Mass. legislation aims to close business loopholes

BOSTON – Gov. Deval L. Patrick this month signed into law a measure aimed at ensuring tax fairness by closing corporate tax loopholes and cutting businesses taxes.
The legislation – an Act Relative to Tax Fairness and Business Competitiveness – helps Massachusetts equalize the tax burden on the state’s businesses by instituting combined reporting, which requires corporations that are engaged in unitary business operations to file combined returns with their affiliates.
This method replaces the “separate return” structure and significantly restricts the ability of groups of affiliated corporations to shift taxable income out of the Commonwealth to low-tax or no-tax jurisdictions.
The legislation also includes “substantial rate reductions” for Massachusetts businesses. Rate changes under the new law include:
• The current business-corporation rate of 9.5 percent will be reduced to 8.75 percent in 2010; 8.25 percent in 2011; and 8 percent in 2012 and later years.
• The current financial-institution tax rate of 10.5 percent will bereduced to 10 percent in 2010; 9.5 percent in 2011; and 9 percent in 2012 and later years.
• The rate for S corporations with more than $9 million in annual receipts will be modified so that the corporate rate for the year minus the personal income tax rate for the year equals the rate for the large S corporation.
In fiscal year 2009, the Mass. Department of Revenue estimates that this proposal will raise new revenue over the next five fiscal years, including $285 million in FY 2009 and $390 million in FY 2010. •