Commission Members in Attendance:
- Chairperson Rebecca Forter, MA Department of Revenue
- Lindsay Janeczek, Designee, MA Auditor
- Sue Perez, Designee, MA Treasurer
- David Emer, Designee, Senate Chair Joint Committee on Revenue
- Andrew DeFalco, Designee, Senate Committee on Ways and Means
- Professor Natasha Varyani, Governor’s Appointee
- Professor Thomas Downes, Governor’s Appointee
- Thomas Baranowski, Designee, House Chair Joint Committee on Revenue
- Jamie Oppendisano, Designee, House Minority Leader
Commission Members Absent:
- Representative Aaron Michlewitz, House Ways and Means Committee
- Chris Carlozzi, Designee, Senate Minority Leader
List of Documents:
- Meeting Agenda
- Draft Minutes
- September 19, 2025 Meeting
- Presentation of November tax expenditure evaluation ratings, discuss and vote on ratings
- 2.203 Net Operating Loss (NOL) Carryover
- 2.502 Exemption for Property Subject to Local Taxation
- 1.046 Exclusion of Benefits Provided to Volunteer Firefighters and Emergency Medical Responders
- 1.018 Exemption of Meals and Lodging Provided at Work
- 1.202 Deduction of Capital Losses against Interest and Dividend Income
- 3.201 Exemption for Alcoholic Beverages
Meeting Minutes:
The meeting via teleconference was called to order at 10:02 AM. Chairperson Forter welcomed Commission members and noted changes in membership. Tom Baranowski has been appointed as the new designee for Rep. Adrian C. Madaro, House Chair, Joint Committee on Revenue. Andrew DeFalco has been appointed as the new designee for Sen. Michael Rodrigues, Chair, Senate Ways and Means. Chairperson Forter 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 September 19, 2025 meeting minutes. Members did not provide any comment. Sue Perez made a motion to approve the minutes from the last meeting. Tom Downes seconded the motion. Members were in favor to approve the September ‘25 meeting minutes as drafted. Jamie Oppendisano abstained since he was absent from the last meeting. The meeting minutes will be posted to the TERC website.
Tom Downes led a discussion on 2.203 Net Operating Loss (NOL) Carryover This tax expenditure was adopted in 1988 and has an annual revenue impact of $234.3 - $285.3 million per year during FY23 - FY27 with no sunset date.
Tom noted that most states have similar tax expenditures, highlighting a report recently published by the Tax Foundation which summarizes NOL rules across all states. Members briefly discussed how California had suspended its NOL for budgetary reasons related to COVID.
Tom reviewed ratings on the evaluation sheet for this tax expenditure. The Commission voted “somewhat agree” on the questions of whether i) we can measure the overall benefit of this tax expenditure 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 per taxpayer is meaningful as an incentive/benefit, and iv) the tax expenditure is relevant today. Tom mentioned that this tax expenditure is especially helpful to small businesses, and that they represent the vast majority of businesses that claim NOLs. In 2021, more than 14,000 businesses claimed this deduction. Over 12,000 of these businesses had a taxable income range of $0 to $49,999 and less than 50 employees. The Commission voted “somewhat disagree” on the question of whether the tax expenditure is easily administered. Tom noted that there is a similar federal deduction for NOLs under Internal Revenue Code (Code) § 172. Massachusetts does not adopt the federal deduction and instead allows the state-specific deduction. The Commission voted “somewhat agree” on the question of whether the tax expenditure is primarily beneficial to smaller businesses. Tom noted that small and large businesses are eligible to claim this deduction. The average claimed amount varied from $78,413 for corporations with taxable income of $50,000 - $99,999 to $2.1 million for corporations with taxable income of $1 million or more.
Tom highlighted the questions listed in the comment section of the evaluation template. Would aligning with the federal Code ease administration and result in increased revenue? Is that worth the harm to small businesses? The Commission agreed that this tax expenditure should not be flagged for legislative review. Tom and Natasha made motions to approve the evaluation template. Members voted to approve the evaluation template 2.203 Net Operating Loss (NOL) Carryover as presented.
Lindsay Janeczek led a discussion on 2.502 Exemption for Property Subject to Local Taxation and noted that it has been previously evaluated by the Commission. This tax expenditure is a corporate excise expenditure that was adopted in 1962 and has an annual revenue impact of $376.0 - $418.8 million per year during FY23 - FY27 with no sunset date. The Commission noted that the goal of this tax expenditure is to avoid duplication of state and local taxation.
Lindsay reviewed ratings on the evaluation sheet for this tax expenditure. 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 tax expenditure is claimed by a broad group of taxpayers, v) the amount claimed per taxpayer is meaningful as an incentive/benefit, and vi) the tax expenditure is relevant today. Lindsay noted that this tax expenditure is targeted towards corporations that have tangible property subject to local taxation in Massachusetts and that this reduction in capital costs helps businesses to thrive and grow, highlighting that about 50,000 filers claim this deduction annually. The Commission voted “somewhat disagree” on the question of whether this tax expenditure is easily administered. Lindsay noted that administering this tax expenditure can be challenging for DOR since the only way to ensure that tangible property is being reported properly is through audits. Chairperson Forter mentioned that DOR frequently receives questions from taxpayers regarding this exemption. Natasha Varyani highlighted that some of these questions end up being litigated at the Appellate Tax Board (ATB). The Commission discussed whether this tax expenditure is primarily beneficial to smaller businesses. Members concluded that they “somewhat agree”. Chairperson Forter and Natasha Varyani noted that the exemption is available to all corporate excise taxpayers subject to local taxation, but that the impact may be more significant for smaller businesses.
The Commission agreed that this tax expenditure should not be flagged for legislative review. Chairperson Forter made a motion to approve the evaluation template. Jamie Oppedisano seconded the motion. Members voted to approve the evaluation template for 2.502 Exemption for Property Subject to Local Taxation as presented.
Jamie Oppedisano led a discussion on 1.406 Exclusion of Benefits Provided to Volunteer Firefighters and Emergency Medical Responders. This tax expenditure was adopted in 2022 and has an annual revenue impact of $0.4 - $0.5 million per year during FY23 - FY27 with no sunset date. This tax expenditure is a result of Massachusetts’ conformity with the Internal Revenue Code.
Jamie reviewed ratings on the evaluation sheet for this tax expenditure. The Commission assumes the goal of this tax expenditure is to recruit and retain volunteer firefighters and emergency medical responders. The Commission voted “somewhat disagree” on the question of whether we can measure the overall benefit towards achieving the goal. The Commission voted “somewhat agree” on the question of whether the tax expenditure justifies its fiscal cost. The Commission voted “strongly agree” that the tax expenditure is claimed by its intended beneficiaries. The Commission voted “somewhat disagree” on the questions of whether i) the tax expenditure is claimed by a broad group of taxpayers and ii) the amount claimed per taxpayer is meaningful as an incentive/benefit. Jamie noted that about 15,000 taxpayers claim this exclusion annually and that the average tax savings is about $30 per taxpayer. The Commission voted “somewhat agree” on the question of whether the tax expenditure is relevant today. The Commission voted “strongly agree” on the question of whether the tax expenditure is easily administered. Jamie noted that this tax expenditure results in a limited revenue impact and it does not present an administrative burden for DOR. The Commission voted “somewhat disagree” on the question of whether the tax expenditure is primarily beneficial to lower income taxpayers. Jamie noted that the intention of the tax expenditure is not the relief of poverty.
The Commission agreed that this tax expenditure should not be flagged for legislative review, highlighting that volunteer firefighters and EMTs serve a vital role in a substantial number of Massachusetts communities. Chairperson Forter noted that this is a new expenditure for Massachusetts (IRC provision enacted 2007; updated 2019; MA conformed to IRC provision in 2022). Members agreed to update the year of adoption in the DOR report to reflect these details. Sue Perez made a motion to approve the evaluation template. Chairperson Forter seconded the motion. The Commission voted to approve the evaluation template for 1.406 Exclusion of Benefits Provided to Volunteer Firefighters and Emergency Medical Responders as presented.
The Commission agreed to review the 1.018 Exemption of Meals and Lodging Provided at Work during the next meeting since the assigned members were absent from this meeting.
Chairperson Forter led a discussion on 1.202 Deduction of Capital Losses against Interest and Dividend Income. This tax expenditure has previously been evaluated by the Commission. This tax expenditure was adopted in 2002 and has an annual revenue impact of $17.5 - $24.9 million per year during FY23 - FY27 with no sunset date.
Individual taxpayers may deduct up to $2,000 of net capital losses against interest and dividend income. Any remaining capital losses can be carried forward and deducted in a succeeding taxable year. Chairperson Forter noted that there is a similar federal deduction that allows up to $3,000 of net capital loss to be deducted against any ordinary income (not just interest and dividend income). See Code § 1211. Chairperson Forter highlighted that the federal deduction is broader than the Massachusetts deduction and that Massachusetts does not follow that Code provision.
Chairperson Forter reviewed ratings on the evaluation sheet for this tax expenditure. The Commission assumes the goal of the tax expenditure is fairness and to reduce loss harvesting across income types. Loss harvesting is a practice where taxpayers intentionally sell capital assets at a loss in order to offset other types of income. The Commission voted “somewhat disagree” on the question of whether we can measure the overall benefit toward achieving the goal. Chairperson Forter mentioned that the benefit of the federal deduction is significantly larger than the state deduction due to the differences in tax rates and that, in general, the federal rules are a greater incentive than state rules. The Commission voted “somewhat agree” on the question of whether the tax expenditure justifies its fiscal cost. Chairperson Forter noted that the fiscal cost is not extraordinary nor insignificant. The Commission voted “somewhat agree” on the question of whether the tax expenditure is claimed by its intended beneficiaries. The Commission voted “strongly agree” on the question of whether the tax expenditure is claimed by a broad group of taxpayers. About 500,000 taxpayers claim this deduction annually. The Commission voted “strongly disagree” on the question of whether the amount claimed per taxpayer is meaningful as an incentive/benefit. Chairperson Forter mentioned that the value of the Massachusetts deduction is not that significant, especially in comparison to the federal deduction. The Commission voted “somewhat agree” on the question of whether the tax expenditure is relevant today. The Commission voted “somewhat disagree” on the question of whether the tax expenditure is easily administered. The mismatch between state and federal rules make it somewhat challenging for DOR to track. The Commission voted “strongly disagree” on the question of whether the tax expenditure is primarily beneficial to lower income taxpayers. Chairperson Forter noted that higher income taxpayers are more likely to have investment income compared to lower income taxpayers.
The Commission agreed that this tax expenditure should not be flagged for legislative review. Chairperson Forter mentioned that one reason we may want to flag it is due to the mismatch in state and federal rules, but that Massachusetts cannot simply conform due to its unique structure for classifying and taxing income.
Natasha Varyani suggested voting “somewhat disagree” instead of “somewhat agree” on the question of whether the tax expenditure justifies its fiscal cost. Members agreed with this change. Chairperson Forter provided a motion to approve the evaluation template. Jamie Oppedisano seconded the motion. The Commission voted to approve the evaluation template for 1.202 Deduction of Capital Losses against Interest and Dividend Income with the change mentioned above.
Sue Perez led a discussion on 3.201 Exemption for Alcoholic Beverages. This tax expenditure has previously been reviewed by the Commission. This tax expenditure was adopted in 1967, repealed in 2009, and reinstated in 2010, and has an annual revenue impact of $173.8 -$186.5 million per year during FY23 -FY27 with no sunset date. Sue noted the increasing cost of this tax expenditure. The revenue impact was $120.9 -$131.6 million per year during FY18-FY22. Kazim Ozyurt helped clarify the increasing cost of this tax expenditure, highlighting that sales tax would be imposed on the price of alcohol while excise tax is imposed on the volume of alcohol. As the price of alcohol increases over time, so does the revenue loss resulting from this tax expenditure.
Sue Perez reviewed ratings on the evaluation sheet for this tax expenditure. The goal of this exemption is to avoid double taxation. Sue highlighted that alcoholic beverages, except those sold by a restaurant as a meal, are exempt from sales tax. They are instead subject to an alcoholic beverage excise at the wholesale level. The excise is determined by volume rather than retail sales price. The Commission voted “somewhat agree” on the question of whether we can measure the overall benefit toward achieving the goal. The Commission voted “strongly disagree” on the question of whether the tax expenditure justifies its fiscal cost. The Commission discussed the fiscal cost of this tax expenditure. Chairperson Forter and Kazim Ozyurt clarified that the revenue loss resulting from this tax expenditure is the forgone sales tax that otherwise would have been collected absent this tax expenditure, not the differential between the amount that would be collected in sales tax and the amount actually collected through the alcoholic beverage excise. Sue noted that alcoholic beverage excise tax collections in FY25 totaled $92.9 million. Sue questioned whether the intent of this sales tax exemption is to forgo more revenue collections than what is actually collected via the excise tax. Natasha Varyani mentioned that she agrees with the Commission’s rating on the question of whether the tax expenditure benefits justify its fiscal cost, highlighting the difference between the sales tax and excise tax on alcohol as well as the growing cost of this expenditure. The Commission voted “somewhat 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 of taxpayers and iii) the tax expenditure is relevant today. The Commission voted “strongly disagree” on the question of whether the amount claimed per taxpayer is meaningful as an incentive/benefit. The Commission voted “strongly agree” on the question of whether the tax expenditure is easily administered. The Commission voted “somewhat agree” on the questions of whether i) the tax expenditure is primarily beneficial to smaller businesses and ii) the tax expenditure is primarily beneficial to lower income taxpayers. Sue mentioned that smaller businesses and lower income taxpayers make up a large portion of those claiming this exemption.
The Commission questioned whether this tax expenditure should be flagged for legislative review, noting its increasing costs. Chairperson Forter reminded members that the final report mentions tax expenditures that have received “strongly disagree” measurement and effectiveness ratings. Tom mentioned that most states have double taxation on alcohol, imposing both excise tax and sales tax. Sue noted that Massachusetts excise rates haven’t changed in a long time. Members agreed that it may make sense to flag this tax expenditure for legislative review in light of increasing costs of alcohol and stagnant excise rates. Tom asked about the treatment of cigarettes in comparison not alcohol. Kazim confirmed that both excise and sales tax are imposed on cigarettes. Members discussed the differences in these “sin taxes”. Sue asked whether Massachusetts excise rates (for alcohol and cigarettes) are competitive compared to neighboring states. Kazim confirmed that Massachusetts excise rates for alcohol are competitive, but that excise rates on cigarettes are relatively high compared to other states. The Commission agreed that this tax expenditure should not be flagged for legislative review but that additional comments should be added to the evaluation template noting the structure of the excise tax, the increasing revenue impact, and treatment of alcohol by other states. Chairperson Forter made a motion to approve the evaluation template. Natasha seconded the motion. The Commission voted to approve the evaluation template for 3.201 Exemption for Alcoholic Beverages with the additional comments noted above.
Members agreed to reconvene in December if possible. The purpose of the next meeting is to discuss and vote on the next batch of tax expenditures. The meeting concluded at 10:55 AM.
| Date published: | January 18, 2026 |
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