Maintaining and enhancing the state’s business and tax competitiveness is a Chamber priority. For the 2017-2018 legislative session, legislators have agreed to file five tax reform proposals that the Chamber drafted. Our team will meet with legislators and submit testimony supporting the following legislation:
An Act Modernizing the Corporate Excise Tax filed by Senator Rodrigues
This bill would eliminate a burdensome and outdated component of the corporate tax that is levied on tangible property, such as inventories, or the net worth of a corporation. The tax must be paid even if a company is losing money or the economy is in a steep recession. Massachusetts is one of a few states that still levies this outdated tax, and only two states levy it at a higher rate without a limit on the maximum payment. Its elimination would help to improve the Commonwealth’s competitiveness.
An Act Extending Net Operating Losses to Financial Institutions
This bill would allow financial institutions to carry net operating losses into future tax years, which would result in more equal tax payments year over year for such institutions because the tax burden would reflect average profitability. The deduction is currently provided to business corporations in Massachusetts, and all industries in most U.S. states. In addition to enhancing the state’s competitiveness for a major sector, this proposal would also alleviate the pressure on start-ups and small businesses, which often incur losses in the early stages of business development, and on all businesses as they experience economic downturns.
An Act Reforming Economic Substance Rules
This bill would align the state’s economic substance rules with the less burdensome federal standard. Economic substance rules limit businesses from conducting transactions solely for tax avoidance. In Massachusetts, the burden is on the taxpayer to prove that a legitimate business purpose exists for the transaction and that the business purpose is proportionate to the tax benefit. This bill would produce a system that is more fair and predictable for taxpayers.
An Act Providing Interest Rate Parity
This bill would treat taxpayers and the Massachusetts Department of Revenue in the same manner with regard to overpayments and underpayments of tax. Specifically, this bill would equalize the interest rate and date upon which interest begins to accrue for the Department of Revenue and the taxpayer on overpayments and underpayments. Currently, the Department is able to take advantage of a more favorable rate while the taxpayer is subjected to less favorable treatment.
An Act Enhancing DOR Reporting
This bill would require the Department of Revenue to provide specific data about the Office of Appeals and the Appellate Tax Board in its Annual Report. Transparency in the appeals process may help identify areas for improvement, such as shortening the average length of the appeals process, which can be costly for both the taxpayer and the Commonwealth.