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Bill H.4975
SECTION 1. Paragraph (c) of section 1 of chapter 62 of the General Laws, as appearing in the 2024 Official Edition, is hereby amended by inserting, after the word “408(q)”, in line 10, the following clause:- ; and provided further that for purposes of section 1400Z, the term “qualified opportunity zone” shall mean “an area located entirely within the commonwealth that is designated as a qualified opportunity zone under said section 1400Z-2;” and provided further that “Code” shall not include reference to certain other amendments to the Internal Revenue Code pursuant to section 90 of chapter 62C.
SECTION 2. Paragraph (1) of subsection (d) of section 2 of said chapter 62, as so appearing, is hereby amended by adding the following subclause:-
(R) The deductions allowed by 70302(f) of Pub. L. 119–21.
SECTION 3. Section 2 of chapter 62B, as appearing in the 2024 Official Edition, is hereby amended by striking out the figure “$1,200”, the first time it appears, and inserting in place thereof the following words:- $2,000, adjusted for inflation as provided by subsection (h) of section 6041 of the Internal Revenue Code, as amended and in effect for the taxable year;.
SECTION 4. Said section 2 of said chapter 62B, as so appearing, is hereby further amended by the striking out the figure “$1,200”, the second time it appears, and inserting in place thereof the following figure:- $2,000.
SECTION 5. Chapter 62C, as appearing in the 2024 Official Edition, is hereby amended by adding the following section:-
Section 90. (a) Except as provided in subsection (b), an amendment of the Internal Revenue Code as would otherwise apply under chapter 62 or chapter 63, that would affect the determination of Massachusetts gross income or Massachusetts deductions under chapter 62 or gross income under paragraph 3 of section 30 of chapter 63 or net income under paragraph 4 of section 30 of chapter 63, shall not apply to:
(1) any taxable year that begins in the calendar year in which the amendment is enacted; or
(2) any taxable year that precedes the calendar year in which the amendment is enacted.
(b)
Subsection (a) shall not apply to an amendment of the Internal Revenue Code if the commissioner determines within 90 days after such amendment is enacted that the impact to tax revenue collected pursuant to chapter 62 or chapter 63 is estimated to be less than $20,000,000, adjusted for inflation as provided by subsection (f) of section 1 of the Internal Revenue Code, as amended and in effect for the taxable year, for:
(1) the fiscal year that begins during the calendar year in which the amendment is enacted; or
(2) any fiscal year that precedes the calendar year in which the amendment is enacted.
(c) For the purposes of this section, the definition of “Code” in section 1 of this chapter shall not apply.
SECTION 6. Section 30 of chapter 63 of the General Laws, as appearing in the 2024 Official Edition, is hereby amended by striking out paragraph 3 and inserting in place thereof the following paragraph:-
3. ''Gross income'', gross income as defined under the provisions of the Federal Internal Revenue Code, as amended and in effect for the taxable year, plus the interest from bonds, notes and evidences of indebtedness of any state, including this commonwealth; provided, however, (i) that gross income of corporations taxable under section 38B shall, in addition to the foregoing, include a deduction for losses from the sale or exchange of capital assets sustained during the taxable year to the extent allowable by the Federal Internal Revenue Code; (ii) for purposes of applying section 1400Z-2 of the Code, the term “qualified opportunity zone” shall mean “an area located entirely within Massachusetts that is designated as a qualified opportunity zone under said section 1400Z-2;” and (iii) certain Code amendments as referenced in section 90 of chapter 62C will have no force or effect.
SECTION 7. Paragraph 4 of said section 30 of said chapter 63, as so appearing, is hereby amended by inserting after the word “allowed,” the first time it appears, the following words:- and provided further that certain Code amendments as referenced in section 90 of chapter 62C will have no force or effect.
SECTION 8. Said paragraph 4 of said section 30 of said chapter 63, as so appearing, is hereby further amended by adding the following clause:
(ix) the deductions allowed by section 70302(f) of Pub. L. 119–21.
SECTION 9. The General Laws are hereby amended by inserting after chapter 63D the following chapter:-
Chapter 63E
TAXATION OF PASS-THROUGH ENTITIES ON INCOME EXCEEDING SURTAX THRESHOLD
Section 1. As used in this chapter, the following words shall, unless the context clearly requires otherwise, have the following meanings:
''Code'', the Internal Revenue Code of the United States as defined in section 1 of chapter 62.
''Commissioner'', the commissioner of revenue.
''Eligible pass-through entity'', an S corporation under section 1361 of the Code, a partnership under section 7701 of the Code or a limited liability company that is treated as an S corporation or partnership under said section 1361 of the Code or said section 7701 of the Code.
''Qualified income taxable in Massachusetts'', the income of an eligible pass-through entity determined under chapter 62 allocable to a qualified member and included in the qualified member's Massachusetts taxable income under said chapter 62; provided, however, that qualified income taxable in Massachusetts shall be limited to the sum of the amounts by which the amount allocated to each qualified member exceeds the surtax threshold.
''Qualified member'', a shareholder of an S corporation or a partner in a partnership, including a member of a limited liability company that is treated as an S corporation or partnership under section 1361 of the Code or section 7701 of the Code, that is a natural person or trust or estate subject to tax under section 10 of chapter 62; provided, however, that a qualified member may be a resident, nonresident or a part-year resident; provided further, that “qualified member” does not include such shareholder, partner or member whose allocable share of income included in their Massachusetts taxable income under said chapter 62 does not exceed the surtax threshold.
Section 2. An eligible pass-through entity may elect to pay an excise on its qualified income taxable in Massachusetts at a rate of 4 per cent. A qualified member of an electing eligible pass-through entity shall be allowed a refundable credit against the tax imposed under this chapter. The credit shall be available to qualified members in an amount proportionate to each qualified member's share of the tax due and paid under this chapter by the eligible pass-through entity multiplied by 0.9. The credit shall be available for the member's taxable year in which the electing eligible pass-through entity's taxable year ends.
Section 3. This chapter shall not apply to any taxable year for which the federal limitation on the state and local tax deduction imposed by section 164(b)(6) of the Internal Revenue Code of the United States, as amended and in effect for the applicable year, has expired or is otherwise not in effect.
Section 4. The excise under this chapter shall be in addition to, and not in lieu of, any other Massachusetts tax required to be paid, including tax imposed by chapter 62 or chapter 63. The excise under this chapter shall be due and payable on the eligible pass-through entity's original, timely-filed return. A return that reports the excise shall be due at the same time as a partnership information return or corporate excise return would be due for the entity under chapter 62C. Nothing in this chapter shall alter any filing requirements for a qualified member under said chapter 62C.
Section 5. The collection and administration of the excise under this chapter shall be governed by chapter 62C unless expressly provided otherwise in this chapter or in regulations promulgated by the commissioner pursuant to this chapter.
Section 6. The election under this chapter shall be made by the eligible pass-through entity on an annual basis in a manner determined by the commissioner. All members of the electing eligible pass-through entity shall be bound by the election. Once an election is made for a particular year, the election shall not be revoked.
Section 7. The commissioner shall promulgate regulations or guidance to carry out the purposes of this chapter. Such regulations or guidance may: (i) make the credit available to qualified members with income from eligible pass-through entities that in turn have income from other eligible pass-through entities; (ii) provide rules on the application of this chapter to eligible trusts and estates; and (iii) require estimated payments of the excise by electing eligible pass-through entities and their qualified members in a manner consistent with chapter 62B.
SECTION 10. Section 6 of chapter 175M, as appearing in the 2024 Official Edition, is hereby amended by striking out, the figure “40”, in lines 22, 33 and 39, each time it appears and inserting in place thereof, in each instance, the following figure:- 100.
SECTION 11. Said section 6 of said chapter 175M, as so appearing, is hereby amended by striking out the figure “100”, in lines 25, 33 and 43, each time it appears, and inserting in place thereof, in each instance, the following figure:- 40.
SECTION 12. Notwithstanding subparagraph (1) of paragraph (d) of section 2 of chapter 62 of the General Laws and paragraph 4 of section 30 of chapter 63 of the General Laws, the deduction allowed by section 174A of the Internal Revenue Code, as amended and in effect for the current tax year is disallowed for taxable years beginning in 2025.
Notwithstanding subparagraph (1) of paragraph (d) of section 2 of chapter 62 of the General Laws and paragraph 4 of section 30 of chapter 63 of the General Laws, the following deductions are disallowed for taxable years beginning in 2025 and 2026: (i) the deduction allowed by section 168(n) of the Internal Revenue Code, as amended and in effect for the current tax year; (ii) the deduction described by section 179 of the Internal Revenue Code to the extent increased by amendments to sections 179(b)(1) and 179(b)(2) of said Internal Revenue Code inserted by section 70306 of Pub. L. 119–21; and (iii) the deduction described by section 163(j) of the Internal Revenue Code to the extent the definition of “adjusted taxable income” is modified by an amendment to section 163(j)(8)(A)(v) of said Internal Revenue Code inserted by section 70303 of Pub. L. 119–21.
Notwithstanding paragraph 3 of section 30 of chapter 63 of the General Laws, a taxpayer shall, for taxable years beginning in 2025 or 2026, apply section 1400Z-2 of the Internal Revenue Code as in effect for taxable years beginning prior to January 1, 2026.
SECTION 13. Sections 1, 5 through 7, inclusive, and 9 through 11, inclusive, shall apply for taxable years beginning on or after January 1, 2026.
SECTION 14. Sections 2 and 8 shall apply for taxable years beginning on or after January 1, 2025.
SECTION 15.
Sections 3 and 4 shall apply beginning with payments made on or after January 1, 2026.
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