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