Massachusetts lawmakers announced that they struck a deal on a comprehensive tax relief package, the details of which are to be announced in legislation to be filed next week. Some of the news media coverage is summarized below.
Old Colony law will continue to monitor developments and analyze the tax relief package for impact on our clients.
From Politico‘s Massachusetts Playbook:
Top Democratic legislative leaders say they’ve struck a deal on a package of tax breaks that “responsibly implements our shared goal of making Massachusetts more affordable, equitable, and competitive.” But we won’t know what’s in it until next week, when lawmakers plan to file and vote on the agreement that’s been nearly two years in the making.
Gov. Maura Healey said she’s “pleased” to see an accord. As she should be. This is a win for the governor, who made tax relief for families and businesses a centerpiece of her campaign last year. But how much of a win will depend on which proposals made the cut.
From the Boston Globe:
Massachusetts legislative leaders said Thursday they have reached an agreement on a tax relief bill after months of closed-door negotiations, signaling a wide-ranging package that has been debated in some form on Beacon Hill since 2022 is nearing the governor’s desk.
Legislative officials did not release details of the bill on Thursday evening, saying they intend to file and vote on the agreement at some point next week.
House Speaker Ronald Mariano and Senate President Karen E. Spilka said in a statement with their respective budget chairs that the bill “responsibly implements our shared goal of making Massachusetts more affordable, equitable, and competitive.”
“In an effort to provide meaningful financial relief to the Commonwealth’s residents and businesses, we are thrilled to announce that an agreement has been reached in principle that reconciles the differences between the House and Senate tax relief packages,” the leaders said.
Both chambers passed packages in the spring that include several similar elements, and the Legislature carved out roughly $580 million in this year’s state budget to absorb any relief or tax cuts.
The legislation both chambers advanced would double the tax credit for seniors who rent or own in Massachusetts, raise the deduction for renters from $3,000 to $4,000, and increase the state’s earned income tax credit — designed to help low-income families — from 30 percent to 40 percent of the federal credit.
The House and Senate also both proposed reshaping the Massachusetts estate tax, considered among the strictest in the country, by raising the tax threshold from $1 million to $2 million.
But they differed on key details, from the overall size of the package to their embrace of business-friendly tax cuts.
The House’s $1.1 billion bill, which was designed to take full effect in three years, included a provision to cut the tax rate on short-term capital gains — profits on investments held up to a year — from 12 percent to 5 percent. It’s a change Governor Maura Healey also pushed as part of her own $1 billion proposal, arguing it would help make the state more competitive.
The Senate rejected that measure, as well as another business-backed initiative that the House passed to adjust how state corporate taxes are calculated.
“We focused on individuals and families, not on corporations,” state Senator Michael J. Rodrigues, the chamber’s budget chief, said at the time.
The Senate plan, unlike the House, also sought to dramatically raisethe cap on a tax exemption designed to helpboost housing construction, while also raising the annual authorization on a low-income housing tax credit by $20 million.
The Senate’s bill did include a similar proposal to the House to combine two existing tax credits — for child care and dependent care — into one. But it would allow taxpayers to claim $310 per dependent, roughly half of the $600 cap the House and Healey sought.
But whether those, or other elements, survived the private negotiations is unclear. “We’ll have more details to share next week,” an aide to Mariano said Thursday night.
A tax relief deal has hung over the State House as one of, if not the, biggest item on the Legislature’s to-do list this fall. But when it could emerge was unclear after lawmakers broke for August without an agreement, and there’s been little movement on any major legislation since.
Lawmakers appeared primed to pass a package last year in former governor Charlie Baker’s final year in office. But they ultimately scuttled plans for permanent tax relief after officials became aware the state had triggered a 1986 tax-cap law for just the second time in nearly four decades, later prompting the Baker administration to send millions of taxpayers their cut of a $3 billion refund.
From WBUR:
Top state House and Senate Democrats have reached an agreement on a tax relief bill, and plan to send it to Gov. Maura Healey next week as an opening act for their fall session.
The deal, announced in a two-sentence statement Thursday evening without details on the actual compromise, could bring to end a debate that began nearly two years ago in an effort to put a dent in the state’s high cost of living and make Massachusetts more competitive for residents and businesses.
In July, legislators broke for a summer recess without a deal on tax relief, instead allotting $581 million to cover tax relief impacts in fiscal year 2024. The final package’s value could exceed $1 billion in the out years, or come in lower depending on which relief measures are swept into the consensus bill.
Competing House and Senate tax relief bills died in 2022 when the Legislature was blindsided as surging revenue collections required the state to give back about $3 billion in tax collections under a decades-old voter law. The huge rebates prompted Democrats to pull back their targeted tax relief plans.
In November, voters adopted a Constitutional amendment put on the ballot by Democrats that raises taxes by more than $1 billion on people and households with incomes above $1 million per year, monies that legislators quickly set about appropriating to make investments in public education and transportation.
This year, the House and Senate revisited their targeted tax relief bills, with Healey picking up the push from former Gov. Charlie Baker.
Competing bills again went into a six-person House-Senate conference committee. That panel was appointed in June, and has been negotiating in secret.
Just after 6 p.m. Thursday, the “agreement in principle” was announced in a statement issued by House Speaker Ronald Mariano and Senate President Karen Spilka, along with two of the six conferees – House Ways and Means Chairman Aaron Michlewitz and Senate Ways and Means Chairman Michael Rodrigues.
“In an effort to provide meaningful financial relief to the Commonwealth’s residents and businesses, we are thrilled to announce that an agreement has been reached in principle that reconciles the differences between the House and Senate tax relief packages. We look forward to filing and taking up the conference report next week, which responsibly implements our shared goal of making Massachusetts more affordable, equitable, and competitive,” the statement said.
In a statement just after 9 p.m., Gov. Healey said, “As I’ve said from day one, tax relief is essential for making Massachusetts more affordable, competitive and equitable. I’m pleased that the Legislature has taken this step and look forward to delivering urgently needed tax relief to Massachusetts residents and businesses.”
The tax relief package passed by the House this spring would cost the state $654 million initially and eventually rise to $1.1 billion. It called for stepping down the short-term capital gains tax rate from 12% to 5%, and and making a change designed to make Massachusetts more attractive to multi-state companies, which are subject to a three-factor apportionment based on location, payroll, and receipts to determine how much income is taxable in Massachusetts.
Meanwhile, Senate Democrats pushed through a $586 million package with some similarities to the House’s plan — increasing the rent cap deduction from $3,000 to $4,000, doubling the senior circuit breaker tax credit cap and increasing the earned income tax credit to 40% of the federal credit.
In addition to the Senate not adopting the single sales factor reform or the capital gains tax cut, the branches also differed over the size of the increase in the child and dependent tax credit. The House sought to raise the credit from $180 to $310 per dependent this fiscal year, and bump it up each year until it reaches $614 by fiscal 2027. The Senate bill would increase the credit to $310 per child with no future incremental increases.
The Senate had also adopted proposals to increase the Low-Income Housing Tax Credit annual authorization from $40 million to $60 million, extend the brownfields tax credit until 2028, increase Title V septic credits and dairy tax credits, and double lead paint abatement credits and the statewide cap on apprenticeship tax credits. Representatives didn’t include any of these smaller reform policies in their plan.
And from Boston 25:
BOSTON — Top Democrats on Beacon Hill said Thursday afternoon that they reached an agreement “in principle” on a tax relief package for “residents and businesses.”
In a joint statement, House Speaker Ronald Marinao, Senate President Karen Spilka, and Ways and Means Co-Chairs Rep. Aaron Michlewitz and Sen. Michael Rodrigues said they were “thrilled to announce that an agreement has been reached in principle that reconciles the differences between the House and Senate tax relief packages.”
“We look forward to filing and taking up the conference report next week, which responsibly implements our shared goal of making Massachusetts more affordable, equitable, and competitive,” the group said in a statement.
Details of the compromise were not immediately available Thursday evening but more details could surface next week when lawmakers file the bill.
In July, legislators broke for a summer recess without a deal on tax relief, instead allotting $581 million to cover tax relief impacts in fiscal year 2024. The final package’s value could exceed $1 billion in the out years, or come in lower depending on which relief measures are swept into the consensus bill.
Competing House and Senate tax relief bills died in 2022 when the Legislature was blindsided as surging revenue collections required the state to give back about $3 billion in tax collections under a decades-old voter law. The huge rebates prompted Democrats to pull back their targeted tax relief plans.
In November, voters adopted a Constitutional amendment put on the ballot by Democrats that raises taxes by more than $1 billion on people and households with incomes above $1 million per year, monies that legislators quickly set about appropriating to make investments in public education and transportation.
This year, the House and Senate revisited their targeted tax relief bills, with Healey picking up the push from former Gov. Charlie Baker.
In a statement Thursday night, Gov. Healey said, “As I’ve said from day one, tax relief is essential for making Massachusetts more affordable, competitive and equitable. I’m pleased that the Legislature has taken this step and look forward to delivering urgently needed tax relief to Massachusetts residents and businesses.”
This post is a part of Old Colony Law’s Estate Tax Updates.