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Using MassTaxConnect to submit annual certification of entity tax status

Answers to frequently asked questions about submitting certification of annual tax status for certain legal entities treated as corporations.

Updated March 31, 2021

Table of Contents

General

How do I access the Annual Certification of Entity Tax Status application?

  • Go to MassTaxConnect 
  • In the File section, select Submit Annual Certification of Entity Tax Status.

This form is completed without having to log in to an account.

What is the purpose of the Annual Certification of Entity Tax Status?

The annual certification enables the Commissioner of Revenue to provide local assessors with a comprehensive and current list of legal entities treated, as of January 1 of each year, as corporations for tax purposes and subject to tax or excise under: 

G.L. c. 58, § 2: The List of Corporations Subject to Taxation in Massachusetts (also called the Corporations Book) is published online each spring and assists local assessors in determining whether a particular entity owning personal property as of January 1 of the publication year is entitled to certain property tax exemptions as a corporation. 

G.L. c. 59, § 5(16): The Annual Certification of Entity Tax Status is essential to determining or verifying your company’s status. DOR historically has compiled the list from a combination of corporate:

  • Excise and other tax returns and 
  • Registrations with the Secretary of State.

However, at the time the list is published each year, this information may not indicate the current corporate or non-corporate tax status of every entity.

For example, a recently formed entity:

  • May not yet have filed any returns or 
  • May have changed its tax status or
  • Is part of a consolidated corporate tax return. 

What entities must file the Annual Certification of Entity Tax Status?

Existing and recently formed (1) corporations, and (2) other business entities, including: 

  • limited liability companies (LLCs), 
  • partnerships, 
  • business trusts, 
  • certain entities organized in foreign countries and other unincorporated entities, 

that are treated as corporations for federal and Massachusetts tax purposes, must file if they have personal property in a Massachusetts city or town as of January 1 and want to ensure they are listed in the Corporations Book as an entity eligible for specific local property tax exemptions as a corporation.

For more information, please see Directive 12-5: Procedure for Inclusion in Annual List of Corporations for Property Tax and Other Purposes.

Business entities must also file if they:

  • Have changed their entity tax status since the prior year’s certification or
  • Are no longer treated as corporations for federal and Massachusetts tax purposes but were listed in the prior year’s Corporations Book.

Business entities that do not own any real or personal property in Massachusetts as of January 1 of the publication year are not required to file the Annual Certification of Entity Tax Status.

Non-profit corporations or entities that may be eligible for local property tax exemptions under G.L. c. 59, § 5 as charitable, religious, veteran or other organizations are not required to file the Annual Certification of Entity Tax Status.

Sole proprietors are also not required to file the Annual Certification of Entity Tax Status.

Local boards of assessors make those exemption decisions based on:

  • Information provided in exemption applications and
  • Annual returns the organizations file with them.

Why is the Annual Certification as of January 1?

In Massachusetts, property taxes are assessed as of January 1 prior to the fiscal year that begins the following July 1.

What is the deadline for filing the Annual Certification of Entity Tax Status?

April 1. The Annual Certifications of Entity Tax Status (as of January 1 of each year) must be filed on or before the following April 1.

For example, the certification of your company’s status as of January 1, 2021 must be filed by April 1, 2021. Shortly after April 1, 2021, the 2021 Corporations Book will be released online to assist local boards of assessors determining the tax status of business entities within their communities for the fiscal year that begins on July 1, 2021 (Fiscal Year 2022).

When will access to DOR's website for filing the Annual Certification of Entity Tax Status be available for each year’s filing?

Generally, the Annual Certification of Entity of Tax Status is available in September and remains open until the deadline, April 1 of the publication year.

For example, access to DOR’s website for filing the Annual Certification of Entity Tax Status as of January 1, 2021 begins in September 2020 and ends on April 1, 2021.

What if my company changes its tax status after filing an Annual Certifications of Entity Tax Status?

By April 1, your company must amend its certification so that it properly reflects its entity tax status as of the preceding January 1.

For example, suppose that on November 15, 2020, your company files an Annual Certification of Entity Tax Status as of January 1, 2021 stating it is treated as a corporation for federal and Massachusetts tax purposes. Then, in January 2021, your company’s federal (and, thus, Massachusetts) tax status changes, by

  • election,
  • reorganization, or
  • otherwise,

such that your company is no longer treated as a corporation for tax purposes as of January 1, 2021. Your company must file an amended certification by April 1, 2021 declaring that it was not treated as a corporation for tax purposes as of the preceding January 1.

What if my company changes its tax status after April 1?

Your company will show that change in tax status in its Annual Certification of Entity Tax Status as of the following January 1.

For example, suppose that in its Annual Certification of Entity Tax Status as of January 1, 2021, your company certified that it was treated as a corporation for federal and Massachusetts tax purposes. Then, in July 2021, your company’s federal (and, thus, Massachusetts) tax status changes, by

  • election,
  • reorganization,
  • or otherwise,

such that as of the succeeding January 1 the entity will not be treated as a corporation for tax purposes. In your company’s Annual Certification of Entity Tax Status as of January 1, 2022, your company would certify that it is not treated as a corporation for federal tax purposes.

Does my company have to submit the Annual Certification of Entity Tax Status if it files as part of a combined report?

When a combined tax reporting (355S and 355U) is filed with DOR, only the principal reporting corporation is tied to that return. Any entity that is part of the combined return that would qualify to be included should complete the Annual Certification of Entity Tax Status in order to appear in the book.

What is the principal reporting corporation?

In the event that there are two or more members of a combined group required to file a combined report pursuant to G. L. c. 63, § 32B, the principal reporting corporation is the taxable member of the group that is required to make the filing.

For more information, see 830 CMR 63.32B.2(11)(a): Combined Reporting.

The principal reporting corporation also is charged with acting as the agent of the taxable members of the combined group for purposes of all tax matters relating to the combined report.

If I submit an Annual Certification of Entity Tax Status as a manufacturing company, will I be listed in the Corporation Book as a manufacturing Corporation?

It depends. In order to be listed in the Corporations Book as a manufacturing corporation (“M”), a company must:

  • File a Form 355Q and
  • Be affirmatively classified by DOR as a manufacturing corporation.

A company that does not file a Form 355Q and is not classified as a manufacturing corporation may be entitled to manufacturing corporation status for corporate excise purposes if it is a manufacturer in fact.

However, it cannot receive local property tax exemptions for a manufacturing corporation unless it has applied for and obtained DOR classification as a manufacturing corporation.

Once a company applies and has been classified as a manufacturing corporation, it retains its classification, unless it changes its name, merges with or is taken over by another company, or has its:

  • Manufacturing classification revoked in a prior year, or
  • Facts materially change such that it no longer qualifies to be classified as a manufacturing corporation.

For more information about manufacturing corporation classification, see 830 CMR 58.2.1: Manufacturing Corporations.

In any event, a manufacturing corporation also must file an Annual Certification of Entity Tax Status to ensure that it will be included in the Corporations Book.

Further information relating to the determination of manufacturing corporation status in the case of S Corporations that have one or more Qualified Subchapter S Subsidiaries (QSubs) may be found in several frequently asked questions below.

How does a corporation get a designation as manufacturing in Massachusetts?

DOR classification as a manufacturing corporation for property tax purposes is done by application, according to the procedures detailed in 830 CMR 58.2.1: Manufacturing Corporations.

An entity that is taxed as a business corporation in Massachusetts, that is engaged substantially in manufacturing must apply to and be classified as a manufacturer by the Commissioner of Revenue in order to receive the manufacturing corporation property tax exemptions.

Similarly, a corporation must be classified as a research and development corporation in order to receive the research and development corporation exemptions.

Please note that this designation only applies if the corporation is in a community that has accepted the local option as of January 1.

To date, Lowell, Springfield, and Worcester have notified DOR of their adoption of Chapter 59, §5 Clause 16(3)(1) or Clause 16(3)(ii).

Application for classification as a manufacturer must be made on or before January 31 in order to be classified as of January 1 of the same year, the fiscal year assessment date.

For example, an application for manufacturing classification filed November 1, 2020 or January 15, 2021 may be approved effective as of January 1, 2021.

However, an application for classification filed February 15, 2021 may be approved as of January 1, 2022, but not as of January 1, 2021. Application is made on Form 355Q pursuant to 830 CMR 58.2.1: Manufacturing Corporations.

Taxpayers and assessors may appeal the denial or approval of manufacturing classification.

Must an Annual Certification of Entity Tax Status be filed for each QSub?

Yes. Because a QSub must first be treated as a corporation for federal income tax purposes (which classification is followed for Massachusetts corporate excise tax purposes) in order to be eligible to be treated as a QSub, a QSub’s assets may qualify for local property tax exemptions available to corporations.

For that reason, even though a QSub’s

  • income,
  • assets, and
  • other attributes

are treated as those of its parent S Corporation for corporate excise tax purposes, a QSub may be included in the Corporations Book, and must be so included to ensure the availability of property tax exemptions for corporations.

Accordingly, an Annual Certification of Entity Tax Status must be filed for each QSub.

Are Qualified Subchapter S Subsidiaries (QSubs) includable in the Corporations Book?

Yes. First, some background on QSubs: A QSub is a Qualified Subchapter S Subsidiary as defined under the federal Internal Revenue Code, and QSub status for an eligible subsidiary of an S Corporation requires a special federal election on the part of the S Corporation.

In order to be eligible to be treated as a QSub, the S Corporation subsidiary must be either a corporation in fact (i.e., organized as a corporation within the U.S.) or have elected to be treated as a corporation for federal income tax purposes.

Once an S Corporation parent makes an election to treat a qualifying subsidiary as a QSub, the QSub is treated as:

  • A division of its S Corporation parent and
  • The parent S Corporation is the only entity then required to file a Massachusetts corporate excise return.

Must I submit an Annual Certification of Entity Tax Status if I am an out of state entity that is incorporated and registered to do business with Massachusetts?

Yes. Any legal entity with property in a Massachusetts city or town that wants to ensure that it is listed in the Corporations Book as an entity eligible for specific local property tax exemptions for corporations must submit the Annual Certification of Entity Tax Status.

In addition, every entity qualifying to be listed as a corporation is asked to verify whether it is taxable in Massachusetts as a:

  • Business corporation 
  • Manufacturing corporation 
  • Financial institution or
  • Insurance company.

The extent of local property tax exemptions depends in large part on this particular Massachusetts corporate tax treatment.

Do I have the right to contest an assessment which is incorrect?

Yes. If your company claims over assessment of its property tax for any reason, it may apply to the local board of assessors for abatement of the tax. Abatement applications (State Tax Form 128) must be filed with the assessors on or before the due date of the first installment of the actual tax bill. Your property tax bill states the abatement application due date for the year.

If I do not submit an Annual Certification of Entity Tax Status and do not appear in the Corporations Book, can I appeal the failure to be listed?

Yes. Publication of the Corporations Book will ordinarily take place shortly after April 1 of each year. You should monitor the DOR’s Corporations Book website to see if your company appears on the published list. Your company may appeal to the Appellate Tax Board, if your company:

  • Is not listed and you believe it should be treated as a corporation and included in the Corporations Book,
  • Is listed but you believe it has been erroneously classified.

That appeal must be filed on or before April 30, or 30 days after the Corporations Book is released to local assessors, whichever is later.

For more information, see G.L. c. 58, § 2: Commissioner; annual lists to board of assessors; classifications; objections; appeal.

The release date of the Corporations Book is found online. Local boards of assessors also may challenge, in this same manner, the listing of companies that do appear in the Corporations Book where the local assessors believe the listing is inaccurate.

Who should my company contact with specific questions about its local personal property tax obligations?

The board of assessors of the community in which the property is situated. Local assessors are the tax administrators for their communities and make all

  • personal property tax assessment, 
  • abatement and exemption decisions

based on information gathered from their own sources, supplied by property owners in returns and provided by the Corporations Book.

For more information, please see the Division of Local Services' Personal Property Frequently Asked Questions.

However, these FAQs are not intended to answer taxpayer- or fact-specific personal property tax questions. Those questions must be directed to the local assessors who address them.

How is manufacturing company classification claimed and determined in the case of an S Corporation with QSubs?

In the case of an S Corporation with one or more QSubs, manufacturing status is determined on the basis of the:

  • Assets
  • Activities and 
  • Other attributes of the S Corporation, plus 
  • All QSubs considered in the aggregate. 

Therefore, the parent S Corporation must:

  • file the Form 355Q and 
  • be classified as a manufacturing corporation

in order for the assets of a QSub to be eligible for property tax exemptions available to a manufacturing corporation. 

This is because manufacturing corporation status is determined under the corporate excise, G.L. c. 63, § 42B, and for that purpose any QSubs are not:

  • Separate filing entities and 
  • All of their assets and other attributes are treated as those of the parent S Corporation. 

If an S Corporation with one or more QSubs, considered in the aggregate, qualifies for manufacturing corporation classification, then all of the property of the S Corporation and its QSubs will be eligible for property tax exemptions available to manufacturing corporations.

Conversely, if an S Corporation considered together with any of its QSubs does not qualify for manufacturing corporation classification, then: 

  • None of the assets of the S Corporation and 
  • Any of its QSubs will be eligible for such manufacturing company exemptions, irrespective of whether the S Corporation or any QSub might be engaged in substantial manufacturing if it were considered in isolation. 

Please note that submission of the Annual Certification of Entity Tax Status for an S Corporation and for each QSub also is necessary in order that each such entity may be:

  • Listed in the Corporations Book as a corporation, and may be 
  • Designated as a manufacturing corporation (when qualifying for classification as such). 

For information on how to apply for manufacturing classification, refer to procedures detailed in the 830 CMR 58.2.1: Manufacturing Corporations.

If my company submits the Annual Certification of Entity Tax Status, does it still have to file a local return where it has personal property?

Yes. The purpose of the Annual Certification of Entity Tax Status is to verify that the Corporations Book compiled to assist local boards of assessors is a complete and accurate listing of all companies treated as corporations for federal and Massachusetts tax purposes as of each January 1.

However, most corporations or other entities treated as corporations are still liable for local personal property taxes on underground and aerial assets and, except for manufacturing corporations, certain machinery.

If liable for local property taxes, these entities have a legal obligation to file a return of those taxable assets (State Tax Form 2 issued by the city or town) with 

Definitions

What is personal property?

Personal property generally includes tangible items that are not:

  • Firmly attached to land or buildings and 
  • Specially designed for, or of such, a size and bulk to be considered part of the real estate. 

This includes:

  • Merchandise
  • Furnishings and effects
  • Machinery
  • Tools
  • Animals and 
  • Equipment. 

Such personal property will be taxable unless a specific exemption provision applies.

All personal property situated in the Commonwealth is subject to tax, unless specifically exempt by law. Property is situated in a particular city or town in the Commonwealth if it is present on January 1 with the owner's intention that it remain with some degree of permanence.

Property that is frequently moved from place to place or intended for use temporarily at different places is considered situated where the owner is an inhabitant or has a principal place of business (if the property is business personal property).

For more information, please see the Division of Local Services' Personal Property Frequently Asked Questions

What is a corporation?

A corporation is an organization formed in accordance with state law to act as an artificial person to carry on business (or other activities), which can:

  • Sue or be sued, and 
  • Issue shares of stock to raise funds with which to start a business or increase its capital, unless it is non-profit.

If you intend to form a Massachusetts-based corporation, you must:

  • File Articles of Organization with the Secretary of the Commonwealth and
  • Fulfill all applicable registration requirements of the:
    • Federal Internal Revenue Service 
    • Massachusetts Department of Revenue and 
    • Massachusetts Division of Unemployment Assistance.

The Articles of Organization contain administrative information a corporation must furnish to officially establish identity in the Commonwealth. Corporations organized in Massachusetts are domestic corporations.

Corporations organized or chartered in another state or country are foreign corporations. They must file a foreign registration certificate with the Secretary of the Commonwealth within 10 days of commencing business in Massachusetts.

In addition, all foreign and domestic corporations registered in Massachusetts are required to file an annual report with the Secretary of the Commonwealth within two and one-half months after the close of their fiscal year.

For more information about this reporting requirement, or about incorporation in general, contact the Secretary of the Commonwealth's Corporations Division at:

What is a Limited Liability Company (LLC)?

A limited liability company (LLC) is a non-corporate business whose owners are protected against personal liability for the organization's:

  • Debts and
  • Obligations.

The LLC is a hybrid legal entity that has both the characteristics of a corporation and a partnership. An LLC provides its owners with corporate-like protection against personal liability. It is, however, usually treated as a non-corporate business organization for local property tax purposes.

What is a Partnership?

A partnership is an association of two or more persons engaged in a business enterprise in which the profits and losses are shared proportionally. The formation of a partnership requires a voluntary association of persons who own the business and intend to conduct the business for profit. Persons can form a partnership by written or oral agreement, and a partnership agreement often governs the partners' relations to each other and to the partnership. The term person generally includes:

  • Individuals 
  • Corporations and 
  • Other partnerships and business associations. 

Accordingly, some partnerships may contain individuals as well as large corporations.

What is a Business Trust?

A business trust is an unincorporated business organization:

  • Created by a legal document 
  • A declaration of trust and
  • Used instead of a corporation or partnership for the transaction of various kinds of businesses with limited liability.

It differs from a corporation in that it does not receive a charter from the state giving it legal recognition; it derives its status from the voluntary action of the individuals who form it. The trust instrument is similar to a corporate charter, however, in that the trustees manage the business like a corporation's board of directors. They hold the assets of the business for the benefit of those holding shares. The shareholders have:

  • Limited personal liability and
  • Receive distributions of the profits of the business.

What is a Non-Profit Corporation?

A non-profit corporation is an incorporated organization created by 

  • statute, 
  • government or 
  • judicial authority 

that is not intended to provide a profit to the owners or members but instead uses them to help pursue its goals. A non-profit corporation is usually created with a specific purpose, such as for educational, charitable or related to other enumerated purposes, it may be a:

  • Foundation
  • Charity or 
  • Other type of non-profit organization.

What is a Sole Proprietor?

A sole proprietor is a form of business in which one person owns all the assets of the business, in contrast to a partnership or a corporation.

A person who does business for himself or herself is engaged in the operation of a sole proprietorship. Anyone who does business without formally creating a separate business organization is a sole proprietor.

Many small businesses operate as sole proprietorships. Professionals, consultants, and other service businesses that require minimum amounts of capital often operate this way.

A sole proprietorship is not a separate legal entity, like a partnership, limited liability company, trust or corporation.

No legal formalities are necessary to create a sole proprietorship, other than:

  • Appropriate licensing to conduct business and
  • Registration of a business name if it differs from that of the sole proprietor.

Because a sole proprietorship is not a separate legal entity, it is not itself a taxable entity. The sole proprietor reports the income and expenses from the business on Schedule C of her or his personal federal income tax return.

What is a member of a combined group?

A member of a combined group is a corporation that is required to be included in a combined report filed pursuant to G. L. c. 63, § 32B.

A member of a combined group may or may not be a corporation that is subject to Massachusetts tax. However, in all instances a member’s

  • income and
  • apportionment data

are required to be reported in the context of the combined report for purposes of determining the income component of the corporate excise that is due from each taxable member of the combined group.

For more information, see 830 CMR 63.32B.2: Combined Reporting.

What is Manufacturing?

Manufacturing is a process that transforms raw or finished materials by hand or machinery, and through human skill and knowledge, into a new product possessing a:

  • New name 
  • Nature and 
  • Adapted to a new use. 

Many cases have been decided delineating what constitutes manufacturing. What constitutes manufacturing is a facts and circumstances decision, and it is best to review the case histories to determine whether an action qualifies as manufacturing.

What is a C Corporation?

C Corporation is:

  • The most common type of corporation (named after Subchapter C of the Internal Revenue Code) and
  • Taxed as a separate business entity.

What is an S Corporation?

An S Corporation is a type of corporation (named after Subchapter S of the Internal Revenue Code) that, for tax purposes, has characteristics of both a pass-through entity and a corporation.

S Corporations generally have owners who are individual taxpayers, and an S Corporation is limited in the number of shareholders it may have.

An S Corporation passes through its

  • income,
  • deductions,
  • losses,
  • and credits

to shareholders, who must report these items on their individual income tax returns. S Corporations also are subject to an entity-level tax.

What is a QSub?

A Qualified Subchapter S Subsidiary, or QSub, is a specific type of subsidiary

  • Owned by an S Corporation and
  • Subject to rules in the federal Internal Revenue Code.

Once an S Corporation parent makes an election to treat a qualifying subsidiary as a QSub, the QSub is treated as a division of its S Corporation parent, and the parent S Corporation takes into account the QSub’s:

  • income, 
  • assets, and 
  • other attributes

in determining the parent S Corporation’s Massachusetts tax liability.

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