Massachusetts Corporate Taxes provides practitioners with detailed guidance on the taxes imposed on corporations doing business in Massachusetts—business corporations, financial institutions, insurance companies, and utility corporations—according to Chapter 63 of the Massachusetts General Laws. Addressing the various taxes imposed by Chapter 63, as well as by other parts of Massachusetts law, the Portfolio, written by Jonathan Brett Muroff, Esq., identifies in detail:
In addition, this Portfolio identifies and examines available credits and incentives, combined net income, the apportionment formula and its application among multistate business corporations, and the unitary business principle. The Working Papers, which appear at the end of the Portfolio, contain examples of various tax forms used by business entities in Massachusetts.
Massachusetts Corporate Taxes allows you to benefit from:
This Portfolio is part of the Premier State Tax Library, a comprehensive series, which covers major state tax transactions and issues with expert, in-depth analysis, and offers commentary on a wide range of multi-state and state-specific taxation topics, including Sales and Use, Corporate Income, Individual Income, Property, Gross Receipts, Limitations on States' Authorities to Tax, Credits and Incentives, Electronic Commerce, Mergers and Acquisitions, Procedure and Administration, Special Industries, and more.
Detailed Analysis
2140.01. INTRODUCTION
2140.02. TAXATION OF BUSINESS CORPORATIONS: AN OVERVIEW
2140.03. TAXATION OF BUSINESS CORPORATIONS: ENTITIES SUBJECT TO TAX
Introductory Material
A. S Corporations
1. In General
2. Net Operating Losses
3. Credits
4. Qualified Subchapter S Subsidiaries
5. Taxation of S Corporation Shareholders
a. In General
b. Part–Year Residents
B. Limited Liability Companies
C. Manufacturing Corporations
2. Manufacturing
a. The Cases
b. The Regulations
3. Substantiality
4. Tax Benefits
a. Local Property Tax Exemption
b. Investment Tax Credit
c. Sales and Use Tax Exemptions
5. Procedures
a. Application
b. Reapplication
c. Revocation
D. Research and Development Corporations
2. Research and Development
3. Tax Benefits
a. Investment Tax Credit
b. Sales and Use Tax Exemptions
E. Security Corporations
2. Qualification
a. What is a Security for Purposes of 38B?
(1) Limited Partnership Interests
(2) Massachusetts Business Trusts
(3) Wholly Owned Subsidiaries
(4) Debt Instruments
(5) Other Financial Instruments
b. What Activities Can a Security Corporation Conduct?
3. Intercompany Issues
4. Application
5. Returns
6. Election to Withdraw Security Corporation Classification
F. Regulated Investment Companies
G. Real Estate Investment Trusts
2. Qualified REIT Subsidiaries
H. Real Estate Mortgage Investment Conduits
I. Domestic International Sales Corporations and Foreign Sales Corporations
J. Associations
K. Utility Corporations
L. Financial Institutions
M. Insurance Companies
N. Exempt Organizations
O. Offshore Investment Companies
P. Massachusetts Business Trusts
2. Certain Exempt Corporate Trusts
Q. Cooperatives
R. Mutual Holding Companies
2140.04. TAXATION OF BUSINESS CORPORATIONS: JURISDICTION TO TAX
A. The Imposition Statute
1. Qualification to Do Business
2. Doing Business
3. Employing Capital, Plant, or Any Other Property in the Commonwealth
B. Limitations on the Taxing Power of Massachusetts
1. Constitutional Constraints
2. Federal Statutory Limitations – Public Law 86–272
a. Solicitation of Orders
(1) Massachusetts Regulations Defining Scope of “Solicitation of Orders” After Wrigley
(2) Massachusetts Cases Defining Scope of “Solicitation of Orders” After Wrigley
b. Delivery From a Point Outside the State
c. Effect of Qualifying to Do Business on Public Law 86–272 Immunity
3. Statutory and Administrative Limitations on the Power of Massachusetts to Impose the Corporate Excise
a. Property in a Public Warehouse
b. Property in Transit
c. Ownership of Shares of a Corporation
d. Maintenance of Accounts
e. Independent Contractors
f. Corporate Partners
(1) Certain Partnerships Dealing in Securities
(2) Publicly Traded Partnerships
(3) De Minimis Connection to the State
2140.05. TAXATION OF BUSINESS CORPORATIONS: THE NET INCOME MEASURE
A. Issues Surrounding the Federal Starting Point
1. “Real” vs. “Fictional” Income
2. Massachusetts and the Federal Intercompany Transaction Rules
3. Massachusetts and the Federal Entity Classification Rules
4. Unitary Business Issues
B. State Modifications to the Net Income Measure Tax Base
1. Gross Income
2. Net Income
a. Deductions for Losses Sustained in Other Taxable Years
(1) Definition of a Net Operating Loss
(2) The General Net Operating Loss Deduction
(3) Start–Up Corporation Net Operating Loss Deduction
(4) Switching the Methodology Used From Year to Year
(5) Combined Returns
(6) S Corporations
(7) Mergers
(8) Changes of Ownership
b. Dividends Received Deduction
c. State or Local Income, Franchise or Capital Stock Taxes
d. Federal Bonus Depreciation Deduction
e. Deduction for Renovation of Abandoned Buildings
f. Deduction for Employer Contributions
g. Deduction for U.S. Wage Credit
h. Other Modifications to Net Income
3. Taxable Net Income
4. Net Income Determined to be Taxable
C. Other Adjustments to Net Income-Transactions Between Related Parties
1. Transactions that Lack Business Purpose and Economic Substance Other Than Tax Avoidance
2. Debt vs. Equity
b. Cash Management Systems
c. “Push Down” of Acquisition Indebtedness
3. The Commissioner's Authority to Adjust Net Income
2140.06. TAXATION OF BUSINESS CORPORATIONS: THE NON–INCOME MEASURE
A. Tangible Property Corporations v. Intangible Property Corporations
B. Taxation of Tangible Property Corporations
C. Taxation of Intangible Property Corporations
1. Assets and Taxable Net Worth
2. Liabilities and Taxable Net Worth
3. Deduction for Investment in Subsidiaries
4. Effect of Characterization of Intercompany Arrangements on Taxable Net Worth
D. Short Taxable Years
E. Combined Returns
2140.07. CREDITS AND INCENTIVES
A. Priority and Limitations
B. Investment Credits
C. Economic Opportunity Area Incentives
1. Investments in Certified Projects
2. Renovating Abandoned Buildings
3. Brownfield Site Cleanup Credit
4. Other Incentives
D. Research and Development Credit
E. Miscellaneous Credits and Incentives
1. Company Shuttle Vans
2. Alternative Energy Sources
3. Full Employment Program Credit
4. Harbor Maintenance Tax Credit
5. Insurance Company Investment Tax Credit
6. Low Income Housing Tax Credit
7. Charitable Contribution Tax Credit
8. Historic Rehabilitation Tax Credit
9. Jobs Incentive Payment for Certain Biotechnology Companies
F. Property Tax Incentives
1. Tax Increment Financing Zones
G. Financial Assistance Programs
1. Predevelopment Assistance Program
2. Bond Programs
3. Emerging Technology Fund
4. Other Financing Programs
H. Other Programs
1. Workforce Training Fund
2140.08. TAXATION OF BUSINESS CORPORATIONS: COMBINED RETURNS
A. Making the Election
B. Determination of Combined Net Income
1. Method of Computation
2. Deferred Intercompany Transactions
3. Net Operating Losses
4. Computation of Combined Income
5. Application of Credits
C. Procedural Issues
1. Filing Requirements
2. Extensions
3. Estimated Payments
2140.09. TAXATION OF BUSINESS CORPORATIONS: MULTISTATE BUSINESS CORPORATIONS AND THE UNITARY BUSINESS PRINCIPLE
A. United States Supreme Court Decisions
B. Massachusetts and the Unitary Business Principle
1. Supreme Judicial Court Decisions
2. Appellate Tax Board Decisions
3. The Regulations
2140.10. TAXATION OF BUSINESS CORPORATIONS: MULTISTATE BUSINESS CORPORATIONS AND THE APPORTIONMENT FORMULA
A. The Right to Apportion – “Taxable in Another State”
1. Subject to Tax
2. Jurisdiction to Tax
B. The Apportionment Factors
1. Property Factor
a. Real and Tangible Personal Property
b. Valuation of Property Owned
(1) Original Cost
(2) Inventory or Stock of Goods
(3) Averaging Property Values
c. Valuation of Property Rented
(1) Items Included in Rent
(2) Net Annual Rent
(3) Property Used at No Charge or Nominal Rent
d. Property Used During the Taxable Year
e. Property in Transit
f. Mobile Property
2. Payroll Factor
a. Compensation
b. Compensation Paid in Massachusetts
c. Leased or Temporary Employees
d. Affiliated Corporations
e. Accounting Methods
3. Sales Factor
a. When Sales of Tangible Personal Property are in Massachusetts
(1) Destination Sales
(2) Throwback Sales
(a) Not Taxable in the State of the Purchaser
(b) Not Sold by an Agent Who is Chiefly Situated at, Connected With or Sent Out From the Taxpayer's Owned or Rented Business Premises Outside of Massachusetts
(c) Determining Who is an Agent
(d) Determining Who Sold Property
(e) Determining Location of Taxpayer's Owned or Rented Business Premises
(3) Resale to Foreign Government
b. Sales Other Than Sales of Tangible Personal Property in Massachusetts
(1) Income Producing Activity
(2) Costs of Performance
C. Industries Eligible for Single Sales Factor
1. Mutual Fund Service Corporations
b. Definition of a Mutual Fund Service Corporation
(1) Management Services
(2) Distribution Services
(3) Administration Services
c. Taxable Net Income From Mutual Fund Sales
d. Apportionment of Taxable Net Income From Mutual Fund Sales
e. Sales Factor for Mutual Fund Sales
f. Single Sales Factor Apportionment Formula for Mutual Fund Sales
(1) Job Growth Requirements
(2) Effect of Acquisition or Divestiture on Jobs Commitment Level
(3) Adverse Economic Conditions
(4) Combined Returns
g. Mutual Fund Service Corporation's Apportionment Percentage to Calculate the Non–Income Measure of the Corporate Excise
h. Reporting Requirements
2. Manufacturing Corporations
a. Manufacturing
b. Substantial
c. Information Report
D. One or More Factors Inapplicable
1. Three Factor Apportionment
2. Single Factor Apportionment
E. Alternative Apportionment Formulas for Special Industries
1. Airline Corporations
a. Property Factor
b. Payroll Factor
c. Sales Factor
2. Motor Carriers
3. Courier and Package Delivery Services
F. Alternative Method of Apportionment
1. The Application
2. Application Considered
3. Application Withdrawal
4. Issues Where Permission is Granted
5. Penalties
6. Abatement
7. Combined Returns
G. Corporate Partners
1. Taxation of Corporate Partners Generally
2. Special Apportionment Rules
2140.11. TAXATION OF BUSINESS CORPORATIONS: PROCEDURES FOR FILING RETURNS AND MAKING PAYMENT OF TAX
A. Filing Returns
1. Forms
2. Initial Due Date to File Return
3. Extensions of Due Date to File Return
4. Amended Returns
5. Federal Change
6. Combined Returns
B. Payment of Tax
C. Penalties and Interest
1. Penalty for Failure to File or Filing a Late Return
2. Penalty for Failing to File or Correct a Return After Notice
3. Penalty for Filing a False or Fraudulent Return
4. Penalty for Failure to Timely Pay Tax
5. Penalty for “Bad” Check
6. Interest
D. Estimated Payments
2. Exceptions to Requirement of Four Annual Payments
3. Short Taxable Years
4. Special Estimated Tax Rules for Corporations With Fewer Than Ten Employees in the First Full Taxable Year
5. Officers' Personal Liability and Penalty
6. Addition to Tax for Underpayment of Estimated Tax
7. Forms
8. Electronic Funds Transfer
9. Combined Returns
2140.12. TAXATION OF UTILITY CORPORATIONS
A. In General
B. Credits
C. Returns
2140.13. TAXATION OF FINANCIAL INSTITUTIONS
A. Financial Institutions
B. Engaged in Business in the Commonwealth
C. Net Income
D. Net Income Determined to be Taxable
1. Receipts Factor
a. Receipts From the Lease or Rental of Property
b. Receipts From Lending Business
c. Receipts From Credit Card Business
d. Receipts From Investment and Trading Business
e. Other Receipts
2. Property Factor
a. Real and Tangible Personal Property Owned or Rented By the Taxpayer
b. Loans
c. Credit Card Receivables
3. Payroll Factor
4. Alternative Apportionment
E. Credits
F. Returns
2140.14. TAXATION OF INSURANCE COMPANIES
A. Gross Premiums Taxes
1. Premiums From Life Insurance Business
2. Premiums From Preferred Provider Arrangements
3. Premiums From Other Insurance Lines
4. Retaliatory Taxes
5. Credits
a. Credit for Certain Contributions to the Massachusetts Capital Resource Co.
b. Credit for Contributions to the Massachusetts Life Initiative
c. Credit for Massachusetts Life and Health Insurance Guaranty Association Assessment
d. Credit for Retaliatory Taxes Paid to Other Jurisdictions
e. Credit for Certain Contributions to the P & C Initiative
f. Credit for Property Used in an Economic Opportunity Area
g. Full Employment Credit
B. Gross Investment Income Tax
C. Investment Privilege Excise
a. The Premium Factor
b. The Payroll Factor
2. Rate
4. Returns
D. Marine or Fire and Marine Insurance Companies
1. Annual U.S. Marine Insurance Underwriting Profit
a. Net Earned Premiums
b. Deductions
2. Annual Net Premiums From Marine Insurance
3. Cessation or Discontinuance of Marine Insurance Business in Massachusetts
4. Credits
2140.15. MISCELLANEOUS TAXES ON CORPORATIONS
A. Excise on Corporations Interested in Ships and Vessels
B. Tax on Corporations Engaged in the Sale of Alcoholic Beverages
C. Urban Redevelopment Corporations
D. Corporations Subject to the Corporate Franchise Tax
Working Papers
Item Description Sheet
Worksheet 1 BNA 2008 Survey of State Tax Departments: Massachusetts Questionnaire
Bibliography