Here are some of the Massachusetts issues and opportunities that we have recently worked on for our clients:

Corporate Excise Tax

• Taxpayers with otherwise closed tax years can make adjustments to those years that can increase net operating losses and credits available for carryforward into later years. We obtained several million dollars in relief for a Fortune 500 technology company by applying the Department’s published apportionment position to increase available net operating losses and recalculating research and investment tax credits. Contact us about conducting an analysis of your net operating loss and credit carryforwards.
• The Department often takes the position that indebtedness to affiliates is not “true debt,” resulting in an increase in net worth for corporate excise tax purposes. We have represented taxpayers in appeals involving intercompany indebtedness, and have experience building a record to demonstrate that intercompany obligations are, in fact, “true debt.”
• The Department is aggressive in reclassifying out-of-state businesses as manufacturing corporations required to use single -sales factor apportionment. For example, the Department takes the position that it can reclassify corporations included in a combined filing group as manufacturing corporations if they purchase goods from affiliated manufacturing corporations included in the same combined group. This position is contrary to the statutes governing manufacturing corporation classification and combined filing. We are currently representing a taxpayer challenging the Department’s position.
• Financial institutions that purchase loans may be entitled to source all such loans outside Massachusetts for apportionment purposes, including, in some circumstances, loans where the borrower or security is located in Massachusetts.
• Corporations classified as financial institutions are not subject to the net worth-based component of the corporate excise tax and apportion net income using an industry-specific formula. Corporations that have "captive" finance companies in their affiliated group may qualify as financial institutions, potentially resulting in substantial tax savings. We have obtained significant settlements on this issue several taxpayers.
• Holders of REMIC residual interests with excess inclusion income should be able to exclude such income when computing net income for Massachusetts corporate excise tax purposes. We recently obtained a significant settlement on this issue at the Appellate Tax Board for a major financial institution.
• Goodwill resulting from “pushed-down” purchase accounting adjustments should be excluded from net worth for corporate excise tax purposes. We recently obtained refunds for a Fortune 500 manufacturer on this issue.
• Under Massachusetts statute, receipts from services are sourced to the location where the service is delivered. Notwithstanding the statutory rule, under the Department's regulations, certain categories of receipts, including brokerage receipts and receipts from professional services, are sourced to the customer location, even when the service is delivered elsewhere. Taxpayers sourcing receipts to the customer location may be entitled to refunds.
• Massachusetts has a “throwout” rule for receipts from sales of services in states where the taxpayer is not “subject to tax.” Under Massachusetts’ expansive nexus rules, most taxpayers are subject to tax in all states in which they make sales. Thus, taxpayers that have applied the throwout rule may be entitled to refunds.
• The Department often disregards the separate existence of captive insurance companies and, on audit, includes the income of such insurance companies in the combined corporate excise tax calculation of the affiliated business corporations. If the captive insurer qualifies as an insurance company for federal income tax purposes, these adjustments are contrary to Massachusetts law. We have successfully challenged these adjustments for multiple clients.
• Massachusetts will be moving to a single-sales factor apportionment formula for most corporate taxpayers in 2025. For taxpayers engaged in capital-intensive businesses, this change could produce an apportionment that fails to reflect how income is earned. Such taxpayers should consider petitioning to use an alternative apportionment method. Also, the use of a single-sales factor to apportion the net worth-based portion of the corporate excise tax will, in many cases, produce a distortive result that is subject to challenge.

Sales Tax

• Multistate businesses that paid Massachusetts sales tax on software purchases may be entitled to a refund on the portion of the purchase price attributable to usage outside of Massachusetts. We can work with your vendors to obtain these refunds.

Alternative Dispute Resolution

• Our focus is on achieving the best results for our clients in an efficient and low-profile manner. In some cases, that requires considering options outside the traditional administrative and judicial appeal processes.
• We have represented multiple Fortune 500 companies in successfully resolving multimillion-dollar corporate excise tax issues through the Department’s pre-assessment mediation program. In each case, the company obtained the desired result, while avoiding the publicity and cost of extended litigation.
• The Department operates a voluntary disclosure program specifically aimed at resolving uncertain tax issues in an expedited manner, prior to audit. We have assisted clients in navigating this program, allowing them to release reserves booked under ASC 740.

Massachusetts State Tax Intelligence

Our team devotes significant resources to develop and maintain a Massachusetts unpublished document database – giving us an inside look at the Department’s audit policies, implementation of new tax legislation, and other regulatory developments, as well as cutting-edge issues raised in cases pending at the Appellate Tax Board. With this information, we help our clients identify new issues, plan around tax traps, and take advantage of hidden opportunities to minimize their taxable exposure.