On March 10, 2023, the Supreme Judicial Court of Massachusetts held that capital gains resulting from the sale of an urban redevelopment project were not subject to Massachusetts personal income tax. As an incentive for private entities to invest in constructing, operating, and maintaining urban redevelopment projects, Massachusetts exempts these entities “from the payment of any tax, excise or assessment to or from the commonwealth … on account of a project.” The court concluded that the exemption extends to capital gains from the sale of such urban redevelopment projects because the gains are “on account of” the project. The court relied on an analysis of the statute’s plain language, finding that “on account of” the project meant “because of” the project. The court concluded that capital gains – the increased value of the properties – are causally related to the project and thus exempt. The court’s conclusion was buttressed by the statute as a whole and its legislative history, which demonstrated that the tax exemption was established to stimulate the investment of private capital. The court observed that “[a]chieving a capital gain from the sale of [the] project is often a significant driver for real estate investors[.]”
Reagan v. Commissioner of Revenue, 203 N.E.3d 1150 (Mass. 2023).