June 20, 1989

You represent (Mutual Bank), a mutually-owned Massachusetts savings bank which is currently restructuring under G.L. c. 167H. Under the plan of reorganization, the Mutual Bank will become a mutually-owned holding company (Mutual Holding Company) by placing the substantial portion of its assets, including all of its deposits, into a newly-formed stock savings bank (Subsidiary Bank) in a transaction qualifying under § 351 of the Internal Revenue Code. The Mutual Holding Company will retain all the shares of the Subsidiary Bank as well as the shares of two existing but inactive subsidiaries of the Mutual Bank [.] The Mutual Holding Company will be mutually owned by the depositors in the Subsidiary Bank. See G.L. c. 167H.

I. Tax Status of Mutual Holding Company

You have requested a ruling on the tax status of a mutual holding company organized under G.L. c. 167H. This chapter was added by St. 1987, c. 630, and became effective on January 26, 1988. You assert that a mutual holding company is not taxable under G.L. c. 62, 63. Except as stated below, we agree.

A. Bank Excise

We note first that a mutual holding company is not a "bank" subject to the bank excise under G.L. c. 63, §§ 1 & 2. Mutual holding companies are forbidden by statute to accept deposits. G.L. c. 167H, § 6. Furthermore, you state that the Mutual Holding Company will not make loans to unaffiliated third parties in the regular course of its business.

The activities of mutual holding companies are more akin to those of a bank holding company than to those of a bank. Indeed, mutual holding companies are expressly subject to the limitations and restrictions placed on bank holding companies by G.L. c. 167A and federal law and regulations. G.L. c. 167H, § 6. Thus, the Mutual Holding Company is not taxable under G.L. c. 63, § 2.

B. Domestic Corporation

Next, we observe that the Mutual Holding Company does not fall within the definition of domestic corporation under G.L. c. 63, § 30(1), which includes:
every corporation organized under or subject to chapter one hundred fifty-six, chapter one hundred and fifty-six A, chapter one hundred and fifty six B or chapter one hundred and eighty which has privileges, powers, rights or immunities not possessed by individuals or partnerships….

A mutual holding company is obviously not organized under any of the chapters specified. Moreover, it is not directly "subject to" these chapters because it is not a corporation having a capital stock and established for the purpose of carrying on business for a profit under G.L. c. 156, § 2; 156B § 3; and because it is not organized for the purposes stated in G.L. c. 180, § 4; 156A, § 1. Finally, chapters 167A, 167H, 168 do not indirectly subject mutual holding companies to the provisions of chapters 156, 156A, 156B, or 180. [1]

Because a mutual holding company is neither a bank nor a domestic corporation nor any other entity described a G.L. c. 63, we conclude that it is not subject to the excise under chapter 63 unless it does business as a savings and insurance bank under G.L. c. 178, in which case it must pay the excise stated in G.L. c. 63, § 18.

C. Chapter 62

We also agree that a mutual holding company is not an entity subject to the income tax under G.L. c. 62. It is not an individual or a partnership and, because it lacks transferable shares, it is not a corporate trust. Finally, a mutual holding company is not, by virtue of its organization alone, a corporate fiduciary within the meaning of G.L. c. 62, § 14. However, the Mutual Holding Company may become subject to G.L. c. 62, § 14, if it otherwise receives income in a fiduciary capacity.

II. Taxable Year

You have asked how the Mutual Holding Company and its subsidiaries should file Massachusetts returns in the year of reorganization. Because the Mutual Holding Company is not under current law subject to G.L. c. 62, 63, it should not file returns. However, all income earned before the reorganization by the Mutual Bank is subject to the bank excise, as is all income of the Subsidiary Bank after the reorganization.

The Subsidiary Bank must use the same taxable year that it uses for federal purposes, which, in this case, is the same taxable year previously employed by the Mutual Bank. See G.L. c. 63, § 1 (defining taxable year). In the year of reorganization, the Subsidiary Bank shall file a full year return and shall include in its return all of the income attributable to the Mutual Bank before the reorganization, but after the end of the Mutual Bank's last taxable year, and all the income of the Subsidiary Bank after the date of reorganization. The return shall not include income attributable to the Mutual Holding Company after the reorganization. The existing, inactive subsidiaries of the Mutual Bank are unaffected by this ruling and should continue to file appropriate returns.

III. Conclusion

Although we believe that the statutory gap which compels this ruling is due to legislative oversight rather than to deliberated legislative policy, we agree that under current law a mutual holding company organized under G.L. c. 167H is not subject to tax under G.L. c. 62, 63, except as stated above. We emphasize that this ruling is limited to chapters 62 and 63 and does not preclude, for example, any sales and use tax liability or local property tax liability of a mutual holding company.

Very truly yours,
/s/Stephen W. Kidder
Stephen W. Kidder
Commissioner of Revenue
SWK:KKP:kwb
June 20, 1989
LR 89-8

[1] Although G.L. c. 167A, § 4A(5), applies G.L. c. 156B §§ 86-98 to certain bank holding company acquisitions, these provisions would appear to grant rights to minority shareholders of the target company and not to subject the acquiring holding company (which in the case of a mutual holding company, can have no minority shareholders) to chapter 156B. Furthermore, G.L. c. 167A, § 4A, applies to acquisitions by companies "having capital stock divided into shares."