Reagan v. Commissioner of Revenue

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revision and are superseded by the advance sheets and bound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-13287

JAMES J. REAGAN, JR., & another1 vs. COMMISSIONER OF REVENUE.

Suffolk. December 5, 2022. - March 10, 2023.

Present: Budd, C.J., Gaziano, Lowy, Cypher, Kafker, Wendlandt,
& Georges, JJ.

Urban Redevelopment Corporation. Taxation, Urban redevelopment
corporation, Capital gain, Exemption, Appellate Tax Board:
findings. Statute, Construction. Administrative Law,
Agency's interpretation of statute.

Appeal from a decision of the Appellate Tax Board.

The Supreme Judicial Court on its own initiative
transferred the case from the Appeals Court.

Richard L. Jones (Caroline A. Kupiec also present) for the
taxpayers.
Celine E. de la Foscade-Condon for Commissioner of Revenue.
Karen A. Pickett & Daniel B. Winslow, for New England Legal
Foundation, amicus curiae, submitted a brief.
Frank J. Bailey, John C. La Liberte, & Selena Fitanides,
for PioneerLegal, LLC, amicus curiae, submitted a brief.

1 Irene M. Reagan.
 2

WENDLANDT, J. "There are three things that matter in

property: location, location, location."2 Starting in the

1940s, however, as the Legislature sought to remedy the public

exigency of blighted, decadent, and substandard areas in the

Commonwealth's cities and towns, location was not enough; the

Legislature concluded that it needed to provide an incentive for

private investment in urban redevelopment projects to transform

the landscape of the Commonwealth and to supply urgently needed

low income housing. Thus, the Legislature enacted and amended

G. L. c. 121A.

Pertinent to the present appeal, the statute provides a tax

exemption as an incentive for private entities to invest in

constructing, operating, and maintaining urban redevelopment

projects in areas that have become deteriorated, unsightly, and

often dangerous. The tax concession, which can be extended for

up to forty years, see note 5, infra, provides that these

private entities are exempt "from taxation of real and personal

property and from betterments and special assessments and from

the payment of any tax, excise or assessment to or for the

2 This expression has been attributed, perhaps apocryphally,
to Lord Harold Samuel, a real estate tycoon in Great Britain.
Safire, Location, Location, Location, N.Y. Times Magazine (June
26, 2009) (noting 1926 real estate classified advertisement in
Chicago Tribune stating, "Attention salesmen, sales managers:
location, location, location, close to Rogers Park," was
published at time when young Lord Samuel was only fourteen years
old).
 3

[C]ommonwealth or any of its political subdivisions on account

of a project" (emphasis added). G. L. c. 121A, § 18C (f). In

consideration of this tax concession, the tax-exempt entity is

required, inter alia, to pay a specifically defined excise

annually, to agree to certain restrictions set forth by local

housing authorities, to limit its cumulative annual return on

investment, and to make additional payments to local

authorities. G. L. c. 121A, § 18C.

This case presents the question whether, when an otherwise

qualifying entity sells an urban redevelopment project during

the forty-year tax-exempt window, the tax concession extends to

the capital gain from the sale. In other words, we must

determine whether a tax on such a capital gain is a tax "on

account of" the project. Concluding that it is and that it thus

falls under the tax concession, we reverse the decision of the

Appellate Tax Board (board) to the contrary.3

1. Background. The following facts are taken from the

parties' undisputed statement of facts and the exhibits attached

thereto.

a. The limited partnership interests. The taxpayer James

J. Reagan, Jr., was the sole beneficiary of Newbury Realty

Trust, which held a minority interest in three limited

3 We acknowledge the amicus briefs submitted by the New
England Legal Foundation and PioneerLegal, LLC.
 4

partnerships -- St. James Company (St. James), Blackstone

Company (Blackstone), and Kenmore Abbey Limited Partnership

(Kenmore Abbey) (collectively, c. 121A partnerships) -- each of

which owned, operated, and maintained an urban redevelopment

project undertaken pursuant to G. L. c. 121A, § 18C. Newbury

Realty Trust was a nominee trust that was disregarded for

Federal and Massachusetts tax purposes; accordingly, Reagan was

treated as the direct owner of the three limited partnership

interests.

b. The urban redevelopment projects. For nearly forty

years, and with the approval of the then-named Boston

Redevelopment Authority (BRA),4 the c. 121A partnerships invested

over $45 million to acquire blighted properties and to

construct, operate, and maintain urban redevelopment projects in

Boston (city) pursuant to G. L. c. 121A (c. 121A projects).

Specifically, St. James transformed an abandoned and

structurally unsound eight-story building in Boston's South End

district into 193 dwelling units devoted to elderly housing.

Blackstone redeveloped a long-abandoned school property in

Boston's West End section into 145 residential units devoted to

affordable housing and housing designated for the elderly and

4 The BRA was renamed the Boston Planning and Development
Agency in September 2016. Marchese v. Boston Redev. Auth., 483
Mass. 149, 150 n.1 (2019).
 5

individuals with disabilities. Kenmore Abbey transformed two

vacant hotels on Commonwealth Avenue and Kenmore Street in

Boston into 199 residential rental units for the elderly and

individuals with disabilities, and approximately 12,000 square

feet of commercial space. For each c. 121A partnership, the

c. 121A project constituted its sole asset; the c. 121A

partnerships conducted no activities unrelated to their

respective c. 121A projects.

Each of the c. 121A projects was approved by the city –- in

1975 for St. James, in 1977 for Blackstone, and in 1982 for

Kenmore Abbey -- for a forty-year term5 pursuant to a G. L.

c. 121A, § 6A, contract with the city6 and a G. L. c. 121A,

§ 18C, regulatory agreement (§ 18C regulatory agreement) with

5 Pursuant to G. L. c. 121A, § 10, urban redevelopment
corporations organized pursuant to G. L. c. 121A, § 3 (§ 3
corporations), and G. L. c. 121A, § 18C, entities (§ 18C
entities, and together with § 3 corporations, c. 121A entities)
are exempt from taxes for fifteen years, but the exemption is
extendable to up to forty years, in the aggregate.

6 General Laws c. 121A, § 6A, provides that when a c. 121A
entity determines to carry out an approved urban redevelopment
project, it shall contract to carry out the project with the
municipality in which the project is to be situated. The
c. 121A entity may also contract to pay the city or town an
amount in addition to the excise prescribed by G. L. c. 121A,
§ 10, see note 8, infra. General Laws c. 121A, § 6A, further
provides: "All amounts payable, in addition to the [c. 121A]
excise . . . , pursuant to a contract or agreement executed
under this section shall be in lieu of taxes assessed and levied
upon the [c. 121A entity's] real and personal property."
 6

the BRA.7 Each c. 121A partnership agreed to pay an annual

excise pursuant to G. L. c. 121A, § 10 (c. 121A excise),8 and

also agreed to make additional annual payments to the city.

Furthermore, pursuant to their § 18C regulatory agreements with

the BRA, St. James's cumulative annual return on investment was

limited to six percent; and each of Blackstone's and Kenmore

Abbey's cumulative annual returns on investment was limited to

eight percent.9

7 General Laws c. 121A, § 18C (c), requires § 18C entities
to "agree by regulatory agreement entered into with the
department of housing and community development, or in Boston
with the [BRA], as to financing the cost of the project."

8 General Laws c. 121A, § 10, provides, in relevant part,
that a c. 121A entity shall annually pay, in addition to certain
other excises not relevant to this appeal, the c. 121A excise,
which is either a minimum defined amount or, if greater:

"an excise equal to the sum of the following: namely, an
amount equal to five per cent of its gross income in such
preceding calendar year, from all sources, and an amount
equal to ten dollars per thousand upon the . . . fair cash
value . . . of all real and tangible personal property of
such corporation."

"Gross income" is defined as "payments actually made by persons
for the right to reside in or occupy any portion or all of the
project." G. L. c. 121A, § 10. Essentially, the c. 121A excise
comprised one percent of the valuation of the c. 121A project
plus five percent of the rental income.

9 Pursuant to G. L. c. 121A, § 18C (e), to be eligible for
G. L. c. 121A tax-exempt status, partnerships cannot "receive or
accept as net income from a project any sum in excess of eight
per cent of the amount invested by them in such project for each
year in which they own or have owned the project." Until an
amendment was enacted in 1975, the cumulative annual return on
 7

The c. 121A partnerships paid the c. 121A excise, as well

as the additional payments to the city, for each year they owned

and carried out their respective c. 121A projects, including for

2012 (the tax year at issue).

c. The property transfers. In the tax year at issue, as

the tax-exempt period neared the end of the approved forty-year

term, the c. 121A partnerships sold their respective c. 121A

projects pursuant to G. L. c. 121A, § 11, to unrelated buyers.

An application was submitted to the BRA requesting permission

for each proposed sale. The applications specified that upon

transfer, the buyers would be required to continue to operate

the c. 121A projects, pursuant to the same restrictions as had

applied to the c. 121A partnerships. The BRA approved the

transfers, as did the mayor of Boston.

The buyer of each c. 121A project entered into a G. L.

c. 121A, § 6A, contract with the city and a § 18C regulatory

agreement with the BRA. Upon the transfer, each new owner

continued operating their respective c. 121A project.

Following the sales, each c. 121A partnership distributed

to Reagan his distributive share of the sale proceeds.

d. The Reagans' 2012 tax filings. Reagan and his wife,

Irene M. Reagan, reported the capital gains from the sales of

investment was capped at six percent. See St. 1975, c. 827,
§ 16.
 8

the c. 121A projects in their 2012 Federal income tax return.

The Reagans submitted their 2012 Massachusetts income tax

return, which reflected no taxable income from the c. 121A

partnerships. The Reagans disclosed their distributive share of

the capital gains in their Massachusetts filing, but they did

not include it in their total taxable capital gains, taking the

position that the gains were exempt from tax under G. L.

c. 121A, § 18C (f), because the gains were "on account of" the

c. 121A projects.

In March 2016, the Commissioner of Revenue (commissioner)

issued a notice of assessment to the Reagans related to their

capital gains from the sales of the c. 121A projects, and in

March 2017, denied the Reagans' application for abatement.

The Reagans timely appealed to the board. The Reagans and

the commissioner submitted a statement of agreed facts to the

board. In July 2020, the board issued a decision upholding the

assessment; and in August 2021, the board issued its findings of

fact and report. The Reagans timely appealed, and we

transferred the case to this court sua sponte.

2. Discussion. To determine whether the tax exemption

applies to the capital gains on the sales of the c. 121A

projects, we must determine whether imposing a tax on the

capital gain realized from the sale of a c. 121A project is a
 9

tax "on account of" a project as that phrase is used in G. L.

c. 121A, § 18C (f).

a. Standard of review. "We review conclusions of law,

including questions of statutory construction, de novo." New

England Forestry Found., Inc. v. Assessors of Hawley, 468 Mass.

138, 149 (2014).

"In doing so, the general and familiar rule is that a
statute must be interpreted according to the intent of the
Legislature ascertained from all its words construed by the
ordinary and approved usage of the language, considered in
connection with the cause of its enactment, the mischief or
imperfection to be remedied and the main object to be
accomplished, to the end that the purpose of its framers
may be effectuated" (quotation and alteration omitted).

Oracle USA, Inc. v. Commissioner of Revenue, 487 Mass. 518, 522

(2021), quoting Commissioner of Revenue v. Gillette Co., 454

Mass. 72, 76 (2009).

Where, as here, we are asked to construe the scope of a tax

exemption, we are guided by the principle that "an exemption

from taxation 'is a matter of special favor or grace,' and . . .

statutes granting exemptions from taxation are therefore to be

strictly construed." South Boston Sav. Bank v. Commissioner of

Revenue, 418 Mass. 695, 698 (1994), quoting State Tax Comm'n v.

Blinder, 336 Mass. 698, 703 (1958). An exemption is "to be

recognized only where the property falls clearly and

unmistakably within the express words of a legislative command."

Blinder, supra. "The burden is on the taxpayer to demonstrate
 10

entitlement to an exemption claimed." South Boston Sav. Bank,

supra.

"We defer to the board's expertise with respect to the

interpretation of tax laws in the Commonwealth." U.S. Auto

Parts Network, Inc. v. Commissioner of Revenue, 491 Mass. 122,

127 (2022), quoting VAS Holdings & Invs. LLC v. Commissioner of

Revenue, 489 Mass. 669, 674 (2022). See Oracle USA, Inc., 487

Mass. at 522, quoting Shaffer v. Commissioner of Revenue, 485

Mass. 198, 203, cert. denied, 141 S. Ct. 819 (2020) ("[B]ecause

the board is an agency charged with administering the tax law

and has expertise in tax matters, we give weight to its

interpretation of tax statutes"). If the board's construction

of a tax law "is reasonable, we will defer to its

interpretation." Oracle USA, Inc., supra.

"At the same time, principles of deference are not

principles of abdication; '[t]he proper interpretation of a

statute is a question of law for us to resolve.'" Oracle USA,

Inc., 487 Mass. at 522, quoting Gillette Co., 454 Mass. at 76.

"Board decisions will be set aside for an error of law." VAS

Holdings & Invs. LLC, 489 Mass. at 674. Where the taxpayer

meets it burden to show entitlement to a tax concession, we will

reverse a decision of the board denying an exemption. See,

e.g., New England Forestry Found., Inc., 468 Mass. at 159 (board

erred in concluding that forest property owned by nonprofit was
 11

not tax exempt from property tax where nonprofit carried its

burden to show it occupied land for charitable purpose).

b. Plain language. We begin with the "ordinary and

approved usage of the language" of the statute. Oracle USA,

Inc., 487 Mass. at 522, quoting Gillette Co., 454 Mass. at 76.

General Laws c. 121A, § 18C (f), exempts G. L. c. 121A, § 18C,

entities (§ 18C entities) "from taxation of real and personal

property and from betterments and special assessments and from

the payment of any tax, excise or assessment to or for the

[C]ommonwealth or any of its political subdivisions on account

of a project" (emphasis added). The ordinary meaning of the

phrase "on account of" is "because of." Random House Dictionary

of the English Language 10 (1973) (defining "on account of" as

"by reason of" and "because of"); Merriam-Webster Online

Dictionary, https://www.merriam-webster.com/dictionary/account

[https://perma.cc/WEC4-2UMP] (same). "On account of" requires a

causal connection "between the term that the phrase 'on account

of' modifies and the factor specified in the statute at issue."

Rousey v. Jacoway, 544 U.S. 320, 326 (2005). See Gross v. FBL

Fin. Servs., Inc., 557 U.S. 167, 176 (2009) (using "on account

of" synonymously with "because of"). Accordingly, the plain

meaning of G. L. c. 121A, § 18C (f), exempting a qualifying

entity from "any" tax "on account of" a project, is a tax
 12

concession for any taxes causally connected to the project. See

Rousey, supra.

Capital gain falls within this provision; plainly, the gain

is causally related to the project.10 Contrary to the board's

conclusion, this determination is supported by the definition of

the term "project." The statute defines "project" as:

"any undertaking consisting of the construction in a
blighted open, decadent or sub-standard area of . . .
residential, commercial, [or other] buildings . . . and the
operation and maintenance of such buildings . . . after
construction . . . [and] may include as incidental thereto
. . . acquisition and assembly of the land (and buildings
and structures and other improvements thereon, if any)
within a blighted open, decadent or sub-standard area."

G. L. c. 121A, § 1. Consistent with this definition, the c.

121A partnerships each "acqui[red]" property in an area that had

been blighted, decadent, and substandard. Each c. 121A

partnership invested in the "construction" of buildings on those

acquired properties. Thereafter, each c. 121A partnership

"operat[ed]" and "maint[ained]" such buildings. Indeed,

10Contrary to the commissioner's argument, this
construction is supported by O'Gilvie v. United States, 519 U.S.
79 (1996), in which the United States Supreme Court concluded,
as we do here, that "on account of" means "for the sake of: by
reason of: because of." Id. at 83, quoting Webster's Third New
International Dictionary 13 (1981). Because the punitive
damages in that case were not "'received . . . on account of'
the personal injuries, but rather were awarded 'on account of' a
defendant's reprehensible conduct and the jury's need to punish
and to deter it," they fell outside of the tax exemption there
at issue. O'Gilvie, supra.
 13

although not required by the statute, for each c. 121A

partnership, the c. 121A project was its sole asset.

As a result of these investments in the c. 121A projects

over the course of nearly four decades, the value of the

properties in the formerly blighted areas increased. This

increased value is reflected in the capital gain. In other

words, the capital gain -- the increased value -- was causally

related to the project -- the "acquisition," "construction,"

"operation," and "maintenance" efforts of the c. 121A

partnerships. See G. L. c. 121A, § 1. Thus, despite the canon

of statutory construction requiring us to construe tax

concessions narrowly, see South Boston Sav. Bank, 418 Mass. at

698, here the Legislature's choice of the phrase "on account of"

requires the construction we adopt.

c. Statutory framework. The conclusion that the tax

exemption extends to the capital gain from the sale of a c. 121A

project is buttressed by the statute as a whole. See City Elec.

Supply Co. v. Arch Ins. Co., 481 Mass. 784, 790 (2019), quoting

LeClair v. Norwell, 430 Mass. 328, 333 (1999) ("[w]hen the

meaning of a statute is brought into question, a court properly

should read other sections and should construe them together").

See also Plymouth Retirement Bd. v. Contributory Retirement

Appeal Bd., 483 Mass. 600, 605 (2019) ("Beyond plain language,

courts must look to the statutory scheme as a whole, so as to
 14

produce an internal consistency within the statute. Even clear

statutory language is not read in isolation" [quotations,

citations and alteration omitted]); Commonwealth v. Morgan, 476

Mass. 768, 777 (2017) ("The plain language of the statute, read

as a whole, provides the primary insight into that intent. . . .

We do not confine our interpretation to the words of a single

section").

In particular, the Legislature confirmed its choice to

grant a broad tax concession by codifying its intent in the

statute itself. See Brookline v. Commissioner of the Dep't of

Envtl. Quality Eng'g, 398 Mass. 404, 412 (1986) (court may

consider codified intent as part of statute as whole where it

does not conflict with more specific provisions). Specifically,

G. L. c. 121A, § 2, sets forth the Legislature's finding that

"blighted open, decadent or sub-standard areas" comprised a

"growing menace, injurious . . . to the safety, health, morals

and welfare of the residents of the [C]ommonwealth." The

Legislature also acknowledged that, particularly in areas where

blight existed, there was a shortage of "decent, safe and

sanitary buildings" for residential and other purposes. Id.

The Legislature further found that this "menace" could not be

remedied solely by the Commonwealth's regulatory police powers

and that it could not "be dealt with effectively by the ordinary

operations of private enterprise without the aids" provided in
 15

G. L. c. 121A. Id. Accordingly, the Legislature intended G. L.

c. 121A to

"stimulate the investment of private capital in blighted
open, decadent or sub-standard areas, and in the
construction, maintenance and operation in such areas of
needed decent, safe and sanitary residential, commercial,
industrial, institutional, and recreational buildings;
. . . the construction, maintenance and operation of such
buildings on such land in such areas will assist in
achieving permanent and comprehensive elimination of
existing slums, and sub-standard, decadent and blighted
conditions and in preventing the recurrence or
redevelopment of such conditions."

Id. In sum, the statute sets forth the Legislature's intent to

provide a significant incentive to spur private investment to

transform blighted areas of the Commonwealth's cities and towns,

and to build sorely needed low income housing,11 to remedy a

The statute has encouraged private development of
11

affordable housing:

"The most frequent application of Chapter 121A has been in
the construction of housing for low and moderate income
families. Approximately [ninety-four percent] of all
Chapter 121A projects developed to date have been
residential. . . .

"Chapter 121A is designed to stimulate development in
Massachusetts by making tax payments on eligible
investments both predictable and affordable. Tax
agreements are established to assure the feasibility of
certain desirable projects. They are negotiated to
compensate for the state's over-reliance on the property
tax, and to provide the tax predictability which is
necessary for major investments under certain
circumstances."

Executive Office of Communities & Development, Chapter 121A: A
Handbook for Local Officials 3 (Nov. 1979).
 16

situation that had become a public exigency, which the

Commonwealth's police powers alone could not solve and which was

not being addressed by operation of the private marketplace in

the absence of such an incentive. See Boston Edison Co. v.

Boston Redev. Auth., 374 Mass. 37, 45 (1997), citing G. L.

c. 121A, § 2 ("Chapter 121A was enacted in response to a

legislative determination that the continued existence of blight

and decay posed a threat to the health and safety of the

inhabitants of the Commonwealth. The Legislature concluded that

such conditions constituted a public exigency and that their

elimination would be in the public interest").

Yet, other than the tax concession, the statute provides

little to entice private entities to invest in c. 121A projects,

which by necessity are highly regulated. See, e.g., G. L.

c. 121A, § 3 (project must be "authorized and approved by the

Boston Redevelopment Authority" or local housing board); G. L.

c. 121A, § 5 (application must specify, inter alia, "the reasons

why the project is necessary or desirable [and] the uses to

which the project is to be put," and include site plan); G. L.

c. 121A, § 6A (G. L. c. 121A, § 3, corporations [§ 3

corporations] and § 18C entities [together, c. 121A entities]

must contract with city or town "for the carrying out of such

project in accordance with the application, the provisions of

[G. L. c. 121A], and the rules, regulations and standards
 17

prescribed by the housing board for such project"); G. L.

c. 121A, § 18C (e) (requiring regulatory agreement with BRA and

compliance with inspections and financing regulations).

Indeed, despite the tax exemption, c. 121A entities are not

unencumbered by payments to the Commonwealth. Significantly, in

consideration of the tax concession, c. 121A entities must pay,

in addition to other excises, the c. 121A excise, calculated

based on a formula that considers the entity's annual rental

income as set forth in G. L. c. 121A, § 10. See note 8, supra.

Also, local authorities can require that the entities "pay to

the city or town with respect to one or more years such specific

or ascertainable amount in addition to the [c. 121A] excise

. . . as may have been stated in the application." G. L.

c. 121A, § 6A. See note 6, supra. Further, the statute caps

the cumulative annual return on investment at eight percent.

G. L. c. 121A, § 18C (e). See note 9, supra.

These other limiting provisions of the statute bolster our

construction of the tax concession and, particularly, of the

term "on account of" in order to achieve the codified intent to

"stimulate the investment of private capital in blighted open,

decadent or sub-standard areas," and to encourage the

"construction, maintenance and operation in such areas of needed

decent, safe and sanitary residential, commercial, industrial,

institutional, and recreational buildings." G. L. c. 121A, § 2.
 18

One of the most effective "aids" provided in G. L. c. 121A,

to "stimulate the investment of private capital" is the tax

exemption.12 G. L. c. 121A, § 2. See Dodge v. Prudential Ins.

Co. of Am., 343 Mass. 375, 383-384 (1961), quoting Opinion of

the Justices, 341 Mass. 760, 778 (1960) ("since 'urban

redevelopment corporations, although in a sense private

corporations, perform functions for the public benefit analogous

to those performed by various other types of corporations

commonly called public service corporations, property owned by

them and used in such service may receive favored treatment in

the matter of taxation'"). See also Boston Edison Co., 374

Mass. at 50 (because c. 121A projects "serve public purposes,"

they "are subsidized by grants of tax concessions"). Achieving

a capital gain from the sale of a c. 121A project is often a

significant driver for real estate investors;13 construing "on

account of" to extend to the capital gain from the sale of a

project thus not only falls within the broad language the

Legislature chose for the tax concession, but is supported by

the statute's "main object" to spur private investment in

12Chapter 121A also provides tax predictability. See note
11, supra.

13See generally A. Baum & D. Hartzell, Global Property
Investment: Strategies, Structures, Decisions xi (2012) (real
estate investors are generally driven by ability to "earn income
from rents and from selling the asset at the end of a holding
period for more than they paid for it").
 19

blighted areas. See Oracle USA, Inc., 487 Mass. at 522, quoting

Gillette Co., 454 Mass. at 76.

d. Legislative history. Given the unambiguous meaning of

"on account of," we need not examine the provision's history.

See Osborne-Trussell v. Children's Hosp. Corp., 488 Mass. 248,

254 (2021), quoting Doherty v. Civil Serv. Comm'n, 486 Mass.

487, 491 (2020) ("If the statutory language is clear, 'courts

must give effect to its plain and ordinary meaning and need not

look beyond the words of the statute itself'"). Nevertheless,

it is notable that the breadth of the tax exemption contemplated

finds further support in the statute's legislative history. In

its original form, G. L. c. 121A provided that c. 121A projects

could be carried out only by § 3 corporations. St. 1945,

c. 654. Such corporations are created "for the purpose of

carrying out a project authorized and approved, or to be

authorized and approved, by the housing board," and cannot

"undertake more than one project." St. 1945, c. 654, § 3. The

statute initially exempted such corporations only from property

taxes. See St. 1945, c. 654, § 10 ("The real estate and

personal property of any such corporation shall for a period of

forty years after its organization be exempt from taxation under

[G. L. c. 59]").

In 1956, with blight persisting, the Legislature amended

the statute to expand the tax benefits for § 3 corporations. It
 20

provides that, for the exemption period, the corporations "shall

be exempt from taxation and from betterments and special

assessments; and . . . shall not be required to pay any tax,

excise or assessment to or for the [C]ommonwealth or any of its

political subdivisions," except for the c. 121A excise and

certain other excises, if applicable.14 St. 1956 c. 640, § 4.

In 1965, the Legislature recognized that the statute did

not foster incentive sufficient to lure private investment in

addressing the problem of blight. Accordingly, it again

expanded the reach of the statute, amending G. L. c. 121A to

extend the tax advantages previously provided only to § 3

14In 1956, the House of Representatives asked the Justices
of this court to determine whether it was

"within the competency of the General Court . . . to enact
a law exempting urban redevelopment corporations and their
property, including certain leased property, from taxation,
betterments and special assessments for a period of forty
years after their organization, and providing that during
said period such corporations shall pay no tax, excise or
assessment, except a corporate excise and certain other
excises."

Opinion of the Justices, 334 Mass. 760, 761 (1956). The
Justices answered in the affirmative. Id. at 764. The Justices
again addressed similar questions regarding amendments in 1960
pertaining to, inter alia, whether a particular redevelopment
project should qualify as an urban redevelopment project, in
Opinion of the Justices, 341 Mass. 760, 770 (1960). The
Justices concluded that if "each project is properly found (in
accordance with [G. L. ]c. 121A as amended by the bill) to be
for a public purpose," then yes, it was within the competency of
the Legislature to exempt qualifying projects, as redefined in
the proposed bill, from taxation. Id. at 780.
 21

corporations to § 18C entities. See G. L. c. 121A, § 18C,

inserted by St. 1965, c. 859, § 1. Specifically, the

Legislature allowed "[i]ndividuals, and associations of persons

organized in the [C]ommonwealth in the form of joint ventures,

partnerships, limited partnerships or trusts, resident or

organized in the [C]ommonwealth, or charitable corporations" to

"undertake projects . . . or acquire a project which has been

authorized and approved and which has been developed or is being

developed." Id.

However, unlike § 3 corporations, whose sole business is

cabined to activities related to c. 121A projects, the

Legislature permitted § 18C entities to undertake business and

activities other than c. 121A projects. Compare G. L. c. 121A,

§ 3 ("No [§ 3] corporation shall undertake more than one project

or engage in any other type of activity"), with G. L. c. 121A,

§ 18C (providing no similar restriction on business activities

of § 18C entities). Accordingly, the Legislature provided that

§ 18C entities would enjoy the same tax concession as § 3

corporations, but only to the extent of their G. L. c. 121A

business activities. G. L. c. 121A, § 18C (f). Other business

activities of such entities -- their non-G. L. c. 121A

activities -- do not enjoy the G. L. c. 121A tax exemption; to

accomplish this end, the Legislature limited the exempt
 22

activities to those "on account of" -- i.e., causally related to

-- urban redevelopment projects.15

In 1975, the Legislature again expanded the incentives

available to c. 121A entities, by enacting G. L. c. 121A, § 18D,

to permit the construction and sale of residential condominium

units within c. 121A projects. St. 1975, c. 827, § 19. The

amendment extends, for a limited duration, certain benefits,

including the tax concession, to purchasers of condominium units

within c. 121A projects, "as an additional means of stimulating

the investment of private capital in" blighted areas. G. L.

c. 121A, § 18D.

In sum, the legislative history of G. L. c. 121A evinces an

intent to spur private entities to invest in urban redevelopment

projects by expanding the available tax exemption, which is

consistent with our construction of "on account of" to include

the capital gain from the sale of a project.

e. Board's analysis. Passing over the plain language and

legislative history, the board rested its conclusion that the

capital gain from the sale of a c. 121A project did not fall

15By contrast, the "on account of" language was unnecessary
for § 3 corporations, whose sole business are projects under
G. L. c. 121A, § 3. Consequently, the Legislature did not use
the "on account of" language in setting forth the tax exemption
for § 3 corporations. See G. L. c. 121A, § 10 ("such
corporation shall not be required to pay any tax, excise, or
assessment to or for the [C]ommonwealth or any of its political
subdivisions").
 23

within the tax concession on three grounds: (1) that the

capital gain was realized after the sale of the projects when,

the board contended, the c. 121A partnerships were no longer

eligible for the tax concession; (2) that the expansion of the

tax exemption to condominium owners and the required use of the

profits from such sales to create a guaranty fund evinced the

legislative intent to preclude capital gain from the tax

exemption, see G. L. c. 121A, § 18D; and (3) that it was

required in deference to the commissioner's Letter Ruling 94-7

(Oct. 4, 1994).

i. Timing of capital gain. The board principally relied

on the observation that after a § 18C entity sells the project,

it can no longer derive rental income from the project, and thus

it is no longer entitled to the privilege of the tax concession.

Reagan vs. Commissioner of Revenue, Appellate Tax Bd., No.

C332548, ATB 2021 at 221-222 (Aug. 18, 2021). While the board's

observation is true,16 its conclusion that capital gain is not

"on account of" a project is a non sequitur.

16General Laws c. 121A, § 18C, provides that once c. 121A
entities have "carried out their obligations and performed their
duties as imposed by" G. L. c. 121A for the tax-exempt period,
the entities "shall thereafter no longer be subject to the
obligations of this chapter . . . nor shall they enjoy the
rights and privileges hereby granted." See G. L. c. 121A, § 16
(equivalent provision for § 3 corporations). The board
maintained that the tax exemption is one of the "rights and
privileges" that terminates once the c. 121A entity is no longer
a c. 121A entity. This is true but inapposite. As discussed
 24

The board's conclusion seems to rest on a misapprehension -

- namely, that capital gain is realized after the project is

sold.17 To the contrary, capital gain is realized coincident

with the sales transaction; it is, by definition, "[t]he profit

realized when a capital asset is sold or exchanged" (emphasis

added).18 Black's Law Dictionary 259 (11th ed. 2019). See

supra, each c. 121A partnership performed its duties until the
sale, at which time it simultaneously realized the capital gain
at issue.

Similarly, the board's observation that the c. 121A
partnerships no longer derived rental income from the c. 121A
projects following the sale of the projects is true but
inapposite. General Laws c. 121A, § 18C (f), contemplates a
quid pro quo –- namely, that "in consideration" of the tax
exemption, entities carrying out c. 121A projects will pay the
c. 121A excise. The parties do not dispute that the c. 121A
partnerships complied with their G. L. c. 121A obligations,
including for the tax year at issue; in particular, the c. 121A
partnerships paid the c. 121A excise based on, inter alia,
rental income, see note 8, supra.

17At oral argument, counsel for the commissioner
acknowledged that capital gain is realized "actually
simultaneous[ly]" with a sale.

18"Property is generally treated as acquired and disposed
of when title passes or the benefits and burdens of ownership
are transferred, whichever occurs first." 4 Mertens Law of Fed.
Income Taxation § 22:18 (2021). Capital gain is measured as of
the sale date, confirming that it is realized simultaneously
with, not after, the sale of a capital asset. See id., citing
Fogel v. Commissioner of Internal Revenue, 203 F.2d 347, 349
(5th Cir. 1953); Rev. Rul. 70-598, 1970-2 C.B. 168 (in
determining period for which asset has been held, taxpayer's
holding period generally begins on day after date that property
was acquired and generally ends on date of disposition). See
also Rev. Rul. 54-607, 1954-2 C.B. 177 ("In determining the
holding period for capital gain and loss purposes, the date the
 25

Minkin v. Commissioner of Revenue, 425 Mass. 174, 180 (1997)

(capital gain is realized "when the . . . property is liquidated

at a profit"); id. (transferor realizes "a capital gain . . . on

the sale" [emphasis added]); Johnson v. Department of Revenue,

387 Mass. 59, 65 (1982) ("capital gain was realized when the

sale was made" [emphasis added; alteration and citation

omitted]). Accord Boston Elevated Ry. v. Metropolitan Transit

Auth., 323 Mass. 562, 572 (1949) (capital gain tax "sprang from"

sale of property; "[u]ntil there was a transaction completed by

the payment of the cash consideration, there was no taxable

gain"); Internal Revenue Service, Topic No. 409: Capital Gains

and Losses, https://www.irs.gov/taxtopics/tc409

[https://perma.cc/AZ64-QENH] ("To determine how long you held

the asset [for purposes of calculating the capital gain], you

generally count from the day after the day you acquired the

asset up to and including the day you disposed of the asset").19

property is acquired is excluded, and the date the property is
disposed of is included").

19The board also expressed concern that an entity that
sells a project prior to the expiration of its tax-exempt period
would benefit from a tax-exempt capital gain, but an entity that
did not timely sell, would be required to pay tax on the capital
gain. Reagan vs. Commissioner of Revenue, ATB 2021 at 219-220.
This, however, is inherent in a fixed term; the obligations,
rights and privileges end when the term ends. See note 16,
supra. There is no suggestion that the c. 121A partnerships
acted in bad faith or attempted to "game the system" in any way.
 26

ii. Guaranty fund for condominium sales. The board next

relied on G. L. c. 121A, § 18D, discussed in part 2.d, supra, to

support its conclusion that "on account of" a project does not

extend to capital gain. In particular, the section requires a

c. 121A entity that sells condominium units within a project to

reserve the "profit" from such sales in a guaranty fund to be

used to pay expenses related to the project's rental units,

among other restrictions. G. L. c. 121A, § 18D. The

Legislature defined "profit" for the purposes of G. L. c. 121A,

§ 18D, as the proceeds from the condominium unit sales reduced

by "the amount invested in the condominium, . . . any related

costs and expenses reasonably attributable to any such sale

. . . and all state, federal and other taxes and excises

applicable to any gain derived therefrom" (emphasis added).

Because the Legislature defined profit for the purposes of G. L.

c. 121A, § 18D, as reduced by "all state . . . taxes and excises

applicable to any gain derived" from condominium unit sales, the

board concluded that the Legislature impliedly acknowledged that

State taxes would be "applicable" to the capital gain from the

sale of a project.

This conclusion ignores the purpose of G. L. c. 121A,

§ 18D, which, as specifically stated in the section, is to

provide "an additional means of stimulating the investment of

private capital in [blighted] areas, including the construction,
 27

operation, management and maintenance therein of housing for low

income persons and families"; accordingly, we disagree that the

Legislature's use of the phrase "all state . . . taxes . . .

applicable to any gain" evinces an implicit intent to deprive

c. 121A entities of one of the key incentives in investing in

blighted areas. See Conservation Comm'n of Norton v. Pesa, 488

Mass. 325, 332 (2021), quoting Bellalta v. Zoning Bd. of Appeals

of Brookline, 481 Mass. 372, 378 (2019) ("we must avoid any

construction of statutory language which leads to an absurd

result"); Richardson v. UPS Store, Inc., 486 Mass. 126, 132

(2020), citing ROPT Ltd. Partnership v. Katin, 431 Mass. 601,

603 (2000) ("court may not interpret statutes to produce

illogical result").

iii. Letter ruling. The board also relied on Letter

Ruling 94-7 to support its construction of "on account of."

Letter Ruling 94-7 concerned whether the c. 121A excise applied

to the proceeds from the sale of a project. The commissioner

concluded that the excise did not apply to the sale proceeds.

Letter Ruling 94-7, quoting G. L. c. 121A, § 10. Although it

was not relevant to the letter ruling, and without citing any

authority or providing any rationale whatsoever, the

commissioner then stated that, "[t]hese proceeds are subject to

tax, not under [G. L. ]c. 121A, but under the general tax

provisions of Massachusetts law (i.e., [G. L. ]c. 62 or [G. L.
 28

]c. 63, as the case may be)." Id. The conclusory statement,

which conflicts with the plain language of G. L. c. 121A, § 18C,

the statute as a whole, and the legislative history, is not

entitled to deference.20 See G. L. c. 62C, § 3 ("The

commissioner may prescribe regulations and rulings, not

inconsistent with law, to carry into effect the provisions of

[the tax] statutes"); Massachusetts Mun. Wholesale Elec. Co. v.

Massachusetts Energy Facilities Siting Council, 411 Mass. 183,

194 (1991) ("an administrative agency has no authority to

promulgate rules or regulations that conflict with the

statutes").21

f. Annual income cap. In addition to pressing us to defer

to the board's analysis, the commissioner contends that we

should affirm the decision based on the use of the term

"section" in G. L. c. 121A, § 18C (e). That provision caps the

cumulative annual return on investment for § 18C entities to

20Following oral argument, the commissioner submitted the
March 8, 1994 interdepartmental legal memorandum prepared by a
Department of Revenue attorney, which apparently is the basis
for the letter ruling. We afford it no deference. See
generally Kisor v. Wilkie, 139 S. Ct. 2400, 2416 (2019)
(declining to defer to agency staff's "ad hoc statement").

21Following oral argument, we asked the commissioner to
provide data regarding the tax treatment afforded to capital
gain realized by other c. 121A entities that have sold c. 121A
projects within the tax exemption period. We agree with the
parties that the data, which are incomplete, do not alter our
analysis.
 29

eight percent. See note 9, supra. Paragraph (e) also states,

"Nothing in this section shall be applicable to the payment of

dividends out of the profits from the sale of the capital assets

of the corporation" (emphasis added). G. L. c. 121A, § 18C (e).

The commissioner maintains that the use of the word "section"

refers to the entirety of § 18C, including paragraph 18C (f),

the tax exemption provision, and argues that the term

eviscerates the tax exemption for dividends (and distributions)

from asset sales, including any capital gain from the sale of

the project itself. We disagree that the use of the term

"section" should be given such weight.

Instead, it is clear in context that the statement

regarding dividends from asset sales refers to the eight percent

cap set forth in paragraph (e) and means only that the cap on

the annual cumulative return on investment set forth in

paragraph (e) does not apply to dividends paid from profit on

asset sales. This construction of the dividends provision is

supported by the rest of paragraph (e), which provides that for

certain projects "the preceding limitations on dividends shall

not apply" if certain Federal or State agencies "allow[] a

change in the allowable distribution or other measure to

increase the rate of return on investment." G. L. c. 121A,

§ 18C (e). Accordingly, we reject the commissioner's argument

that the Legislature's use of the term "section" evidences its
 30

intent impliedly to limit the scope of the tax exemption set

forth in paragraph (f), a separate paragraph of G. L. c. 121A,

§ 18C. Tellingly, the board declined to adopt the

commissioner's argument; we decline to do so as well.22

3. Conclusion. For the foregoing reasons, we reverse the

decision of the board.

So ordered.

22Because we conclude that the capital gain at issue was
not taxable, we do not reach the Reagans' alternative argument
that the board erred in adopting the Federal adjusted basis of
the c. 121A projects.