Massachusetts Senate Bill S1887

Massachusetts 2023-2024 Regular Session

• Introduced: 2/16/23
• Refer: 2/16/23

Caption

Relative to single sales factor

Impact

The adoption of a single sales factor approach will likely simplify tax compliance for financial institutions operating in Massachusetts. Under current rules, institutions typically apportion their income based on a combination of sales, property, and payroll factors, which can be complex and burdensome. Transitioning to a single sales factor means that only the sales made within the commonwealth would be used to calculate the taxable income, promoting a more straightforward mechanism while potentially reducing the tax liabilities for some corporations, thereby encouraging investment and operations within the state.

Summary

S1887 aims to amend Chapter 63 of Massachusetts General Laws concerning the taxation of financial institutions by modifying how net income is apportioned to the state. Specifically, the bill proposes a single sales factor method for calculating the tax owed by financial institutions. This change would impact institutions that earn income both within and outside of Massachusetts, as it would alter the existing multifactor formula traditionally used for tax purposes. The intention is to provide a simpler and potentially more favorable tax landscape for these entities by relying solely on the sales generated within the state.

Contention

Notable points of contention surrounding S1887 include concerns from lawmakers and advocacy groups about the broader implications of lowering tax revenue from financial institutions. Critics worry that shifting to a single sales factor could disproportionately benefit larger companies at the expense of smaller firms and local businesses, potentially straining state resources. There may also be debates on whether this approach would lead to unintended consequences in tax equity, where some businesses might enjoy significant tax advantages without correlating contributions to local economic development.