Massachusetts ~ Corporate Income Tax: Treatment of Offshore Investment Companies Explained

CCH Tax Day Report

The Massachusetts Department of Revenue has revised a Technical Information Release (TIR) that explains the application of the corporation excise tax to offshore investment companies described in IRC §864(b)(2)(A)(ii) that conduct activities in Massachusetts. The TIR expands the safe harbor rules, which are based on analogous federal rules, under which certain offshore investment companies will not be subject to the Massachusetts corporation excise tax. Specifically, the holding of shareholders meetings or boards of directors meetings by offshore investment funds organized under the laws of a foreign country (or by foreign companies serving as management companies for those funds) will no longer be treated as doing business in Massachusetts that would by itself create nexus for corporation excise tax purposes. The TIR also describes security corporation treatment for offshore investment companies that are subject to the corporation excise tax. If an offshore investment company is doing business in Massachusetts and subject to the Massachusetts corporation excise tax, it may apply for security corporation classification if it is engaged exclusively in buying, selling, dealing in, or holding securities on its own behalf and not as a broker. A security corporation is subject to the higher of an excise tax on its gross income (based on federal gross income subject to certain modifications), or the minimum excise tax of $456.

Technical Information Release 17-2, Massachusetts Department of Revenue, February 16, 2017, ¶401-617, superseding Technical Information Release 98-6, June 24 1998, ¶350-223

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