United States

Massachusetts: Budget Agreement Includes Tax Amnesty; Changes to FAS 109 Deduction

Jul 27, 2015
From KPMG TaxWatch

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The recently-adopted Massachusetts budget agreement includes provisions establishing yet another tax amnesty program and makes changes to the FAS 109 deduction.  Recall, last year’s budget bill established a limited amnesty program, which ended on May 15, 2015. Only taxpayers that received a Tax Amnesty Notice were eligible to participate.  The current year budget bill (HB 3650) authorizes the Commissioner of Revenue to establish a tax amnesty program during fiscal year 2016. Under the program, penalties associated with a taxpayer’s failure to (i) timely file any proper return for any tax type and for any tax period; (ii) timely pay any tax liability; or (iii) pay the proper amount of any required estimated payment toward a tax liability, will be waived without the taxpayer having to establish reasonable cause or the absence of willful neglect.  Only liabilities for tax periods beginning prior to January 1, 2014 may be satisfied during the program.  Furthermore, the Commissioner is not authorized to waive interest on taxes owed. The scope of the program, including the tax types and periods covered, including any limited look-back period for unfiled returns (which may not exceed three years) will be determined by the Commissioner.  However, amnesty is not available for fuel taxes administered under the International Fuel Tax Agreement or local option portions of taxes or excises collected for the benefit of cities, towns, or state governmental authorities. Specific dates will likewise be set by the Commissioner, but the program must run for 60 days within fiscal year 2016 (i.e., it must be completed prior to June 30, 2016). The Commissioner will also be required to establish procedures to prevent taxpayers participating in this amnesty from participating in any future amnesty held over the next 10 years.

As originally approved by the budget conference committee, the budget bill repealed the so-called FAS 109 deduction, which was enacted in 2008 to offset the financial statement impact faced by taxpayers when Massachusetts moved to combined reporting.  The deduction was originally scheduled to be taken over a 7-year period beginning in 2012, but has been delayed several times, most recently to the 2016 tax year.  After outcry from several business groups, lawmakers and the Governor reportedly agreed to keep the deduction, but make certain changes, which were outlined in an attachment to the budget bill. As such, the deduction will be taken over a thirty-year (rather than seven-year) period beginning in the 2021 tax year.  Please contact Mike Desrochers at 617-988-1396 with questions on the tax amnesty program or the changes to the FAS 109 deduction.


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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.