Income/Franchise:
Massachusetts DOR Posts Release on New Entity-Level Taxation for Some Pass-through Entities

Technical Information Release (TIR) 22-6: Pass-through Entity Excise, Mass. Dept. of Rev. (3/18/22). The Massachusetts Department of Revenue (Department) released a technical information release (TIR 22-6) addressing state law [see H. 4009 (2021) and previously issued Multistate Tax Alert for more details on this new law] that provides an election for some “eligible pass-through entities (PTEs)” to pay a new entity-level excise tax (PTE Excise) on qualified income that is taxable in Massachusetts at a rate of 5%, applicable for taxable years beginning on or after January 1, 2021. The Department states that the purpose of this release is to explain the PTE Excise election, computation of the excise, filing and payment requirements, and computation of the PTE Excise credit that is available to qualified members of a PTE that makes the election. According to TIR 22-6, the excise generally is equal to 5% of:

• PTE income attributable to qualified members who are Massachusetts residents; plus
• PTE income attributable to nonresident qualified members multiplied by the PTE’s Massachusetts apportionment percentage for the taxable year.

Qualified members are allowed a Massachusetts personal income tax credit for 90% of their share of the PTE Excise paid by the PTE. The PTE Excise credit is refundable if it is claimed against Massachusetts personal income tax and treated as an overpayment. Please contact us with any questions.