The $540 million supplemental budget on Gov. Charlie Baker’s desk includes some tax law changes sought by the Republican governor, but not all of them. Baker had proposed changes that his administration says would clarify the effects for state tax purposes of federal tax law changes made last year.
The Legislature agreed to his proposals governing global intangible low taxed income (GILTI) and foreign-derived intangible income (FDII). Baker’s proposals clarifying the state tax treatment of income from deemed repatriation for business corporations were also included, and the governor’s office and the Legislature are counting on $65 million in related new revenues in this year’s state budget, according to an administration official.
The bill lawmakers passed on Monday did not include the sections Baker requested regarding the state tax treatment of income from deemed repatriation for individuals. A Baker proposal unrelated to the federal tax law and governing sales tax registration for remote sellers was also not included in the bill, which remains under review, according to a Baker administration aide.
The bill (H 4930), which was passed without debate, did include GILTI and FDII sections, although it is not yet clear whether changes were made to those sections from what was originally proposed by Baker. The revenue impacts of those sections are also unclear.
According to a summary of Baker’s proposal, the GILTI measure would treat global intangible low-taxed income as Subpart F income for corporate excise tax purposes, making it a deemed dividend for state tax purposes that is eligible for the state’s 95 percent dividends received deduction.
For individual income taxes, the governor proposed to make GILTI income taxable for individuals, without deduction, which is consistent with the federal approach. For corporate excise tax purposes, the governor’s FDII sections proposed to decouple from the federal deduction, whose purpose is to incentivize multi-national corporations to return intangible assets to ownership in the U.S., according to the administration.
