Marzilli Votes to Advance Tax Fairness and Competitiveness In the Business Community
Senator Jim Marzilli announced today that on May 6th, the Senate approved legislation to modernize and simplify the Commonwealth's corporate tax structure and establish an automatic rate reduction plan for businesses, from 9.5 percent to 8 percent, over a three-year period beginning in 2010.
The Senate proposal adopts the "check-the-box" reform to prevent corporations from claiming one status for Massachusetts taxes and another for federal and other-state taxes. It also adopts "combined reporting" to prevent multi-state businesses from moving their Massachusetts income to affiliates in lower-tax areas.
"Since 2003, the legislature has been working on closing loopholes in our tax code that allow profitable companies to avoid paying their fare share of the cost of government. Four years ago, I filed comprehensive legislation to close those loopholes, including the "combined reporting" bill. I am pleased beyond words that the Senate, House and Governor have all agreed to enact those bills. Our work now moves on to the legislative conference committee to make sure that the legislature invests those funds in our schools, public safety, health and human services," said Senator Marzilli.
These reforms will bring the Commonwealth in line with its competitor states, making Massachusetts the last in the nation to adopt "check-the-box" and the 23rd state to implement combined reporting.
The proposal includes financial institutions in the combined reporting regimen and similarly reduces their proportional excise rate from 10.5 percent to 9.0 percent over three years, beginning in 2010.
For smaller corporations, which make up the majority of businesses in the Commonwealth, the bill also reduces excise rates over three years, beginning January 1, 2010. The rate for "S-corporations" with gross sales between $6 million and $9 million moves from 3 percent to 1.8 percent, and the rate for S-corporations with gross sales above $9 million moves from 4.5 percent to 2.7 percent.
In addition to restructuring corporate taxation, the Senate proposal also adopts a one-dollar increase in the cigarette tax and applies it to existing inventories effective July 1, 2008.
The bill also ensures that businesses or Internet retail agents who resell hotel/motel rooms cannot avoid the tax on the full price of the room as paid by consumers.
Other provisions of the bill include:
- Allows businesses to use their federal consolidated return group as the base for their combined group as long as the election does not reduce by 20 percent or more and $1 million or more the total net income that would be apportioned to Massachusetts in the absence of such election.
- Clarifies that recipients of the personal earned income tax credit must live or work in Massachusetts.
The bill will now go back to the House for further action.