Free Download: New Massachusetts Tax Updates

A new Massachusetts Tax Update has just been added to our site.
The most recent update includes developments from 2009.

Updates from the report include:

  • Geoffrey and Capital One Cases – Nexus Without a Physical Presence
  • Limits On States’ Taxation Powers
  • State Transfer Pricing Case
  • Economic Nexus Legislation In Other States
  • New York City Case Involving Post 9/11 Rent On World Trade Center Buildings
  • W.R. Grace Appellate Tax Board Case
  • Work Product Doctrine
  • Sales Tax Increase
  • State Income Tax Credit For Donated Conservation Land
  • Streamlined Sales Tax Project
  • New Hampshire Update

You can download the update using the form on the right.

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Massachusetts Tax Collections Continue To Exceed Predictions

In January, Massachusetts collected more taxes than expected for the fourth consecutive month.  This is largely due to the strong collections of the state sales tax during the holidays and corporate and business taxes.  Tax collection increases have caused Gov. Patrick to consider restoring some of the governmental services he was forced to cut earlier in the fiscal year.  Corporate and business tax collections totaled $54 million this January.  This signals a sharp increase from $29 million from the previous January.

Tax Audits On The Rise

It is estimated that more than 1.4 million United States taxpayers were audited last year. This is the most audits in more than a decade. The IRS hasn’t tipped its hand about its secret formula for determining whether or not to flag a return. However, there are some general guidelines to follow in order to avoid drawing attention to yourself. Whether for your personal or business taxes, having a professional review your tax situation is a smart move. The more complicated your tax return is, the more beneficial hiring tax professional.

Learn more here.

Massachusetts Small Business Tax Credits

In his continuing efforts to create jobs and stimulate economic growth in Massachusetts, Gov. Patrick has filed his legislative plan to help small businesses hire new workers and reduce the cost of doing business. The plan provides tax credits for businesses and creates a new organization to provide businesses with the financial capital and resources for growth.

Read more here

Amendment to Combined Reporting Regulation

DOR has issued a “Working Draft Regulation Amendment” that revises certain provisions of the
current combined reporting regulation (adopted in May 2009). The affected sections describe how to
calculate the separate income of a member of a combined group that is to be included in the combined
group’s taxable income in any case in which that member was not incorporated in the United States and
not treated as a U.S. corporation under the federal Internal Revenue Code (i.e. “non-U.S.

Currently, the MA combined reporting regulation does not distinguish between the income of a non-
U.S. corporation that is to be included in a water’s edge combined report and the income of such
corporation to be included in a worldwide combined report (except in the case of the provision that
limits one category of water’s edge inclusion to certain specified income from intangibles or services
where such income exceeds 20% of income). As a result, the current regulation does not itself reflect
any limitation on the scope of the income that non-U.S. corporations in a water’s edge filing are to
include in the combined group’s taxable income. DOR has determined that the regulation should make
clear that in the context of a water’s edge report, non-U.S. corporations are only to take into account
items of income that are within the scope of federal gross income of such corporations under the Code
(with any Massachusetts adjustments thereto).

The working draft also includes some related changes, including a revision to an apportionment
provision of the regulation to make clear that when a non-U.S. corporation includes only those items of
income that are included in federal gross income, it must limit its apportionment factors to the factors
that relate to such federal gross income.

Practitioners also should remember that there are many foreign corporations that are not subject to
federal income tax, but are subject to state taxation. This disparity results from bilateral tax treaties and
their so-called “permanent establishment” provisions that could result in a foreign corporation having
nexus for state income tax purposes but not federal income tax purposes. When making elections of
reporting methods, this disparity should be considered.

Governer Patrick’s Massachusetts Tax And Budget Proposal Highlights For Fiscal Year 2011

Governer Deval Patrick released his 28.2 billion budget proposal. The proposal is heading over to the Legislature. Once the Senate and the House construct their version of the bill, they will send it back to Gov. Patrick. The 2011 fiscal year begins on the first of July.

Some highlights regarding the new Massachusetts budget proposal include:

Among other things, the new proposal includes an increase in taxes on soda and candy. The candy and soda tax increase would result by eliminating the current sales tax exemption. Taxing soda and candy would generate $52 million for health prevention programs. These programs are setup to educate the public about lifestyle habits that are detrimental to your health. Sticking with the healthy living theme, new tax hikes are proposed for smokeless tobacco and cigars.

The new budget proposal cuts back on a tax credit program hoping to bring film producers to Massachusetts. Massachusetts film industry insiders argued that cutting the program is shortsighted seeing as the program has been doing well. It has generated more than $1 billion in economic activity over the last four years, but the program is expensive to maintain.

Cuts have also been made reducing a life sciences tax credit designed to lure companies to Massachusetts. While this program has enjoyed success and creation of new jobs for Massachusetts, the program is expensive. The credits will not be eliminated, simply reduced.

The budget proposal will continue to fund the Commonwealth Care program. This program extends health care coverage to 170,000 adults. It is a component from the state’s 2006 health care law.

Gov. Patrick’s budget proposal depends in part upon $600 million in federal aid. The catch is that Congress hasn’t yet approved the bill and if it doesn’t pass, than additional cuts will be needed. The 2011 budget proposal will be a three percent increase over last years budget.