Recently enacted legislation changes the taxation of financial institutions doing business in Massachusetts. Sections 1 and 2 of Chapter 63 of the Massachusetts General Laws (Taxation of Banks, Trust Companies, etc.) have been stricken and replaced by new statutory provisions contained in St. 1995, c. 81, An Act Relative to the Equitable Taxation of Financial Institutions. The amendments to G.L. c. 63 (contained in new §§ 1,2 and 2A) generally apply to tax years beginning on or after January 1, 1995. 
II. Definition of Financial Institution:
Prior to this statutory change, the excise under G.L. c. 63, §§ 1 and 2 generally applied to banks, banking associations, trust companies, and savings and loan associations existing by authority of Massachusetts or federal laws or the laws of a foreign country, but not banks organized under the laws of another state.
The new provisions apply to a broader range of financial institutions, including the following:
(a) any bank, banking association, trust company, federal or state savings and loan association, including banks for cooperatives organized under the United States Farm Credit Act of 1933, existing by authority of the United States, or any state, or a foreign country;
(b) any other institution, association or entity which has deposits or accounts insured under the Federal Deposit Insurance Act or the FDIC, or which is a member of a federal Home Loan Bank, or any other bank or thrift institution engaged in the business of receiving deposits, or any corporation organized under the provisions of 12 USC 611-631 and 12 USC 3101;
(c) bank holding companies and savings and loan holding companies;
(d) any corporation subject to supervision by the Massachusetts Division of Banks, including but not limited to collection agencies, corporations making small loans, credit card issuers, out-of-state banking associations or corporations transacting business in Massachusetts, check cashing businesses, organizations providing services to financial institutions, corporations purchasing or holding retail installment sales contracts for motor vehicles, insurance premium finance agencies, sales finance companies which purchase retail installment sales agreements or revolving credit agreements from one or more retail sellers, and mortgage lenders and brokers; or
(e) any other corporation in substantial competition with financial institutions described in (a) - (d) which derives more than 50% of its gross income, excluding nonrecurring, extraordinary items, from loan origination, from lending activities (including discounting obligations), or from credit card activities.
Credit unions as described in G.L. c. 171, § 1 and credit unions organized under comparable laws of other states are excluded from the definition of financial institution. Federally chartered credit unions are exempt under the Federal Credit Union Act, 12 U.S.C. 1768.
III. Tax Rates:
The new statute subjects the taxable net income of "financial institutions" described in (a) and (b) above to the following rates of tax:
Taxable years beginning Rate
1999 and forward 10.50
The rate applicable to the taxable net income of "financial institutions" described in (c), (d) and (e) above is 10.50% for taxable years beginning in 1995 and forward.
Regardless of the applicable rate, the minimum excise is $456.00.
IV. New Nexus Rules for Out-of-State Financial Institutions:
The new statute applies to any financial institution engaged in business in Massachusetts, defined as any of the following:
(a) having a business location in Massachusetts;
(b) having employees, representatives or independent contractors conducting business activities on its behalf in Massachusetts;
(c) maintaining, renting or owning any tangible or real property in Massachusetts;
(d) regularly performing services in Massachusetts;
(e) regularly engaging in transactions with customers in Massachusetts that involve intangible property and result in income flowing to the taxpayer from residents of Massachusetts;
(f) regularly receiving interest income from loans secured by tangible personal or real property located in Massachusetts; or
(g) regularly soliciting and receiving deposits from customers in Massachusetts.
With respect to the activities described in (d) through (g) inclusive, activities are presumed, subject to rebuttal, to be conducted on a regular basis within Massachusetts if any of such activities are conducted with 100 or more residents of Massachusetts during any taxable year or if the taxpayer has $10,000,000 or more of assets attributable to sources within Massachusetts or if the taxpayer has in excess of $500,000 in receipts attributable to sources within Massachusetts.
For tax years beginning on or after January 1, 1995, Massachusetts has adopted a three-factor apportionment formula based on receipts, payroll, and property. Apportionment applies to financial institutions with income from business activity which is taxable both within and without Massachusetts.
VI. Grace Period for Making 1995 Estimated Tax Payments:
Every corporation which in any taxable year can reasonably expect to have an estimated tax for such taxable year in excess of $1,000 shall make payments of estimated tax pursuant to G.L. c. 63B. An addition to tax for underpayment of estimated tax is charged at the rate established under G.L. c. 62C, § 32 (which is the rate that the Department uses to calculate interest on underpayments and overpayments).
Payments of estimated corporate excise are discussed in greater detail in the Department's regulation, 830 CMR 63B.2.2.  In certain circumstances the additions to tax for underpayments of estimated tax will not be imposed. See Section (8) of the Regulation. In addition to the provisions in the regulation, no additions to tax for underpayment of estimated tax will be imposed for the 1995 tax year on certain financial institutions if estimated payments are made by the dates indicated below:
Calendar year financial institutions not subject to tax in Massachusetts during the preceding taxable year.
Installment by December 15, 1995. No additions to tax for periods of underpayment prior to December 15, 1995.
Fiscal year financial institutions not subject to tax in Massachusetts during the preceding taxable year.
Installment by December 15, 1995 or the 15th day of the third month of the first quarter of the fiscal year, whichever is later. No additions to tax for periods of underpayment prior to the due date of the first installment.
Calendar and fiscal year financial institutions subject to the bank excise, G.L. c. 63, §§ 1 and 2 for the preceding taxable year and other corporations subject to tax under G.L. c. 62 or G.L. c. 63 for the preceding taxable year.
No grace period for making estimated payments.
Estimated payments should be made with Form 355-ES. The form and
instructions are available from Massachusetts Department of Revenue offices. The form may be requested by calling (617) 727-4545. Form 355-ES is also available through DOR's Fax on Demand system by dialing (617) 727-2123 from the handset on a fax machine and, using the keypad on the handset, entering code 307.
/s/Frederick A. Laskey
for Mitchell Adams
Commissioner of Revenue
October 25, 1995
 Corporations included in the new definition of "financial institution" which were taxed under G.L. c. 62 (Income tax on individuals, corporate trusts, partnerships and S corporations) or G.L. c. 63, §§ 30 to 42, inclusive (Corporate Excise), for a taxable year beginning in 1994 remain subject to tax under those chapters and not as financial institutions until tax years beginning on or after January 1, 1999. St. 1995, c. 81, § 7, uncodified.
 Note as to effective dates of 830 CMR 63B.2.2: When this regulation was promulgated in February of 1990, St. 1989, c. 39, § 7, stated that certain changes in requirements for payments of estimated tax effective for tax years ending on and after December 31, 1989 would expire on December 31, 1990. However, § 7 was repealed (St. 1990, c. 121), and the changes reflected in 830 CMR 63B.2.2 continue in effect.
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