University of Massachusetts Auxiliary Services v. Commissioner of Revenue (May 1, 2014)

COMMONWEALTH OF MASSACHUSETTS
APPELLATE TAX BOARD

UNIVERSITY OF MASSACHUSETTS	 v. 	 COMMISSIONER OF REVENUE
AUXILIARY SERVICES

Docket No. C310462			 	 Promulgated:
							 May 1, 2014
						 	
		
	This is an appeal filed under the formal procedure pursuant to G.L. c. 62C, § 39, from the refusal of the appellee, the Commissioner of Revenue (the "appellee" or "Commissioner"), to abate room occupancy excise for the monthly taxable periods beginning August 2009 through June 2010, inclusive.
	Commissioner Rose heard the appeal. Chairman Hammond and Commissioners Scharaffa, and Chmielinski joined him in the decision for the appellant. 
	These findings of fact and report are made at the request of the appellee pursuant to G.L. c. 58A, § 13 and 831 CMR 1.32.

	James C. Donnelly, Jr., Esq., Andrew B. O'Donnell, Esq. and Matthew R. Fisher, Esq. for the appellant.

Kevin M. Daly, Esq. for the appellee.
	

FINDINGS OF FACT AND REPORT
	Based on an agreed statement of facts and exhibits and testimony offered into evidence at the hearing of this appeal, the Appellate Tax Board ("Board") made the following findings of fact.  
University of Massachusetts Auxiliary Services ("UMass Auxiliary Services") is a subdivision of the Department of Administration and Finance of the University of Massachusetts at Amherst ("UMass Amherst" or "appellant"). UMass Amherst was created by the Legislature pursuant to G.L. c. 75, § 1 as a "public institution of higher learning" which serves as the flagship of the state's public university system, with an enrollment of over 27,000 students. UMass Amherst is authorized by G.L. c. 75, § 11 to create and administer special trust funds for self-supporting revenue-generating activities, which are overseen by UMass Auxiliary Services. However, there are no separate legal entities which hold the trust funds and the UMass Auxiliary Services is not a separate legal entity from UMass Amherst. UMass Amherst receives its funding from appropriations made by the General Court and its activities are overseen by a Board of Trustees made up of a group of individuals appointed by the Legislature and from members of the student body. See G.L. c. 75, §§ 1A and 8. One of the revenue-generating activities overseen by UMass Auxiliary Services is the operation of a hotel open to the public, called UMass Hotel ("Hotel") that is located in the Campus Center Student Union building complex ("Campus Center"), in the heart of the campus grounds.  
The appellant began collecting room occupancy excise related to Hotel operations beginning in August 2009. Claiming that the Hotel's operations are statutorily exempt from the room occupancy excise under G.L. c. 64G, § 2 ("§ 2"), which exempts lodging accommodations provided by a federal, state, or municipal institution, the appellant filed three Applications for Abatement requesting abatements of room occupancy excise paid. An initial application dated February 5, 2010, was made for the monthly periods of August 2009 through December 2009; a second application dated July 26, 2010, was made for the monthly periods of January 2010 through March 2010; and a final application dated August 25, 2010, was made for the monthly periods of April 2010 through June 2010, totaling $199,536.99 in aggregate, plus interest and penalties. On December 16, 2010, the Commissioner denied each of the Applications for Abatement. On February 14, 2011, the University timely filed its Petition Under Formal Procedure with the Board. The Board therefore ruled that it had jurisdiction to hear and decide this appeal.
Background of Hotel Operations
The appellant offered the testimony of Meredith Schmidt, Director of the Campus Center, who has been employed there since the 1970s. Ms. Schmidt testified that no third parties outside of UMass Amherst are involved in the administration of the Hotel. The Hotel does not operate under any license from the Town of Amherst or any other municipal body. 
The Hotel occupies the third through seventh floors of the Campus Center, a large complex in the center of campus, which also houses campus facilities such as the campus radio station, the Collegian student newspaper office, student organization offices, the University store, and administrative offices. Of the 219,963 square foot complex, the Hotel occupies 34,525 square feet, or approximately 15.7%. Ms. Schmidt testified that approximately 12,000 students and faculty visit the Campus Center each day, which she noted was widely referred to as the "living room" of the campus. She also testified that the Hotel does not have its own dining facilities or a separate entrance for guests, who proceed through the main floor of the Campus Center to the Hotel's reception area on the third floor. According to the appellant's guest tracking software system, guests of the Hotel were largely made up of either groups attending conferences or athletic events at the university or campus visitors such as prospective students and parents.  
The hotel is operated by 12 full-time employees and 20 to 25 students. All employees and students are employed by the Commonwealth of Massachusetts, as required by G.L. c. 75, § 14. The school has a large Hospitality and Tourism Management program ("HTM program"), which offers a major within the Isenberg Business School to prepare students seeking to pursue careers in that industry. As part of the HTM program requirements, students are required to complete a certain amount of work experience hours in a position within the hospitality and tourism industry. Ms. Schmidt testified that UMass Amherst students are given preference in hiring for jobs at the Hotel in order to assist them with fulfilling the work experience requirement. Additionally, students may use work at the Hotel as work-study to supplement financial aid. 
2009 Amendment to the Room Occupancy Excise Statute
UMass Amherst had never collected room occupancy excise from guests of its Hotel prior to 2009. Historically, § 2 had provided exemptions for all lodging provided by a federal, state, or municipal institution or an educational institution. John Musante, previously the Finance Director and currently the Town Manager of Amherst, testified that the Town of Amherst had unsuccessfully approached UMass Amherst on multiple occasions in the past to induce them to voluntarily collect the tax from guests of the Hotel, as Amherst College, a private university in the town of Amherst, had done for many years with respect to a hotel that it operated. 
The appellee attempted to offer evidence in the form of an email chain between State Senator Rosenberg and two of his staffers, to assert that the senator, whose district includes the town of Amherst, intended to draft legislation to compel the appellant to collect room occupancy excise at the Hotel. The chain began with an email dated February 5, 2009 from the senator to his staffers expressing his desire to amend § 2 to impose room occupancy excise on hotels operated by educational institutions and specifically referring to the appellant: 
I want to make sure that we insert language into [§ 2] that effectively says that hotels that are located on college campuses or operated by any other form of nonprofit/educational organizations [are] subject to [room occupancy excise]. This is extremely important as I have been trying to get UMass to do the right thing and apply this tax for a very long time voluntarily and they have refused. This is wrong and I do not want to miss the chance to fix this finally now that we have a chance to do it. 

As a result of this effort, § 2(b) was amended in June 2009, effective August 1, 2009, to limit the exemption for "lodging accommodations, including dormitories, at religious, charitable, educational and philanthropic institutions" by excluding "accommodations provided by any such institution at a hotel or motel operated by the institution." St. 2009, Chapter 27, § 50 ("2009 Amendment"). The appellee also attempted to offer into evidence an email chain between Rosalie Adams, a legislative aide to State Senator Rosenberg, Laurence Shaffer, then the Town Manager of Amherst, and John Musante.  In an email from that chain dated July 20, 2009, Ms. Adams stated to Mr. Musante that the 2009 Amendment would impose room occupancy excise on the appellant beginning August 1, 2009. Neither State Senator Rosenberg nor Ms. Adams testified at the hearing. 
The appellee also offered a document titled Finance Committee Report to Amherst Citizens and Recommendations for the July 27, 2009 Special Town Meeting ("Amherst Finance Committee Report") related to a July 2009 town meeting where the Town of Amherst voted to raise the local option room occupancy excise from 4% to 6%. The Amherst Finance Committee Report advocated for the increase, specifically noting the increased revenue which would be derived from tax on the Hotel. This view is consistent with the testimony of Mr. Musante before the Board that the Town of Amherst believed the 2009 Amendment applied to the appellant. 
The only other evidence of legislative intent offered by the appellee was a report by the General Court's Special Commission on Municipal Relief, on which State Senator Rosenberg served as co-chairman, published in May 2009 ("Special Commission Report"). While the Special Commission Report cites the general need for increased municipal revenue and provides ideas for augmenting room occupancy excise revenue by allowing an increase in the local option excise rate and applying tax to vacation rentals, the report makes no mention whatsoever of imposing tax on hotel lodging provided by a state or educational institution. 
Correspondence Between the Town of Amherst and the Department of Revenue

On November 5, 2009, Mr. Shaffer sent a letter to Edward Lauper, the Deputy Chief of the Rulings and Regulations Bureau of the Massachusetts Department of Revenue ("Department"), requesting a written ruling from the Department as to whether the Hotel was subject to room occupancy excise in the wake of the 2009 Amendment. The letter was copied to State Senator Rosenberg, Robert Holub, the Chancellor of UMass Amherst, and Richard H. Conner, Executive Director, Government and Community Relations, UMass Amherst. 
On November 13, 2009, Mr. Lauper responded to the request in a letter to Mr. Shaffer, which was copied to Joe McDermott, Deputy Commissioner of the Audit Division of the Department, but was not copied to any party affiliated with the appellant ("DOR Response Letter"). After noting the exact language of the 2009 Amendment, Mr. Lauper stated:
This section was effective August 1, 2009. Our understanding of the legislative intent of the provision is the same as yours; going forward the state and local room occupancy excise would apply to a hotel or motel operated by an educational institution, but not dormitories. Further, we  believe that the specific language in G.L. c. 64G, (b) [sic] as amended, applies here rather than the more general language is [sic] G.L. c. 64G, (a) [sic], exempting accommodations at state institutions. Although the Campus  Center  Hotel has not contacted the Rulings and Regulations Bureau, their website http://www.umasshotel.com/ confirms that this is a full service hotel open to the public. 

Based on the foregoing, it appears that the Campus Center Hotel should have begun collecting state and local room occupancy taxes on August 1, 2009.

Summary of Findings of Fact

On the basis of the evidence presented, the Board made the following findings and rulings. For the reasons detailed in the following Opinion, the Board found and ruled that the Hotel was not subject to room occupancy excise because: (1) it did not fit within the definition of a taxable "hotel" or "motel" as the appellant was not licensed by the Town of Amherst; and (2) the appellant was properly characterized as a "state institution" for the purposes of § 2(a) and thus was exempt from room occupancy excise on any lodging it operated, regardless of the 2009 Amendment to § 2(b).
With respect to the Commissioner's attempt to offer evidence supporting her claim that there was a legislative intent to subject the Hotel to room occupancy excise, the Board found and ruled that both email chains were unsubstantiated hearsay and irrelevant to its analysis, given the clear and unambiguous language of the amended statute and were therefore excluded. Furthermore, the Board found that neither the interpretation of the statute by the Town of Amherst in the Amherst Finance Committee Report nor the description of the need of municipalities to raise tax revenue in the Special Commission Report constituted evidence of any intent of the Legislature or otherwise carried any probative value. Further, because the DOR Response Letter was not issued to a taxpayer, the Board found and ruled that the Department's response was not a letter ruling pursuant to 830 CMR 62C.3.2 and therefore should not be accorded the deference of a public written statement.  Finally, as the Department's interpretation was contrary to the plain language of the statute, the Board did not find the DOR Response Letter to be persuasive. 
Accordingly, the Board issued a decision for the appellant and an abatement of all room occupancy excise collected during the periods at issue in the amount of $199,536.99, plus interest and penalties.

OPINION
G.L. c. 64G, § 3 imposes an excise on the transfer of occupancy of a room in a bed and breakfast establishment, hotel, lodging house, or motel in Massachusetts. G.L. c. 64G, § 3A allows cities and towns the option to impose an additional local excise on room occupancy, which Amherst has exercised.

   Treatment of the Appellant as a "Person" and the Hotel as a "hotel" or "motel" under G.L. c. 64G, § 1

Pursuant to G.L. c. 64G, § 3, the room occupancy excise is imposed on the transfer of occupancy of lodgings by any "operator" in the Commonwealth, which is then defined in G.L. c. 64G, § 1(f) as any "person" who operates a "bed and breakfast establishment, hotel, lodging house or motel" in the Commonwealth. The appellant argued that the room occupancy excise should not be applicable to it as (1) UMass Amherst does not meet the definition of a "person" under the statute and (2) the Hotel does not meet the definition of a "hotel" or "motel."
"Person" is defined for purposes of Chapter 64G to include: 
an individual, partnership, trust or association, with or without transferable shares, joint stock company, corporation, society, club, organization, institution, estate, receiver, trustee, assignee or referee and any other person acting in a fiduciary capacity, whether appointed by a court or otherwise, or any combination of individuals acting as a unit. 

G.L. c. 64G, § 1(g)(emphasis added). The enabling statute that allowed for the creation of UMass Amherst,         G.L. c. 75, § 1, specifically refers to the university as a "public institution of higher learning." (Emphasis added). Although the appellant would therefore appear to be a "person" for purposes of G.L. c. 64G, the Board need not reach this issue since the Hotel is not a "hotel" or "motel" for purposes of G.L. c. 64G, § 1. 
A "hotel" is defined as "any building used for the feeding and lodging of guests licensed or required to be licensed under the provisions of section six of chapter one hundred and forty." G.L. c. 64G, § 1(c)(emphasis added). A "motel" is defined as "any building . . . in which persons are lodged for hire with or without meals and which is licensed or required to be licensed under the provisions of section thirty-two B of chapter one hundred and forty . . ."  G.L. c. 64G, § 1(e)(emphasis added).
The Hotel is not licensed by the Town of Amherst under Chapter 140. Neither party offered evidence or argument on the issue of whether the Hotel was required to be licensed under Chapter 140 and likewise the Board did not make a determination on this issue. Instead, it ruled that the Commissioner has no authority to require that the Hotel be licensed where the Town has not done so and thus she had no authority to require the Hotel to collect room occupancy excise, irrespective of whether the Hotel falls within a specific exemption under G.L. c. 64G, § 2. See also 1965/1966 Op. Atty. Gen. 2 (July 8, 1966).
Treatment of the Appellant as a Federal, State, or Municipal Institution and Effect of 2009 Amendment

Even if the Hotel were included within the definition of a hotel or motel subject to room occupancy excise, there are six enumerated statutory exemptions to the excise contained in § 2, which provides that the provisions of Chapter 64G shall not be construed to include, inter alia: 
lodging accommodations at federal, state or municipal institutions; [or]

lodging accommodations, including dormitories, at religious, charitable, educational and philanthropic institutions; provided, however, that this exemption shall not apply to accommodations provided by any such institution at a hotel or motel operated by the institution . . . 

While Chapter 64G does not define a "federal, state or municipal institution" for purposes of the room occupancy excise, the appellant is referred to in its enabling statute at different times as a "public institution" and has repeatedly been found to be an "agency" of the Commonwealth. G.L. c. 75, § 1. See e.g., Wong v. The Univ. of Mass., 438 Mass. 29, 39 n.3 (2002); McNamara v. Honeyman, 406 Mass. 43, 47-48 (1989); Robinson v. Commonwealth, 32 Mass. App. Ct. 6, 9 (1992). All of the appellant's employees, including all employees and students involved in the Hotel operation, are employees of the Commonwealth, the appellant receives all of its funding from appropriations by the General Court, and the appellant's activities are required by statute to be overseen by a Board of Trustees made up of individuals appointed by the Legislature or members of the student body. Accordingly, the Board found that the appellant was a state institution for purposes of the exemption from room occupancy excise under § 2(a).  See 1975/1976  Atty. Gen. Op. 60 (April 12, 1976) (because the Hotel was part of a facility constructed and operated by state bodies for the purpose of serving the state university, the Attorney General opined that it clearly constituted lodging accommodations at a state institution for purposes of § 2(a)).  
§ 2(b) was amended, effective August 1, 2009, to limit the exemption for "lodging accommodations, including dormitories, at religious, charitable, educational and philanthropic institutions" to exclude "accommodations provided by any such institution at a hotel or motel operated by the institution." St. 2009, Chapter 27, § 50. The Commissioner attempted to introduce evidence in the form of an email from the state senator who sponsored the amendment stating his express wish to subject UMass Amherst to the room occupancy excise on its Hotel operation. The Commissioner's view is that the statute must be read, in light of the senator's intent, to apply the provision added by the amendment to § 2(b) subjecting hotel lodging provided by an educational institution to tax, to all educational institutions, including ones which would fall under another exemption. 
It is well established that if the language of a statute is "plain and unambiguous it is conclusive as to legislative intent" as "'statutory language is the principal source of insight into legislative purpose.'" Sterilite Corp. v. Continental Casualty Co., 397 Mass. 837, 839 (1986), quoting Bronstein v. Prudential Ins. Co., 390 Mass. 701, 704 (1984). Where the language of a statute is clear and unambiguous, it is conclusive as to legislative intent. Boston Neighborhood Taxi Ass'n v. Department of Pub. Utils., 410 Mass. 686, 690 (1991); Sterilite Corp., 397 Mass. at 839. It may be very well that State Senator Rosenberg's personal intention in proposing the amendment was that UMass Amherst would become subject to room occupancy excise; however, "[s]tatements of individual legislators as to their motives concerning legislation are an inappropriate source from which to determine the intent of legislation" as they may not reflect the ideas of the body as a whole. Boston Water & Sewer Com. v. Metropolitan Dist. Com., 408 Mass. 572, 578 (1990), citing Administrative Justice of the Hous. Court Dep't v. Commissioner of Admin., 391 Mass. 198, 205 (1984).
It is only the exemption provided by § 2(b) that was limited in scope to specifically include language excluding hotel lodging accommodations. A modifying clause is confined to the last antecedent unless there is something in the subject matter or dominant purpose which requires a different interpretation.  Commonwealth v. Brown, 391 Mass. 157, 160 (1984); Moulton v. Brookline Rent Control Bd., 385 Mass. 228, 230-231 (1982); Hopkins v. Hopkins, 287 Mass. 542, 547 (1934). As the Board shall not "read into the statute a provision which the Legislature did not see fit to put there, whether the omission came from inadvertence or of set purpose," in the absence of an act by the Legislature to explicitly modify § 2(a), the Board will not construe any limitation thereto based on a modification to another subsection. Sterilite Corp., 397 Mass. at 839, n.3, quoting King v. Viscoloid Co., 219 Mass. 420, 425 (1914).	
This approach is consistent with the approach taken by the Supreme Judicial Court in Dir. of the Div. of Employment Security v. Roman Catholic Bishop of Springfield, 383 Mass. 501 (1981). In that case, the Court addressed an exemption from an unemployment insurance coverage requirement for employees of the Roman Catholic Diocese of Springfield ("Church") who worked at elementary and secondary parochial schools operated by the Church in Massachusetts. Id. at 503. Historically, the governing federal statute and the Massachusetts statute upon which it was based had required coverage for employees of all non-profit corporations, except for, inter alia, those in the employ of a church or religious organization or in the employ of a school which was not an institution of higher education. Id. See I.R.C. § 3309(b) (1970); G.L. c. 151A, § 6(r) (1974). Both statutes were later amended in concert to remove the exemption for employees of a school which was not an institution of higher education, leaving the exemption for employees of a church organization untouched. Id. 
The Director of the Division of Employment Security argued that the amendment evinced an intent on the part of Congress to subject all employers operating elementary or secondary schools to an unemployment insurance coverage obligation, including employers that were religious organizations. Id. at 503-504. The Court disagreed, ruling that because the church-operated schools held a dual exemption, "the elimination of one exemption did not by itself subject these schools to the provisions of the unemployment compensation." Id.  The fact that the exemption for employees of a church organization remained intact subsequent to the amendment indicated to the Court that there was no legislative intent to subject church-operated schools to an unemployment insurance obligation. Similarly, the Board held here that if the appellant continued to properly qualify as a federal, state or municipal institution under § 2(a), any of its lodging accommodations would be exempt from room occupancy excise, regardless of any change to § 2(b). 
Commissioner's Letter to the Town of Amherst
	Finally, the appellee argued that the conclusion in the DOR Response Letter to the Town of Amherst that the appellant was subject to room occupancy excise should be entitled to deference from the Board.  The Commissioner is authorized to issue written letter rulings under G.L. c. 62C, § 3, in response to questions raised by  a taxpayer or his authorized representative. 830 CMR 63.3.2(2). The Department's Division of Local Services may issue a Letter of Opinion on Local Taxation to a city or town on matters pertaining to assessment, classification, and administration of local taxes. 830 CMR 63.3.1(9). 
The DOR Response letter at issue was neither; it was an informal, unpublished letter which was not addressed to the taxpayer. It was not made available to the public and contained nothing beyond a cursory analysis of the issue, which did not even correctly cite to the statute in question. Even if the Commissioner had issued a formal letter ruling, while it is appropriate to "grant substantial deference to an interpretation of a statute by the administrative agency charged with its administration  . . .'[a]n incorrect interpretation of a statute . . . is not entitled to deference.'" Massachusetts Hosp. Ass'n v. Department of Medical Sec., 412 Mass. 340, 345-346 (1992), citing Kszepka's Case, 408 Mass. 843, 847 (1990) and Manning v. Boston Redevelopment Auth., 400 Mass. 444, 453 (1987). The Department's conclusion that "the specific language in G.L. c. 64G, (b) [sic] as amended, applies here rather than the more general language is [sic] G.L. c. 64G, (a) [sic], exempting accommodations at state institutions" has no basis under the clear language of the statute.
Conclusion
Accordingly, the Board found that the appellant was not required to charge and collect the room occupancy excise as assessed by the Commissioner and issued a decision for the appellant, granting an abatement of $199,536.99, plus interest and penalties.
					
				     THE APPELLATE TAX BOARD



				By: ____________________________ _____
				    Thomas W. Hammond, Jr., Chairman




A true copy,

Attest: _________________________
	      Clerk of the Board

 The other types of lodgings subject to room occupancy excise are a "bed and breakfast establishment," a "bed and breakfast home," and a "lodging house," none of which would apply to the appellant.         See G.L. c. 64G, §§ 1 and 3. 
 The Commissioner argued that the term "state institution" in § 2(a) should only be limited to state hospitals where residents are institutionalized. Furthermore, the Commissioner argued that while she agrees that UMass Amherst is a "state agency," that fact does not necessarily lead to the conclusion that it is a "state institution." The Board found these arguments to be wholly without merit and that the Commissioner failed to properly articulate any basis in the case law or statutes for these assertions.   

ATB 2014-224