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HOUSE . . . . . . . No. 3770
The Commonwealth of Massachusetts
______________________________________
HOUSE OF REPRESENTATIVES , April 13, 2023.
The committee on Ways and Means, to whom was referred the message
from Her Excellency the Governor submitting requests for making
appropriations for the fiscal year 2023 to provide for supplementing certain
existing appropriations and for certain other activities and projects (House,
No. 47) reports, in part, recommending that the accompanying bill (House,
No. 3770) ought to pass.
For the committee,
AARON MICHLEWITZ. 2 of 17
FILED ON: 4/11/2023
HOUSE . . . . . . . . . . . . . . . No. 3770
The Commonwealth of Massachusetts
_______________
In the One Hundred and Ninety-Third General Court
(2023-2024)
_______________
An Act to improve the Commonwealth’s competitiveness, affordability, and equity.
Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority
of the same, as follows:
1 SECTION 1. Section 2H of chapter 29 of the General Laws, as appearing in the 2020
2Official Edition, is hereby amended by striking out, in line 29, the figure “15” and inserting in
3place thereof the following figure:- 25.5.
4 SECTION 2. Section 3 of chapter 62 of the General Laws, as so appearing, is hereby
5amended by striking out, in line 109, the figure “$3,000” and inserting in place thereof the
6following figure:- $4,000.
7 SECTION 3. Section 4 of said chapter 62, as so appearing, is hereby amended by
8inserting, in line 5, after the word “cent” the following words:- ; provided, however, that any
9gain from the sale or exchange of capital assets held for 1 year or less shall be taxed at the rate of
108 per cent.
11 SECTION 4. Said section 4 of said chapter 62, as amended by section 3, is hereby further
12amended by striking out the figure “8” and inserting in place thereof the following figure:- 5. 3 of 17
13 SECTION 5. Section 6 of said chapter 62, as appearing in the 2020 Official Edition, is
14hereby amended by striking out, in lines 245 and 250, the figure “30”, each time it appears, and
15inserting in place thereof, in each instance, the following figure:- 40.
16 SECTION 6. Said section 6 of said chapter 62, as so appearing, is hereby further
17amended by striking out, in line 447, the figure “$750” and inserting in place thereof the
18following figure:- $1,500.
19 SECTION 7. Said section 6 of said chapter 62 is hereby further amended by striking out
20subsections (x) and (y), added by section 29 of chapter 24 of the acts of 2021, and inserting in
21place thereof the following subsection:-
22 (x)(1) As used in this subsection, the following words shall, unless the context clearly
23requires otherwise, have the following meanings:
24 “Cost-of-living adjustment”, for any calendar year, the percentage, if any, by which the
25CPI for the preceding calendar year exceeds the CPI for calendar year 2023.
26 “CPI”, the consumer price index for any calendar year as defined in section 1 of the
27Code.
28 “Eligible dependent”, an individual who is either: (i) under the age of 13 and who
29qualifies for exemption as a dependent pursuant to section 151 of the Code; (ii) not less than 65
30years of age and who qualifies as a dependent pursuant to section 152 of the Code; or (iii)
31disabled and who qualifies as a dependent pursuant to section 152 of the Code.
32 “Maintains a household”, the same meaning as defined in section 21 of the Code. 4 of 17
33 (2) A taxpayer who maintains a household that includes as a member an eligible
34dependent shall be allowed a credit in an amount equal to $310 for each such eligible dependent;
35provided, that the credit provided in this subsection shall be allowed only if the taxpayer and the
36taxpayer’s spouse file a joint return for the taxable year or if the taxpayer qualifies as a head of
37household pursuant to section 2(b) of the Code. For each taxable year, the commissioner shall
38annually increase the amount of the credit for each eligible dependent as provided by this
39subsection by an amount equal to such credit multiplied by the cost-of-living adjustment for the
40calendar year in which such taxable year begins. With respect to a taxpayer who is a non-resident
41for part of the taxable year, the credit shall be further limited to the amount of allowable credit
42multiplied by a fraction, the numerator of which shall be the number of days in the taxable year
43the person resided in the commonwealth and the denominator of which shall be the number of
44days in the taxable year. A person who is a non-resident for the entire taxable year shall not be
45allowed the credit. If the amount of the credit allowed pursuant to this subsection exceeds the
46taxpayer’s tax liability, the commissioner shall treat the excess as an overpayment and shall pay
47the taxpayer the entire amount of the excess without interest.
48 SECTION 8. Paragraph (2) of subsection (x) of said section 6 of said chapter 62, as
49amended by section 7, is hereby further amended by striking out the figure “$310” and inserting
50in place thereof the following figure:- $455.
51 SECTION 9. Said paragraph (2) of said subsection (x) of said section 6 of said chapter
5262, as amended by section 8, is hereby further amended by striking out the figure “$455” and
53inserting in place thereof the following figure:- $600. 5 of 17
54 SECTION 10. The first paragraph of section 6 of chapter 62F of the General Laws, as
55appearing in the 2020 Official Edition, is hereby amended by striking out the second sentence
56and inserting in place thereof the following 3 sentences:- The credit shall be applied against the
57then current personal income tax liability of each taxpayer who files an income tax return in both
58the then current and the previous taxable year in an amount determined by dividing the total
59amount of excess revenues by the total number of taxpayers filing an income tax return in the
60previous taxable year. For the purposes of this section, a married couple filing a joint return shall
61be counted as 2 taxpayers. If the amount of the credit allowed under this section exceeds the
62taxpayer’s liability, the commissioner shall treat the excess as an overpayment and shall pay the
63taxpayer the amount of the excess without interest.
64 SECTION 11. Section 2A of chapter 63 of the General Laws, as so appearing, is hereby
65amended by striking out subsections (b) and (c) and inserting in place thereof the following 2
66subsections:-
67 (b) If the financial institution has income from business activity which is taxable both
68within and without the commonwealth, its net income shall be apportioned to the commonwealth
69by multiplying its net income by its receipts factor. If the receipts factor is missing, the whole of
70the financial institution’s net income shall be taxable pursuant to section 2. The receipts factor
71shall be missing if both its numerator and denominator are zero, but it shall not be missing
72merely because its numerator is zero.
73 (c) The receipts factor shall be computed according to the method of accounting, cash or
74accrual basis, used by the taxpayer for federal income tax purposes for the taxable year. 6 of 17
75 SECTION 12. Subsection (d) of said section 2A of said chapter 63, as so appearing, is
76hereby amended by striking out paragraph (xii) and inserting in place thereof the following
77paragraph:-
78 (xii) The amount of interest, dividends, net gains, but not less than zero, and other income
79from investment assets and activities and from trading assets and activities to be attributed to the
80commonwealth and included in the numerator shall be determined by multiplying all such
81income from such assets and activities by a fraction, the numerator of which shall be the total
82receipts included in the numerator pursuant to paragraphs (i) through (x), inclusive, and
83paragraph (xii) and the denominator of which shall be all total receipts of the taxpayer included
84in the denominator other than interest, dividends, net gains, but not less than zero, and other
85income from investment assets and activities and from trading assets and activities.
86 SECTION 13. Said section 2A of said chapter 63, as so appearing, is hereby further
87amended by striking out subsections (e) through (g), inclusive, and inserting in place thereof the
88following subsection:-
89 (e) If the provisions of subsections (a) to (d), inclusive, are not reasonably adapted to
90approximate the net income derived from business carried on within the commonwealth, a
91financial institution may apply to the commissioner, or the commissioner may require the
92financial institution, to have its income derived from business carried on within the
93commonwealth determined by a method other than that set forth in subsections (a) to (d),
94inclusive. Such application shall be made by attaching to its duly-filed return a statement of the
95reasons why the financial institution believes that subsections (a) to (d), inclusive, are not
96reasonably adapted to approximate its net income derived from business carried on within the 7 of 17
97commonwealth and a description of the method sought by it. A financial institution which so
98applies shall, upon receipt of a request therefor from the commissioner, file with the
99commissioner, under oath of its treasurer, a statement of such additional information as the
100commissioner may require.
101 If, after such application by the financial institution, or after the commissioner’s own
102review, the commissioner determines that the provisions of subsections (a) to (d), inclusive, are
103not reasonably adapted to approximate the financial institution’s net income derived from
104business carried on within the commonwealth, the commissioner shall by reasonable methods
105determine the amount of net income derived from business activity carried on within the
106commonwealth. The amount thus determined shall be the net income taxable under section 2 and
107the foregoing determination shall be in lieu of the determination required by subsections (a) to
108(d), inclusive. If an alternative method is used by the commissioner hereunder, the
109commissioner, in their discretion, with respect to the 2 next succeeding taxable years, may
110require similar information from such financial institution if it shall appear that the provisions of
111subsections (a) to (d), inclusive, are not reasonably adapted to approximate for the applicable
112year the financial institution’s net income derived from business carried on within the
113commonwealth and may again by reasonable methods determine such income.
114 SECTION 14. Said chapter 63 is hereby further amended by striking out section 38, as so
115appearing, and inserting in place thereof the following section:-
116 Section 38. The commissioner shall determine the part of the net income of a business
117corporation derived from business carried on within the commonwealth as follows: 8 of 17
118 (a) Net income, as defined in section 30, adjusted as follows shall constitute taxable net
119income:
120 (1) 95 per cent of dividends, exclusive of distributions in liquidation, included therein
121shall be deducted other than dividends from or on account of the ownership of:
122 (i) shares in a corporate trust, as defined in section 1 of chapter 62, to the extent such
123dividends represent tax-free earnings and profits, as defined in section 8 of said chapter 62, as in
124effect on December 31, 2008;
125 (ii) deemed distributions and actual distributions, except actual distributions out of
126previously taxed income, from a domestic international sales corporation, as defined in 26 U.S.C.
127§ 992, which is not a wholly owned domestic international sales corporation; or
128 (iii) any class of stock, if the corporation owns less than 15 per cent of the voting stock of
129the corporation paying such dividend.
130 (2) Long-term capital gains realized and long-term capital losses sustained from the sale
131or exchange of intangible property affected under the provisions of the Federal Internal Revenue
132Code, as amended, and in effect for taxable years ended on or before December 31, 1962, shall
133not be included in any part therein.
134 (b) If the corporation does not have income from business activity which is taxable in
135another state, the whole of its taxable net income, determined pursuant to subsection (a), shall be
136allocated to the commonwealth. For purposes of this section, a corporation is taxable in another
137state if: (1) in that state such corporation is subject to a net income tax, a franchise tax measured
138by net income, a franchise tax for the privilege of doing business or a corporate stock tax; or (2) 9 of 17
139that state has jurisdiction to subject such corporation to a net income tax regardless of whether,
140in fact, the state does or does not. Notwithstanding any other provision of this section, the
141portion of the taxable net income of a corporation that a non-domiciliary state is prohibited from
142taxing under the Constitution of the United States shall be allocated in full to the commonwealth
143if the commercial domicile of the corporation is in the commonwealth.
144 (c) If a corporation has income from business activity which is taxable both within and
145without the commonwealth, its taxable net income, as determined pursuant to subsection (a),
146shall be apportioned to the commonwealth by multiplying such taxable net income by the sales
147factor.
148 (d) The sales factor is a fraction, the numerator of which is the total sales of the
149corporation in the commonwealth during the taxable year, and the denominator of which is the
150total sales of the corporation everywhere during the taxable year.
151 As used in this section, unless specifically stated otherwise, “sales” shall mean all gross
152receipts of the corporation, including deemed receipts from transactions treated as sales or
153exchanges under the Code, except interest, dividends and gross receipts from the maturity,
154redemption, sale, exchange or other disposition of securities; provided, however, that “sales”
155shall not include gross receipts from transactions or activities to the extent that a non-domiciliary
156state would be prohibited from taxing the income from such transactions or activities under the
157Constitution of the United States.
158 (e) Sales of tangible personal property are in the commonwealth for purposes of this
159section if: (1) the property is delivered or shipped to a purchaser within the commonwealth
160regardless of the f.o.b. point or other conditions of the sale; or (2) the corporation is not taxable 10 of 17
161in the state of the purchaser and the property was not sold by an agent or agencies chiefly
162situated at, connected with or sent out from premises for the transaction of business owned or
163rented by the corporation outside the commonwealth. “Purchaser”, as used in clauses (1) and (2)
164shall include the United States government.
165 (f) Sales, other than sales of tangible personal property, are in the commonwealth for
166purposes of this section if the corporation’s market for the sale is in the commonwealth. The
167corporation’s market for a sale is in the commonwealth and the sale is thus assigned to the
168commonwealth for the purpose of this section:
169 (1) in the case of sale, rental, lease or license of real property, if and to the extent the
170property is located in the commonwealth;
171 (2) in the case of rental, lease or license of tangible personal property, if and to the extent
172the property is located in the commonwealth;
173 (3) in the case of sale of a service, if and to the extent the service is delivered to a
174location in the commonwealth;
175 (4) in the case of lease or license of intangible property, including a sale or exchange of
176such property where the receipts from the sale or exchange derive from payments that are
177contingent on the productivity, use or disposition of the property, if and to the extent the
178intangible property is used in the commonwealth; and
179 (5) in the case of the sale of intangible property, other than as provided in clause (4),
180where the property sold is a contract right, government license or similar intangible property that
181authorizes the holder to conduct a business activity in a specific geographic area, if and to the 11 of 17
182extent that the intangible property is used in or otherwise associated with the commonwealth;
183provided, however, that any sale of intangible property, not otherwise described in this clause or
184clause (4), shall be excluded from the numerator and the denominator of the sales factor.
185 (g) If the sales factor is missing, the whole of the corporation’s net income shall be
186taxable net income allocated to the commonwealth. The sales factor shall be missing if both its
187numerator and denominator are zero, but it shall not be missing merely because its numerator is
188zero.
189 (h) For the purposes of this section:
190 (1) in the case of sales, other than sales of tangible personal property, if the state or states
191to which sales should be assigned cannot be determined, it shall be reasonably approximated;
192 (2) in the case of sales other than sales of tangible personal property if the taxpayer is not
193taxable in a state to which a sale is assigned, or if the state or states to which such sales should be
194assigned cannot be determined or reasonably approximated, such sale shall be excluded from the
195numerator and denominator of the sales factor;
196 (3) the corporation shall be considered to be taxable in the state of the purchaser if
197tangible personal property is delivered or shipped to a purchaser in a foreign country;
198 (4) sales of tangible personal property to the United States government or any agency or
199instrumentality thereof for purposes of resale to a foreign government or any agency or
200instrumentality thereof are not sales made in the commonwealth;
201 (5) in the case of sale, exchange or other disposition of a capital asset, as defined in
202paragraph (m) of section 1 of chapter 62, used in a taxpayer’s trade or business, including a 12 of 17
203deemed sale or exchange of such asset, “sales” shall be measured by the gain from the
204transaction;
205 (6) “security” shall mean any interest or instrument commonly treated as a security as
206well as other instruments which are customarily sold in the open market or on a recognized
207exchange, including, but not limited to, transferable shares of a beneficial interest in any
208corporation or other entity, bonds, debentures, notes and other evidences of indebtedness,
209accounts receivable and notes receivable, cash and cash equivalents including foreign currencies
210and repurchase and futures contracts;
211 (7) in the case of a sale or deemed sale of a business, the term “sales” shall not include
212receipts from the sale of the business “goodwill” or similar intangible value, including, without
213limitation, “going concern value” and “workforce in place”;
214 (8) in the case of a business deriving receipts from operating a gaming establishment or
215otherwise deriving receipts from conducting a wagering business or activity, income-producing
216activity shall be considered to be performed in the commonwealth to the extent that the location
217of wagering transactions or activities that generated the receipts is in the commonwealth;
218 (9) in the case of a business deriving receipts from operating a marijuana establishment or
219otherwise deriving receipts from conducting a marijuana business or activity, income-producing
220activity shall be considered to be performed in the commonwealth to the extent that the location
221of marijuana transactions or activities that generated the receipts is in the commonwealth; and
222 (10) dividends that are deemed to be received from an entity, including amounts included
223in federal gross income pursuant to sections 951 or 951A of the Code, shall not be considered
224“sales”. 13 of 17
225 (i)(1) As used in this subsection, the following words shall, unless the context requires
226otherwise, have the following meanings:
227 “Administration services”, include, but are not limited to, clerical, fund or shareholder
228accounting, participant record keeping, transfer agency, bookkeeping, data processing, custodial,
229internal auditing, legal and tax services performed for a regulated investment company, but only
230if the provider of such service or services during the taxable year in which such service or
231services are provided also provides or is affiliated with a person that provides management or
232distribution services to any regulated investment company.
233 “Affiliate”, the meaning as set forth in 15 USC section a-2(a)(3)(C), as may be amended
234from time to time.
235 “Distribution services”, include, but are not limited to, the services of advertising,
236servicing, marketing or selling shares of a regulated investment company, but, in the case of
237advertising, servicing or marketing shares, only where such service is performed by a person
238who is, or in the case of a close end company, was, either engaged in the services of selling
239regulated investment company shares or affiliated with a person that is engaged in the service of
240selling regulated investment company shares. In the case of an open end company, such service
241of selling shares shall be performed pursuant to a contract entered into pursuant to 15 USC
242section a-15(b), as from time to time amended.
243 “Domicile”, presumptively the shareholder’s mailing address on the records of the
244regulated investment company. If, however, the regulated investment company or the
245corporation has actual knowledge that the shareholder’s primary residence or principal place of
246business is different than the shareholder’s mailing address said presumption shall not control. If 14 of 17
247the shareholder of record is a company which holds the shares of the regulated investment
248company as depositor for the benefit of a separate account, then the shareholder shall be the
249contract owners or policyholders of the contracts or policies supported by the separate account,
250and it shall be presumed that the domicile of said shareholder is the contract owner’s or
251policyholder’s mailing address to the extent that the company maintains such mailing addresses
252in the regular course of business. If the regulated investment company or the corporation has
253actual knowledge that the shareholder’s principal place of business is different than the
254shareholder’s mailing address said presumption shall not control.
255 “Management services”, include, but shall not necessarily be limited to, the rendering of
256investment advice directly or indirectly to a regulated investment company, making
257determinations as to when sales and purchases of securities are to be made on behalf of the
258regulated investment company, or the selling or purchasing of securities constituting assets of a
259regulated investment company, and related activities, but only where such activity or activities
260are performed: (i) pursuant to a contract with the regulated investment company entered into
261pursuant to 15 USC section a-15(a), as from time to time amended; (ii) for a person that has
262entered into such contract with the regulated investment company; or (iii) for a person that is
263affiliated with a person that has entered into such contract with a regulated investment company.
264 “Mutual fund sales”, taxable net income derived within the taxable year directly or
265indirectly from the rendering of management, distribution or administration services to a
266regulated investment company, including net income received directly or indirectly from
267trustees, sponsors and participants of employee benefit plans, which have accounts in a regulated
268investment company. 15 of 17
269 “Regulated investment company”, the meaning as set forth in section 851 of the Code.
270 (2) Mutual fund sales, other than the sale of tangible personal property, shall be assigned
271to the commonwealth to the extent that shareholders of the regulated investment company are
272domiciled in the commonwealth as follows:
273 (i) By multiplying the taxpayer’s total dollar amount of sales of such services on behalf
274of each regulated investment company by a fraction, the numerator of which shall be the average
275of the number of shares owned by the regulated investment company’s shareholders domiciled in
276the commonwealth at the beginning of and at the end of the regulated investment company’s
277taxable year that ends with or within the taxpayer’s taxable year and the denominator of which
278shall be the average of the number of shares owned by the regulated investment company
279shareholders everywhere at the beginning of and at the end of the regulated investment
280company’s taxable year that ends with or within the taxpayer’s taxable year.
281 (ii) A separate computation shall be made to determine the sale for each regulated
282investment company, the sum of which shall equal the total sales assigned to the commonwealth.
283 (3) Nothing in this subsection shall limit the commissioner’s authority under subsection
284(k).
285 (j) If a corporation maintains an office, warehouse or other place of business in a state
286other than the commonwealth for the purpose of reducing its tax under this chapter, the
287commissioner shall, in determining the amount of taxable net income apportionable to the
288commonwealth, adjust the sales factor to properly reflect the amount which the factor ought
289reasonably to assign to the commonwealth. 16 of 17
290 (k) If the apportionment provisions of this section are not reasonably adapted to
291approximate the net income derived from business carried on within the commonwealth by any
292type of industry group, the commissioner may, by regulation, adopt alternative apportionment
293provisions to be applied to such an industry group in lieu of the foregoing provisions.
294 (l) In any case in which a purchasing corporation makes an election under section 338 of
295the Code, the target corporation shall be treated as having sold its assets for purposes of this
296section.
297 (m) The commissioner shall adopt regulations to implement subsections (d) to (i),
298inclusive.
299 SECTION 15. Section 2A of chapter 65C of the General Laws, as so appearing, is hereby
300amended by striking out subsection (a) and inserting in place thereof the following subsection:-
301 (a) A tax is hereby imposed upon the transfer of the estate of each person dying on or
302after January 1, 1997 who, at the time of death, was a resident of the commonwealth. The
303amount of the tax shall be equal to the credit for state death taxes that would have been allowable
304to a decedent’s estate as computed pursuant to section 2011 of the Internal Revenue Code, as in
305effect on December 31, 2000, hereinafter referred to as the “credit”. In the event that the federal
306gross estate of a person includes real or tangible personal property located outside of the
307commonwealth at the time of death, the tax shall be reduced by an amount equal to the
308proportion of such allowable credit as the value of said real or tangible personal property located
309outside of the commonwealth bears to the value of the entire federal gross estate wherever
310situated, pursuant to section 2011 of the Internal Revenue Code, as in effect on December 31,
3112000. 17 of 17
312 SECTION 16. Said section 2A of said chapter 65C, as so appearing, is hereby further
313amended by adding the following subsection:-
314 (f) Effective for the estates of decedents dying on or after January 1, 2023, for purposes
315of computing the tax imposed by subsections (a) and (b), the credit shall be determined based on
316the value of the federal taxable estate after such estate is reduced by $2,000,000. Estates of
317decedents dying on or after January 1, 2023 shall not be required to pay any tax pursuant to
318subsections (a) and (b) if the value of the federal taxable estate is $2,000,000 or less. For the
319purposes of this subsection, the federal taxable estate is the federal gross estate less any qualified
320conservation exclusion elected pursuant to section 2031(c) of the Internal Revenue Code, as in
321effect on December 31, 2000, and further reduced by the deductions allowable by the Internal
322Revenue Code, as in effect on December 31, 2000.
323
324 SECTION 17. Sections 15 and 16 shall take effect for the estates of decedents dying on
325or after January 1, 2023.
326 SECTION 18. Sections 4 and 8 shall take effect on January 1, 2024.
327 SECTION 19. Section 9 and sections 11 through 14, inclusive, shall take effect on
328January 1, 2025.
329 SECTION 20. Except as otherwise specified, this act shall take effect for taxable years
330beginning on or after January 1, 2023.