Surtax Examples and OJC Instructions with Worksheets

The following examples explain the application of the surtax for a nonresident taxpayer who participates in a composite return filed by a pass-through entity (PTE) for tax year 2023. Additionally, you will find Other Jurisdiction Credit (OJC) instructions with applicable worksheets for taxpayers subject to the surtax.

Updated: December 22, 2023

Frequently Asked Questions: 4% Surtax on Taxable Income Over $1,000,000

Example 1: Nonresident is subject to 4% surtax & all income is reported on Form NRCR

Nonresident “Susan” is subject to the 4% surtax because her taxable income for 2023 exceeds the surtax threshold for that year. All of Susan’s taxable income is reported on Massachusetts K-1s, from PTEs that filed composite returns.

Business Name	Part C (1231) Income	Participating in Composite	Composite Tax Payments on MA K1	PTE Withholding on MA K-1
Partnership “A”	$500,000	Y	$25,000	$0
S-Corporation “B”	$500,000	Y	$25,000	$0
Partnership “C”	$500,000	Y	$25,000	$0

Partnership “A”, S-Corporation “B”, and Partnership “C” file composite returns for any partners/shareholders who elected to be part of the composite.  Susan receives 3 Massachusetts K-1s that:

a.    Show she participated in 3 composite returns,
b.    Show the amount of tax payments made on her behalf on those composite returns (Schedule 3K-1, Line 38 and Schedule SK-1, Line 29 show $25,000 each), and
c.    Show that she has a total amount of income greater than the surtax threshold of $1,000,000, which will make her subject to a 4% surtax.

Susan must file a Form 1-NRPY, report all of her taxable income from her 3 Massachusetts K-1s on the form and complete a Schedule 4% Surtax. 

i	Schedule D, Line 21 is $1,500,000
ii	Schedule D, Line 22, and Form 1-NR/PY, Line 28 is $74,780
iii	Schedule 4% Surtax, Line 3 is $1,500,000
iv	Schedule 4% Surtax, Line 6 is $500,000
v	Schedule 4% Surtax, Line 7, and Form 1-NR/PY, Line 32b (vertical) is $20,000
vi	Form 1-NR/PY, Line 32a (vertical) is $75,000
vii	Form 1-NR/PY, Line 32c (vertical) is $75,000
viii	Form 1-NR/PY, Line 32 (vertical) is $20,000

Frequently Asked Questions: 4% Surtax on Taxable Income Over $1,000,000

Example 2: Nonresident is subject to 4% surtax & part of income is reported on Form NRCR

Nonresident “Thomas” is subject to the 4% surtax in 2023 because his income exceeds the surtax threshold. Part of Thomas’s income is reported on Massachusetts K-1s from PTEs that filed composite returns, but Thomas also has separate income that needs to be reported on a Form 1-NR/PY (sale of Massachusetts property, Massachusetts wages, and non-composite Massachusetts K-1s).

Business Name	Part C (1231) Income	Participating in Composite	Composite Tax Payments on MA K1	PTE Withholding on MA K-1
Partnership “A”	$500,000	Y	$25,000	$0
S-Corporation “B”	$500,000	N	$0	$25,000
Partnership “C”	$500,000	Y	$25,000	$0

**Additional Massachusetts Wages of $500,000 with $25,000 withholding

Partnership “A” and Partnership “C” file composite returns for any partners who elected to be part of the composite.  Thomas receives 3 Massachusetts K-1s that:

a.    Show he participated in 2 composite returns,
b.    Show the amount of tax payments made on his behalf on those composite returns (Schedule 3K-1, Line 38 show $25,000 each),
c.    Show he has PTE Withholding of $25,000 from S-Corporation “B” on SK-1, line 28 for which he is still responsible for filing a Form 1-NR/PY, and
d.    Show that he has a total amount of income greater than the surtax threshold of $1,000,000, which will make him subject to the 4% surtax.

Thomas must file a Form 1-NR/PY, report on the form all of his taxable income from his 3 Massachusetts K-1s, the sale of Massachusetts property, Massachusetts wages, and non-composite Massachusetts K-1s, and complete Schedule 4% Surtax. 

i	Form 1-NR/PY, Line 5 is $500,000
ii	Form 1-NR/PY, Line 23 is $24,780
iii	Schedule D, Line 21 is $1,500,000
iv	Schedule D, Line 22, and Form 1-NR/PY, Line 28 is $75,000
v	Thomas claims “Massachusetts income tax withheld from other forms” on Form 1-NR/PY, line 42c for $25,000 ($25,000 in PTE Withholding) to account for the PTE Withholding he has
vi	Thomas claims Form 1-NR/PY, line 42a for $25,000 to account for his withholding on wages
vii	Schedule 4% Surtax, Line 1 is $500,000
viii	Schedule 4% Surtax, Line 3 is $1,500,000
ix	Schedule 4% Surtax, Line 6 is $1,000,000
x	Schedule 4% Surtax, Line 7 and NRPY, Line 32b (vertical) is $40,000
xi	Form 1-NR/PY, Line 32a (vertical) is $99,780
xii	Form 1-NR/PY, Line 32c (vertical) is $50,000
xiii	Form 1-NR/PY, Line 32 (vertical) is $89,780
xiv	Form 1-NR/PY, Line 58 tax due is $39,780

Frequently Asked Questions: 4% Surtax on Taxable Income Over $1,000,000

Example 3: Nonresident is NOT subject to the 4% surtax & all income is reported on Form NRCR

Nonresident “Walden” is not subject to the 4% surtax in 2023 because their taxable income for that year is below the surtax threshold. Walden’s only taxable income is reported on Massachusetts K-1s, from PTEs that filed composite returns.

Business Name	Part C (1231) Income	Participating in Composite	Composite Tax Payments on MA K1	PTE Withholding on MA K-1
Partnership “A”	$200,000	Y	$10,000	$0
S-Corporation “B”	200,000	Y	$10,000	$0
Partnership “C”	$200,000	Y	$10,000	$0

Partnership “A”, S-Corporation “B”, and Partnership “C” file composite returns for any partners that elected to be part of the composite.  Walden receives 3 Massachusetts K-1s that: 

a.    Show they participated in 3 composite returns,
b.    Show the amount of tax payments made on their behalf on those composite returns (Schedule 3K-1, Line 38 & Schedule SK-1, Line 29 show $10,000 each), and
c.    Show that they have a total amount of income less than the surtax threshold of $1,000,000. 

Walden does not need to file a Form 1-NRPY to report their income from the 3 Massachusetts K-1s and does not have to complete Schedule 4% Surtax. 

Frequently Asked Questions: 4% Surtax on Taxable Income Over $1,000,000

Example 4: Nonresident is NOT subject to the 4% surtax & part of income is reported on Form NRCR

Nonresident “John” is not subject to the 4% surtax in 2023 because his taxable income for that year is below the surtax threshold. Part of John’s income is reported on Massachusetts K-1s, from PTEs that filed composite returns. John also has a $200,000 gain from the sale of Massachusetts property that needs to be reported on a Form 1-NR/PY. 

Business Name	Part C (1231) Income	Participating in Composite	Composite Tax Payments on MA K1	PTE Withholding on MA K-1
Partnership “A”	$200,000	Y	$10,000	$0
S-Corporation “B”	$200,000	Y	$10,000	$0
Partnership “C”	$200,000	Y	$10,000	$0

Partnership “A”, S-Corporation “B”, and Partnership “C” file composite returns for any partners that elected to be part of the composite.  John receives 3 Massachusetts K-1s that:

a.    Show he participated in 3 composite returns,
b.    Show the amount of tax payments made on his behalf on those composite returns (Schedule 3K-1, Line 38 & Schedule SK-1, Line 29 show $10,000 each), and
c.    Show that he has a total amount of income (including the separate gain from the sale of Massachusetts property) less than the surtax threshold of $1,000,000.

John must file a Form 1-NR/PY to report income from the sale of his Massachusetts property, but he does not have to complete Schedule 4% Surtax because his taxable income is less than $1,000,000. 

i	Schedule D, Line 21 is $200,000
ii	Schedule D, Line 22, and Form 1-NR/PY, Line 28 is $9,780 (not $10,000 due to exemption)
iii	Form 1-NR/PY, Line 32a (vertical) is $9,780
iv	Form 1-NR/PY, Line 32b (vertical) is $0 (does not need to complete Schedule 4% Surtax)
v	Form 1-NR/PY, Line 32c (vertical) is $0
vi	Form 1-NR/PY, Line 32 is $9,780
vii	Form 1-NR/PY, Line 58 tax due is $9,780

Frequently Asked Questions: 4% Surtax on Taxable Income Over $1,000,000

Other Jurisdiction Credit (OJC) Instructions with Applicable Worksheets

Taxes Due Any Other State (full year and part-year residents only)

If you (1) are a resident or part-year resident, (2) earned income while a resident reported on your Massachusetts return, (3)  are sub­ject to taxation in another state or jurisdiction on such income, and (4) filed a return and paid taxes in the other state or jurisdiction on such income, complete the following worksheet and enter the amount of credit in Form 1 line 30 or Form 1-NR/PY line 34. Do not include taxes paid to the U.S. government. (This credit does not apply to city or local taxes.) A nonresident is not eligible for this credit. A part-year resident may not include taxes paid on income earned while a nonresident.

You are allowed to claim a credit for taxes due to the following jurisdictions:

• Other states in the U.S., including payments made under the Rhode Island Temporary Disabil­ity Insurance Act (see DOR Directive (DD) 12-1);
• Any territory or dependency of the U.S. (includ­ing Puerto Rico, the Virgin Islands, Guam, the Dis­trict of Columbia); or
• The Dominion of Canada or any of its provinces (less any U.S. credit amount allowable from U.S. Form 1116).

The amount of taxes due to the other jurisdiction should be apportioned if there are multiple income sources reported on the other jurisdiction return.

Credit is not given for a property tax due to an­other jurisdiction on account of capital stock or property. This does not refer to a tax on gain or income from the sale of capital stock or property, as included on Schedule B or Schedule D. Credit is also not given for any interest and penalties paid on a tax due to another jurisdiction.

Note: For questions on the Pass-through Entity Tax credit and its effect on this credit, refer to DOR Directive 19-1.

Below, there is a separate Worksheet for Taxes Due Any Other State for each type of income.  To calculate the credit, only complete a worksheet for a particular type of Massachusetts income if that income was also taxed by another jurisdiction.

Each type of income’s Worksheet for Taxes Due Any Other State has a corresponding OJC Surtax Worksheet.  Only complete the OJC Surtax Worksheet if you are subject to the 4% surtax on Form 1 line 28b, or Form 1-NR/PY line 32b.  If another jurisdiction taxed a particular type of income, and you are subject to the surtax, only complete the OJC Surtax Worksheet for that type of income.  Only report the amount from line 7 of the OJC Surtax Worksheet on line 8 of the corresponding Worksheet for Taxes Due Any Other State.   

On the Worksheets for Taxes Due Any Other State, enter in line 1 such income taxed in an­other jurisdiction calculated as if it was earned in Massachusetts.

If you choose to pay the optional 5.85% tax rate, substitute 0.0585 for 0.05 in line 4 of the Worksheet for Taxes Due Any Other State - 5% Income Other than Interest and Dividend Income, and in line 4 of the Worksheet for Taxes Due Any Other State – Schedule B Interest and Dividends.

If you are completing multiple Worksheets for Taxes Due Any Other State, when instructed to “Enter the amount of tax due to other jurisdiction (before credits and payments),” enter only the tax due to another jurisdiction on the type of income for which each separate worksheet is being completed.  For example, if you are completing a Worksheet for Taxes Due Any Other State – Schedule B Interest and Dividends, enter on line 14 only the amount of tax due to the other jurisdiction on the interest and dividend income reported on line 1.

If you are completing multiple Worksheets for Taxes Due Any Other State, add the last line of each worksheet for the total amount of the credit and entered that sum on Form 1, line 30 or Form 1- NR/PY line 34.

Note: Be sure to complete and enclose Sched­ule OJC, Income Tax Due to Other Jurisdic­tions, and enter the two-letter state or juris­dictional postal code for each state or jurisdic­tion for which you are taking the credit. Tax­payers from a territory or dependency of the U.S., or the Dominion of Canada or any of its provinces, must enter “FC” as the postal code.

Worksheets

OJC Surtax: 5% Income Other than Interest and Dividend Income

1	Enter Total income from Form 1 line 19 or Form 1-NR/PY line 23 (not less than zero)
2	Enter Total income on Schedule B line 37  (not less than zero)
3	Enter Total income on Schedule D line 21 or Schedule D-IS, sum of part 3, column 1, lines 26 a-h (not less than zero)
4	Add lines 1 through 3
5	Divide line 1 by line 4
6	Enter the total amount of surtax from  Form 1 line 28 b or Form 1 -NR/PY line 32 b
7	Multiply line 6 by line 5 and enter the result from line 7 of this worksheet on line 8 of the Worksheet for Taxes Due Any Other State

Taxes Due Any Other State - 5% Income Other than Interest and Dividend Income

1	Enter 5.0% income included in Form 1 line 10 or Form 1-NR/PY line 12 on which you paid taxes to another jurisdiction
2	Enter the total of Form 1 line 10 and the total MA bank interest or the interest exemption amount, whichever is smaller, from Form 1, line 5a or line 5b or  Form 1-NR/PY line 12 and the total MA bank interest or the interest exemption amount, whichever is smaller from Form 1 line 7a or line 7b.
3	Divide line 1 by line 2, not greater than 1
4	Multiply Form 1 line 19 or Form 1-NR/PY line 23 by .05
5	Enter any Limited Income Credit  (Form 1, Line 29 or Form 1-NR/PY, Line 33 )
6	Subtract line 5 from line 4
7	Multiply line 6 by line 3
8	Enter the amount from line 7 of the OJC Surtax worksheet
9	Multiply line 8 by line 3
10	Total tax - Combine lines 7 and 9
11	Enter the amount of Tax Due to the other jurisdiction  (before credits and payments)
12	Enter the smaller of lines 10 or 11 here and on Form 1, line 30 or Form 1-NR/PY line 34

OJC Surtax – Schedule B Interest and Dividends

1	Enter Total income from Form 1 line 19 or Form 1-NR/PY line 23 (not less than zero)
2	Enter Total income on Schedule B line 37  (not less than zero)
3	Enter Total income on Schedule D line 21 or Schedule D-IS, sum of part 3, column 1, lines 26 a-h (not less than zero)
4	Add lines 1 through 3
5	Divide line 2 by line 4
6	Enter the total amount of surtax from  Form 1 line 28 b or Form 1 -NR/PY line 32 b
7	Multiply line 6 by line 5 and enter the result from line 7 of this worksheet on line 8 of the Worksheet for Taxes Due Any Other State

Taxes Due Any Other State – Schedule B Interest and Dividends

1	Enter interest income (other than interest from MA banks) on which you paid taxes to another jurisdiction
2	Enter the total of Schedule B line 7
3	Divide line 1 by line 2, not greater than 1
4	Multiply Form 1 line 20 or Form 1-NR/PY line 24 by .05
5	Enter any Limited Income Credit  (Form 1, Line 29 or Form 1-NR/PY, Line 33 )
6	Subtract line 5 from line 4
7	Multiply line 6 by line 3
8	Enter the amount from line 7 of the OJC Surtax worksheet
9	Multiply line 8 by line 3
10	Combine Schedule B lines 7 and 13c  and enter here
11	Divide line 2 of this worksheet by line 10
12	Multiply line 11 by line 9
13	Total tax - Combine lines 7 and 12
14	Enter the amount of Tax Due to the other jurisdiction  (before credits and payments)
15	Enter the smaller of lines 13 or 14 here and on Form 1, line 30 or Form 1-NR/PY line 34

Surtax – Schedule B Short Term Capital Gains

1	Enter Total income from Form 1 line 19 or Form 1-NR/PY line 23 (not less than zero)
2	Enter Total income on Schedule B line 37  (not less than zero)
3	Enter Total income on Schedule D line 21 or Schedule D-IS, sum of part 3, column 1, lines 26 a-h (not less than zero)
4	Add lines 1 through 3
5	Divide line 2 by line 4
6	Enter the total amount of surtax from  Form 1 line 28 b or Form 1 -NR/PY line 32 b
7	Multiply line 6 by line 5 and enter the result from line 7 of this worksheet on line 8 of the Worksheet for Taxes Due Any Other State

Taxes Due Any Other State – Schedule B Short Term Capital Gains

1	Enter short term capital gain income, on which you paid taxes to another jurisdiction
2	Enter the total of Schedule B line 13c reduced by Schedule B line 11
3	Divide line 1 by line 2, not greater than 1
4	Enter Form 1 line 23a or Form 1-NR/PY line 27b 8.5% tax amount
5	Enter any Limited Income Credit  (Form 1, Line 29 or Form 1-NR/PY, Line 33)
6	Subtract line 5 from line 4
7	Multiply line 6 by line 3
8	Enter the amount from line 7 of the OJC Surtax worksheet
9	Multiply line 8 by line 3
10	Combine Schedule B lines 7 and 13c and enter here
11	Divide line 2 of this worksheet by line 10
12	Multiply line 11 by line 9
13	Total tax - Combine lines 7 and 12
14	Enter the amount of Tax Due to the other jurisdiction  (before credits and payments)
15	Enter the smaller of lines 13 or 14 here and on Form 1, line 30 or Form 1-NR/PY line 34

OJC Surtax – Schedule B Long Term Capital Gains on Collectibles and Pre-1996 Installment Sales

1	Enter Total income from Form 1 line 19 or Form 1-NR/PY line 23 (not less than zero)
2	Enter Total income on Schedule B line 37  (not less than zero)
3	Enter Total income on Schedule D line 21 or Schedule D-IS, sum of part 3, column 1, lines 26 a-h (not less than zero)
4	Add lines 1 through 3
5	Divide line 2 by line 4
6	Enter the total amount of surtax from  Form 1 line 28 b or Form 1 -NR/PY line 32 b
7	Multiply line 6 by line 5 and enter the result from line 7 of this worksheet on line 8 of the Worksheet for Taxes Due Any Other State

Taxes Due Any Other State – Schedule B Long Term Capital Gains on Collectibles and Pre-1996 Installment Sales

1	Enter long term capital gain income from collectibles and pre-1996 installment sales on which you paid taxes to another jurisdiction
2	Enter the total of Schedule B line 11
3	Divide line 1 by line 2, not greater than 1
4	Enter Form 1 line 23b or Form 1-NR/PY line 27b
5	Enter any Limited Income Credit  (Form 1, Line 29 or Form 1-NR/PY, Line 33)
6	Subtract line 5 from line 4
7	Multiply line 6 by line 3
8	Enter the amount from line 7 of the OJC Surtax worksheet
9	Multiply line 8 by line 3
10	Combine Schedule B lines 7 and 13c and enter here
11	Divide line 2 of this worksheet by line 10
12	Multiply line 11 by line 9
13	Total tax - Combine lines 7 and 12
14	Enter the amount of Tax Due to the other jurisdiction  (before credits and payments)
15	Enter the smaller of lines 13 or 14 here and on Form 1, line 30 or Form 1-NR/PY line 34

OJC Surtax for Schedule D Long Term Capital Gains

1	Enter Total income on Form 1 line 19  (not less than zero)
2	Enter Total income on Schedule B line 37  (not less than zero)
3	Enter Total income on Schedule D line 21 or Schedule D-IS, sum of part 3, column 1, lines 26 a-h (not less than zero)
4	Add lines 1 through 3
5	Divide line 3 by line 4
6	Enter the total amount of surtax from  Form 1 line 28 b or Form 1 -NR/PY line 32 b
7	Multiply line 6 by line 5 and enter the result from line 7 of this worksheet on line 8 of the Worksheet for Taxes Due Any Other State

Taxes Due Any Other State – Schedule D Long Term Capital Gains

1	Enter long term  capital gain income, on which you paid taxes to another jurisdiction
2	Enter the total of Schedule D line 13 or Schedule D-IS line 11
3	Divide line 1 by line 2, not greater than 1
4	Enter the amount from Form 1 line 24 or  Form 1-NR/PY  line 28
5	Enter any Limited Income Credit  (Form 1, Line 29 or Form 1-NR/PY, Line 33)
6	Subtract line 5 from line 4
7	Multiply line 6 by line 3
8	Enter the amount from line 7 of the OJC Surtax worksheet
9	Multiply line 8 by line 3
10	Total tax - Combine lines 7 and 9
11	Enter the amount of Tax Due to the other jurisdiction  (before credits and payments)
12	Enter the smaller of lines 10 or 11 here and on Form 1, line 30 or Form 1-NR/PY line 34

Frequently Asked Questions: 4% Surtax on Taxable Income Over $1,000,000