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Massachusetts: Draft Release Summarizes Newly Enacted Single Sales Factor and Financial Institution Apportionment Provisions

Working Draft TIR: Provisions in the 2023 Tax Relief Legislation, Mass. Dept. of Rev. (1/5/24). The Massachusetts Department of Revenue posted a working draft technical information release (“draft TIR”) for practitioner comment, explaining certain provisions included in the 2023 tax relief legislation entitled “An Act to Improve the Commonwealth’s Competitiveness, Affordability, and Equity” (the “Act”) [see H.B. 4104 (2023), and previously issued Multistate Tax Alert for more details on this legislation]. Regarding the state tax law changes “affecting only G.L. c. 63 taxpayers,” the draft TIR explains Massachusetts’ move to single sales factor apportionment for all business corporations and financial institutions, and the financial institution apportionment of investment and trading income, which are effective “for tax years beginning on or after January 1, 2025.” The draft TIR explains that the Act changes the method by which financial institutions are required to source receipts from investment and trading assets and activities – providing that the amount of such receipts included in the numerator of the sales factor is determined by multiplying the total of such receipts by a fraction, the numerator of which is the financial institution’s receipts, other than receipts from investment and trading assets and activities, sourced to Massachusetts and the denominator of which is the financial institution’s total receipts, other than receipts from investment and trading assets and activities – and “there is no elective variation on this rule.” The draft TIR also addresses some other provisions in the Act, including the reduction in the short-term capital gains rate. Please contact us with any questions.