November 13, 2012

New Massachusetts Requirement for Manufacturing Corporations to Obtain Local Property Tax Exemptions on Machinery, Directive 12-5

Contributor Paul Graney, Partner, Tax & Business

New Massachusetts Requirement for Manufacturing Corporations to Obtain Local Property Tax Exemptions on Machinery, Directive 12-5 Tax & Business

Massachusetts statute provides a local property tax exemption on manufacturing machinery for any entity classified as a manufacturing corporation by the Department of Revenue. This was previously a onetime application and once granted, the classification and thus the local property tax exemption, remained in place until revoked by the DOR. Now an annual certification will be required on the DOR Webfile for business website. The DOR will also be using this process to remove any entities that are not taxed as corporations federally from the list and potentially resulting in a denial of the local property tax exemption for such entities, such as single member LLC’s.

Language from the Directive is below:

Each year, pursuant to G.L. c. 58, § 2, the Commissioner issues an Annual List of Corporations Subject to Taxation in Massachusetts (the “List”) as of January 1 of that year under G.L. c. 59, §§ 60A, and 63, which assists in the important determination as to which corporations are entitled to local property tax benefits. This Directive announces a revised procedure that qualifying entities must fulfill in order to be included on the List. This revised procedure is intended to reduce the potential for errors in the compilation of the List, which can have significant adverse consequences for individual taxpayers as well as for cities and towns.

Effective January 1, 2013, any entity seeking to be included on the List must file an Annual Certification of Entity Tax Status through Webfile for Business by April 1st of the calendar year for which the inclusion on the List is sought (i.e., with respect to the entity’s status as a corporation as of January 1st of such year).

Failure to electronically file the certification by April 1st may result in that entity not appearing on the List for that year, potentially resulting in the loss of local property tax benefits that inure to corporations that are properly included on the List unless a timely appeal is filed.

Any entity that is treated as a disregarded entity or a partnership or is otherwise not treated as a corporation for federal income tax purposes (other than a QSub, which has a special status)[3] is not entitled to appear on the List, and is consequently not entitled to tax exemptions afforded to corporations under G.L. c. 59, §5, cl. 16 (2 & 3).[4] Any such entity that previously appeared on the List will be removed.

Should you have any questions about this Tax Flash, please contact your Marcum Tax Advisor.

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