Changes for Massachusetts Business Entity Classification for Income Tax and Corporate Excise Purposes

Under recent changes to the law, Massachusetts business entity classification for income tax and corporate excise purposes now generally conforms to federal entity classification under the so-called check-the-box rules. A result of this conformity, there are no longer special taxation provisions for corporate trusts.

IRAs and Roth IRAs Under Massachusetts Tax Statute

Under Massachusetts tax legislation, a personal income tax deduction for contributions to an IRA is not allowed whether or not there is an allowable federal deduction for such contributions. Therefore, amounts contributed to traditional IRAs for which no Massachusetts personal income tax deduction was previously allowed will not be subject to tax when the IRA is converted to a Roth IRA.

Traditional IRA Conversion to a Roth IRA in 2010 In Massachusetts

In general, Massachusetts follows the provisions of the Code as of January 1, 2005, with certain exceptions.

Massachusetts generally adopts the federal rollover rules in IRC § 408A with certain adjustments. The regulations provide:

In the case of a distribution within the meaning of subsection (d)(3) of section 408A of the Code as amended and in effect for the taxable year, any amount included as income for federal tax purposes under said section 408A by reason of such distribution shall be included in gross income and, to the extent such distribution is included in adjusted gross income under subsection (c), shall be taken into account in determining taxable income under this chapter in the same manner as under subparagraph (A) of said subsection (d)(3) of said section 408A of said Code.

For Roth IRA conversions in 2010, unless a taxpayer elects for federal purposes to include the applicable conversion amount in gross income in 2010, the taxpayer must include the applicable Massachusetts gross income from the conversion ratably in 2011 and 2012. Thus, unless the federal election applies, none of the amount includible in Massachusetts gross income as a result of a conversion occurring in 2010 is included in Massachusetts gross income in 2010, and half of the income resulting from the conversion may be included in Massachusetts gross income in 2011 and half in 2012.

Tax Attorney Richard M. Stone is admitted to the Bar in Massachusetts, Ohio, Pennsylvania, DC, and the U.S. Tax Court. He received his J.D. from the University of Pennsylvania Law School, and his B.S. in Mathematics from Lafayette College.

McLane Law Firm Welcomes Richard M. Stone

April 19, 2010, Manchester, NH and Woburn, Massachusetts – The McLane Law Firm welcomes attorney Richard M. Stone to its TradeCenter 128 office location in Woburn, MA.

About the McLane Law Firm

Founded in 1919, the McLane Law Firm is one of New England’s premier full-service law firms with offices in Manchester, Concord and Portsmouth, New Hampshire, as well as Woburn, Massachusetts. Driven by the firm’s depth of sophisticated legal expertise and an unwavering commitment to client service, McLane has built collaborative and lasting relationships with a broad spectrum of domestic and international clients.

Massachusetts One of the Few States to Tax Royalties and Interest Paid by Local Subsidiaries to their Corporate Parents in Other Countries

Foreign businesses, which include some of the major employers in the state of Massachusetts, are acting to transform a state law they state taxes their subsidiaries inappropriately and will discourage them from investment and growing here.

The law, put into practice as part of a wider rewrite of corporate and business tax regulations in 2008, makes Massachusetts one of the few states to tax royalties and interest paid by local subsidiaries to their corporate parents in other countries. Taxation of the payments raises about $40 million a year in additional revenue for the state, according to rough estimates by the state Department of Revenue.

Foreign-owned corporations claim the law is equal to double taxation, given that the corporate parents must pay taxes on royalties and interest in their home country. They also say it offends the spirit of tax treaties between the US government and more than 60 other nations that are targeted at stopping double taxation.

Massachusetts legislators are looking at legislation that would repair the problem for most foreign companies, but no action is imminent.

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House Lawmakers Scrap Proposal To Increase Massachusetts Property Taxes

A proposal that could have raised property taxes by up to $500 million was scrapped today by Massachusetts House lawmakers.

Proposition 2 1/2 is a state law that limits property tax increases. The measure was approved by voters in 1980 and changed the way local districts raise taxes in order to pay for municipal services. Under the proposition, local government can not raise property taxes by more than 2.5% per year without getting voter approval.

You can read more about the failed plan here.

Leaders In Opposition To Proposed Ballot Cutting Massachusetts Sales Tax

Leaders are concerned that a proposal in place to cut the state sales tax to 3% would mean devastating cuts in state and municipal services. If approved, it would cost the state about $2.34 billion in revenues.

Another ballot proposal will get rid of the 6.25 percent sales tax on the retail sale of beer, wine and alcohol. If passed, this would cut $100 million in revenues each year from state government.

The concern is that the loss in revenue by the tax cut would be crippling to local government services.

You can read more about the tax cut proposals here.

No Gas Tax Hike According To Gov. Patrick

According to the Massachusetts Gov., Deval Patrick, there will be no gas tax hike. The Governor dismissed the idea of raising the gas tax at a breakfast forum today for the 2010 gubernatorial candidates.

At the breakfast, the governor outlined his agenda hoping for a second term in office. He also went on to explain his policy decisions over the past four years. According to the article:

The governor vowed to continue to examine the state’s transportation system, but dismissed any notion of hiking the gas tax, saying the state cannot afford it at this time. The governor had supported a gas tax in the past because, under state law, any revenues from the tax would have to be redirected to transportation projects.

This is a welcome relief for Massachusetts drivers.

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New Taxes On Meals Are Bringing In More Revenue Than Expected

The Massachusetts Legislature enabled local communities to impose a tax on meals. The new tax has been bringing in more money than was originally anticipated.

In total, 73 communities have instituted the new tax. It was projected that Boston would raise an additional $1.4 million in revenue, and it wound up bringing in $1.5 million in October, the first month the tax was put in place. Medford more than doubled the state’s projection.

While it has proven to be a new source of revenue, the tax is being met with resistance from business owners, restaurants, and others in the community tired of more taxes.

Attorney Richard M. Stone, Featured Speaker at the 2010 Massachusetts Bar Association Annual Conference

We are excited to announce that Richard Stone will be a featured speaker at the 2010 Massachusetts Bar Association Annual Conference. The conference will take place on Thursday, March 11 and Friday, March 12 at the Westin Copley Place in Boston.

Programming for the conference includes:

  • Plenary sessions
  • Two continuous tracks on law practice management
  • Other recent developments.

You can read more about the conference on the Massachusetts Bar Association website:

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