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How will MA DOR respond to the mandatory repatriation tax?

State tax obligations may change in response to the passage of the Tax Cuts and Jobs Act (TCJA). State tax law generally responds to changes in the federal tax code in one of four ways: it will change state tax laws through rolling conformity, annual conformity, fixed conformity or selective conformity.

Four forms of conformity, explained

States that adopt a rolling method of conformity with the federal tax law automatically adopt the tax code as it is revised. These states may specifically decouple, or choose not to follow, specific provisions. An annual conformity system generally results in adoption of any changes at a predetermined date on a yearly basis while the last two methods, fixed and selective conformity, involve the state essentially picking and choosing which regulations to adopt.

Massachusetts uses the rolling method of adoption.

Provision decoupling, Massachusetts chooses not to conform with mandatory repatriation tax

The Massachusetts Department of Revenue (DOR) recently released a publication that provides some guidance on how the DOR will respond to the mandatory repatriation tax outlined in the TCJA. Ultimately, the state has decoupled from this provision. There are some situations where a business will need to report deemed repatriated income on state tax returns. The state site provides guidance.

The state has also announced it will waive any penalties from underpayments that were the result of this tax provision.

Navigation difficult, get legal counsel if audited

A failure to abide by these changes could result in an audit. Entrepreneurs that find their business the subject of an investigation by the Internal Revenue Service (IRS) are wise to take action to protect their interests. An attorney experienced in these matters can help.

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