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Massachusetts Basic Business Taxes 2011

Massachusetts' economic development, finance and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include unitary filing requirements, corporate tax rates, and simplifying the corporate tax structure.

March 2011
Starting in 2010, the tax rates will be gradually reduced to eight percent on the following schedule (MA Gen. Laws ch. 63, [section]39):
* Tax years beginning on or after January 1, 2010: 8.75 percent.
* Tax years beginning on or after January 1, 2011: 8.25 percent.
* Tax years beginning on or after January 1, 2012: 8.00 percent.

The net income measure on large S-corporations has been modified so that it is tied to the corporate rates above. Effective for tax years beginning on or after January 1, 2009, the net income measure on S corporations with $9 million or more in total receipts will be equal to the corporate rate in effect less the individual rate then in effect. For S-corporations with $6 million or more but less than $9 million in total receipts, the rate will be two-thirds of the rate for larger S-corporations. For 2009, the rates will be as follows (MA Gen. Laws ch. 63, [section]32D(a)(ii)):
* Total receipts of $9 million or more: 9.5 percent - 5.3 percent, or 4.2 percent.
* Total receipts of at least $6 million but less than $9 million: 4.2 percent x 2/3, or 2.8 percent.

Financial institutions are currently taxed at 10.5 percent, but the tax rate will be reduced to 9 percent as follows (for financial institutions that are not S corporations) (MA Gen. Laws ch. 63, [section]2(b)):
* Tax years beginning on or after January 1, 2010: 10.0 percent.
* Tax years beginning on or after January 1, 2011: 9.5 percent.
* Tax years beginning on or after January 1, 2012: 9.0 percent.

Where applicable, the act leaves the non-income measure of the corporate excise unchanged.

This summer Massachusetts enacted a law aimed at simplifying the corporate tax structure and raising revenue while cutting corporate tax rates (An Act Relative to Tax Fairness and Business Competitiveness, stat. 2008, ch. 173, signed into law July 3, 2008).

The major provisions include new unitary filing requirements; conformity with the federal check-the-box rules for state tax purposes, including disregarded entity status for qualified subchapter 8 subsidiaries (QSubs); and corporate rate reductions.

Unitary Filing:
With this law, Massachusetts joins 22 other states in requiring corporations engaged in unitary business operations to file combined returns with their affiliates.

With combined reporting, a corporation required to file on a combined basis must calculate its state taxable income of the combined group, and inter-company transactions will be disregarded.

A group of corporations with common ownership is defined as "unitary" under the act if the corporations are "sufficiently interdependent, integrated or interrelated through their activities so as to provide mutual benefit and produce a significant sharing or exchange of value among them" (MA Gen. Laws ch. 63, [section]32B(b)(1)).

Common ownership is defined as more than 50 percent of voting control, whether such ownership is direct or indirect (MA Gen. Laws ch. 63, [section]32B(b)(2)).

Massachusetts State Contact:
Massachusetts Business Resource Team
10 Park Plaza, Suite 3730
Boston, MA 02116
1-877-BIZTEAM (249-8326)

Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.

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