2.200
2.200 Deductions from Gross Income
Tax Expenditure Name
Tax Expenditure Number
FY2019
FY2020
FY2021
FY2022
FY2023
Deductions from Gross Income
2.200
224.7
229.3
241.8
255.9
266.9
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Tax Item
Description
Origin
FY2023
2.201
Charitable Contributions and Gifts Deduction
Charitable Contributions and Gifts Deduction
In calculating net income, corporations may deduct charitable donations up to 10% of taxable income computed without the deduction. The Tax Cuts and Jobs Act (TCJA; enacted December 22, 2017) changed the limitation and the charitable deduction is no longer allowed for contributions to a college or university in exchange for athletic event seating rights. There is a carryover of excess contributions available for 5 succeeding taxable years.
58.5
2.203
Net Operating Loss Carryover
Net Operating Loss Carryover
The net operating loss (NOL) deduction is a current-year deduction for losses sustained in prior years. Losses incurred in years a corporation is not subject to the corporate excise in Massachusetts (for example, where the corporation does no business in Massachusetts) are not allowed to be carried forward. While the Internal Revenue Code provides a federal deduction for NOLs, Massachusetts does not conform to those rules; rather the General
Laws provide for a specific Massachusetts deduction. The deduction was enacted in 1988. Prior to 2010, NOLs incurred by Massachusetts corporate excise filers could be carried forward for not more than 5 years, and could not be carried back. Losses incurred in taxable years beginning on or after January 1, 2010 can be carried forward for 20 years, and cannot be carried back.
Laws provide for a specific Massachusetts deduction. The deduction was enacted in 1988. Prior to 2010, NOLs incurred by Massachusetts corporate excise filers could be carried forward for not more than 5 years, and could not be carried back. Losses incurred in taxable years beginning on or after January 1, 2010 can be carried forward for 20 years, and cannot be carried back.
202.3
2.204
Excess Natural Resource Depletion Allowance
Excess Natural Resource Depletion Allowance
Taxpayers in extractive industries (mining or drilling for natural resources) may deduct a percentage of gross mining income as a depletion allowance ("percentage depletion") even if the cost basis of the property has been reduced to zero. The deduction may not exceed 50% (in some cases, 100%) of taxable income from the property. In the case of oil and gas, percentage depletion is available only to domestic oil and gas sold by "independent producers" (nonintegrated companies). The excess of the deduction, which is available using the percentage of gross income method of depletion over a depletion deduction based on cost, is a tax expenditure.
IRC §§ 613, 613A; M.G.L. c. 63, § 30.3
2.1
2.205
Deduction for Certain Dividends of Cooperatives
Deduction for Certain Dividends of Cooperatives
Cooperatives are organizations comprised of separate businesses that band together for limited purposes to take advantage of economies of scale, for example when buying supplies or selling products. Farmers' cooperatives and certain corporations acting as cooperatives may deduct so-called "patronage dividends" from their gross incomes. A "patronage dividend" is a dividend paid to members of the cooperative: (i) based on the quantity or value of business done with the members, (ii) under a pre-existing obligation of the cooperative; and (iii) determined by the cooperative's net earnings from business with members. In order to deduct the dividends, cooperatives must provide notice to members of the total patronage dividend and must pay a minimum of 20% of each member's dividend in cash within 8½ months following the close of the cooperative's taxable year.
The deduction is based on the notion that the cooperative is an agent working for the members and that any funds transferred to members already belong to the members. See Farm Service Cooperative v. Commissioner, 619 F.2d 718, 722 (1979). In this view, the primary function of a cooperative is the allocation of the economic benefits of the cooperative, either in the form of net savings or net earnings. The deduction recognizes that taxing patronage dividends would discourage such allocation and could result in double taxation of income (first when earned by the cooperative and second as a dividend received by the member).
The deduction is based on the notion that the cooperative is an agent working for the members and that any funds transferred to members already belong to the members. See Farm Service Cooperative v. Commissioner, 619 F.2d 718, 722 (1979). In this view, the primary function of a cooperative is the allocation of the economic benefits of the cooperative, either in the form of net savings or net earnings. The deduction recognizes that taxing patronage dividends would discourage such allocation and could result in double taxation of income (first when earned by the cooperative and second as a dividend received by the member).
4.0
2.206
Deduction for Renovation of Abandoned Buildings as Part of Certified Project
Deduction for Renovation of Abandoned Buildings as Part of Certified Project
Businesses renovating eligible buildings that are part of a project certified by the Economic Assistance Coordinating Council (EACC) may deduct 10% of the costs of renovation from gross incomes. This deduction may be in addition to any other deduction for which the cost of renovation may qualify. To be eligible for this deduction, renovation costs must be related to buildings designated as abandoned by the EACC. Previously, the deduction was available only for improvements to abandoned buildings located in Economic Opportunity Areas (EOA), as designated by the EACC. However, in 2016, the legislature enacted "An Act Relative To Job Creation And Workforce Development", which eliminated the EOA requirement, and inserted the requirement that the EACC needs to only certify a project. These changes are effective for tax years beginning on or after January 1, 2019.
M.G.L. c. 63, §38O
Negligible
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