The Reignited Incentive to Bolster Blighted Boston Neighborhoods

The Reignited Incentive to Bolster Blighted Boston Neighborhoods

The realization of profit is one of many incentives in deciding whether to develop property. A recent decision issued by the Supreme Judicial Court in Reagan v. Comm'r of Revenue, No. SJC-13287, 2023 WL 2437788 (Mass. Mar. 10, 2023), should signal developers to consider the advantages of undertaking investment projects pursuant to G.L. c. 121A, the statute governing Urban Redevelopment Corporations in Massachusetts. The court’s recent decision found that the statute’s favorable tax exemption extends to capital gains realized from the sale of any such project. While the decision contemplates the legitimate economic benefits that can flow to a developer that has invested for several decades, more importantly, it is a powerful reminder of the enduring need to introduce low-income housing to the Commonwealth.

The Reagan case is a reminder to developers of the tax advantages of G.L. c. 121A. While c. 121A projects are considerably regulated, the ability to sell a project one has invested in for several decades, without being taxed on the capital gains, is opportune.

General Laws c. 121A provides a tax concession, which may be availed for up to 40 years, to private entities that undertake urban redevelopment projects in blighted areas in the Commonwealth. The Legislature intended that the tax concession would promote redevelopment of declining, substandard areas and proliferate low-income housing. Entities that receive approval to maintain a c. 121A project are afforded “exemption from taxation of real and personal property and from betterments and special assessments and from the payment of any tax, excise or assessment to or for the commonwealth or any of its political subdivisions on account of a project … .” G.L. c. 121A, § 18C(f) (emphasis added). The tax exemptions apply to the realty and personalty of the c. 121A project at issue. The Legislature counteracts the seemingly generous tax concession by, inter alia, heavily regulating the c. 121A project, ordering private entities to pay an annual excise and other additional payments, and limiting the cumulative annual return on investment.

The Reagan case highlights three G.L. c. 121A projects located in now booming Boston boroughs spearheaded by an individual, James J. Reagan, Jr., which ultimately proved profitable. Reagan was the sole beneficiary of the Newbury Realty Trust. The Newbury Realty Trust held a minority interest in three limited partnerships: the St. James Company, Blackstone Company, and Kenmore Abbey limited Partnership. Each partnership owned and developed an urban development project pursuant to G.L. c. 121A, § 18C. As the Newbury Realty Trust was a nominee trust, and therefore disregarded for tax purposes, Reagan was regaled as the direct owner of the three partnerships. As such, any tax reporting for the c. 121A projects was to be reported on Reagan’s individual filing.

Over the course of nearly 40 years, the three partnerships invested over $45 million in connection with their c. 121A projects, all of which revamped blighted neighborhoods in Boston. As described by the SJC, the three projects repurposed the following Boston neighborhoods:

Specifically, St. James transformed an abandoned and structurally unsound eight-story building in Boston's South End district into 193 dwelling units devoted to elderly housing. Blackstone redeveloped a long-abandoned school property in Boston's West End section into 145 residential units devoted to affordable housing and housing designated for the elderly and individuals with disabilities. Kenmore Abbey transformed two vacant hotels on Commonwealth Avenue and Kenmore Street in Boston into 199 residential rental units for the elderly and individuals with disabilities, and approximately 12,000 square feet of commercial space.

In 2012, some 30 years after the last of the three partnerships was approved for c. 121A status, the three partnerships sold their respective c. 121A projects to third-party buyers and realized capital gains on the sales. Undoubtedly, there had been an increase in the value of the three projects, which were initially invested in as far back as 1975. When Reagan submitted his and his wife’s 2012 tax filing, they did not include the capital gains from the sales as part of their total taxable capital gains. Reagan believed the tax concession in c. 121A extended to the capital gains and was still operative to him. The underlying issue in the case was whether Reagan should be taxed on the capital gains from the project sales. The Appellate Tax Board upheld the Commissioner of Revenue’s assessment against Reagan for the capital gains reasoning, inter alia, that since the projects had already been sold, Reagan should not continue to reap the tax benefits previously available to him under the statute.

The tax exemptions afforded to c. 121A projects are available only if the undertaking in question is “on account of a [c. 121A] project.” G.L. c. 121A, § 18C(f). Therefore, for Reagan to be exempt from paying any assessment on the capital gains, it was necessary for the Court to find that the realization of capital gains was “on account of a project.” The question turns on whether “the gain is causally related to the project.” In its deliberation, the Court considered, inter alia, the significant investments put into the projects for nearly four decades, which in turn increased the values of the underlying land and likely attributed to the gains. Ultimately, the Court held that the term “on account of” is meant “to include the capital gain from the sale of a project.” Therefore, it was error for the Appellate Tax Board to uphold the Commissioner’s assessment against Reagan in regards to the capital gains.


The Reagan case is a reminder to developers of the tax advantages of G.L. c. 121A. While c. 121A projects are considerably regulated, the ability to sell a project one has invested in for several decades, without being taxed on the capital gains, is opportune. Developers that proceed pursuant to this statute can invest for decades and then transfer projects freely when ready. Additionally, the case demonstrates the latent potential in developing blighted municipalities. Reagan maintained c. 121A projects in Boston’s West End and South End, which in the 1970s and ‘80s may have been blighted sites, but are now highly sought out and frequented neighborhoods in the City. Not only does the statute benefit the developer, but the Commonwealth by diversifying its housing stock and making it more accessible to low-income families.

While the hope is that developers continue to utilize c. 121A unprovoked, if the low-income housing situation in the Commonwealth persists, it is conceivable that the tax breaks in G.L. c. 121A, § 18C(f) will be extended to include even more scenarios, like the one seen in Reagan, to incentivize developers to keep developing blighted areas.

Pamela M. Coufos Condo Law Blog

If you have any need for legal services related to this article, or any similar matter, you can email Pamela at or any of our other attorneys at Moriarty Bielan and Malloy LLC at 781-817-4900 or

Pamela M. Coufos