se, for the appellants.[105]

FINDINGS OF FACT AND REPORT

On the basis of the testimony and exhibits offered into evidence at the hearing of this appeal, the Presiding Commissioner made the following findings of fact.

On January 1, 2008, Shawn K. and Cynthia M. Ahearn (“appellants”) were the assessed owners of an improved parcel of real estate located at 8 Leominster Street in Westminster (“subject property”). For fiscal year 2009, the assessors valued the subject property at $408,800 and assessed a tax thereon, at a rate of $13.00 per $1,000, in the amount of $5,314.40. In accordance with G.L. c. 59, § 57C, the appellants paid the tax due without incurring interest, and in accordance with G.L. c. 59, § 59, the appellants timely filed an Application for Abatement with the assessors. The assessors granted a partial abatement on February 10, 2009, in the amount of $369.20, having reduced the subject property’s assessed value to $380,400. On February 23, 2009, the appellants seasonably filed an appeal with the Appellate Tax Board (“Board”). On the basis of these facts, the Presiding Commissioner found and ruled that the Board had jurisdiction to decide this appeal.

The subject property consists of a 0.34-acre parcel of real estate improved with a single-family, antique Colonial-style home containing 3,204 square feet of finished living area.[106] The dwelling consists of eight rooms, including five bedrooms as well as two full bathrooms.

The appellants argued that the subject property was overvalued for fiscal year 2009. In support of their argument, the appellants submitted limited data regarding sales of thirteen properties, five of which sold during 2007 and eight of which sold during 2008. In addition, three of the thirteen properties are located outside Westminster. Although the data included each property’s address, sale price, and living area, crucial information was lacking. Specifically, the appellants presented no evidence relating to the desirability of each property’s location, the style or condition of the dwellings situated on the purportedly comparable properties, or the physical attributes of each parcel. Lacking this information, the Presiding Commissioner could not determine if the properties were comparable to the subject property, much less consider adjustments to account for differences between the properties and the subject property. Consequently, the Presiding Commissioner found that the sales data presented by the appellants were not sufficiently probative to establish the subject property’s fair cash value.

The appellants also submitted property record cards for purportedly comparable properties to support their assertion that the subject property’s assessed value was excessive relative to these properties’ assessed values. The Presiding Commissioner found, however, that this evidence supported rather than undermined the value placed upon the subject property by the assessors. In particular, of the cited properties, the Presiding Commissioner found that the property at 6 Leominster Street, the assessed value of which was $331,100 for fiscal year 2009, was most comparable to the subject property. Like the subject property, the dwelling at 6 Leominster Street is an antique Colonial-style home. Its living area is 2780 square feet, approximately thirteen percent smaller than the dwelling on the subject property. The property record card for 6 Leominster Street also indicates that the parcel size is 0.23-acres, approximately one-third smaller than the subject property’s parcel. Finally, the dwelling on the subject property was in slightly better condition than the dwelling at 6 Leominster Street.

In sum, the property at 6 Leominster Street was somewhat smaller than the subject property, its dwelling was in poorer condition, and its 2009 assessed value was approximately thirteen percent lower than the subject property’s assessed value. The Presiding Commissioner found that the difference between the properties’ assessed values was wholly consistent with the differences between the properties themselves, and therefore the assessment data relating to 6 Leominster Street supported the assessed value of the subject property. Moreover, the Presiding Commissioner found that the balance of the properties for which the appellants submitted property record cards were sufficiently distinct in style, size and condition relative to the subject property to render comparison with the subject property less probative than comparison with 6 Leominster Street.

Having considered all of the evidence, the Presiding Commissioner found that the sales-comparison data presented by the appellants were not adequate to establish the fair cash value of the subject property, and the comparable-assessment evidence supported the subject property’s assessed value. The Presiding Commissioner therefore found that the appellants failed to meet their burden of demonstrating that the subject property’s assessed value exceeded its fair cash value for fiscal year 2009. On this basis, the Presiding Commissioner issued a decision for the assessors in this appeal.

OPINION

Assessors have a statutory obligation to assess real estate at its fair cash value as of the first day of January of the year preceding the fiscal year at issue. G.L. c. 59, §§ 11 and 38. The definition of fair cash value is the price upon which a willing buyer and a willing seller would agree if both were fully informed and neither was under compulsion. Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).

The burden of proof is upon the taxpayer to make out a right to an abatement as a matter of law. Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974). The assessment is presumed to be valid unless the taxpayer is able to sustain his or her burden of proving otherwise. Id. The taxpayer may sustain this burden by introducing affirmative evidence of fair cash value, or by proving that the assessors erred in their method of valuation. General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 600 (1984).

“[S]ales of property usually furnish strong evidence of market value, provided they are arm’s-length transactions and thus fairly represent what a buyer has been willing to pay for the property to a willing seller.” Foxboro Associates v. Assessors of Foxborough, 385 Mass. 679, 682 (1982). Sales of comparable realty in the same geographic area and within a reasonable time of the assessment date generally contain probative evidence for determining the value of the property at issue. Graham v. Assessors of West Tisbury, Mass. ATB Findings of Fact and Reports 2008-321, 400 (citing McCabe v. Chelsea, 265 Mass. 494, 496 (1929)), aff’d, 73 Mass. App. Ct. 1107 (2008). When comparable sales are used, however, allowances must be made for various factors which would otherwise cause disparities in the comparable property’s sale prices. See Pembroke Industrial Park Co., Inc. v. Assessors of Pembroke, Mass. ATB Findings of Fact and Reports 1998-1072, 1082. “Adjustments for differences in the elements of comparison are made to the price of each comparable property . . . . The magnitude of the adjustment made for each element of comparison depends on how much that characteristic of the comparable property differs from the subject property.” APPRAISAL INSTITUTE, THE APPRAISAL OF REAL ESTATE, 322 (13^th ed., 2008).

In the present matter, the appellants submitted certain data relating to sales of purportedly comparable properties in support of their assertion that the subject property’s assessed value exceeded its fair cash value. This data, however, was not sufficient to establish the subject property’s fair cash value. In particular, the appellants did not present evidence of the desirability of each property’s location, the style or condition of the dwellings situated on the purportedly comparable properties, or the physical attributes of each parcel. Absent this information, the Presiding Commissioner could not determine if the properties were comparable to the subject property. Neither could adjustments be made to account for differences between the properties and the subject property. Consequently, the Presiding Commissioner found that the comparable-sales data presented by the appellants were not sufficiently probative to constitute affirmative evidence of the subject property’s fair cash value.

G.L. c. 58A, § 12B provides in pertinent part that “at any hearing relative to the assessed fair cash valuation or classification of property, evidence as to fair cash valuation or classification of property at which assessors have assessed other property of a comparable nature or class shall be admissible.” “The introduction of such evidence may provide adequate support for either the granting or denial of an abatement.” John Alden Sands, et al. v. Assessors of Bourne, Mass. ATB Findings of Fact and Reports 2007-1098, 1106-07, (citing Chouinard v. Assessors of Natick, Mass. ATB Findings of Fact and Reports 1998-299, 307-308.) (other citations omitted).

The Presiding Commissioner allowed into evidence various property record cards for purportedly comparable properties, which the appellants had submitted to bolster their argument that the subject property’s assessed value was excessive. The Presiding Commissioner found, however, that this comparable-assessment evidence supported the value placed upon the subject property by the assessors. More specifically, the property at 6 Leominster Street, the assessed value of which was approximately thirteen percent lower than the subject property’s assessed value, and which the Presiding Commissioner found most comparable to the subject property among the properties submitted for consideration, was smaller than the subject property, and its dwelling was in poorer condition. Having considered these facts, the Presiding Commissioner found that the difference between the properties’ assessed values was consistent with and justified by the differences between the properties. In turn, the Presiding Commissioner found that the assessment data relating to 6 Leominster Street supported the assessed value of the subject property. Moreover, the Presiding Commissioner found that that the assessment data for 6 Leominster Street was more probative than the data relating to other properties for which the appellants submitted property record cards.

On the basis of the evidence presented, the Presiding Commissioner found that the appellants did not provide sufficient evidence to support their claim that the subject property was overvalued. As discussed, supra, the appellants’ comparable-sales evidence lacked crucial data, and their comparable-assessment submissions supported rather than undermined the contested assessment. The Presiding Commissioner thus found and ruled that the appellants failed to meet their burden of demonstrating that the subject property’s assessed value exceeded its fair cash value for fiscal year 2009.

On the basis of the foregoing, the Presiding Commissioner issued a decision for the assessors in this appeal.

APPELLATE TAX BOARD

By: _______________________________

James D. Rose, Commissioner

A true copy:

Attest: __________________________

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

JENNIFER & ALAN DEANE v. BOARD OF ASSESSORS OF THE TOWN OF WESTBOROUGH

Docket No. F300424 Promulgated

June 25, 2010

This is an appeal filed under the informal procedure[107] pursuant to G.L. c. 58A, § 7A and G.L. c. 59, §§ 64 and 65, from the refusal of the Board of Assessors of the Town of Westborough (“appellee” or “assessors”) to abate taxes on certain real estate in Westborough, owned by and assessed to Jennifer and Alan Deane, (together, “appellants”) under G.L. c. 59, §§ 11 and 38 for fiscal year 2009 (“fiscal year at issue”).

Commissioner Egan heard this appeal. Chairman Hammond and Commissioners Scharaffa, Rose, and Mulhern joined her in a decision for the appellants.

These findings of fact and report are made pursuant to a request by the appellee under G.L. c. 58A, § 13 and 831 CMR 1.32.

Alan Deane, pro se, for the appellants.

Gregory Franks, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of the testimony and exhibits offered into evidence at the hearing of this appeal, the Appellate Tax Board (“Board”) made the following findings of fact.

On January 1, 2008, the relevant date of assessment for the fiscal year at issue, the appellants were the assessed owners of a 1.156-acre parcel of land, improved with a two-story, Colonial-style dwelling (“subject dwelling”), located at 14 Olde Hickory Path in Westborough, Massachusetts (“subject property”). Constructed in 2000, the subject dwelling has a concrete foundation, wood clapboard and brick exterior, and an asphalt shingle roof. It has thirteen rooms, including four bedrooms, as well as five full bathrooms and two half-bathrooms. The dwelling has a total finished living area of 5,223 square feet. Interior features include hardwood and carpet flooring and four fireplaces. The subject dwelling also has a three-car attached garage, a full, unfinished basement, and a screened porch and patio area.

For the fiscal year at issue, the assessors assessed the subject property at $1,808,000, and assessed a tax thereon, at a rate of $15.50 per thousand, in the total amount of $28,024.00. Westborough’s Collector of Taxes mailed the actual tax bills for fiscal year 2009 on December 18, 2008. The appellants timely paid the taxes due without incurring interest. The appellants timely filed an Application for Abatement with the assessors on January 6, 2009. The Application for Abatement was denied in part and allowed in part by vote of the assessors on January 27, 2009. The assessors partially abated the assessment because they determined that the original assessment was premised upon an incorrect measurement of the subject dwelling’s total gross living area. The assessed value was reduced to $1,720,500. The appellants timely filed an appeal with the Board on April 22, 2009. On the basis of these facts, the Board found and ruled that it had jurisdiction to hear and decide this appeal.

A. The Appellants’ Case-in-Chief

The appellants presented their case-in-chief through the testimony of Alan Deane, whom the Board found to be credible. The appellants also introduced into evidence numerous documents – including property record cards – with information regarding the assessments of several properties in the same neighborhood as the subject property. The following chart substantially reproduces the chart presented by the appellants containing data from eight other properties located on Olde Hickory Path.

Address	Acres	Year Built	SFLA	Full Bath	Half Bath	Bedrooms	Assessed Value ($)
Subject Property	1.156	2000	5,223	5	2	4	1,720,500
8	1.18	2005	5,262	4	2	4	1,634,300
10	1.18	2004	6,317	4	1	4	1,768,800
11	1.15	2000	5,080	4	2	4	1,100,100
12	1.2	2003	5,218	2	2	4	1,538,300
16	1.15	2002	6,953	4	2	4	1,910,000
17	1.6	2002	6,244	4	2	4	1,718,700
18	1.9	2004	5,325	6	1	6	1,692,400
20	1.7	2001	5,291	4	2	4	1,705,300

As evidenced in the above chart, despite being older and smaller in total finished living area than most of the comparable properties, the subject property had one of the highest assessments. Mr. Deane testified that all of the homes on Olde Hickory Path were constructed by the same builder. Mr. Deane further testified that the homes that were constructed first, including the subject property, were not of the same quality as the properties that were constructed later, and that he had to replace decks and balconies at the subject property because of the poor construction.

The appellants also introduced into evidence a document entitled “Town of Westborough: Current vs. Previous Assessment Detail Report by Location” (“Assessment Detail Report”). The Assessment Detail Report showed the fiscal year 2009 assessed value and previous assessed value for approximately twenty properties located on Olde Hickory Path. The subject property was one of only three properties on Olde Hickory Path whose assessment increased in fiscal year 2009. Further, the Assessment Detail Report showed current and previous assessments for properties on other streets in the same neighborhood as the subject property. The overall trend in the neighborhood was for a decrease in assessed value.

B. The Assessors’ Case-in-Chief

The assessors presented their case-in-chief through the testimony of assessor Linda Swadel and the submission of a comparative analysis involving five single-family homes located in the subject property’s neighborhood. The following chart substantially reproduces the comparative analysis offered by the assessors.[108]

	Subject Property	18 Olde Hickory	Adjust.($)	5 Whispering Pine	Adjust.($)	16 Olde Hickory	Adjust.($)
Proximity	N/A	Same Street		Same Subdivision		Same Street
Sale Price ($)	N/A	1,900,000		1,075,000		N/A
Sale Price ($/Sq. Ft.)	N/A	396,000		233.90		N/A
Assessment ($)	1,720,500	1,692,400		1,033,600		1,910,000
Assessment ($/Sq. Ft.)	355.92	352.73		224.89		315.60
Sale Date	N/A	8/29/07		9/7/07		N/A
Location	Excellent	Excellent		Excellent		Excellent
Lot Size (acres)	1.156	1.295	-2,100	2.64 acres	-22,300	1.153
Style	Colonial	Colonial		Colonial		Colonial
Construct. Quality	AA- Superb	AA- Superb		A- Very Good	660,600	AA- Superb
Age/Condition	9 Yrs./ Very Good	5 Yrs./Excellent	-25,800	8 Yrs./VeryGood	-22,500	8 Yrs./Excellent	-12,700
Room Count	13/4/5 full/2 half	11/6/6.5	-2,800	13/5/4	21,700	11/4/4 full/2 half	9,100
SFLA	4834	4798	2,700	4596	17,600	6052	-90,100
Attic Sq. Ft./% Fin.	486/80%	527sf/100%	-3,400	568/0%	7,100	901/100%	-15,600
Basement	Full Unfin.	Full Unfin.	-2,800[109]	Full Unfin.		Full Unfin.
Garage	3 Car Attach.	3 CarAttach.		3 CarAttach.		3 Car Attach.
Fireplaces	4	2	18,200	1	27,300	4
Decks/Porch	SP/Deck/OFPPatio	2 small decks	7,000	Deck/Enc.FP	-3,700	Lg. Enc. FP/Patio	-4,100
Total Adjust.			-9,000		685,800		-113,400
Adjust. Assessment			1,683,400		1,719,400		1,796,600
Adjust. Sale Price			1,891,000		1,760,800

	Subject Property	21 Olde Hickory	Adjust.($)	5 Olde Hickory	Adjust.($)
Proximity	N/A	Same Street		Same Street
Sale Price ($)	N/A	N/A		N/A
Sale Price ($/Sq. Ft.)	N/A	N/A		N/A
Assessment	1,720,500	1,863,600		1,732,500
Assessment ($/Sq. Ft.)	355.92	309.47		381.02
Sale Date	N/A	N/A		N/A
Location	Excellent	Excellent		Excellent
Lot Size	1.156	2.45	-19,500	1.879	-10,900
Style	Colonial	Colonial	-13,700	Colonial
Construction Quality	AA- Superb	AA – Superb		AA – Superb
Age/Condition	9 Yrs./ Very Good	8 Yrs./Excellent		4 Yrs./Very Good	-24,200
Room Count	13/4/5 full/2 half	13/5/5 full/2 half		11/4/6 full/2 half	-9,100
SFLA	4834	6022	-87,900	4547	21,200
Attic	486/80%	674/60%	-2,100	453/100%	-1,200
Basement	Full Unfin.	Full Unfin.		Full Unfin.
Garage	3 Car Attach.	3 CarAttach.		3 CarAttach.
Fireplaces	4	3	9,100	2	18,200
Decks/Porches	SP/Deck/OFPPatio	OFP/Deck	1,200	OFP	5,000
Total Adjust.			-112,900		-1,000
Adjust. Assessment			1,750,700		1,731,500
Adjust. Sale Price

For the purposes of their analysis, the assessors considered 18 Olde Hickory Path to be the most comparable to the subject property, because of its close proximity to the subject property and the fact that it sold during 2007, close to the relevant assessment date. Based on the adjusted assessments and/or sales prices of the comparable properties derived through their analysis, the assessors’ opinion of value for the subject property was $1,720,500, its assessed value as abated.

C. The Board’s Ultimate Findings

On the basis of all of the evidence, the Board found that the appellants met their burden of proving that the assessed value of the subject property, as abated, exceeded its fair cash value. The appellants presented evidence showing that the overall trend in the subject property’s neighborhood was for a decrease in assessed value from the previous fiscal year. However, the subject assessment represented an increase from the previous fiscal year. There was no evidence in the record to explain why the subject property would have been an exception to this trend, nor evidence to support a finding that the value of the subject property increased from its value for the previous fiscal year.

The evidence showed that, despite being older than and in inferior condition to most of the homes on the same street, the subject property had one of the higher assessments. Only two properties on Olde Hickory Path were assessed for more than the subject property. The dwellings at both of those properties, 10 Olde Hickory Path and 16 Olde Hickory Path, were newer and substantially larger in living area than the subject property. The only other property constructed in 2000, like the subject property, was 11 Olde Hickory Path, which was assessed for $620,400 less than the subject property. The Board found this discrepancy to be persuasive evidence that the subject property was overvalued for the fiscal year at issue.

The Board agreed with the assessors that 18 Olde Hickory Path was the property most comparable to the subject property. However, 18 Olde Hickory Path was newer and in better condition than the subject property and also had a slightly larger lot size. 18 Olde Hickory Path sold for $1,900,000 in 2007, and its assessed value for the fiscal year at issue was $1,692,400. Based on all of the evidence, with particular reliance on 18 Olde Hickory Path, the Board found that the fair cash value of the subject property was $1,685,000.

Accordingly, the Board issued a decision for the appellants in this appeal and granted an abatement of $550.25.

OPINION

Assessors are required to assess real estate at its fair cash value as of the first day of January preceding the fiscal year at issue. G.L. c. 59, § 38. The fair cash value of a property is defined as the price upon which a willing buyer and a willing seller would agree if both were fully informed and under no compulsion. Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).

The burden of proof is upon the taxpayer to make out a right to an abatement. Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974). The assessment is considered to be valid unless the taxpayer meets its burden and proves otherwise. Id. A taxpayer “may present persuasive evidence of overvaluation either by exposing flaws or errors in the assessors’ method of valuation, or by introducing affirmative evidence of value which undermines the assessors’ valuation.” General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 600 (1984) (quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983)).

In the present appeal, the appellants introduced persuasive evidence that the subject property’s assessed value was greater than its fair cash value. The evidence showed that the assessed values of most properties in the subject property’s neighborhood declined from the previous fiscal year, while the subject assessment represented an increase from the previous fiscal year. There was no evidence in the record to explain why the subject property would have been an exception to this trend, nor was there evidence to support a finding that the value of the subject property increased from its value for the previous fiscal year.

Furthermore, evidence regarding numerous comparable properties in the subject property’s immediate neighborhood was entered into the record. These properties were similar in style to the subject property and were constructed by the same builder. However, the subject property was one of the first homes built in the development, and the evidence showed that it was older than, and in inferior quality to, most of the other homes in the neighborhood. The subject property also had a smaller lot size and less total finished living area than many of the comparable properties. Nevertheless, the subject assessment was among the highest on Olde Hickory Path. The Board found this discrepancy to be persuasive evidence that the subject property was overvalued for the fiscal year at issue and found and ruled that the appellants met their burden of proving that the subject property was overvalued.

In evaluating the evidence before it, the Board selected among the various elements of value and formed its own independent judgment of fair cash value. General Electric Co., 393 Mass. at 605; North American Philips Lighting Corp. v. Assessors of Lynn, 392 Mass. 296, 300 (1984). The Board need not specify the exact manner in which it arrived at its valuation. Jordan Marsh v. Assessors of Malden, 359 Mass. 106, 110 (1971). The fair cash value of property cannot be proven with “mathematical certainty and must ultimately rest in the realm of opinion, estimate and judgment.” Assessors of Quincy v. Boston Consolidated Gas Co., 309 Mass. 60, 72 (1941).

Because of its location and other similarities, the Board found that 18 Olde Hickory Path was the property most comparable to the subject property. However, 18 Olde Hickory Path was newer and in better condition than the subject property. 18 Olde Hickory Path sold for $1,900,000 in 2007; for the fiscal year at issue, its assessed value was $1,692,400. Based on all of the evidence, with particular reliance on 18 Olde Hickory, the Board found and ruled that the fair cash value of the subject property for the fiscal year at issue was $1,685,000. Accordingly, the Board issued a decision for the appellants in this appeal and granted an abatement of $550.25.

APPELLATE TAX BOARD

By: __________ ___ __

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest:

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

ELIZABETH T. GORDON v. BOARD OF ASSESSORS OF THE TOWN OF UPTON

Docket No. F299396 Promulgated

June 28, 2010

This is an appeal filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65, from the refusal of the Board of Assessors of the Town of Upton (“appellee” or “assessors”) to abate taxes on certain real estate in Upton, owned by and assessed to Elizabeth T. Gordon (“Ms. Gordon” or “appellant”) under G.L. c. 59, §§ 11 and 38 for fiscal year 2009 (“fiscal year at issue”).

Commissioner Egan (“Presiding Commissioner”) heard this appeal and issued a single-member decision for the appellee in accordance with G.L. c. 58A, § 1 and 831 CMR 1.20.

These findings of fact and report are made pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.

Elizabeth T. Gordon, pro se, for the appellant.

Charles Marsden, Assessor, for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of the testimony and exhibits entered into evidence in the hearing of this appeal, the Presiding Commissioner made the following findings of fact. On January 1, 2008, the relevant date of assessment for the fiscal year at issue, the appellant was the assessed owner of two parcels of land located in Upton (together, the “subject parcels”).[110] The first parcel, designated as map 001 lot 002 in the assessors’ records, consists of 8.59 acres of unimproved land (“parcel A”). The second parcel, designated as map 001 lot 003 in the assessors’ records, consists of 53.8 acres of unimproved land (“parcel B”). The subject parcels are wooded with some wetlands. The subject parcels are accessible only from Fay Mountain Road, which is not a public road. Town services, such as paving, plowing, and sewer, are not provided on Fay Mountain Road. At their rear boundaries, the subject parcels come to a steep ledge, where they abut the Massachusetts Turnpike.

For the fiscal year at issue, the assessors valued parcel A at $88,700 and assessed a tax thereon, at the rate of $12.43 per $1,000, in the total amount of $1,102.54. For the fiscal year at issue, the assessors valued parcel B at $320,200 and assessed a tax thereon, at the rate of $12.43 per $1,000, in the total amount of $4,062.20.[111] On December 31, 2008, Upton’s Collector of Taxes mailed the actual fiscal year 2009 tax bills. The appellant timely paid the tax due without incurring interest. On January 29, 2009, the appellant timely filed an Application for Abatement with the assessors, which they denied on March 3, 2009. The appellant seasonably filed her petition with the Appellate Tax Board (“Board”) on April 13, 2009. On the basis of these facts, the Presiding Commissioner found and ruled that the Board had jurisdiction to hear and decide this appeal.

In her case-in-chief, the appellant presented her testimony and a number of documents and exhibits, including her own written narratives, several maps and photographs, deeds, and data from supposedly comparable properties. Ms. Gordon’s written narratives included information regarding three abutting or nearby parcels on Fay Mountain Road owned by Joseph and Judith Meichelbeck, (“Meichelbeck property”), and Raymond and Susan Nydam (“Nydam property”). Ms. Gordon asserted that the Meichelbeck and Nydam properties were comparable to the subject parcels, and that the subject parcels were overvalued in comparison to those properties. However, Ms. Gordon did not offer the property record cards, or any other relevant assessing document, showing the size, assessed value, or any other particulars about the Meichelbeck and Nydam properties.

In presenting their case-in-chief, the assessors presented various jurisdictional documents, a land value chart showing land values in Upton, and the testimony of Mr. Marsden, which the Presiding Commissioner found to be credible. Mr. Marsden testified that the Meichelbeck and Nydam properties, as well as many other parcels near the subject parcels, were classified as recreational land under G.L. c. 61B (“chapter 61B”).[112] Chapter 61B allows taxpayers who own “land not less than five acres in area [that is] retained in substantially a natural, wild, or open condition or in a landscaped or pasture condition or in a managed forest condition” to apply to the assessors to have the land classified as recreational land. Under chapter 61B, the assessed value of land classified as “recreational land shall [not] exceed twenty-five per cent of its fair cash value as determined pursuant to chapter fifty-nine.” The Presiding Commissioner therefore found that the record did not support a finding that the Meichelbeck and Nydam properties were comparable to the subject property, both because there was insufficient evidence to establish their basic comparability and because they were classified as recreational land, while the subject parcels were not.

Mr. Marsden further testified that the valuation of the subject parcels was consistent with Upton’s fiscal year 2009 land assessment tables. For excess land, the assessment table specified that the first five acres were to be valued at $12,000 per acre, the next twenty acres were to be valued at $8,000 per acre, and any additional acreage was to be valued at $4,000 per acre. The property record cards for the subject parcels indicated that their values were consistent with Upton’s excess land values for the fiscal year at issue, with the exception that there appeared to be a reduction of 25% to the value of the first five acres of parcel B, such that they were valued at $45,000, rather than $60,000. Accordingly, the Presiding Commissioner found that the subject parcels were valued as excess land, rather than residential property or property with road frontage, for the fiscal year at issue.

Based on the foregoing, the Presiding Commissioner found that the record did not support a finding that the assessed values of the subject parcels exceeded their fair cash values for the fiscal year at issue. The appellant attempted to establish the overvaluation of the subject parcels by comparing them to the Meichelbeck and Nydam properties. However, the Presiding Commissioner found that those properties were not comparable to the subject parcels, and therefore, did not establish a basis for proving that the subject parcels were overvalued. The appellant offered additional evidence, including maps and pictures. The Presiding Commissioner found that the record in its totality, however, did little more than establish that the subject parcels were unimproved excess land, which is how they were valued by the assessors, in accordance with Upton’s excess land assessment table. Accordingly, the Presiding Commissioner found and ruled that the appellant failed to meet her burden of proving that the subject parcels were overvalued for the fiscal year at issue and issued a decision for the appellee in this appeal.

OPINION

The burden of proof is upon the taxpayer to make out a right to an abatement. Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974). The assessment is considered to be valid unless the taxpayer meets its burden and proves otherwise. Id. A right to an abatement can be proven by either introducing affirmative evidence of fair cash value or by proving that the assessors erred in their method of valuation. General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 600 (1984).

Properties whose assessed values are relied upon must be comparable to the subject property in order to be probative of fair cash value. Assessors of Lynnfield v. New England Oyster House, Inc., 362 Mass. 696, 703 (1972). In the present appeal, the appellant relied upon a comparison of the subject parcels with the Meichelbeck and Nydam properties. The Presiding Commissioner found that the appellant failed to establish basic comparability between the subject properties and those properties, which the evidence showed were classified under Chapter 61B, while the subject parcels were not. The assessed values of those properties therefore did not provide reliable evidence of the fair cash values of the subject parcels.

Similarly, the additional evidence offered by the appellant failed to demonstrate that the assessed values of the subject parcels exceeded their fair cash values. The record showed that the subject parcels were wooded land, some portions of which were wetlands. The evidence showed that the subject parcels were valued as excess land by the assessors, in accordance with Upton’s excess land valuation tables. The evidence simply did not support a finding that the assessors erred in assessing the subject parcels or that the subject parcels’ assessed values were greater than their fair cash values.

Accordingly, the Presiding Commissioner found and ruled that the appellant failed to meet her burden of proving her right to an abatement, and issued a decision for the appellee in this appeal.

APPELLATE TAX BOARD

By: _____ ___

Nancy T. Egan, Commissioner

A true copy,

Attest: __

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

ANTHONY P. SNIGIER v. BOARD OF ASSESSORS OF THE CITY OF BROCKTON

Docket No. F299523 Promulgated

June 28, 2010

This is an appeal filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65, from the refusal of the Board of Assessors of the City of Brockton (“appellee” or “assessors”) to abate taxes on certain real estate in Brockton, owned by and assessed to Anthony P. Snigier (“Mr. Snigier” or “appellant”) under G.L. c. 59, §§ 11 and 38 for fiscal year 2009 (“fiscal year at issue”).

Commissioner Egan (“Presiding Commissioner”) heard this appeal and issued a single-member decision for the appellee in accordance with G.L. c. 58A, § 1 and 831 CMR 1.20.

These findings of fact and report are made pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.

Anthony P. Snigier, pro se, for the appellant.

Philip Nessralla, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of the testimony and exhibits entered into the record in this appeal, the Presiding Commissioner made the following findings of fact. On January 1, 2008, the relevant date of assessment for the fiscal year at issue, the appellant was the assessed owner of a 0.316-acre parcel of land improved with a 5,690 square-foot building and a 9,000 square-foot asphalt parking lot, located at 772 North Main Street in Brockton (“subject property”).[113] The subject building was constructed in 1983 and has a brick and steel exterior. It primarily consists of a six-bay garage which houses the appellant’s automotive repair business. In addition to the garage area, the subject building also has finished areas consisting of three offices, three bathrooms, an employee break room and a customer waiting area. The paved parking lot can accommodate approximately 50 cars.

For the fiscal year at issue, the assessors valued the subject property at $408,500, and assessed a tax thereon, at a rate of $22.84 per thousand, in the total amount of $9,330.14. The appellant timely paid the taxes due without incurring interest. On January 23, 2008, the appellant filed an Application for Abatement with the assessors, which was denied by vote of the assessors on January 30, 2008. The appellant timely filed this appeal with the Appellate Tax Board (“Board”) on April 23, 2009. Based on the foregoing, the Presiding Commissioner found and ruled that the Board had jurisdiction to hear and decide this appeal.

A deed entered into evidence indicated that Mr. Snigier purchased the subject property in December of 2006 for $450,000. However, Mr. Snigier testified that he purchased the subject property under duress, as he had only thirty days to find a location for his business. Mr. Snigier also testified that, for fiscal year 2008, the assessors initially assessed the subject property for $440,800, but that the assessment was later abated, by agreement of the parties, to $350,000.

In addition to his testimony, Mr. Snigier offered a comparative analysis of five commercial properties in Brockton, as well as the property record cards for each of his selected comparable properties. The comparative analysis offered by Mr. Snigier is substantially reproduced in the following chart.

Address	Assessed ValueFY08 ($)	Assessed ValueFY09 ($)	Change ($)
772 NorthMain St.	350,000	408,500	58,500
501 NorthMain St.	384,800	356,000	-28,200
312 NorthMontello St.	342,000	314,300	-27,700
33 MontelloStreet	293,500	272,000	-21,500
210 NorthCary St.	358,600	329,600	-27,000
225 NorthMontello St.	395,000	363,000	-32,000

The five properties selected for comparison by Mr. Snigier were all classified as automotive repair facilities for assessment purposes, with the exception of 33 Montello Street, which was classified as warehouse space. However, the property record card for 33 Montello Street showed a building with three garage bays which appeared to house a car wash or automotive repair business. Mr. Snigier concluded from his analysis that properties comparable to the subject property saw a decrease in their assessment of approximately seven percent between fiscal year 2008 and 2009. Based on this analysis, Mr. Snigier opined that the fair cash value of the subject property for the fiscal year at issue was $325,500, which was seven percent less than its assessed value, as abated, of $350,000 for the preceding fiscal year.

The assessors presented their case through the testimony of assessor Paul Sullivan and through the introduction of various documents. Among the exhibits offered by the assessors were two Multiple Listing Service (“MLS”) listings offering the subject property and the automotive business located thereon for sale. One MLS listing, dated June 16, 2008, recited an asking price of $875,000. According to the listing, the original asking price had been $975,000, but was reduced to $875,000 after the property had been on the market for 94 days. Included in the sale price were the automotive business, the subject real property, and certain other personal property, such as tools and equipment. The other MLS listing, dated January 18, 2009, recited an asking price of $689,900.

In addition, Mr. Sullivan testified that, on average, commercial properties in Brockton increased in assessed value by five percent between fiscal years 2008 and 2009. Mr. Sullivan stated that the assessors used income and expense data to determine the assessed value of the subject property for the fiscal year at issue. The Presiding Commissioner found his testimony to be credible.

On the basis of all of the evidence, the Presiding Commissioner found and ruled that the appellant did not meet his burden of proving that the assessed value of the subject property was greater than its fair cash value. The appellant purchased the subject property for $450,000 in December of 2006, just thirteen months before the relevant date of assessment. The Presiding Commissioner found that the actual sale of the subject property, reasonably close to the relevant date of assessment, provided reliable evidence of its fair cash value for the fiscal year at issue.

The appellant asserted that he purchased the subject property under duress and, therefore, the actual sale price did not reflect an arm’s-length transaction. However, there was nothing in the record besides the appellant’s testimony indicating that he purchased the subject property under duress, and the Presiding Commissioner found that the appellant’s bare assertion was insufficient to establish that the sale price did not reflect the subject property’s fair cash value at the time.

Moreover, the Presiding Commissioner found that even if Mr. Snigier had established that he purchased the subject property under duress, that fact in and of itself would not prove that the subject property was overvalued for the fiscal year at issue. The appellant purchased the subject property for $450,000 in December of 2006. Even assuming arguendo that the appellant paid more than fair cash value when he purchased the subject property, the subject assessment – $408,500 – was still considerably less than the purchase price paid by the appellant. Further, Mr. Snigier’s opinion of value for the subject property for the fiscal year at issue was $325,000, or $125,000 less than what he paid for the subject property in December of 2006. The Presiding Commissioner found that the record did not support the conclusion that the subject property’s fair cash value just thirteen months later was nearly twenty-eight percent less than the purchase price paid by the appellant.

Based on the foregoing, the Presiding Commissioner found and ruled that the appellant failed to meet his burden of proving that the assessed value of the subject property exceeded its fair cash value for the fiscal year at issue.[114] Accordingly, the Presiding Commissioner issued a decision for the appellee in this appeal.

OPINION

Assessors are required to assess real estate at its fair cash value as of the first day of January preceding the fiscal year at issue. G.L. c. 59, § 38. The fair cash value of a property is defined as the price upon which a willing buyer and a willing seller would agree if both are fully informed and under no compulsion. Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).

The burden of proof is upon the taxpayer to make out a right to an abatement. Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974). The assessment is considered to be valid unless the taxpayer meets its burden and proves otherwise. Id. A right to an abatement can be proven by either introducing evidence of fair cash value, or by proving that the assessors erred in their method of valuation. General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 600 (1984).

In the present appeal, the Presiding Commissioner found and ruled that the appellant failed to prove that the assessed value of the subject property exceeded its fair cash value. The appellant introduced a chart showing the assessed values of five comparable commercial properties in Brockton. Although evidence of the assessed values of comparable properties is probative, evidence of actual sales generally furnishes the most reliable evidence of fair cash value. Foxboro Associates v. Assessors of Foxborough, 385 Mass. 679, 682 (1982); New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456, 469 (1981); First National Stores, Inc. v. Assessors of Somerville, 358 Mass. 554, 560 (1971). The Presiding Commissioner found and ruled that the actual sale price of the subject property in December of 2006 provided the most reliable evidence of its fair cash value. Although the appellant testified that he purchased the subject property under duress, there was no other support for this assertion in the record. Moreover, even assuming arguendo that the appellant paid more than fair cash value for the subject property, the subject assessment – $408,500 – was still considerably less than the $450,000 purchase price paid by the appellant. The evidence presented by the appellant simply did not establish that the assessed value of the subject property was greater than its fair cash value for the fiscal year at issue.

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

MARY R. UPTON v. BOARD OF ASSESSORS OF THE TOWN OF WAYLAND

Docket Nos. F294419, F299715 Promulgated:

July 9, 2010

These are appeals filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65, from the refusal of the Board of Assessors of the Town of Wayland (“assessors” or “appellee”) to abate taxes on certain real estate located in Wayland, owned by and assessed to the appellant under G.L. c. 59, §§ 11 and 38, for fiscal years 2008 and 2009.

Commissioner Mulhern heard the appeals. Chairman Hammond and Commissioners Scharaffa and Rose joined him in the decision for the appellee in docket number F294419 and the decision for the appellant in docket number F299715.

These findings of fact and report are made pursuant to requests by both the appellant and the appellee under G.L. c. 58A, § 13 and 831 CMR 1.32.

Mary R. Upton, pro se, for the appellant.

Mark J. Lanza, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

Based on the testimony and exhibits offered into evidence in these appeals, the Appellate Tax Board (“Board”) made the following findings of fact.

On January 1, 2007 and January 1, 2008, Mary R. Upton (“appellant”) was the assessed owner of a waterfront parcel of real estate improved with a single-family dwelling located at 23B Bayfield Road in the Town of Wayland (“subject property”). For fiscal years 2008 and 2009, the assessors valued the subject property at $1,119,300 and $931,000, respectively. The assessors assessed taxes at the rate of $14.98 per $1,000 for fiscal year 2008 and $16.37 per $1,000 for fiscal year 2009, resulting in tax assessments of $16,996.15 for fiscal year 2008 and $15,446.17 for fiscal year 2009.[115] In accordance with G.L. c. 59, § 57C, the appellant timely paid each fiscal year’s taxes without incurring interest.

On December 27, 2007 and February 2, 2009, in accordance with G.L. c. 59, § 59, the appellant timely filed an Application for Abatement with the assessors for fiscal years 2008 and 2009, respectively. On March 25, 2008, the assessors granted the appellant a partial abatement for fiscal year 2008 and lowered the subject property’s assessed value by $241,100 to $878,200. The appellant’s fiscal year 2009 abatement application was deemed denied on May 2, 2009.[116] The appellant seasonably filed her appeals with the Appellate Tax Board (“Board”) on April 10, 2008 for fiscal year 2008 and on May 1, 2009 for fiscal year 2009. On the basis of these facts, the Board found and ruled that it had jurisdiction to hear and decide these appeals.[117]

The subject property is a 2.7-acre, triangle-shaped parcel of real estate, which is improved with a single-family, ranch-style dwelling built over a concrete slab. The subject dwelling, which was built in 1957, has a wood shingle exterior and an asphalt gable roof. The dwelling contains a total living area of approximately 1,810 square feet with a total of six rooms, including three bedrooms, as well as three full bathrooms. Other amenities include one fireplace, a one-story barn, a two-car attached garage, an open porch, and a 720-square foot wood deck located to the rear of the dwelling overlooking Dudley Pond.

The subject property has approximately 213 feet of frontage on Dudley Pond on one side of the triangle-shaped lot. Located on another side of the subject property is the Massachusetts Water Resource Authority (“MWRA”) Aqueduct and located on the third side of the parcel are five residential properties. The subject property has no street frontage and therefore is a nonconforming parcel; access to the subject property is via a driveway easement crossing an abutter’s land. There is a ten-foot right-of-way granted to 23 Bayfield Road to access Dudley Pond. The Dudley Pond area of the subject property is densely settled with a mix of cottage-style dwellings and some larger, more recently renovated dwellings.

The appellant offered into evidence two valuation analyses for fiscal years 2008 and 2009. In her valuation analyses, the appellant included numerous documents, including the subject property’s property record cards for the fiscal years at issue, various town maps, a discussion of the Wayland assessors’ land-pricing schedule, the appellant’s interpretation of the assessors’ land schedule in comparison to the subject property, a listing of all properties that sold in Wayland in calendar years 2006 and 2007, a comparison of the assessment increases for properties in the Dudley Pond area from fiscal year 2008 to fiscal year 2009, and a listing of sales and assessments of purportedly comparable ranch-style properties located in Wayland.

The appellant’s primary argument was that the assessors’ land-valuation schedule used to develop the assessed land values in the Dudley Pond area was flawed. The appellant argued that as a result of the flawed land schedule, the subject property, which is a nonconforming lot with no frontage, was overvalued. The appellant maintained that there were insufficient arm’s-length sales in the Dudley Pond area during calendar years 2006 and 2007 to support the premium attributable to the land value assessments of Dudley Pond area properties for the fiscal years at issue. The appellant further maintained that there were no waterfront land sales in the Dudley Pond area during calendar year 2007 to support the assessors’ upward trend from fiscal year 2008 to fiscal year 2009.

Lastly, the appellant argued that the subject dwelling was overvalued compared to other ranch-style dwellings located in Wayland. The appellant did not, however, establish comparability between the subject property and her cited comparables nor did she make any adjustments to account for any differences between the chosen comparables and the subject property. Based on her calculations, the appellant arrived at an opinion of value for the subject property of $655,000 for fiscal year 2008 and $613,295 for fiscal year 2009.

Jason Brodie, a member of the assessors, was asked by the hearing officer if there had been any sales on Dudley Pond during the fiscal years at issue. Mr. Brodie testified that he did not know and that he was not involved in the valuation of the subject property. The hearing officer also asked if sales in the Dudley Pond area were flat during calendar year 2007, in comparison to calendar year 2006. Mr. Brodie again testified that he did not know the answer to the question and that he was not involved in the valuation of the subject property. The assessors then rested on the presumed validity of their assessments.

On the basis of all of the evidence, the Board found that, for fiscal year 2008, the appellant failed to demonstrate that the fair cash value of the subject property was less than its assessed value, as abated. The Board found that the appellant failed to establish comparability between her cited comparable assessments and sales and, moreover, failed to make any adjustments for differences that existed between the purportedly comparable properties and the subject property. Accordingly, the Board issued a decision for the appellee in Docket No. F294419.

However, with respect to fiscal year 2009, the Board found that the subject property’s assessment was excessive. The Board found that the evidence presented did not support a finding that real estate prices for waterfront property in Wayland similar to the subject property increased during calendar year 2007. The Board found, on the basis of the record in this appeal, that the real estate market for waterfront properties similar to the subject property remained stable in calendar year 2007 and that the subject property’s fiscal year 2008 assessment, as abated, of $878,200, best reflected the subject property’s fair market value as of January 1, 2008. Accordingly, the Board issued a decision for the appellant in Docket No. F299715, and granted an abatement of $878.96.

OPINION

Assessors are required to assess real estate at its fair cash value as of the first day of January preceding the fiscal year at issue. G.L. c. 59, §§ 11 and 38. The fair cash value of property is defined as the price upon which a willing buyer and a willing seller would agree if both were fully informed and under no compulsion. Boston Gas. Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).

Actual sales of the subject “are very strong evidence of fair market value, for they represent what a buyer has been willing to pay to a seller for [the] particular property [under appeal].” New Boston Garden Corp. v. Board of Assessors of Boston, 383 Mass. 456, 469 (1981) (quoting First Nat’l Stores, Inc. v. Assessors of Somerville, 358 Mass. 554, 560 (1971)). “Evidence of the sale prices of ‘reasonably comparable property’ is the next best evidence to the sale of the property in question.” Lattuca v. Robsham, 442 Mass. 205, 216 (2004). Required are “fundamental similarities” between the subject property and the comparison properties. Id. at 216. The appellant bears the burden of “establishing the comparability of . . . properties [used for comparison] to the subject propert[ies].” Fleet Bank of Mass. v. Assessors of Manchester, Mass. ATB Findings of Fact and Reports 1998-546, 554. Accord New Boston Garden Corp. v. Assessors of Boston, 383 Mass. at 470. “Once basic comparability is established, it is then necessary to make adjustments for the differences, looking primarily to the relative quality of the properties, to develop a market indicator of value.” New Boston Garden Corp., 383 Mass. at 470.

In the present appeals, the appellant offered into evidence valuation analyses which included a listing of property sales in Wayland during fiscal years 2006 and 2007 and also a listing of the fiscal years 2008 and 2009 assessment of numerous properties located in the Dudley Pond area and throughout Wayland. The appellant did not, however, establish comparability between the cited properties and the subject property nor did she make any adjustments to account for differences between the purportedly comparable properties and the subject property. See Antonino v. Assessors of Shutesbury, Mass. ATB Findings of Fact and Reports 2008-54, 71 (“[R]eliance on unadjusted assessments of assertedly comparable properties . . . was insufficient to justify a value lower than that assessed.”). Therefore, the Board found and ruled that the appellant failed to prove that the subject property’s fair cash value exceeded its fiscal year 2008 assessment, as abated. Accordingly, the Board issued a decision for the appellee in Docket No. F294419.

However, the Board further found and ruled that the subject property’s fiscal year 2009 assessment was excessive. The Board found that the evidence presented did not support a finding that real estate prices for waterfront properties in Wayland similar to the subject property increased between January 1, 2007 and January 1, 2008. Moreover, the Board found, on the basis of the evidence of record in this appeal, that the real estate market for waterfront property similar to the subject property remained stable in calendar year 2007 and that the $878,200 as-abated assessment of the subject property for fiscal year 2008 best reflected the subject property’s fair market value as of January 1, 2008. Accordingly, the Board issued a decision for the appellant in Docket No. F299715, and granted an abatement of $878.96.

“In reaching its opinion of fair cash value in this appeal, the Board was not required to believe the testimony of any particular witness or to adopt any particular method of valuation . . . . Rather, the Board could accept those portions of the evidence that the Board determined had more convincing weight.” Foxboro Associates v. Board of Assessors of Foxborough, 385 Mass. 679, 683 (1982); New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456 at 469, 473; Assessors of Lynnfield v. New England Oyster House, Inc., 362 Mass. 696, 701-02 (1972).

The Board applied these principles in reaching its determination that the assessors overvalued the subject property for fiscal year 2009. Accordingly, the Board issued a decision for the appellant in Docket No. F299715, and granted abatement in the amount of $878.96.

APPELLATE TAX BOARD

By: ____________________________________

Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: _________________________________

Clerk of the Board

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

STEIN B. JACOBSEN v. BOARD OF ASSESSORS OF

THE TOWN OF CONCORD

Docket No. F298614 Promulgated:

July 9, 2010

This is an appeal filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65, from the refusal of the appellee to abate taxes on real estate located in the Town of Concord, owned by and assessed to the appellant under G.L. c. 59, §§ 11 and 38, for fiscal year 2008.

Commissioner Egan heard this appeal. Commissioners Scharaffa, Rose, and Mulhern joined her in the decision for the appellant.

These findings of fact and report are made pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.

Stein B. Jacobsen, pro se, for the appellant.

Nina L. Pickering Cook, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

On January 1, 2007, Stein B. Jacobsen was the assessed owner of a parcel of real estate improved with a single-family home located at 531 Monument Street in the Town of Concord. For fiscal year 2008, the Board of Assessors of Concord (“assessors”) valued the subject property at $1,014,400, and assessed a tax thereon, at the rate of $10.72 per thousand, in the amount of 10,874.37.[118] Concord’s Collector of Taxes mailed the town’s actual tax bills on February 28, 2008. On or before May 1, 2008, in accordance with G.L. c. 59, § 57C, the appellant timely paid the tax due on the actual tax bill without incurring interest.[119] On April 30, 2008, in accordance with G.L. c. 59, § 59, the appellant timely filed an Application for Abatement with the assessors,[120] which they denied on May 22, 2008. On August 22, 2008, in accordance with G.L. c. 59, §§ 64 and 65, the appellant seasonably filed his appeal with the Appellate Tax Board (“Board”). On this basis, the Board found and ruled that it had jurisdiction to hear and decide this appeal.

In challenging the subject property’s fiscal year 2008 assessment of $1,014,400, the appellant relied on the testimony of his spouse, Joana Vizgirda, and a self-prepared valuation report that contained data pertaining to the subject property, as well as comparable-sales, “value-trend,” and regression analyses, plus a letter from the sales associate who sold the subject property to the appellant, which explains several “limiting factors affecting the fair market value of [the subject property].” In defense of the assessment, the assessors primarily relied on the testimony of, and the appraisal report and valuation analysis prepared by, their real estate valuation expert, Jonathan Avery. Based on this evidence and reasonable inferences drawn therefrom, the Board made the following findings of fact.

The subject property consists of a 2.42-acre parcel of land improved with a 2,353-square-foot,[121] contemporary, split-level, single-family residence, which the appellant classified as a “deck house.” The parcel is identified as Parcel 1454 on assessor’s Map H-6 and is located on the corner of Monument Street and Red Coat Lane. The subject property is situated in a residentially zoned area along Monument Street just north of Concord’s central business district and approximately 300 yards north of the Minuteman National Historical Park. The one-half mile area beyond the national park includes the subject property and two other like-age, contemporary structures situated among a wide variety of antique properties. Contemporary homes similar to the subject are more frequently found in other areas of Concord, primarily in the Annursnac Hill area and in sections of West Concord near the Sudbury town line. An entry driveway and athletic fields associated with the Fenn School, a private, independent day school for boys in grades four through nine, are located across the street from the subject property.

The subject property’s 2.42-acre, rectangular-shaped lot is slightly higher in the front along Monument Street. It slopes gradually down to wetlands in the rear, which comprise over fifty percent of the lot. The wetlands area is lightly wooded and includes typical wetlands vegetation and an intermittent stream. The uplands portion of the lot along Monument Street is primarily open with some shade trees and a stone wall along Monument Street.

The basement floor of the contemporary structure is at ground level on the front portion of the lot and a few feet above the wetlands. The front and south side of the lot have been backfilled to provide a small yard area around the structure. The driveway, however, is at ground level to access the garage under the first floor. The basement has a walk out exit to a large patio at ground level. Landscaping and foundation plantings are basic. The wood retaining wall and steps from the front walk down to the driveway are in a state of decay. The site has town water and a private septic system and is not located in a flood zone.

The subject property’s contemporary-style residential structure has vertical cedar exterior siding and double-pane casement-style windows. The main floor of the interior contains 1,769-square-feet of living space,[122] which consists of seven rooms, including 3 bedrooms, as well as two full bathrooms. The flooring is primarily maple with a parquet floor in the family room. The flooring for the master bathroom was recently replaced. The kitchen has vinyl flooring, and the main bathroom has a ceramic floor. The living room, which opens to the large, ten by twenty-four foot, wood deck, contains a floor-to-ceiling brick fireplace. The kitchen has Formica counters and wood-veneer cabinets with basic appliances.

The 600-square-foot garage is under the bedrooms and accessed from the driveway off of Red Coat Lane. The remaining portion of the basement is approximately seventy percent finished. This 584-square-foot finished area includes a family room with a fireplace, an office area, and a one-half bathroom. The family room has a walk-out exit to a large, twenty by twenty-five foot, patio with a storage shed on the north side. Utilities include a 100-amp fused electrical system, forced hot water heating system with two zones, a separate hot water heater, and central air conditioning.

Overall, the property is of average quality with several areas of deferred maintenance, including: areas of woodpecker damage on the exterior; several failing glazed windows; some unstained portions of siding; a decaying exterior shed; steps and retaining wall deterioration; and a deck in need of repair and refinishing. The estimated cost to cure these items of deferred maintenance ranges from $10,000 to $20,000. In addition, the subject property has an underground oil tank, which might have to be removed in order to sell the property. However, no definitive sales evidence was submitted in this regard.

In an effort to prove that the subject property was overvalued and should have been valued in “the low $800,000’s” for fiscal year 2008, the appellant, through his self-prepared valuation report and the testimony of his spouse, Ms. Vizgirda, first analyzed four properties in Concord, which he considered comparable to the subject property. These properties sold from May, 2006 to January, 2007 for sale prices ranging from $640,000 to $875,000. Two of the properties were contemporary-style homes, similar to the subject property, while the other two properties consisted of Colonial-style and ranch-style homes. With the exception of the ranch, which was considerably smaller than the subject property, the other three properties’ living and effective areas were reasonably comparable to the subject property’s. The two contemporary homes were located several miles away from the subject property and had significantly smaller lot sizes, while the Colonial- and ranch-style properties were located significantly closer to the subject property and had similar-sized lots. None of these properties had extensive wetlands like the subject property, and they were not exposed to the same amount of vehicular traffic that the near-by private school created for the subject property. After adjusting the sale price of the ranch for its differing building style and the sale prices of all of the properties for locational but no other differences with the subject property, the appellant and his spouse derived adjusted sale prices for these properties ranging from $679,774 to $846,800. The appellant then averaged the adjusted sale prices and calculated an indicated value for the subject property of $778,628 using this methodology.

The appellant and his spouse developed his “location adjustment factor” for each of these properties by comparing the sale prices of three properties from what he deemed to be the subject property’s neighborhood to the sale prices of three supposedly similar properties from what he deemed to be his comparable properties’ neighborhood. The appellant did not institute any adjustments to the sale prices to account for differences between properties from what he considered to be the subject property’s neighborhood and properties from his comparable properties’ neighborhoods. The appellant simply claimed that these properties, which he compared to one another for purposes of devising his location adjustment factor, were similar enough.

A summary of the appellant’s comparable-sales analysis is contained in the following table.

	Subject Property	57 Whits End Rd.	44 Jennie Dugan Rd.	47 Old Bedford Rd.	201 Inde-pendence Rd.

Living Area (SF)	1771	1773	1814	2160	1653
Eff. Area (SF)*	2404	2537	2482	2440	1963
Style	Contemp.	Contemp.	Contemp.	Colonial	Ranch
Acreage	2.42	1.35	1.34	2.47	2.39
Br/Ba**	3/2.5	3/3	4/2	4/2.5	2/2
Year (Yr.) Built	1968	1971	1963	1996	1943
Eff. Yr. Built	1983	1990	1986	1996	1982
Miles from Town Ctr.	1.2	3.3	3.7	1.5	1.2
Wetlands	Extensive	None	Under 30%	Under 5%	None
House Siting	Near Road	Sheltered	Near Road	Sheltered	Near Road
Traffic	Commuter	Local	Local	Minor	Local
View	School	Woods	Woods	Fields	Woods
Sale Date	11/01/1988	11/02/2006	01/12/2007	10/25/2006	05/01/2006
Sale Price ($)	450,000	640,000	730,000	781,350	875,000
Bldg. Adj. ($)***