Governor Deval Patrick's Budget Recommendation - House 2 Fiscal Year 2015

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Changes to Existing Tax Laws

SECTION 11.   [Tax non-insurance subsidiaries of insurance companies like other business corporations]
(A) Chapter 63 of the General Laws is hereby amended by inserting after section 29E the following section:-
Section 29F. (a) When 50 per cent or more of the capital interests or profits interest in an entity that is engaged in a non-insurance trade or business and that would otherwise be treated as a partnership or disregarded entity for purposes of this chapter is owned, directly or indirectly, by an insurance company described in sections 20 to 29E, inclusive, the net income that passes through to that insurance company with respect to the non-insurance trade or business shall be taxed to the partnership or disregarded entity as if the partnership or disregarded entity were a corporation subject to tax under this chapter.
(b) A partnership or disregarded entity, described in subsection (a), shall file a return in the manner of a business corporation under the applicable section of this chapter with respect to the non-insurance income and activities of such partnership or disregarded entity, and shall pay the associated excise, taking into account only the portion of such net income that would otherwise pass through to an insurance company described in sections 20 to 29E, inclusive. To the extent applicable, income that is taxable to the partnership or disregarded entity under this section, and any related tax attributes and activities, shall be included and taken into account in a combined report filed under section 32B.
(c) As used in this section, the term "partnership or disregarded entity" shall include a real estate investment trust, in this subsection called a REIT, within the meaning of Section 856 of the Internal Revenue Code of 1986, as amended. In any case in which this section applies to the ownership of a REIT, the dividends paid deduction to which the REIT is entitled under the Code, to the extent attributable to the income taxed under this section, shall not be recognized.
(d) The commissioner may issue regulations or other guidance to implement this section.
(B) Subsection (A) shall be effective for tax years beginning on or after January 1, 2015.

[Tax security corporations like other business corporations]
(C) Section 32B of chapter 63 of the General Laws, as appearing in the 2012 Official Edition, is hereby amended by striking out, in line 60, the following words:- 38B or.
(D) Section 38B of said chapter 63 is hereby repealed.
(E) Section 68C of said chapter 63, as amended by section 42 of chapter 46 of the acts of 2013, is hereby further amended by striking out clause (2).
(F) Subsections (C), inclusive, shall apply to tax years beginning on or after January 1, 2015.

[Expand room occupancy excise to include transient accommodations]
(G) Section 1 of chapter 64G of the General Laws, as appearing in the 2012 Official Edition, is hereby amended by striking out the word "four", in line 4, and inserting in place thereof the following figure:-1.
(H) Said section 1 of said chapter 64G, as so appearing, is hereby amended by striking out subsection (b).
(I) Said section 1 of said chapter 64G, as so appearing, is hereby amended by inserting after the word "motel", in line 29, the following words:- or other transient accommodations.
(J) Said section 1 of said chapter 64G, as so appearing, is hereby further amended by inserting after the word "rooms", in line 33, the following words:- or other transient accommodations.
(K) Said section 1 of said chapter 64G, as so appearing, is hereby further amended by adding the following subsections:-
(k) "Transient accommodations", a vacation or leisure accommodation, including, but not limited to an apartment, a single or multiple family housing, a cottage, a condominium or a time-share unit which is rented to occupants for a period of 90 consecutive days or less, regardless of whether such use and possession is as a lessee, tenant, guest or licensee, but not including accommodations provided to seasonal employees by employers.
(l) "Vacation or leisure accommodation", occupancy for a price to be paid and intended at the time of contract or agreement to be for a period of 90 consecutive days or less, regardless of whether such use and possession is as lessee, tenant, guest or licensee.
(L) Section 3 of said chapter 64G, as so appearing, is hereby amended by striking out, in line 3, the words "or motel" and inserting in place thereof the following words:- , motel or other transient accommodations.
(M) Section 3A of said chapter 64G, as so appearing, is hereby amended by deleting the words "or motel", in lines 4 and 9, and inserting in place thereof in each instance the following words:- , motel or other transient accommodations.
(N) Said chapter 64G is hereby further amended by adding the following section:-
Section 13. For transient accommodations subject to this section, the owner of the apartment, single or multiple family housing, cottage, condominium or time-share unit shall be responsible for assessing, collecting, reporting and paying over the tax as described for operators in sections 3, 3A, 4, 5, 6 and 7A, and shall be liable in the same manner as operators in section 7B. If a property owner enters into a contract under which a real estate agent, manager or management company collects the rent, that real estate agent, manager or management company shall collect the room occupancy excise and shall be jointly liable with the owner for payment of tax amounts to the department of revenue. The commissioner of revenue may adopt regulations for the reporting, collecting, remitting and enforcement of this excise.
(O) Subsections (G) to (N), inclusive, shall be effective for transfers of occupancy subject to the excise under chapter 64G of the General Laws, commencing on or after August 1, 2014.

[Clarify that present room occupancy excise applies to Internet room resellers]
(P) Section 1 of chapter 64G of the General Laws, as appearing in the 2012 Official Edition, is hereby amended by inserting after paragraph (b) thereof the following paragraph:-
(b1/2) "Doing business in the commonwealth", ownership or operation of a bed and breakfast establishment, hotel, lodging house or motel that islocated in the commonwealth, maintenance otherwise of a place of business in the commonwealth, the presence of an employee in the commonwealth on more than a de minimis basis, solicitation in the commonwealth of orders for transfer of occupancy of accommodations located in the commonwealth, solicitation in the commonwealth by a reseller of a contract or other cooperative arrangement with an operator with respect to accommodations located in the commonwealth, inspection in the commonwealth of accommodations that may be the subject of a cooperative arrangement between an operator and a reseller, or other exploitation of the market for accommodations or resale of accommodations located in the commonwealth by any means whatsoever, including, but not limited to, salesmen, solicitors or representatives in the commonwealth, whether those salesmen, solicitors or representatives are employed by the operator or reseller, by a person affiliated with the operator or the reseller by common ownership, or by any other party. This definition is intended to extend the jurisdiction of the commonwealth over operators and resellers to the full extent authorized by the Constitution and the laws of the United States.
(Q) Said section 1 of said chapter 64G, as so appearing, is hereby further amended by inserting after the word "operator", in line 49, the following words:- or the room reseller.
(R) Said section 1 of said chapter 64G, as so appearing, is hereby further amended by adding the following paragraphs:-
(k) "Room reseller" or "Reseller", any person having any right, permission, license, or other authority from or through an operator to reserve or arrange transfer of occupancy of accommodations the transfer of which is subject to this chapter, such that the occupant pays all or a portion of the rent to the reseller. The term "Room Reseller" or "Reseller" includes, but is not limited to, sellers of travel packages as defined in this chapter.
(l) "Travel package," a room or rooms bundled with 1 or more separate components such as air transportation, car rental or similar items and charged to the customer or occupant for a single retail price.
(S) Said chapter 64G is hereby further amended by striking out section 3 and inserting in place thereof the following section:
Section 3. An excise is hereby imposed upon the transfer of occupancy of any room or rooms in a bed and breakfast establishment, hotel, lodging house, or motel in this commonwealth by any operator or room reseller doing business in the commonwealth at the rate of 5 per cent of the total amount of rent for each occupancy. No excise shall be imposed if the total amount of rent paid by the occupant is less than $15 per day or its equivalent. The operator or room reseller shall pay the excise to the commissioner at the time provided for filing the return required by section 16 of chapter 62C.
The value of the transfer of any room or rooms bundled as part of a travel package may be determined from the room reseller's books and records that are kept in the regular course of business.
(T) The first paragraph of section 3A of said chapter 64G, as appearing in the 2012 Official Edition, is hereby amended by striking out the first, second and third sentences and inserting in place thereof the following 3 sentences:- A city or town that accepts this section may impose a local excise tax upon the transfer of occupancy of any room or rooms in a bed and breakfast establishment, hotel, lodging house or motel located within the city or town by any operator or room reseller at a rate up to, but not exceeding, 6 per cent of the total amount of rent paid by the occupant for the occupancy, but the city of Boston may impose a local excise upon the transfer of occupancy of any room in a bed and breakfast establishment, hotel, lodging house or motel located within the city by any operator or room reseller at the rate of up to but not exceeding 6.5 per cent of the total amount of rent paid by the occupant for the occupancy. No excise shall be imposed if the total amount of rent paid by the occupant is less than $15 per day or its equivalent or if the accommodation is exempt under section 2. The operator or room reseller shall pay the local excise tax imposed under this section to the commissioner at the same time and in the same manner as the excise tax due the commonwealth.
(U) Said chapter 64G is hereby further amended by striking out sections 4 to 6, inclusive, and inserting in place thereof the following 4 sections:
Section 3B. Notwithstanding any other provision of this chapter, in cases in which occupancy is transferred through the use of a room reseller, the application of the excise shall be as follows: If the room reseller is required to register under section 6 to collect the excise, the room reseller shall collect and pay to the commissioner the excise upon the amount of rent paid by the occupant to the room reseller, less the amount of rent that the reseller has paid to the operator. Whether or not the room reseller is so registered, the operator shall collect and pay to the commissioner the excise upon the amount of rent paid to the operator by the reseller or the occupant.
No assessment shall be made against an operator on the basis of an incorrect remittance of the excise under this chapter by an unaffiliated room reseller and no assessment shall be made against a room reseller on the basis of an incorrect remittance of the excise under this chapter by an unaffiliated operator.
Section 4. Reimbursement for the excise imposed under sections 3 and 3A shall be paid by the occupant or the room reseller to the operator and by the occupant to the room reseller, as the case may be, and each operator and room reseller doing business in the commonwealth shall add to the rent and shall collect from the occupant or the room reseller the full amount of the excise imposed, in accordance with sections 3 and 3A, and that excise shall be a debt to the operator or room reseller, when so added to the rent, and shall be recoverable at law in the same manner as other debts.
Section 5. The amount of the excise collected by the operator or the room reseller under this chapter shall be stated and charged separately from the rent and shown separately on any record thereof at the time the transfer of occupancy is made, or on any evidence of the transfer issued or used by the operator or the room reseller. A room reseller shall not be required to disclose to the occupant the amount of tax charged by the operator. The reseller shall represent to the occupant that the separately stated taxes charged by the reseller include taxes charged by the operator.
Section 6. No person shall operate a bed and breakfast establishment, hotel, lodging house or motel in this commonwealth, or do business as a room reseller in the commonwealth, unless a certificate of registration has been issued to that person in accordance with section 67 of chapter 62C.
(V) Section 7A of said chapter 64G, as appearing in the 2012 Official Edition, is hereby amended by inserting after the word "operator", in line 1 and in line 7, the following words:- or room reseller .
(W) Said chapter 64G is hereby further amended by striking out section 7B and inserting in place thereof the following section:-
Section 7B. Every operator or room reseller who fails to pay to the commissioner any sums required to be paid by this chapter shall be personally and individually liable for those amounts to the commonwealth. The terms "operator" and "room reseller", as used in this section, include an officer or employee of a corporation, or a member or employee of a partnership, who as an officer, employee or member is under a duty to pay over the taxes imposed by this chapter.
(X) Section 12 of said chapter 64G, as so appearing, is hereby amended by inserting after the word "operator", in line 5, the following words:- and each room reseller.
(Y) For purposes of the convention center surcharge imposed by section 9 of chapter 152 of the acts of 1997, as amended, the term "operator" shall mean "operator or room reseller."
(Z) Subsections (P) to (Y), inclusive, shall be effective for transfers of occupancy subject to the excise under chapter 64G of the General Laws, commencing on or after August 1, 2014.

[Repeal exemption of candy and soda from sales tax]
(AA) Section 1 of chapter 64H of the General Laws is hereby amended by inserting after the definition of "Business", as appearing in the 2012 Official Edition, the following definition:-
"Candy", a preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts or other ingredients or flavorings in the form of bars, drops, or pieces. "Candy" shall not include any preparation containing flour and shall require no refrigeration.
(BB) Said section 1 of said chapter 64H is hereby further amended by inserting after the definition of "Services", as amended by sections 2 and 3 of chapter 95 of the acts of 2013, the following definition:-
"Soft drinks", non-alcoholic beverages that contain natural or artificial sweeteners, but not including beverages that contain milk or milk products, soy, rice or similar milk substitutes, or vegetable or fruit juice.
(CC) Section 6 of said chapter 64H, as appearing in the 2012 Official Edition, is hereby amended by striking out, in line 77, the words ", soft drinks".
(DD) Said section 6 of said chapter 64H, as so appearing, is hereby further amended by striking out, in line 78, the words ", candy and confectionary".
(EE) Said section 6 of said chapter 64H, as so appearing, is hereby further amended by inserting after the word "include", in line 80, the following words:- soft drinks and candy, as defined in section 1,.
(FF) Said section 6 of said chapter 64H, as so appearing, is hereby further amended by striking out, in lines 115 to 116, the words "in the instance in which it sells only snacks and candy with a sales price of less than $3.50" and inserting in place thereof the following words:- to the extent that it sells food products with a sales price of less than $3.50; provided further, that candy and soft drinks as defined in section 1 are subject to tax regardless of whether the vending machine from which they are sold is considered an eating establishment or not.
(FF) Said section 6 of said chapter 64H, as so appearing, is hereby further amended by inserting after the word "Beverages", in line 127, the following words:- , except soft drinks,.
 
 

Summary:
This section changes present tax laws by: * taxing non-insurance subsidiaries of insurance companies like other business corporations; * taxing security corporations like other business corporations; * expanding the room occupancy excise to include transient accommodations; * clarifying that the room occupancy excise applies to Internet room resellers; and * repealing the exemption of candy and soda from the sales tax.



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