Local company probably pretty steamed over ruling it owes Boston more than $2.2 million in back taxes

The Massachusetts Appeals Court ruled today that Veolia, which generates steam at a Chinatown plant, owes the city of Boston $2.2 million in taxes for the 2015 fiscal year because it applied for a tax abatement via letters attached to its quarterly tax payments rather than through an official abatement form.

The court agreed with a decision by the state Appellate Tax Board that even though Veolia might have had a case for having the "personal property tax" waived - as had happened the year before - the law is the law and because Veolia didn't get around to filling out the right form until three months after the abatement deadline the company has to just suck it up and pay the tax.

Boston had never sought to apply the personal-property tax to Veolia's steam plant and distribution pipes until the 2013-2014 tax year, when the board of assessors ruled the company owed $2 million in taxes on the equipment. The company filed the proper form for an abatement by the state-imposed deadline, got turned down by the assessors, then appealed to the state Appellate Tax Board. The board sided with the company and ruled it was a "manufacturer" exempt from the particular city tax and so did not owe the city $2 million.

Undeterred by the state ruling, the assessors sent Veolia a bill for the same tax - this time for $2.2 million - for the 2014-2015 tax year. In the meantime, the city is appealing the tax board's decision for the earlier tax year, so the whole matter remains somewhat up in the air.

In any case, instead of filing a formal appeal with the assessors again the company made its quarterly payments, but with a letter attached to each check from its vice president for finance stating that the company had petitioned the Appellate Tax Board to overrule the assessors again.

The company finally did fill out the appropriate form to request an abatement - but not until more than three months after the deadline for filing for one, and only after somebody at the assessors' office called the VP to say they had no record of a formal abatement request.

This time, the Appellate Tax Board ruled against Veolia, not because it had changed its mind about whether the company is exempt from the tax, but because the law is pretty clear that the procedure for getting a tax abated starts with filling out the right form by the deadline. Since Veolia failed to follow that step, the board ruled, the company could not even argue for why it deserved an abatement.

In its ruling today, the appellate court agreed that the rules are the rules:

It is well settled that the remedy of abatement is a statutory one, and if any of the statute's requirements are not complied with, the remedy is lost.

More specifically, the court said those letters attached to Veolia's tax-payment checks did not count as abatement "applications," under the law, that they were hardly "a form approved by the commissioner [of revenue]" for abatements and that even though the company did finally fill out State Tax Form 128, it did so three months after the deadline.

In reaching our conclusion, we acknowledge that the result is a harsh one for Veolia, and will be particularly severe if the tax board's decision that the tax levied on its personal property for fiscal year 2014 was assessed unlawfully is affirmed. However, neither the statute, nor the relevant case law, permit a different conclusion. On the contrary, the Legislature has given no indication that cases interpreting the jurisdictional requirements of ยง 59, which was amended to include the present language in 1933, was not in accordance with its intention.

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Comments

Taxes on nothing

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While relatively small, this tax someday will devour Boston due to the power of compounding.

What happens is a company buys property - so that gets taxed - say a computer for $1000 that generates $25 in tax. Let's say the computer gets damaged in a flood - it's now worthless. So the company has to buy a new computer and is taxed at $25 again on the new computer. However, the $25 from last year doesn't go away. It gets put into the overall tax pie and is spread around to all the other taxpayers PLUS it goes up by 2.5% per year.

This has been going on for almost 40 years - so there are now hundreds of millions of dollars embedded in Boston's property tax that are literally a tax on nothing. And this gets added to every year as equipment depreciates and becomes obsolete. And it compounds at 2.5% every year.

Mentioned this to someone in the tax department years ago and they said, wow, never thought of that. Then they went back to work as usual and in the meantime millions of dollars of taxes on nothing have been added to our taxes.

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11

You have uncovered the

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You have uncovered the conspiracy of the century! The city is doomed!

Size of the problem

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One can make a lot of assumptions around this - but the personal property tax is currently about 7.5% of the levy. Assuming this has been embedded in the budget twice on fully depreciated property over the past 37 years - plus compounding etc. - about 15% of the budget is a "tax on nothing" - or a burden now shared by everyone that has never owned any of that property. Assuming this continues every 20 years, in 40 years - or say 2 generations of homeowners - about a third of the property taxes will be on property that no longer exists.

If nothing is done - yes, the city is doomed - unless you are terrible at arithmetic.

And that's before we get into what happens if the Fed ever takes their finger off the scales of interest rates.

root of the problem

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I think Massachusetts tax laws (for property, personal property, excise) needs a major revision. The local assessors' calendars for valuation, billing, abatement, and collection are probably the same today as they were 100 years ago. There are so many things that can be improved

- prorated taxes for partial years

- monthly collection with autopay

- more frequent and timely valuation

- accepting abatement and exemption applications anytime (prorate the credits)

- fewer paper forms

Someone in the Legislature would need to make a serious effort to reform it, since you need to change many procedures that are hardcoded in Mass law.

Company's treasurer should be fired

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Knowing what forms to fill out and meeting deadlines is a basic part of the job of treasurer/CFO. If you filled out the abatement forms last year, you know the procedure. Just put a reminder in your calendar to do it each year. Not rocket science.

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23

I think it's clear that the

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I think it's obvious that the company knows they dropped the ball on submitting the correct forms, but their reasoning is a) they did notify the city treasurer in writing that they intended to apply for abatement, and b) they made the city aware that the city assessor should have known that it should not have levied the tax in the first place. So, extenuating circumstances.

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14

Really?

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When you're being well-paid to handle a company's finances (I wish I were paid 1/2 what this fool probably gets), it's your job to pay attention to detail and not make assumptions. It's not that difficult to have a minion fill out a form and submit it to the city.

So the city can send a bogus

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So the city can send a bogus tax bill, and it's the taxpayer's problem to get the city to correct it. And if you contact them using the wrong form, they will ignore it until after the deadline to file the proper form.

In other words, it doesn't matter what's right or wrong. It just matters that you follow whatever bureaucratic demands the government imposes, and if you don't, you have no recourse.

Why doesn't the city have to face any consequences for sending the bogus bill, after the state ruled this property shouldn't be taxable?

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16

Ah, footnotes

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That's a good question, and the wording of part of the court ruling should have given me pause (something along the lines of "It'd be a shame for Veolia if it ultimately wins the 2014 decison").

The answer is in a footnote:

The assessors have filed a timely notice of appeal from [the first decision]. Because the case is under appeal, the decision of the tax board granting a tax abatement for fiscal year 2014 is not final.

So, technically, the assessors weren't doing anything wrong in sending out the bill for the second year, because the courts have yet to rule on their appeal of the decision on the first year's bill.

My apologies; I've rewritten the part of the story that made it seem like the assessors were being kind of dickish with the second bill.

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13

Mis-carriage of justice

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If the previous case was decided in their favor then maybe they should ask the judge in the previous case if they could pretty please not pay.