NOTE: This article has been updated to reflect final Technical Information Releases from Massachusetts.
The Commonwealth of Massachusetts recently announced two final Technical Information Releases (TIR) addressing issues surrounding Opportunity Zones and Partnership Technical Terminations.
One of the new provisions included in the Tax Cuts and Jobs Act (TCJA) was the creation of Opportunity Zones as a way to incentivize investors to invest in economically distressed communities. Massachusetts has now publicly stated in a final TIR that corporations are allowed to defer gains from Opportunity Zones and are required to follow the basis reduction rules to comply with the Federal law. However, individuals are not allowed to defer gains on Opportunity Zones for personal income tax purposes and the basis reduction requirements would not apply.
Massachusetts also announced in a second TIR that The Department of Revenue does not intend to comply with the repeal of partnership technical terminations. This stems from a TCJA measure which repeals technical terminations for federal income tax purposes. Under a technical termination a partnership is treated as terminated if there was a sale or exchange of 50 percent or more of the total interest in the partnership’s capital and profits within a 12-month period. Because Massachusetts does not comply, partnerships in Massachusetts must file an information return with the Commonwealth on or before the 15th day of the third month following the close of the taxable year. Massachusetts allows partnerships an automatic six-month extension to file tax returns. However, Massachusetts has extended that deadline until the Federal due date (including extensions) to help ease the burden of this Federal departure.
If you have questions concerning these two topics, please contact a member of your DGC client service team or Jonathan Farrell, CPA at 781-937-5373 / firstname.lastname@example.org or Patrick Bevington, CPA, MST at 781-937-5365 / email@example.com.