Origin: Massachusetts adopts the federal tax treatment of incentive stock options as provided in the Internal Revenue Code (the "Code") as amended on January 1, 2024. Under the federal rules, and therefore for Massachusetts purposes as well, no tax consequences result when employees are granted or exercise options to purchase company stock. Employees are taxed only when they sell the stock acquired through the exercise. This results in a deferral of tax for both federal and Massachusetts tax purposes which constitutes a tax expenditure.
Origin: M.G.L. c. 62 § 1(c) and (d); G.L. c. 62, § 2(a); Code§§ 421, 422, and 424
Tax Type
Tax Expenditure
Item Number
Item Name
Description
Origin
FY2022
FY2023
FY2024
FY2025
FY2026
Personal Income Tax
Deferrals of Gross Income
1.102
Treatment of Incentive Stock Options
Massachusetts adopts the federal tax treatment of incentive stock options as provided in the Internal Revenue Code (the "Code") as amended on January 1, 2024. Under the federal rules, and therefore for Massachusetts purposes as well, no tax consequences result when employees are granted or exercise options to purchase company stock. Employees are taxed only when they sell the stock acquired through the exercise. This results in a deferral of tax for both federal and Massachusetts tax purposes which constitutes a tax expenditure.
M.G.L. <a href="https://malegislature.gov/Laws/GeneralLaws/PartI/TitleIX/Chapter62/Section1" target="_blank">c. 62 § 1(c) and (d)</a>; G.L. <a href="https://malegislature.gov/Laws/GeneralLaws/PartI/TitleIX/Chapter62/Section2" target="_blank">c. 62, § 2(a)</a>; Code§§ <a href="https://www.law.cornell.edu/uscode/text/26/421" target="_blank">421</a>, <a href="https://www.law.cornell.edu/uscode/text/26/422" target="_blank">422</a>, and <a href="https://www.law.cornell.edu/uscode/text/26/424" target="_blank">424</a>
5.9
5.7
5.8
6.0
6.8
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