State and Municipal Bond Interest

For the income portion of the corporate excise tax, "gross income" means gross income as defined under the Internal Revenue Code which includes interest from bonds, notes and evidences of indebtedness of the federal government, plus interest from bonds, notes, etc. issued by any state including Massachusetts.

The interest from certain bonds issued by Massachusetts agencies or instrumentalities may be exempt from all direct taxation by the enabling legislation for those bonds. However, this interest is not excluded from the computation of the Massachusetts corporate excises because the excises are indirect taxes levied on the right or privilege of corporate existence or doing business in Massachusetts in a corporate capacity. Therefore, the interest is merely used to measure the value of the right or privilege being taxed.

Massachusetts References:
  • M.G.L. Chapter 63, Section 30.3