We stated at the outset that this Blog was only to be used as a “think tank” for sharing ideas related to tax practice and procedure.  And we hope a glance of our prior posts are true to that.

So, why are we going to discuss the Massachusetts Division of Fisheries and Wildlife, and its agency, Natural Heritage, in a tax blog?

Well, because the fact pattern is relevant to tax practice and procedure.

Laws exist in the event land is affected by endangered species.  In a nutshell, Massachusetts General Law 131A basically states that if a plant or animal is designated a “Significant Habitat,” then 1) Public hearings and notices are required, 2) Notice to land owners is required, 3) Recording in the registry of deeds if required, and 4) Landowners are compensated for a just taking related to the foregoing.

And typical with many IRS and state tax statutes, “The Secretary may promulgate regulations necessary to administer the law (or words to that effect).”

However the argument here, having read the Springfield Republican’s series on the subject in their July 29 through 31 publications with great interest, relates to the Massachusetts Division of Fisheries and Wildlife (specifically Natural Heritage), promulgating a regulation that contains language far beyond what is in M.G.L. 131A.  Specifically, they created a new designation, called “Priority Habitat.”  This new designation DOES NOT require 1) Public hearings and notices, 2) Notice to landowners, 3) Recording in the registry of deeds, and 4) Compensation.

It appears that, with this regulation in effect, landowners have been required to donate or restrict land, or frankly, pay money to or at the direction of Natural Heritage in order for landowners to further their intentions with their property (in this particular case, build a home).

Any tax practitioner can see that this would be a catastrophe had the Internal Revenue Service or the Commonwealth of Massachusetts Department of Revenue worked in this manner, creating regulations that were literally “about face” from statutory intent.  We are aware of situations where the Internal Revenue Service certainly pushed its luck, but we’re not aware of a circumvention of the law similar to the actions of Natural Heritage as reported in the Springfield Republican story.

By the way, has anyone treated a payment to Natural Heritage, pursuant to this fact scenario, on a tax return?  There doesn’t appear to be donative intent, for charitable contribution purposes.  Perhaps only in Massachusetts has it become ordinary and necessary as a business expense, although one can’t help but see “bribe or kickback” under IRC §162 in the notes of an aggressive and ambitious IRS examiner.  This is an interesting theoretical discussion for another time.

The Commonwealth of Massachusetts, following the United States Constitutional outline, has its own three branches of government; the executive, legislative and judicial.  The legislative branch makes the laws, the executive branch enforces the laws, and the judicial branch interprets the laws.  If the executive branch makes and enforces laws, we basically violate our Constitution, both at the Federal and Massachusetts level.  We negate one entire branch of government, the branch that makes laws.  And “we are a government of laws, not of men,” recalling Boston native John Adams.  So if we circumvent the body that makes the laws, and we are a government of laws….I don’t know what we become, but we sure would be putting a lot of control in very few people.

This particular regulation, by Massachusetts Fisheries and Wildlife, and led by Natural Heritage, is the biggest diversion from statutory intent that I have ever witnessed professionally.  The regulations don’t further the intent of the statute in any way whatsoever, and in fact, create significant “new law.”  A new designation was created, “Priority Habitat” via the regulations, and that designation has been used exclusively by the Division of Fisheries and Wildlife, sidestepping all aspects of due process as expressed by the statute.  If upheld, that would render the Massachusetts Statehouse a useless puppet legislatively, with the real power of Government residing in the executive branch, which can use administrative agencies to create its own laws as it deems necessary.  That means the tax code could be next.  Not exactly what the Founding Fathers had in mind.