VERIZON NEW ENGLAND INC. vs. BOARD OF ASSESSORS OF BOSTON & others. [Note 1]

MCHUGH, J. Verizon New England Inc. (Verizon) appeals from a decision of the Appellate Tax Board (board) concluding that poles and wires (which the parties refer to as "aerial plant") erected on public ways, as well as construction work in progress (CWIP), are subject to taxation by the cities of Boston and Newton for fiscal year (FY) 2003 through FY 2009. For the reasons that follow, we vacate the board's order.

Background. The record, significant portions of which are based on an agreed statement of facts and allied exhibits, reveals that Verizon is a New York corporation. Verizon has been authorized to do business in the Commonwealth since 1884, initially as the New England Telephone & Telegraph Company and later under its current name. Verizon provides telephone, telegraph, and other telecommunications services throughout the Commonwealth and owns, wholly or in combination with others, poles, wires, conduits, machinery, and other equipment in many, if not all, of the Commonwealth's cities and towns.

The Newton and Boston boards of assessors (collectively, assessors), like their counterparts across the Commonwealth, are charged with assessing personal property for purposes of local taxation. To ensure uniformity in valuation of similar property that telephone and telegraph companies own in many different cities and towns, G. L. c. 59, § 39, as appearing in St. 1955, c. 344, § 1, requires the Commissioner of Revenue (commissioner) to determine annually the "valuation at which the machinery, poles, wires and underground conduits, wires and pipes of all telephone and telegraph companies shall be assessed."

To facilitate compliance with § 39, telephone and telegraph companies annually provide the commissioner with a list, on a form the commissioner issues in accordance with G. L. c. 59, § 41, stating the original cost of the personal property the commissioner indicates is subject to central valuation. [Note 3] The commissioner

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then values the property described on the forms and, by May 15 of each year, certifies those values to the assessors of cities and towns where the property is located. G. L. c. 59, § 39. Subject to any changes that occur as the result of appeals, the values so certified are the values the assessors must use to assess and tax the property for the fiscal year beginning the following July.

The commissioner's form contains instructions that, among other things, describe the property the companies must list. For the years in question, the forms stated that "corporations . . . will be valued only on poles and wires over private property, underground conduits, wires and pipes in public or private property, and machinery used [for particular purposes] . . . . G. L. c. 59, § 39; G. L. c. 59, § 5, cl. 16(1); G. L. c. 59, § 18(5)." [Note 4] Accordingly, when Verizon filed the required forms, it did not list the cost of its aerial plant over public ways or its CWIP.

Newton filed a timely appeal from the values the commissioner had assigned for FY 2003 through FY 2008, and Boston and Verizon filed appeals from the values the commissioner had assigned for FY 2005 through FY 2009. Among the questions raised in all of the appeals was whether aerial plant over public ways and CWIP were taxable.

The board bifurcated the appeals. Phase one dealt with several issues other than valuation, including whether aerial plant over public ways was taxable. Phase two focused on valuation and other discrete issues, including whether CWIP was taxable. After hearings, the board issued its phase one order on March 3, 2008, ruling that aerial plant over public ways was taxable. [Note 5] On August 4, 2009, the board issued a decision that CWIP was

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taxable. [Note 6] On October 1, 2009, the board issued its findings of fact and report on both phases. This appeal followed in timely fashion.

Discussion. a. Aerial plant over public ways. The board based its conclusion that aerial plant over public ways is taxable primarily on G. L. c. 59, § 18, First. Chapter 59, § 18, is one of three sections of the General Laws that together provide the broad framework for taxing real and personal property within the Commonwealth. [Note 7] The First clause, as amended through St. 1978, c. 581, § 4, reads as follows:

"First, All tangible personal property, including that of

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persons not inhabitants of the commonwealth . . . shall, unless exempted by [G. L. c. 59] section five, be taxed to the owner in the town where it is situated on January first." [Note 8]

In the board's view, then, the broad language of § 18, First, created a general rule that all tangible personal property, including Verizon's poles and wires on public ways, is subject to property taxation. Verizon's argument to the contrary proceeds as follows. In a number of cases decided long ago, the Supreme Judicial Court held that personal property owned by corporations is not taxable without explicit statutory authorization. Chapter 59, § 18, First, is not an explicit statutory authorization because it does not mention corporate property. Only two other clauses in § 18 explicitly mention corporate property and neither authorized taxation of aerial plant over public ways during a fiscal year at issue in these proceedings. [Note 9]

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Urging that the board's approach is correct, the assessors argue that, although Verizon's reading of the statutes and the cases is essentially accurate, the rationale on which the cases rested has been undercut by an evolution in the Commonwealth's approach to corporate taxation. That evolution, in the assessors' view, effectively broadened the reach of G. L. c. 59, § 18, First, and justifies the result the board reached here. Principally for three reasons, we do not agree.

First of all, G. L. c. 59, § 18, First, has been in existence in one form or another for more than 150 years and the Supreme Judicial Court has uniformly construed the word "owner" as appearing in that clause to exclude corporations. See Boston & Sandwich Glass Co. v. Boston, 4 Met. 181, 183-186 (1842) (construing Rev. Stats. 1836, c. 7, and subsequent amendment, St. 1839, c. 139, § 1); Middlesex R.R. v. Charlestown, 8 Allen 330, 333 (1864) (construing Gen. Stats. 1860, c. 11, § 12, First). As the court observed in Worcester v. Board of Appeal in Tax Matters, 184 Mass. 460, 464 (1904):

"In a word, the general provisions of law for taxation of personal property were not applicable to corporations. Except as to machinery, which is specially mentioned [in what is now § 18, Second], the personal property was reached through the shareholders. . . . And this interpretation [

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of the taxing statutes] . . . was adopted . . . plainly and simply upon the ground that the opposite interpretation would result in a form of double taxation."

To be sure, when those cases were decided, the predecessor to the current § 18, First, was narrower and imposed a tax only on "goods, wares, merchandise, and other stock in trade . . . including stock employed in the business of manufacturing or of the mechanic arts," as the provision appeared in Gen. Stats. 1860, c. 11, § 12, First, or "goods . . . or other stock in trade, including stock employed in manufactories," as the language appeared in the statute the court discussed in Amesbury Woollen & Cotton Mfg. Co. v. Amesbury, 17 Mass. 461, 462 (1821). But the focus of those cases was on the scope of the word "owner," a word, the cases held, that did not include corporations. By 1918, when the Legislature broadened § 18, First, to reach "all tangible personal property," as it does today, see St. 1918, c. 129, § 1, [Note 10] that construction of "owner" had been in place for nearly one hundred years. Neither the 1918 legislation nor anything the Legislature has done since changed, qualified, or expanded that term. See Boston v. MacGray Co., 371 Mass. 825, 828 (1977) ("In matters of taxation [the court] should follow the pattern of [its] decisions, leaving to the Legislature the opportunity to make responsive adjustments in the scope of the tax statutes").

That the word "owner" remains unchanged and unqualified cannot be attributed to legislative oversight. In 1937, a special legislative commission composed of a Senator, several Representatives, and several individuals appointed by the Governor was charged with analyzing the Massachusetts tax system and recommending changes. In its report, the commission stated that "[s]ince [1813,] real estate of a corporation and its machinery (from 1832 to 1936) has [sic] been subject to local taxation, but all other forms of personal property belonging

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to corporations have been wholly free from direct taxation." 1938 House Doc. No. 1703, at 45 (Report of the Special Commission on Taxation and Public Expenditures: Part III, The Tax Structure). Thirty-two years later, another special commission, similarly composed, said essentially the same thing. See 1971 Senate Doc. No. 1281, at 73-74 (Second Report of the Special Commission to Develop a Master Tax Plan Relative to the Massachusetts Revenue Structure). The Legislature made no change to c. 59, § 18, First, in response to either report.

The second reason for our conclusion that the general terms of § 18, First, do not reach aerial plant on public ways rests on the care and precision the Legislature has used in other sections dealing with taxation of wires and poles. The Legislature first addressed the subject in 1902 when it enacted G. L. c. 18, Tenth, which read in material part as follows:

"Underground conduits, wires and pipes laid in public streets by any corporation . . . shall be assessed to the owners thereof in the cities and towns in which they are laid."

St. 1902, c. 342, § 1. Seven years later, it added the power to tax aerial plant erected on private property, revising the section so that it read: "[u]nderground conduits, wires and pipes laid in public streets, and poles, underground conduits and pipes, together with the wires thereon or therein, laid in or erected upon private property . . . by any corporation . . . shall be assessed to the owners thereof in the cities or towns in which they are laid or erected."

St. 1909, c. 439, § 1. See Assessors of Springfield v. Commissioner of Corps. & Taxn., 321 Mass. 186, 194 (1947) ("It is to be noted that the statute makes no provision for the taxation of poles with the wires thereon erected on public ways but taxes only those located on private property"). That is essentially the way the material portion of the statute read from 1909 to 2009 when the Legislature changed the language to reach aerial plant on public as well as private property. See St. 2009, c. 27, § 25, and note 9, supra. Where the Legislature has devoted explicit

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and careful attention to imposition of taxes in one statutory section, we are loath to assume that it has covered the same subject elsewhere by implication. In fact, to do so would run counter to the settled principle that the "right to tax must be found within the letter of the law and is not to be extended by implication. It is a well-established principle that tax laws are to be strictly construed, and ambiguities in tax statutes are to be resolved in favor of the taxpayer." Commissioner of Rev. v. Molesworth, 408 Mass. 580, 581 (1990) (citation omitted). [Note 11]

Third and finally, we have grave doubts about judicial power to alter an established construction of a statute under circumstances like those this case presents and about the wisdom of doing so even if the power exists. In so saying, we acknowledge that judicial decisions excluding corporations from G. L. c. 59, § 18, First, originated in a desire to avoid double taxation. At the time the current statute's predecessors were enacted, shareholders were taxed on the value of corporate shares they owned. Those taxes were assessed in the town where the shareholder lived and, the theory was, double taxation would result if the corporation were also taxed on its personal property in the town where the property was located. See, e.g., Salem Iron Factory Co. v. Danvers, 10 Mass. 514, 516-518 (1813).

Shareholders are no longer taxed on the value of their shares, see G. L. c. 59, § 5, Twenty-fourth, so the precise basis for excluding corporate property from § 18, First, has disappeared. That change in circumstances, however, does not necessarily empower a court or agency to revisit a statutory construction that has been in existence for 150 years. Construction of a statute

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is an exercise in determining legislative intent, not an exercise in freelance rule making. See Carpenter's Case, 456 Mass. 436, 446 (2010), quoting from Board of Educ. v. Assessor of Worcester, 368 Mass. 511, 513 (1975) (a "statute must be interpreted according to the intent of the Legislature"). If a court misjudges the underlying intent, the Legislature can change the statute to clarify its intention, see Nei v. Burley, 388 Mass. 307, 315 (1983) (if the court's construction of a statute "does not reflect the mind of the Legislature, it is free to change the law"), and, on occasion, it has done so. See, e.g., Swift v. AutoZone, Inc., 441 Mass. 443, 449-450 (2004) ("Lest there be any doubt as to legislative intent in 1960, the 2003 amendment to permit crediting was swift legislative action in the wake of the Superior Court judge's ruling to the contrary in this case. That action is strongly suggestive of the Legislature's intent in 1960" [footnote omitted]). But a court's power to decide that changed conditions require a new construction of a statute it construed long ago is, at best, quite limited. [Note 12] The only basis for doing so would be to make the statute consistent with the court's view of what the Legislature would do were it to look anew at the subject of the legislation. To do that, however, is to legislate, not to construe, and the power to legislate lies exclusively in the Legislature's domain. See, e.g., Commonwealth v. Vickey, 381 Mass. 762, 767 (1980) ("[W]hen the statute appears not to provide for an eventuality, there is no justification for judicial legislation"); Massachusetts Bay Transp. Authy. v. Massachusetts Bay Transp. Authy. Retirement Bd., 397 Mass. 734, 740 (1986); Leopoldstadt, Inc. v. Commissioner of the Div. of Health Care Fin. & Policy, 436 Mass. 80, 92 (2002); Commonwealth v. Gillis, 448 Mass. 354, 364 (2007).

The principles just described have a special grip here because, as the legislative approach to corporate taxation has evolved over the years, the Legislature itself has explicitly dealt with the issue of double taxation. When it first permitted cities and towns to tax corporate machinery, the Legislature was careful to require deduction of the value of the taxed machinery from the value of the shares taxable to the shareholders. See St. 1832,

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c. 158, § 2. See also Rev. Stats. 1836, c. 7, § 10, Second. [Note 13] In 1864, the Legislature moved from a local tax on corporate shares paid by shareholders to an excise tax on the market value of all shares paid by the corporation, collected centrally and distributed to cities and towns. In making that change, the Legislature was careful to exclude real estate and machinery taxed locally from the value on which the excise was levied. See St. 1864, c. 208, §§ 5, 8, 15. After it authorized local taxation of certain pipes, conduits, and wires, the Legislature added those items to the list of exclusions from the value subject to the excise. See St. 1909, c. 490, § 41, Third. It did so again in 1919 when it revised the corporate taxation scheme to include a tax on corporate income. See St. 1919, c. 355, §§ 1(3)(a), 2(1), 15(1). The same legislative focus on the interplay between the subjects of local taxation and the value on which an excise is levied is evident in the statutes governing corporate taxation today. See G. L. c. 62C, § 12; G. L. c. 63, § 55. Under those circumstances, there is simply no basis for judicial or agency refinement of the Legislature's handiwork. See generally, e.g., Molesworth, 408 Mass. at 581 ("The right to tax must be found within the letter of the law and is not to be extended by implication"). [Note 14]

Nothing the Supreme Judicial Court said in RCN-BecoCom, LLC v. Commissioner of Rev., 443 Mass. 198 (2005) (RCN), on

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which the assessors rely, leads us to a contrary conclusion. There the court said that G. L. c. 59, § 18, First, and § 18, Second, were not mutually exclusive, with the consequence that certain machinery owned by the taxpayer, but not taxable under § 18, Second, could be taxed under § 18, First. Twice during the course of its opinion, however, the court noted that the taxpayer was not a corporation. Id. at 200, 206. The observation had consequences, for the taxpayer's lack of corporate status made it ineligible for the exemption from taxation contained in G. L. c. 59, § 5, Sixteenth. Id. at 207. Here, we are not faced with a question regarding the interplay between § 18, First, and § 18, Second. Instead, the applicability of § 18, First, to corporations is the issue, and Verizon is undeniably a corporation. RCN, therefore, does not contain a rule of decision applicable to this case. [Note 15]

b. Construction work in progress. Given what we have said thus far, the issue of construction work in progress, or CWIP, can be dealt with more quickly. For the reasons expressed, we do not think that CWIP is taxable to corporations pursuant to c. 59, § 18, First. That leaves c. 59, § 18, Fifth, as a source of taxing power. To the extent that CWIP consists of "[u]nderground conduits, wires and pipes laid in public ways, . . . and poles, underground conduits and pipes, together with the wires thereon or therein, laid in or erected upon private property," it is taxable for the years in question. The meaning of the statutory terms presents a question of law, see Commonwealth v. Vega, 449 Mass. 227, 230 (2007) ("Statutory interpretation is a question of law. . . . As with any question of statutory interpretation, our starting point is the statutory text"), and nothing in the statute suggests that the poles, wires, or conduits must be "in service" before the taxing power attaches. Because the

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board approached the issue more globally, its findings are insufficient to allow us to determine whether and to what extent the valuation is limited to taxable components of Verizon's over-all CWIP.

The decision of the appellate tax board is vacated and the case is remanded for further proceedings consistent with this opinion.

So ordered.