Commonwealth Conversations: Revenue

Vendor Takes Licking in Road Salt Procurement Case

Written by James Crowley, Esq., Bureau of Municipal Finance Law

 

The U.S. Court of Appeals for the 1st Circuit ruled against a company which supplied road salt to the City of Boston in the winter of 2004-2005 and then disputed with the City over the amount owed for the deliveries. The decision is International Salt Company, LLC v. City of Boston, (1st Circuit. Mass., December 18, 2009).

 

In August 2004 the City of Boston sought bids for 75,000 tons of road salt for the upcoming winter season. The City accepted the bid of International Salt Company, LLC (ISCO) and a contract was executed. Under the terms of the contract, ISCO agreed to supply 75,000 tons of road salt at $36.42 per ton for a total price of $2.7 million. In October 2004 the City Auditor certified the appropriation of funds. A week later the Mayor approved the contract in writing.

 

ISCO delivered about 71,000 tons of road salt to the City by February 2005 at the agreed price of $36.42 per ton. It was a very snowy winter, however, and the City officials demanded additional deliveries through the end of the contract term on June 30, 2005 so as to ensure public safety. ISCO contended that it was obligated to supply only 75,000 tons at $36.42 per ton. The company informed the City that shipping costs had risen sharply and any deliveries in excess of 75,000 tons would have to be paid for at a price to be negotiated or later determined by a court. Under protest, ISCO delivered an additional 27,000 tons in excess of the 75,000 ton contract figure. Although ISCO wanted a price increase for the 27,000 additional tons of road salt, the City paid the vendor at the $36.42 contract rate. ISCO attempted to negotiate with the City and argued that the City by placing orders in excess of the contractually established 75,000 ton figure had implicitly agreed to pay the fair market price for the extra deliveries. ISCO’s position was that the City should be expected to pay the market rate of $56.37 per ton instead of the contract price of $36.42 per ton. Consequently, ISCO asserted that the City of Boston should pay $1.5 million for the additional 27,000 tons instead of the $984,000 amount as calculated by the City.

 

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A Great New Reason to Make a Haiti Relief Donation

Posted by:
Edward Peters, Director, Publishing and Media Services, Department of Revenue

 

The IRS has just announced a new law that allows taxpayers to claim Haiti earthquake relief donations made this year on their current 2009 tax returns. Take a look at the IRS story.

A First Look at Local Option Meals Excise Adoptions

By Lisa Juszkiewicz, Director of the Municipal Databank

 

A review of revenues for this new local option shows that the first month of collections, or October alone, totaled $2,774,514. A preliminary review of revenues in November shows an additional $2.6 million collected.

 

Of the communities who initially adopted the local option meals excise, the City of Boston is the largest by population (and likely by relevant dining establishments). Of the approximately $2.7 million collected in October, $1,493,154.22 million came from and went back to Boston. The City of Cambridge had the second highest meals revenue collections in October with $256,811.97.

Worcester, our second largest city by population, came in with the third highest collections ($152,737.62) in October and the City of Springfield followed in fourth ($113,323.74). Of the 30 initial communities, the small, western Massachusetts Town of Sunderland collected the least at $2,640.08. That said, even in small communities, collections may amount to noteworthy new monthly revenue. Cities like Taunton, Northampton, and Somerville ranged from $42,138.59 to $45,874.59 to $60,854.69.

 

The new local option excise of .75 percent on the sale of restaurant meals originating within the municipality was created within the FY2010 state budget. To implement the new local option excise the municipality must accept MGL Ch 64L, section 2(a) by a majority vote of the local legislative body, subject to local charter.

 

For the local option excise to be effective October 1st a municipality needed to vote to accept the local option by August 31. As mentioned above, 30 municipalities accepted by the August 31 deadline and they received their first distribution on December 31. The December distribution was based on revenues generated on the sale of restaurant meals in October and reported to the Department of Revenue in November.

 

For full story please click here.

 

Editor’s Correction: An earlier version of this article was posted with incorrect information in the first paragraph. The originally posted article stated, in the final clause of the first paragraph, that November’s revenues would, “be shared among the 66 communities who had adopted the local excise in time for a disbursement later this month.” However, only those first 30 communities who adopted the excise by August 31 are eligible for any disbursements at this time. The 36 communities who adopted the excise on or before Dec 1 will be eligible to collect January revenues beginning March 31. This error was due to a change by the editor and not the fault of the author.

See what's new for the 2010 filing season

Posted by:
Edward Peters, Director, Publishing and Media Services, Department of Revenue

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Last week, DOR released its annual filing season video presentation. The informational videos are full of useful information for both tax practitioners and taxpayers -- topics include an update on important tax law changes, a discussion of recent health care reform changes, a talk with the Department’s Taxpayer Advocate and a look at DOR’s expanded WebFile program. Tax professionals can also earn a CPE credit for watching the presentation. Take a look!

 

 

Golf Course Recreational Classification Declared Out of Bounds

Written by James Crowley, Esq., Bureau of Municipal Finance Law

 

If you have ever traveled to Cape Cod, you may have heard of the Cape Cod National Golf course, an 18-hole championship golf course located in the communities of Harwich and Brewster. When the owners of the course failed to convince both towns’ boards of assessors to classify the property as Chapter 61B recreational land, which would mean reduced taxes; there were appeals to the Appellate Tax Board(ATB). The ATB issued its decision this summer in the case: Cape Cod Five Cents Savings Bank and William R. Enlow as Trustees of the John R. Pfeffer Family Trust and Cape Cod National Golf Foundation, Inc. v. Boards of Assessors of Harwich and Brewster, (ATB docket #F277365, July 17, 2009).

 

The trustees held title to approximately 151 acres of land of which 70 acres were located in Brewster and 81 acres were located in Harwich. About 90 acres of the subject property were used as a golf course. In addition, the Cape Cod Commissionrequired the trustees to maintain 50 acres of the parcel as a wooded wildlife habitat. Buildings in Brewster consisted of a clubhouse, the golf pro’s residence and a maintenance building. Located in Harwich were a barn, a pump house to irrigate the golf course and restroom facilities.

 

The trustees tried to obtain recreational classification in fiscal years 2001 to 2004. During this time frame, the trustees leased the property to the Cape Cod National Golf Club, LLC (Club)which managed the property. The parcel could only be used by members of the Club and guests at the Wequassett Inn. Both boards of assessors rejected the applications for Chapter 61B status on the grounds that the subject property was not available to the general public as required by statute. The trustees appealed to the ATB, but then signed a written agreement in August 2004 with both boards of assessors not to pursue their claims for fiscal years 2001 to 2004. The trustees also agreed in writing not to apply for Chapter 61B status in future years for so long as the golf course was presently organized.

 

The importance of the latter provision became apparent in September 2004 when the Club conveyed its leasehold interest in the subject property to the Cape Cod National Golf Foundation, Inc. (Foundation), which was a Florida nonprofit corporation organized in April 2004 for very general charitable purposes. The bylaws of the Foundation stated that members of the Club were to be considered non-voting members of the Foundation. Conversely, all members of the Foundation were also members of the Club. The bylaws made the golf course available only to the members of the Club and to guests of the Wequassett Inn. Even though the Foundation was technically the lessee, the Club continued to manage the golf course and received revenue from Club memberships, greens fees, charges paid by patrons of the Wequassett Inn, and sales at the pro shop and clubhouse restaurant.

 

For full story please click here.

 

Earned Income Tax Credit can deliver big bucks

Posted by:

Robert Bliss, Director of Communications, Department of Revenue

The federal Earned Income Tax Credit (EITC) is the federal (and state) income tax credit available to low- and moderate-income working families and individuals that can return as much as $5,657 in cash to a qualifying taxpayer.

If you are a working family with three or more qualifying children filing a joint return and your family earned less than $43,279 ($48,279 married filing jointly) in 2009, you may be eligible for up to $5,657 in federal and state tax credits. The state credit is equal to 15 percent of the federal credit.

A family with one qualifying child and earnings of $35,463 ($40,463 married filing jointly) is eligible for a credit of $3,043.

And for those without children, a single person earning up to $13,440 or a married couple filing jointly earning up to $18,440 are eligible for $457 in EITC.

It is estimated that approximately 50,000 eligible families in Massachusetts did not apply for the EITC, which would have delivered about $75 million in real dollars.

For information on the credit and on locating a free tax preparation site near your, go to the Mass.Gov web site for EITC.

To view a video presentation on the credit by Lt. Gov. Timothy Murray, click on www.mass.gov/dor and then on the video link on the homepage under "Tax Tips."

Conservation Restrictions and Real Property Taxation

Written by Joan Youngman, Lincoln Institute of Land Policy

 

Conservation restrictions are the most significant and fastest-growing means of protecting environmentally sensitive land, and Massachusettshas been a leader in their development. It is 44^th among states in terms of land area, but 10^th in terms of acres preserved for conservation. It has more land trusts than any other state except California, and it was the first state in the nation to amend its statutes to recognize this new property right.[1]Its pioneering legislation described this as a, “conservation restriction.” Later states and a model federal Uniform Act have called this same instrument a, “conservation easement.”

 

A conservation easement limits future development by transferring some rights in property, such as the right to construct new buildings, from the landowner to a nonprofit organization or a governmental entity for conservation purposes. Conservation easements are enormously popular because they are the only means of permanently restricting development while allowing property to remain in private ownership. This has a number of important advantages over a completely public model of preservation, where a government agency or conservation organization might purchase property outright in order to maintain it as open space. Many owners who care deeply for their land do not want to sell it and move away but may be pleased to donate or sell the development rights to insure that their property is protected in the future. These owners may well be better able to maintain the property than hard-pressed public agencies or nonprofit organizations. Owners who cannot afford to donate the development rights may offer them for sale, which would be less costly to the conservation organization acquiring the rights than a purchase of the entire property. Continued private ownership generally also means that some portion of the property value will remain on the local tax rolls.

 

For full story please click here.

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[1]The conservation restriction was introduced to Massachusetts by Chapter 666, Acts of 1969, which created new sections 31-33 of M.G.L. c. 184.

City and Town turns a (web) page

Posted by: Robert G. Nunes, Deputy Commissioner of Revenue & Director of Municipal Affairs, Department of Revenue

  

Welcome to City and Town’s new online home on the Department of Revenue’s blog, OpenDOR: Commonwealth Conversations.

City and Town has evolved over time, but its purpose and mission remain the same as when the first four-page issue was desktop published in August 1987. That first edition arrived with this editorial note: “Designed with local officials in mind, this newsletter is intended to keep you abreast of current developments or issues which could affect the services you provide to your communities.”

In the ensuing 22 years, City and Town has consistently presented substantive analysis, reports, and information on a wide range of local issues—despite significant revisions to font, style, form, size, design, version (hard-copy or digital), distribution, and editors along the way.

 

This 2010 revision will again be in form and not in content. We will continue to provide the types of stories you are accustomed to reading, with only the delivery method and frequency changing. Instead of issuing PDF-style monthly newsletter editions over the course of the year, City and Town content will be distributed weekly. Each Thursday subscribers will receive email alerts of new stories posted to the DOR blog. Stories will also continue to be available on the City and Town website, where both the past PDF editions as well as each new story will be archived for handy reference.

 

The migration of City and Town to the DOR blog will allow us to provide you with more relevant immediate communication and, for the first-time, allow for reader comments on published articles. If an issue arises which needs presentation or clarification right away, City and Town will be able to respond quickly rather than wait for the next publication cycle.

 

In the coming months we hope the new blog format will facilitate discussion of such issues as regionalization, municipal relief legislation, and meetings of the municipal cabinet and regionalization commission. It will also be a central location for up-to-date budget, training and event data. City and Town is now more responsive and engaging.

 

For those of you who choose to print City and Town, please take comfort in the fact that stories posted to both the blog and website are formatted for easy printing.

 

As City and Town evolves we found it a unique opportunity to streamline our division-wide communications. As a one-stop-shop-style of communication, City and Town online will keep you more informed and less harried by an overrun inbox. Our weekly City and Town email will alert you not only to City and Town stories but also legal bulletins, databank news, and any other DLS communications. That said, City and Town news emails will not replace DLS Alerts for time-sensitive information.

 

We hope this move will make City and Town more responsive to your needs and relevant to the times. Moving forward we encourage your comments, feedback and ideas on our blog and by email at cityandtown@dor.state.ma.us.

Deputy Commissioner & Director of Municipal Affairs

& the City and Town Editorial Board

December revenues top monthly collection from a year ago for third consecutive month

The monthly revenue collection has topped that of a year ago for the third consecutive month.

The reasons for this improved performance in collection vary from month to month, but one common denominator is the Aug. 1 change in the sales tax rate from 5 percent to 6.25 percent.

December 2009 revenues totaled $1.885 billion, up $22 million or 1.2 percent from December 2008, according to the revenue numbers DOR released yesterday. Similarly,  November revenues and October revenues topped collections for the same months in 2008.

The first three months of FY10 (July, August and September) saw monthly collections fall short of those from a year ago, which is one reason why the FY10 revenue estimate was adjusted downward by $600 million in mid-October to $18.279 billion.

However, based on the past three months performance both in terms of surpassing last year's monthly collections and in terms of beating revised benchmarks, the FY10 revenue estimate was revised yesterday to $18.460 billion, an increase of $181 million.

Sales tax revenue for December 2009 was $377 million, up $71 million from a year ago, an increase of 23.4 percent and $14 million over benchmark. Had there been no sales tax rate increase, the collection would have been 3.9 percent less than a year ago. Year-to-date, sales tax collection is $2.231 billion, up $227 million or 11.3 percent. Again, had there been no sales tax rate increase, the collection for the first six months of FY10 would have been 7.0 percent less than a year ago, which is in line with other states.

Click here  for a closer look at the numbers behind the December figures.

And for overviews of how states throughout the nation are dealing with their fiscal issues, click here and here Massachusetts continues to face an estimated $3 billion budget gap in FY11, which begins July 1, 2010. Governor Patrick will release his proposed FY11 budget later this month.