Blog & News

This is a premium post...

If you are not an AIM member - Consider joining. AIM Members receive access to all our premium content online.

If you're an AIM member please login to your AIM account to view this post:

Back to Posts

Summary of An Act to improve the Commonwealth’s competitiveness, affordability, and equity.

Posted on April 14, 2023

The package is expected to cost $654 million in FY 24 and raise to $1.1 billion by FY 26. The text of the legislation is attached. Please see the following highlights:

Single Sales Factor Apportionment
The House plan would establish a single sales factor apportionment in Massachusetts based
exclusively on receipts. Currently, most businesses in the Commonwealth are subject to a three-factor apportionment based on location, payroll, and receipts. Effective Date 1/1/2025.

Tax Credits/Tax Cuts
The House Bill phases in several of Governor Healey’s tax proposals over the course of several
years. This brings down the FY 24 impacts of several of the proposals. Please see the table below
outlining the differences.



Chapter 62F
The package contains reforms to Chapter 62F. Chapter 62F is a statutory mechanism that creates automatic tax refunds when the state reaches certain revenue targets. The House plan will change the statute so that the refund will no longer be income based. Under the House plan, all rebates will be the same amount regardless of how much a taxpayer paid in taxes the previous year. Married couples filing jointly will be counted as 2 taxpayers for refund purposes.

Chapter 62F was adopted by ballot question in 1986 and has only been triggered in 1987 and 2022. Last year $2.97 billion was returned to Massachusetts taxpayers in the form of checks
from the Department of Revenue. Those checks were income based, therefore the more a taxpayer paid in state taxes, the higher their return was.

*Please note that several of Governor Healey’s proposals for tweaking the Question 1 surtax are not included in this package. However, it is likely that several of those tax reforms including
exempting the Question 1 revenue from triggering Chapter 62F will be included as outside sections in the House budget tomorrow.

Stabilization Fund Cap
The House tax bill also raises the Stabilization Fund Cap to 25.5%. Currently, if the amount remaining in the fund at the end of a fiscal year exceeds 15% of budgeted revenues the excess
funds must be transferred to the Tax Reduction Fund which then transfers the money to taxpayers through one-time increases in the personal exemption allowable against income tax
liability. The bill proposes adjusting the cap to 25.5%, which would allow the Commonwealth’s savings account to retain more funding.

The tax package will be debated and voted on by the full House this Thursday, April 13.