Current through Register 1531, September 27, 2024
(1)
Statement of Purpose, Effective Dates, Outline.
(a)
Purpose. The
purpose of 830 CMR 63B.2.2, is to describe the procedures and requirements for
corporations to make payments of estimated tax, under M.G.L. c. 63B,
§§ 2 through 10, for taxable years ending on or after December 31,
1989.
(b)
Effective
Dates. 830 CMR 63B.2.2 applies to taxable years ending on or after
December 31, 1989. For taxable years ending before December 31, 1989, the
provisions of St. 1989, c. 39 are not applicable. See St.
1989, c. 36, § 6; St. 1990, c. 121, § 80.
(c)
Outline of
Topics. In order to facilitate the use of 830 CMR 63B.2.2, 830 CMR
63B.22(1)(c) lists the sections contained in 830 CMR 63B.2.2.
(1) Statement of Purpose, Effective Dates,
Outline.
(2) Definitions.
(3) General Rule.
(4) Estimated Tax Payments.
(5) Special Estimated Tax Rules for Taxpayers
with Less than Ten Employees in the First Taxable Year of 12 Months.
(6) Estimated Tax Payments for Short Taxable
Year Taxpayers.
(7) Estimated Tax
Payments Allowed as Credit against Tax.
(8) Addition to Tax for Underpayment of
Estimated Tax.
(9) Transition Rule
for First and Second Estimated Tax Payments in the Taxable Year Ending on or
after December 31, 1989.
(10)
Officers' Personal Liability and Penalty.
(2)
Definitions. For
the purpose of 830 CMR 63B.2.2, the following terms shall have the following
meanings:
Amount of Underpayment, the excess of
the amount required in any estimated tax payment over the amount, if any, of
the estimated tax payment made on or before the due date of the estimated tax
payment.
Calendar Year, any taxable year
beginning on January 1 and ending on December 31 of the same year. For the
purposes of 830 CMR 63B.2.2(2): Calendar Year, any
52-53 week calendar year permitted under I.R.C. s. 441(f) is a 12 month
calendar year; a taxpayer with a permitted 52-53 week calendar year should make
estimated tax payments as if its taxable year began on January 1 and ending on
December 31.
Commissioner, the Commissioner of
Revenue or the Commissioner's designee duly authorized to perform the duties of
the Commissioner.
Corporation, every corporation,
company, or association subject to taxation under M.G.L. c. 63 or under any
special act that is in lieu of the provisions of M.G.L. c.
63.
Credit against Tax, the sum of all
estimated tax payments made between the beginning of the taxable year and the
end of the taxable year plus any overpayment from the preceding taxable year
that the taxpayer elected to apply against the current taxable year's estimated
tax.
Current Taxable Year, the current or
present period for which the taxpayer is required to file a return with the
federal government, as defined under M.G.L. c. 63, § 1, § 30(6),
§ 30(12), or § 52A(1)(c).
Department, the Department of
Revenue.
Employee, as defined in M.G.L. c. 62B,
§ 1.
Estimated Tax, the amount that a
corporation estimates as the taxes due for the current taxable year under
M.G.L. c. 63, any act in lieu thereof, or any act in addition
thereto.
Estimated Tax Payment, the portion of
tax due and paid on or before any of the required due dates for payment.
Fiscal Year, any taxable year of
12months beginning on a date other than January 1 and ending on a date other
than December 31 of the same calendar year. For purposes of this definition,
any 52-53 week fiscal year permitted under I.R.C. § 441(f) is a 12 month
fiscal year; a taxpayer with a permitted 52-53 week fiscal year should make
estimated tax payments as ifits taxable year beganonthe first of the calendar
month closest to the actual first day of the taxable year and ended on the last
day of the calendar month closest to the actual last day of the taxable
year.
Period of Underpayment, the period
from the due date of the estimated tax payment to the earlier of the following
two dates: the due date of the return as required under M.G.L. c. 62C, §
11 or § 12, or, with regard to any amount of underpayment, the date the
amount of underpayment is paid.
Preceding Taxable Year, the taxable
year ending immediately before the beginning of the current taxable
year.
Present Minimum Corporate Excise, the
minimum corporate tax of $456, or the current applicable amount, as imposed by
M.G.L. c. 63, §§ 32, 39, as amended by St. 1969, c. 546, § 18,
and St. 1988, c. 202, §§ 14, 18, or any act in addition thereto, or
the minimum corporate excise of $228, or the current applicable amount, as
imposed by M.G.L. c. 63, § 38B.
Required Annual Payment, the amount of
estimated tax required to be paid, as determined under M.G.L. c. 63B, §
3(c)(i) through (iii), as amended by St. 1989, c. 39, § 1, and under 830
CMR 63B.2.2(8)(b).
Short Taxable Year, any taxable year
of less than 12 calendar months that is not a 52-53 week calendar year or
fiscal year permitted under I.R.C. § 441(f).
Tax, the tax required to be paid under
M.G.L. c. 63, any act in lieu thereof, or any act in addition
thereto.
Tax Shown on the Return, tax liability
shown on the return that is originally filed by the taxpayer.
Taxable Year, the period for which the
taxpayer is required to file a return with the federal government, as defined
under M.G.L. c. 63, § 1, § 30(6), § 30(12), or §
52A(1)(c).
Taxpayer, any corporation subject to
taxation under M.G.L. c. 63, any act in lieu thereof, or in
addition thereto.
(3)
General Rule. Any taxpayer that reasonably expects
that its tax in any taxable year, as shown on its return, will exceed $1,000
must make estimated tax payments.
(4)
Estimated Tax
Payments.
(a)
Requirement ofEstimated TaxPayments. A taxpayer that
reasonably expects that its tax for any taxable year, as shown on its return,
will exceed $1,000 must make estimated tax payments of its required annual
payment.
(b)
Number of
payments and amounts to be included in estimated tax payments.
1.
Genera l. A
taxpayer that reasonably expects that its tax for any taxable year, as shown on
its return, will exceed $1,000 must make four estimated tax payments of its
required annual payment in any taxable year, except as otherwise provided in
830 CMR 63B.2.2(4)(c) and 830 CMR 63B.2.2(5).
2. Due dates and amounts of payments to be
made in four installments.
a. The first
installment is due on or before the 15th day of the third month of the taxable
year and should be equal to 40% of its required annual payment, except as
otherwise provided in 830 CMR 63B.2.2(4)(c).
b. The second installment is due on or before
the 15th day of the sixth month of the taxable year
and should be equal to 25% of its required annual payment, except as otherwise
provided in 830 CMR 63B.2.2(4)(c).
c. The third installment is due on or before
the 15th day of the ninth month of the taxable year
and should be equal to 25% of its required annual payment, except as otherwise
provided in 830 CMR 63B.2.2(4)(c).
d. The fourth installment is due on or before
the 15th day of the 12th
month of the taxable year and should be equal to the remaining 10% of its
required annual payment, except as otherwise provided in 830 CMR 63B.2.2
(4(c).
3.
Election to Make Early Estimated Tax Payments. At the
election of the taxpayer, the taxpayer may make any estimated tax payment
before the due date.
(c)
Exceptions to Requirement of Four Estimated Tax
Payments.
1.
Genera l. The first installment is due on or before
the 15th day of the third month of the taxable year,
unless after the last day of the second month of the taxable year or as
otherwise provided in 830 CMR 63B.2.2(5) the taxpayer reasonably estimates that
its tax, as shown on its return, will exceed $1,000.
2.
Requirement to Make Three
Estimated Tax Payments. If after the last day of the second month
of the taxable year and before the first day of the sixth month of the taxable
year the taxpayer reasonably estimates that its tax, as shown on its return,
will exceed $1,000, the first installment is due on or before the
15th day of the sixth month of the taxable year and
should be equal to 65% of its required annual payment, the second installment
is due on or before the 15th day of the ninth month
of the taxable year and should be equal to 25% of its required annual payment,
and the third installment is due on or before the
15th day of the 12th
month of the taxable year and should be equal to the remaining 10% of its
required annual payment.
3.
Requirement to Make Two Estimated Tax Payments. If
after the last day of the fifth month of the taxable year and before the first
day of the ninth month of the taxable year the taxpayer reasonably estimates
that its tax, as shown on its return, will exceed $1,000, the first installment
is due on or before the 15th day of the ninth month
of the taxable year and should be equal to 90% of its required annual payment
and the second installment is due on or before the
15th day of the 12th
month of the taxable year and should be equal to the remaining 10% of its
required annual payment.
4.
Requirement to Make one Estimated Tax Payment. If
after the last day of the eighth month and before the first day of the
12th month of the taxable year the taxpayer
reasonably estimates that its tax, as shown on its return, will exceed $1,000,
the single installment is due on or before the 15th
day of the 12th month of the taxable year and should
be equal to 100% of its required annual payment.
(5)
Special Estimated Tax Rules
for Taxpayers with Fewer than Ten Employees in the First Taxable Year of 12
Months.
(a)
Genera l. A taxpayer with fewer than ten employees for
the entirety of its first taxable year of 12 months is not subject to the
percentage schedule for estimated tax payments described in 830 CMR
63B.2.2(4)(b) and (c) and may make its estimated tax payments in accord with
the percentage schedules described in 830 CMR 63B.2.2(5)(b) and (c).
(b)
Due Dates and Amounts of
Payments to be Made in Four Installments.
1. The first installment is due on the
15th day of the third month of the taxable year and
should be equal to 30% of its required annual payment, except as otherwise
provided in 830 CMR 63B.2.2(5)(c).
2. The second installment is due on the
15th day of the sixth month of the taxable year and
should be equal to 25% of its required annual payment, except as otherwise
provided in 830 CMR 63B.2.2(5)(c).
3. The third installment is due on the
15th day of the ninth month of the taxable year and
should be equal to 25% of its required annual payment, except as otherwise
provided in 830 CMR 63B.2.2(5)(c).
4. The fourth installment is due on the
15th day of the 12th
month of the taxable year and should be equal to the remaining 20% of its
required annual payment, except as otherwise provided in 830 CMR
63B.2.2(5)(c).
(c)
Exceptions to Requirement of Four Estimated Tax
Payments.
1.
General. The first installment is due on the
15th day of the third month of the taxable year,
unless after the last day of the second month of the taxable year the taxpayer
reasonably estimates that its tax will exceed $1,000.
2.
Requirement to Make Three
Estimated Tax Payments. If after the last day of the second month
of the taxable year and before the first day of the sixth month of the taxable
year the taxpayer reasonably estimates that its tax will exceed $1,000, the
first installment is due on or before the 15th day
of the sixth month of the taxable year and should be equal to 55% of its
required annual payment, the second installment is due on or before the
15th day of the ninth month of the taxable year and
should be equal to 25% of its required annual payment, and the third
installment is due on the 15th day of the
12th month of the taxable year and should be equal
to the remaining 20% of its required annual payment.
3.
Requirement to Make Two
Estimated Tax Payments. If after the last day of the fifth month
of the taxable year and before the first day of the ninth month of the taxable
year the taxpayer reasonably estimates that its tax will exceed $1,000, the
first installment is due on or before the 15th day
of the ninth month of the taxable year and should be equal to 80% of its
required annual payment and the second installment is due on or before the
15th day of the 12th month of the taxable year and
should be equal to the remaining 20% of its required annual payment.
4.
Requirement to Make one
Estimated Tax Payment. If after the last day of the eighth month
and before the first day of the 12th month of the
taxable year the taxpayer reasonably estimates that its tax will exceed $1,000,
the single installment is due on or before the 15th
day of the 12th month of the taxable year and should
be equal to 100% of its required annual payment.
(d)
Conditions for Eligibility
for Special Rules. A taxpayer with fewer than ten employees for
the entirely of its first taxable year of 12 months may use the percentage
schedules outlined in 830 CMR 63B.2.2(5)(b) and (c) only under the following
conditions:
1. The taxpayer may not employ
more than nine employees at any time during its first taxable year of 12
months; and
2. The taxpayer, for
purposes of determining the number of its employees, must count all employees,
regardless of their location, both inside and outside Massachusetts.
(6)
Estimated Tax Payments for Short Taxable Year
Taxpayers.
(a)
Genera l. Any taxpayer with a short taxable year of
four calendar months or more and that on or before the first day of the last
month of the taxpayer's short taxable year reasonably expects that its tax, as
shown on its return, in the short taxable year will exceed $1,000 must make
estimated tax payments. The Commissioner will not impose an addition to tax for
under payment of estimated tax against any taxpayer with a short taxable year
of less than four calendar months; taxpayers with a short taxable year of less
than four calendar months must file their returns and pay their tax in accord
with the provisions of M.G.L. c. 62C, §§ 11, 12.
(b)
Due Dates and Amounts to be
Included in Estimated Tax Payments.
1.
Short Taxable Years of Ten to
11 Months. Taxpayers with short taxable years of ten to 11 months
should make their first estimated tax payment equal to 30% of the tax on the
15th day of the fourth month of the short taxable
year, their second estimated tax payment equal to 25% of the tax on the
15th day of the sixth month, their third estimated
tax payment equal to 25% of the tax on the 15th day
of the ninth month, and their fourth estimated tax payment equal to 20% on the
15th day of the last month.
2.
Short Taxable Years of Seven
to Nine Months. Taxpayers with short taxable years of seven to
nine months should make their first estimated tax payment equal to 30% of the
tax on the 15th day of the fourth month of the short
taxable year, their second estimated tax payment equal to 25% of the tax on the
15th day of the sixth month, and their third
estimated tax payment equal to 45% of the tax on the
15th day of the last month.
3.
Short Taxable Years of Five to
Six Months. Taxpayers with short taxable years of five to six
months should make their first estimated tax payment equal to 30% of the tax on
the 15th day of the fourth month of the short taxable year and their second
estimated tax payment equal to 70% of the tax on the 15th day of the last
month.
4.
Short Taxable
Years of Four Months. Taxpayers with short taxable years of four
months should make their single estimated tax payment equal to 100% of the tax
on the 15th day of the month following the close of
the short taxable year.
(c)
Treatment of Partial
Months. For the purposes of the due dates for estimated tax
payments in 830 CMR 63B.2.2(6)(b), the Commissioner will treat any short
taxable year of a certain number of full calendar months plus a partial
calendar month as if the partial month were a full calendar month.
Example 1: Osgood Co., a calendar year
taxpayer, was purchased during a hostile takeover and closed its taxable year
on June 15, 1989. Its next taxable year ended December 31, 1989. For purposes
of calculating estimated tax payments due dates, the taxable year ending June
15, 1989, is a short taxable year of six months, and the taxable year beginning
June 16, 1989, and ending December 31, 1989, is a short taxable year of seven
months. Osgood's estimated tax payments for the short taxable year ending June
15, 1989, are due on April 15, 1989, and June 15, 1989. Osgood's estimated tax
payments for the short taxable year beginning June 16, 1989, and ending
December 31, 1989, are due on September 15, 1989, November 15, 1989, and
December 15, 1989.
(d)
Election to Make Early Estimated Tax Payments. At the
election of the short taxable year taxpayer, the taxpayer may make any
estimated tax payment before the due date of the installment.
(7)
Estimated Tax
Payments Allowed as Credit against Tax.
(a)
Genera l. The
Commissioner will allow all payments made under M.G.L. c. 63B for any taxable
year as a credit to the taxpayer for the tax under M.G.L. c. 63 for the
taxpayer's current taxable year. Under M.G.L. c. 62C, § 79(c), any amounts
paid as estimated tax for any taxable year under M.G.L. c. 63B will be deemed
to have been paid on the last day prescribed for filing the return for that
taxable year, determined without regard to any extension of time for filing the
return.
(b)
Application
of Tax Refunds to Estimated Tax. Tax refunds due to the taxpayer
under M.G.L. c. 62C, § 36, for the preceding taxable year may be applied
as payments of estimated tax for the current taxable year, if the taxpayer
specifies on its return for the preceding taxable year that it wishes the
refund so applied. See 830 CMR 63B.2.2(8)(c) regarding application of tax
refunds to estimated tax and the imposition of additions to tax.
(c)
Carryover Credits or
Deductions not Allowed. Carryover credits or deductions for any
preceding taxable year are not allowed as credits against estimated
tax.
(8)
Addition to Tax for Underpayment of Estimated Tax.
(a)
Genera l. If a
taxpayer is required under M.G.L. c. 63B, § 2, and under 830 CMR
63B.2.2(4) through (6) to make estimated tax payments of its required annual
payment and fails to make the payments, the Commissioner will impose an
addition to tax upon the amount of the underpayment for the period of the
underpayment. For underpayments prior to January 1, 1993, an addition to tax of
18% per year will be imposed. For underpayments outstanding or coming into
existence on or after January 1, 1993, an addition to tax at the rate
established under M.G.L. c. 62C, § 32 will be imposed.
(b)
Standards for Calculation of
a Taxpayer's Required Annual Payment. The Commissioner will not
impose an addition to tax for underpayment of an estimated tax payment if the
amount of the payment made on or before the due date equals the required
percentage of the taxpayer's required annual payment as described in 830 CMR
63B.2.2(4) through (6), in accord with the following rules:
1.
90% of the Tax Shown on the
Return for the Current Taxable Year. The Commissioner will not
impose an addition to tax for underpayment of estimated tax if the estimated
tax payments for the current taxable year equal or are greater than 90% of the
tax shown on the return for the current taxable year or, if no return is filed,
90% of the tax liability as finally determined for the current taxable
year.
2.
100% of the
Tax Shown on the Return for the Preceding Taxable Year.
a.
General. The
Commissioner will not impose an addition to tax for underpayment of estimated
tax if the estimated tax payments for the current taxable year equal or are
greater than 100% of the tax shown on the return for the preceding taxable
year, except as provided in 830 CMR 63B.2.2(8)(b)2.b.
b.
Exception not Applicable to
Large Corporations.
i. The
exception provided in 830 CMR 63B.2.2.(8)(b)2.a. does not apply to a taxpayer
that is a large corporation, as defined in I.R.C. § 6655(g)(2), as amended
on January 1, 1989, and in effect for the taxable year.
ii. A large corporation may use the exception
provided in 830 CMR 63B.2.2(8)(b)2.a. for the purposes of making its first
estimated tax payment as long any reduction in the first estimated tax payment
caused by the use of this exception is made up by increasing the amount of the
next installment by the amount of the reduction.
iii. Any taxpayer that is a large corporation
for purposes of determining any addition to federal tax under I.R.C. §
6655 in any taxable year is also deemed to be a large corporation for purposes
of the exception in 830 CMR 63B.2.2(8)(b)2.a. for the same taxable year. The
rules for component members of a controlled group of corporations under I.R.C.
§§ 1561, 6655(g)(B)(ii), apply for determining whether a corporation
is a large corporation for Massachusetts purposes.
iv. The Commissioner will not impose the
addition to tax for underpayment from large corporations if the large
corporation can show that the amount of any payment made on or before the due
date equaled the required percentage of the large corporation's tax for the
current taxable year, as described in 830 CMR 63B.2.2(8)(b)1., without regard
to any extraordinary, non-recurring event or circumstances that occur after the
due date for the estimated tax payment, so long as the estimated tax payment
due immediately following the extraordinary event includes the amount of the
increase due to the extraordinary event.
v. The Commissioner will impose the addition
for tax for underpayment if the large corporation did not pay the applicable
percentage of tax for any estimated tax payment because of seasonal, cyclical,
or otherwise predictable events in the current taxable year of the large
corporation.
3.
90% of the Tax for the Current Taxable Year or, if no Return is
Filed, 90% of the Tax for the Current Taxable Year Determined Using the Income
Apportionment Percentage for the Preceding Taxable Year.
a.
Return is Filed.
When a return is filed, the Commissioner will not impose an addition to tax for
underpayment of estimated tax if the estimated tax payments for the current
taxable year equal or are greater than 90% of the tax liability as finally
determined for the current taxable year.
If an addition to tax for underpayment of estimated tax is
imposed at the time a return is filed because the taxpayer did not come within
the safe harbor of either 830 CMR 63B.2.2(8)(b)1 or 830 CMR 63B.2.2(8)(b)2. but
subsequently - for example, after an abatement, or credit given on an audit, or
reduction in tax resulting from a federal change - the taxpayer's estimated tax
payments for that year equal or are greater than ninety percent of the
taxpayer's revised tax liability for that year, then the previously imposed
addition to tax will also be abated.
Example: Company A makes estimated tax
payments during 2001 of$ 800 and files a 2001 corporate excise return showing a
tax liability of $1,000. Company A's 2000 return showed a tax liability of $
900. Because Company A does not meet either the 90% of this year's tax safe
harbor or the 100% of last year's tax safe harbor, it pays an addition to tax
on its underpayment of estimated tax. In 2003, Company A obtains an abatement
of $ 150 for its 2001 corporate return. Because the $800 it paid in estimated
tax payments for 2001 equals or is greater than 90% of Company A's actual 2001
tax liability ($850 x 90% = $ 765) the addition to tax paid on the 2001 return
is abated.
b.
No
Return is Filed. When no return is filed, the Commissioner will
not impose an addition to tax for underpayment of estimated tax if the
estimated tax payments for the current year equal or are greater than ninety
percent of the taxpayer's tax liability for the current taxable year, as
calculated by multiplying the Commissioner's estimate of the taxpayer's current
taxable net income by the preceding taxable year's income apportionment
percentage, if any. Taxpayers who apportioned no income to Massachusetts in the
preceding taxable year cannot assert this safe harbor provision, 830 CMR
63B.2.2(8)(b)3.b.
(c)
Addition to Tax for
Underpayment and the Application of Tax Refunds to Estimated
Taxes. The Commissioner will generally not impose any addition to
tax for underpayment of estimated tax against any taxpayer that meets both of
the following requirements:
1. The taxpayer
requests that its tax refund, or any portion of the tax refund, for the
preceding taxable year be applied to its estimated taxes for the current
taxable year; and
2. The amount of
tax refund applied from the preceding taxable year is equal to or greater than
the required annual payment as calculated under 830 CMR
63B.2.2(8)(b).
(d)
Collection of Addition to Tax for Underpayment. The
Commissioner will assess and collect the addition to tax for underpayment in
the same manner as the Commissioner assesses and collects the tax on domestic
business corporations under M.G.L. c. 63, § 32.
(9)
Transition Rule for First and
Second Estimated Tax Payments in the Taxable Year Ending on or after December
31, 1989.
(a)
Inclusion of Increase in Percentage for First Estimated Tax
Payment. Any taxpayer that made its first estimated tax payment
for its first taxable year ending on or after December 31, 1989, before April
27, 1989, the effective date of St. 1989, c. 39, under the percentage schedule
of former M.G.L. c. 63B, § 4, must increase its second estimated tax
payment by the difference between the amount required for the first estimated
tax payment under the former percentage schedule and the amount required for
the first estimated tax payment under the current applicable percentage
schedule under M.G.L. c. 63B, §§ 2 through 5, 7, 9, 10, as amended by
St. 1989, c. 39, notwithstanding any other provisions of M.G.L. c. 63B and 830
CMR 63B.2.2.
(b)
Addition to Tax for Failure to Include Increase. If a
taxpayer fails to pay the difference between the amounts required for the first
installment under the former percentage schedule and the current applicable
percentage schedule on or before the due date of the second estimated tax
payment, the Commissioner will impose an addition to tax for underpayment of
estimated tax for the period between the due date of the second estimated tax
payment and the date the taxpayer pays the amount of the difference.
These provisions are illustrated by the following
example:
Example 2: Abbot, Inc., a calendar
year taxpayer, reasonably expected in January 1989 that its tax for 1989 would
be $10,000. On March 15, 1989, Abbot paid $3,000 (30% of $10,000) in estimated
tax. On June 15, 1989, Abbot should pay $3,500 (25% plus 10% of $10,000); on
September 15, 1989, Abbot should pay $2,500 (25% of $10,000); on December 15,
1989, Abbot should pay $1,000 (10% of $10,000).
(10)
Officers' Personal Liability
and Penalty. Any officer, director, or employee of a taxpayer
required to pay an estimated tax who is wilfully responsible for the failure of
the taxpayer to make an estimated tax payment will be liable under M.G.L. c.
63B, § 9, for the amount of tax not paid to the Department as a result of
such failure and for a penalty of not less than $500 and not more than
$5,000.
