Section 28 Opioids Excise, Excessive Price Increase Penalty & Pass-Through Excise

The General Laws are hereby amended by inserting after chapter 63B the following 3 chapters:-

Chapter 63D. Excise on manufacture and sale of certain opioids for distribution in the commonwealth.

Section 1. "Commissioner", the commissioner of revenue.

"Gross receipts", receipts from sales made by a person to a purchaser that is not a related party. In the case of sales to a related party or parties for subsequent resale to an unrelated buyer, the gross receipts are the amount paid for the product by the first unrelated buyer.

"Opioid", any product included in the pharmacological class category of full opioid agonist, opioid agonist or partial opioid agonist in the National Drug Code (NDC) Directory NDC Product File, except for products approved by the U.S. Food and Drug Administration for the treatment of opioid use disorder.

"Person", any natural person or legal entity.

"Related parties", an entity that belongs to the same affiliated group as the person under section 1504 of the Internal Revenue Code, as amended and in effect for the taxable year, or if the entity and the person are otherwise commonly owned and controlled.

Section 2. (a) Any person who manufactures opioids and sells such products, directly or through another person, for distribution in the commonwealth shall pay an excise of 15 per cent of its gross receipts from such sales; provided, however, that gross receipts subject to the excise under this section shall be limited to the sales of opioids that are ultimately dispensed in the commonwealth pursuant to a valid prescription issued under section 18 of chapter 94C.

(b) A person who manufactures opioids and sells such products, directly or through another person, for distribution in the commonwealth as described in subsection (a) shall file a return as provided in subsection (a) of section 4 declaring total sales subject to excise in the immediately preceding calendar quarter. In the event that a person filing such a return pays an excise of 15 per cent of its gross receipts from sales of opioids that are not ultimately dispensed in the commonwealth pursuant to a valid prescription issued under section 18 of chapter 94C, the person may claim a credit for such excise amounts on the return for the tax period during which such sales are ultimately dispensed.

Section 3. The excise under section 2 shall apply only to persons who maintain a place of business in the commonwealth or whose total sales of all products, directly or through another person, for distribution in the commonwealth are more than $25,000 in the calendar quarter to which the excise under section 2 otherwise would apply, or in the case of the 6 months ending June 30, 2022, more than $50,000 for such 6 month period.

Section 4. (a) Any person subject to the excise under section 2 shall file a return with the commissioner and shall pay such excise by the fifteenth day of the third month following the end of each calendar quarter. Such return shall set out the person's total sales subject to excise in the immediately preceding calendar quarter and shall provide such other information as the commissioner may require.

(b) Each person subject to the excise under section 2 shall provide to the commissioner annually, on or before June 1st, a report detailing all opioids sold, directly or through another person, for distribution in the commonwealth in the prior calendar year. Such report shall include:

(i) the person's name, address, phone number, federal Drug Enforcement Administration (DEA) registration number and controlled substance registration number issued by the department;

(ii) the name and NDC of the opioid;

(iii) the unit of measure and quantity of the opioid;

(iv) the name, address and DEA registration number of the first unrelated buyer of the opioid;

(v) the date of the sale of the opioid;

(vi) whether the opioid was ultimately dispensed in the commonwealth pursuant to a valid prescription issued under section 18 of chapter 94C;

(vii) the gross receipt total, in dollars, of all opioids sold;

(viii) the gross receipt total, in dollars, and quantity by NDC of all opioids ultimately dispensed in the commonwealth pursuant to a valid prescription issued under section 18 of chapter 94C; and

(ix) any other elements required by the commissioner.

Section 5. The excise imposed under this chapter shall be in addition to, and not a substitute for or credit against any other tax or excise imposed under the General Laws.

Section 6. The commissioner may disclose information contained in returns and reports filed under this chapter to the department of public health for purposes of verifying that the appropriate amount of a filer's sales subject to excise are properly declared and that all reporting is otherwise correct. Return and report information so disclosed shall remain confidential and shall not be public record.

Section 7. To the extent that a person subject to excise under section 2 fails to pay amounts due under this chapter, a related party of such person that directly or indirectly distributes the opioid of such person in the commonwealth shall be jointly and severally liable for the excise due.

Section 8. The commissioner may promulgate regulations or issue other guidance for the implementation of this chapter.

Chapter 63E. Penalty on drug manufacturers for excessive price increases

Section 1. "Commissioner", the commissioner of revenue.

"Consumer price index", the consumer price index for all urban consumers for Boston, as most recently reported by the federal Bureau of Labor Statistics.

"Drug", any medication, as identified by a National Drug Code, approved for sale by the U.S. Food and Drug Administration.

"Excessive price," the price of a drug if it exceeds the sum of (a) the reference price of that drug, as adjusted for any increase or decrease in the consumer price index since the reference price was determined, and (b) an additional 2 per cent of the reference price for each 12 month period that has elapsed since the date on which the reference price was determined. The 2 per cent increment provided in (b) of the preceding sentence shall compound annually on the first day of the first calendar quarter commencing after the end of each 12 month period described therein.

"Excessive price increase", the amount by which the price of a drug exceeds the sum of (a) the reference price of that drug, as adjusted for any increase or decrease in the consumer price index since the reference price was determined, and (b) an additional 2 per cent of the reference price for each 12 month period that has elapsed since the date on which the reference price was determined. The 2 per cent increment provided in (b) shall compound annually on the first day of the first calendar quarter commencing after the end of each 12 month period described therein.

"Person", any natural person or legal entity.

"Price", the wholesale acquisition cost of a drug, per unit, as reported to the First Data Bank or other applicable price compendium designated by the commissioner.

"Reference price", the price of a drug as of January 1, 2021 or in the case of any drug first commercially marketed in the United States after January 1, 2021, the price of the drug on the date when first marketed.

"Related party", an entity is a related party with respect to a person if that entity belongs to the same affiliated group as that person under section 1504 of the Internal Revenue Code, as amended and in effect for the taxable year, or if the entity and the person are otherwise under common ownership and control.

"Unit", the lowest dispensable amount of a drug.

Section 2. (a) Any person who manufactures and sells drugs, directly or through another person, for distribution in the commonwealth and who establishes an excessive price for any such drug directly or in cooperation with a related party, shall pay a per unit penalty on all units of the drug ultimately dispensed or administered in the commonwealth. The penalty for each unit shall be 80 per cent of the excessive price increase for each unit, determined at the beginning of the calendar quarter.

(b) A person who establishes an excessive price for a drug as described in subsection (a) shall file a return as provided in section 4 declaring all units of excessively priced drug sold for distribution in the commonwealth during the quarter. In the event that a person filing such a return pays a penalty with regard to one or more units of drug that are ultimately dispensed or administered outside of the commonwealth, the person may claim a credit for such penalty amounts on the return for the tax period during which such units are ultimately dispensed or administered.

Section 3. The penalty under section 2 shall apply for any calendar quarter only to a person who maintains a place of business in the commonwealth or whose total sales of all products, directly or through another person, for distribution in the commonwealth were more than $100,000 in the prior twelve month period. The penalty shall not apply more than once to any unit of drug sold.

Section 4. Any person subject to the penalty under section 2 shall file a return with the commissioner and shall pay the penalty by the fifteenth day of the third month following the end of each calendar quarter, subject to such reasonable extensions of time for filing as the commissioner may allow. The return shall set out the person's total sales subject to penalty in the immediately preceding calendar quarter and shall provide such other information as the commissioner may require.

Section 5. The penalty imposed under this chapter shall be in addition to, and not a substitute for or credit against, any other penalty, tax or excise imposed under the General Laws.

Section 6. The commissioner may disclose information contained in returns filed under this chapter to the department of public health for purposes of verifying that a filer's sales subject to penalty are properly declared and that all reporting is otherwise correct. Return information so disclosed shall remain confidential and shall not be public record.

Section 7. To the extent that a person subject to penalty under section 2 fails to pay amounts due under this chapter, a related party of such person that directly or indirectly distributes in the commonwealth any drug whose sales are subject to this chapter shall be jointly and severally liable for the penalty due.

Section 8. The commissioner may promulgate regulations or issue other guidance for the implementation of this chapter.

Chapter 63F. Taxation of Pass-Through Entities

Section 1. For taxable years beginning on or after January 1, 2021, an eligible pass-through entity may elect to pay an excise on its qualified income taxable in Massachusetts at a rate of five per cent. A qualified member of an electing pass-through entity shall be allowed a credit against the tax imposed under chapter 62 for the qualified member's share of such excise paid by the pass-through entity. The credit shall be available to qualified members in an amount proportionate to each member's share of the pass-through entity's qualified income taxable in Massachusetts. The credit shall be available for the member's taxable year in which the pass-through entity's taxable year ends.

Section 2. This chapter shall not apply to taxable years for which the federal limitation on the state and local tax deduction imposed by Code section 164(b)(6) has expired or is otherwise not in effect.

Section 3. The following words as used in this chapter shall, unless the context otherwise requires, have the following meanings:

''Code'', the Internal Revenue Code as defined in section 1 of chapter 62 and applicable to the taxable year.

''Commissioner'', the commissioner of revenue.

"Eligible pass-through entity", an S corporation under Code section 1361, a partnership under Code section 701 or a limited liability company that is treated as an S corporation or partnership under those Code sections.

"Qualified income taxable in Massachusetts", income of an eligible pass-through entity determined under chapter 62 allocable to a qualified member and included in such member's Massachusetts taxable income under chapter 62.

"Qualified member of a pass-through entity", a shareholder of an S corporation or a partner in a partnership that is a natural person. A qualified member may be a resident, non-resident or a part year resident.

Section 4. The excise under this chapter shall be in addition to, and not in lieu of, any other Massachusetts tax required to be paid, including tax under chapter 62 or chapter 63. The excise under this chapter shall be due and payable on the pass-through entity's original, timely-filed return. A return that reports the excise shall be due at the same time as a partnership information return or corporate excise return would be due for the entity under chapter 62C. This chapter shall not change any filing requirements for a qualified member under chapter 62C.

Section 5. The collection and administration of the excise under this chapter shall be governed by the provisions of chapter 62C unless expressly stated otherwise in this chapter or in regulations promulgated by the commissioner under this chapter.

Section 6. The election under this chapter shall be made by the eligible pass-through entity on an annual basis in a manner determined by the commissioner. All members of the electing pass-through entity shall be bound by the election. Once made, the election cannot be revoked.

Section 7. The commissioner shall prescribe regulations or other guidance to carry out the purposes of this chapter. Such regulations or other guidance may (i) make the credit available to qualified members with income from eligible pass-through entities that in turn have income from other pass-through entities, (ii) address the application of this chapter to trusts, and (iii) require estimated payments of the excise by electing pass-through entities and their qualified members in a manner consistent with chapter 62B. Such regulations and other guidance shall, to the extent feasible, ensure that an electing pass-through entity and its qualified members pay an aggregate amount of tax under this chapter and chapter 62 that is generally equivalent to the amount of tax that would have been due from those members under chapter 62 in the absence of an election to pay an excise under this chapter.

This section imposes an excise tax on opioids distributed in the Commonwealth, penalizes drug manufacturers for excessive price increases, and directs DOR to issue regulations permitting pass-through entities to elect to be taxed at the entity level.