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State tells Boston tax collectors to keep hands off South Station

The Massachusetts Appellate Tax Board last week ordered the city of Boston to pay back some $2.4 million in property taxes levied against the company that leases parts of South Station for retail and office use, because state law forbids property tax assessments on any MBTA property, even if it's used for commercial concerns.

The payments cover taxes the company paid in 2009 and 2010.

In its ruling, the tax board said the state law in question is unambiguous: No taxes on MBTA property, period, no matter the use. The board noted the state legislature rejected requests from Mayor Tom Menino to allow taxes on T property used primarily for commercial purposes.

The board added the city did itself no favors by only trying to collection property taxes at South Station and not at other MBTA stations at which space is leased for commercial uses - in particular, Ruggles and Back Bay stations.

The board also noted that in 1970, the BRA began tearing the entire then dilapidated station down as part of a plan to build an office tower, hotels and a 5,000-car garage and that it stopped only when ordered to do so by then Gov. Michael Dukakis in 1974. The BRA eventually gave up and sold the station to the MBTA, which then financed a massive renovation of the station in part through lease payments from a private company willing to lease out some of the renovated space.

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Sounds very similar to the Payment in Lieu of Taxes program here in Boston. The city hits up the big boys for payments (Harvard, Mass General) while letting the little guys get away without paying, even though no one is required to pay anything at all, according to state law.

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The decision brings that up, because apparently part of the lease agreement between the MBTA and the leasing company stipulates the company would try to work out a PILOT agreement. The tax board said that was ultimately irrelevant to the decision on the taxes the company had paid, because, basically, "no taxes means no taxes."

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