In a move that will be significant to many Massachusetts residents and businesses, Massachusetts Governor Maura Healey signed into law a tax package that will provide benefits of up to $1 billion. The bill was signed into law on October 4, 2023 by the governor, and the package includes provisions that will impact both income taxes and estate taxes. This third, and final, post focuses on changes to Massachusetts corporate income tax. For a deeper understanding of other aspects of this bill, read our previous posts on its impact on Estate Taxes and Individual Income Taxes.
Currently, Massachusetts requires most companies to use a 3-factor apportionment formula of property, payroll, and a double-weighted sales factor. The exception to this apportionment method is in relation to manufacturing companies, qualifying defense contractors, and mutual fund service corporations in which these companies must use a single sales factor apportionment method. The new tax bill in Massachusetts states that starting for tax years that end on or after January 1, 2025, all companies will adopt a single sales factor apportionment method. It is important to note that companies that manufacture in Massachusetts will need to continue to qualify as a manufacturing company under M.G.L CH. 62 s. 42B in order to continue claiming certain exemptions for property and sales/use tax and also the ability to claim the investment tax credit.
For companies that are based in Massachusetts with all or most of their property and payroll located in the state, this could be seen as beneficial in the fact that it could lower their overall apportionment percentage. Consequently, companies that are required to file a tax return in Massachusetts that only have sales in the state would generally experience a higher apportionment percentage than previous years with all facts considered the same. The Massachusetts government hopes that this change will remove a disincentive for companies to hire and place their headquarters in Massachusetts and attract more businesses to move to the state.
DiSanto, Priest & Co. can help you with corporate tax planning and navigate the tax opportunities created by the Massachusetts Tax Bill of 2023. Call us at (401) 921-2000 or submit our contact form to get started.