June 6, 1980
In your letter of April 28, 1980, you inquired about the Massachusetts income taxation of interest from "Mini-Money Certificates" offered by the ********** National Bank.
These "Mini-Money Certificates" (MMCs) have a minimum purchase price of $3,000.00, have a term of 89 days, and may not be redeemed prior to maturity without forfeiting all interest. Security for the investment is provided by Treasury Bills or other obligations of the federal government. MMC purchasers do not receive the actual government obligations securing the certificate. MMCs are not deposits and are not insured by the Federal Deposit Insurance Corporation.
General Laws Chapter 62, Section 2 defines Massachusetts gross income as federal gross income with certain modifications which are not here relevant. Massachusetts gross income is divided into Part A taxable income, which is taxed at the rate of 10%, and Part B taxable income, which is taxed at the rate of 5%. Part A income is composed of dividends, net capital gain, and interest other than interest on savings deposits in banking institutions in Massachusetts. Part B income is all other income subject to taxation.
Based on the foregoing, it is ruled that interest paid by ************ National Bank on its "Mini Money Certificates" is not interest from savings deposits. Therefore, the interest is Part A income and is taxable at the rate of 10%, plus surcharge.
Very truly yours
/s/L. Joyce Hampers
L. Joyce Hampers
Commissioner of Revenue