Curator’s B & B Business in Historic State Park Destroys Real Estate Tax Exemption: Willowdale LLC v. Board of Assessors of Topsfield, 78 Mass. App. Ct. 767 (2011).
Bradley Palmer State Park is a 721-acre reservation and estate set among the rhododendrons, white pines and meadows of Hamilton and Topsfield, nestled between Willowdale State Forest and the Ipswich River Wildlife Sanctuary. The park’s namesake was a turn-of-the century Boston lawyer who represented the likes of the United Fruit Company, State Street Trust, the Gillette Safety Razor Company and President Woodrow Wilson. Over the years, Mr. Palmer acquired a great deal of real estate in the Essex County area, including the mansion in Topsfield that today bears his name. Willowdale LLC could have used a lawyer like Mr. Palmer before opening a bed and breakfast at the Palmer Mansion in 1999.
Willowdale opened the B & B after leasing the historic Palmer Mansion (and six surrounding acres) from the Massachusetts Department of Environmental Management (now the Department of Conservation and Recreation) as part of an historic curatorship legislative program developed to preserve unused, historic properties through public-private partnerships. Under the 50-year lease, Willowdale was responsible for the payment of all real estate taxes, if and when assessed. The lease also charged Willowdale with the responsibility of maintaining and preserving the property, but allowed it to deduct any monies spent on upkeep and maintenance from the rent payments.
Upon the completion of renovations, Willowdale began operating a for-profit conference center and B & B – uses expressly contemplated and permitted under the terms of the lease – out of Palmer Mansion. Although Willowdale conducted free public tours of the interior of the mansion and held free community events on occasion, the interior of the mansion was otherwise accessible only to paying customers.
The Topsfield Board of Assessors assessed Willowdale with real estate taxes for the 2007 and 2008 tax years. Willowdale paid the taxes, but applied to the Board for an abatement, claiming entitlement to a tax exemption for the leased property on the grounds that operation of its business was “reasonably necessary to the public purpose of … a park, which is available to the use of the general public.” M.G.L. c. 59, § 2B. Willowdale theorized that income from the business was necessary to maintain and use the historic structure. The Board of Assessors rejected Willowdale’s “reasonably necessary” argument and denied the abatement. The Board also held that the leased portion of the property (6 of 721 acres) was not itself a “park” and, thus, did not qualify for an exemption under any circumstances. Noting the lofty burden of proof facing a taxpayer claiming an exemption, the State’s Appellate Tax Board affirmed. Willowdale then sought relief in the Appeals Court.
In affirming the Appellate Tax Board’s decision, the Appeals Court noted that entitlement to a tax exemption must be clear and unmistakable. For two reasons, no such entitlement was recognizable here. First, the public’s use of the remainder of the State Park was in no way contingent upon or affected by the presence of Willowdale’s operations at the mansion. Second, the interior of the leased portion of the property was primarily available only to paying customers of Willowdale’s for-profit business, effectively removing such portion from the definition of a “park” within the meaning of M.G.L. c. 59, § 2B. As the Appeals Court wrote: “Willowdale confuses what is reasonably necessary to the maintenance and use of the mansion as a historic property with what is reasonably necessary to the public purpose of a park available to the use of the general public.”
The decision stands as a helpful tool to those seeking to enjoy the otherwise favorable terms of long-term leases offered by the Commonwealth, as well as to the communities where such historic properties are located.
Published in Developments in Municipal Law Fall 2011 Newsletter.