The Massachusetts House of Representatives took steps to improve the economy last night by passing an economic development bill that limits the scope of combined tax reporting, creates a 3 percent capital gains tax rate for individual investors in Massachusetts-based start-ups, and provides all industries with the ability to extend a net operating-loss (NOL) from five to 20 years.
The bill also does away with the so-called “gift ban” that regulates interactions among physicians, and pharmaceutical and medical-device companies. At the same time, House members did not include several provisions that were counterproductive to economic growth, including changes to the law governing non-compete agreements in Massachusetts and a proposal to allow association health plans.
The final House vote was 145 to 4. A legislative conference committee must now reconcile elements of the House bill to the version passed by the state Senate in April.
Approval of the “water’s edge” provision for combined reporting has been a key objective for AIM and many of the commonwealth’s largest employers since the Legislature passed combined reporting in 2008. The House bill falls short of the changes sought by the business community, but still represents a step forward in efforts to preserve the jobs created by multi-state and multinational employers in Massachusetts.
The House water’s edge measure says that income earned by Massachusetts companies through foreign affiliates or subsidiaries does not have to be included in the company’s state taxable income as long as the income from the foreign affiliate is exempt from United States federal income tax by virtue of a federal income tax treaty. AIM originally sought a full water’s edge provision that would exclude all income from foreign affiliates, whether or not subject to federal tax treaties.
“Water’s edge may seem like dry tax policy, but it has significant implications for jobs here in Massachusetts,” said Richard C. Lord, President and Chief Executive Officer of AIM.
“The water’s edge, capital gains and net operating-loss provisions passed by the House are all meaningful steps in the battle to jump-start the job market. We urge the conference committee to maintain those provisions in the final legislation.”
House members declined to include proposals to reform the Unemployment Insurance system and to shift the Massachusetts Workforce Training Fund into a trust that would remove the program from the uncertainties of yearly budget deliberations. AIM is disappointed that the two measures were left out, but remains committed to finding solutions to the issues surrounding UI and the commonwealth’s flagship worker training fund.
AIM looks forward to working with House and Senate leadership and the conference committee to address the differences between the two branches, including:
• a provision to require state officials to issue small-business impact statements for all proposed new regulations;
• a provision to extend permits granted for projects now stalled for financing reasons; and
• a provision calling for a "sunset commission" to review and eliminate agencies, functions and rules of state government that are no longer necessary.