Massachusetts Tax Implications of Selected Provisions of the Federal Consolidated Appropriations Act, 2021 and the American Rescue Plan Act of 2021
DATE: 01/12/2022
TABLE OF CONTENTS
A. Introduction
B. Individual Income Tax Provisions
C. Corporate Excise and Personal Income Tax Provisions Affecting Businesses
A. Introduction
This Technical Information Release (“TIR”) explains the Massachusetts personal income tax and corporate excise impact of certain recently enacted federal tax law changes.1 These federal tax law changes were included in the federal Consolidated Appropriations Act, 2021 (“CAA 2021”) omnibus legislation,2 which was comprised of the COVID-Related Tax Relief Act of 2020 (“CTRA”) and the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (“TCDTRA”), and the American Rescue Plan Act of 2021 (“ARPA”) (together, the “Acts”).3
This TIR addresses the following provisions of the Acts:
Individual Income Tax Provisions:
Changes to the earned income tax credit
Changes to retirement plans
Reduction in medical expense deduction floor
Additional recovery rebates for individuals
Exclusion of unemployment compensation from gross income
modification to the exclusion of student loan forgiveness
Extension of exclusion for certain employer payments of student loans
Increased exclusion for employer-provided dependent care assistance
Exclusion of benefits provided to volunteer firefighters and emergency medical responders
Exclusion of certain COBRA premium assistance from gross income
Repeal of deduction for qualified tuition and related expenses
Qualified disaster-related personal casualty losses
Temporary special rules for flexible spending accounts
Child Tax Credit advance payments
Corporate Excise and Personal Income Tax Provisions Affecting Businesses:
Tax Implications of Paycheck Protection Program loan forgiveness, Economic Injury Disaster Loan Advances, and debt relief subsidies paid by the Small Business Administration
Tax Implications of Shuttered Venue Operator Grants and Restaurant Revitalization Grants
Depreciation of certain residential rental property over 30-year period
Qualified disaster relief charitable contributions
Employee Retention Credit
Expansion of disallowance of deduction for certain compensation paid by publicly traded corporations
Temporary allowance of full deduction for business meals
Election to waive application of certain modifications to farming losses
Extension of limitation on non-corporate taxpayer's deduction of business losses
Both the Massachusetts personal income tax and the corporate excise rely on the Internal Revenue Code (“Code”) for the definition of gross income and the determination of certain deductions.
The Massachusetts personal income tax adopts the Code as amended and in effect on January 1, 2005 (the “2005 Code”) for purposes of determining most items of gross income and certain deductions, but adopts the current Code for purposes of determining certain other enumerated items, including the determination of trade or business expense deductions.4 Massachusetts personal income taxpayers may have trade or business expense deductions if, for example, they are sole proprietors fling Schedule C or if they report rental, partnership, or S corporation income on Schedule E.
The Acts affect several Massachusetts personal income tax provisions. Certain of these Massachusetts provisions conform to the current Code. Massachusetts will follow the federal changes to those provisions, as discussed below. For those Massachusetts provisions that conform to the 2005 Code, Massachusetts will not follow the federal tax law changes affecting those provisions.
Under Massachusetts law, conformity with the Code operates differently in the context of the Massachusetts corporate excise. In contrast to the law as it applies to the personal income tax, the Massachusetts corporate excise generally adopts the current Code in determining items of gross income and deductions.5
The Acts also made changes to certain federal credits. Massachusetts law generally does not conform to the tax credits provided under the Code, and instead provides its own tax credits, which, with certain exceptions (such as the earned income tax credit), operate independently of the Code.
The following sections summarize the Acts' federal tax law changes and explain the application of the changes in Massachusetts.
B. Individual Income Tax Provisions
(1) Changes to the earned income tax credit
TCDTRA and ARPA made numerous changes to the federal Earned Income Tax Credit (“EITC”).6 These changes generally expand eligibility for the credit, and the amount of the credit, available under Code § 32. TCDTRA's EITC changes apply only to the 2020 tax year (i.e., for EITC claimed on returns fled in 2021), and ARPA's EITC changes generally apply only to the 2021 tax year (i.e., for EITC claimed on returns fled in 2022).
Massachusetts follows Code § 32 as in effect under the current Code for purposes of calculating the Massachusetts EITC.7 Specifically, the Massachusetts EITC equals 30% of the federal EITC, as increased by the Acts.8 Thus, the expansion of the federal EITC will be taken into account in calculating the Massachusetts EITC.
(2) Changes to retirement plans
CTRA and TCDTRA provide rules pertaining to certain early retirement distributions and expand the ability of taxpayers to defer taxes on withdrawals from certain retirement accounts.9 Such withdrawals will be taxable for federal tax purposes if not restored to the retirement account in a specified time and manner.
Massachusetts does not follow all of the federal rules pertaining to retirement plans. However, Massachusetts does follow the current Code in determining whether a withdrawal from a retirement plan has occurred. Thus, early distributions under the Acts will be taken into account in determining Massachusetts gross income in the same tax year and in the same amounts as such distributions are included in federal gross income.10
Note that the taxable amount of distributions from retirement accounts may be different for Massachusetts personal income tax and federal tax purposes.11
(3) Reduction in medical expense deduction floor
Taxpayers are allowed a federal deduction under Code § 213 for medical expenses that exceed a certain percentage of their federal adjusted gross income. This threshold was set to rise from 7.5% to 10% of federal adjusted gross income under prior law. TCDTRA made the 7.5% threshold permanent.12
Under G.L. c. 62, § 3.B(b)(4), Massachusetts provides a deduction for medical expenses equal to the federal deduction provided by Code § 213 for taxpayers that itemize their deductions on their federal income tax returns. Massachusetts adopts the current Code with respect to Code § 213 for Massachusetts personal income tax purposes. Therefore, Massachusetts adopts the permanent reduction to the medical expense deduction threshold for taxpayers that itemize their deductions on their federal income tax returns.
(4) Additional recovery rebates for individuals
CTRA and ARPA provide refundable credits for qualifying individual taxpayers. Specifically, CTRA adds new Code § 6428A, which allows a credit of up to $600 for an individual taxpayer ($1,200 in the case of a joint return), plus $600 for each “qualifying child” as defined in Code § 24(c).13 ARPA adds new Code § 6428B, which allows an additional credit of up to $1,400 for an individual taxpayer ($2,800 in the case of a joint return), plus $1,400 for each “dependent” as defined in Code § 152.14
The CTRA credit was available in 2020 and was paid to most eligible taxpayers in the form of a check from the Internal Revenue Service. Under new Code § 6428A(f), the CTRA credit is reconciled on the 2020 tax return, fled in 2021. Specifically, taxpayers that did not receive checks for the full amount of the credit were eligible to claim the remainder of the credit on their 2020 returns. Taxpayers that received checks in excess of the amount for which they were eligible were required to pay back the excess with their 2020 returns.
Similarly, the ARPA credit was paid to most eligible taxpayers in the form of a check in 2021. Under new Code § 6428B(f), the ARPA credit will be reconciled on 2021 returns, fled in 2022.
The credits under CTRA and ARPA are excluded from federal gross income. Massachusetts gross income as computed for individuals is federal gross income with certain modifications not relevant here.15 Because neither the credits nor the advance payments of the credits under CTRA or ARPA are includable in federal gross income, they are not includable in Massachusetts gross income and thus are not subject to the Massachusetts personal income tax.
(5) Exclusion of unemployment compensation from gross income
ARPA amends Code § 85, for 2020, to exclude $10,200 of unemployment compensation from the gross income of taxpayers whose federal adjusted gross income is less than $150,000.16
Massachusetts follows Code § 85 as in effect under the 2005 Code and therefore does not adopt the federal amendment to Code § 85. However, Massachusetts recently enacted legislation that allows a $10,200 exclusion with respect to unemployment compensation for taxpayers whose household income is not more than 200% of the federal poverty level. The exclusion applies to the 2020 and 2021 tax years.17 See TIR 21-6 for additional details.
(6) modification to the exclusion of student loan forgiveness
ARPA amends Code § 108(f)(5) to exclude from gross income most discharges of certain student loans for taxable years beginning on or after January 1, 2021 and ending on or before December 31, 2025, regardless of the reason for the discharge.18 Previously, Code § 108(f)(5) excluded only discharges of certain student loans on account of death or disability from gross income.
Massachusetts follows Code § 108(f)(5) as in effect under the current Code.19 Therefore, Massachusetts adopts ARPA's changes to Code § 108(f)(5), and income from the discharge of student loans excluded by ARPA may also be excluded from Massachusetts gross income.
(7) Extension of exclusion for certain employer payments of student loans
The CARES Act excluded certain payments made by an employer of principal or interest with respect to certain student loans incurred by an employee for the education of the employee from gross income under Code § 127.20 The TCDTRA extends the exclusion, which was set to expire for taxable years beginning on or after January 1, 2021, to instead expire for taxable years beginning on or after January 1, 2026.21 Code § 221(e)(1) disallows a deduction for interest paid by an employee on such loans.
Massachusetts follows the 2005 Code with respect to Code §§ 127 and 221. See TIR 20-9. Therefore, such loan payments made by an employer are not excluded from an employee's Massachusetts gross income. Likewise, Massachusetts does not conform to the disallowance of the deduction for interest paid by an employee on such loans.
(8) Increased exclusion for employer-provided dependent care assistance
ARPA amends Code § 129 to temporarily increase the amount of the exclusion from gross income of amounts paid by an employer to provide dependent care assistance to an employee. For the 2021 tax year only, the exclusion is increased from $2,500 to $5,250 for married taxpayers fling separate returns, and from $5,000 to $10,500 for all other taxpayers.22
Massachusetts follows Code § 129 as in effect under the 2005 Code. Therefore, Massachusetts does not adopt the increased exclusion amounts. The Massachusetts exclusion amounts continue to be $2,500 for married individuals fling separate returns and $5,000 for all other taxpayers.
(9) Exclusion of benefits provided to volunteer firefighters and emergency medical responders
TCDTRA excludes from gross income qualified state and local tax benefits and qualified payments provided to any member of a qualified volunteer emergency response organization in an amount up to $300 under Code § 139B.23 The exclusion applies to taxable years beginning on or after January 1, 2021.
Massachusetts follows the 2005 Code with respect to Code § 139B. Code § 139B was not in the 2005 Code, Therefore, qualified state and local tax benefits and qualified payments provided to any member of a qualified volunteer emergency response organization must be included in Massachusetts gross income.
(10) Exclusion of certain COBRA premium assistance from gross income
ARPA created Code § 139I, which excludes certain COBRA continuation coverage subsidies provided to certain individuals who were either involuntarily terminated or suffered a reduction of hours from employment from April 1, 2021 through September 30, 2021 from federal gross income.24 The exclusion applies to taxable years beginning on or after January 1, 2021.
Massachusetts follows the 2005 Code with respect to Code § 139I. Code § 139I was not in the 2005 Code. Therefore, such COBRA continuation coverage subsidies provided to certain individuals must be included in Massachusetts gross income.
(11) Repeal of deduction for qualified tuition and related expenses
TCDTRA repeals Code § 222, which provided a deduction for qualified tuition and related expenses.25 Massachusetts follows Code § 222 as in effect under the 2005 Code. Under the 2005 Code, the federal deduction under Code § 222 had expired. See TIR 07-4. Therefore, TCDTRA's repeal of Code § 222 has no Massachusetts personal income tax impact.
(12) Qualified disaster-related personal casualty losses
TCDTRA expands the federal deduction for qualified disaster-related personal casualty losses incurred by individual taxpayers.26 Specifically, TCDTRA eliminates certain restrictions that previously applied to the deduction.27 Massachusetts does not allow any deduction for casualty losses. Thus, this federal tax law change has no impact for Massachusetts personal income tax purposes.
(13) Temporary special rules for flexible spending accounts
TCDTRA made several temporary changes to health and dependent care flexible spending arrangements (“FSAs”).28 These changes allow employers to extend eligibility requirements and allow additional time to use balance carryovers for participating employees.29 The federal changes pertain to how and when amounts that have already been contributed to such FSAs may be used, and do not result in the inclusion or exclusion of any federal gross income. Massachusetts follows the Code as currently amended and in effect with respect to the federal rules governing FSAs.30 Therefore, to the extent that an FSA qualifies as an eligible plan for federal purposes, it will also qualify as such for Massachusetts purposes.
(14) Child Tax Credit advance payments
ARPA made several changes to the federal Child Tax Credit provided by Code § 24, effective for the 2021 tax year. Further, ARPA added new Code § 7527A, which directs the IRS to establish a program that will make advance payments of a taxpayer's anticipated Child Tax Credit for the 2021 tax year.31
As previously noted, Massachusetts has its own tax credits that generally operate independently from federal tax credits and, consistent with this fact, has not conformed to the federal Child Tax Credit. Therefore, the changes to the federal Child Tax Credit have no impact for Massachusetts personal income tax purposes. In addition, amounts of federal Child Tax Credit received by taxpayers are not includable in federal gross income, and thus are not includable in Massachusetts gross income subject to the Massachusetts personal income tax.
C. Corporate Excise and Personal Income Tax Provisions Affecting Businesses
As noted above, the CAA 2021 and ARPA affected business taxpayers as well as individual taxpayers. The Massachusetts corporate excise generally adopts the current Code in determining items of gross income and deductions. In contrast, the Massachusetts personal income tax generally adopts the 2005 Code, but Specifically adopts certain provisions of the Code on a current basis, including Code § 62(a)(1), pertaining to the determination of certain trade or business expense deductions.32 The following is a discussion of the effect of the recent federal tax law changes on those businesses subject to the Massachusetts corporate excise and those whose tax is determined under the provisions of the Massachusetts personal income tax.
(1) Tax Implications of Paycheck Protection Program loan forgiveness, Economic Injury Disaster Loan advances, and Debt Relief Subsidies paid by the Small Business Administration
(a) In General
CTRA changed federal tax law to clarify that otherwise deductible business expenses are allowed to be deducted even if the expenses are paid with the proceeds of forgiven Paycheck Protection Program (“PPP”) loans.33 With respect to Economic Injury Disaster Loan (“EIDL”) advances, CTRA and ARPA provide that such EIDL advances are not included in the gross income of recipients and allow for the deduction of otherwise allowable business expenses paid using EIDL advances.34 CTRA also provides that debt relief subsidy payments by the Small Business Administration (“SBA”) are not included in the gross income of the person on whose behalf the payment is being made and allows for the deduction of otherwise allowable business expenses paid using such payments.35
(b) Massachusetts impact
Personal Income Tax. Massachusetts law allows personal income taxpayers to deduct from their gross income for the 2020 tax year cancellation of debt income related to forgiven PPP loans, EIDL advances, and debt relief subsidies paid by the SBA.36 See TIR 21-6. Recent legislation, “An Act Relative to Immediate COVID-19 Recovery Needs,” allows personal income taxpayers to deduct these amounts from their Massachusetts gross income for tax years beginning on or after January 1, 2021 as well.37 Thus, these amounts are deductible in determining Massachusetts taxable income. PPP borrowers may deduct expenses paid using PPP loan amounts to the extent that the expenses are otherwise deductible for federal income tax purposes. Recipients of EIDL advances and debt relief subsidies paid by the SBA may similarly deduct expenses paid with such amounts to the extent that the expenses are otherwise deductible for federal income tax purposes.
Costs and expenses paid using PPP loan amounts that are ultimately forgiven or using EIDL advances or debt relief subsidies paid by the SBA are not eligible for any of the credits that may be claimed under G.L. c. 62.
Corporate Excise. For Massachusetts corporate excise purposes, gross income means federal gross income as defined under the current Code.38 Thus, Massachusetts generally conforms to the federal exclusions from gross income for PPP loan forgiveness, EIDL advances, and debt relief subsidies paid by the SBA. As a result, these amounts are not included in Massachusetts taxable net income. PPP borrowers may deduct expenses paid using PPP loan amounts to the extent that the expenses are otherwise deductible for federal income tax purposes. Recipients of EIDL advances and debt relief subsidies paid by the SBA may similarly deduct expenses paid with such amounts to the extent that the expenses are otherwise deductible for federal income tax purposes.
Costs and expenses paid using PPP loan amounts that are ultimately forgiven or using EIDL advances or debt relief subsidies paid by the SBA are not eligible for any of the credits that may be claimed under G.L. c. 63.
(2) Tax Implications of Exclusion of Shuttered Venue Operator Grants and Restaurant Revitalization Grants
(a) In General
Federal law authorized the SBA to award grants to certain live performance venue operators or promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theatre operators, and talent representatives (“Shuttered Venue Operator Grants”).39 CTRA provides that recipients of such Shuttered Venue Operator Grants may exclude these grants from their gross income and may deduct otherwise allowable business expenses paid with such grants.40
ARPA allows the SBA to award Restaurant Revitalization Grants to eligible restaurants.41 ARPA provides that recipients of Restaurant Revitalization Grants may exclude such amounts from their gross income and may deduct otherwise allowable business expenses paid with such grants.42
(b) Massachusetts Impact
Personal Income Tax. Recent legislation, “An Act Relative to Immediate COVID-19 Recovery Needs,” allows personal income taxpayers to deduct Shuttered Venue Operator Grants and Restaurant Revitalization Grants from their Massachusetts gross income for tax years beginning on or after January 1, 2021.43 Thus, these amounts are deductible in determining Massachusetts taxable income. Recipients of Shuttered Venue Operator Grants and Restaurant Revitalization Grants may deduct expenses paid with such amounts to the extent that the expenses are otherwise deductible for federal income tax purposes.
Costs and expenses paid using either Shuttered Venue Operator Grants or Restaurant Revitalization Grants are not eligible for any of the credits that may be claimed under G.L. c. 62.
Corporate Excise. For purposes of the corporate excise, Massachusetts follows the current Code. Therefore, recipients of either Shuttered Venue Operator Grants or Restaurant Revitalization Grants that are subject to the corporate excise may exclude such grants from their Massachusetts gross income. Also, recipients of either Shuttered Venue Operator Grants or Restaurant Revitalization Grants may deduct expenses paid using such grants if the expenses are otherwise deductible for federal tax purposes.
Costs and expenses paid using either Shuttered Venue Operator Grants or Restaurant Revitalization Grants are not eligible for any of the credits that may be claimed under G.L. c. 63.
(3) Depreciation of certain residential rental property over 30-year period
TCDTRA reduces the depreciation period for certain residential rental property from 40 years to 30 years under the alternative depreciation system (“ADS”) provided by Code § 168(g).44 This federal tax law change is elective and applies retroactively to taxable years beginning after December 31, 2017.
Personal Income Tax. Massachusetts conforms to the current Code with respect to Code § 168(g) for purposes of the Massachusetts personal income tax because this section provides a trade or business expense deduction. Specifically, with respect to trade or business expense deductions, Massachusetts conforms to the Code “as amended and in effect for the taxable year.”45 Therefore, Massachusetts adopts the changes made by TCDTRA with respect to the depreciable life of residential rental property by an electing real property trade or business starting with the 2018 taxable year. The federal changes do not impact prior Massachusetts taxable years because those changes were not included in the Code “as amended and in effect” in those prior taxable years.
Corporate Excise. For corporate excise purposes, Massachusetts generally conforms to the Code “as amended and in effect for the taxable year.”46 Therefore, Massachusetts similarly adopts the new federal depreciation deduction starting with the 2018 taxable year. The new federal rules do not impact prior taxable years because they were not included in the Code “as amended and in effect” in prior taxable years.
(4) Employee Retention Credit
The TCDTRA expands the federal employee retention credit (“ERC”) established in the CARES Act.47 As originally enacted in the CARES Act, the ERC was set to expire for the quarter end This credit is for employers whose business operations were either fully or partially suspended as a direct result of a pandemic-related government shutdown order in tax years 2020 and 2021. Under the CARES Act, a taxpayer could not claim both a PPP loan and the ERC. However, the TCDTRA removed that limitation.48 To the extent a taxpayer claims the federal ERC in relation to certain wages paid, those wages may not be deducted as a trade or business expense for federal purposes.49
Personal Income Tax. Massachusetts has its own tax credits that generally operate independently from federal tax credits and, consistent with this fact, has not conformed to the ERC. For purposes of determining business deductions under the Massachusetts personal income tax, Massachusetts conforms to the current Code. Where a taxpayer cannot deduct wages paid for federal income tax purposes as a result of claiming the ERC, the taxpayer also cannot deduct such wages for Massachusetts personal income taxes. See DOR Directive 14-4.
Corporate Excise. Massachusetts has its own tax credits that generally operate independently from federal tax credits and, consistent with this fact, has not conformed to the ERC. Massachusetts follows the current Code for purposes of the corporate excise. Therefore, where a taxpayer cannot deduct wages paid for federal income tax purposes as a result of claiming the ERC, the taxpayer also cannot deduct such wages for Massachusetts corporate excise purposes. See DOR Directive 14-4.
(5) Qualified disaster relief charitable contributions
TCDTRA temporarily increases the charitable contributions deduction limitation in Code § 170(b)(2)(A) to 100% of taxable income for certain qualified disaster relief contributions made to charitable organizations by corporations from January 1, 2020 through February 25, 2021.50
Personal Income Tax. Massachusetts personal income taxpayers are not allowed a charitable contribution deduction for the 2020 or 2021 tax years. The Massachusetts charitable deduction authorized by G.L c. 62, § 3.B(a)(13) has been suspended since the 2002 tax year. While the deduction was scheduled to be reinstated for tax years beginning on or after January 1, 2021, the FY21 Budget delays that reinstatement for one additional year and the FY 22 Budget delays it for one additional subsequent year. See TIR 21-4; St. 2021, c. 24, §99. As this federal tax law change applies only through February 25, 2021, Massachusetts will not adopt it due to the delay in the reinstatement of the charitable contribution deduction.
Corporate Excise. Massachusetts follows the current Code for purposes of the corporate excise. Therefore, Massachusetts adopts the increased charitable contribution deduction limitation for certain qualified disaster relief contributions made to charitable organizations by corporations from January 1, 2020 through February 25, 2021.
(6) Expansion of disallowance of deduction for certain compensation paid by publicly traded corporations
ARPA amends Code § 162(m) to further limit the deduction of executive compensation by publicly traded corporations. Prior law limited the deduction to $1,000,000 for the three highest paid corporate officers. ARPA applies the limitation to the next five highest compensated employees, in addition to the top three.51 The additional disallowance is set to take effect for tax years beginning after December 31, 2026.
Personal Income Tax. The Massachusetts personal income tax follows the current Code with respect to trade or business expense deductions. Therefore, for such purposes Massachusetts conforms to ARPA's further limitation of deductions under Code § 162(m) starting with the 2027 taxable year.
Corporate Excise. The Massachusetts corporate excise conforms to the Code on a current Code basis including with respect to trade or business expense deductions. Thus, the new restrictions on the deduction of employee compensation apply to the corporate excise starting with the 2027 taxable year.
(7) Temporary allowance of full deduction for business meals
TCDTRA amends Code § 274(n) to allow businesses to deduct as a business expense the full amount of the cost of food and beverages provided by a restaurant on or after January 1, 2021 through December 31, 2022.52 This deduction had previously been limited by the federal Tax Cuts and Jobs Act (“TCJA”)53 to 50 percent of the cost of such food and beverages.54
Personal Income Tax. The Massachusetts personal income tax explicitly conforms to Code § 274(n) under the current Code.55 Therefore, for purposes of the personal income tax Massachusetts conforms to the changes to Code § 274(n) and allows the expanded deduction for the 2021 and 2022 taxable years.
Corporate Excise. The Massachusetts corporate excise conforms to deductions provided under the Code on a current Code basis. Therefore, for purposes of the corporate excise Massachusetts conforms to the changes to the deduction provided by Code § 274(n) and allows the expanded deduction for the 2021 and 2022 taxable years.
(8) Election to waive application of certain modifications to farming losses
CTRA amended Code § 172 to allow certain farmers to elect to disregard specific limitations on the federal net operating loss (“NOL”) deduction for losses incurred in tax years, 2018 through 2020.56 See TIR 20-9.
Personal Income Tax. The Massachusetts personal income tax does not allow the deduction of an NOL.57 Therefore, the changes to the NOL rules adopted by CTRA have no impact for Massachusetts personal income tax purposes.
Corporate Excise. The Massachusetts corporate excise allows an NOL deduction under the specific provisions of G.L. c. 63, §§ 30.4(ii) and 30.5, with no reference to the federal NOL rules set forth under Code § 172. Therefore, the suspension of Code § 172 limitations, and the further modification thereof by § 281 of the CTRA, have no impact for Massachusetts corporate excise purposes.
(9) Extension of limitation on non-corporate taxpayers' deduction of business losses
ARPA extends Code § 461(l), which limits the deductions attributable to a business of a non-corporate taxpayer.58 Code § 461(l) was set to expire for tax years beginning after December 31, 2025, but ARPA extends the limitation such that it will now expire for tax years beginning after December 31, 2026. Massachusetts follows IRC § 461 as in effect under the 2005 Code and does not follow the limitation in IRC § 461(l) because it was not in effect in 2005. See TIR 18-14. Therefore, the extension of the limitation in IRC § 461(l) on non-corporate taxpayers' deduction of business losses has no impact for Massachusetts personal income tax purposes or for Massachusetts corporate excise purposes.
Geoffrey E. Snyder
Commissioner of Revenue
January 12, 2022
FOOTNOTES
1This TIR does not contain an exhaustive list of the Massachusetts tax implications of the Acts. The changes discussed in this TIR are those identified by the Department of Revenue as most likely to be of interest to taxpayers and their advisers.
2See Public Law No. 116-260, signed into law on December 27, 2020.
3See Public Law No. 117-2, signed into law on March 11, 2021.
4G.L. c. 62, § 1(c).
5G.L. c. 63, § 30.3, 30.4.
6See TCDTRA, § 211; ARPA, §§ 9621-9624, 9626.
7G.L. c. 62, § 6(h)(1).
8Id.
9See CTRA § 285, which amends Code § 420(f); TCDTRA § 208, which amends Code § 401(a)(3); TCDTRA § 302(a).
10See generally G.L. c. 62, § 1(c), which adopts the retirement provisions in current Code §§ 401 through 420.
11See G.L. c. 62, § 2(a)(2)(F). In general, withdrawals from retirement accounts are taxable for both federal and state purposes to the extent they are determined to consist of contributions that were not previously subject to tax. Due to differences in the taxability of contributions for federal and state purposes, the amount of such contributions may be different for state and federal purposes, resulting in different taxable amounts.
12TCDTRA, § 101.
13CTRA, § 272.
14ARPA, § 9601.
15G.L. c. 62, § 2(a).
16ARPA, § 9042.
17St. 2021, c. 9, § 26(a).
18ARPA, § 9675.
19G.L. c. 62, § 1(c).
20CARES Act, § 2205.
21TCDTRA, § 120.
22ARPA, § 9632.
23TCDTRA, § 103.
24ARPA, § 9501.
25TCDTRA, § 104.
26TCDTRA, § 304(b).
27Id.
28TCDTRA, § 214.
29Id.
30G.L. c. 62, § 1(c).
31ARPA, § 9611.
32G.L. c. 62, § 1(c).
33CTRA, § 276(a).
34CTRA, § 276(b); ARPA, § 9672.
35CTRA, § 276(c).
36St. 2021, c. 9 § 12.
37St. 2021, c. 102 § 77.
38G.L. c. 63, § 30.3, 30.4; § 32D(a)(ii).
39Economic Aid to Hard-Hit Small Businesses, Nonprofts, and Venues Act, § 324.
40CTRA, § 278(d)(2).
41ARPA, § 5003.
42ARPA, § 9673.
43St. 2021, c. 102 § 77.
44TCDTRA, § 202.
45G.L. c. 62, § 1(c).
46G.L. c. 63, § 30.3, 30.4.
47CARES Act, § 2301; TCDTRA, § 206-207,
48TCDTRA, § 206(c)(2)(B)(i).
49CARES Act, § 2301(e).
50TCDTRA, § 304(a).
51ARPA, § 9708.
52TCDTRA, § 210.
53See Public Law No. 115-97, signed into law on December 22, 2017.
54TCJA, § 13304(a)(2)
55G.L. c. 62, § 1(c); G.L. c. 63, § 30.4.
56CTRA, § 281.
57G.L. 62, § 2(d)(1)(C).
58ARPA, § 9041.
END FOOTNOTES