Massachusetts 2023-2024 Regular Session

Massachusetts Senate Bill S2390 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	1 of 14
2	2	SENATE . . . . . . . . . . . . . . No. 2390
3	3	Senate, May 24, 2023 -- Text of amendment (825) (offered by Senator Fattman) to the Ways and
4	4	Means amendment (Senate, No. 3) to the House Bill making appropriations for the fiscal year
5	5	2024 for the maintenance of the departments, boards, commissions, institutions, and certain
6	6	activities of the Commonwealth, for interest, sinking fund, and serial bond requirements, and for
7	7	certain permanent improvements.
8	8	The Commonwealth of Massachusetts
9	9	_______________
10	10	In the One Hundred and Ninety-Third General Court
11	11	(2023-2024)
12	12	_______________
13	13	1 by inserting after section ___ the following section:-
14	14	2 "SECTION 1. Section 2A of chapter 63 of the General Laws, as appearing in the 2020
15	15	3Official Edition, is hereby amended by striking out subsection (b) and by inserting in place
16	16	4thereof the following subsection:-
17	17	5 (b) If a financial institution has income from business activity which is taxable both
18	18	6within and without this commonwealth, its net income shall be apportioned to the
19	19	7commonwealth by multiplying its net income by the apportionment percentage. The
20	20	8apportionment percentage is determined by adding 25 percent of the property factor plus 25
21	21	9percent of the payroll factor plus 50 percent of the receipts factor. If 1 of the factors is missing
22	22	10the percentages set forth in the preceding sentence shall be increased proportionately such that
23	23	11the sum of the percentages by which the 2 remaining factors are multiplied under this subsection
24	24	12is one. If 2 factors are missing, the remaining factor is the apportionment percentage. If all 3
25	25	13factors are missing, the whole of the financial institution’s net income shall be taxable under 2 of 14
26	26	14Section 2. A factor is missing if both its numerator and denominator are 0, but it is not missing
27	27	15merely because its numerator is 0.
28	28	16 SECTION 2. Said subsection (b) of said section 2A of said chapter 63, as so appearing, is
29	29	17hereby further amended by striking out the words “25 percent of the property factor plus 25
30	30	18percent of the payroll factor plus 50”, inserted by section 8, and inserting in place thereof the
31	31	19following words:- 16.5 percent of the property factor plus 16.5 percent of the payroll factor plus
32	32	2067.
33	33	21 SECTION 3. Said subsection (b) of said section 2A of said chapter 63, as so appearing, is
34	34	22hereby further amended by striking out the words, “16.5 percent of the property factor plus 16.5
35	35	23percent of the payroll factor plus 67”, inserted by section 9, and inserting in place thereof the
36	36	24following words:- 8.25 percent of the property factor plus 8.25 percent of the payroll factor plus
37	37	2583.5.
38	38	26 SECTION 4. Said section 2A of said chapter 63, as so appearing, is hereby amended by
39	39	27striking out subsections (b) and (c) and inserting in place thereof the following 2 subsections:-
40	40	28 (b) If the financial institution has income from business activity which is taxable both
41	41	29within and without this commonwealth, its net income shall be apportioned to this
42	42	30commonwealth by multiplying its net income by its receipts factor. If the receipts factor is
43	43	31missing, the whole of the financial institution’s net income shall be taxable under section 2. The
44	44	32receipts factor is missing if both its numerator and denominator are 0, but it is not missing
45	45	33merely because its numerator is 0.
46	46	34 (c) The receipts shall be computed according to the method of accounting, cash or accrual
47	47	35basis, used by the taxpayer for federal income tax purposes for the taxable year. 3 of 14
48	48	36 SECTION 5. Said section 2A of said chapter 63, as so appearing, is hereby further
49	49	37amended by striking out subsections (e), (f) and (g) and inserting in place thereof the following
50	50	38subsection:-
51	51	39 (e) If the provisions of subsections (a) to (d), inclusive, are not reasonably adapted to
52	52	40approximate the net income derived from business carried on within the commonwealth, a
53	53	41financial institution may apply to the commissioner, or the commissioner may require the
54	54	42financial institution, to have its income derived from business carried on within this
55	55	43commonwealth determined by a method other than that set forth in subsections (a) to (d),
56	56	44inclusive. Such application shall be made by attaching to its duly-filed return a statement of the
57	57	45reasons why the financial institution believes that the provisions of this section are not
58	58	46reasonably adapted to approximate its net income derived from business carried on within this
59	59	47commonwealth and a description of the method sought by it. A financial institution which so
60	60	48applies shall, upon receipt of a request therefor from the commissioner, file with the
61	61	49commissioner, under oath of its treasurer, a statement of such additional information as the
62	62	50commissioner may require.
63	63	51 If, after such application by the financial institution, or after the commissioner’s own
64	64	52review, the commissioner determines that the provisions of subsections (a) to (d), inclusive, are
65	65	53not reasonably adapted to approximate the financial institution’s net income derived from
66	66	54business carried on within the commonwealth, the commissioner shall by reasonable methods
67	67	55determine the amount of net income derived from business activity carried on within the
68	68	56commonwealth. The amount thus determined shall be the net income taxable under section two
69	69	57and the foregoing determination shall be in lieu of the determination required by subsections (a)
70	70	58to (d), inclusive. If an alternative method is used by the commissioner hereunder, the 4 of 14
71	71	59commissioner, in his discretion, with respect to the two next succeeding taxable years, may
72	72	60require similar information from such financial institution if it shall appear that the provisions of
73	73	61subsections (a) to (d), inclusive, are not reasonably adapted to approximate for the applicable
74	74	62year the financial institution’s net income derived from business carried on within this
75	75	63commonwealth and may again by reasonable methods determine such income.
76	76	64 SECTION 6. Subsection (c) of section 38 of said chapter 63, as so appearing, is hereby
77	77	65amended by striking out in lines 46 to 48, inclusive, the words “a fraction, the numerator of
78	78	66which is the property factor plus the payroll factor plus twice times the sales factor, and the
79	79	67denominator of which is four”, and inserting in place thereof the following words:- a fraction
80	80	68which is the sum of: 18.75 per cent multiplied by the payroll factor, plus 18.75 per cent
81	81	69multiplied by the property factor, plus 62.5 per cent multiplied by the sales factor.
82	82	70 SECTION 7. Said subsection (c) of said section 38 of said chapter 63, as so appearing, is
83	83	71hereby further amended by striking out the words, “18.75 per cent multiplied by the payroll
84	84	72factor, plus 18.75 per cent multiplied by the property factor, plus 62.5”, inserted by section 6,
85	85	73and inserting in place thereof the following words:- 12.5 per cent multiplied by the payroll
86	86	74factor, plus 12.5 per cent multiplied by the property factor, plus 75.
87	87	75 SECTION 8. Said subsection (c) of said section 38 of said chapter 63, as so appearing, is
88	88	76hereby further amended by striking out the words, “12.5 per cent multiplied by the payroll factor,
89	89	77plus 12.5 per cent multiplied by the property factor, plus 75”, inserted by section 7, and inserting
90	90	78in place thereof the following words:- 6.25 per cent multiplied by the payroll factor, plus 6.25
91	91	79per cent multiplied by the property factor, plus 87.5. 5 of 14
92	92	80 SECTION 9. Said section 38 of said chapter 63, as so appearing, is hereby further
93	93	81amended by striking out subsection (g) and inserting in place thereof the following subsection:-
94	94	82 (g) If one of the factors is missing, the percentages set forth in subsection (c) shall be
95	95	83increased proportionately such that the sum of the percentages by which the 2 remaining factors
96	96	84are multiplied under this subsection is 1. If 2 factors are missing, the remaining factor is the
97	97	85apportionment percentage. If all 3 factors are missing, the whole of the taxpayer’s net income
98	98	86shall be its taxable net income. A factor is missing if both its numerator and denominator are 0,
99	99	87or if it is otherwise determined to be insignificant in producing income.
100	100	88 SECTION 10. Said chapter 63, as so appearing, is hereby further amended by striking out
101	101	89section 38 and inserting in place thereof the following section:-
102	102	90 Section 38. The commissioner shall determine the part of the net income of a business
103	103	91corporation derived from business carried on within the commonwealth as follows:
104	104	92 (a) Net income as defined in section 30 adjusted as follows shall constitute taxable net
105	105	93income:
106	106	94 (1) 95 percent of dividends, exclusive of distributions in liquidation, included therein
107	107	95shall be deducted other than dividends from or on account of the ownership of:
108	108	96 (i) shares in a corporate trust, as defined in section 1 of chapter 62, to the extent such
109	109	97dividends represent tax-free earnings and profits, as defined in section 8 of chapter 62, as in
110	110	98effect on December 31, 2008,
111	111	99 (ii) deemed distributions and actual distributions, except actual distributions out of
112	112	100previously taxed income, from a DISC which is not a wholly owned DISC, or 6 of 14
113	113	101 (iii) any class of stock, if the corporation owns less than 15 per cent of the voting stock of
114	114	102the corporation paying such dividend.
115	115	103 (2) Long-term capital gains realized and long-term capital losses sustained from the sale
116	116	104or exchange of intangible property affected under the provisions of the Federal Internal Revenue
117	117	105Code, as amended, and in effect for taxable years ended on or before December 31, 1962, shall
118	118	106not be included in any part therein.
119	119	107 (b) If the corporation does not have income from business activity which is taxable in
120	120	108another state, the whole of its taxable net income, determined under the provisions of subsection
121	121	109(a), shall be allocated to this commonwealth. For purposes of this section, a corporation is
122	122	110taxable in another state if (1) in that state such corporation is subject to a net income tax, a
123	123	111franchise tax measured by net income, a franchise tax for the privilege of doing business, or a
124	124	112corporate stock tax, or (2) that state has jurisdiction to subject such corporation to a net income
125	125	113tax regardless of whether, in fact, the state does or does not. Notwithstanding any other provision
126	126	114of this section, the portion of the taxable net income of a corporation that a non-domiciliary state
127	127	115is prohibited from taxing under the Constitution of the United States shall be allocated in full to
128	128	116the commonwealth if the commercial domicile of the corporation is in the commonwealth.
129	129	117 (c) If a corporation has income from business activity which is taxable both within and
130	130	118without this commonwealth, its taxable net income, as determined under the provisions of
131	131	119subsection (a), shall be apportioned to this commonwealth by multiplying such taxable net
132	132	120income by the sales factor. 7 of 14
133	133	121 (d) The sales factor is a fraction, the numerator of which is the total sales of the
134	134	122corporation in the commonwealth during the taxable year, and the denominator of which is the
135	135	123total sales of the corporation everywhere during the taxable year.
136	136	124 As used in this subsection, unless specifically stated otherwise, ‘‘sales’’ shall mean all
137	137	125gross receipts of the corporation, including deemed receipts from transactions treated as sales or
138	138	126exchanges under the Code, except interest, dividends and gross receipts from the maturity,
139	139	127redemption, sale, exchange or other disposition of securities; provided, however, that ‘‘sales’’
140	140	128shall not include gross receipts from transactions or activities to the extent that a non-domiciliary
141	141	129state would be prohibited from taxing the income from such transactions or activities under the
142	142	130Constitution of the United States.
143	143	131 (e) Sales of tangible personal property are in the commonwealth for purposes of this
144	144	132section if:
145	145	133 (1) the property is delivered or shipped to a purchaser within the commonwealth
146	146	134regardless of the f.o.b. point or other conditions of the sale; or (2) the corporation is not taxable
147	147	135in the state of the purchaser and the property was not sold by an agent or agencies chiefly
148	148	136situated at, connected with or sent out from premises for the transaction of business owned or
149	149	137rented by the corporation outside the commonwealth. ‘‘Purchaser’’, as used in clauses (1) and (2)
150	150	138shall include the United States government.
151	151	139 (f) Sales, other than sales of tangible personal property, are in the commonwealth for
152	152	140purposes of this section if the corporation’s market for the sale is in the commonwealth. The
153	153	141corporation’s market for a sale is in the commonwealth and the sale is thus assigned to the
154	154	142commonwealth for the purpose of this section: 8 of 14
155	155	143 (1) in the case of sale, rental, lease or license of real property, if and to the extent the
156	156	144property is located in the commonwealth;
157	157	145 (2) in the case of rental, lease or license of tangible personal property, if and to the extent
158	158	146the property is located in the commonwealth;
159	159	147 (3) in the case of sale of a service, if and to the extent the service is delivered to a
160	160	148location in the commonwealth;
161	161	149 (4) in the case of lease or license of intangible property, including a sale or exchange of
162	162	150such property where the receipts from the sale or exchange derive from payments that are
163	163	151contingent on the productivity, use or disposition of the property, if and to the extent the
164	164	152intangible property is used in the commonwealth; and
165	165	153 (5) in the case of the sale of intangible property, other than as provided in clause (4),
166	166	154where the property sold is a contract right, government license or similar intangible property that
167	167	155authorizes the holder to conduct a business activity in a specific geographic area, if and to the
168	168	156extent that the intangible property is used in or otherwise associated with the commonwealth;
169	169	157provided, however, that any sale of intangible property, not otherwise described in this clause or
170	170	158clause (4), shall be excluded from the numerator and the denominator of the sales factor.
171	171	159 (g) If the numerator and denominator of the sales factor are zero or if the sales factor is
172	172	160otherwise determined to be insignificant in producing income, the taxpayer shall determine its
173	173	161sales factor by:
174	174	162 (1) adding to its sales any interest, dividends and gross receipts from the maturity,
175	175	163redemption, sale, exchange or other disposition of securities, and applying the sourcing 9 of 14
176	176	164provisions for receipts under section 2A to the total adjusted sales amount, as if the taxpayer
177	177	165were a financial institution for purposes of that section; or
178	178	166 (2) if, notwithstanding the adjustments in subsection (g)(1), the numerator and
179	179	167denominator of the sales factor remains zero or if the factor is otherwise determined to be
180	180	168insignificant in producing income, the whole of the taxpayer’s net income shall be taxable net
181	181	169income allocated to the commonwealth, provided that the alternative apportionment provisions
182	182	170of subsection (e) of section 2A shall be applicable, as if the taxpayer were a financial institution
183	183	171for purposes of that section.
184	184	172 (h) For the purposes of this section:
185	185	173 (1) in the case of sales, other than sales of tangible personal property, if the state or states
186	186	174to which sales should be assigned cannot be determined, it shall be reasonably approximated;
187	187	175 (2) in the case of sales other than sales of tangible personal property if the taxpayer is not
188	188	176taxable in a state to which a sale is assigned, or if the state or states to which such sales should be
189	189	177assigned cannot be determined or reasonably approximated, such sale shall be excluded from the
190	190	178numerator and denominator of the sales factor;
191	191	179 (3) the corporation shall be considered to be taxable in the state of the purchaser if
192	192	180tangible personal property is delivered or shipped to a purchaser in a foreign country;
193	193	181 (4) sales of tangible personal property to the United States government or any agency or
194	194	182instrumentality thereof for purposes of resale to a foreign government or any agency or
195	195	183instrumentality thereof are not sales made in the commonwealth; 10 of 14
196	196	184 (5) in the case of sale, exchange or other disposition of a capital asset, as defined in
197	197	185paragraph (m) of section 1 of chapter 62, used in a taxpayer’s trade or business, including a
198	198	186deemed sale or exchange of such asset, ‘‘sales’’ shall be measured by the gain from the
199	199	187transaction;
200	200	188 (6) ‘‘security’’ shall mean any interest or instrument commonly treated as a security as
201	201	189well as other instruments which are customarily sold in the open market or on a recognized
202	202	190exchange, including, but not limited to, transferable shares of a beneficial interest in any
203	203	191corporation or other entity, bonds, debentures, notes and other evidences of indebtedness,
204	204	192accounts receivable and notes receivable, cash and cash equivalents including foreign currencies
205	205	193and repurchase and futures contracts;
206	206	194 (7) in the case of a sale or deemed sale of a business, the term ‘‘sales’’ shall not include
207	207	195receipts from the sale of the business ‘‘goodwill’’ or similar intangible value, including, without
208	208	196limitation, ‘‘going concern value’’ and ‘‘workforce in place’’; and
209	209	197 (8) in the case of a business deriving receipts from operating a gaming establishment or
210	210	198otherwise deriving receipts from conducting a wagering business or activity, income-producing
211	211	199activity shall be considered to be performed in the commonwealth to the extent that the location
212	212	200of wagering transactions or activities that generated the receipts is in the commonwealth.
213	213	201 (i) (1) As used in this subsection, the following words shall, unless the context requires
214	214	202otherwise, have the following meaning:
215	215	203 ‘‘Administration services’’, include, but are not limited to, clerical, fund or shareholder
216	216	204accounting, participant record keeping, transfer agency, bookkeeping, data processing, custodial,
217	217	205internal auditing, legal and tax services performed for a regulated investment company, but only 11 of 14
218	218	206if the provider of such service or services during the taxable year in which such service or
219	219	207services are provided also provides or is affiliated with a person that provides management or
220	220	208distribution services to any regulated investment company.
221	221	209 ‘‘Affiliate’’, the meaning as set forth in 15 USC section a-2(a)(3)(C), as may be amended
222	222	210from time to time.
223	223	211 ‘‘Distribution services’’, include, but are not limited to, the services of advertising,
224	224	212servicing, marketing or selling shares of a regulated investment company, but, in the case of
225	225	213advertising, servicing or marketing shares, only where such service is performed by a person
226	226	214who is, or in the case of a close end company, was, either engaged in the services of selling
227	227	215regulated investment company shares or affiliated with a person that is engaged in the service of
228	228	216selling regulated investment company shares. In the case of an open end company, such service
229	229	217of selling shares must be performed pursuant to a contract entered into pursuant to 15 USC
230	230	218section a-15(b), as from time to time amended.
231	231	219 ‘‘Domicile’’, presumptively the shareholder’s mailing address on the records of the
232	232	220regulated investment company. If, however, the regulated investment company or the mutual
233	233	221fund service corporation has actual knowledge that the shareholder’s primary residence or
234	234	222principal place of business is different than the shareholder’s mailing address said presumption
235	235	223shall not control. If the shareholder of record is a company which holds the shares of the
236	236	224regulated investment company as depositor for the benefit of a separate account, then the
237	237	225shareholder shall be the contract owners or policyholders of the contracts or policies supported
238	238	226by the separate account, and it shall be presumed that the domicile of said shareholder is the
239	239	227contract owner’s or policyholder’s mailing address to the extent that the company maintains such 12 of 14
240	240	228mailing addresses in the regular course of business. If the regulated investment company or the
241	241	229mutual fund service corporation has actual knowledge that the shareholder’s principal place of
242	242	230business is different than the shareholder’s mailing address said presumption shall not control.
243	243	231 ‘‘Management services’’, include, but are not necessarily limited to, the rendering of
244	244	232investment advice directly or indirectly to a regulated investment company, making
245	245	233determinations as to when sales and purchases of securities are to be made on behalf of the
246	246	234regulated investment company, or the selling or purchasing of securities constituting assets of a
247	247	235regulated investment company, and related activities, but only where such activity or activities
248	248	236are performed: (i) pursuant to a contract with the regulated investment company entered into
249	249	237pursuant to 15 USC section a-15(a), as from time to time amended; (ii) for a person that has
250	250	238entered into such contract with the regulated investment company; or (iii) for a person that is
251	251	239affiliated with a person that has entered into such contract with a regulated investment company.
252	252	240 ‘‘Mutual fund sales’’, taxable net income derived within the taxable year directly or
253	253	241indirectly from the rendering of management, distribution or administration services to a
254	254	242regulated investment company, including net income received directly or indirectly from
255	255	243trustees, sponsors and participants of employee benefit plans which have accounts in a regulated
256	256	244investment company.
257	257	245 ‘‘Regulated investment company’’, the meaning as set forth in section 851 of the Internal
258	258	246Revenue Code as amended and in effect for the taxable year.
259	259	247 (2) Notwithstanding the foregoing, mutual fund sales, other than the sale of tangible
260	260	248personal property, shall be assigned to the commonwealth to the extent that shareholders of the
261	261	249regulated investment company are domiciled in the commonwealth as follows: 13 of 14
262	262	250 (a) by multiplying the taxpayer’s total dollar amount of sales of such services on behalf
263	263	251of each regulated investment company by a fraction, the numerator of which shall be the average
264	264	252of the number of shares owned by the regulated investment company’s shareholders domiciled in
265	265	253the commonwealth at the beginning of and at the end of the regulated investment company’s
266	266	254taxable year that ends with or within the taxpayer’s taxable year and the denominator of which
267	267	255shall be the average of the number of shares owned by the regulated investment company
268	268	256shareholders everywhere at the beginning of and at the end of the regulated investment
269	269	257company’s taxable year that ends with or within the taxpayer’s taxable year.
270	270	258 (b) A separate computation shall be made to determine the sale for each regulated
271	271	259investment company, the sum of which shall equal the total sales assigned to the commonwealth.
272	272	260 The commissioner shall adopt regulations to implement subsections (d) to (i), inclusive.
273	273	261Nothing in this subsection shall limit the commissioner’s authority under subsection (k).
274	274	262 (j) If a corporation maintains an office, warehouse or other place of business in a state
275	275	263other than this commonwealth for the purpose of reducing its tax under this chapter, the
276	276	264commissioner shall, in determining the amount of taxable net income apportionable to this
277	277	265commonwealth, adjust any factor to properly reflect the amount which the factor ought
278	278	266reasonably to assign to this commonwealth.
279	279	267 (k) If the apportionment provisions of this section are not reasonably adapted to
280	280	268approximate the net income derived from business carried on within this commonwealth by any
281	281	269type of industry group, the commissioner may, by regulation, adopt alternative apportionment
282	282	270provisions to be applied to such an industry group in lieu of the foregoing provisions. 14 of 14
283	283	271 (l) In any case in which a purchasing corporation makes an election under section 338 of
284	284	272the Code, the target corporation shall be treated as having sold its assets for purposes of this
285	285	273section.
286	286	274 SECTION 11. Sections 1 and 6 shall take effect for the tax year beginning on January 1,
287	287	2752025 and ending on December 31, 2025.
288	288	276 SECTION 12. Sections 2 and 7 shall take effect for the tax year beginning on January 1,
289	289	2772026 and ending on December 31, 2026.
290	290	278 SECTION 13. Sections 3 and 8 shall take effect on January 1, 2025 and shall be effective
291	291	279for all tax years beginning on or after January 1, 2025.
292	292	280 SECTION 14. Sections 4, 5 and 10 shall take effect on January 1, 2026 and shall be
293	293	281effective for all tax years beginning on or after January 1, 2026."