Section 13213 of the Omnibus Budget Reconciliation Act of 1993 ("OBRA," P.L. 103-66) amended Sections 82 and 132 of the Internal Revenue Code (the "Code") with respect to the federal income tax treatment of certain moving expense reimbursements received or accrued after December 31, 1993. The purpose of this TIR is to explain the effect of these changes on the reporting of Massachusetts gross income.
Prior to its amendment by OBRA, Section 82 of the Code provided that "there shall be included in gross income (as compensation for services) any amount received or accrued . . . as a payment for or reimbursement of expenses of moving from one residence to another residence which is attributable to employment or self-employment." Section 13213 of OBRA amended Sections 82 and 132 of the Code to exclude from federal gross income those amounts meeting the definition of "qualified moving expense reimbursement" set out in section 132(g) of the Code. As a result, qualified reimbursements for expenses incurred after December 31, 1993, are not included in federal gross income beginning with the 1994 tax year.
The OBRA amendments do not change the Massachusetts personal income tax treatment of moving expense reimbursements because Massachusetts adopts the Internal Revenue Code as amended on January 1, 1988 ("the 1988 Code") in determining Massachusetts gross income. See G.L. c. 62, §§ 1(c) and 2(a). Under Section 82 of the 1988 Code, gross income includes all amounts paid by an employer and received or accrued directly or indirectly by an individual as a payment or reimbursement of the expenses of an employment-related move from one residence to another. See DOR Directive 93-3. Therefore, although certain of such amounts are now excluded from federal gross income pursuant to the OBRA amendments, all such amounts continue to be included in Massachusetts gross income and all such amounts continue to be not deductible under the Massachusetts personal income tax. See id.
Massachusetts reporting requirements
A. Reporting for 1994 returns
For Massachusetts personal income tax purposes, all employment related moving expense reimbursements must be included in Massachusetts gross income. For federal income tax purposes, employers have been instructed to code Section 132(g) qualified moving expense reimbursements with the letter "P" and report them in box 13 of the Federal Form W-2. For Massachusetts reporting purposes, individuals having amounts in box 13 which are coded with the letter "P" must include them as part of Massachusetts gross income in Item 2 for Form 1 and Form ABC filers, and, where applicable, in Item 3 for Form 1-NR filers. Taxpayers who need to file amended returns in order to comply with the requirements of this TIR should file Form 33X, Massachusetts Amended Individual Income Tax Return, and report these amounts in Item 5.
B. Reporting for future years
Until Massachusetts adopts the Internal Revenue Code that incorporates the federal income tax treatment of qualified moving expense reimbursements, employers should include such reimbursements in State wages, Box 17 on the Form W-2, and must code such amounts with letter "P" and list them in Box 13.
Commissioner of Revenue