The Massachusetts Department of Revenue has released its plans for drafting new and amended state tax regulations (as well as a few repeals) for 2014.  Notable planned changes to the Code of Massachusetts Regulations include:

  • Amendments to the NOL deductions and carryforward regulation to reflect changes under combined reporting (830 CMR 63.30.2).
  • Amendments to corporate nexus regulations to (1) reflect the Department’s interpretation of the scope of the Supreme Court’s Capital One and Geoffrey decisions and; and (2) a statutory change requiring taxpayers protected by Public Law 86-272 to pay the non-income measure of the corporate tax (830 CMR 63.39.1).
  • A new regulation governing withholding from the proceeds of sales of Massachusetts real estate to non-residents (830 CMR 62B.2.4).

In all, the Department’s list includes seventeen proposed regulatory changes.  Notably absent?  An amendment to the  corporate excise tax sourcing and apportionment regulations to reflecting the upcoming January 1, 2014 change from cost of performance sourcing to market sourcing for sales, other than sales of tangible personal property, as well as the implementation of a throwout rule.

It is our view that this is simply an oversight.  Department officials have made numerous public statements over the past several months indicating that a draft regulation spearheaded by Rulings and Regulations Chief Michael Fatale is in the works, so taxpayers should expect a draft regulation covering market sourcing and throwout in the near future.  For more detail on the market sourcing and throwout statutory changes, checkout Reed Smith’s previous alert and teleseminar.

Taxpayers that are concerned about any of these upcoming changes should be aware that they do not have to wait until the draft regulation is issued to reach out to the Department of Revenue with comments.  The Department typically invites taxpayer comments at any time during the drafting process, and it is our view that taxpayer’s have a better chance of having their voices heard the earlier they speak up in the process.  Once the draft regulation is issued, the Department’s views have often hardened and it may be harder to get changes made.