Commission Members in Attendance:
- Chairperson Rebecca Forter, Designee, MA Department of Revenue
- Lindsay Janeczek, Designee, MA Auditor
- Andrew DeFalco, Designee, Senate Committee on Ways and Means
- Professor Natasha Varyani, Member, Governor’s Appointee
- Professor Thomas Downes, Member, Governor’s Appointee
- Thomas Baranowski, Designee, House Chair Joint Committee on Revenue
- Sue Perez, Designee, MA Treasurer
Commission Members Absent:
- Representative Aaron Michlewitz, Member, House Ways and Means Committee
- Chris Carlozzi, Designee, Senate Minority Leader
- David Emer, Designee, Senate Chair Joint Committee on Revenue
- Jamie Oppendisano, Designee, House Minority Leader
Agenda Items:
- Meeting Agenda
- Draft Minutes
- February 27, 2026 Meeting
- Presentation of April tax expenditure evaluation ratings, discuss and vote on ratings
- 1.102 Treatment of Incentive Stock Options
- 1.103 Exempt of Earnings on Stock Bonus Plans or Profit Sharing Trusts
- 3.602 Exemption for Vending Machine Sales
- 3.202 Exemption for Motor Fuels
- 2.617 & 3.005 Life Sciences Tax Incentive Program
Meeting Minutes:
The meeting via teleconference was called to order at 2:03 PM. Chairperson Forter welcomed Commission members, called roll, and a quorum was recognized. Chairperson Forter put the Commission and public on notice that the meeting is recorded for the purpose of minutes. The recording of the meeting will be kept for public record and will not be deleted.
Chairperson Forter asked for any comments or questions on the February 27, 2026 meeting minutes. Members did not provide any comment. Chairperson Forter made a motion to approve the minutes. Tom Downes seconded the motion. Members were in favor of approving the April ‘26 meeting minutes as drafted. The meeting minutes will be posted to the TERC website.
Chairperson Forter led a discussion on 1.102 Treatment of Incentive Stock Options. Massachusetts adopts the federal treatment of incentive stock options. There are no tax consequences when employees are granted the stock options or when they exercise them, there is no tax until the stock is sold. The annual cost of this expenditure is $5.8 to $7.7 million per year. There is no sunset date. The goal of this expenditure is job creation and maintenance and competitiveness/strategic. States that follow the definition of income in the Code follow the federal rules for incentive stock options. The Commission is only aware of one state that has decoupled, Pennsylvania. The Commission agreed that to be consistent with other states it makes sense to have the expenditure. Chairperson Forter noted that this expenditure has previously been evaluated by the Commission and that ratings have not changed much. The Commission voted “somewhat disagree” on the questions of whether (i) we can measure the overall benefit toward achieving the goal and (ii) the amount claimed is meaningful as an incentive/benefit. Similar to other expenditures that are a result of the state’s conformity to the federal code, it is hard to know whether the state tax benefit is what is driving taxpayer behavior. The Commission voted “somewhat agree” on the question of whether the benefit justifies its fiscal cost. The Commission voted “strongly agree” on the question of whether the tax expenditure is claimed by its intended beneficiaries. The Commission voted “somewhat disagree” on the question of whether the tax expenditure is claimed by a broad group of taxpayers. While DOR does not have data on the number of taxpayers receiving incentive stock options, by default it is a relatively narrow group. The Commission voted “strongly agree” on the questions of whether (i) the tax expenditure is relevant today and (ii) the tax expenditure is easily administered. Whenever the state conforms to federal rules, that eases DOR administration. The Commission voted “strongly disagree” on the question of whether the tax expenditure is primarily beneficial to lower income taxpayers. Taxpayers who are receiving incentive stock options are probably at the higher end of the income spectrum. The Commission agreed that this tax expenditure should not be flagged for legislative review. Chairperson Forter reviewed the comment section of the evaluation template, highlighting that it is difficult to know how much the state benefit really drives behavior. Chairperson Forter asked members whether they had any comments or questions. No comments or questions from members. Chairperson Forter made a motion to approve the evaluation template. Tom Downes seconded the motion. Members voted to approve the evaluation template for 1.102 Treatment of Incentive Stock Options as presented
Tom Downes led a discussion on 1.103 Exempt of Earnings on Stock Bonus Plans or Profit Sharing Trusts. Tom noted that this expenditure is similar to 1.102 Treatment of Incentive Stock Options, but this expenditure has a much higher cost of $1,134.0 to $1,316.3 million per year due to its inclusion of pension plans. The earnings of pensions are not taxed until the pension is cashed out. This expenditure is not formally a result of conformity to the Code, as there is separate Massachusetts legislation for this expenditure, but the federal tax treatment is exactly the same. Tom noted this expenditure is claimed by a broader group of taxpayers compared to 1.102 Treatment of Incentive Stock Options due to the inclusion of pensions. The Commission voted “somewhat agree” on the questions of whether (i) we can measure the overall benefit, (ii) the tax expenditure is claimed by its intended beneficiaries, and (iii) the amount claimed per taxpayer is meaningful as an incentive/benefit. The Commission voted “strongly agree” on the questions of whether (i) the tax expenditure’s benefit justices its fiscal cost, (ii) the tax expenditure is claimed by a broad group, (iii) the tax expenditure is relevant today, and (iv) the tax expenditure is easily administered. The Commission voted “somewhat disagree” on the question of whether the tax expenditure is primarily beneficial to lower income taxpayers. Similar to 1.102 Treatment of Incentive Stock Options, Tom noted that it is difficult to know how much the state benefit really drives behavior and that typical claimants of this exemption are of higher income. The goal of the expenditure is access to opportunity and to encourage retirement savings. The Commission did not flag this tax expenditure for legislative review. Chairperson Forter asked members whether they had any comments or questions. No comments or questions from members. Chairperson Forter made a motion to approve the template. Tom Downes seconded the motion. Members voted to approve the evaluation template for 1.103 Exempt of Earnings on Stock Bonus Plans or Profit Sharing Trusts as presented.
Sue Perez led a discussion on 3.602 Exemption for Vending Machine Sales. Sue noted that ratings have not changed much since this expenditure was last reviewed but that the annual cost has increased slightly. This tax expenditure was adopted in 1967 and updated in 1977 and 1986 and does not have a sunset date. This sales and use tax exemption is not a result of conformity to the federal Code. The goal of the expenditure is to ease compliance costs. The Commission voted “somewhat disagree” on the question of whether we can measure the overall benefit toward achieving the goal. The Commission voted “somewhat agree” that the tax expenditure justifies its fiscal cost. Sue noted that the annual cost is under $2 million. The Commission voted “strongly agree” on the question of whether the tax expenditure is claimed by its intended beneficiaries. The Commission voted “strongly disagree” on the question of whether the tax expenditure is claimed by a broad group. Sue noted that in FY22 there were 44 vending machine operators in the Commonwealth. The Commission voted “somewhat disagree” on the question of whether the amount claimed by taxpayers was meaningful as an incentive/benefit. Sue mentioned that in FY22 the average benefit per taxpayer (vending machine operator) was $36,700. The Commission voted “somewhat agree” on the questions of whether (i) the tax expenditure is relevant today, (ii) the tax expenditure is easily administered, and (iii) the tax expenditure is primarily beneficial to smaller businesses. Sue highlighted that many other states offer a similar exemption. Chairperson Forter asked members whether they had any questions. Tom Downes mentioned that anyone buying from the vending machine is also benefitting from this exemption, not just vending machine operators. Tom also noted that historically this exemption made more sense when physical coins were the primary method for purchasing items from a vending machine, but does it make as much sense today with most machines being digitized and able to accept card payments. Natasha Varyani agreed with Tom, noting that it is a lot easier to collect and remit sales tax via digital payments. Natasha suggested to begin collecting data on the number of vending machines that are digital. Chairperson Forter agreed with adding a comment to the evaluation template regarding the digitization of machines and that if this exemption was repealed it would likely result in all vendors going digital. Sue also agreed with the additional comment. Chairperson Forter asked members if they had any other questions. No comment from members. Chairperson Forter made a motion to approve the evaluation template. Sue seconded the motion. Members voted to approve the evaluation template for 3.602 Exemption for Vending Machine Sales with an additional comment.
Chairperson Forter noted that the online version of the evaluation template introduced with this batch will not be used by the Commission, and that the Commission would revert to the Word version instead.
Lindsay Janeczek led a discussion on 3.202 Exemption for Motor Fuels. Lindsay noted that this expenditure has been previously evaluated by the Commission and that ratings have not changed much. This tax expenditure was adopted in 1967 and has no sunset date. The annual cost is $552.2 to $719.9 million. This sales tax exemption is not a result of conformity to the federal Code. The goal of the expenditure is avoidance of double taxation. Motor fuels purchased for highway use are exempt from sales tax and are instead subject to a different excise under state law. The Commission voted “somewhat agree” on the questions of whether (i) we can measure the overall benefit toward achieving the goal, (ii) the tax expenditure’s benefit justifies its fiscal cost. (iii) the tax expenditure is claimed by a broad group, (iv) the amount claimed is meaningful as an incentive / benefit, (v) the tax expenditure is easily administered, and (vi) the tax expenditure is primarily beneficial to smaller businesses. The Commission voted “strongly agree” on the questions of whether (i) the tax expenditure is claimed by its intended beneficiaries and (ii) the tax expenditure is relevant today. Lindsay noted that this expenditure does not present any special administration challenges for DOR. The Commission did not flag this tax expenditure for legislative review. Tom Baranowski highlighted that the expenditure helps avoid double taxation of motor fuels. Chairperson Forter asked members whether they had any comments or questions. No comment from members. Chairperson Forter made a motion to approve the template. Lindsay seconded the motion. Members voted to approve the evaluation template for 3.202 Exemption for Motor Fuels as presented.
Chairperson Forter noted that 1.611 & 2.614 & 3.004 Film Credit, Payroll and Production / Exemption for Sales to Motion Picture Production Companies has been postponed to the next meeting due to assigned members being absent from today’s meeting.
Tom Downes led a discussion on 2.617 & 3.005 Life Sciences Tax Incentive Program (the program). Tom noted that the program includes a variety of credits available to both firms and individuals. Components of this tax expenditure were adopted in 2008 and 2011. The Life Sciences Jobs and Research credits are set to expire December 31, 2028. The other credits included in the program do not have sunset dates. This tax expenditure is not a result of conformity to the federal Code. Tom noted other states have similar kinds of credits. The goal of the expenditure is job creation & maintenance, investment, and competitiveness/strategic. Tom mentioned that evaluation ratings have not changed much since the last time this expenditure was reviewed by the Commission. These credits are administered by the Massachusetts Life Science Center (MLSC). The Commission voted “somewhat disagree” on the question of whether we can measure the overall benefit toward achieving the goal. Tom highlighted the possibility that the program may not incentivize the behavior of firms and that the economic activity might have occurred absent the program. The Commission voted “somewhat agree” on the question of whether the tax expenditure justifies its fiscal cost. Tom noted that the administration of the program ensures that the credits are being received by the intended beneficiaries. The Commission voted “strongly disagree” on the question of whether the tax expenditure is claimed by a broad group as few taxpayers benefit from the program annually. The Commission voted “somewhat agree” on the question of whether the amount claimed per taxpayer is meaningful as an incentive/benefit. The Commission voted “strongly agree” on the questions of whether (i) the tax expenditure is relevant today and (ii) the tax expenditure is easily administered. Tom noted that the firms taking advantage of the program tend to be larger. The Commission voted between “somewhat disagree” and “strongly disagree” on the question of whether (i) the tax expenditure is primarily beneficial to smaller businesses and (ii) the tax expenditure is primarily beneficial to lower income taxpayers. The Commission agreed that this tax expenditure should not be flagged for legislative review. Tom reviewed the comment section of the evaluation template, highlighting that Massachusetts has a disproportionate share of the national life sciences industry. Tom noted similarities and differences between the Life Sciences Program and the Film Incentive Credit (expert approved, capped annual amount, sunset dates, claw back provision). Chairperson Forter noted that this model has become more and more common for credits, with an administering agency having expertise and an application/allocation process which makes administering a credit cap easier. Chairperson Forter asked members whether they had any comments or questions. No comments from members. Chairperson Forter made a motion to approve the template. Natasha Varyani seconded the motion. Members voted to approve the evaluation template for 2.617 & 3.005 Life Sciences Tax Incentive Program as presented.
Chairperson Forter noted that the next Commission meeting is to be scheduled for May to review the next batch of expenditures. She asked members whether they had any questions. No questions from members. She thanked everyone for their contributions and adjourned the meeting at 2:37 PM.
| Date published: | June 29, 2026 |
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