By Vidor A. Nosce
The Massachusetts Department of Revenue has issued guidance on recent law changes included in the FY 2025 Budget Act (L. 2024, H4800) relating to the state’s updated IRC conformity date, the joint filing requirement for certain married couples, repeal of the deduction of interest and dividends from Massachusetts banks, repeal of the sales tax exemption for certain publication of tax-exempt organizations, and availability of the credit for septic system repairs. (Massachusetts Technical Information Release No. 24-14, 11/14/2024.)
IRC conformity.
Massachusetts personal income tax is conformed to the Internal Revenue Code as amended on January 1, 2024 (previously January 1, 2022). With the updated conformity, Massachusetts now conforms to: (1) the limitation of noncorporate excess business losses under IRC § 461(l)(3) so that noncorporate taxpayers will not be allowed to deduct excess business losses from their Massachusetts gross income through the 2028 taxable year, and (2) the changes to eligibility requirements for federal charitable contribution deductions under in IRC § 170 made before January 1, 2024.
Joint filing requirements.
For tax years beginning on or after January 1, 2024, a married couple filing a joint federal income tax return is not required to file a joint Massachusetts income tax return if at least one of the spouses would not otherwise be required to file a Massachusetts return because that spouse’s Massachusetts gross income did not exceed $8,000 in the taxable year.
Repeal of deduction of interest and dividends from Massachusetts banks.
Effective for tax years beginning on or after January 1, 2024, the Act repealed Mass. Gen. L. Ch. 62 § 3.B(a)(6) which formerly allowed amounts of interest and dividends from Massachusetts banks to be excluded from Massachusetts Part B taxable income. The former deductions were $100 for a single person, head of household or a married person filing a separate return, or $200 for a husband and wife filing a joint return, from savings deposits, savings accounts, shares or share savings accounts that are in a Massachusetts bank.
Repeal of the sales tax exemption for certain publications of tax-exempt organizations.
Effective September 27, 2024 (60 days after effective date of the Act), the exemption in Mass. Gen. L. Ch. 64H § 6(m) is repealed for sales of publications of any corporation, foundation, organization or institution that is a IRC § 501(c)(3) organization and described in Mass. Gen. L. Ch. 64H § 6(e), except in cases where such publications are produced in an accessible format, including, but not limited to, braille, enlarged print, audio or electronic text, for use by individuals unable to read other print due to disability.
Credit for septic system repairs.
In addition to repairs for failed septic system, the Act allows a Title 5 credit against the personal income tax for taxpayers who repair, replace, or upgrade a cesspool or septic system or who connect to a sanitary sewer collection system, if such repair, replacement, upgrade or sewer connection is required by Title 5 of the State Environmental Code, 310 CMR 1500, a watershed permit issued by the Massachusetts Department of Environmental Protection (DEP), or by other requirements needed for implementation of the watershed permit imposed by the permittee or the DEP. The credit is generally available beginning in the tax year the required work is completed.
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