This audit, which is statutorily required under Chapter 555 of the Acts of 1986, examines the period of July 1, 2018 through June 30, 2019.
Audit Determination of Whether Net State Tax Revenues Exceeded Allowable State Tax Revenues -- Fiscal Year 2019
|Organization:||Office of the State Auditor|
|Date published:||September 16, 2019|
Chapter 555 of the Acts of 1986 inserted Chapter 62F into the Massachusetts General Laws. This chapter provides for the establishment, for each fiscal year beginning with the fiscal year ended June 30, 1987, of a state tax revenue growth limit, calculated on the basis of the level of growth in total wages and salaries of the citizens of the Commonwealth. In addition, the law requires that the Commissioner of Revenue, annually on or before September first, prepare and submit to the State Auditor a report of the net state tax revenues and the allowable state tax revenues of the Commonwealth for the preceding fiscal year.
Chapter 555 gives oversight responsibilities to the State Auditor for each fiscal year. Specifically, the Auditor is responsible for reviewing the Commissioner’s report for completeness and accuracy and, in doing so, may make, or request that the Commissioner make, any necessary adjustments or modifications to ensure its completeness and accuracy. Further, the Auditor, annually on or before the third Tuesday of September, shall independently determine whether net state tax revenues for the fiscal year exceeded allowable state tax revenues. If the State Auditor determines an excess of state tax revenues, she shall report that determination and the amount by which allowable state tax revenues were exceeded to the Governor, the President of the Senate, the Speaker of the House, the respective Chairs of the Committees on Ways and Means of the Senate and House, and the Commissioner. The law further states that the determination of the State Auditor as to the existence and the amount of excess state tax revenues shall be conclusive. Thereafter, the Commissioner shall take all the necessary action to effectuate a tax credit equal to the total amount of such excess.
On July 30, 1987, the Commissioner of Revenue prepared his first annual report, as required by Chapter 62F of the General Laws, on net state tax revenues and allowable state tax revenues and submitted it to the State Auditor for review.
The State Auditor reviewed the report for completeness and accuracy and determined, on August 15, 1987, that state tax revenues for the fiscal year ended June 30, 1987 exceeded allowable state tax revenues by $29,221,675 (Audit Report No. 88-5004-9).1 Accordingly, the State Auditor requested that the Commissioner effectuate a tax credit of $29,221,675. The Commissioner responded by adding a line on the 1987 version of the Massachusetts Individual Income Tax Return, upon which each individual taxpayer could insert their individually calculated share of the $29,221,675 credit.
As of December 19, 1988, the Department of Revenue (DOR) had processed credits to individual taxpayers of approximately $16,823,000 of the $29,221,675 in fiscal year 1987 excess state tax revenues. At that time, DOR ceased compiling data on the credit. The time limit for filing for refunds with DOR has since expired, and any funds remaining unclaimed will remain within the General Fund. Section 37 of Chapter 62C of the General Laws, which sets the time limit for filing for refunds, states, in part,
Any person aggrieved by the assessment of a tax, other than a tax assessed under chapters sixty-five or sixty-five A, may apply in writing to the Commissioner, on a form approved by him, 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.
For the fiscal years ended June 30, 1988 through 2018, the State Auditor determined that net state tax revenues were less than allowable state tax revenues; therefore, no tax credit was required to be effectuated by the Commissioner of Revenue for those years.
For the fiscal year ended June 30, 2019, we have determined that the net state tax revenues of $30,202,588,989 were below the allowable state tax revenues of $33,977,241,799 by $3,774,652,810, resulting in no excess state tax revenues (see Exhibit I).
For fiscal years 1987 through 2019, net state tax revenues increased approximately 273%, from $8,102,373,437 to $30,202,588,989. Allowable state tax revenues increased approximately 321%, from $8,073,151,762 to $33,977,241,799, during the same time period.
For fiscal year 2019, $23,968,789,008, or 79.4%, of the net state tax revenue was derived from income and sales and use taxes, which are traditionally the largest sources of revenue received by the Commonwealth (see Exhibit III).
1. All figures disclosed in this report have been rounded for presentation purposes.