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Session Law

2004

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Chapter 262 AN ACT FURTHER REGULATING THE DEPARTMENT OF REVENUE.

Whereas , The deferred operation of this act would tend to defeat its purpose, which is forthwith to make certain changes in the tax laws and other laws relating to the department of revenue, 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. Chapter 10 of the General Laws is hereby amended by striking section 28A, as appearing in the 2002 Official Edition, and inserting in place thereof the following section:-

Section 28A. Prior to disbursement of a prize in excess of $600, the commission shall review information furnished by the IV-D agency and by the department of revenue, as set forth in chapter 119A and in this section to ascertain whether the holder of a winning ticket owes past due child support to the commonwealth or to an individual to whom the IV-D agency is providing services, and to ascertain whether the holder of a winning ticket owes any past-due tax liability to the commonwealth. If the holder owes past-due child support or a past-due tax liability, the commission shall notify the IV-D agency or the commonwealth, respectively, of the holder's name, address and social security number. Subsequent to statutory state and federal tax withholding, the commission shall first disburse to the IV-D agency the full amount of the prize or such portion of the prize that satisfies the holder's past-due child support obligation and, if funds remain available after that disbursement, the commission shall disburse to the department of revenue the full amount of the prize or such portion of the prize that satisfies the holder's past-due tax liability. The commission shall disburse to the holder only that portion of the prize, if any, remaining after the holder's past-due child support obligation and the holder's past-due tax liability have been satisfied.

SECTION 2. Section 3F of chapter 23A of the General Laws, as so appearing, is hereby amended by striking out, in line 70, the words "and only" and inserting in place thereof the following words:- or by the commissioner of revenue upon denial of the application for the tax credit provided in section 38N of chapter 63, and.

SECTION 3. Said section 3F of said chapter 23A of the General Laws, as so appearing, is hereby further amended by striking out, in line 73, the word "and", the first time it appears, and inserting in place thereof the following word:- or.

SECTION 4. Subsection (2) of said section 3F of said chapter 23A, as so appearing, is hereby amended by adding the following sentence:- Annually, on or before the first Wednesday in December, the EACC shall file a report detailing its findings of the review of all certified projects that it evaluated in the prior fiscal year to the commissioner of revenue and to the joint committee on taxation and the joint committee on commerce and labor.

SECTION 5. The first paragraph of section 10C of chapter 58 of the General Laws, as so appearing, is hereby amended by striking out the fourth sentence.

SECTION 6. Said section 10C of said chapter 58, as so appearing, is hereby further amended by striking out the second paragraph.

SECTION 7. Section 13 of said chapter 58 is hereby amended by striking out, in line 1, as so appearing, the words "nineteen hundred and seventy-five and every fifth" and inserting in place thereof the following words:- 2005 and every fourth.

SECTION 8. Said chapter 58 is hereby further amended by striking out section 14, as so appearing, and inserting in place thereof the following section:-

Section 14. The commissioner, not later than June 1 of each year in which he makes such a determination, shall notify the assessors of each city or town where the commonwealth owns, or the county commissioners hold, land for the purposes stated in this section, of his determination of the value of such land in such city or town. He shall hold a public hearing on such valuation on or before June 10 next following and shall include notice of the public hearing in the notification of his determination to the assessors. The commissioner may, on the basis of any new information furnished to him at the hearing or otherwise, change the valuation of any such land in a city or town. Notice of any such change shall be sent to the assessors of the city or town on or before July 20 next following. A board of assessors aggrieved by a determination of the value of any land as valued under section 13 or 15 may make a written application for a correction to the appellate tax board on or before August 10 next following, setting forth the grounds for correction. Not later than January 20 of the year next following the year in which it is filed, the board shall, upon the basis of such application or after the assessors' hearing, as the board may determine, make a finding whether the commissioner acted in accordance with section 13. If the board finds that the commissioner failed so to act, it shall thereupon make a determination of value in accordance with section 13 and shall notify the board of assessors and the commissioner of its determination, and its decision shall be conclusive.

With respect to the determination of the value of land held by the division of watershed management in the department of conservation and recreation for the purposes named in section 5G of chapter 59, the commissioner shall send the notice of such valuations required by this section to be sent to the assessors of each city or town where such land is held to the division and the division may, if aggrieved by a determination of the value of such land, also apply for a correction to the appellate tax board. Any application by the assessors and division for correction of the valuation of land held for the purposes named in said section 5G of said chapter 59 shall be made and acted upon in the manner provided in this section, except that every application shall name as appellees the commissioner of revenue and all parties, other than the appellant, to whom notice of valuation was required to be sent. Any notices issued by the appellate tax board shall be sent to the appellant and all named appellees.

SECTION 9. Section 15 of said chapter 58, as so appearing, is hereby amended by striking out, in line 3, the word "four" and inserting in place thereof the following figure:- 3.

SECTION 10. Section 2 of chapter 60A of the General Laws, as so appearing, is hereby amended by striking out the tenth sentence and inserting in place thereof the following sentence:- The owner, if aggrieved by the excise assessed, may at any time within 3 years after the date the excise was due or 1 year after the date the excise was paid, whichever is later, apply for an abatement to the board of assessors, and from a decision of the board of assessors upon such application, an appeal may be taken to the county commissioners or to the appellate tax board, all in accordance with section 64 or 65 of chapter 59.

SECTION 11. Said chapter 60A is hereby further amended by adding the following section:-

Section 8. Notwithstanding the failure of the owner of a motor vehicle on which an excise was assessed under this chapter to apply for an abatement within the time set forth in section 2, the board of assessors may abate the whole, or any part of any such excise, or any interest thereon or costs relative thereto, that remains unpaid where, in the assessors' opinion it should be abated. No such abatements shall be granted unless they are in accordance with such rules, regulations and guidelines as the commissioner of revenue may prescribe and no interest shall be due in connection with any such abatement. Whenever an abatement is granted under this section, the assessors shall enter the same in their record of abatements. The assessors shall annually, not later than August 1, report to the commissioner, in the form and manner prescribed by him, the abatements granted during the prior fiscal year.

SECTION 12. Paragraph (a) of section 8 of chapter 62 of the General Laws, as appearing in the 2002 Official Edition, is hereby amended by striking out the second paragraph and inserting in place thereof the following paragraph:-

The Massachusetts adjusted gross income of such corporate trust shall be redetermined as if it were a resident natural person; provided, however, that for purposes of any determination involving sections 311, 312, 332 to 338, inclusive or 346 to 368, inclusive, of the Code, any corporate trust shall be treated as a corporation. No deductions or exemptions allowable under Parts A, B or C of section 3 shall be allowed to a corporate trust. The taxable income of each Part shall be the Massachusetts adjusted gross income of such Part allocated or apportioned to Massachusetts in accordance with section 38 of chapter 63.

SECTION 13. Said section 8 of said chapter 62 is hereby further amended by striking out paragraph (b), as amended by section 8 of chapter 4 of the acts of 2003 and inserting in place thereof the following paragraph:-

(b) Paragraph (a) shall not apply to a corporate trust which: (i) is a regulated investment company under section 851 of the Code or a real estate investment trust under section 856 of the Code; (ii) is exempt under subdivision (1) or (2) of section 23 of chapter 32; (iii) has made a valid election for the taxable year to be treated as a real estate mortgage investment conduit, as defined in section 860D of the Code for federal income tax purposes; or (iv) would qualify as a holding company under this paragraph in effect on December 31, 2003 and on such date was a holding company under the Public Utility Holding Company Act of 1935.

SECTION 14. Section 10 of chapter 62 of the General Laws, as appearing in the 2002 Official Edition, is hereby amended by inserting after the word "code", in line 80, the following words:- or who is a beneficiary receiving income included in gross income under subsection (h).

SECTION 15. Said section 10 of said chapter 62, as so appearing, is hereby further amended by adding the following 3 subsections:-

(h) A trustee or other fiduciary receiving income included in the gross income of a beneficiary by reason of section 652 or 662 of the Code shall be allowed a deduction in computing the taxable income of the trust for that portion of Part A, Part B or Part C income attributable to such beneficiary, and the income shall be included in the gross income of such beneficiary. The amount of the deduction for the trust and the amount of the income inclusion for the beneficiary shall be adjusted to account for the difference between the calculation of federal taxable income under the Code and the calculation of Massachusetts taxable income under this chapter.

(i) A trustee or other fiduciary receiving income taxable to a beneficiary under subsection (h) shall file with his return of income a form, to be specified by the commissioner, indicating the items of income attributable to such beneficiary and the name and taxpayer identification number of the beneficiary and such other information as the commissioner deems necessary.

(j) Upon determination by the commissioner of noncompliance by a beneficiary with the tax laws of the commonwealth including, but not limited to, the timely filing of accurate returns and payments of amounts due, subsections (h) and (i) shall not apply.

SECTION 16. Sections 12 and 12A of said chapter 62 are hereby repealed.

SECTION 17. Section 13 of said chapter 62, as appearing in the 2002 Official Edition, is hereby amended by striking out, in line 1, the words "ten to twelve A, inclusive," and inserting in place thereof the following words:- 10 and 11.

SECTION 18. Paragraph (b) of section 17 of said chapter 62, as so appearing, is hereby amended by striking out the first sentence and inserting in place thereof the following sentence:- A nonresident of the commonwealth who is a member of a partnership that is engaged in the conduct of a trade or business in the commonwealth or that owns or leases real property in the commonwealth, except a nonresident limited partner of a limited partnership engaged exclusively in buying, selling, dealing in or holding securities on its own behalf and not as a broker, shall be subject to the taxes imposed by this chapter on his distributive share of the income received or earned by the partnership from sources taxable under this chapter.

SECTION 19. Section 63 of said chapter 62, as so appearing, is hereby amended by striking out subsection (a) and inserting in place thereof the following subsection:-

(a) For the purposes of this section, the term "installment transaction" shall mean a transaction which:

(1) is treated for federal income tax purposes under section 453 of the Code; and

(2) would, but for the application of said section 453 of the Code, result in an item of Massachusetts gross income for the taxable year of the transaction that is equal to or greater than $1,000,000.

SECTION 20. Subsection (d) of said section 63 of said chapter 62, as so appearing, is hereby amended by striking out the third sentence and inserting in place thereof the following sentence:- The person making the election shall deposit with the commissioner security, in a form satisfactory to the commissioner, in an amount equal to such excess for the payment of future taxes under this chapter.

SECTION 21. Section 2 of chapter 62B of the General Laws, as so appearing, is hereby amended by inserting after the fourth paragraph the following paragraph:-

The commissioner may, if he deems such action necessary for the protection of the revenue of the commonwealth, require persons other than employers: (1) to deduct and withhold taxes from payments made by such persons to residents, nonresidents and part-year residents of the commonwealth; (2) to file withholding returns as prescribed by the commissioner; and (3) to pay over to the commissioner, or to a depositary designated by the commissioner, the taxes so required to be deducted and withheld; provided, however, that nothing in this paragraph shall authorize the commissioner to require any corporation, foundation, organization or institution that is exempt from federal taxation under Section 501(c)(3) of the Internal Revenue Code, as amended and in effect for the taxable year, to withhold taxes from persons who are not employees, except where the payments made by the exempt person for a particular performance or other event exceed $10,000.

SECTION 22. Said section 2 of said chapter 62B, as so appearing, is hereby further amended by inserting after the word "payment", in line 49, the following words:- , except that such withholding for purposes of this chapter shall apply to payments of winnings of $600 or greater notwithstanding any contrary provisions of the Internal Revenue Code, as amended from time to time.

SECTION 23. Section 13 of said chapter 62B, as so appearing, is hereby amended by striking out, in lines 4 and 5, the words "two hundred dollars" and inserting in place thereof the following figure:- $400.

SECTION 24. Section 14 of said chapter 62B, as so appearing, is hereby amended by striking out, in lines 44 and 46, the figure "$200" and inserting in place thereof, in each instance, the following figure:- $400.

SECTION 25. Chapter 62C of the General Laws is hereby amended by striking out section 35, as so appearing, and inserting in place thereof the following section:-

Section 35. If a check or electronic funds transfer in payment of any tax, interest, penalty, fee or other charge is not duly paid, there shall, in addition to any other penalties provided by law, be paid as a penalty by the person who tendered such check or electronic funds transfer, upon notice and demand by the commissioner in the same manner as the tax or other amount to which the check or electronic funds transfer relates, an amount equal to 2 per cent of the amount of such check or electronic funds transfer; provided, however, that if the amount of such check or transfer is less than $1,500, the penalty under this section shall be $30 or the amount of such payment, whichever is less. This section shall not apply if the person tendered a check or authorized an electronic funds transfer in good faith and with reasonable cause to believe that it would be duly paid. The commissioner may, in his discretion, abate any such penalty in whole or in part.

SECTION 26. Subsection (a) of section 50 of said chapter 62C, as so appearing, is hereby amended by striking out the last 2 sentences and inserting in place thereof the following 6 sentences:- The lien shall arise at the time the assessment is made or deemed to be made and shall continue until: (1) the liability for the amount assessed or deemed to be assessed is satisfied; (2) a judgment against the taxpayer arising out of such liability is satisfied; or (3) any such liability or judgment becomes unenforceable by reason of the lapse of time within the meaning of section 6322 of the Code. Notwithstanding section 65, the lien created in favor of the commonwealth for any unpaid tax shall remain in full force and effect for: (i) a period of 10 years after the date of assessment, deemed assessment or self-assessment of the tax; or (ii) for such longer period of time as permitted by section 6322 of the Code, in effect and as amended from time to time, and as construed or interpreted either by the regulations or other authorities promulgated under said section 6322 of the Code by the Internal Revenue Service or by any federal court or United States Tax Court decision. If, by operation of said section 6322 of the Code, a tax lien in favor of the commonwealth would extend beyond its initial or any subsequent 10-year period, the commissioner shall be authorized to refile his notice of lien. If any such refiled lien is filed within the "required refiling period", as that term is defined in section 6323(g)(3) of the Code, the lien in favor of the commonwealth shall relate back to the date of the first such lien filing. Otherwise, any such refiled lien shall be effective from the date of its filing. The commissioner of revenue shall promulgate such rulings and regulations as may be necessary for the implementation of this subsection.

SECTION 27. Section 53 of said chapter 62C, as so appearing, is hereby amended by inserting after the word "tax", in line 7, the following words:- including, without limitation, any periodic or lump sum payments from any state or local agency or authority, including unemployment compensation and other benefits not otherwise exempt, judgments, settlements and lottery winnings.

SECTION 28. Said section 53 of said chapter 62C, as so appearing, is hereby further amended by adding the following subsection:-

(e) With respect to a levy on securities or a levy on shares of a mutual fund other than a money market mutual fund, the person or entity may sell or repurchase such securities or shares in the ordinary and usual course of investing, but may not receive funds resulting from such sale, for a time period of up to 45 days. If, during such time period, the commissioner has not rescinded the levy, extended the time period or notified the person or entity in possession of such securities or shares to remit funds, at the end of such time period such person shall forthwith liquidate sufficient securities or shares to satisfy the full amount of the lien and remit the liquidated funds to the commissioner.

SECTION 29. The first paragraph of section 65 of said chapter 62C, as so appearing, is hereby amended by striking out the first sentence and inserting in place thereof the following sentence:- Taxes shall be collected: (i) within 6 years after the assessment of the tax; (ii) within any further period after such 6-year period during which the taxes remain unpaid but only against any real or personal property of the taxpayer to which a tax lien has attached and for which a notice of lien has been filed or recorded under section 50 in favor of the commonwealth in accordance with applicable state or federal law within 6 years after the assessment of the tax; (iii) prior to the expiration of any period of collection agreed upon in writing by the commissioner and the taxpayer before the expiration of such 6-year period; or, (iv) if there is a release of levy under section 64 after such 6-year period, then before such release.

SECTION 30. Section 2 of chapter 62E of the General Laws, as so appearing, is hereby amended by striking out, in lines 7 and 8, the words "and consistent with federal requirements or limitations".

SECTION 31. Said section 2 of said chapter 62E, as so appearing, is hereby further amended by striking out the last sentence and inserting in place thereof the following sentence:- The commissioner may require an employer of 50 employees or more, including a governmental entity or a labor organization, or a payor of income to submit such information using a form and means of electronic transmittal prescribed by the commissioner.

SECTION 32. Section 4 of said chapter 62E, as so appearing, is hereby amended by inserting after the word "companies", in lines 35 and 36, the following words:- , any mutual fund.

SECTION 33. Said section 4 of said chapter 62E, as so appearing, is hereby further amended by inserting after the word "account", in line 44, the first time it appears, the following words:- , brokerage account, mutual fund account.

SECTION 34. Section 5 of said chapter 62E, as so appearing, is hereby amended by inserting after the word "associations", in line 13, the first time it appears, the following words:- , mutual funds, brokers.

SECTION 35. Subsection (a) of section 2A of chapter 63, as so appearing, is hereby amended by adding the following sentence:- Notwithstanding any other provision of this section, the portion of the net income of a financial institution that a nondomiciliary state is prohibited from taxing under the Constitution of the United States shall be allocated in full to the commonwealth if the commercial domicile of the institution is in the commonwealth.

SECTION 36. Section 30 of said chapter 63 is hereby amended by striking out, in line 146, as so appearing, the word "thirty-two" and inserting in place thereof the following words:- 32 or of a foreign corporation taxable under clause (1) of subsection (a) of section 39.

SECTION 37. Said section 30 of said chapter 63, as so appearing, is hereby further amended by striking out, in lines 151 and 152, the words "organized in the commonwealth".

SECTION 38. Said section 30 of said chapter 63, as so appearing, is hereby amended by striking out paragraph 9.

SECTION 39. Said section 30 of said chapter 63, as so appearing, is hereby further amended by striking out paragraphs 10 and 11 and inserting in place thereof the following 2 paragraphs:-

10. "Tangible property corporation", a corporation whose tangible property situated in the commonwealth on the last day of the taxable year and not subject to local taxation is 10 per cent or more of such portion of its total assets on the last day of the taxable year less those assets as are situated in the commonwealth on the last day of the taxable year and are subject to local taxation, less its investment on that date in subsidiary corporations which represent 80 per cent or more of the voting stock of those corporations, as shall be found by multiplying that amount by the corporation's income apportionment percentage, as determined under section 38, or a corporation which, in the judgment of the commissioner, should be so classified. For the purposes of this paragraph, the assets of the corporation shall be valued at their book value.

11. "Intangible property corporation", a corporation whose tangible property situated in the commonwealth on the last day of the taxable year and not subject to local taxation is less than 10 per cent of such portion of its total assets on the last day of the taxable year less those assets as are situated in the commonwealth on the last day of the taxable year and are subject to local taxation, less its investment on that date in subsidiary corporations which represent 80 per cent or more of the voting stock of those corporations, as shall be found by multiplying that amount by the corporation's income apportionment percentage, as determined under section 38, or a corporation which, in the judgment of the commissioner, should be so classified. For the purposes of this paragraph, the assets of the corporation shall be valued at their book value.

SECTION 40. The first paragraph of section 32B of said chapter 63, as so appearing, is hereby amended by adding the following sentence:- The commissioner may require corporations that have made such election to report the income measure and the nonincome measure of the excise, and the minimum excise if applicable, all as set forth in sections 32 and 39r, on a single form; provided, however, that nothing in this section shall be construed to eliminate the requirement that each corporation participating in a combined return compute its nonincome measure and the minimum excise if applicable in accordance with said sections 32 and 39.

SECTION 41. Subsection (b) of section 38 of said chapter 63, as so appearing, is hereby amended by adding the following sentence:- Notwithstanding any other provision of this section or of section 52A, the portion of the taxable net income of a corporation that a non-domiciliary state is prohibited from taxing under the Constitution of the United States shall be allocated in full to the commonwealth if the commercial domicile of the corporation is in the commonwealth.

SECTION 42. Subsection (f) of said section 38 of said chapter 63, as so appearing, is hereby further amended by striking out the third paragraph and inserting in place thereof the following paragraph:-

For the purposes of this subsection: (1) in the case of the licensing of intangible property, the income-producing activity will be deemed to be performed in the commonwealth to the extent that the intangible property is used in the commonwealth; (2) the corporation will be deemed to be taxable in the state of the purchaser if the tangible personal property is delivered or shipped to a purchaser in a foreign country; and (3) sales of tangible personal property to the United States government or any agency or instrumentality thereof for purposes of resale to a foreign government or any agency or instrumentality thereof are not sales made in the commonwealth.

SECTION 43. Section 38 of said chapter 63, as so appearing, is hereby amended by adding the following subsection:-

(n) In any case in which a purchasing corporation makes an election under section 338 of the Code, the target corporation shall be treated as having sold its assets for purposes of this section.

SECTION 44. Section 38B of said chapter 63, as so appearing, is hereby amended by inserting after subsection (b) the following subsection:-

(b 1/2) For the purposes of subsection (a), "securities" includes (1) equity or debt instruments and options, futures and other derivatives, that are traded on and were acquired through a public exchange or another arms length secondary market; (2) bond as defined in and issued pursuant to chapter 23G; (3) cash and cash equivalents, including savings and checking accounts and certificates of deposit, and foreign currencies; (4) interests in a real estate investment trust under section 856 of the Code or a regulated investment company under section 851 of the Code, or a real estate mortgage investment conduit under section 860D of the Code, so long as none of the mortgages owned by the conduit were originated by the holder thereof or by an affiliate of the holder; (5) mortgage-backed securities that are guaranteed by the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Home Loan Bank or the Federal Home Loan Mortgage Corporation; (6) collateralized mortgage obligations, so long as none of the mortgages that underlie the obligation were originated by the holder thereof or by an affiliate of the holder; and (7) any other passive investment vehicles that, in the judgment of the commissioner, should be considered to constitute "securities" for the purposes of said subsection (a); "affiliate" means a member of an affiliated group as defined under section 1504 of the Code; and "debt instruments" shall be deemed to include, but not be limited to, debt obligations of the United States, its agencies or instrumentalities and of any state or political subdivision thereof, their agencies or instrumentalities. Nothing in this subsection shall be construed to limit the instruments that may be held by an investment partnership for purposes of the safe harbor set forth in subsection (b) of section 17 of chapter 62.

SECTION 45. Subsection (a) of section 38N of said chapter 63, as so appearing, is hereby amended by adding the following 3 paragraphs:-

A credit allowed under this section may be taken only after the taxpayer completes an annual application for the credit, signed under the pains and penalties of perjury by an authorized representative of the corporation, files it with the commissioner of revenue and the commissioner certifies that property eligible for the credit is used in a certified project within the economic opportunity area as defined in said section 3A of said chapter 23A and wholly within an area designated as an economic target area pursuant to section 3D of said chapter 23A and the area conforms to the definition of a "blighted open area", "decadent area", or "sub-standard area" as set forth in section 1 of chapter 121A, and that the certified project satisfies the employment projections specified in the original project proposal. The commissioner of revenue shall notify the economic assistance coordinating council, of any application that is not certified.

The commissioner shall, not less than once every 2 years, review all projects certified by the economic assistance coordinating council on or after January 1, 2000 if the taxpayer participating in a certified project files an application for the tax credit allowed under this section.

Based upon the information provided in the application, the commissioner of revenue shall make a determination on whether the certified project is in compliance with the definition of certified project set forth in this section and whether the project has a reasonable chance of increasing employment opportunities for residents of the certified project as advanced in the initial proposal certified by the EACC. If the commissioner of revenue determines that the certified project is no longer in compliance, then he shall notify the economic assistance coordinating council of the determination, and certification of the project shall be revoked by the economic assistance coordinating council. If the project is considered decertified for reasons of fraud or material misrepresentation, as determined by the commissioner of revenue, the commissioner shall have a cause of action against the controlling business of the project for the value of any economic benefits received, including, but not limited to, the amount of the tax credit allowed under this section. Nothing in this section shall be deemed to limit the authority of the commissioner to make adjustments to a corporation's liability upon audit.

SECTION 46. Said chapter 63 is hereby further amended by striking out section 42A, as so appearing, and inserting in place thereof the following section:-

Section 42A. The taxable net income of a foreign corporation allocated or apportioned to this commonwealth under section 38 shall be its net income subject to the tax under this chapter.

SECTION 47. Subsection (c) of section 3 of chapter 63B of the General Laws, as so appearing, is hereby amended by striking out clause (iii) and inserting in place thereof the following 2 clauses:

(iii) 90 per cent of the tax for the taxable year, or

(iv) 90 per cent of the tax that would be required to be shown on the return for the taxable year if the tax were determined by using the income apportionment percentage determined for the preceding taxable year under chapter 63.

SECTION 48. The definition of "Sale at retail" or "retail sale" of section 1 of chapter 64H of the General Laws, as amended by section 8 of chapter 9 of the acts of 2003, is hereby further amended by striking out the second sentence and inserting in place thereof the following sentence:- When tangible personal property is physically delivered by an owner, a former owner thereof, a factor, or an agent or representative of the owner, former owner or factor, to the ultimate purchaser residing in or doing business in the commonwealth, or to any person for redelivery to the purchaser, pursuant to a retail sale made by a vendor not engaged in business in the commonwealth, the person making or effectuating the delivery shall be considered the vendor of that property, the transaction shall be a retail sale in the commonwealth by the person and that person, if engaged in business in the commonwealth, shall include the retail selling price in its gross receipts, regardless of any contrary statutory or contractual terms concerning the passage of title or risk of loss which may be expressly or impliedly applicable to any contract or other agreement or arrangement for the sale, transportation, shipment or delivery of that property.

SECTION 49. Section 6 of said chapter 64H, as appearing in the 2002 Official Edition, is hereby amended by striking out, in line 32, the word "five" and inserting in place thereof the following figure:- 10.

SECTION 50. Said section 6 of said chapter 64H, as so appearing, is hereby further amended by striking out paragraph (ff) and inserting in place thereof the following paragraph:-

(ff) Sales of printed material which is manufactured in the commonwealth to the special order of a purchaser, to the extent the material is delivered to an interstate carrier, a mailing house or a United States Post Office for delivery or mailing to a purchaser located outside the commonwealth or a purchasers designee located outside the commonwealth, including sales of direct and cooperative direct mail promotional advertising materials which are manufactured both inside and outside the commonwealth and which are distributed to residents of the commonwealth from locations both inside and outside the commonwealth. For the purpose of this paragraph, "direct and cooperative direct mail promotional advertising materials" shall mean individual discount coupons, or advertising leaflets incorporating the coupons within the promotional advertising materials no greater than 6 pages in length, and including any accompanying envelopes and labels. In order to be exempt hereunder, the promotional advertising materials shall be distributed as a part of a package of materials promoting 1 or more than 1 business, each operated at separate and distinct locations, and directed in a single package to potential customers, at no charge to the potential customer, of the businesses paying for the delivery of such material. For the purpose of this paragraph, "direct and cooperative direct mail promotional advertising materials" shall not include mail order catalogs, department store catalogs, telephone directories, or similar printed advertising books, booklets or circulars greater than 6 pages in total length.

SECTION 51. Section 2 of chapter 64I of the General Laws, as so appearing, is hereby amended by inserting after the word "vendor", in line 4, the following words:- or manufactured, fabricated or assembled from materials acquired either within or outside the commonwealth.

SECTION 52. Said chapter 64I is hereby amended by inserting after section 4 the following section:-

Section 4A. (a) An individual taxpayer subject to the excise under this chapter who has not paid over the excise due for a purchase of tangible personal property as provided for under chapter 64H shall pay and account for that liability to the commissioner annually either by entering the amount of his liability upon the appropriate line item of the taxpayer's personal income tax return or by filing a separate use tax return in the form prescribed by the commissioner. If the taxpayer elects to report the use tax liability on his personal income tax return, irrespective of the filing status chosen, the taxpayer shall enter either: (i) the estimated liability as provided in subsection (b) based upon the taxpayer's Massachusetts adjusted gross income as determined under section 2 of chapter 62; or (ii) the exact amount of the liability based upon actual taxable purchases for the calendar year. Taxpayers opting to pay an estimated use tax liability for any period in accordance with the subsection (b) shall not be subject to any additional assessment of use tax for the period even if the taxpayer's estimated liability is lower than the actual liability. A taxpayer having no use tax liability for a tax period may enter a zero on the appropriate line of his personal income tax return.

(b) A taxpayer electing to satisfy a use tax liability by estimating it shall calculate the liability in accordance with the following table and provisions. The estimated liability shall only be applicable to purchases of any individual items each having a total sales price of less than $1,000. For each taxable item purchased at a sales price of $1,000 or greater, the actual use tax liability for each purchase shall be added to the amount of the estimated liability derived from the below table.

MA AGI Per Return Use Tax Liability
$0 - $ 25,000
$ 0.00
$25,001 - $ 40,000
$15.00
$40,001 - $ 60,000
$25.00
$60,001 - $ 80,000
$35.00
$80,001 - $100,000
$45.00
Above $100,000
(Multiply MA AGI by .0005)

SECTION 53. Subsection (c) of section 2 of chapter 119A of the General Laws, as appearing in section 364 of chapter 26 of the acts of 2003, is hereby further amended by striking out the third and fourth sentence and inserting in place thereof the following 2 sentences:- Upon collection, a penalty or fee shall be retained by the IV-D agency; but, the penalty or fee shall be placed in the child support trust fund established pursuant to section 9. Upon collection, interest shall be distributed to the individual obligee on whose behalf the collection was made.

SECTION 54. Section 9 of said chapter 119A, as appearing in the 2002 Official Edition, is hereby amended by inserting after the word "services", in line 8, the following words:- , all penalties assessed and collected by the IV-D agency.

SECTION 55. Said section 9 of said chapter 119A, as so appearing, is hereby further amended by inserting after the word "chapter", in line 12, the following words:- ; but, the federal incentive payments shall be expended only as authorized by Title IV, Part D of the Social Security Act.

SECTION 56. Section 10 of said chapter 119A, as so appearing, is hereby amended by striking out, in line 3, the word "two" and inserting in place thereof the following figure:- 3.

SECTION 57. Said section 10 of said chapter 119A, as so appearing, is hereby further amended by inserting after the word "fund", in line 12, the following words:- attributed to federal incentive payments.

SECTION 58. Said section 10 of said chapter 119A, as so appearing, is hereby further amended by adding the following paragraph:-

(3) A child support penalties account to be expended, without appropriation, pursuant to subsections (b) and (c) of section 10A. To this account shall be credited all penalties collected by the IV-D agency, all amounts designated for this account pursuant to subsection (a) of said section 10A, all interest collected by the IV-D agency on the state share of arrears assigned to the commonwealth pursuant to Title IV, Parts A and E, and Title XIX of the Social Security Act, and all interest and earnings of the fund, except as provided in paragraph (2) of this section. The state treasurer shall report annually, on or before October 15, to the secretary of administration and finance and to the house and senate chairs of ways and means on the total expenditures from the child support penalties account in the prior fiscal year.

SECTION 59. Said chapter 119A is hereby further amended by inserting after section 10 the following section:-

Section 10A. (a) If a case receiving IV-D services is otherwise eligible for case closure and the commissioner of revenue determines that (1) an obligor has made an overpayment of $10 or less of the amount of any child support owed by the obligor, or (2) child support in the amount of $10 or less is due to an individual obligee, the commissioner shall disburse the amounts to the obligor or obligee. If the obligor or obligee fails to negotiate the check issued by the commonwealth within 180 days of its issuance, the funds shall be placed in the account established pursuant to paragraph (3) of section 10, to be expended as provided in subsections (b) and (c) of this section.

(b) If the commissioner determines that the IV-D agency has distributed a payment to an individual obligee that was not a child support collection on behalf of the obligee, or that the obligee was otherwise not entitled to the payment, the IV-D agency shall make diligent efforts to recover the payment from the obligee, including deducting the amount, or a portion thereof, from future collections of child support made on behalf of the obligee. Recovered amounts shall be placed in the account established pursuant to paragraph (1) of section 10. Where the IV-D agency does not recover the payment, the IV-D agency may issue a refund of an overpayment to an obligor, or a replacement payment to an individual obligee on whose behalf the child support collection was made, from the account established pursuant to paragraph (3) of said section 10.

(c) If the commissioner determines that an individual obligee or obligor has incurred bank or similar fees as a direct result of administrative error by the IV-D agency, the IV-D agency may, at the discretion of the commissioner, reimburse the obligee or obligor for the fees from the account established pursuant to paragraph (3) of section 10.

SECTION 60. Chapter 175 of the General Laws is hereby amended by inserting after section 24E, inserted by section 445 of chapter 26 of the acts of 2003, the following section:-

Section 24F. (a) Subject to the requirements of sections 24D and 24E, which shall take precedence over this section, before making any nonrecurring payment equal to or in excess of $500 to a claimant under a contract of insurance, every company authorized to issue policies of insurance pursuant to this chapter shall exchange information with the department of revenue to ascertain whether that claimant owes taxes to the commonwealth. The company shall either provide the department of revenue with information about the claimant or examine information made available by the department of revenue and updated not more than once a month. If the company elects to provide the department of revenue with information about a claimant, the company shall provide, not less than 10 business days before making payment to the claimant, the claimant's name, address, date of birth and social security number as appearing in the company's files and other information appearing in the company's files as the commissioner of revenue, in consultation with the commissioner of insurance, may require by regulation. The company shall use a method and format prescribed by the commissioner of revenue but if the company is unable to use a method and format prescribed by the commissioner, the company shall cooperate with the department of revenue to identify another method or format, including submission of written materials. If the company elects to examine information made available by the department of revenue and the claimant owes taxes to the commonwealth, the company shall notify the department of revenue, not less than 10 business days before making payment to the claimant, of the claimant's name, address, date of birth and social security number as appearing in the company's files and other information appearing in the company's files as the commissioner of revenue, in consultation with the commissioner of insurance, may require by regulation, using a method and format prescribed by the commissioner of revenue. The insurer may remit to the department of revenue the full amount of taxes owed to the commonwealth at the time it so notifies the department of revenue or at any time before making payment to the claimant, without regard to the 10-day business period. A company shall not share information with the department of revenue if doing so would require the companies to violate the claimant's right to privacy under state or federal law.

For the purpose of this section, the word "claimant" shall mean an individual who brings a claim against an insured party under a liability insurance policy issued in the commonwealth or under the liability coverage portion of a multi-peril policy issued in the commonwealth, a beneficiary 13 years of age or older under a life insurance contract issued in the commonwealth, or a beneficiary 13 years of age or older living in the commonwealth who is designated to receive payment under a life insurance contract issued by a company licensed in the commonwealth. For the purposes of this section, the term "non-recurring payment" shall not include fines paid by companies to claimants pursuant to subsection (e). The department of revenue shall not consider a person to owe taxes to the commonwealth: (1) if the person has filed in good faith an application for abatement of the tax, which is still pending; (2) if the person has filed in good faith a petition before the appellate tax board contesting the tax, which is still pending; (3) if the person has filed in good faith an appeal from an adverse decision of the appellate tax board, which is still pending; or (4) if the statute of limitations for filing an application for abatement, petition or appeal has not yet expired.

(b) This section shall not apply to that portion of a claim resulting in payments on behalf of the claimant issued to a third party where there is documentation showing that the third party has provided or agreed to provide the claimant with a benefit or service related to the claim including, but not limited to, the services of an attorney or a medical doctor, or to any portion of a claim based on damage to or a loss of real property. The commissioner of revenue, in consultation with the commissioner of insurance, shall promulgate regulations setting forth procedures for making payment to the department of revenue when a third party has either provided or agreed to provide goods or services to the claimant, and the insurance company cannot reasonably determine the remaining amount payable to the claimant.

(c) An individual making a claim governed by this section shall provide his current address, date of birth and social security number to the insurance company, upon the request of the company. The company may inform the claimant that the request is being made in accordance with this section for the purpose of assisting the department of revenue in collecting taxes owed to the commonwealth. An individual who refuses to provide the information required by this section shall not receive payment on the claim, and the company that declines payment on this basis shall be exempt from suit and immune from liability under this chapter or any other chapter or in any common law action in law or equity.

(d) Pursuant to regulations issued by the commissioner of revenue in consultation with the commissioner of insurance, a company that knowingly fails to accurately exchange information regarding a claim to which this section applies shall be subject to a penalty assessed by the department of revenue. A company that makes a payment to the department of revenue pursuant to this section and an insured individual on whose behalf the company makes a payment shall be immune from any obligation or liability to the claimant or other interested party arising from the payment, notwithstanding the provisions of this chapter or any other law.

(e) Information provided by the department of revenue to a company under this section may only be used for the purpose of assisting the department in collecting taxes owed to the commonwealth. An individual or company who uses the information for any other purpose shall be liable in a civil action to both the department of revenue and the claimant in the amount of $1,000 each, for each violation.

(f) In the event of a state of emergency declared by the governor or the president of the United States, the commissioner of insurance may temporarily suspend the application of this section to claims made due to the conditions resulting in the state of emergency.

SECTION 61. Chapter 96 of the acts of 2002 is hereby amended by striking out section 10, as amended by section 14 of chapter 364 of the acts of 2002, and inserting in place thereof the following section:-

Section 10. Section 3 shall take effect for returns filed on or after January 1, 2002 and shall cease to be effective for returns filed on or after January 1, 2006.

SECTION 62. In the event that 1 or more states characterize as subject to apportionment income that the commissioner considers to be allocable in full to the commonwealth under this act, the commissioner shall use his best efforts in consultation with the state or states to avoid subjecting the income to multiple taxation.

SECTION 63. Notwithstanding any general or special law to the contrary, for tax years beginning on or after January 1, 2005 and before January 1, 2006, a trustee or other fiduciary receiving Part A income, Part B income or Part C income taxable to a beneficiary under subsection (h) of section 10 of chapter 62 of the General Laws, as added by section 15 of this act, shall deduct and withhold from distributions of the income a tax at the rate applicable to income of that class. The tax so withheld shall not reduce the amount of income taxable to the beneficiary but shall be included in his return of income and shall be credited against the amount of income tax as computed in the return.

SECTION 64. The commissioner of revenue shall issue rules and regulations necessary to implement this act.

SECTION 65. (a) There shall be a special commission to investigate and study the effectiveness of requiring combined reporting for all corporate excise tax filers in the commonwealth. Combined reporting would require corporations, when filing their tax returns, to list all of the profits they have earned, including the profits earned by any subsidiary with which they are engaged in a unitary business, and to calculate their profits subject to apportionment based on that total.

(b) The commission shall include the following members: the house and senate chairpersons of the joint committee on taxation, who shall serve as the co-chairpersons of the commission, the house and senate chairpersons of the joint committee on commerce and labor, house and senate vice chairpersons of the joint committee on taxation, the ranking minority house and senate members of the joint committee on taxation, the commissioner of revenue, and 1 member appointed by each of the following organizations: the Federal Reserve Bank of Boston, the Multistate Tax Commission, the Massachusetts Taxpayers' Foundation, the Massachusetts Budget and Policy Center, the Associated Industries of Massachusetts, the Massachusetts AFL-CIO, and the Massachusetts Municipal Association.

(c) The scope of the commission's inquiry shall include, but shall not be limited to an examination of the following: the decline in corporate excise tax revenue relative to personal income in Massachusetts, whether corporate excise tax revenue is lost due to tax avoidance strategies, whether combined reporting would be effective in combating and minimizing such strategies, the long-term revenue implications for the commonwealth of adopting combined reporting, the contribution that combined reporting would make in improving the commonwealth's ability to enforce the corporate excise tax, the economic impact of adopting combined reporting, and the experiences of other states that currently use combined reporting. The commission shall examine related aspects of apportionment under section 38 of chapter 63 of the General Laws, including but not limited to whether the Legislature should amend the sales factor defined in subsection (f) of said section 38 to include as sales of tangible personal property in the commonwealth any property that is shipped from an office, store, warehouse, factory, or other place of storage in this commonwealth for which the taxpayer is not taxable in the state of the purchaser. The commission shall also examine whether single sales factor provisions available under subsections (k), (l), and (m) of section 38 of chapter 63 of the General Laws should apply only to the apportionment of income in section 30 of chapter 63 of the General Laws, and not to the net worth calculation in paragraph 8 of section 30 of said chapter 63.

(d) The commission shall conduct 3 public hearings in 3 different municipalities in the commonwealth.

(e) The commission shall report to the house and senate committees on ways and means and the joint committee on taxation the results of its investigation and study, and its recommendations, if any, together with drafts of legislation necessary to carry the recommendations into effect, by filing the same with the clerk of the senate on or before May 1, 2005.

SECTION 66. There shall be a special commission to study the impact and collection of the hotel occupancy excise tax authorized in chapter 64G of the General Laws. The commission shall consist of the house and senate chairpersons of the joint committee on taxation, who shall serve as chairpersons of the commission, 2 members appointed by the senate president, 1 member appointed by the minority leader of the senate, 2 members appointed by the speaker of the house of representatives, 1 member appointed by the minority leader of the house of representatives, the commissioner of revenue or his designee, the director of the Massachusetts office of travel and tourism or his designee, a representative of the Massachusetts Municipal Association and 4 members appointed by the governor, 1 of whom shall represent the hotel industry and 1 of whom shall represent internet intermediaries. The commission shall hold at least 3 public hearings, 1 of which shall occur in Berkshire county and 1 of which shall occur on Cape Cod, Martha's Vineyard or Nantucket. The commission shall report on the revenue and economic impacts of the hotel occupancy excise tax and enforcement and collection efforts by the department of revenue and local governments. The commission shall report the results of its study and make recommendations for legislative changes, if any, resulting from its study to the clerks of the house and senate and the house and senate committees on ways and means on or before December 1, 2004.

SECTION 67. Sections 12 and 13 shall apply to taxable years beginning on or after January 1, 2004.

SECTION 68. Section 25 shall apply to payments received by the commissioner of revenue on or after January 1, 2005.

SECTION 69. Section 52 shall apply to purchases made on or after January 1, 2004.

SECTION 70. Sections 26 and 29 shall take effect on January 1, 2005, and shall be applicable to any tax liability, inclusive of penalties, interest, costs, forfeitures, or additions to tax, which remains due and unpaid as of January 1, 2005, or which is assessed on or after January 1, 2005. Any notice of tax lien in favor of the commonwealth recorded on a date making it less than 6 years old as of January 1, 2005 shall, if not sooner discharged as a result of payment of the tax, continue in full force and effect for a period of 10 years from the date of assessment of the tax without the need for any notice of lien re-filing by the commissioner. Thereafter, any further extension of the lien and any lien re-filing requirements shall be governed by section 50 of chapter 62C as amended by this act.

SECTION 71. Sections 1, 22, 27 and 60 shall take effect on December 1, 2004.

SECTION 72. Sections 14 to 20, inclusive, and sections 23, 24, 43, and 47 shall apply to tax years beginning on or after January 1, 2005.

SECTION 73. Sections 35, 41, 46, and 62 shall apply with respect to income that is recognized on or after July 1, 2004.

SECTION 74. Section 44 shall take effect on October 1, 2004, and shall apply to taxable years ending on or after that date; but, a corporation shall not lose its status as a securities corporation for a taxable year that begins before October 1, 2004 if: (1) the instruments that it holds for the portion of the taxable year ending on September 30, 2004 qualify as securities under section 38B of chapter 63 of the General Laws as it read before the effective date of this act; and (2) the instruments that it holds for the portion of the taxable year beginning on October 1, 2004 qualify as securities under section 38B of chapter 63.

Approved August 9, 2004.

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