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Massachusetts May Refuse to Adopt Federal Interest Expense Limits

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| Legal Advisory

The Massachusetts House of Representatives overwhelmingly voted in favor of a bill to decouple the Massachusetts tax code from a significant federal interest deduction limitation. The federal limitation is contained in Internal Revenue Code Section 163(j). Section 163(j), enacted under the Tax Cuts and Jobs Act of 2017, generally limits interest expense deductions to 30% of business adjusted taxable income, plus any interest income. The Massachusetts bill, H.4127, (the “Bill”) would allow Massachusetts businesses to deduct interest for Massachusetts income tax purposes without regard to the Section 163(j) limitation.

The proposed Massachusetts legislation would not change the federal limitation. However, if passed into law, it would have a materially favorable effect for many Massachusetts businesses in calculating their Massachusetts income tax obligation.

The Bill is now with the Massachusetts Senate. If approved by the Senate, the Bill will be sent to the governor. We are tracking this proposed legislation and will update you on its status.

This advisory was prepared by Nutter's Tax Department. For more information, please contact your Nutter attorney at 617.439.2000.

This advisory is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

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