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In 2008, Massachusetts enacted combined reporting for corporate income taxes. As tax practitioners are well aware, there are serious financial consequences to such changes, which go beyond the mere composition of the entities in the combined report. One such consequence is the financial accounting impacts on deferred tax assets and liabilities. When combined reporting was being considered in 2008, corporations were outspoken about the unintended financial consequences of such a change, and the Massachusetts legislature heard the cry.
When Massachusetts adopted combined reporting, similar to other states, it provided for relief to corporations impacted by the change and by the accounting requirements of FAS 109 brought on by the change. To alleviate such impacts, Massachusetts provided for relief to impacted taxpayers. The relief was to take the form of a deduction for groups which had an increased deferred tax liability as a result of the conversion. In general, the deduction is to be taken ratably over a seven year period, and was set to begin in 2012.
When the state's fiscal situation deteriorated after 2008, the commencement of the deduction was delayed. In H.B. 4200, the Massachusetts legislature has again delayed the commencement of the deduction for impacted corporations. Corporate taxpayers may now begin to take the deduction in 2014. Only time will tell if the state further delays the promised relief.
RELATED LINKS: For additional information on combined reporting and FAS 109 principles, see:
1-3 Bender's State Taxation: Principles and Practice § 3.12 - Apportionment and Combined/Consolidated Returns
1-1 FIN 48 Accounting for Uncertain Tax Positions 1.01 - Overview and Background
1-7A Applying GAAP and GAAS § 7A.11 - FASB Interpretation No. 48
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