On July 11, 2011, the Governor signed into law the Fiscal Year 2012 Budget (“the Act”).[1] This Technical Information Release (“TIR”) explains provisions in the Act relating to personal income tax, G.L. c. 62, corporate excise, G.L. c. 63, sales tax, G.L. c. 64H, tax administration, G.L. c. 62C, and cigarette excise, G.L. c. 64C.

I.  Life Sciences Tax Incentive Program; Personal Income Tax and Corporate Excise

The existing Life Sciences Tax Incentive Program in G.L. c. 23I, § 5 consists of several tax benefits that are explained in TIR 08-23, Life Sciences Tax Incentive Program under St. 2008, c. 130.

Effective for tax years beginning on or after January 1, 2011, the Act adds another tax incentive to the Life Sciences Tax Incentive Program in the form of a refundable jobs credit. A taxpayer, to the extent authorized by the Life Sciences Tax Incentive Program, may be allowed a refundable jobs credit against the tax liability imposed under G.L. c. 62, the personal income tax, or G.L. c. 63, the corporate excise.[2] A taxpayer claiming a life sciences refundable jobs credit must commit to the creation of a minimum of 50 net new permanent full-time positions in Massachusetts.

The amount of life sciences jobs credit allowed to a taxpayer will be determined by the Massachusetts Life Sciences Center in consultation with the Department of Revenue.

If a life sciences jobs credit claimed by a taxpayer exceeds the tax otherwise due under the personal income tax or the corporate excise, as applicable, 90 percent of the balance of such credit may, to the extent authorized by the life sciences tax incentive program, be refundable to the taxpayer.  Excess credit amounts shall not be carried forward to subsequent taxable years.

The refundable jobs credit is subject to all the requirements of G.L. c. 23I, including the requirements set out in TIR 08-23. The total dollar amount of the various life sciences tax incentives, including the refundable jobs credits, for qualifying life sciences companies is subject to an annual cap of $25 million.

II.  Dairy Farmer Tax Credit; Personal Income Tax and Corporate Excise

The Massachusetts dairy farmer tax credit is tied to the U.S. Federal Milk Marketing Order for the applicable market, such that when the U.S. Federal Milk Marketing Order price drops below a trigger price anytime during the taxable year an eligible dairy farmer will be entitled to the credit. This refundable credit may be claimed against the taxes due under G.L. c. 63 or G.L. c. 62; however, the total amount of credits granted cannot exceed $4 million in any year. See TIR 09-21.

Pursuant to the Act, the Department of Food and Agriculture regulations for the implementation of the credit shall provide that when the Massachusetts Board of Food and Agriculture determines that an error has been made in calculating the trigger price or in reporting or collecting data used in the calculation of the trigger price or the credit, the Commissioner of Agricultural Resources shall recalculate, with or without amendments, the trigger price or tax credit.[3]

III.  Medically Necessary Breast Pumps; Sales Tax

General Laws chapter 64H, § 2 imposes an excise on retail sales of tangible personal property or telecommunications services in the Commonwealth by any vendor unless otherwise exempt.

Effective July 1, 2011, the Act[4] specifies that “physician-prescribed, medically necessary breast pumps” are exempt from sales and use tax.

IV.  Expenses of Human Organ Donation; Personal Income Tax

The Act provides a new personal income tax deduction for certain expenses and other costs incurred by an individual who donates an organ for an organ transplant to another individual.

Effective for tax years beginning on or after January 1, 2012, the following deduction is allowed against Part B income:

In the case of an individual who donates an organ to another person for human organ transplantation, the individual may claim an amount equal to the following expenses that are incurred by the individual and related to the individual’s organ donation:  (i) travel expenses; (ii) lodging expenses; and (iii) lost wages not to exceed $10,000. For the purposes of this subparagraph, “human organ” shall mean all or part of human bone marrow, liver, pancreas, kidney, intestine or lung. An individual who is a nonresident for all or part of the taxable year shall not be eligible to claim this deduction. [5]

V.  FAS 109 Deduction; Corporate Excise

A “FAS 109”[6] deduction was approved for certain publicly held companies as part of a Massachusetts tax law change that lowered the corporate tax rate in stages and adopted combined reporting for tax years beginning on or after January 1, 2009.[7] In general, if the enactment of combined reporting requirements for unitary businesses results in an increase to a combined group’s net deferred tax liability, the combined group is entitled to a FAS 109 deduction. See TIR 09-8.

The Act delays by a year the implementation of the FAS 109 deduction. Under prior law, if applicable, the FAS 109 deduction was to be prorated over the 7-year period beginning with the combined group’s taxable year that begins in 2012. Under the Act, the first year of the 7-year period to claim the FAS 109 deduction is the combined group’s taxable year that begins in 2013.[8]

VI.  Stamper Compensation; Cigarette Excise

Pursuant to G.L. c. 64C, § 30, a cigarette stamper is authorized by the Commissioner to purchase and affix cigarette excise stamps.

The Act provides for compensation of certain stampers who are in compliance with G.L. c. 64C, the cigarette excise, and, to the extent applicable, G.L. c. 64H, § 3A, prepayment of tax on tobacco products that will be held for retail sale, and G.L. c. 94F, tobacco manufacturers and brands directory[9].

Effective for stamps purchased on or after January 1, 2012, the Act amends chapter 64C to provide:

A stamper who has complied with this chapter and, to the extent applicable, section 3A of chapter 64H and chapter 94F, including the rules and regulations promulgated thereunder, may withhold and retain from each payment to be made by that stamper for such stamps as compensation for service rendered in compliance with this chapter and, to the extent applicable, said section 3A of chapter 64H and chapter 94F the following amounts:  (1) for encrypted stamps purchased and not returned for an abatement, $12 per roll of 1,200 stamps; and (2) in each fiscal year, $600 per roll of 30,000 encrypted stamps for the first 50 rolls purchased and $200 per each additional roll of 30,000 encrypted stamps purchased; and (3) in the case of non-encrypted adhesive stamps purchased and not returned for an abatement, $1.85 for each 600 stamps purchased and a proportionate amount for any fraction thereof.[10]

VII.  Quarterly Publication of Tax Policy Issues under Development

The Act provides that the Department shall publish on its website, updated quarterly, a listing of tax policy issues under development. The online listing will include a brief description of all tax policy matters, excluding letter rulings requested by individual taxpayers, on which, as of the date of publication, the Commissioner reasonably anticipates issuing public guidance within the following 12 months.[11] The list may be accessed at www.mass.gov/dor.

VIII.   Administrative Provisions relative to State Taxation

A.  Interest Charges after Audit; G.L. c. 62C, § 32(f)

1.  Statutory Change

Section 32 of chapter 62C has been amended by adding the following subsection:

(f) In the event of a deficiency assessment issued by the department after an audit of a return filed by a taxpayer for a tax period, where the length of the audit exceeded 18 months as measured from the department’s opening conference with the taxpayer or the taxpayer’s duly authorized representative to discuss a field audit or, in the case of a desk audit from its initial letter or other written communication to the taxpayer notifying the taxpayer that a desk audit has been initiated, to its issuance of a notice of intent to assess tax, the department shall determine the interest payable with respect to such deficiency after the expiration of such 18 month period and before the department’s issuance of such notice of intent to asses, by reducing the rate provided in subsection (a) by 2 percentage points, but not below zero, or, in the case of an audit whose length as so determined exceeds 36 months, by reducing the rate provided in subsection (a) with respect to such period after the expiration of 18 months and before the department’s issuance of the notice of intent to assess by 2.5 percentage points, but not below zero, if in either instance it determines that the taxpayer complied with all requests for information or documentation made during the audit period with substantial promptness and completeness, and where the taxpayer is not otherwise responsible for the extended duration of the audit. A taxpayer may appeal a department determination that the taxpayer did not comply with an audit request for information or documentation with substantial promptness and completeness to the appellate tax board along with any assessed tax in dispute.[12]

2.  Effective Date

The new interest calculation at G.L. c. 62C, § 32(f) will apply to interest accruing on deficiency assessments where the audit resulting in the deficiency assessment is commenced after July 1, 2011.[13]

3.  Summary

The Act allows for reduced interest rates on underpayments of tax in the case of certain audits where the audit lasts more than 18 months. The reduced interest rates will be applied where the Department determines that the taxpayer responded with “substantial promptness and completeness” to all requests for information or documentation during the audit period, and where the taxpayer is not responsible for the extended duration of the audit. The Department construes the term “substantial promptness and completeness” as codifying a reasonableness standard depending on the facts and circumstances of each case.

A taxpayer may appeal a Department determination that the taxpayer did not comply with an audit request for information or documentation with substantial promptness and completeness to the Appellate Tax Board along with any assessed tax in dispute.

B.  Applications for Abatement and Refunds; G.L. c. 62C, §§ 36, 36A and 37

1.  Statutory Changes

Section 36 of chapter 62C has been amended by striking out the third paragraph and inserting in place thereof the following paragraph:

A request for a refund or credit of an overpayment of any tax where a required return has not been timely filed, shall be made by filing the overdue return within 3 years from the due date of the return, taking into account any extension of time for filing the return, or within 2 years of the date that the tax was paid, whichever is later. A request for a refund or credit of an overpayment of any tax where no return is required shall be made by the taxpayer within 2 years from the time the tax was paid. A request for a refund or credit of an overpayment of tax where the required return was timely filed shall be made within the period permitted for abatement for that return under section 37. Any request for a refund or credit filed beyond these deadlines shall be denied by the Commissioner. Where a refund or credit results from an abatement under section 37, the amount of such refund or credit shall be limited to the amount paid, or deemed paid pursuant to section 79, within 3 years of the date that the application for abatement is filed, taking into account any extension of time for filing the return. This section shall not limit refunds or credits otherwise allowed pursuant to section 30 or 30A.[14]

Section 37 of chapter 62C has been amended by striking out the first paragraph and inserting in place thereof the following paragraph:

Any person aggrieved by the assessment of a tax, other than a tax assessed under chapter 65 or 65A, may apply in writing to the commissioner, on a form approved by the commissioner, for an abatement thereof at any time:  (1) within 3 years from the date of filing of the return, taking into account paragraph (a) of section 79; (2) within 2 years from the date the tax was assessed or deemed to be assessed; or (3) within 1 year from the date that the tax was paid, whichever is later; provided, however, that where the commissioner and the taxpayer have agreed to extend the period for assessment of a tax pursuant to section 27, the period for abatement or for abating such tax shall not expire prior to the expiration period within which an assessment may be made pursuant to such agreement or any extension thereof; and provided further that any abatement that would result in a refund of tax, including a credit of such refund against another liability, is subject to section 36 to the extent of such refund or credit.[15]

2.  Effective Date

The amendments to G.L. c. 62C, §§ 36 and 37 apply to requests for refund or applications for abatement filed with the Commissioner on or after July 1, 2011; provided however, that the amendments to §§ 36 and 37 shall not apply with respect to tax periods where the statute of limitations for refund or abatement, as applicable, had expired prior to July 1, 2011.[16]

3.  Discussion

The Act amends the parts of G.L. c. 62C, §§ 36 and 37 dealing with the requirements for requests for refunds and applications for abatement, and certain limitations on the amount of refunds. These sections of the Act are discussed together as there are cross references in §§ 36 and 37 applying to applications for abatement and to the amount of refunds that are permitted.

(a) Amendments to G.L. c. 62C, § 37; Abatements

Time Limitations for Filing an Application for Abatement. The Act amends the three-year statute of limitations period for applying for an abatement of tax that has been assessed, whether it was a deficiency assessment or a deemed assessment in accordance with the tax return filed.

Prior to the Act, G.L. c. 62C, § 37 provided that a person aggrieved by the assessment of a tax may apply in writing to the Commissioner, on a form approved by her, for an abatement thereof at any time

  • within three years from the last day for filing the return for such tax, determined without regard to any extension of time,
  • within two years from the date the tax was assessed or deemed to be assessed, or
  • within one year from the date that the tax was paid, whichever is later.

The Act amends § 37 to lengthen the three-year part of this limitations period. The two-year and one-year periods for filing an application for abatement are unchanged.

As amended by the Act, G.L. c. 62C, § 37 provides that a person aggrieved by the assessment of a tax may apply in writing to the Commissioner, on a form approved by her, for an abatement thereof at any time

  • within three years from the date of filing the return, taking into account § 79(a),
  • within two years from the date the tax was assessed or deemed to be assessed, or
  • within one year from the date that the tax was paid, whichever is later.

Pursuant to § 79(a), any return filed before the last day prescribed for the filing of the return (determined without regard to any extension of time to file) is considered as filed on such last day. Under the Act, where a return is filed either on or before the prescribed due date (determined without regard to any extension of time to file), an application for abatement may be filed within three years from such due date for the return. Where a return is timely filed on extension, an application for abatement may be filed within three years from the actual date of filing the return. Also, where a return is not timely filed, an application for abatement may be filed within three years from the date of filing the delinquent return.

Limitations on the Amount of a Refund Resulting from an Abatement. Separate from its expansion of the period for filing certain applications for abatements, the Act clarifies the interaction of the abatement provisions in § 37 and the refund provisions of § 36 by amending § 37 to provide that “. . . any abatement that would result in a refund of tax, including a credit of such refund against another liability, is subject to section 36 to the extent of such refund or credit.”[17]

As amended by the Act, § 36 provides:

Where a refund or credit results from an abatement under section 37, the amount of such refund or credit shall be limited to the amount paid, or deemed paid pursuant to section 79, within 3 years of the date that the application for abatement is filed, taking into account any extension of time for filing the return.

If the taxpayer has filed a tax return and has filed an application for abatement within the next three years, the refund or credit amount is measured by and limited to the tax paid within three years before the taxpayer filed the application for abatement, plus any extension of time the taxpayer had for filing the tax return. Tax returns filed or tax payments made before the prescribed due date (determined without regard to any extension of time to file the return) are deemed filed or paid on the prescribed due date.[18]

If the three-year period for filing an application for abatement has expired, and an application for abatement is filed within two years of an assessment, the Commissioner may grant an abatement up to the amount of that assessment.[19] If the time for filing an abatement application has otherwise expired and an application for abatement is filed within one year of a payment of a portion of an assessment, the Commissioner may grant an abatement up to the amount of the payment.[20]

(b) Amendments to G.L. c. 62C, § 36; Credit or Refund of Overpaid Taxes.

In general, § 36 allows alternative deadlines for the filing of claims for the refund or credit of overpayments, broken down within three different categories, i.e., requests for a refund or credit (i) where a return has been timely filed, (ii) where a return has not been timely filed, and (iii) where no return is required for the particular type of tax. Refunds or credits must be claimed by the later of the alternate deadlines in each category.

Timely Filed returns. Where a return is timely filed, § 36 generally continues to tie the period for seeking refunds or credits of tax to the period for filing an abatement application under § 37. That period has been liberalized, as discussed in the preceding Part VIII.B.3(a) of this TIR, with the amendment made by the Act to § 37, so that, in general, the effect is to allow a full three-year period for claiming a refund of overpaid tax in the case of filers who timely file returns on extension. In contrast, the statute prior to amendment did not take extensions into account. However, also as discussed in Part VIII.B.3(a), supra, where a refund or credit results from an abatement under § 37, the amount of such refund or credit is limited to the amount of tax paid, or deemed paid pursuant to § 79, within three years before the taxpayer filed the application for abatement, plus any extension of time the taxpayer had for filing the tax return.

Returns Not Filed Timely.  Prior to the Act, c. 62C, § 36 provided that an application for a refund of an overpayment of any tax where a return which is required to be filed has not been timely filed, shall be made and filed, along with the overdue return,

  • within three years from the date that the return was due to be filed, without regard to extensions, or
  • within two years of the date that the tax was paid, whichever is later.

The Act amends § 36 to lengthen the three-year part of this limitations period. The two-year period for requesting a refund in connection with a late-filed return is unchanged.

As amended by the Act, G.L. c. 62C, § 36 provides that an application for a refund of an overpayment of any tax where a return which is required to be filed has not been timely filed, shall be made and filed, along with the overdue return,

  • within three years from the due date of the return, taking into account any extension of time for filing the return, or
  • within two years of the date that the tax was paid, whichever is later.

Return Not Required to be Filed. Section 36 provides: “A request for a refund or credit of an overpayment of any tax where no return is required shall be made by the taxpayer within 2 years from the time the tax was paid.” For purposes of this provision of § 36, the threshold condition that “no return is required to be filed” means that the tax is of a type that is generally paid and assessed without the filing of a return.[21] This condition is not met in situations involving income tax, where returns are generally required to be filed (and even a taxpayer whose income is below the dollar threshold for filing must file a return to claim excess withholding or prove entitlement to a credit).

Clarification of the Effect of Late Refund Claim. The Act amends § 36 to specify that: “Any request for a refund or credit filed beyond these deadlines shall be denied by the Commissioner.”

4. Interaction with G.L. c. 62C, § 36A

Section 36 establishes the basic rule that any request for a refund or credit filed beyond the statutory deadlines shall be denied by the Commissioner. Also relevant to the issue of refunds is G.L. c. 62C, § 36A. The first paragraph of § 36A provides:  

If the commissioner determines that any tax has been assessed at an excessive amount because of departmental clerical error or that any payment has been received in error, he may, in his discretion, correct such error at any time and adjust the assessment accordingly or refund the erroneous payment without application of the taxpayer. Interest on any resulting refund shall be paid in accordance with section forty.

Section 36A is not a general exception to the rule in § 36 instructing the Commissioner to deny a refund request made after the expiration of the statute of limitations. Rather, § 36A allows the Commissioner to correct certain Department errors in processing without requiring the taxpayer to file an application for refund or abatement.

Section 36A was adopted verbatim based on the Commissioner’s 1986 Legislative Recommendations, “Authorization for the Commissioner of Revenue to Correct Errors in Tax Assessments or Payments.”[22] In accordance with the legislative history leading to the enactment of § 36A, and in accordance with the express language added to § 36 regarding late refund claims, the Commissioner will limit her application of this section to the correction of errors made by the Department.[23]

5. Application of the Limitations on Refunds – Examples

Notes:
 For purposes of simplicity, the examples do not take into account the effect of weekends, holidays, short taxable years, or other special circumstances in the determination of statutory due dates. Thus, personal income tax returns for calendar year filers are considered as due on the April 15 immediately following the end of the tax year, and corporate returns for calendar year filers are considered as due on the March 15 immediately following the end of the tax year.

References in the examples to §§ 36 and 37 refer to the third paragraph of § 36 and the first paragraph of § 37, as amended by the Act.

(a) Request for Refund Claimed on a Late Filed Return; G.L. c. 62C, § 36

Example 1. Taxpayer A wished to obtain a refund of personal income tax of $100 withheld for the year 2008, but failed to file a timely tax return. Taxpayer A owed zero tax for 2008; thus, Taxpayer A qualified for an automatic extension of time to file the return until October 15, 2009.[24] After a lengthy delay, Taxpayer A filed his 2008 tax return on October 1, 2012, and requested a $100 refund. The request for refund was timely filed, having been made by filing the overdue return within 3 years of the due date of the return, taking into account the automatic extension.[25] The Department will pay the refund. If, instead, Taxpayer A filed his 2008 return on November 1, 2012, the request for refund will not be timely, and the $100 overpayment will not be refunded.

Example 2. A calendar-year taxpayer, Corporation XYZ, files by March 15, 2009 a timely and proper application for extension of time to file its corporate excise return for 2008, so that its return was then due on September 15, 2009. The combination of estimated payments and payments made with the extension application totaled $10,000. Corporation XYZ did not timely file its corporate excise return before the extended due date, but filed the return on September 1, 2012, properly calculating its tax as $9,000 and claiming a refund of $1,000. The request for refund was timely filed, having been made by filing the overdue return within 3 years of the due date of the return, taking into account the extension.[26] The Department will pay the refund. If, instead, Corporation XYZ filed its 2008 return on October 1, 2012, the request for refund will not be timely, and the $1,000 overpayment will not be refunded.

Example 3. Taxpayer C filed delinquent income tax returns for both 2008 and 2009 on November 1, 2012. Taxpayer C correctly calculated a refund amount of $200 for 2008 and a tax due amount of $300 for 2009. No additional tax was due for 2008; thus, Taxpayer C qualified for an automatic extension of time to file the 2008 return until October 15, 2009. Because the 2008 return showing a refund was filed more than three years after the date of the automatic extension, the refund amount of $200 for 2008 cannot be refunded or carried forward as a credit on the 2009 return.[27] Taxpayer C must pay the $300 tax due for 2009 plus applicable interest and penalties.

Example 4. Taxpayer D’s personal income tax withholding for 2008 was $1,200. Taxpayer D qualified for an automatic extension of time to file the return until October 15, 2009. However, Taxpayer D did not file her tax return for 2008 until November 1, 2012, showing a self-assessed income tax liability of $1,000 and seeking a refund of $200. Taxpayer D is subsequently contacted by the Audit Division and assessed a total income tax liability of $1,100 for 2008, resulting in an additional tax of $100 beyond the $1,000 that taxpayer had self-assessed. Because Taxpayer D’s withholding tax totaled $1,200 for 2008, the Department’s assessment does not result in any additional tax remaining due for 2008. However, Taxpayer D will not receive a refund of the $100 of tax that was withheld in excess of the liability that was finally assessed, because the 2008 return was filed after October 15, 2012 and thus more than 3 years after the due date of the return taking into account the automatic extension.[28]

(b) Refund Claim on an Application for Abatement; G.L. c. 62C, §§ 36 and 37

Example 5.
Financial Institution ABC neglects to file an extension request for its year ending December 31, 2011.[29] ABC had paid $1,000 in estimated tax during calendar year 2011, and under G.L. c. 62C, § 79, its estimated tax is deemed paid on March 15, 2012. ABC filed its return six months late on September 15, 2012, reported a total tax liability of $10,000, and paid the $9,000 balance (plus applicable penalties and interest). On September 15, 2015, ABC files an application for abatement claiming only the minimum financial institution excise of $456 as due for the 2011 taxable year. The abatement application is timely filed under G.L. c. 62C, § 37, because it is filed within 3 years of September 15, 2012, the actual filing date for the return. In reviewing the abatement application, the Commissioner concurs that the proper tax for the 2011 year is $456. An application for abatement claiming a refund, however, is subject to the additional limitations of G.L. c. 62C, § 36 whereby the amount of the refund is limited to the amount paid or deemed paid within 3 years of the date that the application for abatement is filed.[30] This 3-year limitation on the amount of any refund is subject to extension for the time of any valid extension for filing a return, but in this example there was no valid extension. Therefore, ABC will receive a refund of $9,000 (plus an amount reflecting excess interest and penalties) paid on September 15, 2012, which was within the 3-year period before the filing of the abatement application. However, no further refunds are available. Specifically, because there was no valid extension for filing the return, the “excess” estimated tax paid by ABC is not refundable as it is outside this 3-year limitation period.

Example 6. Taxpayer E’s personal income tax withholding for 2010 was $1,000. Under G.L. c. 62C, § 79, withholding for 2010 is deemed paid on April 15, 2011. No additional tax was due for 2010; thus, Taxpayer E qualified for an automatic extension of time to file the 2010 return until October 15, 2011. Taxpayer E filed the 2010 return on October 1, 2011, reported a tax liability of $900, and received a refund of $100. Subsequently, Taxpayer E discovered he had failed to claim an allowable deduction on his 2010 return. Taxpayer E filed an application for abatement on September 25, 2014, claiming an adjusted tax liability for 2010 of $500 and seeking an additional refund of $400. The abatement application is timely filed under G.L. c. 62C, § 37, because it is filed within 3 years of the actual filing date for the return (October 1, 2011). Under G.L. c. 62C, § 36, the amount of a refund that results from an abatement is limited to payments made within 3 years of the date that the application for abatement was filed (September 25, 2014) plus any extension of time for filing the return. The $1,000 withholding was paid within 3 years plus the extension of time to file. Taxpayer E will receive the $400 refund.

Example 7.  Same facts as Example 6, except Taxpayer E filed his 2010 return on November 1, 2011, reported a tax liability of $900, and received a refund of $100. (Taxpayer E qualified for an automatic extension of time to file until October 15, 2011, but actually filed after this date.) On September 25, 2014, Taxpayer E files an application for abatement of his 2010 tax seeking an additional refund of $400. The abatement application is timely filed under G.L. c. 62C, § 37, because it is filed within 3 years of the actual filing date for the return (November 1, 2011). Under G.L. c. 62C, § 36, the amount of a refund that results from an abatement is limited to payments made within 3 years of the date that the application for abatement was filed (September 25, 2014) plus any extension of time for filing the return. The $1,000 withholding was paid within 3 years plus the extension of time to file. Taxpayer E will receive the $400 refund.

Example 8. Same facts as Example 6, except Taxpayer E filed his 2010 return on April 15, 2011, reported a tax liability of $900, and received a refund of $100. On September 25, 2014, Taxpayer E files an application for abatement of his 2010 tax seeking an additional refund of $400. Under G.L. c. 62C, § 37, the application for abatement is not timely because it was filed more than 3 years after the 2010 tax return was filed (April 15, 2011). The Department will not pay the refund. In this case, Taxpayer E had to have filed the application for abatement by April 15, 2014 to receive the $400 refund.

Example 9. Taxpayer F made quarterly estimated tax payments in the total amount of $8,000 for 2010. Taxpayer F filed his personal income tax return early, on March 1, 2011, and reported a tax liability of $8,000. Under G.L. c. 62C, § 79, the return is deemed filed on April 15, 2011 and the tax due (previously paid as estimated tax) is deemed paid on April 15, 2011. As a result of an audit, on April 6, 2013 a tax deficiency of $1,000 is assessed (indicating a total tax of $9,000), which Taxpayer F pays on February 1, 2014.

Tax Year 2010
April 15, 2011     deemed payment date, payments of estimated taxes of $8,000
April 15, 2011     deemed filing date, self-assessment of $8,000

April 6, 2013       deficiency assessment of $1,000 (total tax = $9,000) plus penalties and interest

February 1, 2014 bill paid in full

Later, Taxpayer F discovers that he neglected to claim certain allowable deductions and credits on his original return and files an application for abatement seeking a refund of $3,000 (indicating a total tax of $6,000). The amount of refund available depends on the date of the filing of the application for abatement.

Three-year period for filing application for abatement. An application for abatement made by April 15, 2014 will be timely under G.L. c. 62C, § 37 because it is filed within three years from the date of the filing of the return which is deemed to be April 15, 2011. Under G.L. c. 62, § 36, the application for abatement will be timely as to the requested refund of $3,000 because all payments, including the tax shown on the original return which was deemed paid on April 15, 2011, were made “within 3 years of the date that the application for abatement is filed, taking into account any extension of time for filing the return.”

Two-year period for filing application for abatement. If the three-year period for filing an application for abatement has expired (after April 15, 2014), and an application for abatement is filed within two years of an assessment (April 6, 2013) the amount of an abatement that can be granted is limited.[31] An application for abatement filed after April 15, 2014 but before April 6, 2015 will be timely under G.L. c. 62C, § 37 because it was filed within two years of the deficiency assessment which was made on April 6, 2013. However, where the application for abatement was filed more than three years after the filing date of the return (April 15, 2011), no portion of the original $8,000 tax paid can be refunded or credited. The amount of the refund will be limited to payments on the deficiency assessment of $1,000 plus associated penalties and interest.  

 

/s/Amy Pitter
Amy Pitter
Commissioner of Revenue


AP:MTF:adh

March 26, 2012

TIR 11-6



[1] St. 2011, c. 68, An Act Making Appropriations For The Fiscal Year 2012 For The Maintenance Of The Departments, Boards, Commissions, Institutions And Certain Activities Of The Commonwealth, For Interest, Sinking Fund And Serial Bond Requirements And For Certain Permanent Improvements.
[2] St. 2011, c. 68, § 65 amending G.L. c. 62, § 6 by adding new subsection (r); St. 2011, c. 68, § 70 amending G.L. c. 63 by adding new section 38CC.
[3] St. 2011, c. 68, § 64, amending G.L. c. 62, § 6(o)(2); St. 2011, c. 68, § 69, amending G.L. c. 63, § 38Z(b).
[4] St. 2011, c. 68, § 72, amending G.L. c. 64H, § 6(l).
[5] St. 2011, c. 68, § 62, adding subparagraph G.L. c. 62, § 3B(a)(16).
[6] The Statement of Financial Accounting Standards No. 109 (“FAS 109”), “Accounting for Income Taxes,” requires that the effects of income taxes be reported on an entity’s financial statements for current and future years.
[7] St. 2008, c. 173, § 95.
[8] St. 2011, c. 68, § 136, amending St. 2008, c. 173, § 95.
[9] Effective August 4, 2004, cigarettes cannot be sold, offered for sale, or possessed for sale in Massachusetts, or stamped for sale in Massachusetts, unless the manufacturer and brand family are identified in the Directory.
[10] St. 2011, c. 68, §§ 71 and 212, amending G.L. c. 64C, § 30 (fourth paragraph).
[11] St. 2011, c. 68, § 23, amending G.L. c. 14, § 6.
[12] St. 2011, c. 68, § 66, amending G.L. c. 62C, § 32 by adding new subsection (f).
[13] St. 2011, c. 68, § 221. 
[14] St. 2011, c. 68, § 67, amending G.L. c. 62C, § 36 (third paragraph).
[15] St. 2011, c. 68, § 68, amending G.L. c. 62C, § 37 (first paragraph).
[16] St. 2011, c. 68, §§ 209 and 221.
[17] St. 2011, c. 68, amending G.L. c. 62C, § 37 (first paragraph).
[18] G.L. c. 62C, § 79.
[19] See 830 CMR 37.1 (4) Limitations on Amount of Abatement.
[20] Id.
[21]The deeds excise under G.L. c. 64D is an example of a tax that is paid where no tax return is required to be filed.

[22] On November 6, 1985, in accordance with G.L. c. 30, § 33, the Commissioner submitted “Legislative Recommendations of the Department of Revenue for Legislative Action during the 1986 Session of the General Court.” The summary of the change to G.L. c. 62C, § 36A explains the reason for the proposed legislation. In relevant part, the summary states:

Presently, the tax laws do not have an express provision authorizing the Commissioner of Revenue to correct obvious clerical errors in tax assessments or tax payments which may be generated by normal processing activity of the department. These would include such items as keying errors by data entry operators, multiple assessments for the same tax liability and failure to credit payments received. Erroneous payments would include the deposit of checks drawn to the order of the Internal Revenue Service or other payees and deposited by the department in error. This proposal would authorize the Commissioner at any time to correct and adjust an assessment that is excessive due to departmental clerical error or to refund the erroneous payment. An application for abatement filed by the taxpayer would not be required, and no time limitation would be applicable to these adjustments.

[23] Id. 
[24] See TIR 06-21, Revised Rules for Automatic Extensions of Time to File Tax Returns for Certain Taxpayers.
[25] See G.L. c. 62C, § 36 (first sentence).
[26] Id.
[27] Id.
[28] Id.
[29] In the case of a financial institution, there is no automatic extension of time to file a return. To request an extension, a financial institution is required to file Form 355-7004 Misc., on or before the normal due date of the return and pay in full the estimated tax due. See TIR 06-21.
[30] See G.L. c. 62C, § 36 (first and penultimate sentences), § 37 (last sentence).
[31] See 830 CMR 37.1 (4) Limitations on Amount of Abatement.