Key Takeaways

  • The MA corporate tax rate (excise) combines an 8.0% income-based tax and a property-based tax of $2.60 per $1,000 of tangible property or net worth.
  • All corporations doing business in Massachusetts must pay the corporate excise tax, which includes both an income measure and a non-income measure.
  • A minimum corporate excise tax of $456 applies regardless of income.
  • The MA corp tax rate applies to both domestic and foreign corporations, with income apportioned to Massachusetts based on in-state property, payroll, and sales.
  • Certain industries such as banks, insurance, and utilities follow specialized excise structures.
  • Corporations may carry forward net operating losses for up to five years under current law.
  • Massachusetts does not impose a separate corporate alternative minimum tax.

Massachusetts corporate tax is applied to the taxable earnings of corporations that do business or are located in the state.

Introduction of Massachusetts Corporate Tax

Income resulting from businesses is taxed in just about every state, and Massachusetts is no exception.

Although some feel Massachusetts' reputation regarding taxes is up for debate, the nickname, Taxachusetts, indicates that the state is certainly known for its taxes.

With a flat 8 percent corporate tax rate, Massachusetts finds itself between the higher and lower rates applied by other states in the area.

Comparatively, federal corporate tax is applied marginally rather than at a flat rate, and the corporate tax rate of 15 other states surpasses that of Massachusetts.

Vermont and Maine apply a graduated system concerning rates; however, this application allows the taxes to rapidly exceed the 8 percent rate of Massachusetts.

Looking at the 8.2 percent rate of New Hampshire, Massachusetts' rate seems quite reasonable in comparison.

Additionally, a corporate alternative minimum tax is not required in Massachusetts like it is in Maine and New Hampshire.

The Massachusetts corporate tax is like an individual tax, except it is applied to businesses and uses a bracketed structure.

Understanding the Components of the MA Corporate Excise Tax

The Massachusetts corporate excise tax—often referred to as the MA corporate tax rate—is composed of two main parts:

  1. Income Measure: A tax of 8.0% applied to the corporation’s taxable net income apportioned to Massachusetts.
  2. Non-Income Measure: A tax of $2.60 per $1,000 of either the corporation’s taxable tangible property or net worth in the state, whichever applies.

Corporations must calculate both measures and pay the greater of the two or the minimum excise tax of $456, whichever is higher.

The tax base closely follows federal taxable income, adjusted for Massachusetts-specific additions and deductions such as interest on state obligations or certain depreciation allowances.

Filing the Annual Tax Return

Corporations are required to file an annual return like individual taxpayers and are also authorized to apply deductions from the following expenses:

  • Salaries paid
  • Cost of goods sold
  • Other appropriate business costs

The purpose of the alternative minimum tax system is to work in conjunction with the standard system, making sure that a minimum amount of taxes is paid each year by taxpayers. The alternative minimum amount is paid if it is greater than the amount applied under the standard system.

Legal business types are taxed differently:

  • Corporations: Complete corporate income tax.
  • S corporations: Apply state tax to personal returns.
  • Limited Liability Companies (LLCs): Apply state tax to personal returns.
  • Partnerships: Apply state tax to personal returns.
  • Sole Proprietorships: Apply state tax to personal returns.

The rates applied to corporate and personal income differ from state to state.

Corporate rates usually vary between 4 and 9 percent and are usually flat, while personal rates change with income and can vary between 0 and 9 percent or more.

The following four states do not apply a corporate income tax:

  • Nevada
  • South Dakota
  • Washington
  • Wyoming

The following seven states do not apply a personal income tax:

  • Nevada
  • South Dakota
  • Washington
  • Wyoming
  • Alaska
  • Florida
  • Texas

The following states only apply tax earnings from interest and dividends:

  • New Hampshire
  • Tennessee

Annual Filing Deadlines and Payment Structure

Corporate excise returns must be filed by the 15th day of the third month after the close of the corporation’s fiscal year, typically March 15 for calendar-year filers. Corporations must make quarterly estimated payments if their annual tax liability exceeds $1,000.

Massachusetts aligns closely with federal accounting rules—corporations use the same tax year and accounting methods as reported to the IRS.

Net operating losses can be carried forward for up to five years, providing limited relief for corporations with fluctuating income. However, loss carrybacks are not permitted under Massachusetts law.

Potential Additional Taxes

In addition to corporate and personal taxes, some states apply a franchise or privilege tax to certain businesses for the right to do business in that state.

Just like state taxes, a franchise tax is based on the type of business, but are often either applied as a flat rate or calculated using the net value of the business.

Specifically, Massachusetts institutes a corporate excise tax that takes into consideration both a business's earnings and net value.

This corporate excise tax is usually applied to the following business types:

  • Corporations
  • S corporations

The remaining unlisted business types do not have an entity level tax.

Regardless of the type of business, any personal income received from a business must be included on the individual state return.

Massachusetts adheres to the federal application of classifying businesses:

  • If a business files federally as a corporation, then it is considered a corporation in Massachusetts for tax purposes.
  • Businesses that are not incorporated can choose to file as either an individual or a corporation.

Industry-Specific Corporate Tax Variations

Certain corporations are subject to alternative excise structures:

  • Financial institutions and security corporations may be taxed differently, reflecting their specialized business activities.
  • Insurance companies pay a separate excise tax on premiums rather than income.
  • Utility companies are also governed by unique excise rules that account for their regulated operations.

These variations ensure that corporations in industries with distinct revenue structures are taxed fairly relative to their economic footprint in Massachusetts.

Application of Corporate Excise Tax

Both foreign and domestic corporations in Massachusetts are usually subject to the corporate excise tax.

Corporate excise taxes must be filed by the 15th day of the third month following the end of the corporation's fiscal year.

Although it is not required unless a business earns more than $100,000 in revenues per year, Massachusetts Department of Revenue prefers that corporations file online.

How the MA Corporate Tax Rate Applies to Multistate Corporations

Massachusetts uses a three-factor apportionment formula—based on property, payroll, and sales—to determine the portion of income subject to Massachusetts tax for corporations doing business in multiple states.

  • Property Factor: The ratio of in-state property to total property.
  • Payroll Factor: The ratio of Massachusetts payroll to total payroll.
  • Sales Factor: The ratio of in-state sales to total sales.

Corporations operating both within and outside Massachusetts must apply this apportionment to calculate income taxable in the state. In certain cases, businesses may petition for alternative apportionment methods if the standard formula does not fairly represent their activities.

Foreign corporations with property or business activities in Massachusetts are subject to the excise tax even if headquartered elsewhere.

How the Location Affects Taxes

Businesses that provide products or services to other states may have ties to more than one state requiring that they pay taxes in those states, as well as their home state.

Local Apportionment and Interstate Tax Coordination

Because the MA corp tax rate interacts with other states’ corporate tax systems, multistate corporations must navigate potential double taxation risks. Massachusetts mitigates this by allowing credit for taxes paid to other jurisdictions on the same income, where applicable.

Additionally, income derived from business activities within the state must be fairly apportioned to Massachusetts, ensuring the tax burden reflects the corporation’s in-state presence and operations.

Local jurisdictions in Massachusetts do not impose additional corporate income taxes, but corporations remain responsible for municipal property taxes on real and tangible personal property used in business.

Frequently Asked Questions

1. What is the current MA corp tax rate?

The Massachusetts corporate excise tax combines an 8.0% income-based rate and a $2.60 per $1,000 property/net worth rate, with a minimum excise of $456.

2. Which corporations must pay the Massachusetts corporate excise tax?

Both domestic and foreign corporations doing business or owning property in Massachusetts are subject to the tax.

3. How does Massachusetts apportion income for multistate corporations?

The state uses a three-factor formula (property, payroll, and sales) to determine taxable income attributable to Massachusetts.

4. Are there special rules for S corporations or LLCs?

Yes. S corporations and LLCs are generally taxed through their owners’ personal returns, but larger S corporations may still pay an excise tax on income.

5. What deductions or credits are available to reduce the MA corp tax rate?

Corporations may deduct standard business expenses, claim certain investment tax credits, and apply net operating loss carryforwards for up to five years.

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