Dental Service of Massachusetts, Inc. v. Commissioner of Revenue (Lawyers Weekly No. 10-059-18)
NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us SJC-12346 DENTAL SERVICE OF MASSACHUSETTS, INC. vs. COMMISSIONER OF REVENUE. Suffolk. December 5, 2017. – April 13, 2018. Present: Gants, C.J., Gaziano, Lowy, Budd, & Cypher, JJ. Taxation, Abatement, Insurance company, Excise. Practice, Civil, Abatement. Insurance, Health and accident, Group, Coverage. Statute, Construction. Words, “Covered persons.” Appeal from a decision of the Appellate Tax Board. The Supreme Judicial Court granted an application for direct appellate review. David C. Kravitz, Assistant State Solicitor, for Commissioner of Revenue. Daniel P. Ryan (David J. Nagle also present) for the taxpayer. James Roosevelt, Jr., & Rachel M. Wertheimer, for Massachusetts Association of Health Plans, amicus curiae, submitted a brief. BUDD, J. The taxpayer, Dental Service of Massachusetts, Inc.,[1] is an insurer that provides dental coverage through preferred provider arrangements (PPAs).[2] Pursuant to G. L. c. 176I, § 11, insurers operating PPAs are obligated to pay annually an excise tax equal to a specified percentage “of the gross premiums received during the preceding calendar year for coverage of covered persons residing in this [C]ommonwealth” (emphasis added). The term “[c]overed person” is defined in the statute as “any policy holder or other person on whose behalf the organization is obligated to pay for or provide health care services.” G. L. c. 176I, § 1. The taxpayer and the Commissioner of Revenue (commissioner) disagree regarding whether “covered persons” may sometimes refer to the employer-organizations that contract with insurers, or instead refers only to the individuals receiving health care services (in this case, dental care).[3] That is, when an employer purchases group insurance on behalf of its employees, does the insurer owe tax on premiums paid by or on behalf of only those individuals who live in Massachusetts, as the taxpayer contends, or does the insurer owe tax on all premiums received from the Massachusetts-based employer regardless of where its individual employees reside, as the commissioner contends. We agree with the Appellate Tax Board (board), and conclude that “covered persons” as used in G. L. c. 176I, § 11, refers solely to natural persons who, as employees, receive insurance coverage for health care services under a group insurance plan, rather than employer entities.[4] Background. The statute governing PPAs, G. L. c. 176I, was enacted in 1988. St. 1988, c. 23, § 65. Chapter 176I includes an assessment provision that requires “[e]very organization . . . […]
Categories: News Tags: 1005918, Commissioner, Dental, Inc., Lawyers, massachusetts, Revenue, Service, Weekly
WorldWide TechServices, LLC v. Commissioner of Revenue, et al. (and three consolidated cases) (Lawyers Weekly No. 10-032-18)
NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us SJC-12328 WORLDWIDE TECHSERVICES, LLC vs. COMMISSIONER OF REVENUE & another[1] (and three consolidated cases[2]). Suffolk. November 7, 2017. – February 22, 2018. Present: Gants, C.J., Gaziano, Lowy, Budd, Cypher, & Kafker, JJ. Taxation, Abatement, Sales and use tax. Practice, Civil, Abatement, Intervention. Administrative Law, Intervention. Due Process of Law, Intervention in civil action. Appeal from a decision of the Appellate Tax Board. The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court. Edward D. Rapacki for the intervener. John A. Shope (Michael Hoven also present) for the taxpayers. Daniel J. Hammond, Assistant Attorney General (Daniel A. Shapiro also present) for Commissioner of Revenue. Ben Robbins & Martin J. Newhouse, for New England Legal Foundation, amicus curiae, submitted a brief. KAFKER, J. Fifteen years and three Supreme Judicial Court decisions ago, this protracted case commenced regarding taxes imposed on computer service contracts. The litigation began when purchasers of the service contracts filed a putative class action against the sellers,[3] claiming under G. L. c. 93A that the imposition of these taxes was unlawful and an unfair and deceptive practice. The sellers successfully moved to compel arbitration pursuant to the terms of the computer service contracts, and a judge in the Superior Court eventually confirmed the award. The next chapter in this tax saga, and the one we are required to decide today, then ensued. For the sole and express purpose of hedging their bets in response to the class action, the sellers had applied for tax abatements from the Commissioner of Revenue (commissioner) beginning in 2004. The commissioner denied the applications, and the sellers petitioned the Appellate Tax Board (board). The appellant, Econo-Tennis Management Corp., doing business as Dedham Health and Athletic Complex (Dedham Health), one of the consumers who purchased these service contracts, moved to intervene in the proceedings, which the board allowed. Thereafter, the board, with certain exceptions, reversed the decision of the commissioner and allowed the abatements, ordering the parties to compute the amounts to be abated. Taxes totaling $ 215.55 were imposed on the service contracts purchased by Dedham Health.[4] After the class action litigation on the claims under G. L. c. 93A ended in the sellers’ favor, the sellers withdrew their tax abatement petitions with prejudice. Dedham Health moved to strike the withdrawals. The […]
Categories: News Tags: 1003218, cases, Commissioner, consolidated, Lawyers, Revenue, TechServices, three, Weekly, WorldWide
D & H Distributing Company v. Commissioner of Revenue (Lawyers Weekly No. 10-124-17)
NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557- 1030; SJCReporter@sjc.state.ma.us SJC-12260 D & H DISTRIBUTING COMPANY vs. COMMISSIONER OF REVENUE. Suffolk. April 3, 2017. – July 31, 2017. Present: Gants, C.J., Lenk, Hines, Gaziano, Lowy, Budd, & Cypher, JJ. Taxation, Sales and use tax. Internet. Constitutional Law, Commerce clause, Interstate commerce, Taxation. Interstate Commerce. Appeal from a decision of the Appellate Tax Board. The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court. Philip S. Olsen (Jonathan A. Block also present) for the taxpayer. Julie E. Green, Assistant Attorney General, for Commissioner of Revenue. CYPHER, J. If a consumer enters his or her neighborhood sporting goods store in Massachusetts and purchases a baseball glove, the store, as the “vendor,” collects the Massachusetts sales tax owed from the consumer and remits it to the Department of Revenue (department). See G. L. c. 64H, §§ 1, 2. This case evaluates a more complex transaction in which a Massachusetts consumer instead finds a hypothetical baseball glove online, and purchases it from an out-of-State retailer who then orders the glove from a Massachusetts wholesaler and directs the wholesaler to deliver the glove directly to the doorstep of the Massachusetts consumer. In that more complicated transaction, known as a “drop shipment sale,” the wholesaler is considered to be the vendor, and is obligated to collect sales tax and remit it to the department. The taxpayer, D & H Distributing Company (D & H), is a company in the position of the hypothetical wholesaler just described. It appeals from a decision of the Appellate Tax Board (board) in which the board concluded that under a provision of the Massachusetts sales tax statute known as the “drop shipment rule,” D & H was responsible for collecting and remitting the sales tax due on products it sold to the out-of-State retailers and then delivered to consumers. G. L. c. 64H, § 1. We agree with the board’s conclusion, and also reject D & H’s argument that the statutory drop shipment rule violates the dormant commerce clause of the United States Constitution. Accordingly, we affirm the decision of the board. Statutory framework. a. Sales tax. General Laws c. 64H distinguishes between retail sales transactions and sales-for-resale transactions. Retail sales of goods and services are subject to tax in Massachusetts. G. L. c. 64H, § 2. […]
Categories: News Tags: 1012417, Commissioner, Company, Distributing, Lawyers, Revenue, Weekly
Guardianship of Yosselin Guadalupe Penate; Department of Revenue v. Lopez, et al. (Lawyers Weekly No. 10-102-17)
NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us SJC-12138 SJC-12184 GUARDIANSHIP OF YOSSELIN GUADALUPE PENATE. DEPARTMENT OF REVENUE[1] vs. MANUEL MORALES LOPEZ & another.[2] Suffolk. January 6, 2017. – June 9, 2017. Present: Gants, C.J., Lenk, Hines, Gaziano, Lowy, & Budd, JJ. Alien. Probate Court, Jurisdiction. Jurisdiction, Probate Court. Petition for appointment of a guardian filed in the Suffolk Division of the Probate and Family Court Department on September 14, 2015. A motion for special findings of fact was heard by Virginia M. Ward, J. The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court. Complaint to establish paternity filed in the Suffolk Division of the Probate and Family Court Department on November 25, 2014. A motion for special findings of fact was heard by Virginia M. Ward, J. The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court. Valquiria C. Ribeiro for Marvin H. Penate. Jennifer B. Luz (Joshua M. Daniels also present) for E.G. Elizabeth Badger for Kids in Need of Defense & others, amici curiae. The following submitted briefs for amici curiae: Benjamin C. Mizer, Principal Deputy Assistant Attorney General, William C. Peachey, Erez Reuveni, & Joseph A. Darrow, of the District of Columbia, for the United States. Mary K. Ryan & Meghan S. Stubblebine for American Immigration Lawyers Association, New England Chapter, & others. HINES, J. In these appeals brought by E.G., an eight year old undocumented immigrant from Guatemala, and Yosselin Guadalupe Penate, a nineteen year old undocumented immigrant from El Salvador, we consider for the second time[3] the statutorily mandated role of the Probate and Family Court (and the Juvenile Court) in a juvenile’s application for special immigrant juvenile status (SIJ) under 8 U.S.C. § 1101(a)(27)(J) (2012). Congress established the SIJ status classification “to create a pathway to citizenship for immigrant children,” Recinos v. Escobar, 473 Mass. 734, 737 (2016), who have been abused, neglected, or abandoned by one or both parents. The issue presented in these appeals is whether a judge may decline to make special findings based on an assessment of the likely merits of the movant’s application for SIJ status or on the movant’s motivation for seeking SIJ status. The judge implicitly determined that neither child would be entitled to […]
Genentech v. Commissioner of Revenue (Lawyers Weekly No. 10-012-17)
NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us SJC-12083 GENENTECH, INC. vs. COMMISSIONER OF REVENUE. Suffolk. October 7, 2016. – January 12, 2017. Present: Gants, C.J., Botsford, Lenk, Hines, Gaziano, Lowy, & Budd, JJ. Taxation, Corporate excise, Manufacturing corporation. Constitutional Law, Taxation, Commerce clause, Interstate commerce. Appeal from a decision of the Appellate Tax Board. The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court. Catherine A. Battin, of Illinois (Richard C. Call also present) for the taxpayer. Brett M. Goldberg (Jamie E. Szal also present) for Commissioner of Revenue. BOTSFORD, J. Under the Massachusetts corporate excise tax statute, G. L. c. 63, corporations that generate business income in Massachusetts and other States pay taxes on that income according to a statutory formula that seeks to apportion and tax the corporation’s income generated in the Commonwealth. Beginning in 1996, for a “manufacturing corporation,” the apportionment formula has been based solely on the corporation’s sales, see G. L. c. 63, § 38 (l), inserted by St. 1995, c. 280, § 2. The taxpayer Genentech, Inc., is a Delaware corporation with a principal place of business in California and earns business income in the Commonwealth as well as other States. In this appeal from a decision of the Appellate Tax Board (board), Genentech challenges the board’s determination that it qualified as a manufacturing corporation for the tax years 1998 through 2004 (tax years at issue); it also challenges the board’s rejection of its claim that application of § 38 (l)’s single-factor apportionment formula based on sales to the company violated the commerce clause of the United States Constitution. We affirm the decision of the board. Facts. We summarize the findings of fact made by the board. See G. L. c. 58A, § 13 (“The decision of the board shall be final as to findings of fact”). Genentech is a biotechnology company that develops drugs derived from proteins produced by living cells. Through a four-step process, Genentech employees modify the genetic codes of living cells to produce “proteins of interest” with desired pharmacologic effects.[1] First, Genentech scientists and other employees alter the deoxyribonucleic acid (DNA) of the selected cells to instruct them to produce a specific “protein of interest.” Second, employees facilitate the production of the protein of interest by placing the genetically altered […]
P.F. v. Department of Revenue (Lawyers Weekly No. 11-170-16)
NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us 15-P-771 Appeals Court P.F. vs. DEPARTMENT OF REVENUE. No. 15-P-771. Norfolk. May 12, 2016. – December 6, 2016. Present: Cohen, Rubin, & Hanlon, JJ. Divorce and Separation, Child support, Modification of judgment. Parent and Child, Child support. Complaint for divorce filed in the Norfolk Division of the Probate and Family Court Department on February 22, 2004. A complaint for modification, filed on January 9, 2012, was heard by John D. Casey, J. P.F., pro se. Benjamin K. Golden, Assistant Attorney General, for the defendant. COHEN, J. The plaintiff, an incarcerated father, filed a complaint for downward modification of child support payments ordered following his divorce from the child’s mother. A judge of the Probate and Family Court denied the request, reasoning that the father’s loss of income was a foreseeable consequence of his conviction of indecent assault and battery on the child for whom he owes support. Before us is the father’s appeal. We conclude that, on the record before us, the judge’s refusal to reduce the father’s child support payments in accordance with the Massachusetts Child Support Guidelines (2013) (guidelines) was outside the range of his discretion. We therefore vacate the judgment and remand the case for further consideration.[1] Background. The father and the mother were married in September, 2000, and had one child together, a daughter. The marriage was short-lived. The father and the mother divorced in April, 2004, and the father subsequently was ordered to pay weekly child support of $ 72. In March, 2010, the father was convicted of indecent assault and battery on the child and was sentenced to five to seven years in State prison.[2] In 2012, the father filed a complaint seeking modification of his child support obligation, citing his inability to pay child support while incarcerated. On September 9, 2014, following a hearing at which the father represented himself,[3] and at which the child support enforcement division of the Department of Revenue (DOR) appeared on behalf of the mother,[4] a judge of the Probate and Family Court issued a judgment denying the father’s modification request, stating that “[i]t should have been a foreseeable consequence of [the father’s] criminal conduct that he would be incarcerated, lose his employment and thus lose his ability to earn income to pay support.” The intended […]
The First Marblehead Corporation, et al. v. Commissioner of Revenue (Lawyers Weekly No. 10-122-16)
NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us SJC-11609 THE FIRST MARBLEHEAD CORPORATION & another[1] vs. COMMISSIONER OF REVENUE. Suffolk. May 3, 2016. – August 12, 2016. Present: Gants, C.J., Spina, Cordy, Botsford, Duffly, Lenk, & Hines, JJ.[2] Financial Institution. Taxation, Excise, Apportionment of tax burden. Constitutional Law, Taxation, Commerce clause, Interstate commerce. Interstate Commerce. Appeal from a decision of the Appellate Tax Board. The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court. Donald-Bruce Abrams (John S. Brown with him) for the taxpayer. Brett M. Goldberg, Assistant Attorney General (Daniel J. Hammond, Assistant Attorney General, with him) for Commissioner of Revenue. The following submitted briefs for amici curiae: Margaret Winterkorn Meyers, of New York, David W.T. Daniels, of the District of Columbia, & Emily M. Kelley, for Michael S. Knoll & another. Helen Hecht, Bruce Fort, Sheldon Laskin, & Lila Disque, of the District of Columbia, for Multistate Tax Commission. BOTSFORD, J. In The First Marblehead Corp. v. Commissioner of Revenue, 470 Mass. 497, 498 (2015) (First Marblehead), this court affirmed a decision of the Appellate Tax Board (board) concerning the tax liability of the taxpayer GATE Holdings Inc. (Gate), under the Commonwealth’s financial institution excise tax (FIET). Gate was a wholly owned subsidiary of The First Marblehead Corporation (FMC),[3] id. at 497-498, and “played an integral role in the FMC student loan securitization process[,]” as the holder of beneficial interests in all the separate trusts that effectively owned the securitized student loans. Id. at 499. Gate had no employees, no office space, and no tangible assets; it was essentially a holding company. Id. Gate’s taxable property consisted of its interests in the securitized student loans held in the trusts. Id. In its decision, the board determined, and this court agreed, that all of Gate’s interests in the securitized loans were properly assigned to Massachusetts under the FIET’s apportionment rules set forth in G. L. c. 63, § 2A, resulting in a greater tax liability than Gate had calculated. Id. at 498. Gate filed a petition for a writ of certiorari in the United States Supreme Court. On October 13, 2015, the Court granted Gate’s petition, vacated this court’s rescript in the case, and remanded the case for further consideration in light of Comptroller of the Treasury of Md. […]
Categories: News Tags: 1012216, Commissioner, Corporation, First, Lawyers, Marblehead, Revenue, Weekly
Bank of America, N.A. v. Commissioner of Revenue (Lawyers Weekly No. 10-096-16)
NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us SJC-11995 BANK OF AMERICA, N.A., trustee,[1] vs. COMMISSIONER OF REVENUE. Suffolk. March 7, 2016. – July 11, 2016. Present: Gants, C.J., Spina, Cordy, Botsford, Duffly, Lenk, & Hines, JJ. Trust, Taxation. Taxation, Trust, Income tax. Fiduciary. Domicil. Words, “Inhabitant.” Appeal from a decision of the Appellate Tax Board. The Supreme Judicial Court granted an application for direct appellate review. Kevin P. Martin (Joshua M. Daniels with him) for the taxpayer. Kirk G. Hanson, Assistant Attorney General, for Commissioner of Revenue. Phoebe A. Papageorgiou, of the District of Columbia, & Brad S. Papalardo, for Massachusetts Bankers Association & another, amici curiae, submitted a brief. BOTSFORD, J. In this case, we consider whether Bank of America, N.A. (bank), in its capacity as a corporate trustee of several inter vivos trusts, qualifies as an “inhabitant” and accordingly is subject to the fiduciary income tax under G. L. c. 62, § 10, even though the bank is not domiciled in Massachusetts. Considering the bank’s appeal from a decision of the Appellate Tax Board (board) in which the board determined that the bank did qualify as an inhabitant, we affirm the board’s decision on the record of this case, but on somewhat different grounds.[2] Background.[3] The bank is a national banking association authorized to act as a fiduciary. At all relevant times, the bank’s commercial domicil was in North Carolina, with its principal place of business in Charlotte, North Carolina. This case concerns appeals by the bank from the denials, by the Commissioner of Revenue (commissioner), of applications for abatement of fiduciary income taxes paid by thirty-four inter vivos trusts. The taxes were paid by the bank in its capacity as trustee or co-trustee of each of the thirty-four trusts;[4] the taxes paid related to the tax year ended December 31, 2007 (tax year at issue). In 2011, the bank took the position that these thirty-four and similar inter vivos trusts of which the bank served as trustee or co-trustee did not qualify as “resident inter vivos trusts,” as described in 830 Code Mass. Regs. § 62.10.1(1) (b) (2016),[5] and therefore were not subject to fiduciary income tax under G. L. c. 62, § 10 (§ 10). Accordingly, the bank filed with the commissioner 2,987 applications for abatement of the tax and […]
National Grid USA Service Company, Inc. v. Commissioner of Revenue (Lawyers Weekly No. 11-065-16)
NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us 14-P-1861 Appeals Court NATIONAL GRID USA SERVICE COMPANY, INC. vs. COMMISSIONER OF REVENUE. No. 14-P-1861. Suffolk. December 11, 2015. – June 8, 2016. Present: Cypher, Carhart, & Blake, JJ. Taxation, Abatement, Corporate excise. Public Utilities. Appeal from a decision of the Appellate Tax Board. John S. Brown (Donald-Bruce Abrams with him) for the taxpayer. Brett M. Goldberg for Commissioner of Revenue. CYPHER, J. National Grid USA Service Company, Inc. (NGUSA) appeals from a decision of the Appellate Tax Board (board) denying its motion for summary judgment and allowing a motion to dismiss brought by the Commissioner of Revenue (commissioner) concerning the effect of a closing agreement between National Grid Holdings, Inc. (NGHI)[1] and the Internal Revenue Service (IRS) on interest deductions under G. L. c. 63, § 30(4). The board rejected National Grid’s position that the closing agreement, which allowed a Federal deduction for a portion of the disputed interest payments, is binding on deductions allowed for State tax purpose. Background. For background we refer to our decision in National Grid Holdings, Inc. v. Commissioner of Rev., 89 Mass. App. Ct. (2016) (National Grid Holdings, Inc.). Briefly, that case dealt with the question whether certain deferred subscription arrangements (DSAs), among various entities related to National Grid plc, the parent company located in the United Kingdom, constituted true indebtedness, whereby payments made pursuant to the DSAs could be deducted as interest in calculating Massachusetts corporate excise tax. The commissioner disallowed the deductions for the 2002 tax year and National Grid appealed to the board. This separate action arose when the board, in hearing the first appeal, declined to admit the closing agreement in evidence. Relevant here, we add the following undisputed facts from the board’s September 19, 2014, findings of fact and report. National Grid’s tax returns for the 2002 tax year were audited by both the commissioner and the IRS. On May 1, 2007, National Grid entered into a closing agreement with the IRS, pursuant to 26 U.S.C. § 7121 of the Internal Revenue Code (code), in connection with National Grid’s Federal tax return.[2] As part of that agreement, the IRS allowed a Federal deduction for a portion of the amount claimed by National Grid as interest on the DSAs. As to National Grid’s 2002 Massachusetts tax return, the commissioner determined that the DSAs were […]
National Grid Holdings, Inc., et al. v. Commissioner of Revenue (Lawyers Weekly No. 11-064-16)
NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us 14-P-1662 Appeals Court NATIONAL GRID HOLDINGS, INC., & others[1] vs. COMMISSIONER OF REVENUE. No. 14-P-1662. Suffolk. December 11, 2015. – June 8, 2016. Present: Cypher, Carhart, & Blake, JJ. Taxation, Abatement, Corporate excise, Accounting principle. Public Utilities. Debt. Corporation, Stock. Evidence, Settlement offer. Appeal from a decision of the Appellate Tax Board. John S. Brown (Donald-Bruce Abrams with him) for the taxpayers. Brett M. Goldberg for Commissioner of Revenue. CYPHER, J. The plaintiffs, National Grid Holdings, Inc. (NGHI), National Grid USA (NGUSA), and National Grid USA Service Company, Inc. (NG Service) (collectively, taxpayers), appeal from a decision of the Appellate Tax Board (board) in favor of the defendant, Commissioner of Revenue (commissioner), on the taxpayers’ claims for an abatement of corporate excise for the tax year ended March 31, 2002. Primarily at issue is whether certain financing transactions, referred to as deferred subscription arrangements (DSAs), among various subsidiaries of National Grid plc (NGPLC), constituted true indebtedness so that the interest paid thereon qualified for the deduction allowed under the Massachusetts taxation of corporations statute, G. L. c. 63, § 30(4). NGPLC is a British electric and gas utility company that owns numerous entities in the United States (U.S.), the United Kingdom (U.K.), and beyond (collectively, National Grid). The DSAs were financing arrangements designed by National Grid to take advantage of the differences in the U.S. and U.K. tax codes.[2] National Grid attempted to cast the transactions as indebtedness under U.S. State and Federal tax laws, thereby reducing National Grid’s tax liability in the U.S., and as equity, under U.K. law, thereby reducing its taxable income in the U.K. Of overriding concern was the avoidance of any appearance of indebtedness in the U.K., where a debenture between a U.K. entity and its foreign subsidiary is strictly prohibited by statute, under threat of criminal sanctions.[3] To that end, National Grid drafted the DSAs as agreements among various related entities to sell and repurchase shares of stock, maintaining in these proceedings that the mandatory nature of the stock repurchase constituted debt under Massachusetts corporate tax law. “We will not modify or reverse a decision of the board if the decision is based on both substantial evidence and the correct application of the law.” Boston Professional Hockey Assn. v. Commissioner of Rev., 443 Mass. 276, 285 (2005). […]