On Wednesday, October 4, 2023, Massachusetts Governor Maura Healey signed into law a package of state tax reforms,^[1] including but not limited to the following:

• The income tax rate for short-term capital gains (e.g., gains from the sale of capital assets held for 1 year or less) is reduced from 12% to 8.5%, effective for tax years beginning on or after January 1, 2023.
• The estate tax will only apply to estates larger than $2 million, and it will only apply to the amount of the estate exceeding $2 million, effective for the estates of decedents who have died on or after January 1, 2023. Previously, the estate tax applied to the entire amount of all estates that were larger than $1 million. For example, an estate of $3 million would have paid the estate tax with respect to the entire $3 million value under the old regime, and now that same estate will only pay the estate tax with respect to the $1 million by which it exceeds the new floor of $2 million.
• Businesses will only use a single sales/receipts factor to apportion their income for corporate income tax, effective as of January 1, 2025. Previously businesses also included payroll and property factors in their apportionment calculations.
• A married couple who files a joint federal income tax return must file a joint Massachusetts income tax return for that year, effective for tax years beginning on or after January 1, 2024. Some couples subject to the so-called millionaires’ tax on a combined basis had separately filed individual Massachusetts tax returns in an attempt to mitigate the impact of the millionaires’ tax.

If you would like to further discuss the ramifications of these Massachusetts tax law changes, please contact the Tax group.

This summary does not include or address every provision of the applicable tax laws discussed above. Any information contained in this communication is not intended as a thorough, in-depth analysis of specific issues. It is also not sufficient to avoid tax-related penalties. This has been prepared for informational purposes and general guidance only, and does not constitute legal advice. You should not act upon the information contained in this publication without obtaining specific legal advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and Hinckley Allen, its members, employees, and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

[1] House Bill 4104.