Bridgewater State Univ. Found. v. Bd. of Assessors of Bridgewater

463 Mass. 154

972 N.E.2d 1016

282 Ed. Law Rep. 1233

BRIDGEWATER STATE UNIVERSITY FOUNDATION ¹

v.BOARD OF ASSESSORS OF BRIDGEWATER.

SJC–11031.

Supreme Judicial Court of Massachusetts, Suffolk.

Submitted May 8, 2012.

Decided Aug. 8, 2012.

Michael R. Coppock, Boston, for the taxpayer.

Mary C. Butler for board of assessors of Bridgewater.

Deirdre Heatwole, Kenneth A. Tashjy, Richard M. Bluestein, Janet S. Lundberg, & Jonathan A. Scharf, Boston, for University of Massachusetts & others, amici curiae, submitted a brief.

Present: IRELAND, C.J., SPINA, CORDY, BOTSFORD, GANTS, & DUFFLY, JJ.

BOTSFORD, J.

A charitable organization is entitled to an exemption from local property taxes under G.L. c. 59, § 5, Third, for real property owned and occupied by the organization. In this case, we consider the exemption in the context of a public charitable foundation that operates exclusively for the benefit of a public university, and owns properties that are occupied and used in part by the foundation but in larger part by the public university. The Appellate Tax Board (board) decided that the Bridgewater State University Foundation (foundation) was entitled to the charitable exemption; on appeal by the board of assessors of the town of Bridgewater (assessors), the Appeals Court reversed. See Assessors of Bridgewater v. Bridgewater State Univ. Found., 79 Mass.App.Ct. 637, 948 N.E.2d 903 (2011)( Bridgewater State Univ. Found.). We granted the foundation's application for further appellate review.² We conclude that the foundation is entitled to the exemption. Accordingly, we affirm the decision of the board.

1. Background. The facts are set out in the Appeals Court's opinion. See id. at 638–639, 948 N.E.2d 903. We summarize them here.³ The foundation is a public charitable trust, and it is “organized and operate[s] exclusively for the benefit of” Bridgewater State University (university) pursuant to G.L. c. 15A, § 37.⁴ The foundation was established in 1984, and has qualified as a tax-exempt organization under § 501(c)(3) of the Internal Revenue Code. The university is an institution of public higher education. See G.L. c. 15A, § 5. There is an operating agreement between the university and the foundation with goals and policies the university certifies, in accordance with c. 15A, § 37, that the foundation is “organized and operated exclusively for the benefit of the [university].” In the agreement, the university certifies that the foundation is operating “in a manner consistent with” the university's goals and policies; the agreement further provides that the foundation “shall expend and apply [the monies and other assets it holds] solely for the benefit of the [university] and not otherwise.”

The foundation owns three buildings and three undeveloped parcels of land (collectively, properties) in the town of Bridgewater. One of the buildings is occupied in part by the foundation for its offices and in part by the university's alumni office; another houses the university's political science department; and the third is used by the university as well as the foundation for receptions and fundraising. The three undeveloped parcels are used by university students for recreation and by university student groups. None of the properties is occupied or used exclusively by the foundation. At this juncture, the foundation permits the university to occupy and use all the properties free of charge.

At issue here are property taxes assessed against each of the six properties by the assessors for fiscal year (FY) 2007 and FY 2008.⁵ The foundation appealed to the board after the assessors determined that the properties were not eligible for the exemption under G.L. c. 59, § 5, Third, and denied its applications for abatement. The board found that because the university's various uses of the properties “advanced the charitable educational mission of [the university], which was the sole purpose of the [foundation's] organization and operations,” “the parcels at issue were exempt under [ G.L. c. 59, § 5, Third], as they were owned and occupied by a charitable organization in furtherance of its charitable purpose.”

2. Standard of review. Decisions of the board are reviewed for errors of law. “Findings of fact by the board must be supported by substantial evidence.” Middlesex Retirement Sys., LLC v. Assessors of Billerica, 453 Mass. 495, 498–499, 903 N.E.2d 210 (2009), and cases cited. While the parties dispute the AppealsCourt's characterization of the matter before the board as a “case stated” ( Bridgewater State Univ. Found., 79 Mass.App.Ct. at 639, 948 N.E.2d 903) and how, if so, the standard of review of facts would be affected, the issue does not appear to be material to resolution of this appeal. The central issue here is one of statutory construction: what does the phrase “owned ... and occupied by ” (emphasis added) a charitable organization in G.L. c. 59, § 5, Third, mean? At their core, questions of statutory construction are questions of law, to be reviewed de novo. See, e.g., AtlanticareMed. Ctr. v. Commissioner of the Div. of Med. Assistance, 439 Mass. 1, 6, 785 N.E.2d 346 (2003).

3. Discussion.General Laws c. 59, § 5, Third, exempts from local property taxation, inter alia:

“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” (emphasis added).

The exemption provided thus is available to “a charitable organization [that] owns real estate and occupies it for its corporate purpose, or allows another charitable organization to occupy it for its purpose.” Assessors of Hamilton v. Iron Rail Fund of Girls Clubs of Am., Inc., 367 Mass. 301, 306, 325 N.E.2d 568 (1975). It is undisputed here that the six properties are owned by the foundation, and that the foundation is a charitable organization. We turn, therefore, to the interpretive issue raised: whether the foundation “occupied” the properties within the meaning of c. 59, § 5, Third, where the foundation did not itself physically occupy them (except in part), but in direct furtherance of its charitable purpose, permitted the university to use the properties to carry out the university's educational mission and goals.

The board concluded that “[o]ccupancy for the purposes of [c. 59, § 5, Third,] means use for the purpose for which the charity is organized,” reasoning that “the fact that the property at issue may be inhabited or used by individuals or an entity other than [the foundation] 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.” The Appeals Court rejected this approach, concluding that the plain terms of c. 59, § 5, Third, “requires occupancy by the charitable organization claiming exemption ... coupled with use for a purpose consistent with the charitable purpose of the occupying charitable organization[;] ... the statutory requirements of occupancy by a charitable organization and use for its charitable purpose are plainly separate and conjunctive.” Bridgewater State Univ. Found., 79 Mass.App.Ct. at 640–641, 948 N.E.2d 903. We do not find it necessary to choose between these conflicting views in order to resolve this case.⁶

As a general matter, “where the language of the statute is plain, it must be interpreted in accordance with the usual and natural meaning of the words,” a rule that “has particular force in interpreting tax statutes.” Gillette Co. v. Commissioner of Revenue, 425 Mass. 670, 674, 683 N.E.2d 270 (1997), quoting Commissioner of Revenue v. AMIWoodbroke, Inc., 418 Mass. 92, 94, 634 N.E.2d 114 (1994). However, it is also the case that “[w]e will not adopt a literal construction of a statute if the consequences of such construction are absurd or unreasonable. We assume the Legislature intended to act reasonably.” Attorney Gen. v. School Comm. of Essex, 387 Mass. 326, 336, 439 N.E.2d 770 (1982). Consequently, “when a literal reading of a statute would be inconsistent with legislative intent, we look beyond the words of the statute,” including “other statutes on the same subject.” Id. at 336, 337, 439 N.E.2d 770. In addition, we “construe statutes that relate to the same subject matter as a harmonious whole and avoid absurd results.” Connors v. Annino, 460 Mass. 790, 796, 955 N.E.2d 905 (2011), quoting Canton v. Commissioner of the Mass. Highway Dep't, 455 Mass. 783, 791–792, 919 N.E.2d 1278 (2010).

In seeking to construe c. 59, § 5, Third, in this case, it helps to take a step back from the statute and to consider these counterfactual scenarios that furnish useful points of reference: (1) if the foundation physically occupied and used the properties in question in the manner they were used by the university in FY [463 Mass. 159]2007 and FY 2008, it would qualify for the exemption that clause Third provides; (2) if the university directly owned the properties and used them for the same purposes that it did in FY 2007 and FY 2008, it would be entitled to tax exemption under c. 59, § 5, Second, ⁷ because, as one of the nine State universities, see G.L. c. 15A, § 5, the university is an agency of the Commonwealth, see, e.g., McNamara v. Honeyman, 406 Mass. 43, 47, 546 N.E.2d 139 (1989); Shocrylas v. Worcester State College, U.S. Dist. Ct., No. 06–40278–FDS, slip op. at 5, 2007 WL 3332818 (D.Mass. Oct. 29, 2007); ⁸ and (3) if the university were itself a charitable organization and using the foundation's properties in the same manner that the university used them, the foundation would be entitled to tax exemption because the properties would “occupied ... by another charitable organization ... for the purposes of such other charitable organization.” G.L. c. 59, § 5, Third.

We have discussed that, as...