Session Laws

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:

SECTION 1. The first paragraph of section 4A of chapter 7 of the General Laws, as appearing in the 1984 Official Edition, is hereby amended by striking out the first sentence and inserting in place thereof the following two sentences:- The executive office for administration and finance shall include an office of the comptroller, headed by a comptroller, who shall be appointed by the governor in accordance with the provisions of section one of chapter seven A; a purchasing agent's division in charge of a purchasing agent, who shall have the rank of a deputy commissioner and shall be appointed by the governor for a term coterminous with that of the governor; a division of public employee retirement administration headed by a commissioner; department of personnel administration, in charge of a personnel administrator, who shall have the rank of commissioner; a division of employee relations, headed by a deputy commissioner for employee relations; a fiscal affairs division, headed by a deputy commissioner for fiscal affairs; a division of capital planning and operations; and a central services division, headed by a deputy commissioner for central services; and a department of revenue, headed by a commissioner of revenue. Each such position shall be classified in accordance with section forty-five of chapter thirty and the salary shall be determined in accordance with section forty-six C of said chapter thirty; provided, however, that notwithstanding the provisions of said chapter thirty, the comptroller shall receive a salary as determined by the provisions of said section one of said chapter seven A.

SECTION 2. Sections thirteen, thirteen A, fourteen, fourteen A, sixteen, seventeen, eighteen, nineteen, twenty, twenty-one, thirty-one, thirty-three, thirty-four, and thirty-five of said chapter seven are hereby repealed.

SECTION 3. The General Laws are hereby amended by inserting after chapter 7 the following chapter:- `tuc CHAPTER 7A. OFFICE OF THE COMPTROLLER.

Section 1. There shall be a state agency within the executive office for administration and finance called the office of the comptroller. The comptroller shall be the administrative and executive head of said office and shall be appointed by the governor for a term coterminus with the governor's. The person so appointed shall be selected without regard to political affiliation and solely on the basis of integrity and demonstrated ability and an advanced degree in accounting, auditing, financial management, business administration, or public administration.

At the time of his appointment as comptroller, the person so appointed shall give bond in the amount of twenty-five thousand dollars or such other amount as the advisory board to the comptroller shall fix for the faithful performance of his duties. Notwithstanding the provisions of chapter thirty the comptroller shall receive a salary as determined by the advisory board to the comptroller; provided, however, that the salary of the comptroller shall not be adjusted to reflect bond premiums nor shall such premiums be paid by or reimbursed by the office of the comptroller or with any state monies.

The person so appointed may be removed from said office, for cause, by the governor. Such cause shall include neglect of duty, misconduct, or conviction of a crime.

In the case of a vacancy in the position of comptroller, his successor shall be appointed in the same manner. No person may be appointed for more than two four year terms.

Section 2. There shall be an advisory board to the comptroller which shall consist of the attorney general, the treasurer, the commissioner of administration who shall be the chairman, the auditor, the chief administrative justice of the trial court, and two persons who have experience in accounting, management, or public finance who shall be appointed by the governor, not more than one of which two shall be members of the same political party. The appointed members shall serve for three year terms, provided, that one such member shall be initially appointed for a two year term and one such member shall be initially appointed for a full three year term. The appointed members may be removed for cause and their successors shall be appointed in the same manner as an initial appointment. The members of the advisory board to the comptroller shall be reimbursed for necessary and reasonable expenses incurred in the performance of their duties, but shall not be otherwise compensated for their services.

The advisory board to the comptroller shall meet at least four times a year. Said advisory board shall provide advice and counsel to the comptroller in the performance of his duties. The advisory board shall be responsible for reviewing any rules or regulations promulgated by the comptroller prior to their implementation. The advisory board shall also review prior to publication the annual financial report of the commonwealth published by the comptroller.

Any action of the advisory board shall be taken with the approval of no less than four members of the advisory board.

Section 3. The comptroller shall examine all accounts and demands against the commonwealth excepting those for the salaries of the governor and the justices of the supreme judicial court, for the payrolls of the executive council and members of the general court, and those due on account of the principal or interest of a public debt. He may require affidavits that articles have been furnished, services rendered and obligations incurred, as claimed. Such affidavit for any office, department, commission and institution shall be made by the person authorized to incur such obligation. The comptroller shall make a certificate specifying the amount due and allowed on each account or demand so examined, the name of the person to whom such amount is payable and the account to which it is chargeable. He shall keep copies of all such certificates and transmit the originals to the governor, who, with the advice and consent of the council, may issue his warrant to the state treasurer for the amount therein specified as due.

The comptroller shall not include on such certificate any amount for any account for which an appropriation is required under section six of chapter twenty-nine if no such appropriation or no allotment has been made or if the amount of such appropriation and allotment for the current fiscal year is insufficient to meet the amount of the demand. The comptroller is prohibited from making or authorizing any spending authority to make a journal entry, so-called, between accounts if the account ultimately to be charged had insufficient monies to support the entry at the time the amount being entered was expended, unless prior notification of the intent to make such a journal entry, indentifying the accounts involved and the amount of the entry, is sent to the house and senate committees on ways and means. The comptroller is further prohibited from certifying any amounts for payment in the event that there is an interim period at the beginning of a fiscal year prior to the final passage of the fiscal year appropriation act or any interim appropriation act, subject to the condition that any amounts otherwise authorized by law to be paid during such interim period may be so certified by the comptroller.

Section 4. The comptroller shall prepare an annual report setting forth all federal grants and reimbursements received by each agency and department of the commonwealth during the fiscal year. Said report shall also include the cost of any state obligation which is a condition for such grant or reimbursement. Such report shall also include, but not be limited to, the nature of each grant, the period of time over which the grant or reimbursement shall be effective, the total commitment of such grant or reimbursement, and the expiration date of each such grant or reimbursement. A copy of said report shall be filed with the commissioner of administration, the house and senate committees on ways and means, and the clerks of the house and senate for the distribution to the membership of the general court.

Section 5. All bills and vouchers on which money has been or may be paid from the treasury upon the certificate of the comptroller or the warrant of the governor shall be kept in the office of the comptroller; and all departments, offices, commissions and institutions authorized to make contracts under which money may be payable from the treasury shall file with the comptroller, before payment, certified copies thereof.

Section 6. No contract to provide consultant services shall be awarded by the commonwealth, or by any department, board, commission or other agency acting in its behalf, unless the persons signing such contract on behalf of the party contracting to provide such services files with the comptroller a statement under the penalties of perjury setting forth the names and addresses of all persons having a financial interest therein, not including, however, any person whose only financial interest consists of the holding of one per cent or less of the capital stock of a corporation contracting to provide such services.

Section 7. The comptroller shall design and install an accounting system for the commonwealth and prescribe the requisite forms and books of account to be used by each department, office, commission and institution of the commonwealth. No form or book of account other than that prescribed as aforesaid shall be used without the approval of the comptroller. He may revise such forms, books or system from time to time. He shall prepare and distribute a book of instructions covering the use and application of said accounting system for the guidance of the various departments, offices, commissions and institutions of the commonwealth.

Section 8. He shall keep all general books of account and determine the extent and character of subsidiary accounts to be kept by all departments, offices, commissions and institutions of the commonwealth. He shall have full authority to prescribe, regulate and make changes in the method of keeping and rendering accounts. He shall establish in each such department, office, commission and institution a proper system of accounts, which shall be uniform so far as is practicable, and a proper system of accounting for stores, supplies, materials and products, and may provide, where he deems it necessary, for a continuing inventory thereof. He shall provide such safeguards and systems of checking as will ensure, so far as possible, the proper collection of all revenue due the commonwealth; and, where he deems it necessary, shall provide that forms and receipts shall be numbered consecutively, making each such department, officer, commission or institution responsible for their use or cancellation.

Section 9. The comptroller shall keep a distinct account, under appropriate headings, of all public receipts and expenditures. He shall keep a like account of the school fund and of other public property and of all debts and obligations due to and from the commonwealth; and for such purpose he shall have free access to the books and papers of the several departments, offices, commissions and institutions.

Section 10. He shall verify all accounting statements included in reports of departments, offices and commissions before the publication of such reports. No such report shall be published by any such department, office or commission until such statements are so verified and approved.

Section 11. The office of the comptroller shall be properly equipped and shall furnish to the agencies within the executive office of administration and finance, to the house and senate committees on ways and means, and to other state agencies and other individuals as required by law or as the advisory board to the comptroller shall direct, all accounting statements relating to the financial status, funds, reserves, appropriation control and cost of operation of the commonwealth at the end of the state fiscal year and at intermediate monthly periods when such information is needed in effecting economies before appropriations have been exhausted, or for other purposes.

Section 12. The comptroller shall, annually on or before the second Wednesday in January, submit to the general court a printed abstract of his annual report, exhibiting a full and accurate statement of the financial condition and a summary of the transactions of the commonwealth for the preceding fiscal year; and as soon as may be after said second Wednesday in January he shall deposit his annual report with the state secretary.

Such report shall contain a summary statement of the receipts into, and payments from, the treasury of the commonwealth for the preceding fiscal year; a detailed statement of such receipts and expenditures, including obligations, whether paid or unpaid, incurred by all departments, offices, commissions and institutions for such fiscal year. It shall include all accounts of expenditure of interest to the public, and, as far as may be, shall show the different departments, offices, commissions and institutions under whose direction the expenditure was made.

The report shall show the aggregate amount of funded debt and of all temporary loans at the beginning and end of the fiscal year respectively and the balance of increase or decrease in each case, and state the cause of such increase or decrease. It shall state whether or not the ordinary expenses of the fiscal year have exceeded the income, and show the amount of the balance. It shall contain a particular statement of all transactions affecting the funds belonging to or held in trust by the commonwealth, including new investments of any portion of the same made during the preceding fiscal year, and also of the manner in which the income of the school fund has been disbursed.

Section 13. In the exercise of the budget director's and deputy commissioner of capital planning and operations' functions relative to the preparation of the budget, the records, resources and full co-operation of the office of the comptroller shall be available.

Section 14. The comptroller or any employee in the office of the comptroller who knowingly violates, authorizes or directs another employee to violate any provision of this chapter or chapter twenty-nine shall be punished by a fine of not more than one thousand dollars or by imprisonment in a jail or a house of correction for not more than one year, or both. In addition, if convicted of such violation the comptroller shall forfeit the bond required pursuant to section one.

Section 15. Subject to prior review by the advisory board to the comptroller, the comptroller is hereby authorized to promulgate rules and regulations to carry out his responsibilities under the provisions of this chapter or other applicable laws. Such rules and regulations shall not be subject to the provisions of chapter thirty A.

SECTION 4. Chapter 29 of the General Laws is hereby amended by striking out section 1, as appearing in the 1984 Official Edition, and inserting in place thereof the following section:-

Section 1. As used in this chapter, the following words shall, unless the context requires otherwise, have the following meanings. All words and terms defined by section thirty-nine A of chapter seven and appearing in this chapter, except for the phrase "state agency", shall have the meaning defined therein unless the context shall indicate another meaning or intent:-

"Account" or "Line-item", a separate unit of appropriation identified by an eight-digit number.

"Appropriation", the authorization by the general court with the approval of the governor, or by overriding his objection thereto, of the expenditure of state revenues from a specified fund for a specified purpose up to a specified maximum amount for a specified period of time.

"Bonds", a written promise to pay a specified amount of money on a specified date or dates in the future, together with a periodic interest at a specified rate.

"Bond fund", a fund of the commonwealth into which bond revenues are deposited.

"Bond revenues", the proceeds of bonds issued by the commonwealth and the interest earned thereon.

"Budget director", the administrative head of the budget bureau within the division of fiscal affairs, within the executive office of administration and finance, or, in the alternative if so designated by the commissioner, the deputy commissioner for fiscal affairs.

"Budgetary funds", state funds which are subject to appropriation as provided in section six.

"Commissioner", the commissioner of administration as provided for in section four of chapter seven.

"Consolidated net surplus in the operating funds", the sum of the undesignated fund balances in the General Fund, the Local Aid Fund, and the Highway Fund at the close of the fiscal year, after authorized transfers from any one of said funds to other funds of the commonwealth.

"Direct appropriation", a first-time appropriation of state revenues, from sources other than bond revenues, retained revenues, and federal grants.

"Federal grant", any financial assistance available to a state agency from the United States government, either directly or through an intermediary, whether a project, formula, or block grant, a subvention, a subsidy, an augmentation, or a state plan. For the purposes of this chapter "federal grant" shall not mean such financial assistance provided pursuant to Titles XVIII or XIX of the Social Security Act or other reimbursements received for state entitlement expenditures and credited to the General Fund nor does it mean federal financial assistance from the United States government for direct payments to individuals, or for other purposes as provided for in section thirty-four of chapter ninety, section two of chapter one hundred and thirty-one, section ten of chapter one hundred and thirty-two A, section two E of chapter twenty-nine, chapter ninety-two, and section forty-eight of chapter one hundred and fifty-one A.

"Fund", an accounting entity established by general or special law to record all the financial resources or revenues together with all related expenditures or liabilities that are segregated for a particular purpose.

"Prior appropriation continued" or "PAC", a phrase used to reappropriate unexpended and unencumbered monies from one fiscal year for the subsequent fiscal year.

"Retained revenue", the income of state agency or other public instrumentality from its operations which by law it is allowed to expend for a particular purpose up to a specified limit without further appropriation which would otherwise be subject to direct appropriation.

"Revenue retention account", an account which allows a state agency or other public instrumentality to use retained revenue during the fiscal year in which such revenue is received to maintain all or a portion of its operations.

"Revolving account", a revenue retention account in which the retained revenues unspent or unencumbered at the end of a fiscal year are carried over into the next fiscal year for expenditure.

"Secretary", the officer in charge of each executive office established by chapters six A and seven; provided, however, that secretary shall mean the board for the board of regents of higher education and the board of education; and provided, further that secretary shall mean the court for the supreme judicial court.

"State agency", a state agency, board, bureau, department, division, section, or commission of the commonwealth.

"State revenue", all income from state taxes, state agency fees, fines, assessments, charges, and other departmental revenues, retained revenues, federal grants, federal reimbursements, lottery receipts, court judgments and the earnings on such income.

"Tax expenditures", state tax revenue foregone as a direct result of the provisions of any general or special law which allows exemptions, exclusions, deductions from, or credits against, the taxes imposed on income, corporations, and sales.

"Trust fund", a fund into which are deposited monies held by the commonwealth or state agencies in a trustee capacity and which must be expended in accordance with the terms of the trust.

SECTION 5. Section 2 of said chapter 29, as so appearing, is hereby amended by adding the following paragraph:-

All such revenue shall be deposited in and credited to the general fund or other state funds during the fiscal year in which it is received. In the event that a question arises as to the correct year to credit the receipt of revenues, the comptroller shall make a determination as to the correct fiscal year and the determination of the comptroller shall be conclusive.

SECTION 6. Said chapter 29 is hereby further amended by inserting after section 2G the following two sections:-

Section 2H. There shall be established and set up on the books of the commonwealth a separate fund to be known as the Commonwealth Stabilization Fund, consisting of amounts transferred to the fund in accordance with the provisions of section five C and income derived from the investment of amounts so transferred. The purpose of the fund shall be to create and maintain a reserve to which any available portion of a consolidated net surplus in the operating funds shall be transferred and from which appropriations may be made for the following purposes: (1) to make up any difference between actual state revenues and allowable state revenues in any fiscal year in which actual revenues fall below the allowable amount and (2) to replace the state and local loss of federal funds or (3) for any event which threatens the health, safety or welfare of the people or the fiscal stability of the commonwealth or any of its political subdivisions. Such event or events, as determined by the general court, shall include, but not limited to, a substantial decline in economic indicators which result in severe reductions in state revenues or state financial assistance to local governmental units, or court ordered or otherwise mandated assumptions by the commonwealth of programs or costs of programs previously borne by local governmental units.

In the event that the amount remaining in the fund at the close of a fiscal year exceeds five per cent of the total state tax revenues received in that fiscal year, as shown in the statement of the comptroller required by clause (h) of section five, the amounts so in excess shall be transferred to the Tax Reduction Fund established by section two I.

Section 2I. There shall be established and set up on the books of the commonwealth a separate fund to be known as the Tax Reduction Fund, consisting of amounts transferred to the fund in accordance with the provisions of section two H and of section six of chapter twenty-nine B and income derived from the investment of amounts so transferred. The purpose of the fund shall be to maintain a reserve which shall be used only to reduce personal income taxes as provided herein.

On or before August fifteenth, the commissioner of administration shall certify to the governor the total of any amount in the Tax Reduction Fund as shown in the financial report of the comptroller for the preceding fiscal year. A temporary increase in the amounts of the personal exemption allowable on the income tax shall be provided, subject to appropriation, for the taxable year ending on the succeeding December thirty-first to the extent that the amount in the Tax Reduction Fund equals an integer multiple of five per cent of the amount of personal income taxes which will not be collected for said taxable year on account of said personal exemptions. Said commissioner shall recommend to the commissioner of revenue the amount of the temporary increase, if any, in said personal exemptions for said taxable year. The comptroller shall transfer from the Tax Reduction Fund forty per cent of the amount equal to said integer multiple of five per cent of the amounts not collected due to said personal exemptions to the Local Aid Fund and sixty per cent of said amount to the General Fund.

SECTION 7. Said chapter 29 is hereby further amended by striking out sections 3, 3A, 4, and 5 and inserting in place thereof the following four sections:-

Section 3. Every officer having charge of any state agency which receives a periodic appropriation from the commonwealth, including all periodic appropriations to be met from state revenues shall annually, on or before a date set by the commissioner submit to the budget director statements (1) showing in detail the amounts appropriated for the preceding and the current fiscal years; (2) the interchanges during the preceding fiscal year between the subsidiary accounts prescribed in accordance with section twenty-seven; (3) the deficiencies and overdrafts, if any, in appropriations for the latest complete fiscal year and for the current fiscal year; (4) estimates of the amounts required for ordinary maintenance for the ensuing fiscal year, with an explanation of any increased appropriations recommended and with citations of the statutes relating thereto, a statement indicating the priorities assigned to each program by said officer; (5) and statements showing in detail the revenue of the state agency in his charge for the latest complete fiscal year, and the revenue and estimated revenue thereof for the current fiscal year, and his estimated revenue from the same or any additional sources for the ensuing fiscal year, with his recommendations as to any changes in the management, practices, rules, regulations or laws governing such state agency which would effect an increase or cause a decrease in revenue from operations, fees, taxes or other sources, or which would facilitate the collection thereof; (6) together with such other information on the expenditures, revenues, activities, output or performance of any such state agency as may be required by rule or regulation of the commissioner, and any other information, including the priorities assigned to each program by said officer, required at any time by the budget director. Every such officer shall also submit to the budget director a statement showing in detail the number of permanent, temporary, and part-time positions authorized for the state agency in his charge and the volume of work performed in the latest complete fiscal year, and justifying his request for permanent, temporary and part-time positions in the ensuing fiscal year in relation to the volume of work expected to be performed by the state agency.

All such statements, recommendations and estimates shall, to the fullest possible extent, conform with the programs of the state agency as defined by the commissioner, with the advice of the officers responsible for the administration thereof and the officer making the submission to the budget director. The said estimates shall not include any estimate for any new or special purpose or object not authorized by statute.

Copies of all such statements, recommendations, and estimates as they pertain to space rentals and maintenance and construction or repair of capital facilities shall be submitted on or before the aforementioned date to the deputy commissioner of capital planning and operations. They shall include a report detailing the current condition of the using agency's buildings, broken down into individual structural or mechanical components, as defined by rule or regulation of the deputy commissioner. Such report shall specify those individual maintenance and repair items for which monies requested in the operating budget shall be used. The deputy commissioner shall review them and submit his evaluation of the priority, necessity, and feasibility of the request contained therein to the officer making such statements, recommendations, and estimates, the budget director, the house and senate committees on ways and means, and the secretary, if any, having charge of such state agency.

Before any such statements, estimates, recommendations or other information relating to a state agency shall be so submitted, they shall be submitted to the house and senate committees on ways and means. In addition, each state agency shall submit such statements, estimates, recommendations, and other information to the secretary having charge of such state agency, if any, who shall review the same and make such additions thereto, deletions therefrom and modifications therein as such secretary deems appropriate; provided, however, that prior to making any such additions, deletions or modifications, such secretary shall conduct public hearings, for which he shall give five days' public notice prior thereto, on all items for which he shall submit a recommendation for appropriations to the governor. Said secretaries shall furnish, to the house and senate committees on ways and means and the house and senate committees on post audit and oversight copies of all such statements, estimates, recommendations, and other information and of all such additions, deletions, and modifications.

Section 3A. Any officer having charge of any state agency which receives a periodic appropriation from the commonwealth, shall upon the request of any standing committee of the house or senate, or of any joint standing committee of the general court, furnish in writing to such committee, and to the commissioner, his estimate of the cost of proposed legislation affecting activities which are or would be under his supervision. Such estimate shall be provided to such committee within ten days of the receipt of such a request by the state agency.

Section 4. Every officer having charge of any state agency who, in his annual reports or otherwise, recommend or petition for the expenditure of money by the commonwealth from any source of revenue, including expenditures to be met by assessments or from bond revenues or trust funds, for any purpose not covered by the estimates required to be submitted under section three, shall, annually, on or before a date set by the commissioner, submit detailed estimates thereof to the budget director, together with any other information required by said budget director. Such estimates and other information relating to such state agency before being submitted to the budget director, shall first be submitted to the appropriate secretary, if any, on or before a date set by him; said secretary shall review the same and make such additions thereto, deletions therefrom and modifications therein as he deems appropriate; provided, however, that prior to making any such additions, deletions or modifications, said secretary shall conduct public hearings, for which he shall give five days' public notice prior thereto, on all items for which he shall submit to the governor a recommendation for an appropriation of one million dollars or more.

All copies of such statements and information relative to expenditures from bond revenues shall be submitted to the deputy commissioner of capital planning and operations on or before the aforementioned date. The deputy commissioner shall evaluate them as to the priority, necessity, and feasibility of the requests contained therein in relation to long range capital facilities development plans and capital facilities development plans and capital facility projects contained therein, as defined by section thirty-nine A of chapter seven. The deputy commissioner of capital planning and operations shall submit his evaluation to the officer providing such estimates and information, the budget director, and the appropriate secretary.

Section 5. (1) The comptroller shall annually, on or before August fifteenth, submit to the commissioner, the budget director, the deputy commissioner of capital planning and operations, and the house and senate committees on ways and means statements setting forth the following facts and figures for all state purposes:

(a) The expenditures for the preceding fiscal year, itemized separately so as to show expenditures made from all state revenues, including federal grants, trust funds, and sources other than state revenues.

(b) The appropriations for the preceding fiscal year.

(c) The actual state revenue for the three preceding fiscal years, itemized so as to show the sources from which received.

(d) The condition of the cash on hand, itemized separately so as to show cash derived from special revenue not available for general state purposes, cash held to meet authorizations and obligations previously made and incurred, and cash which is unencumbered and available for appropriation.

(e) The condition of the state debt, including a listing of all authorized general obligation bonds, whether issued or unissued.

(f) An itemized statement showing the disposition of any funds appropriated to meet emergency or unforeseen conditions.

(g) The consolidated net surplus in the operating funds at the close of the preceding fiscal year, and the amount by which such surplus exceeds one-half of one per cent of the total amount of state tax revenues as defined in chapter twenty-nine B in the preceding fiscal year as itemized in paragraph (c).

(h) The amount in the Commonwealth Stabilization Fund at the close of the preceding fiscal year and the amount by which such amount exceeds five per cent of the total amount of state tax revenues received in the preceding fiscal year.

(i) A statement of these accounts in accordance with generally accepted accounting principles.

(2) The statements submitted shall also set forth the estimates for the current and ensuing fiscal years of all expenditures for payment of claims and all other expenditures authorized by law and not required to be filed under section three.

SECTION 8. Section 5B of said chapter 29, as appearing in the 1984 Official Edition, is hereby amended by striking out the first, second, third and fourth paragraphs and inserting in place thereof the following four paragraphs:-

The commissioner, with the approval of the governor, shall annually on or before August fifteenth, prepare estimates of the total state revenues and total allowable state tax revenues as defined in chapter twenty-nine B which in his judgment will be available for the annual budget for the ensuing fiscal year. In making such estimates he shall take into account the computed maximum state tax revenues as defined in chapter twenty-nine B, the impact of existing taxes, the probable economic growth within the state, anticipated federal fund receipts, the anticipated growth in wages and salaries, departmental and other revenue based on existing laws, and amounts available to be transferred into budgetary funds.

In estimating revenues available for the current year, he shall include the amount certified by the comptroller under the provisions of section five C as available from the consolidated net surplus in the operating funds at the close of the preceding fiscal year and not in excess of one-half of one per cent of the total state tax revenues in such fiscal year. In estimating revenues to be available for the annual budget for the ensuing fiscal year, he shall include an amount of any anticipated consolidated net surplus in operating funds not in excess of one-half of one per cent of the estimated total state tax revenues for the current fiscal year.

The commissioner, with the approval of the governor, shall annually on or before December fifteenth, prepare estimates of the tax expenditures which in his judgment will occur during the ensuing fiscal year. Such estimates of tax expenditures shall be prepared to facilitate a comparison of increases or decreases from actual collections of the preceding fiscal year the estimates of such revenue for the then current fiscal year.

The commissioner shall transmit the estimates of total state revenue and the estimates of tax expenditures to the deputy commissioner of capital planning and operations, to every secretary, to every statutory officer of the commonwealth, who shall transmit to each subordinate agency such of the information which each such officer or secretary determines is appropriate to assist each such agency in its budget preparations, to the house and senate committees on ways and means, and to the joint committee on taxation.

SECTION 9. Said chapter 29 is hereby further amended by inserting after section 5B the following section:-

Section 5C. The comptroller shall annually, on or before August fifteenth, certify to the commissioner of administration the amount of the consolidated net surplus in the operating funds at the close of the preceding fiscal year. The amounts so certified shall be disposed as follows: (a) an amount equal to one-half of one per cent of the total revenue from taxes in the preceding fiscal year, as certified in accordance with section five, shall be available to be used as revenue for the current fiscal year.

(b) Sixty per cent of any remaining amount of such consolidated net surplus shall be transferred to the Commonwealth Stabilization Fund from the General Fund, and forty per cent of any remaining amount of such consolidated net surplus shall be transferred to the Commonwealth Stabilization Fund from the Local Aid Fund.

SECTION 10. Said chapter 29 is hereby further amended by striking out section 6, as appearing in the 1984 Official Edition, and inserting in place thereof the following section:-

Section 6. The budget director shall study and review all estimates and requests for appropriations and other authorizations for expenditures of state funds filed with him as provided by sections three and four, and shall make such investigations as will enable him to prepare an operating budget for the governor, setting forth such recommendations as the governor shall determine. The governor may call upon the comptroller for information relative to finances and for assistance in the preparation of the operating budget. The operating budget shall embody all estimates, requests and recommendations for appropriations, distributions of state revenues and other authorizations for expenditures by the commonwealth in accordance with existing law, other than for capital facility projects and prior-year appropriations, but including those from revolving and revenue retention accounts and those from federal grants, as submitted by each officer having charge of any state agency which receives a periodic appropriation from the commonwealth. The budget recommendations of the governor shall not assume future continuing appropriation of the unspent balances of current or previous appropriations.

The operating budget shall be set out in accordance with the provisions of section 6D and classified and designated so as to show separately estimates and recommendations for: (a) expenses for administration, operation and maintenance; (b) deficiencies or overdrafts in appropriations for former years; (c) interest on the public debt and sinking fund and serial bond requirements; and (d) all requests and proposals for expenditures for new programs and other undertakings; and shall include in detail definite recommendations of the governor relative to the amounts which should be appropriated therefor. The operating budget shall show the estimated state revenue of each state agency. The operating budget shall indicate the number of positions proposed to be authorized for each state agency or such other public instrumentality for the ensuing fiscal year, the number of positions for each state agency in the current and ensuing fiscal years and such other information as may be held to explain the anticipated results of the proposed expenditures.

SECTION 11. Said chapter 29 is hereby further amended by striking out section 6B, as so appearing, and inserting in place thereof the following three sections:-

Section 6B. (a) Notwithstanding any general or special law to the contrary, no state agency shall apply for federal grants or for participation in a federally assisted program under any federal law, and no state agency may approve an application for such a federal grant or approve participation submitted by an agency other than a state agency, unless such state agency shall have, at least thirty days prior to submitting an application, notified the commissioner, the house and senate committees on ways and means, and the joint committee on federal financial assistance, on forms and in a manner prescribed by the commissioner. Such notice shall, at a minimum, include:-

(1) reference to the federal statutory authority under which the action is proposed;

(2) a description of the substance of the application;

(3) a fiscal statement setting forth:-

(i) the projected grant budget per year including the number of personnel to be funded with federal funds;

(ii) the estimated amount of cash match, inkind match or other monies to be supplied by the state and any other source from which such match will be required, and a description of the federal allocation formula and matching requirements including whether the grant is distributed to the commonwealth on the basis of a federally specified formula or on the basis of the federal grantor's discretion and a description of the federal constraints placed on the agency's discretion to use the grant; and

(iii) the duration of the grant, the number of fiscal years the agency has been receiving assistance and the number of fiscal years in which assistance can be expected to continue under the program, and a statement as to the priority of the program alongside other state or federally funded programs, including whether the agency would request that all or part of the program be funded out of the General Fund in the event federal funds are reduced or discontinued.

If, within thirty days of notification of intent to apply for a federal grant, no action, has been taken by either the commissioner, the house or senate committee on ways and means, or the joint committee on federal financial assistance, the application may proceed. To avoid any inconsistency or duplication in review, the commissioner shall establish procedures whereby notices given under this section shall be coordinated with other notice requirements for project or plan proposals in connection with federal aid including those required under Circular A-95 of the United States Office of Management and Budget.

Notwithstanding the foregoing provisions, any federal grant which is included as an appropriation in the state budget shall not be subject to the foregoing review by the house and senate committees on ways and means.

(b) Upon official notification to a state agency from a federal department or agency of approval of a state plan or application for federal funds, the state agency shall notify the commissioner and the comptroller promptly of the amount, duration, payment schedule and other attendant financial terms and conditions. Such notification shall be for the purposes of appropriate recording. The commissioner shall issue a quarterly report detailing, by agency, the status of federal funds applied for, received, and expended. Upon issuance, this report shall be made immediately available to the house and senate committees on ways and means and to the joint committee on federal financial assistance.

(c) All requests for appropriations by an agency for submission to the governor and recommendation to the general court, shall contain, on forms and in a format prescribed by the commissioner, all federal grants received by an agency including that information required in subsection (a). Pursuant to section six the budget director shall include all federal grants received or anticipated by state agencies as a part of the budget.

(d) Notwithstanding the provision of any general or special law to the contrary, no state agency shall establish new, or expand existing programs involving federal or other non-state monies beyond the scope of those already established, recognized, and approved by the general court, until the program and the projected or actual availability of money is submitted to the budget director for recommendation to the general court. No state agency may make expenditures from any federal grant unless such expenditures are made pursuant to specific appropriations of the general court and allotment thereof, said allotment to be made by the comptroller upon receipt of federal grant funds.

Every state agency shall submit a spending plan for such federal grants, by subsidiary accounts, to the house and senate committees on ways and means and the joint committee on federal financial assistance by September first of each year and shall submit revisions of such spending plans to said committees as they shall from time to time be revised.

Pursuant to section two C, all such expenditures shall be charged to the General Federal Grants Fund. Notwithstanding the amount of the appropriation for a specific federal grant, the amount so expended from such federal grant shall not exceed the amount actually received and deposited in the General Federal Grants Fund for such federal grant. To the extent not precluded by the terms and conditions under which federal monies are made available by the United States government, a state agency shall use federal grants in accordance with any policies or priorities established by the general court for the activity being assisted.

(e) If federal grant monies become available to the state for expenditure, as provided for in subsection (a), and the availability of such monies could not reasonably have been anticipated and included in the budget approved by the general court for the fiscal year in question, the treasurer may accept such monies on behalf of the state and the governor may make expenditures of such monies as are authorized by federal and state law. Upon application for, and receipt of, such monies, the governor shall submit to the house and senate committees on ways and means a statement:-

(1) describing the proposed federal expenditures in the same manner as described in the budget document; and

(2) explaining why the availability of such federal grants and the necessity of their expenditure could not have been anticipated in time for such expenditures to have been approved as part of the budget enacted for that particular fiscal year.

No federal grant monies may be expended by a state agency for any program for more than one fiscal year without appropriation by the general court in accordance with this section.

(f) Each spending agency in receipt of federal grant monies shall at the commencement of each fiscal year, and no later than July thirty-first, and any agency which has not previously been in receipt of a federal grant shall, upon notification of grant approval, authorize the comptroller upon his receipt of notice of a federal grant award to initiate such procedures as are established by the commissioner to transfer from the federal grant account to the General Fund for the costs of fringe benefits, indirect costs and space use charges related to each federal grant received by that spending agency; provided, however, that the share of the cost of fringe benefits, attributable to employee pension costs shall be transferred to the state employee's pension reserve fund to meet the costs of the unfunded liability of state employees. Upon approval by the commissioner, and subject to regulations established by him, the amount of indirect costs, either in whole or in part, charged to a federal grant may be utilized to comply with federal requirements for inkind contributions. The costs of fringe benefits must, in all cases, be recovered in cash. The comptroller shall not allow expenditures for the payment of salaries to be made from any federal grant account for which he has not been authorized to charge the full amount of fringe benefits to the account. On or before August fifteenth, and upon request throughout the year, the commissioner shall submit a report to the house and senate committees on ways and means, detailing compliance with this provision by all state agencies in receipt of federal funds. Notwithstanding any provision of general or special law to the contrary, this paragraph shall apply to all state agencies; provided, however, that any institution of higher learning shall be exempt from those charges associated with indirect costs, as described in the following paragraph.

(g) Any portion of a federal grant received by an institution of higher learning which, according to the conditions of said federal grant, is to be paid for or to cover any overhead expenses, indirect costs, supporting services or facilities, or for any purpose other than the direct object of the grant, may be transferred in whole or in part to separate accounts and expended without appropriation for the support of a computer or computers, of another research grant, or of publishing programs under the exclusive control of such institution, or for faculty research or research and scholarly work under the supervision of members of the faculty of such institution.

(h) No individual, corporation or other organization utilizing grants shall be permitted to occupy or use land, buildings, equipment or facilities of the commonwealth or use the services of any officer or employee of the commonwealth during his regular working hours unless there is a written agreement, approved by the commissioner, between said individual, corporation or other organization and said officer or employee, that the commonwealth will be reimbursed for such occupancy or use; provided, however, that upon recommendation of any department, institution, board, commission, agency or employee setting forth good and sufficient reasons, this requirement may be waived in whole or in part by the commissioner on a particular project or projects. All such reimbursements shall be paid into the state treasury. Notice of such waiver shall be filed with the state auditor.

(i) Federal grants shall not be used to supplement the regular salary or compensation of any officer or employee of the commonwealth for services performed during his regular working hours.

(j) The following are excluded from subsections (a), (d) and (e):-

(1) federal grant funds coming to institutions of higher education, including research grants;

(2) research grants to individuals, agencies or institutions not exceeding fifty thousand dollars in annual amount and not creating new, or expanding existing, programs or commitments of state resources;

(3) any federal grant funds not exceeding five thousand dollars in annual amount; and

(4) federal grant funds made available to the state for costs and damages resulting from natural disasters, civil disobedience, or other occurrences of sufficient severity to have occasioned the declaration by the governor of a state of emergency.

Section 6C. In addition to information required by section six to be included in the budget submitted by the governor, said budget shall also include the following information:

(a) a description of and the amount of expenditure by state agencies from trust funds and bond funds anticipated for the subsequent fiscal year; and

(b) a narrative description accompanied by appropriate fiscal statements which shall reconcile the amounts for state revenues and expenditures for the previous fiscal year as presented by the budget director in the governor's budget with the amounts of state revenues and expenditures for the previous fiscal year as presented by the comptroller in the annual financial report of the commonwealth. Such description shall include a statement concerning the net consolidated surplus or deficit in the budgetary funds which are subject to direct appropriation.

Section 6D. All appropriations contained in the fiscal year operating budget, including supplementary and deficiency budgets, as signed into law by the governor or passed notwithstanding his objections thereto shall be set out in section two or section two A of an appropriation act. Each appropriation account or other authorization to expend monies of the state shall include the following information: (a) the account number of the appropriation, (b) the purpose of the appropriation and other restrictive language, and (c) the amount of the appropriation or the maximum expenditure allowed set out in numeric figures. No appropriation otherwise set out in any act shall be valid and the comptroller shall not allow monies to be expended on any appropriation not conforming to the requirements herein established.

Section two of each budget act shall also include appropriation subtotals for each department, board, commission, office, or agency, an appropriation total for each secretariat, for each constitutional office, and for the executive, legislative, and judicial branches of state government, and an appropriation grand total for the entire section.

Section two A shall also include the appropriation subtotals, totals, and grand total required to be included in section two. In addition, section two A shall also include totals of the amount of appropriations in each of the following categories:

(1) prior appropriations continued, (2) federal grants, and (3) revenue retention and revolving accounts.

The provisions of the section shall apply to all appropriations of state funds, including direct appropriations, accounts with prior appropriations continued, federal grant appropriations, and revenue retention or revolving account appropriations.

Direct appropriations shall be contained in section two of each budget act. All other appropriations shall be contained in section two A of any appropriation act.

This section shall not apply to appropriations which are included as part of a capital budget.

SECTION 12. Said chapter 29 is hereby further amended by striking out section 9B, as so appearing, and inserting in place thereof the following section:-

Section 9B. Any monies made available by appropriation or otherwise, to state agencies under the control of the governor or a secretary, but not including the courts, the office of the governor, or the office of the lieutenant governor, shall be expended only in such amounts as may be allotted as provided in this section. The governor shall from time to time divide each fiscal year into allotment periods of not less than one month nor more than four months. The governor or the commissioner when designated in writing by the governor shall allot to each such state agency the amount which it may expend for each such period out of the sums made available to it by appropriation or otherwise. The amount so allotted initially by the governor or the commissioner shall be equal to an amount calculated in accordance with the following formula: the annual sum available for expenditure divided by twelve multiplied by the number of months in the allotment period, unless the full legislative objective of an appropriation would be accomplished, without amendment, by a lesser allocation than that required by the formula. The governor or commissioner may so allocate a greater amount than required by the formula provided, however, that no less than fifteen days prior to the initial allocation of such greater amount to any account for which a supplemental appropriation will become necessary if current rates of spending continue, the governor or commissioner shall file with the house and senate committees on ways and means a report containing the following information: (1) the amount of the appropriation which the commissioner proposes to allocate; and (2) a detailed corrective action plan to prevent a deficiency in the account or accounts involved; a request for a supplemental or deficiency appropriation, if such corrective action plan would violate the legislative objective of the appropriation; or a statement explaining why neither a corrective action plan nor a supplemental appropriation is necessary.

If so designated, the commissioner shall designate such member or members of his office as may be approved by the governor to exercise the foregoing powers in the absence of said commissioner.

Whenever the officer in charge of each such state agency requests a supplemental allotment, he shall submit to the budget director, in such form and at such times as he shall prescribe, such information as may be required by the governor or the commissioner; provided, that before any such information relating to such a state agency has been so submitted to the budget director, it shall first be submitted to the secretary having charge of such state agency who shall review the same and make such additions thereto, deletions therefrom and modifications therein as he deems appropriate.

The governor or the commissioner upon approval of a supplemental allotment shall forthwith file with the house and senate committees on ways and means a report containing the same information as is required for an initial allocation which is greater than the formula amount. The comptroller shall not permit disbursement or obligation against any initial or supplemental allotment until he is provided with a signed copy of a letter of transmittal for such report to said committees and certification by the budget director that said committees have been sent such report.

SECTION 13. Section 9C of said chapter 29, as so appearing, is hereby amended by adding the following paragraph:-

As an alternative to the submission of such proposals to raise additional revenues and to the extent funds are available, the governor may recommend an appropriation equal to such deficiency from the Commonwealth Stabilization Fund in the manner provided in section two H.

SECTION 14. Section 9E of said chapter 29, as so appearing, is hereby amended by striking out, in lines 5 and 6, the words "of administration" and inserting in place thereof the words:- and the house and senate committees on ways and means.

SECTION 15. Section 20 of said chapter 29, as so appearing, is hereby amended by adding the following sentence:- No such voucher shall be submitted by such head nor shall any such approval be given by such head unless sufficient funds are allotted for such purposes at the time the voucher is submitted or the approval is given.

SECTION 16. Section 26 of said chapter 29, as so appearing, is hereby amended by inserting after the word "commonwealth", in line 7, the words:- nor shall any liability be imposed upon the commonwealth under a subsequent appropriation by any ongoing commitment against a current year appropriation.

SECTION 17. Section twenty-seven A of said chapter twenty-nine is hereby repealed.

SECTION 18. Section 29 of said chapter 29, as appearing in the 1984 Official Edition, is hereby amended by striking out the first paragraph and inserting in place thereof the following paragraph:-

Any subsidiary account set up as prescribed in the schedules referred to in section twenty-seven, on the books of any department, office, commission or institution, receiving an appropriation from the commonwealth, may be increased or decreased by the interchange with any other such subsidiary account within the same appropriation account by the officer in charge of such department, office, commission or institution upon his certification to the budget director that such interchange is required to meet unforeseen emergencies where funds are otherwise not available to protect the public interest, and, in the case of a department, office, commission or institution within any executive office established by chapter six A and seven, upon the prior written approval of the secretary having charge of such executive office. Every such certification shall include a statement of the details of the said emergency and of the probable consequences if the said interchange should not be made. An officer making any such certification or giving any such approval shall file forthwith a copy thereof with the comptroller, the house and senate committees on ways and means, and the house and senate committees on post audit and oversight. Under no circumstances shall an interchange otherwise authorized by this section be allowed into a newly established subsidiary account not prescribed by the schedules referred to in section twenty-seven.

SECTION 19. Section 29A of said chapter 29, as so appearing, is hereby amended by striking out the last sentence and inserting in place thereof the following three sentences:- Consultant contracts, whether written with organizations or individuals, shall not be used as substitutes for state positions. The commissioner shall submit quarterly to the house and senate committees on ways and means and the house and senate committees on post audit and oversight a report which identifies all existing consultant contracts by agency, for all accounts established or maintained by the comptroller, including but not limited to appropriation accounts for ordinary maintenance, for federal grants, bond revenue accounts, revolving accounts, retained revenue accounts, and trust accounts. Said report shall identify each contract, its duration, its maximum dollar obligation, the name of the contractor, and the services performed by the contractor.

SECTION 20. Said chapter 29 is hereby further amended by inserting after section 29A the following section:-

Section 29B. The commissioner shall make, and may from time to time amend, rules and regulations governing the procurement and administration of contracts with organizations providing social, rehabilitative, health, or special education services. Such rules and regulations shall not be subject to the provisions of chapter thirty A. No department, office, agency, board, commission or institution within any of the executive offices established by chapters six A and seven shall contract for the provision of any such services except in conformance with said regulations and without the prior written approval of the contract by the secretary having charge of such executive office. No payment shall be made to a contracting organization for any services provided prior to the date upon which a form requesting said services has been approved by the secretary having charge of such executive office and a copy of the same has been filed with the comptroller, with the exception that payment may be made for services rendered no earlier than fifteen days prior to said date, upon approval by the commissioner of administration of a written request for start date retroactivity submitted by the contracting agency and approved by the secretariat in charge of said agency. No person employed by an organization providing social, rehabilitative, health, or special education services as defined above shall directly or indirectly supervise a temporary or permanent employee of the commonwealth. Such contracts shall not be written or used by any department, office, agency, board, commission or institution of the commonwealth to procure full or part-time personal services, or equipment to be used by such department, office, agency, board, commission or institution, or any goods or services not required in the direct provision by the contractor of social, rehabilitative, health, or special education services to populations being served by the contracting department, office, agency, board, commission, or institution.

SECTION 21. Section 31 of said chapter 29, as so appearing, is hereby amended by striking out the fourth paragraph and inserting in place thereof the following paragraph:-

The comptroller shall prepare and submit to the governor and council, for their approval, a weekly warrant which shall include a sum sufficient in each item of appropriation to meet the total current weekly cost of salaries included within such centralized weekly payroll system. The comptroller shall require certification from each spending authority that each employee receiving a salary under the warrant is being paid for duties performed directly for the employing agency and not for duties performed for another state agency. The treasurer shall pay such salaries from the amounts approved by the governor and council in said warrant and shall, within five days after such payment, provide a detailed record thereof to the comptroller. The comptroller, no later than twenty working days after the close of each monthly pay period, shall provide the house and senate committees on ways and means with a record of full and part-time personnel who were paid during the most recently completed monthly pay period. Said report shall identify for each state agency all positions, their position titles and monthly salaries by account, whether appropriation account for ordinary maintenance, federal grant account, revolving account, retained revenue expenditure account, trust account, bond fund account, or any other type of account maintained or established by the comptroller. The provisions of this section shall not be construed so as to prohibit the payment of premiums for the purchase of a life insurance contract, annuity contract or other deferred compensation program for state employees under section sixty-four.

SECTION 22. The General Laws are hereby amended by inserting after chapter 29A the following chapter:- `tuc CHAPTER 29B. STATE REVENUE GROWTH CONTROL.

Section 1. For the purpose of this chapter, the following words shall unless the context clearly requires otherwise, have the following meanings:-

"Allowable state tax revenues", for any fiscal year beginning after June thirtieth, nineteen hundred and eighty-six, an amount equal to the computed maximum state tax revenues for said fiscal year; provided, however, that if the computed maximum state tax revenues for a fiscal year are less than the amount of allowable state tax revenues for the immediately preceding fiscal year, then allowable state tax revenues for said fiscal year shall be equal to the allowable state tax revenues for the immediately preceding fiscal year.

"Allowable state revenue growth factor", for a fiscal year means a number which equals one-third of the net quotent derived from the following two calculations: (1) divide total Massachusetts wages and salaries for the calendar year ending immediately prior to the beginning of such fiscal year by total Massachusetts wages and salaries for the calendar year preceding said calendar year by three years, and (2) subtract the integer one from the resulting quotent; provided, further, that in calculating the allowable state revenue growth factor for any fiscal year, the total for Massachusetts wages and salaries shall be the most recent and accurate estimate by the Bureau of Economic Analysis of the United States Department of Commerce, including periodic adjustments, of said total of Massachusetts wages and salaries for such fiscal year.

"Balanced Budget", a condition of state finance in which the consolidated net surplus at the end of a fiscal year is greater than or equal to one-half of one per cent of state tax revenues of such fiscal year.

"Computed maximum state tax revenues", for any fiscal year beginning after June thirtieth, nineteen hundred and eighty-six, an amount determined by multiplying the amount of allowable state tax revenues for the immediately preceding fiscal year by an amount equal to the sum of one plus the allowable state revenue growth factor, for the then current fiscal year; provided, however, that the computed maximum state tax revenues shall be adjusted in accordance with section four; and provided, however, that only for the fiscal year ending on June thirtieth, nineteen hundred and eighty-six, computed maximum state tax revenues for said fiscal year shall be equal to the state tax revenues for said fiscal year.

"Consolidated net surplus", the sum of the undesignated fund balances in the General Fund, the Local Aid Fund, and the Highway Fund at the close of the fiscal year after authorized transfers from any of said funds to other funds of the commonwealth.

"Excess state tax revenues", the amount by which state tax revenues for a fiscal year exceed the allowable state tax revenues for said fiscal year.

"Local aid", the amounts estimated to be due cities and towns and regional school districts as contained in the notice to assessors, as revised and updated from time to time, pursuant to section twenty-five A of chapter fifty-eight.

"Massachusetts wages and salaries", the most current data on annual wages and salaries of citizens of the commonwealth for the most recently completed calendar year as compiled by the Bureau of Economic Analysis of the United States Department of Commerce, or its successor agency.

"State tax revenues", the revenues of the commonwealth from every tax, surtax, receipt, penalty and other monetary exaction, and interest in connection therewith, including but not limited to, taxes and surtaxes on personal income, excises and taxes on retail sales and use, meals, motor vehicle fuels, businesses and corporations, commercial banks, insurance companies, savings banks, public utilities, alcoholic beverages, tobacco, inheritances, estates, deeds, room occupancy and parimutuel wagering, but excluding revenues collected by the state from local option taxes, so-called, for further direct distribution to cities and towns; provided, however, for the purposes of this chapter, an amount equal to the current expenses paid by the commonwealth in a fiscal year in connection with bonds issued or other indebtedness incurred under any general or special law shall be subtracted from said revenues to determine the amount of state tax revenues in such fiscal year.

Section 2. The governor shall recommend, the general court shall enact, and the governor shall approve a general appropriation bill which shall constitute a balanced budget for the commonwealth. No supplementary appropriation bill shall be approved by the governor which will cause the state budget for any fiscal year not to be balanced. Except as otherwise provided herein, the balanced budget in any fiscal year shall include state tax revenues for such fiscal year which shall not exceed allowable state tax revenues for such fiscal year.

Section 3. Current expenses paid by the commonwealth in connection with bonds issued or other indebtedness incurred under any general or special law shall not be subject to the allowable state tax revenue limitations established by this chapter and may be paid for from revenues in excess of allowable state revenues, notwithstanding the provisions of section six.

Section 4. The computed maximum state tax revenues for any fiscal year beginning after June thirtieth, nineteen hundred and eighty-six shall be increased by an amount equal to the amount of local aid for the previous year multiplied by a factor which is equal to the per cent increase in local aid for the current year over the previous fiscal year minus the allowable state tax revenue growth factor for the current fiscal year.

Section 5. Within sixty days of the end of the fiscal year ending June thirtieth, nineteen hundred and eighty-seven, and within sixty days of the end of each subsequent fiscal year, the comptroller shall prepare a report of the state tax revenues and the allowable state tax revenues of the commonwealth for said fiscal year, and shall submit the report to the governor, the president of the senate, the speaker of the house, the chairmen of the house and senate committees on ways and means.

Section 6. If state tax revenues in any fiscal year exceed allowable state tax revenues for said fiscal year the amount of such excess, as determined by the comptroller and reported pursuant to section four, shall be transferred to the Tax Reduction Fund, established by section two I of chapter twenty-nine, and used to reduce personal income taxes.

Section 7. The supreme judicial court or superior court may, upon the petition of not less than twenty-four taxable inhabitants of the commonwealth, not more than six of whom shall be from any one county, enforce the provisions of this chapter. If successful, said taxable inhabitants shall be entitled to recover reasonable attorneys' fees and other costs from the commonwealth incurred in maintaining such action.

SECTION 23. Said section 1 of said chapter 62 is hereby further amended by adding the following paragraph:-

(m) The terms "long-term capital gain", "short-term capital gain", "long-term capital loss", "short-term capital loss", "net long-term capital gain", "net short-term capital gain", "capital gain net income", and "net capital gain" shall have the meanings given in section one thousand two hundred and twenty-two of the Code; provided, however, that in determining the amount of gain or loss on any sale, exchange, or other disposition of property, the provisions of section six F shall be taken into account, and in determining the amount of long-term capital loss or short-term capital loss for any year, the provisions of paragraph (2) of subsection (c) of section two shall be taken into account; and provided further, that the term "capital asset", as used in section one thousand two hundred and twenty-two of the Code, shall be limited to assets described only in section one thousand two hundred and twenty-one of the Code which are sold, exchanged or otherwise disposed of by a person while he is subject to taxation under this chapter on any Part A taxable income; and provided, further, that the term "capital loss" does not include any item the deduction of which is, or but for some other section would be, prohibited by section two hundred and sixty-two of the Code.

SECTION 24. Paragraph (1) of subsection (a) of section 2 of chapter 62 of the General Laws, as appearing in the 1984 Official Edition, is hereby amended by striking out subparagraph (E).

SECTION 25. Paragraph (2) of said subsection (a) of said section 2 of said chapter 62, as so appearing, is hereby amended by striking out subparagraph (B).

SECTION 26. Paragraph (1) of subsection (b) of said section 2 of said chapter 62, as so appearing, is hereby amended by striking out the introductory clause and inserting in place thereof the following clause:-

Part A gross income shall be the total interest, dividends and capital gain net income included in Massachusetts gross income, other than:-.

SECTION 27. Subsection (c) of said section 2 of said chapter 62, as so appearing, is hereby amended by striking out paragraphs (2) and (3) and inserting in place thereof the following two paragraphs:-

(2) The excess, if any, of the net short-term capital loss for the year over the net long-term capital gain for the year, but not more than one thousand dollars, shall be applied against any interest and dividends included in Part A gross income. If the amount of such excess is less than one thousand dollars, then the excess, if any, of the net long-term capital loss for the year over the net short-term capital gain for the year shall be applied against the balance of such interest and dividends; provided, however, that the aggregate amount of the deduction under this paragraph shall not be more than one thousand dollars. The excess of the net short-term capital loss over the net long-term capital gain, reduced by the amount allowed under this paragraph which is attributable to such excess, shall be a short-term capital loss in the succeeding taxable year. The excess of the net long-term capital loss over the net short-term capital gain, reduced by the amount allowed under this paragraph which is attributable to such excess, shall be a long-term capital loss in the succeeding taxable year.

(3) A deduction equal to fifty per cent of the net capital gain.

SECTION 28. Subsection (d) of said section 2 of said chapter 62, as so appearing, is hereby amended by striking out paragraph (4).

SECTION 29. Subparagraph (7) of paragraph (a) of Part B of section 3 of said chapter 62, as so appearing, is hereby amended by striking out, in line 65, the word "forty-four A" and inserting in place thereof the word:- twenty-one.

SECTION 30. Subparagraph (8) of said paragraph (a) of said Part B of said section 3 of said chapter 62, as so appearing, is hereby amended by striking out, in line 76, the word "forty-four A" and inserting in place thereof the word:- twenty-one.

SECTION 31. Said Part B of said section 3 of said chapter 62 is hereby amended by striking out paragraph (b), as amended by section 6 of chapter 593 of the acts of 1985, and inserting in place thereof the following paragraph:-

(b) The following exemptions shall be allowable to individuals against Part B income:

(1) In the case of a single person or a married person filing a separate return,

(A) a personal exemption of two thousand two hundred dollars,

(B) an additional exemption of two thousand two hundred dollars if the taxpayer was totally blind at the close of his taxable year, and

(C) an additional exemption of seven hundred dollars if the taxpayer had attained the age of sixty-five before the close of his taxable year.

(2) In the case of a husband and wife filing a joint return,

(A) a personal exemption of four thousand four hundred dollars,

(B) an additional exemption of two thousand two hundred dollars for each spouse who was totally blind at the close of his taxable year, and

(C) an additional exemption of seven hundred dollars for each spouse who had attained the age of sixty-five before the close of his taxable year.

(3) An exemption of one thousand dollars for each individual who qualifies for exemption as a dependent under section one hundred and fifty-one (e) of the Code.

(4) An amount equal to the deduction for medical, dental, and other expenses allowed under section two hundred and thirteen of the Code, provided that the individual itemizes deductions on his federal income tax return and has excess itemized deductions thereon. No exemption shall be allowed under this paragraph to an individual who files a joint federal income tax return with his spouse unless a joint return is also filed under this chapter.

(5) An amount equal to the fees, in excess of three per cent of the Part B adjusted gross income paid within the taxable year to any agency licensed to place children for adoption by the taxpayer on account of the adoption of a minor child.

SECTION 32. Said Part B of said section 3 of said chapter 62, as appearing in the 1984 Official Edition, is hereby amended by striking out paragraph (c) and inserting in place thereof the following paragraph:-

(c) Except as hereinafter provided for a non-resident, if the taxable year of any person subject to tax under this chapter is a short taxable year, and such short taxable year is not due to the death of such person, any exemption or deduction under Part B relating or allocable in whole or in part, to any income not included in Massachusetts gross income shall not be allowed to the extent thereof; and any other exemption or deduction under Part B that is not so related or allocable shall be limited to an amount equal to the exemption or deduction otherwise allowable if the person has been a resident of the commonwealth throughout the full taxable year multiplied by a fraction the numerator of which is the number of days in the short taxable year and the denominator of which is three hundred and sixty-five.

If any person subject to tax under this chapter is a non-resident for all or any part of a taxable year, any exemption or deduction under Part B relating or allocable, in whole or in part, to any income not included in Massachusetts gross income shall not be allowed to the extent thereof; and any other exemption or deduction under Part B that is not so related or allocable shall be limited to an amount otherwise allowable under Part B if the person has been a resident of the commonwealth throughout the full taxable year multiplied by a fraction the numerator of which is his Massachusetts gross income and the denominator of which is the amount which would have been his Massachusetts gross income had he been a resident of the commonwealth throughout the full taxable year.

SECTION 33. Section 5 of said chapter 62 is hereby amended by striking out paragraph (a), as amended by section 7 of chapter 593 of the acts of 1985, and inserting in place thereof the following paragraph:-

(a) Notwithstanding the provisions of section four, Part A taxable income and Part B taxable income shall be exempt from all taxes imposed by this chapter if the Massachusetts adjusted gross income of the taxable year does not exceed eight thousand dollars for a single individual or twelve thousand dollars in the aggregate for a husband and wife. No tax imposed under this chapter shall exceed ten per cent of the portion of such Massachusetts adjusted gross income in excess of eight thousand dollars for a single individual or twelve thousand dollars in the aggregate for a husband and wife; provided, however, that the provisions of this sentence shall not apply in any case where such Massachusetts adjusted gross income exceeds one and seventy-five hundredths times the thresholds of eight thousand dollars for a single individual or of twelve thousand dollars in the aggregate for a husband and wife. No exemption shall be allowed under this section to any married individual unless a joint return is filed. In the case of a short taxable year, occurring for any reason other than residence during one portion of the normal taxable year and nonresidence during another portion, there shall be substituted for the amounts of eight thousand dollars and twelve thousand dollars those amounts which bear the same relation to such sums as the number of days in the taxable year bears to three hundred and sixty-five.

SECTION 34. Said chapter 62 is hereby further amended by inserting after section 6E the following section:-

Section 6F. (a) In determining Massachusetts gross income, if the federal gross income includes any item of gain or has been reduced by any item of loss, with respect to property, then the federal gross income shall be increased by the excess of the federal adjusted basis of such property over the Massachusetts adjusted basis thereof, and shall be decreased by the excess of the Massachusetts adjusted basis of such property over the federal adjusted basis thereof.

(b) (1) The Massachusetts initial basis of property held on December thirty-first, nineteen hundred and seventy shall be determined as follows:-

(A) In the case of property as to which, if it had been sold on December thirty-first, nineteen hundred and seventy in the course of business, a gain realized on such sale would have been taxable under this chapter to its then owner:

(i) The Massachusetts initial basis shall, for purposes of computing gain, be its adjusted basis as computed under this chapter as in effect on December thirty-first, nineteen hundred and seventy, and

(ii) The Massachusetts initial basis shall, for the purpose of computing loss, be the lower of the basis computed under clause (i) of this subparagraph or the federal adjusted basis for the determination of loss as of such date.

(B) In the case of any other property the Massachusetts initial basis shall be its federal adjusted basis on such date, determined without regard to any federal adjustment made under section one thousand and fifteen (d) of the Code.

(2) The Massachusetts initial basis of property acquired after December thirty-first, nineteen hundred and seventy shall be determined as follows:-

(A) If the taxpayer's federal basis of the property at acquisition is determined without regard to the basis of such property in the hands of the transferor or of other property in the hands of the transferee, hereinafter called the "basis of prior property", the Massachusetts initial basis shall be the federal basis, determined without regard to any federal adjustment made under section one thousand and fifteen (d) of the Code.

(B) If such federal basis is determined in whole or in part by application of the basis of prior property, and

(i) if no item of gain is includible in federal gross income and federal gross income has not been reduced by any item of loss, with respect to the transaction, the Massachusetts initial basis shall be the initial federal basis, increased by the excess of the Massachusetts adjusted basis over the federal adjusted basis of prior property, or decreased by the excess of the federal adjusted basis over the Massachusetts adjusted basis of prior property, or

(ii) otherwise, the Massachusetts initial basis shall be the initial federal basis of the acquired property.

(C) Notwithstanding subparagraphs (A) and (B), in the case of property acquired from a decedent within the meaning of section one thousand and fourteen (b) of the Code, the initial basis of such property shall be determined under section one thousand and fourteen of the Code, without reference to section one thousand and fourteen (d) of the Code; except that in the case of an election under section five of chapter sixty-five C, the initial basis shall be its value determined under the provisions of such section on the applicable valuation date.

(c)(1) The Massachusetts adjusted basis of property shall be the Massachusetts initial basis of property adjusted by applying the same adjustments as are made to the federal basis for periods after determination of the initial basis, except as hereinafter provided.

(2) There shall be disregarded any federal adjustment resulting from provisions of the Code that were not applicable in determining Massachusetts gross income at the time such federal adjustments were made, and

(3) Adjustments shall be made for any item which was applicable in determining Massachusetts gross income but which was not so applicable in determining federal gross income and for which a federal adjustment would be allowed under the provisions of the Code if the item had been applicable in determining federal gross income.

(4) There shall be disregarded, and the federal basis shall be modified to the extent necessary to disregard, any federal adjustment under section one thousand and fifteen (d) of the Code.

(d) The rules prescribed in this section shall apply to non-residents; except that if any non-resident has owned any items of property during a period when the income or gains from such items were not subject to taxation under this chapter, and if the income or gains from such items subsequently became or become subject to taxation under this chapter, then the special limitations of subparagraphs (2) to (4), inclusive, of paragraph (c) of this section shall not apply as to such period.

SECTION 35. Subsection (b) of section 8 of said chapter 62, as appearing in the 1984 Official Edition, is hereby amended by striking out, in line 22, the word "or",- and by inserting after the word "thirty-two", in line 23, the words:- or (v) has elected to be an S corporation, as defined under section thirteen hundred and sixty-one of the Code, for federal income tax purposes for the taxable year.

SECTION 36. Subsection (c) of section 10 of said chapter 62, as so appearing, is hereby amended by striking out, in lines 47 and 48, the words "appointed by a Massachusetts court; trustees" and inserting in place thereof the words:- ; trustees and executors.

SECTION 37. Section 12A of said chapter 62, as so appearing, is hereby amended by striking out, in line 2, and in lines 9 and 10, the words "clauses one, two, three, and four of".

SECTION 38. Section 13 of said chapter 62, as so appearing, is hereby amended by striking out, in line 1, the word "twelve" and inserting in place thereof the word:- twelve A.

SECTION 39. Said chapter 62 is hereby further amended by inserting after section 17, as so appearing, the following section:-

Section 17A. (a) An inhabitant of the commonwealth who is a shareholder of an S corporation, as defined under section thirteen hundred and sixty-one of the Code and whether or not such S corporation is subject to tax under chapter sixty-three, shall be subject to the taxes imposed by this chapter on his distributive share of the corporation's items of income, loss or deduction, as provided under subchapter S of the Code, for the shareholder's taxable year in which the taxable year of the S corporation ends, or for the final taxable year of a shareholder who dies before the end of the corporation's taxable year; provided, however, such items of income, loss or deduction are taxable or available to the shareholder under the provisions of chapter sixty-two if realized or incurred directly by the shareholder. He shall include separately in his return his distributive share of the S corporation's income or loss from sources taxable under this chapter and of any item of deduction or credit, including the taxpayer's pro rata share of any tax upon income paid by the S corporation and otherwise allowable as a credit under subsection (a) of section six. Credits under section thirty-one A or thirty-eight E of chapter sixty-three shall not be allowed hereunder.

(b) A nonresident of the commonwealth who is a shareholder of an S corporation, as so defined, which is subject to tax under chapter sixty-three shall be subject to the tax imposed by section five A on his distributive share of the income realized by the S corporation as would be subject to taxation under section five A if realized by a nonresident. Where the S corporation does business both within and without the commonwealth, the income derived from business carried on within the commonwealth shall be determined under the provisions of section thirty-eight and forty-two of chapter sixty-three. The shareholder shall include separately in his return his distributive share of such income or loss and of any item of deduction or credit relating thereto.

(c) The character of any item of income, loss, deduction or credit included in a shareholder's distributive share shall be determined as if such item were realized or incurred directly by the shareholder from the source from which realized by the corporation or incurred in the same manner as incurred by the corporation. Such determinations shall be made under the provisions of chapter sixty-two and of the Code applicable to the shareholders of the S corporation.

(d) Notwithstanding any other provision of this chapter, where a corporation has elected to be an S corporation for federal income tax purposes prior to the effective date of this section, and the basis of such corporation's stock or indebtedness has been adjusted for federal income tax purposes under the provisions of Subchapter S of the Code for S corporation taxable years commencing before nineteen hundred and eighty-six, then such adjustments, limited to the extent they are applicable in determining the basis for the corporation's shareholders as of the last day of the last S corporation taxable year commencing before nineteen hundred and eighty-six, will be modifications to the gain or loss recognized under this chapter on the sale or exchange of such stock or indebtedness. Net positive basis adjustments will reduce the shareholder's federal basis in such corporation's stock. Net negative basis adjustments will increase the shareholders federal basis in such corporation's stock. If stock or indebtedness is transferred and the basis to the transferee is determined by reference to the basis of the transferor, then the modifications made by this section will continue to apply to the transferee.

SECTION 40. Section twelve A of chapter sixty-two B of the General Laws is hereby repealed.

SECTION 41. Subsection (a) of section 6 of chapter 62C of the General Laws, as amended by section 12 of chapter 593 of the acts of 1985, is hereby further amended by striking out the first three paragraphs and inserting in place thereof the following three paragraphs:-

Every individual inhabitant of the commonwealth who receives or accrues during the taxable year Massachusetts gross income, as defined in section two of chapter sixty-two, in excess of eight thousand dollars shall make a return of such income.

Every nonresident, whose Massachusetts gross income, determined in accordance with section five A of chapter sixty-two, exceeds eight thousand dollars or the personal exemption to which he may be entitled under section three of chapter sixty-two, whichever is the lesser, every corporate trust taxable under section eight of chapter sixty-two, and every other corporate trust doing business within the commonwealth and every other partnership, association, or trust whose federal gross income, as defined in section one of chapter sixty-two, exceeds one hundred dollars, shall make a return of such income.

Every individual, not otherwise required to file a return under the foregoing provisions of this section, who is a resident for a portion of a twelve-month period beginning on the first day of a taxable year and a nonresident for a portion of the same twelve-month period and whose Massachusetts gross income, as defined in section two of chapter sixty-two, exceeds eight thousand dollars shall make separate returns as a resident and a nonresident of his income subject to taxation under chapter sixty-two.

SECTION 42. Subsection (b) of said section 6 of said chapter 62C, as so appearing, is hereby amended by inserting after the word "sixty-two", in line 34, the words:- which exceeds one hundred dollars.

SECTION 43. Subsection (c) of section 12 of said chapter 62C, as so appearing, is hereby amended by striking out, in line 19, the words "November twenty-fifth" and inserting in place thereof the words:- fifteenth day of the third month following the close of its taxable year.

SECTION 44. Paragraph (b) of section 26 of said chapter 62C, as so appearing, is hereby amended by adding the following paragraph:-

If the commissioner audits or verifies the returns of the same tax for two or more tax periods and determines, as a result thereof, that the amounts assessed result in overpayments for some tax periods and underpayments for others, he shall offset any overpayments against any underpayments and refund any net overpayment as required by section thirty-six. An application for abatement under section thirty-seven shall not be required for overpayments resulting from assessments made pursuant to this section.

SECTION 45. Said chapter 62C is hereby further amended by inserting after section 36 the following section:-

Section 36A. If the commissioner determines that any tax has been assessed at an excessive amount because of departmental clerical error or that any payment has been received in error, he may, in his discretion, correct such error at any time and adjust the assessment accordingly or refund the erroneous payment without application of the taxpayer. Interest on any resulting refund shall be paid in accordance with section forty.

SECTION 46. The first paragraph of section 40 of said chapter 62C, as appearing in the 1984 Official Edition, is hereby amended by inserting after the word "thirty-six", in line 2, the word:- , thirty-six A.

SECTION 47. Said chapter 62C is hereby amended by striking out section 43, as so appearing, and inserting in place thereof the following section:- Section 43. The commissioner is authorized to abate the unpaid portion of the assessment of any tax or any liability in respect thereof, if the amount due does not exceed fifty dollars and the commissioner determines, under uniform rules prescribed by him, that the administration and collection costs involved would not warrant collection of the amount due.

SECTION 48. Subsection (a) of section 53 of said chapter 62C, as so appearing, is hereby amended by striking out, in lines 5 and 6, the words ", except such property as is exempt under section twenty-four of chapter sixty,".

SECTION 49. Said section 53 of said chapter 62C, as so appearing, is hereby further amended by adding the following subsection:-

(d) The effect of a levy on salary or wages payable to or received by a taxpayer shall be continuous from the date such levy is first made until the liability out of which such levy arose is satisfied or becomes unenforceable by reason of lapse of time. The effect of a levy on any other property or rights to property shall remain in effect for six months from the date such levy is first made until the liability out of which such levy arose is satisfied or becomes unenforceable by reason of lapse of time. With respect to a levy described in this subsection, the commissioner shall promptly release the levy when the liability out of which such levy arose is satisfied or becomes unenforceable by reason of lapse of time, and shall promptly notify the person upon whom such levy was made that such levy has been released.

SECTION 50. Said chapter 62C is hereby further amended by inserting after section 55 the following section:-

Section 55A. (a) There shall be exempt from levy the following property:-

(1) Such items of wearing apparel and such school books as are necessary for the taxpayer or for the members of his family.

(2) If the taxpayer is the head of a family, so much of the fuel, provisions, furniture and personal effects in his household, and of the arms for personal use, livestock, and poultry of the taxpayer, as does not exceed fifteen hundred dollars in value.

(3) So many of the books and tools necessary for the trade, business or profession of the taxpayer as do not exceed in the aggregate one thousand dollars in value.

(4) Any amount payable to an individual with respect to his unemployment, including any portion thereof payable with respect to dependents, under an unemployment compensation law of the United States, or of any state.

(5) Mail, addressed to any person, which has not been delivered to the addressee.

(6) Annuity or pension payments under the Railroad Retirement Act, benefits under the Railroad Unemployment Insurance Act, special pension payments received by a person whose name has been entered on the Army, Navy, Air Force and Coast Guard Medal of Honor Roll 38 USC 562, and annuities based on retired or retainer pay under chapter seventy-three of title ten of the United States Code.

(7) Any amount payable to an individual as workmen's compensation, including any portion thereof payable with respect to dependents, under a workmen's compensation law of the United States, or of any state.

(8) If the taxpayer is required by judgment of a court of competent jurisdiction, entered prior to the date of levy, to contribute to the support of his minor children, so much of his salary, wages, or other income as is necessary to comply with such judgment.

(9) Any amount payable to or received by an individual as wages or salary for personal services, or as income derived from other sources, during any period, to the extent that the total of such amounts payable to or received by him during such period does not exceed the applicable exempt amount determined under subsection (d).

(b) The officer seizing property of the type described in subsection (a) shall appraise and set aside to the owner the amount of such property declared to be exempt. If the taxpayer objects at the time of the seizure to the valuation fixed by the officer making the seizure, the commissioner shall summon three disinterested individuals who shall make the valuation. (c) Notwithstanding any other law, no property or rights to property shall be exempt from levy other than the property specifically made exempt by subsection (a).

(d) (1) In the case of an individual who is paid or receives all of his wages, salary, and other income on a weekly basis, the amount of the wages, salary, and other income payable to or received by him during any week which is exempt from levy under paragraph (9) of subsection (a) shall be:

(A) Seventy-five dollars, plus

(B) Twenty-five dollars for each individual who is specified in a written statement which is submitted to the person on whom notice of levy is served and which is verified in such manner as the commissioner shall prescribe by regulations and:

(i) over half of whose support for the payroll period was received from the taxpayer,

(ii) who is the spouse of the taxpayer, or who bears a relationship to the taxpayer specified in paragraphs (1) to (9), inclusive, of section 152 (a) of the Code, relating to definition of dependents, and

(iii) who is not a minor child of the taxpayer with respect to whom amounts are exempt from levy under paragraph (8) of subsection (a) for the payroll period.

For purposes of clause (ii) of subparagraph (B) of the preceding sentence, "payroll period" shall be substituted for "taxable year" each place it appears in paragraph (9) of section 152 (a) of the Code.

(2) In the case of any individual not described in paragraph (1), the amount of the wages, salary, and other income payable to or received by him during any applicable pay period or other fiscal period, as determined under regulations prescribed by the commissioner, which is exempt from levy under paragraph (9) of subsection (a) shall be an amount, determined under such regulations, which as nearly as possible will result in the same total exemption from levy for such individual over a period of time as he would have under paragraph (1) of said subsection (a) if, during such period of time, he were paid or received such wages, salary, and other income on a regular weekly basis.

SECTION 51. Paragraph (1) of subsection (b) of section 58 of said chapter 62C, as appearing in the 1984 Official Edition, is hereby amended by striking out, in line 11, the word "twenty" and inserting in place thereof the word:- eighty.

SECTION 52. Said chapter 62C is hereby further amended by striking out section 65, as so appearing, and inserting in place thereof the following section:-

Section 65. Taxes shall be collected within eight years after the assessment of the tax, or prior to the expiration of any period of collection agreed upon in writing by the commissioner and the taxpayer before the expiration of such eight-year period or, if there is a release of levy under section sixty-four after such eight-year period, then before such release. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon. When any question relative to such taxes is pending before any agency or court at the end of such eight-year period, the commissioner's right to collect any tax due shall continue until one year after the final determination of such question.

SECTION 53. Said chapter 62C is hereby further amended by striking out section 65, as amended by section 52 of this act, and inserting in place thereof the following section:-

Section 65. Taxes shall be collected within six years after the assessment of the tax, or prior to the expiration of any period of collection agreed upon in writing by the commissioner and the taxpayer before the expiration of such six-year period or, if there is a release of levy under section sixty-four after such six-year period, then before such release. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon. When any question relative to such taxes is pending before any agency or court at the end of such six-year period, the commissioner's right to collect any tax due shall continue until one year after the final determination of such question.

SECTION 54. Section 67 of chapter 62C, as appearing in the 1984 Official Edition, is hereby amended by inserting after the third paragraph the following paragraph:-

Registration certificates may be issued for a specified term of not less than three years, subject to renewal without the payment of any additional fee and in accordance with regulations issued by the commissioner. Whether or not such certificates are issued for a specified term, they shall be subject to suspension or revocation as provided in this section. Existing registration certificates may be made subject to renewal or reissuance for a specified term in accordance with regulations issued by the commissioner.

SECTION 55. Said section 67 of said chapter 62C, as so appearing, is hereby further amended by striking out the tenth paragraph and inserting in place thereof the following paragraph:-

An application for a registration or license may be denied by the commissioner for any one of the following reasons:

(1) The registration, license or permit of the applicant has been previously cancelled for cause by the commissioner;

(2) In the opinion of the commissioner, such application is filed by a person as a subterfuge for the real person in interest whose registration or license has previously been cancelled for cause by the commissioner;

(3) The applicant fails to pay the prescribed fee or to file such bond as the commissioner requires pursuant to section sixty-six;

(4) Any tax payable under this chapter has been finally determined to be due from the applicant and has not been paid in full;

(5) Any tax payable under this chapter has been finally determined to be due from an officer, director, partner or employee of the applicant in his capacity as a person under a duty to collect and pay over a tax on behalf of the applicant or another person and has not been paid in full;

(6) The applicant has been convicted of a crime provided for in this chapter within one year from the date on which such application is filed;

(7) An officer, director, partner or employee of the applicant, which officer, director, partner or employee is a person under a duty to collect and pay over a tax on behalf of the applicant has in his capacity as a person under a duty to collect and pay over a tax on behalf of the applicant or another person been convicted of a crime provided for in this chapter within one year from the date on which such application is filed; or

(8) A shareholder owning more than fifty per cent of the voting stock of the applicant where the applicant is a corporation who owned more than fifty per cent of the voting stock of another corporation at the time any tax payable under this chapter has been finally determined to be due and where such tax has not been paid in full, or at the time such other person was convicted of a crime provided for in this chapter within one year from the date on which such application is filed.

SECTION 56. Section 68 of said chapter 62C, as so appearing, is hereby amended by striking out the first paragraph and inserting in place thereof the following paragraph:-

The commissioner may suspend or revoke any license or registration issued pursuant to section sixty-seven for any one of the following reasons:-

(1) The licensee or registrant willfully fails to file any return or report required by this chapter;

(2) The licensee or registrant willfully files, causes to be filed, gives or causes to be given a return, report, certificate or affidavit required under this chapter, or under the provisions of the applicable tax, which is false;

(3) The licensee or registrant willfully fails to collect, truthfully account for or pay over any tax under the provisions of this chapter;

(4) The licensee or registrant has been convicted of a crime provided for by this chapter;

(5) The licensee or registrant has otherwise willfully failed to comply with any provision of the tax laws of the commonwealth or regulations thereunder; or

(6) The licensee or registrant has ceased to act in the capacity for which the license or registration was issued.

SECTION 57. Section seventy-eight of said chapter sixty-two C is hereby repealed.

SECTION 58. The first paragraph of section 18 of chapter 63 of the General Laws, as appearing in the 1984 Official Edition, is hereby amended by striking out, in line 4, the words "twelve months ending December thirty-first of the" and inserting in place thereof the word:- taxable.

SECTION 59. The third paragraph of said section 18 of said chapter 63, as so appearing, is hereby amended by striking out, in lines 20 and 21, the words "within the twelve months ending October thirty-first of the fiscal" and inserting in place thereof the words:- during the taxable.

SECTION 60. Said chapter 63 is hereby further amended by inserting after section 32C the following section:-

Section 32D. Any domestic business corporation or foreign corporation subject to tax under section thirty-two or thirty-nine, which is an S corporation, as defined under section thirteen hundred and sixty-one of the Federal Internal Revenue Code, as amended and in effect for the taxable year, for federal income tax purposes for any taxable year, shall determine the net income measure of the excise imposed under section thirty-two or thirty-nine by taking into account the provisions of Subchapter S of said Code. Income or loss shall be determined as if it were realized or incurred directly by an individual subject to taxation under chapter sixty-two. Income shall be includible in the net income measure only to the extent that such income is taxed to the S corporation for federal income tax purposes.

SECTION 61. Clause (c) of paragraph (14) of section 1 of chapter 64H of the General Laws, as appearing in the 1984 Official Edition, is hereby amended by striking out subclause (ii) and inserting in place thereof the following:-

(ii) the amount charged for property returned by purchasers to vendors upon rescission of contracts of sale when the entire amounts charged therefor, less the vendors' established handling fees, if any, for such return of property, are refunded either in cash or credit, and when the property is returned within ninety days from the date of sale, and the entire sales tax paid is returned to the purchaser; provided, however, that where a motor vehicle is returned pursuant to a rescission of contract such motor vehicle must be returned within one hundred and eighty days of the date of sale.

SECTION 62. Paragraph (h) of section 6 of said chapter 64H, as so appearing, is hereby amended by striking out, in line 105, the words "candy only" and inserting in place thereof the words:- only snacks or candy with a sales price of less than one dollar.

SECTION 63. Said section 6 of said chapter 64H, as so appearing, is hereby further amended by adding the following paragraph:-

(kk) Sales of tangible personal property purchased with federal food stamps and not otherwise exempt under this chapter.

SECTION 64. Section forty-four of chapter five hundred and ninety-three of the acts of nineteen hundred and eighty-five is hereby repealed.

SECTION 65. Said chapter 593 is hereby further amended by striking out section 48 and inserting in place thereof the following section:-

Section 48. Section seventeen of this act shall apply to all state taxes remaining unpaid on or after its effective date.

SECTION 66. Section 50 of said chapter 593 is hereby amended by striking out the last sentence.

SECTION 67. Section 19 of chapter 711 of the acts of 1985 is hereby amended by inserting after the word "seven", in line 1, the word:- , seven A.

SECTION 68. It is hereby found that by tradition and by the requirements of the Constitution, taxation on incomes in the commonwealth has been based in uniform rates upon income derived from the same class of property.

It is hereby further found that there is a tradition of fairness and concern for persons whose incomes are inadequate to maintain a decent standard of living while at the same paying taxes to the commonwealth on such incomes; and that consistent with the provision of the Constitution of the commonwealth allowing reasonable exemptions for such persons from taxation on their income, persons whose incomes are at or below the federal poverty standard should be protected by a no tax status and therefore should not have to pay taxes on income to the commonwealth.

It is hereby further found that all tax filers in the commonwealth should be entitled to a reasonable exemption from personal income taxation by the commonwealth.

It is hereby further found that persons whose incomes are above the tax exempted from income taxation should not be subject to confiscatory levels of marginal tax rates.

Therefore, it is found that it is a reasonable exemption to the personal income tax of the commonwealth to establish a no tax status for tax filers whose income level is less than or equal to the federal income poverty standard plus the amount of the personal exemption allowed to all personal income tax filers; and that the establishment of a marginal tax rate limit on tax filers whose income exceeds the no tax status is reasonable and promotes the uniformity of taxation of income derived from the same class of property.

SECTION 69. All employees of the comptroller's division of the executive office of administration and finance who immediately prior to the effective date of this act held positions classified under section thirty-one of the General Laws or had tenure in their positions by reason of section nine A of chapter thirty of the General Laws shall retain such positions in the office of the comptroller, notwithstanding the abolition of said division and the creation of the office of the comptroller authorized by this act, without impairment of civil service status, seniority, retirement and other rights of the employee, without interruption of their services within the meaning of said chapter thirty-one and of said section nine A of said chapter thirty and without reduction in their compensation and salary grades.

All books, papers, records, documents, plans and property in the custody of the comptroller's division immediately prior to the effective date of this act shall be transferred to the office of the comptroller.

All rules and regulations of the comptroller's division in effect immediately prior to the effective date of this act shall remain in full force and effect until changed or repealed by the office of the comptroller.

All petitions, hearings and other proceedings, duly pending before and all prosecutions and legal and other proceedings duly commenced by or against the said division prior to the effective date of this act shall be completed by said office of the comptroller in accordance with existing law.

All duly existing contracts, leases and obligations of the said division in effect immediately prior to the effective date of this act shall continue in full force and effect. This act shall not affect any renewal provision or option to renew contained in any such lease on the effective date of this act.

SECTION 70. Notwithstanding any general or special law to the contrary, the governor shall appoint, subject to the provisions of section three of this act and no later than April first, nineteen hundred and eighty-seven, a comptroller who shall be the administrative and executive head of the office of the comptroller within the executive office for administration and finance. If the governor fails to appoint a comptroller pursuant to this section, any person serving as comptroller on or subsequent to April first, nineteen hundred and eighty-seven shall be considered to have been appointed in accordance with section three of this act and shall be subject to the provisions of said section three.

SECTION 71. Notwithstanding the provisions of chapter sixty-two B of the General Laws, shareholders of an S corporation subject to tax under section seventeen A of chapter sixty-two of the General Laws, inserted by section thirty-nine of this act, may pay the estimated tax under said chapter sixty-two B on account of income taxable under said section for nineteen hundred and eighty-six ratably on or before the instalment payment dates occurring after the effective date of this act.

SECTION 72. Notwithstanding the provisions of any general or special law to the contrary and notwithstanding the provisions of this act to the contrary, any S corporation, as defined under section thirteen hundred and sixty-one of the Code, as defined under section one of chapter sixty-two of the General Laws, may elect on behalf of itself and its shareholders to be taxed pursuant to the relevant General Laws in effect prior to the amendments contained in sections twenty-four, twenty-five, twenty-eight, thirty-five, thirty-nine, and sixty of this act for its and their tax years ending on or before December thirty-first, nineteen hundred and eighty-seven. In the case of an S corporation subject to taxation in Massachusetts, such election shall be filed with its return for each tax year and each shareholder shall attach a copy of such election to his or her own return for each tax year. In the case of an S corporation not subject to taxation in Massachusetts, each shareholder shall attach a copy of the corporation's election to his or her own return for each tax year. This section shall not apply to any corporation which is incorporated or which files its first federal S election pursuant to section thirteen hundred and sixty-two of said Code on or after the effective date of this act.

SECTION 73. Section forty-seven shall apply to all unpaid tax liabilities that are in existence on or after its effective date. Sections forty-eight, forty-nine, fifty, and fifty-one shall apply to all liens and levies imposed on or after the effective date of said sections. Sections fifty-two and fifty-three shall apply to all taxes assessed prior to their respective effective dates and remaining unpaid on and after such date as well as to all taxes assessed on and after the applicable effective date; provided, however, that the period of time for collection of the tax is extended by written agreement, the provision applicable at the time such agreement was first executed shall continue to apply to the taxes included in such agreement.

SECTION 74. Section six D of chapter twenty-nine of the General Laws, inserted by section eleven of this act, shall take effect on July first, nineteen hundred and eighty-seven. The provisions of sections twenty-four, twenty-five, twenty-eight, thirty-five, thirty-nine, and sixty shall apply to taxable years commencing after December thirty-first, nineteen hundred and eighty-five; provided, however, that the provisions of chapter sixty-two of the General Laws in effect prior to amendment by said sections shall continue to apply to shareholders of an S corporation, as defined under section thirteen hundred and sixty-one of the Code, as defined under section one of chapter sixty-two of the General Laws, with respect to any taxable year of such an S corporation commencing prior to nineteen hundred and eighty-six. Sections twenty-three, twenty-six, twenty-seven, thirty-one, thirty-three, thirty-four, and forty-one shall apply to tax years beginning on or after January first, nineteen hundred and eighty-seven. Section thirty-two shall apply to tax years beginning on or after January first, nineteen hundred and eighty-six. Section fifty-two shall take effect on January first, nineteen hundred and eighty-seven. Section fifty-three shall take effect on January first, nineteen hundred and eighty-eight. Section sixty-three shall take effect on October first, nineteen hundred and eighty-six. Sections sixty-four and sixty-six shall take effect on January first, nineteen hundred and eighty-six.