SECTION 1. Section 2A of chapter 63, as appearing in the 2018 Official Edition, is hereby amended by striking out subsection (b) and inserting in place thereof the following 2 subsections:-

(b)(1) Except as provided by subsection (b)(2), if the financial institution has income from business activity which is taxable both within and without this commonwealth, its net income shall be apportioned to this commonwealth by multiplying its net income by the applicable apportionment percentage. For purposes of subsection (b)(1), the applicable apportionment percentage is determined by adding the taxpayer's receipts factor, property factor and payroll factor together and dividing the sum by three. If one of the factors is missing, the two remaining factors are added and the sum is divided by two. If two of the factors are missing, the remaining factor is the apportionment percentage. If all three factors are missing, the whole of the financial institution's net income shall be taxable under section two. A factor is missing if both its numerator and denominator are zero, but it is not missing merely because its numerator is zero.

(b)(2), Notwithstanding subsection (b)(1), a financial institution that has income from business activity which is taxable both within and without this commonwealth, may elect to have its net income apportioned to this commonwealth by multiplying said taxable net income by the resulting percentage as determined in the following formulas:

(i) For taxable years beginning on or after January 1, 2015 but before January 1, 2016, 20 percent of the property factor plus 20 percent of the payroll factor plus 60 percent of the receipts factor.

(ii) For taxable years beginning on or after January 1, 2016 but before January 1, 2017, 15 percent of the property factor plus 15 percent of the payroll factor plus 70 percent of the receipts factor.

(iii) For taxable years beginning on or after January 1, 2017 but before January 1, 2018, 10 percent of the property factor plus 10 percent of the payroll factor plus 80 percent of the receipts factor.

(iv) For taxable years beginning on or after January 1, 2018 but before January 1, 2019, 5 percent of the property factor plus 5 percent of the payroll factor plus 90 percent of the receipts factor.

(v) For taxable years beginning on or after January 1, 2019, 100 percent of the receipts factor.

SECTION 2. Subsection (d) of said section 2A of said chapter 63, as so appearing, is hereby amended by inserting after paragraph (xiii) the following paragraph:-

(xiv) Notwithstanding the foregoing, a financial institution that elects to apportion its taxable net income pursuant to subsection (b)(2) of this section shall apply the rules applicable to the receipts factor as set forth in this section, with the following exceptions:

(A) In lieu of sourcing receipts pursuant to paragraph (xi), receipts from services not otherwise apportioned under this section are sourced to this commonwealth if the gross receipts are derived from customers in this commonwealth or otherwise attributable to this commonwealth's marketplace.

(B) In lieu of sourcing receipts pursuant to paragraph (xii), the numerator of the receipts factor includes the income described in paragraph (xii)(A) multiplied by a fraction, the numerator of which is the total amount included in the numerator of the receipts factor pursuant to paragraphs (iii), (iv), (vi) and (xiv)(A) and the denominator of which is the taxpayer's total amount of (1) interest and fees or penalties in the nature of interest from loans, (2) interest and fees or penalties in the nature of interest from credit card receivables and receipts from fees charged to card holders, such as annual fees, and (3) receipts from services subject to apportionment pursuant to (xiv)(A).

SECTION 3. Section 2A of said chapter 63, as so appearing, is hereby amended by adding the following subsection:-

(3)(a) The portion of net income derived from business carried on within the commonwealth by a corporation subject to tax under this section shall be determined under the provisions of sections thirty-eight and forty-two; provided, however, that under subsection (c)(1) of section 38 its taxable net income shall be multiplied by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales factor, and the denominator is three.  Any corporation subject to tax under this section that has net income derived from business carried on within the commonwealth may elect to determine the portion of such net income subject to tax in accordance with subsection (c)(2) of section 38.

SECTION 4. Section 38 of said chapter 63, as so appearing, is hereby amended by striking out subsection (c) and inserting in place thereof the following 2 subsections:-

(c)(1) Except as provided by subsection (c)(2), if a business corporation, other than a defense corporation as described in subsection (k), a manufacturing corporation as described in subsection (l), or a mutual fund service corporation to the extent of its mutual fund sales as described in subsection (m), has income from business activity which is taxable both within and without this commonwealth, its taxable net income, as determined under the provisions of subsection (a), shall be apportioned to this commonwealth by multiplying said taxable net income by a fraction, the numerator of which is the property factor plus the payroll factor plus twice times the sales factor, and the denominator of which is four.

(c)(2) Notwithstanding subsection (c)(1), any business corporation, other than a defense corporation as described in subsection (k), a manufacturing corporation as described in subsection (l), or a mutual fund service corporation, as described in subsection (m), to the extent of its non-mutual fund sales, that has income from business activity which is taxable both within and without this commonwealth, may elect to have its taxable net income, as determined under the provisions of subsection (a), apportioned to this commonwealth by multiplying said taxable net income by the resulting percentage as determined in the following formulas:

(i) For taxable years beginning on or after January 1, 2015 but before January 1, 2016, 20 percent of the property factor plus 20 percent of the payroll factor plus 60 percent of the sales factor.

(ii) For taxable years beginning on or after January 1, 2016 but before January 1, 2017, 15 percent of the property factor plus 15 percent of the payroll factor plus 70 percent of the sales factor.

(iii) For taxable years beginning on or after January 1, 2017 but before January 1, 2018, 10 percent of the property factor plus 10 percent of the payroll factor plus 80 percent of the sales factor.

(iv) For taxable years beginning on or after January 1, 2018 but before January 1, 2019, 5 percent of the property factor plus 5 percent of the payroll factor plus 90 percent of the sales factor.

(v) For taxable years beginning on or after January 1, 2019, 100 percent of the sales factor.

SECTION 5. Subsection (f) of section 38 of said chapter 63, as so appearing, is hereby amended by inserting after the third paragraph the following paragraph:-

Notwithstanding the foregoing, a business corporation that elects to apportion its taxable net income pursuant to subsection (c)(2) of this section shall apportion such income using the sales factor rules set forth in this subsection, with the exception that (i) sales other than sales of tangible personal property are sourced to this commonwealth if the gross receipts are derived from customers in this commonwealth or otherwise attributable to this commonwealth's marketplace; and (ii) gross receipts from the licensing of intangible property are sourced to this commonwealth to the extent that the intangible property is used in the commonwealth.

SECTION 6. Sections 1 to 5 shall be effective for tax years beginning on or after January 1, 2018.