830 CMR, § 62C.30.1

Current through Register 1533, October 25, 2024

Section 62C.30.1 - Changes in Federal Taxable Income, Federal Tax Credits, or Federal Taxable Estate

(1)Statement of Purpose; Application; Organization.

(a) The purpose of 830 CMR 62C.30.1 is to describe the requirements and procedures for a Massachusetts taxpayer to report and adjust the tax due to the Commonwealth after a change in federal taxable income, federal tax credits, or federal taxable estate. Persons and corporations subject to taxation under M.G.L. chs. 62 and 63, respectively, must report to Massachusetts when federal taxable income or federal tax credits are finally determined by the federal government to be different from the taxable income or credits originally reported. Estates subject to taxation under M.G.L. c. 65C must report to Massachusetts when the federal taxable estate is finally determined by the federal government to be different from the taxable estate originally reported. See M.G.L. c. 62C, § 30.

(b)830 CMR 62C.30.1 applies to taxes imposed under M.G.L. chs. 62, 63, and 65C.

(c)830 CMR 62C.30.1 is organized as follows:

1. Statement of Purpose; Application; Organization

2. Definitions

3. Reporting Federal Change

4. Date of Assessment with Respect to Federal Change; Determination of Amount of Assessment with Respect to Federal Change

5. Taxpayer Offset of Tax Due

6. Amended Returns with Respect to Federal Change

7. Penalties and Interest

(2)Definitions. For the purposes of 830 CMR 62C.30.1 only, the following terms shall have the following meanings:

Abatement, a reduction of an amount of tax that equals the difference between the amount of tax assessed as a result of an assessment or deemed assessment and the lower amount of tax properly due.

Commissioner, the Commissioner of Revenue or the Commissioner's designee duly authorized to perform the duties of the Commissioner.

Department, the Department of Revenue.

Duly Filed, filed correctly and completely in the manner prescribed by the Commissioner.

Federal Determination, an action taken under federal law that determines a taxpayer's federal taxable income, federal tax credits, or federal taxable estate to be different from that originally reported to the federal government. A federal determination includes, without limitation:

(a) an agreement between the taxpayer and the Commissioner of Internal Revenue to an assessment of any type of liability, including an accepted offer in compromise on an issue of liability;

(b) an executed closing agreement;

(c) any final decision or dismissal by a federal court or tax court resulting in the assessment of a deficiency or in the abatement of an assessed liability;

(d) an assessment based on a defaulted Notice of Deficiency or clerical or mathematical error;

(e) a federal closing letter;

(f) any of the above with regard to a partnership or flow-through entity affecting the tax of a partner or member; or

(g) any of the above with regard to an S Corporation affecting the tax of an S Corporation shareholder.

With regard to partnerships or flow-through entities, Federal Determination includes federal actions that affect partnership or entity items, such as a Notice of Final Partnership Administrative Adjustment, or a disallowance in whole or in part of an Administrative Adjustment Request. An accepted offer in compromise on an issue of ability to pay is not a federal determination for purposes of 830 CMR 62C.30.1.

Federal Tax Credit, a direct reduction of tax due arising from a tax credit or similar provision in the Internal Revenue Code that affects Massachusetts tax liability.

Final Determination, a federal determination when there is no right of administrative or judicial appeal. A federal determination is deemed final, for a taxpayer with a right of appeal, if no appeal is taken. A federal determination is final on the date of decision in the court of last resort. A judicial determination is deemed final on the date the right to any further appeal expires if the appeal is not carried to the court of last resort. For purposes of 830 CMR 62C.30.1, Final Determination is not limited to the meaning of the term when used by the Internal Revenue Service in connection with a closing agreement.

Offset,

(a) a reduction, proposed by the taxpayer at the time of the report of federal change, in the amount of payment owed by a taxpayer after a federal change, subject to the Commissioner's approval; or

(b) a reduction by the Commissioner in the amount of an abatement requested as a result of a federal change.

Tax or Taxes, any tax imposed under M.G.L. c. 62, 63, or 65C, and any interest or penalties imposed under M.G.L. c. 62C and treated as additional tax.

Taxpayer, any individual, partnership, trust, estate, or any other fiduciary subject to taxation under M.G.L. c. 62 or 65C, or any corporation or other entity subject to taxation under M.G.L. c. 63.

(3)Reporting Federal Change.

(a)M.G.L. c. 62 Taxpayers. A taxpayer subject to taxation under M.G.L. c. 62 must report to the Commissioner any change in federal taxable income or federal tax credits resulting in increased Massachusetts tax liability within one year of the date of notice of the federal government's final determination, whether or not the audit or other review is complete with respect to issues not addressed in the agreement, accompanied by payment of any additional tax due plus interest. Interest is calculated under the provisions of M.G.L. c. 62C, § 32, from the due date of the original return. Offsets do not affect the determination whether Massachusetts tax liability has increased due to a federal change.

Taxpayers subject to taxation under M.G.L. c. 62 must report changes in federal taxable income in the manner prescribed by the Commissioner and must submit a copy of the federal Revenue Agent's Report, agreement, document, or any other federal report that provides the necessary information illustrating the changes in federal taxable income or federal tax credits. The filing agent for a composite return shall report when there is any final determination, allocated among the affected taxpayers, that increases any taxpayer's Massachusetts tax liability.

(b)M.G.L. c. 63 Taxpayers. 830 CMR 62C.30.1(3)(a) applies to taxpayers subject to taxation under M.G.L. c. 63, except that these taxpayers must report and pay any additional tax due, plus interest, within three months of the date of notice of the federal government's final determination. The principal reporting corporation for a combined filing group shall report when there is any final determination that changes the Massachusetts tax liability of any member of the group, or of any other member of a federal consolidated group that includes a member of the combined filing group. The principal reporting corporation must provide sufficient detail to properly attribute and allocate the federal adjustments to group members, and to reconcile such amounts with the final determination.

(c)M.G.L. c. 65C Taxpayers. 830 CMR 62C.30.1(3)(a) applies to taxpayers subject to taxation under M.G.L. c. 65C, except that these taxpayers must report and pay any additional tax due, plus interest, within two months of the date of notice of the federal government's final determination.

(d)Procedures Applicable to all Taxpayers. Effective December 5, 2016, all taxpayers shall report all federal changes to the Commissioner by filing an amended return, in the manner prescribed in 830 CMR 62C.26.2.

(4)Date of Assessment with Respect to Federal Change; Determination of Amount of Assessment with Respect to Federal Change.

(a)Date of Assessment with Respect to Federal Change.

1.Taxpayer Self-assessment. The tax is deemed to be assessed with regard to a report of federal change under 830 CMR 62C.30.1(3), at the time when the report of federal change is duly filed.

2.Commissioner Deficiency Assessment. For the purposes of 830 CMR 62C.30.1, the tax is assessed upon the issuance of a Notice of Assessment to a taxpayer, or the entry in the Commissioner's books and records of an amount due from the taxpayer, if such entry predates the Notice of Assessment.

(b)Determination of Assessment Amount with Respect to Federal Change.

1.Taxpayer Self-assessment. Taxes are deemed to be assessed with the taxpayer's calculation and declaration of the tax due, as provided under M.G.L. c. 62C, § 26(a), reported as prescribed by the Commissioner, by the taxpayer or the taxpayer's representative and duly filed with the Commissioner. The deemed assessment is the amount due before any offsets are claimed by the taxpayer.

2.Deficiency Assessment by the Commissioner.

a.Full Amount of Tax Not Assessed. If the Commissioner determines from the taxpayer's report of federal change or upon investigation that the full amount of tax resulting from the federal change has not been assessed or deemed to be assessed, the Commissioner will assess, notwithstanding any limitation in M.G.L. c. 62C, § 26, the full amount of tax with interest, as provided in M.G.L. c. 62C, § 32, from the due date of the original return. Any assessment under 830 CMR 62C.30.1(4)(b)2. will be made in the manner provided in 830 CMR 62C.26.1.

b.Limitation Period for Assessment. The Commissioner will make any deficiency assessment within one year of receiving a taxpayer's report of federal change, as provided in 830 CMR 62C.30.1(3). Where no report of federal change is filed as provided in 830 CMR 62C.30.1(3), the Commissioner will make any deficiency assessments within two years of receiving information from the federal government that it has made a final determination of a taxpayer's federal taxable income, federal tax credits, or federal taxable estate that is different from the amount originally reported. The Commissioner has two years from receipt of information from the federal government to make deficiency assessments.

c.Limitation on Items Assessed. Any assessment made under 830 CMR 62C.30.1(4)(b)2. is limited to changes in taxpayer's tax liability directly attributable to changes, adjustments, or corrections to the taxpayer's federal taxable income or federal credits or federal taxable estate resulting in a final determination.

(5)Taxpayer Offset of Tax Due.

(a)General. When a taxpayer reports a change in federal taxable income, federal tax credits, or federal taxable estate that results in additional tax due to Massachusetts, the taxpayer may propose that the additional tax be offset based on issues for the same tax type and tax year that are unrelated to the federal change by attaching an application justifying the offset, with worksheets as necessary, to the report of federal change. The additional tax due as a result of the federal change may not be offset below zero. Any statement or worksheet attached to the taxpayer's report is considered part of the report of federal change.

(b)Procedure. The reporting and offsetting procedure is as follows:

1. A taxpayer must report federal changes as provided in 830 CMR 62C.30.1(3). The taxpayer must report increases in Massachusetts tax resulting from the change in federal taxable gross income, federal tax credits or federal taxable estate without offsets.

2. To offset any increased taxes for the taxable year in which the federal change applies, the taxpayer must request an offset amount and attach a statement justifying the offset to its report of federal change. The taxpayer may attach worksheets illustrating the tax effect and showing the revised amount after offsets have been taken into account.

3. The Commissioner will make an assessment of the tax, as provided in 830 CMR 62C.30.1(4), based upon the report of federal change. The Commissioner will determine the taxpayer's balance due, taking into consideration the taxpayer's offset request, including the taxpayer's statement and worksheets justifying the proposed offsets.

(6)Amended Returns with Respect to Federal Change.

(a)General Rule. Effective December 5, 2016, if, as a result of the change by the federal government in a taxpayer's federal taxable gross income, federal tax credits, or federal taxable estate, a taxpayer believes that a lesser tax was due the Commonwealth than was assessed or paid, the taxpayer shall file an amended return reporting, in the manner prescribed by the Commissioner in 830 CMR 62C.26.2, the amount of Massachusetts tax determined as a result of the federal change and the amount of the claimed overpayment, accompanied by a copy of the federal revenue agent's report, agreement, document, or any other federal report illustrating the changes in federal taxable income, federal tax credits, or federal taxable estate. The taxpayer's amended return is limited to changes in the taxpayer's tax liability directly attributable to changes, adjustments, or corrections to the taxpayer's federal taxable income, federal tax credits, or federal taxable estate resulting in a final determination.

(b)Limitation Period for Amended Returns. Amended returns reporting a federal change under 830 CMR 62C.30.1 shall be filed within one year of the date of the notice to the taxpayer of final determination by the federal government.

(c)Limitation on the Federal Change Amount. Any reduction in tax shown on an amended return as a result of a federal change under M.G.L. c. 62C, § 30 is limited to the reduction in Massachusetts taxes that results from the federal change.

(d)Substantiation. The taxpayer shall, at the time of filing its amended return, include and attach to it all supporting information, documents, explanations, arguments and authorities that will reasonably enable the Commissioner to determine whether the taxpayer is entitled to the reduction in tax requested. In certain instances an amended return showing a reduction in tax may be treated by DOR as an application for abatement and will be subject to the substantiation requirements set forth in 830 CMR 62C.37.1(6).

(e)Commissioner Offsets. The Commissioner may offset the amount of any overpayment resulting from a federal changewith any additional tax due whether or not the additional tax is based on issues related to the change. Offsets based on issues unrelated to the change may reduce or eliminate the abatement, but any such offset shall not give rise to a net amount of tax due based on an assessment that would otherwise be barred as untimely. Any refund resulting from a federal change is also subject to intercept.

(f)Correlation with Limitation Period for Amended Returns under M.G.L. c. 62C, §§ 36 and 37. Notwithstanding M.G.L. c. 62C, § 30 and 830 CMR 62C.30.1(6)(a) through (d)supra, a taxpayer may file an amended return seeking a reduction in tax, including tax assessed as a result of a change in federal taxable gross income, federal credit, or federal taxable estate, in accordance with the limitations provided in M.G.L. c. 62C, §§ 36 and 37.

(7)Penalties and Interest.

(a)Imposition. Any taxpayer that fails to timely submit a report of federal change or pay any additional tax due plus interest will be assessed a penalty of 10% of the additional tax due in addition to any other applicable interest and penalties. The penalty becomes a part of the additional tax due. Penalties and interest may apply to amounts claimed as offsets that are disallowed by the Commissioner.

(b)Abatement of Penalties. The Commissioner may abate for reasonable cause any penalties imposed under 830 CMR 62C.30.1(7). A taxpayer seeking an abatement of any penalties must present specific facts establishing that its failure to submit a timely report of federal change was due to reasonable cause. A mere assertion, by affidavit or otherwise, that a taxpayer's failure to timely file a report of federal change was reasonable or excusable due to oversight or inadvertence is insufficient to establish reasonable cause.

(c)Interest Payable by Taxpayers on Additional Amount Due Resulting from Federal Change. Interest for a taxpayer duly filing a report of federal change will be calculated on the balance due after offsets have been taken into account. Interest on the balance due amount will accrue from the due date of the original return as provided under M.G.L. c. 62C, § 32(b).

(d)Interest Payable by Commissioner. The Commissioner will pay interest on overpayments resulting from a federal change, reduced for any offsets made by the Commissioner, calculated from the date of receipt of a duly filed report of federal change at the rate provided for overpayments.

830 CMR, § 62C.30.1

Amended by Mass Register Issue 1307, eff. 11/30/2015.

Amended by Mass Register Issue 1333, eff. 12/5/2016.