Commission Members in Attendance:
- Chairperson Rebecca Forter, Designee, MA Department of Revenue
- Lindsay Janeczek, Designee, MA Auditor
- David Emer, Designee, Senate Chair, Joint Committee on Revenue
- 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
- Jamie Oppendisano, Designee, House Minority Leader
- Chris Carlozzi, Designee, Senate Minority Leader
Commission Members Absent:
- Representative Aaron Michlewitz, Member, House Ways and Means Committee
- Sue Perez, Designee, MA Treasurer
Agenda Items:
- Meeting Agenda
- Draft Minutes
- January 23, 2026 Meeting
- Discuss impact of Department of Justice’s final rule updating its regulations for Title II of the Americans with Disabilities Act (ADA)
- Discuss and vote on Annual Report
- Presentation of February tax expenditure evaluation ratings, discuss and vote on ratings
- 3.302 Exemption for Materials, Tools, Fuels, and Machinery Used in Manufacturing
- 3.303 Exemption for Materials, Tools, Fuels, and Machinery Used in Research and Development
- 2.701 Exemption of Credit Union Income
- 1.106 Nontaxation of Capital Gains at Time of Gift
- 1.022 Nontaxation of Capital Gains at Death
- 1.610 and 2.610 Historic Buildings Rehabilitation Credit
Meeting Minutes:
The meeting via teleconference was called to order at 11:02 AM. 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 changes on the January 23, 2026 meeting minutes. Members did not provide any comment. Chairperson Forter made a motion to approve the minutes from the last meeting. Tom Downes seconded the motion. Members were in favor of approving the January ‘26 meeting minutes as drafted. The meeting minutes will be posted to the TERC website.
Chairperson Forter led a discussion on the Department of Justice’s (DOJ) final rule updating its regulations for Title II of the Americans with Disabilities Act (ADA). On April 24, 2024, the DOJ updated its regulations of the ADA with specific requirements about how to ensure that web content and apps are accessible to people with disabilities. The Commission is operating with a deadline of April 24, 2026 (DOJ deadline) to remediate any content that is left online. Chairperson Forter reviewed the online archive exception. Web content that meets all four of the following points are eligible for the online archive exception (i) the content was created before the date the state or local government must comply with this rule, or reproduces paper documents or the contents of other physical media (audiotapes, film negatives, and CD-ROMs for example) that were created before the government must comply with this rule, AND (ii) the content is kept only for reference, research, or recordkeeping, AND (iii) the content is kept in a special area for archived content, AND (iv) the content has not been changed since it was archived. Chairperson Forter mentioned that DOR has discussed a plan to remove older meeting minutes and agenda PDFs that are more than 12 months old. DOR has created an online archive via SharePoint where materials would be available upon request. Chairperson Forter acknowledged that the TERC website would be updated with instructions on how to request materials that have been archived. Chairperson Forter further noted formatting changes to the evaluation template and summary reports as a result of DOJ’s final ruling. Natasha Varyani agreed with the proposed plan. Tom Downes asked if the public would have direct access to the archive. Chairperson Forter responded that the public would not have direct access, they would have to request any archived materials. Members did not provide any other questions or comment on the proposed plan.
Chairperson Forter provided an overview of certain sections of the draft 2026 annual report including particular tax expenditures flagged in the evaluation process and tax expenditures that may warrant legislative review. Members did not provide any comment on 1.201 Capital Gain Deduction for Collectibles. Members did not provide any comment on 1.401 and 1.402 Deduction for Employee Social Security and Railroad Retirement Payments/Deduction for Employee Contributions to Public Pension Plans. Members agreed to remove 1.046 Exclusion of Benefits Provided to Volunteer Firefighters and Emergency Medical Responders since it is a federal expenditure with relatively low cost. Members did not provide any comment on 1.202 Deduction of Capital Losses against Interest and Dividend Income. Members did not provide any comment on 1.403 Additional Exemption for the Elderly. Members did not provide any comment on 1.404 Additional Exemption for the Blind. Members agreed to remove 1.408 Deduction for Adoption Fees. This expenditure was initially flagged due to administration concerns, but on the grounds that there is no corresponding federal deduction. The Commission agreed that this is not a reason to flag the expenditure and agreed to remove it from the report. Members did not provide any comment on 1.428 Gambling Loss Deduction. Members agreed to remove 1.601 Renewable Energy Source Credit. This expenditure was initially flagged due to administration concerns, but on the grounds that there is no corresponding federal deduction. Members did not provide any comment on 1.605 Earned Income Credit. Chairperson Forter noted that 1.615 and 2.619 Conservation Land Tax Credit was missing from the report and would be added back in the final version. Members did not provide any comment on1.623 and 2.625 Cranberry Bog Renovation Credit. Members did not provide any comment on 2.203 Net Operating Loss Carryover. Members did not provide any comment on2.502 Exemption for Property Subject to Local Taxation. Members did not provide any comment on2.604 Research Credit. Members did not provide any comment on 3.102 Exemption for Food. Members agreed to add a comment to 3.201 Exemption for Alcoholic Beverages to note that the expenditure was reinstated in 2010 by voter referendum.
David Emer reviewed his proposed edits to Appendix C: Tax Expenditure Summaries. David provided some additional information for a few tax expenditures. For 1.042 and 1.501 Favorable Tax Treatment of Qualified Small Business Stock (QSBS) Gain, David noted that in 2025, the District of Columbia decoupled from this federal tax expenditure. For 1.609 Refundable Credit Against Property Tax for Seniors (Circuit Breaker), he noted that some municipalities, including Reading and Wakefield, have made eligibility for their own senior property tax relief programs contingent on eligibility for the Circuit Breaker credit. For 2.203 Net Operating Loss Carryover, he noted that a number of states restrict carryforwards below the 20-year threshold. As of 2022, these include Alabama, Minnesota, North Carolina, Oregon, Tennessee, Illinois, Michigan, Montana, New Hampshire, Vermont, Arkansas, and Rhode Island. Pennsylvania and New Hampshire limit the percentage of losses that may be carried forward. Members agreed that these comments should be added to the tax expenditure summaries included in Appendix C.
Chairperson Forter asked whether the Commission wanted to see the draft again once the changes had been made. Members agreed that was not necessary. Chairperson Forter made a motion to approve the Annual Report with the changes discussed. Tom Downes seconded the motion. The Commission voted to approve the Annual Report with the changes noted above.
Chairperson Forter led a discussion on 3.302 Exemption for Materials, Tools, Fuels, and Machinery Used in Manufacturing. This sales tax exemption has an annual cost of $882.9 to $953 million, was adopted in 1967 and is not a result of conformity to the Code. Chairperson Forter noted that ratings have not changed much since this tax expenditure was last reviewed. The Commission voted “somewhat agree” on the questions of whether (i) we can measure the overall benefit and (ii) the tax expenditure justifies its fiscal cost. The Commission voted “strongly agree” on the questions of whether (i) the tax expenditure is claimed by its intended beneficiaries, (ii) the tax expenditure is claimed by a broad group, (iii) the amount claimed is meaningful as an incentive/benefit, and (iv) the tax expenditure is relevant today. The Commission voted “somewhat disagree” on the question of whether the tax expenditure is easily administered; Chairperson Forter noted that this was also a concern that was flagged in the prior cycle. It can be challenging to administer this exemption due to issues related to determining what items should be exempt. Chris Carlozzi provided an example to members, explaining that a rag used to clean a breakroom would not be eligible for the exemption while a rag that is used to clean machinery would be eligible for the exemption. Chairperson Forter noted that this tax expenditure is not flagged for legislative review, but it is to be mentioned in the report that this tax expenditure proposes administrative challenges for both DOR and taxpayers. Chairperson Forter made a motion to approve the evaluation template. Tom Downes seconded the motion. The Commission voted to approve the evaluation template for 3.302 Exemption for Materials, Tools, Fuels, and Machinery Used in Manufacturing as presented.
David Emer led a discussion on 3.303 Exemption for Materials, Tools, Fuels, and Machinery Used in Research and Development. David noted that this expenditure is similar to the exemption that was just reviewed by the Commission (3.302 Exemption for Materials, Tools, Fuels, and Machinery Used in Manufacturing) but that it applies to research and development. David also noted that ratings have not changed since this tax expenditure was last reviewed by the Commission. David flagged that this tax expenditure may cause unnecessary complexity, given the existence of the targeted R&D tax credit. That credit directly rewards increases in R&D activity, whereas this sales tax exemption does not. While R&D is a critical economic engine for Massachusetts, given that there is a Research Credit (previously reviewed by the Commission), it may be worthwhile for the legislature to simplify by combining the two. Tom Downes mentioned that an additional goal of this expenditure may be to avoid pyramiding of sales taxes. Without the exemption, the tax on items used in the research and development process will be reflected in the price of the product sold to the ultimate consumer, resulting in consumers bearing the burden of multiple layers of tax. Chairperson Forter made a motion to approve the evaluation template. The Commission voted to approve the evaluation template for 3.303 Exemption for Materials, Tools, Fuels, and Machinery Used in Research and Development with an additional comment about the expenditure’s goal of avoiding pyramiding of sales taxes.
Chris Carlozzi led a discussion on 2.701 Exemption of Credit Union Income. This tax expenditure was adopted in 1909 and has an annual cost of $18.9 to $ 27.1 million with no sunset date. This corporate excise exemption is a result of conformity to the federal Code. The goals of this expenditure are to encourage credit union operation and conformity. The Commission voted “somewhat agree” on the questions of whether (i) we can measure the overall benefit, (ii) the tax expenditure justifies its fiscal cost, (iii) the tax expenditure is claimed by its intended beneficiaries, (iv) the amount claimed is meaningful as an incentive/benefit, (v) the tax expenditure is relevant today, (vi) the tax expenditure is easily administered, and (vii) the tax expenditure is primarily beneficial to smaller businesses. The Commission voted “somewhat disagree” on the question of whether the tax expenditure is claimed by a broad group. Chairperson made a motion to approve the evaluation template. Chris Carlozzi seconded the motion. The Commission voted to approve the evaluation template for 2.701 Exemption of Credit Union Income as presented.
Natasha Varyani led a discussion on 1.106 Nontaxation of Capital Gains at Time of Gift. This tax expenditure was adopted in 1921 and has an annual cost of $17.9 to $157.6 million with no sunset date. This personal income tax expenditure is a result of conformity to the federal Code. Natasha noted that the statute related to this tax expenditure does not have a stated goal. The Commission assumes that the goal of the expenditure is to simplify administration via conformity to the Code and to provide an advantage for those with capital assets. The Commission voted “somewhat disagree” on the questions of whether (i) we can measure the overall benefit and (ii) the tax expenditure justifies its fiscal cost. Natasha noted the sharp increase in cost over recent years. The Commission voted “strongly disagree” on the questions of whether (i) the tax expenditure is claimed by its intended beneficiaries and (ii) the tax expenditure is primarily beneficial to lower income taxpayers. Natasha noted that it is unclear who the intended beneficiaries really are. The Commission voted “somewhat agree” on the questions of whether (i) the tax expenditure is claimed by a broad group and (ii) the tax expenditure is easily administered. The Commission agreed not to flag this tax expenditure for legislative review. Andrew DeFalco noted that it is unclear if the intended beneficiary is the purchaser of an asset or the giftee receiving the asset. Andrew also noted that the Commission is not aware of any state that departs from the federal basis and recognition rules with respect to gifted capital assets. David Emer noted that Pennsylvania does not conform to the federal code and instead has its own rules on the taxation of capital gains at time of gift. Chairperson Forter suggested adding this comment to the evaluation template. Chairperson Forter made a motion to approve the evaluation template, with that one change. Natasha Varyani seconded the motion. The Commission voted to approve the evaluation template for 1.106 Nontaxation of Capital Gains at Time of Gift with the additional comment noted above.
Tom Downes led a discussion on 1.022 Nontaxation of Capital Gains at Death. Tom noted the similarities between this tax expenditure and 1.106 Nontaxation of Capital Gains at Time of Gift. The goal of this tax expenditure is to encourage savings. The Commission voted “somewhat disagree” on the questions of whether (i) we can measure the overall benefit, (ii) the tax expenditure’s benefit justifies its fiscal cost, and (iii) the tax expenditure is claimed by a broad group. Tom noted that there isn’t much evidence that shows that incentives like this tax expenditure increase savings. The Commission voted “somewhat agree” on the questions of whether (i) the tax expenditure is claimed by its intended beneficiaries, (ii) the amount claimed per taxpayer is meaningful as an incentive/benefit, (iii) the tax expenditure is relevant today, and (iv) the tax expenditure is easily administered. The Commission voted “strongly disagree” on the question of whether the tax expenditure is primarily beneficial to lower income taxpayers. Tom noted that taxpayers that are typically holding these assets at the time of death are of higher income. The Commission noted that decoupling from federal rules may increase revenue but would introduce significant administrative challenges. The Commission agreed not to flag this tax expenditure for legislative review. Chairperson Forter made a motion to approve the evaluation template. Tom Downes seconded the motion. The Commission voted to approve the evaluation template for 1.022 Nontaxation of Capital Gains at Death as presented.
Chris Carlozzi led a discussion on 1.610 and 2.610 Historic Buildings Rehabilitation Credit. This tax expenditure was adopted in 2005 and has an annual cost of $38.4 to $67.2 million. This tax expenditure is set to expire on December 31, 2030. This tax expenditure applies to both corporate excise and personal income tax and is not a result of conformity to the federal Code. The goal of the expenditure is to encourage investment in historic properties. The Commission voted “somewhat agree” on the questions of whether (i) we can measure the overall benefit, (ii) the tax expenditure’s benefit justifies its fiscal cost, (iii) the tax expenditure is claimed by its intended beneficiaries, (iv) the amount claimed is meaningful as an incentive/benefit, (v) the tax expenditure is relevant today, (vi) the tax expenditure is easily administered, and (vii) the tax expenditure is primarily beneficial to smaller businesses. The Commission voted “strongly disagree” on the question of whether (i) the tax expenditure is claimed by a broad group and (ii) the tax expenditure is primarily beneficial to lower income taxpayers. Chris noted that a very small group of taxpayers claims this credit, about 25 per year. The Commission agreed that this tax expenditure should not be flagged for legislative review and noted that this is one of the few expenditures that does have a sunset date. When the expenditure expires, the Legislature will have to review the expenditure to determine whether or not it should be extended. Chairperson Forter mentioned that this expenditure has previously been extended several times since it was adopted. The Commission agreed to review this tax expenditure again prior to its expiration date. Chairperson Forter made a motion to approve the template. Chris Carlozzi seconded the motion. The Commission voted to approve the evaluation template for 1.610 and 2.610 Historic Buildings Rehabilitation Credit as presented.
Chairperson Forter thanked Cole Doherty-Crestin for all his hard work on assembling the annual report, and members for their contributions. She noted that the next Commission meeting is to be scheduled for April to review the next batch of expenditures. Chairperson Forter adjourned the meeting at 12:19 PM.
| Date published: | March 5, 2026 |
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