| Date: | 12/29/2010 |
|---|---|
| Organization: | Massachusetts Department of Revenue |
| Referenced Sources: | Massachusetts General Laws |
Personal Income Tax
I. Introduction
In general, the Massachusetts personal income tax follows the provisions of the Internal Revenue Code ("the Code" or "IRC") as amended on January 1, 2005, and in effect for the taxable year, in determining Massachusetts gross income. In particular, Massachusetts follows IRC § 132(f) as amended and in effect on January 1, 2005, which excludes from an employee's gross income (subject to a monthly maximum) employer-provided parking, transit pass and commuter highway vehicle transportation benefits. [1] However, a federal Act enacted subsequent to January 1, 2005, the American Recovery and Reinvestment Act of 2009 ("ARRA"), created a temporary difference between the Massachusetts and federal exclusion amount for the transit pass and commuter highway vehicle transportation benefits that applies during tax years 2009 and 2010. In addition, a subsequent federal Act, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ("2010 Tax Relief Act"), extended this temporary difference though tax year 2011. This TIR announces the Massachusetts exclusion amounts for tax years 2010 & 2011, and explains the calculation of an inflation adjustment for the transit pass and commuter highway vehicle benefits that applies only for Massachusetts purposes. [2]
II. Massachusetts Tax Year 2010 & 2011 Exclusion Amounts
For the 2010 & 2011 tax years, the Massachusetts exclusion amount for employer-provided parking is $230 per month and the exclusion amount for transit pass and commuter highway vehicle transportation benefits is $120 per month.
III. ARRA Impact
A. Federal and Massachusetts 2009, 2010 and 2011 Tax Year Exclusion Amounts
For federal income tax purposes, certain provisions of ARRA and the 2010 Tax Relief Act have temporarily increased the exclusion amount for the transit pass and commuter highway vehicle benefits to equal the employer-provided parking benefit of $230 per month through tax year 2011. [3] ARRA was enacted on February 17, 2009 and the temporary increase in the monthly exclusion amount for the transit pass and commuter highway vehicle benefits was effective for the months of March, 2009 through December, 2010. [4] The 2010 Tax Relief Act extended the temporary increase through December, 2011. [5] Prior to the increase the monthly exclusion amount for the transit pass benefit was $120. Therefore, for January and February, 2009, the federal and Massachusetts monthly exclusion amounts were equal at $120 per month for the transit pass and commuter highway vehicle benefits and $230 per month for the employer-provided parking benefit. For March 2009 through December, 2011, the federal and Massachusetts monthly exclusion amounts for the employer-provided parking benefit have remained equal at $230 per month (subject to potential inflation adjustment as described below). For the same time period, however, the federal exclusion amount for the transit pass and commuter highway vehicle benefits increased to $230 per month but the Massachusetts exclusion amount for the transit pass and commuter highway vehicle benefits remained at $120 per month (again subject to potential inflation adjustment as described below).
B. Federal 2010 and 2011 Tax Year Inflation Adjustments for Employer-Provided Parking; Massachusetts Adoption; No Change in Monthly Exclusion
Annually, the IRS issues a revenue procedure announcing the calculated inflation adjustments, if any, as to dollar amounts set forth in certain Code provisions, including the exclusion amounts for the employer-provided parking, transit pass and commuter highway vehicle benefits referenced in § 132(f). For the 2010 and 2011 tax years, the IRS has calculated the inflation adjustment for the employer-provided parking benefit, which has resulted in the monthly exclusion amount for that benefit remaining unchanged at $230 per month for both federal and Massachusetts tax purposes. [6]
C. Federal 2010 and 2011 Tax Year Inflation Adjustments for Transit Pass and Commuter Highway Vehicle Benefits; Massachusetts Does Not Adopt
For federal income tax purposes, under ARRA and the 2010 Tax Relief Act, the monthly employer-provided parking benefit exclusion amount for 2010 and 2011 also applies for purposes of the transit pass and commuter highway vehicle benefits, which therefore similarly remains unchanged for 2010 and 2011 at $230 per month. However, as noted above, Massachusetts does not adopt the ARRA and 2010 Tax Relief Act provisions that increase the transit pass and commuter highway vehicle exclusion to equal the employer-provided parking benefit exclusion.
D. Massachusetts 2010 and 2011 Tax Year Inflation Adjustments for Transit Pass and Commuter Highway Vehicle Benefits; No Change in Monthly Exclusion
For Massachusetts income tax purposes, the inflation adjustment must be independently calculated under the formula provided in the January 1, 2005 Code. [7] Applying this formula for 2010 and 2011, the transit pass and commuter highway vehicle benefits exclusion for Massachusetts personal income tax purposes remains at $120 per month.
/s/ Navjeet K. Bal
Navjeet K. Bal
Commissioner of Revenue
320352/jmw
TIR 10-20
December 29, 2010