Justice: SJC-13671, 480 McClellan LLC
versus Board of Assessors of City of Boston.
(scuffling)
Okay, Attorney Albano.
Albeno, Albano? -: Albano.
May it please the court, my name's Jon Albano.
I'm here on behalf of the appellant 480 McClellan LLC.
With me are my colleagues, Matt Schnall and Andrew Patullo.
With the court's permission,
I'd like to address the following three points.
First, whether the board erred
by holding that the for-profit nature of the appellant
compelled the conclusion that the lease
was for a business purpose under the original language
of Section 17 of the Enabling Act.
Second, whether the board erred by refusing to consider
whether the property also was exempt from taxation
under Chapter 59, Section 2B.
And finally whether the board erred
by holding that the 1993 amendment
to the Enabling Act never took effect,
despite the provision of the Massachusetts Constitution
that a bill vetoed by the governor,
quote, "Shall have the force of law," close quote,
if upon reconsideration of the veto bill,
two thirds of both Houses approved the legislation.
Turning first to Section 17,
again, the original language of Section 17
provides that no property of the authority shall be taxed
essentially unless it is leased for business purposes.
What the board did was base its decision
that Section 17 did not apply on the fact that the appellant
is a for-profit business,
but I'd suggest that was wrong for a couple of reasons.
First, the legislature has consistently distinguished
between two distinct concepts in this area,
is a business for profit on the one hand,
and on the other hand is the lease
or occupation for a public purpose.
That distinction is made in Chapter 59, Section 2B.
That distinction also is made in its statutory predecessor,
Section 3A.
And in the appeals court decision
in Beacon South Station Associates
versus the Board of Assessors of Boston,
that distinction also was brought home
because in that case, the court was applying
a public purpose exemption, and it noted that
after the years at issue, the legislation had changed
and added that if you're a for-profit business,
it's taxable.
And the court said that's a narrowing
of the exemption from taxes.
And this same point was made in this court's more,
it wasn't the heart of the case,
but the same point was made in the court's outdoor out front
media case earlier this year.
So there is this recognized distinction
between a for-profit business
and a business that's serving a public purpose.
And yet the board here just conflated the two
and said, your for-profit were done, you're taxable.
The record, though,
the record is that Massport was on record as saying
this lease was essential to the functioning of Massport,
its governmental functions.
The lease itself in permitted uses
has a list that makes it very clear.
There's things like you need to have
an intermodal freight office and warehousing
receipt storage, preparation for shipment of marine,
air domestic and international cargo.
So I would suggest that this record demonstrates,
and there's really no evidence to the contrary.
-: The record is a little bit on unclear, right?
Because there's reference to office space,
but it doesn't say, you know what, office space,
like it could be rented to a candy company
for all we know on this record, is that right?
-: That's a fair point.
The record does not detail what the office space is.
So as I stand here, I can't tell you that office space
was for people who are organizing
freight shipments in cargo.
That is not part of the record.
But I will say that the record that was before the board
was not, does not support a decision that
simply because the company is for profit,
analysis ends and it's not leased,
and it's been leased for business purposes.
-: What happens if hypothetically this were sent back
and for further proceedings?
And what if the property is being used both
for public purposes and for non-public purposes?
-: I would suggest that there the decision should be
what is the primary use of the property
occupying the property, sorry,
that if it is primarily for a public purpose,
but yes, there's some private business as well
that the exemption would apply,
that should be the analysis of the board in this court.
What the heart of this transaction?
-: Can I ask you, why this distinction between business
or why does business purpose require us to look
to whether there is also a public purpose?
And the board seemed to equate business purpose
to for profit.
And you're saying we have to import into the word
business purpose in Section 19,
the idea of whether it's a business for profit
for public purposes.
Why, because it seems to me Section 2B
actually has that language in it,
whereas Section 17 does not have that language.
-: I would suggest that 2B is really quite consistent
and complimentary with, if that's the right term,
with Section 17, it articulates a specific example
of what would not be a business purpose.
And I would also say that the court in,
not out front, it's appeals court predecessor,
the Beacon South Station case really did draw
this distinction of what is it, is it a public purpose?
And that historically is what has exempted property
from taxation.
-: But just stick with me with the language of the statute.
Section 2B says, "Business conducted for profit
other than public purposes," right?
And Section 17 just says, "Leased for business purposes."
And it seems to me that
when there's different language used, it's for a reason.
And you are saying no, no, no,
business purposes in Section 17
means business conducted for profit
other than public purposes
Jon Albano: Or non-profit for public purposes.
-: But wouldn't the legislature have said
in Section 17 something to the effect
if leased for business purposes
other than for public purposes?
-: I think not because if you step back,
what's going on here is we're talking about
publicly owned property
and of course, if it was just Massport,
it wouldn't be taxed.
And so the legislature is saying, okay,
when will this use of publicly owned property be taxable?
And if it's for primarily a business purpose,
then why should my law firm not have to pay
real estate taxes when the law firm across the street does?
There is a notion of this in the cases,
if a business is taking advantage of the exemption
just for a business purpose
as opposed to the what the cases talk about
in these tax exemption, if it's for a public purpose-
-: But those cases, and I haven't looked at them,
you're more familiar than I am.
Are those about section 2B or 3A,
or are they about the specific Enabling Act for Massport?
-: The ones I'm thinking of are really talking
about the history before both of what types of property
are not subject to taxation,
because they are serving primarily a public purpose.
-: So those cases don't deal with any of the things
that we have before us.
-: I would suggest they do bear on the issue because-
Justice: But they're not section 2B cases,
-: Section 2B cases concern more specifically
the language of section 2B.
Although, I mean to-
Justice: I can look it up.
-: I don't wanna guess, but I-
-: 'cause so can I ask you pivot down for a second?
So Section 17 says, no property of the authority
shall be taxed to a lessee, your client,
under Section 2B.
Albano: Right?
-: Instead it goes on to provide, it shall be taxed
if it's used for business purposes.
So why would we look to section 3A or 2B
to figure out the meaning of Section 17?
-: Because that very language is simply saying,
you can't look at 2B, 3A to tax this property.
Justice: Right, including the language in 2B
that says business is conducted for profit
other than public purposes, right?
-: Yes, but my point is this, your Honor,
that all that language says is you don't get to look to 2B
to impose any taxes on this leased property.
I'm not doing that.
I'm looking to 2B, not to tax a lessee,
-: But to inform the meaning of business purposes.
-: Well, and to say that language of 2B,
particularly the last paragraph which now says
the section shall not apply to a use lease or occupancy,
which is reasonably necessary to the public purpose
of a public airport, is totally consistent with 17,
because Section 17 merely says,
thou shalt not look at 2B to impose a tax.
I'm not, I'm looking at 2B
to say 2B says it is not taxable.
-: Can I ask a different question
about the interplay between the statutes?
I think a strange result of not interpreting
business purposes the way that you want to
would be that Massport Airports, Port would be treated
less favorably than all other airports and ports
because they get the benefit of the 2B treatment.
And anyone who's on Massport land would not,
but Massport's already being treated differently.
Massport properties are already being treated differently
than other properties because Section 17 was amended
to include payment in lieu of tax provisions.
So what's your response to that argument
that actually Massport is being treated differently here
and for good reason and very intentionally
by the legislature?
-: I think the response to that is simply,
I'm sorry if I'm being narrow minded,
but I'm just trying to follow what the statute says,
and the statute has these provisions that say
when that property shall not be taxed.
And I don't think the legislature is required
to tie that language to whether payments in lieu of taxes
are offset or not, or are we treating Massport better
than the Mass Turnpike.
But simply, what did the legislature say?
And I'd suggest they said this property
should not be taxed.
If see my times' run out, if I may just quickly
get to the-
Justice: You still got green, so.
-: Sorry?
Justice: You're still on green, so go ahead.
-: Okay, I'm color blind so.
Justice: Okay, oh. (laughing)
-: Whether the amendment to the Enabling Act
was effective or not,
and I would suggest there
that you have a clear constitutional provision
that says, once that two thirds vote override occurs,
the law, the what's the language,
the legislation shall have the force of law.
And yes, the court defers to legislative rules,
but the constitutional provision there,
Part 2, Chapter 1, Section 1, Article 4,
says after, yes, the general court has these powers,
wholesome and reasonable orders concludes by saying
so as the same, be not repugnant or contrary
to this constitution.
And I say two things here,
let me just say this before I sit down.
A, if the internal rules of the Senate
provided that one member filing a motion
for reconsideration trumps,
the clear language of the constitution,
I would say that does not withstand scrutiny.
And last thing I'll say is that rule doesn't even say that,
that rule on motions for reconsideration does not say that,
Oh, by the way, and if we one senator files a motion
for reconsideration and we never take it up,
-: We override goes out the window.
-: If we if we were to agree with you
on this parliamentary issue that you're raising,
would the case then be remanded for determination
under the amended Section 17?
-: I would suggest that the -
-: We don't make facts, we don't find facts here.
-: Right.
-: So where would the determination
as to what happens next
So what happens next, if we agree with you
on the parliamentary question?
-: There are only two possibilities, right?
I would suggest that the court does have discretion to say
if that 1993 amendment is valid,
and the only issue was the property used
for air transportation purposes,
then the record before the board shows that it was,
if that is not, of course, if the court is not satisfied
that the record demonstrates that, then yes,
I agree a remand would be needed.
-: Could I ask one question?
I don't think you've had a chance to respond
to the Massport amicus brief in writing.
Do you wanna say anything about Massport's arguments,
particularly a number of different laws they've identified
or putative laws they've identified
where a similar procedure took place?
It appears I haven't looked at through
all the legislative history myself,
but what they report is that there are a whole host of laws
or bills that were passed, including Section 109,
I might be getting that number wrong,
but another amendment that would actually be problematic
for your client.
-: So the thing I thought I should respond to
in the amicus brief is the citations
to the two opinion of the justices cases,
one in 1956 that cites a 1935 1 and in those cases,
a motion for reconsideration did the trick
that they want it to do here.
I would just say those cases are quite different
for two reasons.
First of all, the both courts said,
well, this was a joint session
and joint sessions don't have regular assemblies,
and therefore the, well, I'll paraphrase.
I don't wanna get it wrong,
but therefore the first vote didn't count.
This is not a motion for reconsideration
that could be taken up at a regular assembly,
and suggested that if that weren't the case,
then the motion for reconsideration never taken up dies.
And the last thing I'd say about that
is that in neither of those cases, was that effect
of a motion for reconsideration to undo legislation
that a constitutional provision requires
have the force of law.
So they don't control here.
And if my memory's right,
there's been no citation by the amicus of,
oh, here are the many cases where vetoes were overridden,
but a motion for reconsideration did them in
and therefore the world will crumble.
I thought when I saw former Justice Ciphers concurrence
in that Lanier case where she quoted the late judge,
Chief Judge Gant saying, we don't generally say, well,
we rely upon the importance of continuity.
So if it was an injustice that occurred a while ago,
we're just gonna leave it be.
This I would ask that the fact that the 1993 Amendment
has been ignored,
notwithstanding the clear constitutional provisions,
the court should not just let it be.
Thank you for (indistinct).
Justice: Did you get your question answered?
-: I'm just relying on the Massport brief,
but at pages 29 and 30, there's an argument
that was about an amendment to 59 2B
that would've changed 59 2B
exemption as well.
There's an argument in general
that there could be sweeping consequences
to this court saying that a practice
that at least it's told to us has been occurred
in a number of other instances could mean
that there are other laws out there
that no one knows our laws.
And that if we say that this seeming practice
is unconstitutional, there are a whole host of laws
that may sort of unexpectedly come into being.
And so I just wanted you to have a chance
to respond to that.
-: Yeah, I'm sorry.
The most I remember from that, well, it's a great brief,
but the thing I remember about it
is that I didn't recall seeing a list
of here are a bunch of overridden vetoes that got cast aside
because there was a motion for reconsideration
never taken up.
So that's what, to me, seemed the most important point.
Justice: Thank you.
Justice: Thank you very much.
Attorney Ambriano?
-: Good afternoon, Attorney Anthony Ambriano
on behalf of the Board of Assessors of Boston.
I would like to address Justice Dewar's question briefly.
Yes, the Massport brief, the amicus brief,
I think hit the nail on the head on that issue,
which I did not, but it did.
If the court were to accept the procedural analysis
offered by McClellan here as to the override
and the motion for reconsideration,
that precise analysis would also apply to Section 109
in that same bill.
Again, vote to override DeVito motions for reconsideration,
motions for reconsideration not acted on,
in which case the air transportation use provision goes out
and much more property is taxable
even than was contemplated.
A couple of more things with respect to the-
-: I mean, I understand that,
but it doesn't answer the question
as to whether the argument is correct or incorrect.
The effect of the argument maybe sweeping,
but that doesn't necessarily mean
that the argument is wrong.
-: Certainly, I will address that.
-: Okay, may I ask you specifically to perhaps on that front
address the, I'm looking at the Journal of the Senate,
which I take it as sort of the official record
of the Senate proceedings.
Am I correct in that understanding
Ambriano: That is correct, yes.
-: Okay, so what I'm looking at is the Senate's own record
of what happened with the override vote.
And it reflects, I think, and you know, I'm looking at,
in case you wanna look at the same thing, page 1315,
it says that the yays and nays having been completed
at whatever time it is that they've been completed,
and it shows all the names that two thirds
of the members present, quote, approved the same.
And what's hanging me up here is,
or what I'm focused on is that
if that is the official record of the Senate,
and it shows that it approved the override,
and we know that the House approved the override as well,
why doesn't that exactly track the language of Article 2?
-: Because I think of very important to that analysis,
justice, is this court's decision in Kay Jewelers
-: Different opposite set of facts, right?
What was the procedure that happened in Kay Jewelers?
-: Kay Jewelers was also the question
before the court in Kay Jewelers,
Justice: But I'm asking about the facts.
-: It was a motion for reconsideration
that had not been ultimately acted on, no final action,
which by the way, is the same language.
-: But what happened before then?
-: Before that, in Kay Jewelers, I testing my knowledge-
Justice: It was the opposite of what happened here.
-: Correct, but I think the fundamental principle enunciated
in Kay Jewelers is that the constitution
requires that action be taken
and it is referred to as a reconsideration.
-: Right, we can look at the Article 2,
but in Kay Jewelers there was no override vote.
The override vote did not pass.
And then there was a Motion for Reconsideration,
that's not this situation.
We have an override vote that satisfies
the requirements of Article 2.
And Article 2 then says, once that happens,
the bill will have, I think it uses, shall the force of law.
If I take all that language at face value,
I'm then left wondering how an enacted upon
Motion for Reconsideration
or even enacted upon Motion for Reconsideration
could override the provision of Article two.
-: I think Article 2, by its terms
says that the legislature shall reconsider,
and that language does not strip the legislature
of its authority to continue to process that bill
in accordance with the legislature's
own rules and procedures, which happened here.
-: Ad infinitum even after they have reconsider it.
I mean, you can't just, I don't think,
take a couple words of Article 2
all by themselves, because Article 2,
and I'm having trouble just pulling it up on my iPad.
But I believe that what it says is that the Senate
can reconsider, and then here we go,
if after such reconsideration,
so the reconsideration comes first
because it says if after such reconsideration,
two thirds of the said Senate or House of Representatives
shall notwithstanding the governor's objections agree
to pass the same, it shall together with the objections
be sent to the other branch of the legislature
where it shall also be reconsidered.
And if approved by two thirds of the members present
shall have the force of law.
I don't see anything in Article 2 that provides
for reconsideration subsequent
to a two thirds override vote.
-: I think that one of the key words, justice
is the word approval.
Approval denotes in accordance
with the legislature's procedures.
Now, the last word of the legislature on this
is no further action was taken.
That's what the Senate records show.
And ultimately the official records
of the Secretary of State show the same thing.
It shows Section 53 was vetoed,
certain other sections were in fact overridden
and took the force of law,
but there was no such certification as to Section 17.
-: This is why I asked you about the Senate record
and whether it was the official record,
because it says that it was approved.
-: It says no further action was taken
on the disapproval veto.
And I direct your attention to volume two
of the record appendix page 146.
-: Okay, but I'm looking at the actual vote
where it says that after the two thirds
of the members present approved the same,
it says that two thirds of the members present approved it.
Why doesn't that end the inquiry?
-: Because under the Senate rules,
a Motion for Reconsideration was made.
That Motion for Reconsideration was itself considered
at least six times,
and each time that vote on that was postponed.
The legislative session ended,
which under Article 10 terminates the bill,
terminates the life of the bill.
-: No, I take it your view
is that the parliamentary procedures
regarding the Motion for Reconsideration can override
Article two's language
that says shall have the force of law?
-: No, I would not take that interpretation.
What I would say is that the word approval in Article 2
is of substantial import that allows the legislature
to process it in accordance
with its customary rules and procedures.
And I think that is the point of Kay Jewelers,
even though yes, factually it was reversed.
Nonetheless, the point is that Article 2
does not divest the legislature
from the ability to consider further action.
And I use the word consider as using Kay Jewelers.
Yes, we can consider it the way we consider everything else.
And so I think that's the important point there.
-: In Kay Jewelers, the consideration took place
before the vote, the override vote.
-: Yes, but nonetheless, again,
this court has traditionally been reluctant
to get into the weeds, shall we say,
of the legislature's rules.
And here again, the final word of the legislature
was no further action was taken.
And that was what was certified by the Secretary of State
with respect to this provision.
-: Can you just explain to me procedurally
how this would have worked?
So there is the two thirds override House and Senate,
and then there's the motion to reconsider,
then let's just say the next day that motion is taken up.
And then what would've happened if it was allowed
the motion to reconsider?
Would that then there be another two thirds vote required?
Or how does that work?
-: Well, certainly if the motion to reconsider
had been denied, that would be an easier course.
Justice: Of course.
-: What would happen, I would be hesitant to speculate
as to what would've happened,
because ultimately, as indicated
it was considered many times, but no vote was ever taken.
And eventually that expired
and go to the opinion of the court
opinion of the justices that there is no final action
taken on legislation
unless and until there is a adverse disposition
to use the court's words of a motion to reconsider.
I may switch now a couple of points with respect
to the exemption issue.
There were some statements on oral argument
that I think from the court as well as counsel
talking about primarily for business purposes
and weighing the work primarily does not appear
in Section 17.
If it is used for business purposes, it is taxable.
The weighing has already been done by the legislature
and that is what has been enacted.
With respect to the issue of for-profit business,
I think the findings of fact of the Appellate Tax Board,
which are final,
they don't really turn on for-profit.
Of course it mentions that the McClellan
is a for-profit, LLC,
but the ATB examined whether it was engaged in business.
Well, the for-profit LLC did buy the interest
in the ground lease.
It did build the building.
-: But that's not very convincing, isn't it?
'Cause any lessee is not going to lease property
unless they have a purpose for it,
even if it's a public purpose.
Even if someone had a very clear, let's call it,
a non-profit or charity, right?
So a non-profit or charity is going to have
a whole bunch of capital
and pay a bunch of money for the property.
And so why is it hugely significant?
-: It has been determined by the legislature
if you're conducting a business-
-: So even if it's a nonprofit?
What's not a business?
Someone has enough money to lease this property.
What in your view would fall outside
quote unquote business purposes?
-: It would be very difficult for me to think of an example
where an entity pays for a lease,
pays for an interest in property,
and then subleases it.
I can't think of an instance where you might say,
well, that really wasn't business.
This is in my view, somewhat easier question
than the one addressed last year and out front.
-: So this is, I mean, it's really peculiar
because then what you're left with is an enabling statute
for Massport, which as amended says,
Massport property is not subject to tax under 3A/2B,
but it's basically always subject to tax to its lessees.
-: Well in the hands of lessees, I think that is correct,
and I think that that is the intent,
and I think that is the way
the ground lease here is structured.
-: But doesn't the legislature usually use words
to have an intended meaning?
They wouldn't have said for business purposes
unless they intended that to have a function, wouldn't they?
-: No, I think that is correct,
and perhaps there is some example
where someone enters into a lease,
not for business purpose, but I'm-
-: I mean, this was originally enacted in 1956
and 3A already existed at that point.
And the 1951 version of 3A
specifically exempted land under the control,
I forget the old name for it,
but the airport person and the port person.
Now the 1951 version of 3A
already exempted their lessees from tax.
So then you get this statute creating Massport,
why shouldn't we, notwithstanding that the language used
in 17 is sort of almost the inverse
of the super awkward 2B language,
which is in connection with a business conducted
for profit other than public purposes.
So it's like the business and the purposes are segregated
and then they've shorthanded it in 17.
Why shouldn't we read the Section 17 language
as sort of shorthand?
-: Well, I think Section 17 by its terms
prevails over any other statute.
-: I agree that I'm just asking about
sort of how we understand the term business purposes,
which it strikes me should have some sort of meaning.
-: Well, one could look and I think the ATB cited it
in its decision in this case, another tax case,
the Sherwin Williams case.
And said, well, business is generally
something undertaken for profit.
In contrast to that, with the decision of the appeals court
and the Mass PCS co-case,
which was a lease situation that had been set up
essentially to take advantage of a tax exemption.
But I think that ultimately
where there's a specific statute here,
I don't think that business purposes
can really be contested,
and at the Appellate Tax Board level here,
McClellan basically said
it's either public purpose or business,
and public purpose does not appear in Section 17 anywhere.
This court in out front in not directly the same situation,
but in out front the taxpayer tried to read
into the MBTA exemption statute.
Well, you can't tax us because we're involved
in an essential governmental function.
-: Well, that was very different
'cause that was running advertisements on billboards,
which is very different from here where you have a letter
from Mass Massport saying the facilities of these lessees
are essential to our operations.
-: Well, again, the statute doesn't say
essential governmental functions anywhere, and it never has.
It's a business for-profit by a for-profit, LLC
involved in activities.
And I think it was pointed out earlier
that the ground lease is not in any way limited
to air transportation uses,
let alone any other public purposes
such as office space will qualify as a permitted use.
There was a question if I may.
(indistinct)
Thank you.
Justice: Yeah, I think we're all set, yeah.