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Massachusetts House of Representatives Passes Corporate Tax Bill to Close Purported Loopholes
April 22, 2008
The Massachusetts House of Representatives recently passed a bill to raise the state's cigarette tax $1 per pack and to revise certain corporate tax laws to enhance state collections. In response to Governor Deval Patrick's repeated calls for alternative funding solutions from the Legislature, House Speaker Sal DiMasi introduced the cigarette tax while also developing corporate tax code changes including a general corporate excise rate cut. During floor debate over the matter, the House also approved a measure which reduced the Massachusetts Department of Revenue's ability to regulate combined reporting - a key area Governor Deval Patrick has sought to reform. The House also added a provision to reduce the excise rate for financial institutions, which would have otherwise been exempt from the corporate rate cut.
Overall, the House tax bill has the potential to assist small-to-medium sized businesses in Massachusetts who do not have multi-state locations. Yet, the Massachusetts Taxpayer Foundation has recently expressed concerns over the effect the House tax bill could have on larger multi-state corporations. The concern: many large corporations will simply choose to leave Massachusetts.
In response, Senate leaders, who anticipate taking the legislation up in May, expressed concern over a number of the items in the House version of the bill. In particular, the Senate version will likely be less �business friendly� (i.e. potentially removing the excise tax rate reduction for financial institutions) while trying to embrace more of Governor Patrick's reform ideas. Senate President Therese Murray, while indicating her support for the cigarette tax, has not publicly stated what the exact Senate version may look like.
It is anticipated that by eliminating the "combined reporting" loophole, next year the Commonwealth will realize more than $200 million to the general fund. The combined value of these changes is 381 million overall. It is also estimated that over 15,000 small-to-mid sized companies will see tax relief at the same time.
Overall, the House tax bill has the potential to assist small-to-medium sized businesses in Massachusetts who do not have multi-state locations. Yet, the Massachusetts Taxpayer Foundation has recently expressed concerns over the effect the House tax bill could have on larger multi-state corporations. The concern: many large corporations will simply choose to leave Massachusetts.
In response, Senate leaders, who anticipate taking the legislation up in May, expressed concern over a number of the items in the House version of the bill. In particular, the Senate version will likely be less �business friendly� (i.e. potentially removing the excise tax rate reduction for financial institutions) while trying to embrace more of Governor Patrick's reform ideas. Senate President Therese Murray, while indicating her support for the cigarette tax, has not publicly stated what the exact Senate version may look like.
It is anticipated that by eliminating the "combined reporting" loophole, next year the Commonwealth will realize more than $200 million to the general fund. The combined value of these changes is 381 million overall. It is also estimated that over 15,000 small-to-mid sized companies will see tax relief at the same time.