Under a grant of authority provided by G.L. chs. 62C, ("the tax administration statute") and G.L. c. 119A, ("the child support enforcement statute") the Commissioner of Revenue ("Commissioner") is authorized to institute collection procedures for all delinquent taxes as well as delinquent child support payments that have accrued pursuant to an order or judgment for support, issued by a court or administrative agency of competent jurisdiction. See G.L. c. 62C, §§ 50, 53; G.L. c. 119A, § 6. In connection with these grants of authority, the Commissioner may require certain financial institutions, including banks, credit unions, brokers, brokerage firms, and entities administering or distributing mutual funds to provide information relating to income paid to individuals subject to tax under G.L. c. 62. See G.L. c. 62C, § 8. The Commissioner may use such information in connection with his obligation to enforce the collection provisions of G.L. chs. 62C and 119A.

The purpose of this Directive is to prescribe the procedures to be followed and the information to be included by depository institutions such as banks and credit unions, as well as brokers, brokerage firms, entities managing or distributing mutual funds, investment companies, and unit investment trusts (hereinafter collectively referred to as "designated reporting institutions") that are required by G.L. c. 62C, § 8, to file an annual report with the Commissioner of Revenue of dividends, interest or other amounts (hereinafter collectively referred to as "reportable accounts") generated in connection with accounts maintained by such entities.

This Directive extends the information reporting requirements previously set forth in Department of Revenue Directive 92-5 to brokers, brokerage firms, entities managing or distributing mutual funds, investment companies, unit investment trusts, and other entities paying or crediting interest or dividends on shares of stock, life insurance, mutual funds, unit investment trusts or brokerage accounts to individuals subject to tax under G.L. c. 62. To the extent that any provision of this Directive is inconsistent with the provisions of DOR Directive 92-5, this Directive supersedes those inconsistent provisions.

ISSUE 1: Who must file annual information reports with the Commissioner in connection with interest, dividends or other amounts paid or credited to certain accounts?

DIRECTIVE 1: The reporting requirements of this directive apply to all "designated reporting institutions", as defined in this Directive. For purposes of this Directive, the term "designated reporting institutions" includes all financial institutions doing business in Massachusetts as depository institutions, including all banks and credit unions doing business in Massachusetts, regardless of where organized or chartered, paying interest on deposits and other amounts to individuals subject to tax under G.L. c. 62. [1] Such institutions include commercial banks, trust companies, savings banks, savings and loan associations, building and loan associations, cooperative banks, homestead associations, and all similar organizations.

Additionally, the term "designated reporting institutions" includes all brokers, brokerage firms, mutual funds, entities managing or distributing mutual funds, investment companies, and unit investment trusts doing business in Massachusetts paying or crediting interest, dividends or other amounts generated by mutual funds or other brokerage accounts to individuals subject to tax under G.L. c. 62. All designated reporting institutions must file such reports in accordance with the procedures described in Directive 3, below.

ISSUE 2: What types of accounts maintained by designated reporting institutions are subject to the annual information reporting requirements set forth in this Directive?

DIRECTIVE 2: The reporting requirements of this Directive apply to all "reportable accounts," as defined in this Directive. For purposes of this Directive, the term "reportable accounts" refers to all accounts for which dividends, interest, or other similar amounts (regardless of how such amounts are designated) are paid or credited to individuals subject to tax under G.L. c. 62 and reportable on I.R.S. Form 1099-INT, Form 1099-DIV, or Form 1099-B. Such accounts are subject to Massachusetts annual information reporting requirements to the extent that they are subject to annual information reporting requirements under the Internal Revenue Code and the applicable regulations promulgated thereunder.

Accounts of individuals subject to tax under G.L. c. 62 for which dividends, interest or other similar amounts have been paid or credited by brokers, brokerage firms, mutual funds, mutual fund managers or distributors, unit investment trusts, commercial banks, trust companies, savings banks, savings and loan associations, building and loan associations, cooperative banks, homestead associations, credit unions, and all similar organizations are subject to reporting requirements of this Directive.

In effect, this Directive requires designated reporting institutions to file reports of interest on debt instruments, and dividends paid or credited on shares of stock, life insurance, and mutual funds, including money market mutual funds, and other types of brokerage accounts, regardless of how designated, whether or not amounts paid on such accounts previously were required to be made in accordance with the requirements set forth in Department of Revenue Directive 92-5. All such payments are subject to all the reporting requirements set forth in this Directive.

ISSUE 3: What are the requirements for filing annual information reports by designated reporting institutions?

DIRECTIVE 3: All designated reporting institutions, as defined in this Directive, must file reports of interest, dividends or other similar amounts paid or credited to all reportable accounts in any calendar year on or before February 28 of each year for the preceding calendar year. Such reports must be filed with the Commissioner in the standardized format required by the Internal Revenue Service, as set forth in Internal Revenue Publication 1220. Institutions required to file more than 250 of such reports relating to interest or other amounts paid on accounts on Form 1099-INT, Form 1099-DIV, or Form 1099-B must file the required reports with the Commissioner on magnetic media in accordance with the procedures set forth in Internal Revenue Publication 1220. The Commissioner will accept an exact copy of the magnetic filing that is submitted to the Internal Revenue Service for this purpose. The Commissioner will not accept electronic filing of such information reports at this time. Affected institutions required to file 250 or fewer of such reports may utilize magnetic media filing, but are not required to do so. In the alternative, such institutions may submit paper filings of Form 1099-INT, Form 1099-DIV, or Form 1099-B in lieu of magnetic media filing. Unlike the Internal Revenue Service requirements for seeking pre-approval to file on magnetic media set forth in Internal Revenue Publication 1220, payors of interest or other amounts are not required to seek similar pre-approval from the Commissioner in order to utilize magnetic media filing for Massachusetts information reporting purposes.

ISSUE 4: May the Form 1099 annual information report required by this Directive be combined with the Form W-2 information reporting required by the Internal Revenue Service?

DIRECTIVE 4: No. This Directive applies only to Form 1099 information reporting requirements and not to Form W-2 reporting requirements. As a general rule, information required for Form W-2 reporting purposes may not be combined on magnetic media with the information required by this Directive. Information required for Form W-2 reporting purposes must be filed with the Social Security Administration in the format prescribed by that agency. If, for some reason, the information required by this Directive is combined on magnetic media with W-2 Form information, the magnetic media must be accompanied by a Department of Revenue Form M-3 Reconciliation Form, and must be sent to the Massachusetts Department of Revenue, Data Integration Bureau, Room 500, Boston, MA 02204.

ISSUE 5: What documentation should be included with a magnetic tape when it is submitted for processing?

DIRECTIVE 5: All designated reporting institutions required by this Directive and by G.L. c. 62C, § 8, to file annual information reports must submit to the Commissioner both a federal "Transmittal of Information Returns Magnetically/Electronically" form (Form 4802 or 4804) and a Massachusetts "1099 Tax Information Transmittal Report" together with each magnetic tape filing.

ISSUE 6: Are corrected information returns required to be submitted to Massachusetts?

DIRECTIVE 6: Yes. All designated reporting institutions subject to the reporting requirements of this Directive having in excess of 250 corrected returns must file such corrected returns in the same manner required for original returns (i.e. on magnetic media). Designated reporting institutions having 250 or fewer corrected returns may file such returns either on paper or on magnetic media. Corrected returns must be filed with the Commissioner under the same terms and conditions that apply to federal information report filings, as described in Internal Revenue Publication 1220.

ISSUE 7: Under what circumstances may an extension of time for filing information returns be granted?

DIRECTIVE 7: Any institution subject to the reporting requirements of this Directive may request in writing an extension of time to file returns required by this Directive. Extensions of time are not automatically granted and the reporting institution must demonstrate good cause for requesting the extension. An extension of time for filing information returns may be granted provided that a written request for extension, accompanied by a copy of the Internal Revenue Service "Request for Extension of Time to File Information Returns" form (Form 8809), is filed with the Commissioner by February 28 following the close of the calendar year in which the amounts were generated. All requests for extension of time to file returns required by this Directive must be sent to the Massachusetts Department of Revenue, Taxpayer Assistance Bureau, 100 Cambridge Street, Boston, MA 02204.

GENERAL DISCUSSION OF LAW:

1. Who must file annual information returns; information required

Chapter 62C of the Massachusetts General Laws requires taxpayers to file certain returns and other statements of information with the Massachusetts Department of Revenue. Section 8 of Chapter 62C requires every individual, corporation, partnership, association, trust, estate, organization, society, club, governmental agency or any other entity doing business in the Commonwealth to report annually to the Commissioner, in such form as the Commissioner may prescribe from time to time, the names and addresses of all residents of the Commonwealth and other persons deriving income in the Commonwealth to whom it has paid any income subject to taxation under Chapter 62 during the preceding calendar year. This income must be reported on the same basis as is required by the federal government under the Internal Revenue Code and must state the amount of such income so paid by it. Id. The same basis of reporting must be used for income that is subject to taxation under Chapter 62 but is not subject to taxation under the Code. Id. Based on the provisions of Chapter 62C, every financial institution doing business in Massachusetts as a depository institution, including banks and credit unions, as well as other entities, such as brokers, brokerage firms, mutual funds, entities managing or distributing mutual funds, investment companies, and unit investment trusts, must make a return to the Commissioner giving such information as the Commissioner may deem necessary for the determination of income paid that is subject to tax under G.L. c. 62. See G.L. c. 62C, § 8.

2. How annual information returns must be filed

The Commissioner has broad authority to prescribe rulings, regulations and the forms necessary for the implementation of the tax laws of the Commonwealth. See G.L. c. 62C, § 3. Many types of information returns must be filed with the Internal Revenue Service on magnetic media if more than a specified number of returns are received for a calendar year. See I.R.C. § 6011(e); Treas. Reg. § 301.6011-2. In order to facilitate the transmittal of this information for Massachusetts information reporting purposes, the Commissioner will accept an exact copy of the magnetic filing that is submitted to the Internal Revenue Service in accordance with the procedures set forth in Internal Revenue Publication 1220. The Commissioner will not accept electronic filing of such information reports at this time.

/s/Mitchell Adams
Mitchell Adams
Commissioner of Revenue

MA:HMP:wrd

December 1, 1993

DOR-D 93-5



[1] In general, every depository institution doing business in Massachusetts whose payments of interest constitute Part B income as provided by G.L. c. 62, § 2, is subject to these information reporting requirements.