Wellesley College, Boston University and Northeastern University announced in August 2014 their intent to file a lawsuit against the Massachusetts Department of Revenue (DOR) for denying the three schools a total of more than $17 million in tax credits for environmental restoration projects. Of this amount, Wellesley requested $6.25 million in credits, while Northeastern applied for $6.4 million and Boston University for $4.4 million after completing projects of a similar scale.
If the lawsuit is successful, the colleges will be granted the credits applied for in 2012 through the Brownfields Tax Credit Program in exchange for the redevelopment of contaminated properties in the state of Massachusetts. Wellesley applied for the tax credits in question after the College conducted environmental restoration along Lake Waban that cost approximately $40 million. Under the state policy, enacted in 1998, organizations that undertake the environmental cleanup of former industrial or commercial sites are eligible to apply for tax credits worth between 25 and 50 percent of the costs incurred.
This law in its original form applies only to for-profit organizations — the organizations typically required to pay income taxes. However, in 2006 the policy was revised to allow nonprofits, including colleges and universities, to apply for the credits and, in turn, sell them to other organizations.
The revisal of the policy was somewhat controversial, but Wellesley Vice President for Finance and Administration Ben Hammond views it as essential.
“The state has incentives that it gives landowners, particularly those who were not themselves the environmental polluters, to encourage them to do the right thing and clean up these sites. It does this through tax credits,” Hammond said.
However, when this provision is applied only to tax-paying organizations, Hammond notes, much of the potential for land redevelopment is lost.
“Nonprofits, which don’t typically pay taxes, don’t have the same incentives and would not be encouraged to clean up these sites [although] many of these sites are owned by nonprofits,” Hammond stated.
Furthermore, Hammond describes the environmental initiatives made by Wellesley College as vital improvements to the land, a chemically-polluted site of a former paint factory purchased in the 1930s by the College when environmental standards were very different.
“I don’t think anyone really understood what that meant at the time or the impact it would have, but later the college and the state department realized that this was a problem,” Hammond notes.
Though Wellesley College viewed the restoration as necessary, it was by no means a simple or cost-effective undertaking. According to Hammond, the college spent a total of approximately $40 million dollars over decades to make the site safe for use.
In early 2013, following a trend of growing participation in the program, the Department of Revenue decided to re-evaluate the regulations of the Brownfields Tax Credit Program and put all pending applications on hold for several months. The final changes, which were eventually released in a November 2013 directive, included several new rules governing the application procedure including the creation of a five-year deadline to apply for tax credits, rendering all cleanups completed prior to June 2006 non-transferrable.
The DOR defends the policy revision as a necessary improvement and notes that the intention was to ensure that after establishing permanent land solutions, organizations don’t hesitate in requesting the tax credits.
“[The Directive was issued] as a means to set forth a more defined set of procedural rules for the implementation of the BTC [Brownfields Tax Credit] program,” the DOR states.
After initiating the directive, the DOR processed the three colleges’ applications and denied the schools tax credit on the basis that the applications described projects from before June 2006, the deadline set by the new policies.
According to Hammond, it is the retroactive nature of the ruling that has frustrated many former applicants.
“The College and many other landowners felt that the change of rules was unfair in that they changed it in the middle of a process, that they changed it retroactively, and that they did it without considering the intent of the legislature in passing the original laws,” Hammond stated.
Additionally, the deadline set by the DOR has become a point of contention.
“Five years is a small window of time considering the scale and extent of some of these environmental cleanup efforts,” Anya Silva ’18 argues.
The trio of colleges appealed the DOR’s decision, but the DOR upheld the credit rejections. In August 2014, the schools banded together to file a lawsuit against the DOR claiming that the 2013 decree was an unlawful change in department policy.
The DOR has until Nov. 17 this year to respond to the lawsuit at which point a judge will rule on whether the state agency violated due process by reinterpreting a policy without legislative direction and applying these new regulations to existing applications.
In the meantime, the issue has raised concerns about how future environmental cleanup efforts will be affected if such credits are not granted to non-profit organizations.
“I think if the government doesn’t encourage people to do the right things and only do the minimum, that will have long-term consequences,” Hammond stated.
Many students and administrators feel that balancing environmental concerns with financial considerations is particularly relevant at colleges like Wellesley.
“There is such a plethora of natural resources and a strong commitment to preserving an environment that all students can enjoy [at Wellesley],” Anjali Madhok ’18 said. “I was drawn to Wellesley partly because of this dedication to improving the broader community, and I think that it is important that the school can continue this mission.”
To a similar effect, Hammond notes the dedicated effort made by the college in confronting the environmental issues.
“I think colleges and universities and Wellesley College in particular are very focused on doing the right thing and protecting our students and our faculty and staff and certainly our neighbors. The College, having spent almost $40 million on this, has invested an incredible amount of money to make something safe, and I think we went beyond what most other property owners would have done,” Hammond stated.
