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$34 Billion House Budget Contains Key Provisions for Employers

Posted by Brad MacDougall on Apr 25, 2013 1:02:00 PM

The Massachusetts House of Representatives last night passed a $34 billion Fiscal Year 2014 budget that increases spending by 4 percent, avoids increases to the income tax and ensures the privacy of companies that exercise their statutory right to use tax benefits.

BudgetThe blueprint includes between $500 million and $800 million that Beacon Hill lawmakers have already  passed to improve roads, bridges and mass transit. The transportation funding package includes $110 million from increasing the gasoline tax 3 cents per gallon and then indexing the levy to inflation; $161 million from a tax on computer services; $110 million from tobacco taxes; and $83 million from changes to utility classification and sales sourcing.

The House budget also includes several key provisions for employers, including one that would keep private the financial information of companies that use the Investment Tax Credit and the Research and Development Tax Credit. The bill removes two employer health-care contributions - the Fair Share Assessment and Medical Security assessment – while requiring that any increases to a new $50-per-worker Employer Responsibility Contribution for health care be approved by the Legislature.

House members approved the budget by a 127 to 29 margin.

“The House budget takes a prudent approach by reducing dependence on one-time revenues and not instituting dramatic tax policy changes. Such ongoing prudence has been an important element of Massachusetts’ positive standing with bonding rating agencies,” said John Regan, Executive Vice President of Government Affairs at Associated Industries of Massachusetts.

“Speaker Robert DeLeo and Ways and Means Committee Chair Brian Dempsey clearly understand that we remain in a time of slow job growth.  This budget and future legislative proposals must maintain a long-term approach that sustains vital government services while creating a predictable environment for investment and job creation.”

The budget now goes to the state Senate for debate in May. A conference committee will then attempt to craft a final bill in time for the start of the new fiscal year on July 1.

The financial privacy provision, contained in an amendment filed by Dempsey, removes the Investment Tax Credit and R&D Tax Credit from new requirements contained elsewhere in the budget that companies receiving credits file detailed financial information that would then be posted to the Web.  AIM maintained that the ITC and R&D credit should be exempted because both are granted as a matter of statutory right, while other tax benefits are individual credits granted through a public application process through a state agency.

AIM has supported moves to eliminate the Fair Share Assessment – created under the 2006 state health reform law – and Medical Security assessment because both will become unnecessary under federal health reform.  The original proposal to replace those two assessments with the Employer Responsibility charge generated concern because it gave a board of three unelected people broad authority to raise the assessment by up to 5 percent annually. The House budget would require that panel to submit proposed increases to Beacon Hill.

Fair Share mandates that employers with 11 or more full-time equivalent employees make a “fair and reasonable” contribution toward the health-care costs of employees or pay an assessment of up to $295 per employee per year. The Medical Security Program requires companies to contribute money to provide low-income unemployed people with health insurance.

An AIM-supported amendment that would have ended a three-year delay in implementation of the so-called FAS 109 deduction was withdrawn, though the House declined to go along with the administration's proposal to eliminate the deduction altogether. FAS 109 is an accounting standard that requires that financial statements reflect the tax consequences of all book/tax differences. The deduction was adopted as part of the 2008 debate over adoption of combined tax reporting in Massachusetts.

Employers also remain concerned about a section of the budget that impacts the tax audit procedures for entities such as partnerships and limited liability companies (LLCs).  The section would allow the Department of Revenue (DOR) to expand audits beyond the legal entity being audited and limit the taxpayer’s appeal options, potentially forcing companies into expensive litigation of issues at the Appellate Tax Board that should be resolved at a more cost-effective administrative level.

Dempsey told State House New Service that the bill addresses many of the priorities Gov. Deval Patrick highlighted in his budget plan in “a balanced a fiscally responsible way.”

Topics: Budget, Issues, Massachusetts House of Representatives, Taxes

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