AN ACT ENHANCING STATE REVENUES.
Whereas , The deferred operation of this act would tend to defeat its purpose, which is to provide forthwith enhanced state revenues to assist in addressing a serious fiscal crisis, therefore it is hereby declared to be an emergency law, necessary for the immediate preservation of the public convenience.
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. Section 1 of chapter 62 of the General Laws, as amended by section 1 of chapter 96 of the acts of 2002, is hereby further amended by striking out paragraph (c) and inserting in place thereof the following paragraph:-
(c) "Code", the Internal Revenue Code of the United States, as amended on January 1, 1998 and in effect for the taxable year; provided, however, that references to sections 62(a)(1), 72, 274(m), 274(n), 401 to 420, inclusive, but excluding sections 402A and 408(q), 457, 529, 3401 and 3405 of the Code, shall refer to the Code as amended and in effect for the taxable year.
SECTION 2. Paragraph (m) of said section 1 of said chapter 62, as appearing in the 2000 Official Edition, is hereby amended by striking out the second paragraph and inserting in place thereof the following paragraph:-
The term "capital gain income" shall mean gain from the sale or exchange of a capital asset. The terms "short-term capital gain", "short-term capital loss", "long-term capital gain", "long-term capital loss", "net short-term capital gain", "net short-term capital loss", "net long-term capital gain" and "net long-term capital loss" shall have the meanings as provided in section 1222 of the Code, as amended and in effect for the taxable year. In determining the amount of gain or loss on any sale, exchange or other disposition of property, section 6F shall be taken into account and in determining the amount of long-term capital loss or short-term capital loss for any year, clause (2) of subsection (c) of section 2 shall be taken into account; provided, however, that losses from the sale or exchange of capital assets shall not include any item the deduction of which is or, but for some other section, would be prohibited by section 165(c), section 262 or section 267 of the Code.
SECTION 3. Said section 1 of said chapter 62, as so appearing, is hereby further amended by adding the following 2 paragraphs:-
(n) "Baseline tax revenues", the amount of state tax revenues that would have been credited to the budgeted funds had there been no change in federal or state tax law or administrative practices that affected tax collections for the year, as estimated by the commissioner.
(o) "Inflation adjusted change in baseline tax revenues", the commissioner's estimate of the percentage change from the preceding fiscal year in the amount of baseline tax revenues minus the percentage change in the consumer price index for all urban consumers for Boston as most recently reported by the federal Bureau of Labor Statistics, from the index so reported 12 months before. The estimate shall be provided to the secretary of administration, the house and senate committees on ways and means and the joint committee on taxation annually, on or before August 30 for the preceding fiscal year. Monthly, on or before the fifteenth day, the commissioner shall provide an estimate for the preceding 3 months to the same recipients.
SECTION 4. Paragraph (2) of subsection (a) of section 2 of said chapter 62, as so appearing, is hereby amended by adding the following subparagraph:-
(L) Any amount of Massachusetts gross income attributable to earnings or distributions from a qualified tuition program, as defined in section 529 of the Code, provided that any distributions are used to pay for qualified educational expenses, as defined in said section 529.
SECTION 5. Said subsection (a) of said section 2 of said chapter 62, as so appearing, is hereby further amended by striking out paragraph (3) and inserting in place thereof the following paragraph:-
(3) Notwithstanding this chapter:
(A) In the case of a distribution within the meaning of subsection (d)(3) of section 408A of the Code as amended and in effect for the taxable year, any amount included as income for federal tax purposes under said section 408A by reason of such distribution shall be included in gross income and, to the extent such distribution is included in adjusted gross income under subsection (c), shall be taken into account in determining taxable income under this chapter in the same manner as under subparagraph (A) of said subsection (d)(3) of said section 408A of said Code.
(B) Gain from the sale of a principal residence included in federal gross income under section 121 of the Code in effect on January 1, 1988, but excluded from federal gross income under section 121 of the Internal Revenue Code in effect for the taxable year, shall not be included in Massachusetts adjusted gross income. Notwithstanding any other provision of this chapter, the amount of gain from the sale of a principal residence excluded from Massachusetts adjusted gross income shall not be less than the exclusion allowed under section 121 of the Code in effect on January 1, 2002.
(C) Effective on and after January 1, 2002, any contributions, including employer contributions, employee deferrals and rollover contributions, allocations under or distributions from stock bonus, pension, profit-sharing, annuity or deferred payment plans or contracts or employee stock ownership plans described in sections 401(a), 402, 403, 404, 409 or 457 of the Code, or simplified employee pensions under section 408(k) of the Code, shall be included in gross income of a taxpayer only to the extent includible in the taxpayer's gross income for federal income tax purposes under the Code.
SECTION 6. Subsection (b) of said section 2 of said chapter 62, as so appearing, is hereby amended by striking out paragraph (3) and inserting in place thereof the following paragraph:-
(3) Part C gross income shall be capital gain income which equals the gains from the sale or exchange of capital assets held for more than 1 year.
SECTION 7. Said section 2 of said chapter 62, as so appearing, is hereby further amended by striking out subsection (c) and inserting in place thereof the following subsection:-
(c) Part A adjusted gross income shall be the Part A gross income less the following deductions and including the following class of gain income:
(1) Any excess of the deductions allowable under subsection (d) over the Part B gross income, but the amount deductible under this paragraph shall not exceed the amount of Part A gross income which is effectively connected with the active conduct of a trade or business of the taxpayer.
(2)(a) Losses from the sale or exchange of capital assets held for 1 year or less, provided that the excess, if any, of the Part A net capital loss for the year over the Part A net capital gain for the year, but not more than $2,000, shall be applied against Part A interest and dividends; provided, however, that any remaining excess of the Part A net capital loss for the year shall be applied against capital gains included in Part C gross income. If Part A net capital loss for the year exceeds the Part C net capital gain for the year, then the excess, if any, of Part A net capital loss, after accounting for any deduction against interest and dividend income, shall be a Part A capital loss under this paragraph in the succeeding taxable year.
(b) The excess, if any, of the Part C net capital losses for the year over the Part C net capital gains for the year shall be applied against capital gains included in Part A gross income. If Part C net capital losses for the year exceed the Part A net capital gain for the year, then the excess, if any, of Part C net capital losses over Part A net capital gain, but not more than $2,000, shall be applied against any interest and dividends included in Part A gross income, provided that the aggregate amount of the deduction allowed in this subparagraph against any interest and dividends shall not be more than $2,000. The excess, if any, of the Part C net capital loss over the Part A net capital gain, after accounting for any deduction against interest and dividend income, shall be a Part C capital loss in the succeeding taxable year.
(3) A deduction equal to 50 per cent of the gain income from the sale or exchange of property defined under section 408 (m)(2) of the Code, as amended and in effect for the taxable year, and held for more than 1 year after reduction by any losses in paragraph (2).
SECTION 8. Said section 2 of said chapter 62, as so appearing, is hereby further amended by striking out subsection (e), and inserting in place thereof the following subsection:-
(e) Part C adjusted gross income shall be the Part C gross income less the following deductions:
(1) Losses from the sale or exchange of capital assets held for more than 1 year. The amount of any class of net capital loss reduced by the amount of such loss that is deducted under subparagraph (b) of paragraph (2) of subsection (c), shall be Part C capital loss in the succeeding taxable year. Where a taxpayer has any unused Class B net loss, Class C net loss, Class D net loss, Class E net loss, Class F net loss or Class G net loss at the end of the taxpayer's last taxable year beginning before January 1, 2002, the aggregate amount of such net losses shall be taken into account in the succeeding taxable year as loss on the sale or exchange of a capital asset held for more than 1 year.
(2) Part C net gains shall be reduced by any remaining excess of the deductions allowable under subsection (d) over the Part B gross income after applying such excess Part B deductions against Part A gross income in accordance with paragraph (1) of subsection (c). The amount deductible under this paragraph shall not exceed the amount of Part C gross income which is effectively connected with the active conduct of a trade or business of the taxpayer. Excess Part B deductions shall not be applied to increase the amount of any net capital losses and may not reduce the amount of any net capital gain below zero. The resulting amount of net capital gain shall comprise Part C adjusted gross income.
SECTION 9. Paragraph (a) of Part B of section 3 of said chapter 62 is hereby amended by striking out subparagraph (13), as amended by section 1 of chapter 136 of the acts of 2001, and inserting in place thereof the following subparagraph:-
(13) An amount equal to the amount of the charitable contribution deduction allowed or allowable to the taxpayer under section 170 of the Code; provided, however, that, in taxable years beginning on or after January 1, 2002, no such deduction shall be allowed in any taxable year unless the rate of tax on Part B taxable income in section 4 in the prior taxable year was equal to 5 per cent; and provided, further, that notwithstanding said section 170 of the Code, no deduction shall be allowed for contributions of household goods or used clothing, as those items are recognized under said section 170 of the Code. All requirements, conditions and limitations applicable to charitable contributions under the Code shall apply for purposes of determining the amount of the deduction under this subparagraph, except that taxpayers shall not be required to itemize their deductions in their federal income tax returns.
SECTION 10. Said section 3 of said chapter 62, as appearing in the 2000 Official Edition, is hereby further amended by striking out, in line 150, the figure "$4,400" and inserting in place thereof the following:- $3,300 for tax years beginning on or after January 1, 2002.
For taxable years beginning on or after January 1, 2004, the personal exemption shall be: (i) the exemption in the previous year plus $275 if the inflation-adjusted growth in baseline taxes in the fiscal year ending the June 30 of the previous year exceeds 2.5 per cent and the inflation-adjusted change in baseline taxes for each consecutive 3 month period reported by the commissioner between August and December of the previous year is greater than 0; or (ii) the personal exemption in effect for the prior year. On or before October 15 of each year, the commissioner shall submit a report to the secretary of administration, the house and senate committees on ways and means and the joint committee on taxation providing a preliminary statement of the personal exemption for taxable years beginning on or after the following January 1. On or before December 15, the commissioner shall make a final statement of the personal exemption for the following year to the same recipients.
The personal exemption shall not exceed $4,400.
SECTION 11. Said section 3 of said chapter 62, as so appearing, is hereby further amended by striking out, in line 158, the figure "$6,800" and inserting in place thereof the following:- $5,100 for tax years beginning on or after January 1, 2002.
For taxable years beginning on or after January 1, 2004, the personal exemption shall be: (i) the exemption in the previous year plus $425 if the inflation-adjusted growth in baseline taxes in the fiscal year ending the June 30 of the previous year exceeds 2.5 per cent and the inflation-adjusted change in baseline taxes for each consecutive 3 month period reported by the commissioner between August and December of the previous year is greater than 0; or (ii) the personal exemption in effect for the prior year. On or before October 15 of each year, the commissioner shall submit a report to the secretary of administration, the house and senate committees on ways and means and the joint committee on taxation providing a preliminary statement of the personal exemption for taxable years beginning on or after the following January 1. On or before December 15, the commissioner shall make a final statement of the personal exemption for the following year to the same recipients.
The personal exemption shall not exceed $6,800.
SECTION 12. Said section 3 of said chapter 62, as so appearing, is hereby further amended by striking out, in line 165, the figure "$8,800" and inserting in place thereof the following:- $6,600 for tax years beginning on or after January 1, 2002.
For taxable years beginning on or after January 1, 2004, the personal exemption shall be: (i) the exemption in the previous year plus $550 if the inflation-adjusted growth in baseline taxes in the fiscal year ending the June 30 of the previous year exceeds 2.5 per cent and the inflation-adjusted change in baseline taxes for each consecutive 3 month period reported by the commissioner between August and December of the previous year is greater than 0; or (ii) the personal exemption in effect for the prior year. On or before October 15 of each year, the commissioner shall submit a report to the secretary of administration, the house and senate committees on ways and means and the joint committee on taxation providing a preliminary statement of the personal exemption for taxable years beginning on or after the following January 1. On or before December 15, the commissioner shall make a final statement of the personal exemption for the following year to the same recipients.
The personal exemption shall not exceed $8,800.
SECTION 13. Section 4 of said chapter 62, as so appearing, is hereby amended by striking out paragraph (b) and inserting in place thereof the following paragraph:-
(b) Part B taxable income shall be taxed at the rate of 5.3 per cent for tax years beginning on or after January 1, 2002.
For taxable years subsequent to tax years in which personal exemption amounts in effect pursuant to subparagraphs (1), (1A) and (2) of paragraph (b) of section 3 are the same as those amounts that were in effect for the taxable year beginning on January 1, 2001, Part B taxable income shall be taxed at the lesser of: (i) the rate in effect for the prior taxable year minus .05 per cent if the inflation adjusted growth in baseline taxes in the fiscal year ending the June 30 of the previous year exceeds 2.5 per cent and the inflation-adjusted change in baseline taxes for each consecutive 3 month period reported by the commissioner between August and December of the previous year is greater than 0; or (ii) the rate in effect for the prior year. On or before October 15 of each year, the commissioner shall submit a report to the secretary of administration, the house and senate committees on ways and means and the joint committee on taxation providing a preliminary statement of the Part B tax rate for taxable years beginning on or after the following January 1. On or before December 15, the commissioner shall make a final statement of the Part B tax rate for the following year to the same recipients.
Part B taxable income shall be taxed at a rate of not less than 5 per cent.
SECTION 14. Said section 4 of said chapter 62, as so appearing, is hereby further amended by striking out paragraph (c) and inserting in place thereof the following paragraph:-
(c) Part C taxable income shall be taxed at the same rate as provided for in paragraph (b).
SECTION 15. Subsection (b) of section 21 of chapter 62C of the General Laws, as so appearing, is hereby amended by adding the following 2 clauses:-
(19) the disclosure of such information as is reasonable and appropriate to the implementation and enforcement of sections 33A, 34 and 35 of chapter 64C.
(20) the disclosure to the attorney general of such information as the attorney general may require for use in enforcing clause (b) of section 2 of chapter 94E.
SECTION 16. Chapter 64C of the General Laws is hereby amended by inserting after section 5 the following section:-
Section 5A. (1) The department shall aggressively seek to collect all excises imposed by this chapter from residents of the commonwealth who purchase cigarettes and tobacco products in interstate commerce. The department shall, pursuant to 15 U.S.C. section 376, seek statements from persons selling cigarettes in interstate commerce to residents of the commonwealth and obtain the monthly invoices covering all such shipments of cigarettes into the commonwealth, as required by said section 376. Those invoices shall, as authorized by said section 376, include the name and address of the person to whom the cigarette shipment was made, the brand, the quantity thereof, and the amount paid. Upon receipt of that information, the department shall make all reasonable efforts to collect all excises due under this chapter.
(2) The department shall provide information received pursuant to this section to the department of public health. The department shall report every 6 months to the house and senate committees on ways and means and the joint committee on health care on the steps taken to enforce this section and the amounts collected pursuant to collection activities mandated by this section.
SECTION 17. Section 6 of said chapter 64C, as appearing in the 2000 Official Edition, is hereby amended by striking out, in lines 3 and 11, the words "thirteen" and inserting in place thereof, in each instance, the following figure:- 50>.
SECTION 18. Said section 6 of said chapter 64C, as so appearing, is hereby further amended by striking out, in line 28, the word "twenty-five" and inserting in place thereof the following figure:- 40.
SECTION 19. Said section 6 of said chapter 64C, as so appearing, is hereby further amended by adding the following paragraph:-
Notwithstanding the provisions of this section, the excise imposed by this section shall equal 15 per cent of the price paid by such licensee or unclassified acquirer to purchase cigars and smoking tobacco so sold, imported or acquired.
SECTION 20. Section 7B of said chapter 64C, as so appearing, is hereby amended by striking out, in lines 1 and 2, the words "Notwithstanding the excise imposed by section six and seven A every" and inserting in place thereof the following words:- In addition to the excise imposed by sections 6 and 7A, every.
SECTION 21. Said chapter 64C is hereby further amended by inserting after section 33 the following section:-
Section 33A. A stamper shall not affix a stamp on a cigarette package containing fewer than 20 cigarettes. A licensee shall not hold for sale, offer for sale, sell, possess with intent to sell, or otherwise dispose of a cigarette package containing fewer than 20 cigarettes. In addition to other remedies provided by law, the commissioner may assess a civil penalty of not more than $5,000 for each violation of this section. The commissioner may suspend or revoke the stamping authority or license of a person who violates this section.
SECTION 22. Section 34 of said chapter 64C, as appearing in the 2000 Official Edition, is hereby amended by adding the following 2 paragraphs:-
In addition to other remedies provided by law, the commissioner may assess a civil penalty of not more than $5,000 for each violation of this section.
The commissioner shall promulgate regulations to implement and enforce this section.
SECTION 23. Section 35 of said chapter 64C, as so appearing, is hereby amended by adding the following 2 paragraphs:-
In addition to other remedies provided by law, the commissioner may assess a civil penalty of not more than $5,000 for each violation of this section.
The commissioner shall promulgate regulations to implement and enforce this section.
SECTION 24. Section 1 of chapter 64H of the General Laws, as so appearing, is hereby amended by inserting after the definition of "Gross receipts" the following 2 definitions:-
"Home service provider", the facilities-based carrier or reseller with which the retail customer contracts for the provision of mobile telecommunications service.
"Mobile telecommunications service", commercial mobile radio service, as defined in section 20.3 of title 47 of the Code of Federal Regulations as in effect on June 1, 1999.
SECTION 25. Said section 1 of said chapter 64H, as so appearing, is hereby further amended by inserting after the definition of "Person" the following definition:-
"Place of primary use", the street address representative of where the customer's use of the mobile telecommunications service primarily occurs, which shall be the residential street address or the primary business address of the customer and which shall be within the licensed service area of the home service provider. The place shall be determined in accordance with 4 U.S.C. sections 121 and 122.
SECTION 26. Said section 1 of said chapter 64H, as so appearing, is hereby further amended by inserting after the word "services", in line 166, the following words:- other than mobile telecommunications services.
SECTION 27. The definition of "Sale at retail" in said section 1 of said chapter 64H, as so appearing, is hereby further amended by inserting after the fifth sentence the following sentence:- In the case of interstate and intrastate mobile telecommunications services, the sale of such services shall be deemed to be provided by the customer's home service provider and shall be considered a sale within the commonwealth if the customer's place of primary use is located in the commonwealth.
SECTION 28. Section 2A of chapter 65C of the General Laws, as so appearing, is hereby amended by striking out subsection (a) and inserting in place thereof the following subsection:-
(a) A tax is hereby imposed upon the transfer of the estate of each person dying on or after January 1, 1997 who, at the time of death, was a resident of the commonwealth. The amount of the tax shall be the sum equal to the amount by which the credit for state death taxes that would have been allowable to a decedent's estate as computed under Code section 2011, as in effect on December 31, 2000, hereinafter referred to as the "credit", exceeds the lesser of:
(i) the aggregate amount of all estate, inheritance, legacy and succession taxes actually paid to the several states of the United States, other than the commonwealth, in respect to any property owned by that decedent or subject to those taxes as part of or in connection with his estate; or
(ii) an amount equal to the proportion of such allowable credit as the value of properties taxable by other states bears to the value of the entire federal gross estate wherever situated.
SECTION 29. Chapter 94 of the General Laws is hereby amended by inserting after section 307B the following section:-
Section 307C. The department of public health may, in consultation with the attorney general and the department of revenue, establish regulations for persons engaged in the sale or shipment of tobacco products to prevent the sale or delivery of tobacco products to children under 18 years of age in the commonwealth.
SECTION 30. Every manufacturer, wholesaler, vending machine operator, unclassified acquirer or retailer, as defined in section 1 of chapter 64C of the General Laws, who, at the commencement of business on the effective date of this act, has on hand any cigarettes for sale or any unused adhesive or meter stamps shall make and file with the commissioner of revenue within 20 days a return, subscribed and sworn to under the penalties of perjury, showing a complete inventory of such cigarettes and stamps and shall, at the time he is required to file such return, pay an additional excise of 37> mills per cigarette on all cigarettes and all unused adhesive and meter stamps upon which only the excise imposed pursuant to sections 6, 7A and 7C of said chapter 64C has previously been paid; provided, however, that the additional excise imposed by this section shall equal 15 per cent of the price paid by such manufacturer, wholesaler, vending machine operator, unclassified acquirer or retailer to purchase smokeless tobacco and 15 per cent of the price paid by such manufacturer, wholesaler, vending machine operator, unclassified acquirer or retailer to purchase cigars and smoking tobacco on hand on that date. All of chapters 62C and 64C of the General Laws relative to the assessment, collection, payment, abatement, verification and administration of taxes, including penalties, shall, so far as pertinent, be applicable to the excise imposed by this section.
SECTION 31. Sections 1, 4, 5, 9, 10, 11, 12 and 13 shall be effective for tax years beginning on or after January 1, 2002.
SECTION 32. Sections 2, 6, 7, 8 and 14 shall be effective for tax years beginning on or after May 1, 2002, and for the portion that begins on May 1, 2002 of any taxable year beginning on or after January 1, 2002 and before May 2, 2002. It is intended, to the maximum extent possible, that all transactions which are completed prior to May 1, 2002 shall be aggregated and taxed under the procedures and rates in place prior to the changes in law set forth in sections 2, 6, 7, 8 and 14 and that all transactions completed on or after May 1, 2002, and shall be aggregated and taxed under the procedures and rates established by the changes in law set forth in said sections 2, 6, 7, 8 and 14.
SECTION 33. Sections 24 to 27, inclusive, shall apply to customer bills issued after August 1, 2002.
SECTION 34. Section 28 shall be effective with respect to estates of decedents dying on or after January 1, 2003.
This Bill having been returned by the Lieutenant-Governor, Acting Governor with her objections thereto in writing (see House 5269) has been passed by the House of Representatives, notwithstanding said objections, two-thirds of the House (122 yeas to 29 nays) having agreed to pass the same.
Sent to the Senate for its action.
Thomas M. Finneran, Speaker.
Steven T. James, Clerk.
Senate, July 24, 2002.
Passed by the Senate, notwithstanding the objections of the Lieutenant-Governor, Acting Governor, two-thirds of the members present (28 yeas to 9 nays) having approved the same.
Thomas F. Birmingham, President.
Patrick F. Scanlan, Clerk.