Date: | 03/01/2023 |
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Referenced Sources: | Massachusetts General Laws |
This Technical Information Release (“TIR”) explains certain significant implications of recent legislation conforming M.G.L. chapter 62[1] (the “Code Update”) to the Internal Revenue Code (“Code”) as amended on January 1, 2022 and in effect for the taxable year (the “2022 Code”). This legislation was enacted as part of the Massachusetts Fiscal Year 2023 Budget.[2]
Chapter 62 conforms to many of the definitions set out in the Code. Massachusetts gross income as defined in chapter 62 is based on the definition of federal gross income under the Code.[3] Similarly, many of the deductions and exemptions allowed to offset Massachusetts gross income are determined by reference to the Code.
Prior to the Code Update, chapter 62 generally conformed to the definitions, deductions and exemptions as set forth in the Code as amended on January 1, 2005 and in effect for the taxable year (the “2005 Code”). As a result of the Code Update, for tax years beginning on or after January 1, 2022, chapter 62 conforms to many federal tax law changes that have been enacted since 2005. Note that, under both current and prior law, chapter 62 adopts certain provisions of the Code as amended and in effect for the current taxable year (i.e., the year for which the personal income tax is being computed).[4] These provisions are not affected by the Code Update. Similarly, where chapter 62 specifically decouples from the Code, the Code Update has no impact.[5]
In TIR 23-1, the Department of Revenue (“DOR”) identified numerous Code provisions enacted or amended since 2005 to which chapter 62 conforms. This TIR explains in more detail the impact of the Code Update on Massachusetts conformity with respect to some of the provisions identified in TIR 23-1. The provisions addressed in this draft are as follows:
- Code §§ 61(a)(8) and 62(a)(10): Repeal of inclusion of alimony received as gross income and repeal of deduction for alimony payments
- Code § 62(a)(2)(D): Educator’s expense deduction
- Code § 83(i): Property transferred in connection with performance of services – treatment of qualified equity grants
- Code § 108(a)(1)(E): Exclusion from gross income of discharged qualified principal residence indebtedness
- Code §§ 127(c)(1) and 221(e): Exclusion from gross income of certain employer payments of student loans
- Code § 132(f): Exclusion from gross income of employer-provided transportation fringe benefits
- Code §§ 132(g) and 217: Moving expense deduction and exclusion from gross income of qualified moving expense reimbursement
- Code § 132(n): Department of Defense Homeowners Assistance Plan
- Code § 137: Employer-provided adoption assistance
- Code § 139B: Exclusion from gross income of benefits provided to members of certain volunteer emergency response organizations; interplay with charitable deduction
- Code § 152: Modification of definition of “dependent”
- Code § 220: Archer Medical Savings Accounts
- Code § 274(a)(4): Limitation on deduction by employers of expenses for fringe benefits
- Code § 461(l): Limitation on excess business losses of noncorporate taxpayers (for tax years 2021 through 2026)
- Code § 1031(a)(1): Repeal of like-kind exchanges for “property other than real property”
- Code § 1202: Partial exclusion for gain from certain small business stock
- Code §§ 1400Z-1, 1400Z-2: Investments in qualified opportunity zones