House Passes Tax Reform Bill
OCTOBER 2, 2023
On Wednesday, September 27, 2023, Representative Bill Driscoll Jr. (D-Milton) joined his colleagues in passing H.4101, a tax reform bill. An Act to improve the commonwealth’s competitiveness, affordability, and equity is a $1 billion tax package that includes several new tax breaks and credits for MA residents.
Notable line items included in the bill prioritize timely changes for taxpayers.
Estate Tax Reforms
The legislation adjusts the Estate Tax threshold from $1 million to $2 million. This is a particularly important given the high home prices in Massachusetts.
Earned income Tax Credit (EITC)
Currently, the Massachusetts Earned income Tax Credit (EITC), is based off the federal EITC. This legislation allows qualifying residents to match up to 40% of the federal EITC, an increase from 30%.
The legislation also implements several new tax credits related to housing:
An increase from $1,200 to $1,400 for seniors who rent or own property in Massachusetts;
An increase in the deduction for renters from $3,000 to $4,000;
Gives municipalities the option to establish a property tax exemption for property that is rented at an affordable, yearly amount;
Increases the Housing Development Incentive Program (HDIP) tax credit from $10 million to $57 million for calendar year 2023, with a statewide cap of $30 million annually, thereafter – HDIP is a state tax credit for developers of affordable housing in Gateway Cities for qualified housing projects; and
Increases the tax credit for qualified low-income housing projects from $40 million to $60 million to incentivize development of affordable housing.
Doubles the Senior Circuit Breaker Credit
The Senior Circuit Breaker provides independent residents, aged 65 years or older, a property credit up to $2,400, double the previous maximum amount.
Dependents, Rainy Day Find Cap and More
The legislation also increases the child/dependent tax credit, adjusts corporation’s tax rate to base it on its share of its nationwide sales occurring in MA, reduces tax on capital gains on assets held for less than a year from 12% to 8.5%, adds sustainable transportation modes such as bicycles/electric bicycles as options for commuter deductions with a maximum deduction of $750 on any and all commuting expenses, increases the Stabilization – or Rainy Day – Fund cap from 15% to 25.5% of the budgeted revenues, and more.
62F and Lessons Learned from Last Year
If signed into law, a provision will be added to Chapter 62F that requires the Commissioner of the Department of Revenue to submit monthly reports indicating net state tax revenue for the current fiscal year, projections of new state tax revenue for the remainder of the fiscal year, and an estimate of if, and when, net state tax revenue may exceed the allowable amount for the fiscal year.
“This influential tax reform bill makes key investments to alleviate the financial burdens facing many residents across the Commonwealth, specifically aiming to get a handle on the rising cost of living,” said Driscoll. “Through the proposed array of tax credit adjustments, the Commonwealth ensures to put more money back in taxpayers’ pockets.”
The bill was adopted by the Senate on Thursday, September 28th and is now before the Governor for acceptance or vetoes.