Outfront Media v. Bd. of Assessors of Bos.

231 N.E.3d 313

OUTFRONT MEDIA LLC

v.BOARD OF ASSESSORS OF BOSTON.

SJC-13489

Supreme Judicial Court of Massachusetts, Suffolk.

Argued January 8, 2024

Decided April 22, 2024

Taxation, Real estate tax: abatement, Real estate tax: exemption. Real Property, Tax. Massachusetts Bay Transportation Authority, Contract. Advertising. Sign. Practice, Civil, Burden of proof. Statute, Construction. Words, "Used," "In connection with."

Appeal from a decision of the Appellate Tax Board.

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

Kelly L. Frey (Edmund P. Daley also present) Boston, for the taxpayer.

Anthony M. Ambriano, Boston, for board of assessors of Boston.

Thomas R. Kiley & Meredith G. Fierro, Boston, for Out of Home Advertising Association of America, amicus curiae, submitted a brief.

Dustin F. Hecker & Daniel B. Winslow, for New England Legal Foundation, amicus curiae, submitted a brief.

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

KAFKER, J.

The real and personal property of the Massachusetts Bay Transportation Authority (MBTA) is generally exempt from tax. G. L. c. 161A, § 24 (§ 24). However, any MBTA real estate that is "leased, used, or occupied in connection with a business conducted for profit" is taxed as if the lessee, user, or occupant were the owner in full of the real estate. Id. At issue here is the use of MBTA outdoor advertising signs. Outfront Media LLC (Outfront) entered into a contract with the MBTA that, among other things, gave Outfront the exclusive right to advertise on outdoor advertising signs owned by the MBTA. Under the contract, Outfront was required to pay a minimum guaranteed amount to the MBTA and a set percentage of any advertising revenue earned above the minimum guaranteed amount. However, Outfront was entitled to the rest of any advertising revenue and was not capped on the amount of revenue it could potentially earn from the signs.

The city of Boston (city) assessed real estate tax for fiscal year 2021 on Outfront for the signs. Outfront sought an abatement of the tax, arguing that the signs were exempt from taxation under § 24. The city denied Outfront’s claim for abatement, and Outfront appealed to the Appellate Tax Board (board), which upheld the tax assessment.

The main issue in this case is whether Outfront’s employment of the signs to post advertisements and generate advertising revenue, among other activities, is a "use" of the MBTA’s property "in connection with a business conducted for profit" under § 24. We conclude that such a use includes the advertising business conducted for profit by Outfront here, and we distinguish such businesses from those merely providing a service for the MBTA such as a janitorial service. We thus hold that Outfront used the signs within the meaning of § 24 and uphold the decision of the board.¹

[1] 1. Background. a. Facts. The following facts are undisputed.² The MBTA owns many outdoor advertising signs (MBTA signs), which are managed by outside contractors and provide a reliable revenue stream to support the MBTA’s transit operations. In April 2019, the MBTA issued a request for responses, seeking bidders for a long-term contract to operate and maintain existing signs, as well as to implement new signs. Pursuant to the request, in October 2019, Outfront entered into a contract with the MBTA (contract) to manage the MBTA signs through June 2034.

Specifically, under the contract, the MBTA granted Outfront the exclusive right to advertise on 121 existing signs and seven new signs to be designed and installed by Outfront on MBTA property. Out- front also received "the exclusive right to install, license, operate and maintain telecommunications equipment" on the MBTA signs as an ancillary use.³

The contract gave Outfront the power to set rates and charges for the sale of advertising space on the MBTA signs, subject to the prior review and approval of the MBTA.⁴ The MBTA also reserved the right to use, at no cost, up to twenty-five percent of the digital display time on the MBTA signs to market the image and services of the MBTA and its municipal partners. Moreover, Outfront was required, again at no cost, to make sign display time available to the MBTA and other government agencies to post emergency messages involving public safety or major service disruptions.

Outfront was also required to compensate the MBTA in several ways. First, regardless of revenue earned, Outfront paid the MBTA a minimum annual guaranteed amount of $3,366,000. Second, Outfront paid the MBTA each month a share of the gross revenue it earned from the MBTA signs. The MBTA’s gross revenue share was a set percentage of advertising and telecommunications revenue from the MBTA signs that exceeded the monthly guaranteed amount. Outfront was entitled to the remaining revenue it earned above these amounts and was not capped on the amount of revenue it could earn from the MBTA signs or the telecommunications equipment.

The contract generally required Outfront to bear the costs of installing, maintaining, and operating the MBTA signs. For example, Outfront was required to obtain all government permits at its own cost and expense, bear the risk of any loss from damage to the MBTA signs, and cover the costs of repairs to the MBTA signs. Similarly, the contract required that the MBTA signs be powered and metered in Outfront’s name and that Outfront pay all related utility costs and fees. Outfront was also required to carry a range of insurance policies, such as general liability, automobile liability, and workers’ compensation. Finally, Outfront was responsible for paying all taxes applicable to services it performed and the rights and interests granted to it under the contract, but the MBTA agreed "[t]o the extent allowed by law" to pass on to Outfront any tax exemptions applicable to the MBTA.

Upon the contract’s expiration or termination, Outfrpnt was required to "hand back" the MBTA signs to the MBTA in a state of good repair and to assign all existing revenue-generating contracts to the MBTA; Outfront was entitled to fifteen percent of all advertising revenue collected after the date of assignment.

The city assessed $198,257.49 in real estate taxes on Outfront for the MBTA signs located in the city for fiscal year 2021. Outfront paid the taxes and applied for an abatement of all such taxes assessed by the city. The city denied the abatement applications, and Outfront timely appealed to the board, which upheld the tax assessment.

b. Procedural history. In January 2022, Outfront moved for summary judgment before the board. The city subsequently moved for partial summary judgment.⁵ The board found that Outfront "used" the MBTA signs within the meaning of § 24 and thus was not exempt from property tax and denied Outfront’s request for an abatement. Outfront appealed, and we transferred the case on our own motion from the Appeals Court.

[2–5] 2. Discussion. a. Standard of review. In our review of board decisions, "[w]e uphold findings of fact of the board that are supported by substantial evidence" and "review conclusions of law, including questions of statutory construction, de novo." Shrine of Our Lady of La Salette Inc. v. Assessors of Attleboro, 476 Mass. 690, 696, 71 N.E.3d 509 (2017) (Our Lady of La Salette). Because this case was submitted to the board on a statement of agreed facts, "the inferences drawn by the board from the facts stated are not binding upon us" (alterations and citation omitted). Middlesex Retirement Sys., LLC v. Assessors of Billerica, 453 Mass. 495, 499, 903 N.E.2d 210 (2009). Although we review questions of law de novo, "because 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, and will affirm its statutory interpretation if that interpretation is reasonable" (quotation and citations omitted). AA Transp. Co. v. Commissioner of Revenue, 454 Mass. 114, 118, 907 N.E.2d 1090 (2009). But "principles of deference are not principles of abdication," and ultimately, "the interpretation of a statute is a matter for the courts" (citations omitted). Our Lady of La Salette, supra.

[6] b. Burden of proof. At the threshold, we must determine who carries the burden of proof. Outfront argues that the city should carry the burden of proving that Outfront is subject to taxation by establishing that it uses public property in connection with a business conducted for profit. The city maintains that Outfront is seeking a tax exemption and thus the burden of proof properly lies with Outfront. We conclude that Outfront is seeking a tax exemption, and therefore, it must shoulder the burden of proof.

As a general rule, "[a]ll property, real and personal, situated within the commonwealth …, unless expressly exempt, shall be subject to taxation." G. L. c. 59, § 2. General Laws c. 161A, § 24, states that "[n]otwithstanding any general or special law to the contrary, the [MBTA] and all its real and personal property shall be exempt from taxation and from betterments and special assessments." However, the exemption does not apply to any MBTA real property if it is "leased, used, or occupied in connection with a business conducted for profit." G. L. c. 161A, § 24. Such property is taxable to the lessee, user, or occupant as if they were the owner in full of the real property. Id.

[7–9] When construing 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.’ " Reagan v. Commissioner of Revenue, 491 Mass. 446, 451, 203 N.E.3d 1150 (2023), quoting South Boston Sav. Bank v. Commissioner of Revenue, 418 Mass. 695, 698, 640 N.E.2d 462 (1994). See Beacon S. Sta- tion Assocs. v. Assessors of Boston, 85 Mass. App. Ct. 301, 305, 9 N.E.3d 334 (2014). "An exemption is ‘to be recognized...