Massachusetts has just enacted new legislation that affects the MA corporate excise imposed upon both subchapter C corporations as well as that imposed upon subchapter S corporations. The following is a very brief overview of the existing law as well as the upcoming changes.

Existing Law
Massachusetts imposes a subchapter C corporation entity level income tax at the rate of 9.5%. Subchapter S corporations with gross receipts less than $6 million do not pay the net income measure of the MA corporate excise. Subchapter S corporations with gross receipts of $6 million to $9 million currently pay MA corporate excise on the net income earned by the subchapter S corporation at the rate of 3%. Subchapter S corporations with gross receipts of $9 million or more pay the net income measure of the corporate excise at the rate of 4.5%.

New Legislation
The following illustrates the reduction in the net income measure of the MA corporate excise for taxable years after this year (with the applicable effective dates as indicated below):
MA Corporate Excise Changes

Note that with respect to taxable years beginning after 12/31/08, the subchapter S corporation entity level tax rate for subchapter S corporations with gross receipts of $9M+ is computed by deducting from the subchapter C corporation net income tax rate the applicable personal income tax rate (currently 5.3%). The applicable rate for subchapter S corporations with gross receipts of $6M-$9M is equal to 2/3 of the rate applicable to subchapter S corporations with gross receipts greater than or equal to $9M.