Despite being around for over two decades, the Massachusetts Brownfields Tax Credit Program continues to be somewhat of an enigma to some property owners and developers. The Massachusetts Brownfields Act was passed in 1998 to encourage and provide an incentive for the cleanup of contaminated properties, often called Brownfield sites. The program provides a tax credit of up to 50% of the net remediation costs to eligible developers. Simply put, a tax credit is the amount of money that a taxpayer (individual or entity) may be permitted to subtract, dollar for dollar, from the income taxes which that taxpayer owes. If there is no need for the tax credit benefit, developers who earn tax credits may elect to “sell” them to tax-paying individuals or entities at a discount.
Overall, the Massachusetts Brownfields Tax Credit Program has been successful in reimbursing hundreds of property owners and developers up to half of their remediation costs once they have reached a Permanent Solution or Remedy Operation Status in accordance with cleanup standards established by the Massachusetts Department of Environmental Protection (MassDEP). However, issues surrounding the application review process were becoming more frequent. To address these issues, on July 9, 2021, the Massachusetts Department of Revenue (DOR) issued final regulation 830 CMR 63.38Q.1 with changes intended to clarify “eligible” costs and provide greater certainty for applicants.
Summary of Changes in Regulation 830 CMR 63.38Q.1: Massachusetts Brownfields Tax Credit
One of the most significant changes is in the clarification of what costs are considered eligible. One substantial clarification was that costs for the removal of asbestos-containing materials will be considered eligible if the removal was required to achieve a Permanent Solution. DOR also provides several very useful examples of what costs are eligible under very specific scenarios.
Where multiple releases have occurred, DOR now allows the aggregation of costs over a 3-year period. This allowance will help applicants meet the eligibility thresholds relative to the 15% assessed value requirement and potentially increase the eligible costs.
Appeals and Denials
The new regulations require DOR to provide written notification to the taxpayer explaining why the credit was denied and detailing the procedure for appealing the denial. An appeal, which must be filed within 30 days of the date set forth in the notification of the denial, will, in most instances, only involve the review of the credits denied, and not the credits granted.
Administrative and Procedural Changes
The new regulations contain several administrative procedure requirements intended to clarify timelines and expedite the application review process. For example, DOR will contact applicants within 30 days to notify them of their assigned examiner, and applicants will receive an update from their assigned examiner every 60 days. DOR has also established an expedited review process for applicants seeking tax credits of $250,000 or less. In addition, DOR is training additional staff and is hiring an environmental engineer to assist in the review process.
Recent changes to Massachusetts Brownfields Tax Credit regulations have streamlined the application process for Brownfields Tax Credits and provided clarification on a number of procedural aspects of the program. It is extremely important that tax credit planning be conducted early in a contaminated site development project to understand eligibility, site closure strategy, and tax credit appetite.
How Can VERTEX Help?
Over the past two decades, our clients have trusted VERTEX for tax credit planning, strategy, and application preparation. To learn more about Brownfields Tax Credits and other VERTEX Environmental Consulting and Remediation services, contact one of the LSPs below or call 888.298.5162.