Technical Information Release

Technical Information Release TIR 22-11: Credit Allowed When Net State Tax Revenues Exceed Allowable State Tax Revenues

Date: 10/14/2022
Referenced Sources: Massachusetts General Laws

(updated October 19, 2022)

Table of Contents

I. Introduction

Pursuant to M.G.L. c. 62F, § 6, the Department of Revenue (the “Department”) is tasked with effectuating the excess revenue credit provided by M.G.L. c. 62F, § 6.  This Technical Information release (“TIR”) explains how the Department will administer the excess revenue credit when the State Auditor has determined under M.G.L. c. 62F, § 5(b) the existence of excess state tax revenues for the previous fiscal year.  Where a taxpayer filed a personal income tax return showing a personal income tax liability for the previous taxable year, the Department will apply an excess revenue credit to said liability by multiplying the liability by the excess revenue percentage for the year.  This TIR describes when taxpayers are eligible to receive an excess revenue credit for the previous taxable year, how the Department determines the credit and how the credit is to be conferred.

This TIR applies to excess revenue credits required to be issued as a result of the State Auditor’s report on net state tax revenues beginning with credits required to be issued for the fiscal year ending June 30, 2022.

II. Definitions

For the purposes of this TIR, the following terms have the following meanings:

Commissioner, the Commissioner of the Department of Revenue of the Commonwealth of Massachusetts, or the Commissioner's designee.

Current calendar year, the calendar year in which the State Auditor makes a determination under M.G.L. c. 62F, § 5(b), that net state tax revenues for the previous fiscal year (i.e., the fiscal year ending on June 30 of the calendar year in which the State Auditor makes the determination) exceed allowable state tax revenues for that fiscal year.

Excess revenue credit, the credit allowed under M.G.L. c. 62F, § 6, calculated by multiplying a taxpayer's personal income tax liability for the previous taxable year by the excess revenue percentage.

Excess revenue percentage, the percentage (to four decimal places) resulting when the Department divides excess state tax revenues determined by the State Auditor by the personal income tax liability incurred by all taxpayers in the previous taxable year.

Excess state tax revenues, the amount, as determined by the State Auditor under M.G.L. c. 62F, § 5(b), by which “net state tax revenues” for a fiscal year exceed “allowable state tax revenues” for that fiscal year, as those terms are defined in M.G.L. c. 62F, § 2.

Personal income tax liability, a taxpayer's liability that is greater than zero (0) for taxes imposed under M.G.L. c. 62, after allowing for any credits, but before adjusting for any withholding, estimated payments, voluntary contributions, or other such amounts.

Personal Income Tax Return, a Massachusetts tax return on which a taxpayer subject to tax under M.G.L. c. 62 reports a personal income tax liability on one of the following forms: Form 1 (Massachusetts Resident Income Tax Return), Form 1‑NR/PY (Nonresident/Part-Year Income Tax Return), Form 2 (Fiduciary Income Tax Return), Form 3M (Income Tax Return for Clubs and Other Organizations Not Engaged in Business for Profit), Form MA NRCR (Nonresident Composite Return), or Form M-990T-62 (Exempt Trust and Unincorporated Association Income Tax Return).

Previous taxable year, the taxable year, as determined under M.G.L. c. 62, §§ 1(h) and 62, that immediately precedes the current taxable year.

State Auditor, the State Auditor for the Commonwealth of Massachusetts.

Taxpayer, a taxpayer, including individuals, certain trusts, fiduciaries, and other entities subject to tax under M.G.L. c. 62 and who filed a Massachusetts personal income tax return for the previous taxable year.

III. Eligibility for the Credit

(a)  General rule. When the State Auditor determines in the current calendar year the existence of excess state tax revenues for the previous fiscal year to be credited to taxpayers, a taxpayer with a personal income tax liability for the previous taxable year is eligible to receive an excess revenue credit determined with respect to the taxpayer’s personal income tax liability for the previous taxable year.  A taxpayer has a personal income tax liability for the previous taxable year for purposes of the excess revenue credit if the taxpayer filed for the previous taxable year a personal income tax return showing a personal income tax liability.

(b)  Deadline for filing a personal income tax return for the previous taxable year.  In order to be eligible to receive an excess revenue credit, a taxpayer must file a personal income tax return for the previous taxable year that shows a personal income tax liability for said previous taxable year.  The due date for such filings is the last possible date that a return can be filed by a taxpayer filing on a fiscal year basis, including extensions.  For example, where the State Auditor determines that excess state tax revenues were collected for the fiscal year ending June 30, 2022, a taxpayer must file a return by September 15, 2023, the due date on extension for the 2021 tax return of a taxpayer with a tax year ending November 30.  Filings made after this due date shall not be eligible for the credit. 

(c)  Adjustments made to personal income tax liability for the previous taxable year after the taxpayer filed the return. The personal income tax liability for the previous taxable year of some taxpayers may change after they file their personal income tax return for that prior year because they file an amended return, seek and obtain an abatement of tax, or incur an assessment of additional tax.  For purposes of determining their eligibility for the excess revenue credit and the amount they are entitled to, taxpayers are required to make a good faith adjustment to their personal income tax liability for the previous taxable year to reflect such changes by the due date that would apply to a calendar year taxpayer filing the previous taxable year’s personal income tax return on extension (October 17, 2022 in the case of the 2021 tax year).  If a taxpayer’s personal income tax liability for the previous taxable year is zero (0) or less after such adjustments, the taxpayer is not eligible to receive an excess revenue credit.  Any adjustment of a taxpayer’s personal income tax liability for the previous taxable year made after the due date that would apply to a calendar year taxpayer filing the previous taxable year’s personal income tax return on extension will not be taken into account in determining the amount of the taxpayer’s excess revenue credit. 

Example: The State Auditor determines that excess state tax revenues were collected for the fiscal year ending June 30, 2022.  Taxpayer A had a personal income tax liability for tax year 2021.  Taxpayer A filed a Form 1 for 2021 on April 15, 2022.  The amount of the excess revenue credit received by Taxpayer A is calculated pursuant to this TIR

In July of 2023, Taxpayer A files an amended Form 1 for the 2021 taxable year reporting a change in personal income tax liability.  The amount of Taxpayer A’s excess revenue credit is not affected by the change because the amended return was filed after October 17, 2022.

IV. Application and Calculation of the Excess Revenue Credit

(a)  Application of the credit.  The Department will determine a taxpayer’s excess revenue credit by first taking the liability as reported on the taxpayer's personal income tax return filed for the previous taxable year and multiplying said liability, as first reduced by any other available credits, but before accounting for withholding, estimated payments, and voluntary payments, by the excess revenue percentage, as determined under this TIR.  Where the application of the excess revenue credit would reduce a taxpayer’s liability as reported on the taxpayer’s tax return filed for the previous year, the Department will issue the amount of the reduction to said liability as a refund.  The excess revenue credit cannot reduce a taxpayer’s liability for the previous taxable year to an amount less than zero (0).  The provisions of M.G.L. c. 62C shall apply to any excess revenue credit issued to a taxpayer.  Pursuant to M.G.L. c. 62D, the amount of the excess revenue credit issued to a taxpayer may be reduced due to refund intercepts, including for unpaid tax liability, unpaid child support, and certain other debts.

(b)  Determination of the excess revenue percentage.  For any year in which the State Auditor determines that excess state revenues exist to be credited to taxpayers, the Department will determine the excess revenue percentage used to calculate the excess revenue credit by dividing the excess state tax revenues determined by the State Auditor for the previous fiscal year by the total personal income tax liability reported to the Commonwealth on a personal income tax return filed for the previous taxable year.  The Department will make this determination after the date by which a personal income taxpayer, filing on a calendar tax year basis, must file a return for the previous taxable year on extension pursuant to M.G.L. c. 62C, § 19.

 

                                                                         /s/ Geoffrey E. Snyder
                                                                        Geoffrey E. Snyder
                                                                        Commissioner of Revenue

GES:RHF

October 14, 2022

TIR 22-11

Referenced Sources:

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