The tax expenditure allows corporations (and will allow individuals) to deduct charitable contributions in determining taxable income. The deduction for individuals and the deduction for corporations are based on separate provisions of Massachusetts law, but both deductions derive from Internal Revenue Code ("Code") § 170. Code § 170 allows both individuals and corporations a federal deduction for charitable contributions to § 501(c)(3) organizations.
The Massachusetts corporate excise deduction for charitable contributions results from the general allowance of federal deductions in the determination of net income. Thus, Massachusetts allows the deduction in the same amount as the federal deduction. All federal requirements and limits pertaining to the deduction apply for Massachusetts purposes. The most important of these limits is that the deduction cannot exceed 10% of a corporation's taxable income. The federal limit was temporarily increased to 25% for certain corporate contributions made in 2020 and 2021. Massachusetts followed those temporary increases.
The corporate excise revenue lost as a result of the deduction for charitable contributions is a Massachusetts tax expenditure.
Origin: M.G.L. c. 63, §30.4; IRC §170
Corporate Excise Tax
Deductions from Gross Income
2.201
Charitable Contributions and Gifts Deduction
The tax expenditure allows corporations (and will allow individuals) to deduct charitable contributions in determining taxable income. The deduction for individuals and the deduction for corporations are based on separate provisions of Massachusetts law, but both deductions derive from Internal Revenue Code ("Code") § 170. <a href="https://www.law.cornell.edu/uscode/text/26/170" target="_blank">Code § 170</a> allows both individuals and corporations a federal deduction for charitable contributions to § 501(c)(3) organizations. <BR><BR>The Massachusetts corporate excise deduction for charitable contributions results from the general allowance of federal deductions in the determination of net income. Thus, Massachusetts allows the deduction in the same amount as the federal deduction. All federal requirements and limits pertaining to the deduction apply for Massachusetts purposes. The most important of these limits is that the deduction cannot exceed 10% of a corporation's taxable income. The federal limit was temporarily increased to 25% for certain corporate contributions made in 2020 and 2021. Massachusetts followed those temporary increases. <BR><BR>The corporate excise revenue lost as a result of the deduction for charitable contributions is a Massachusetts tax expenditure.
M.G.L. <a href="https://malegislature.gov/Laws/GeneralLaws/PartI/TitleIX/Chapter63/Section30" target="_blank">c. 63, §30.4</a>; <a href="https://www.law.cornell.edu/uscode/text/26/170" target="_blank">IRC §170</a>
47.1
55.4
66.1
69.8
71.4
