§ 2A — Financial institutions; determination of net income

Massachusetts § 2A

• Jurisdiction: Massachusetts
• Part I: ADMINISTRATION OF THE GOVERNMENT
• Title IX: TAXATION
• Ch. 63: TAXATION OF CORPORATIONS

Text

Section 2A. The commissioner shall determine the part of the net income of a financial institution derived from business carried on within the commonwealth as follows:(a) If the financial institution does not have income from business activity which is taxable in another state, the whole of its net income shall be taxable under section two. For purposes of this section, a financial institution is taxable in another state as defined in the definition of "taxable'' in section one. 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.[ Subsection (b) effective for taxable years beginning on or after January 1, 2025. See 2023, 50, Sec. 47 as amended by 2023, 77, Sec. 194.](b) If the financial institution has income from business activity which is taxable both within and without the commonwealth, its net income shall be apportioned to the commonwealth by multiplying its net income by its receipts factor. If the receipts factor is missing, the whole of the financial institution's net income shall be taxable pursuant to section 2. The receipts factor shall be missing if both its numerator and denominator are zero, but it shall not be missing merely because its numerator is zero.[ Subsection (c) effective for taxable years beginning on or after January 1, 2025. See 2023, 50 Sec. 47 as amended by 2023, 77, Sec. 194.](c) The receipts factor shall be computed according to the method of accounting, cash or accrual basis, used by the taxpayer for federal income tax purposes for the taxable year.(d) The receipts factor is a fraction, the numerator of which is the receipts of the taxpayer in the commonwealth during the taxable year and the denominator of which is the receipts of the taxpayer within and without the commonwealth during the taxable year. The method of calculating receipts for purposes of the denominator is the same as the method used in determining receipts for purposes of the numerator. As used in this subsection, "receipts'' shall mean gross income, including net taxable gain on disposition of assets and money market transactions in the regular course of the financial institution's trade or business. The numerator of the receipts factor shall include, but not be limited to, the following receipts attributable to the commonwealth:(i) the numerator of the receipts factor includes receipts from the lease or rental of real property owned by the taxpayer if the property is located within the commonwealth or receipts from the sublease of real property if the property is located within the commonwealth.(ii)(A) Except as described in subparagraph (B), the numerator of the receipts factor includes receipts from the lease or rental of tangible personal property owned by the taxpayer if the property is located within this commonwealth when it is first placed in service by the lessee.(B) Receipts from the lease or rental of transportation property owned by the taxpayer are included in the numerator of the receipts factor to the extent that the property is used in the commonwealth. The extent an aircraft will be deemed to be used in the commonwealth and the amount of receipts that is to be included in the numerator of the commonwealth's receipts factor is determined by multiplying all the receipts from the lease or rental of the aircraft by a fraction, the numerator of which is the number of landings of the aircraft in the commonwealth and the denominator of which is the total number of landings of the aircraft. If the extent of the use of any transportation property within the commonwealth cannot be determined, then the property will be deemed to be used wholly in the state in which the property has its principal base of operations. A motor vehicle will be deemed to be used wholly in the state in which it is registered.(iii)(A) The numerator of the receipts factor includes interest and fees or penalties in the nature of interest from loans secured by real property if the property is located within the commonwealth. If the property is located both within the commonwealth and one or more other states, the receipts described in this subsection are included in the numerator of the receipts factor if more than fifty percent of the fair market value of the real property is located within the commonwealth. If more than fifty percent of the fair market value of the real property is not located within any one state, then the receipts described in this subsection shall be included in the numerator of the receipts factor if the borrower is located in the commonwealth.(B) The determination of whether the real property securing a loan is located within the commonwealth shall be made as of the time the original agreement was made and any and all subsequent substitutions of collateral shall be disregarded.(iv) The numerator of the receipts factor includes interest and fees or penalties in the nature of interest from loans not secured by real property if the borrower is located in the commonwealth.(v) The numerator of the receipts factor includes net gains from the sale of loans. Net gains from the sale of loans includes income recorded under the coupon stripping rules of section 1286 of the Internal Revenue Code.(A) The amount of net gains, but not less than zero, from the sale of loans secured by real property included in the numerator is determined by multiplying such net gains by a fraction, the numerator of which is the amount included in the numerator of the receipts factor pursuant to paragraph (iii) and the denominator of which is the total amount of interest and fees or penalties in the nature of interest from loans secured by real property.(B) The amount of net gains, but not less than zero, from the sale of loans not secured by real property included in the numerator is determined by multiplying such net gains by a fraction the numerator of which is the amount included in the numerator of the receipts factor pursuant to paragraph (iv) and the denominator of which is the total amount of interest and fees or penalties in the nature of interest from loans not secured by real property.(vi) The numerator of the receipts factor includes 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, if the billing address of the card holder is in the commonwealth.(vii) The numerator of the receipts factor includes net gains, but not less than zero, from the sale of credit card receivables multiplied by a fraction, the numerator of which is the amount included in the numerator of the receipts factor pursuant to paragraph (vi) and the denominator of which is the taxpayer's total amount of interest and fees or penalties in the nature of interest from credit card receivables and fees charged to card holders.(viii) The numerator of the receipts factor includes all credit card issuer's reimbursement fees multiplied by a fraction, the numerator of which is the amount included in the numerator of the receipts factor pursuant to paragraph (vi) and the denominator of which is the taxpayer's total amount of interest and fees or penalties in the nature of interest from credit card receivables and fees charged to card holders.(ix) The numerator of the receipts factor includes receipts from merchant discount if the commercial domicile of the merchant is in the commonwealth. Such receipts shall be computed net of any card holder charge backs, but shall not be reduced by any interchange transaction fees or by any issuer's reimbursement fees paid to another for charges made by its card holders.(x)(A)(1) The numerator of the receipts factor includes loan servicing fees derived from loans secured by real property multiplied by a fraction, the numerator of which is the amount included in the numerator of the receipts factor pursuant to paragraph (iii) and the denominator of which is the total amount of interest and fees or penalties in the nature of interest from loans secured by real property.(2) The numerator of the receipts factor includes loan servicing fees derived from loans not secured by real property multiplied by a fraction, the numerator of which is the amount included in the numerator of the receipts factor pursuant to paragraph (iv) and the denominator of which is the total amount of interest and fees or penalties in the nature of interest from loans not secured by real property.(B) In circumstances in which the taxpayer receives loan servicing fees for servicing either the secured or unsecured loans of another, the numerator of the receipts factor shall include such fees if the borrower is located in the commonwealth.(xi) The numerator of the receipts factor includes receipts from sales, other than sales of tangible personal property, not otherwise apportioned under this section to the extent that those receipts would be included in the numerator of a corporation's sales factor as determined pursuant to subsection (f) of section 38. For purposes of the receipts sourced pursuant to this paragraph, paragraph (xiii) of subsection (d) shall not apply.[ Paragraph (xii) of subsection (d) effective for taxable years beginning on or after January 1, 2025. See 2023, 50, Sec. 47 as amended by 2023, 77, Sec. 194.](xii)(A) Interest, dividends, net gains, but not less than zero, and other income from investment assets and activities and from trading assets and activities shall be included in the receipts factor. Investment assets and activities and trading assets and activities include but are not limited to: investment securities; trading account assets; federal funds; securities purchased and sold under agreements to resell or repurchase; options; futures contracts; forward contracts; notional principal contracts such as swaps; equities; and foreign currency transactions. With respect to the investment and trading assets and activities described in clauses (1) and (2), the receipts factor shall include the amounts described in said clauses (1) and (2).(1) The receipts factor shall include the amount by which interest from federal funds sold and securities purchased under resale agreements exceeds interest expense on federal funds purchased and securities sold under repurchase agreements.(2) The receipts factor shall include the amount by which interest, dividends, gains and other income from trading assets and activities, including, but not limited to, assets and activities in the matched book, in the arbitrage book and foreign currency transactions, exceed amounts paid in lieu of interest, amounts paid in lieu of dividends, and losses from such assets and activities.[ Subparagraph (B) of paragraph (xii) of subsection (d) effective until January 1, 2025. For text effective January 1, 2025, see below.](B) The amount of interest, dividends, net gains, but not less than zero, and other income from investment assets and activities and from trading assets and activities to be attributed to the commonwealth and included in the numerator shall be determined by multiplying all such income from such assets and activities by a fraction, the numerator of which shall be the total receipts included in the numerator pursuant to paragraphs (i) through (x), inclusive, and paragraph (xii) and the denominator of which shall be all total receipts of the taxpayer included in the denominator other than interest, dividends, net gains, but not less than zero, and other income from investment assets and activities and from trading assets and activities.[ Subparagraph (B) of paragraph (xii) of subsection (d) as amended by 2024, 248, Sec. 14 effective January 1, 2025. See 2024, 248, Sec. 145. For text effective until January 1, 2025, see above.](B) The amount of interest, dividends, net gains, but not less than zero, and other income from investment assets and activities and from trading assets and activities to be attributed to the commonwealth and included in the numerator shall be determined by multiplying all such income from such assets and activities by a fraction, the numerator of which shall be the total receipts included in the numerator pursuant to paragraphs (i) through (x), inclusive, and the denominator of which shall be all total receipts of the taxpayer included in the denominator other than interest, dividends, net gains, but not less than zero, and other income from investment assets and activities and from trading assets and activities.(xiii) All receipts which would be assigned under this section to a state in which the taxpayer is not taxable shall be included in the numerator of the receipts factor, if the taxpayer's commercial domicile is in the commonwealth.[ Subsection (e) effective January 2, 2024 for taxable years beginning on or after January 1, 2025. See 2023, 50 Sec. 47 as amended by 2023, 77, Sec. 194.](e) If the provisions of subsections (a) to (d), inclusive, are not reasonably adapted to approximate the net income derived from business carried on within the commonwealth, a financial institution may apply to the commissioner, or the commissioner may require the financial institution, to have its income derived from business carried on within the commonwealth determined by a method other than that set forth in subsections (a) to (d), inclusive. Such application shall be made by attaching to its duly-filed return a statement of the reasons why the financial institution believes that subsections (a) to (d), inclusive, are not reasonably adapted to approximate its net income derived from business carried on within the commonwealth and a description of the method sought by it. A financial institution which so applies shall, upon receipt of a request therefor from the commissioner, file with the commissioner, under oath of its treasurer, a statement of such additional information as the commissioner may require.If, after such application by the financial institution, or after the commissioner's own review, the commissioner determines that the provisions of subsections (a) to (d), inclusive, are not reasonably adapted to approximate the financial institution's net income derived from business carried on within the commonwealth, the commissioner shall by reasonable methods determine the amount of net income derived from business activity carried on within the commonwealth. The amount thus determined shall be the net income taxable under section 2 and the foregoing determination shall be in lieu of the determination required by subsections (a) to (d), inclusive. If an alternative method is used by the commissioner hereunder, the commissioner, in their discretion, with respect to the 2 next succeeding taxable years, may require similar information from such financial institution if it shall appear that the provisions of subsections (a) to (d), inclusive, are not reasonably adapted to approximate for the applicable year the financial institution's net income derived from business carried on within the commonwealth and may again by reasonable methods determine such income.[ There are no subsections (f) and (g).](h) For purposes of this section, dividends that are deemed to be received from an entity, including amounts included in federal gross income pursuant to sections 951 or 951A of the Code, shall not be considered receipts.