On Oct. 21, 2025, the Massachusetts Department of Revenue (DOR) issued a working draft Technical Information Release (TIR) outlining its conformity with several major provisions of the One Big Beautiful Bill Act (OBBBA), Public Law (P.L.) No. 119-21. Notable areas of non-conformity include the temporary SALT deduction increase and new federal deductions for overtime pay and tips. Below is a summary of these key developments, with a specific focus on non-conformity implications and corporate tax impacts for Massachusetts filers.
The Massachusetts income tax generally determines Massachusetts gross income based on the Internal Revenue Code (“Code”) as amended and in effect on Jan. 1, 2024, but conforms to the Code as currently in effect for the determination of trade or business expense deductions, with limited exceptions, and certain other specified Code sections.
The Massachusetts corporate excise tax calculation automatically conforms to the current Code in determining both Massachusetts gross income and deductions, with limited exceptions.
Key Developments and Non-Conformity Implications:
- The state does not conform to OBBBA §70120 (SALT cap increase to $40,000 for tax years 2025–2029), as Massachusetts does not offer a SALT deduction.
- Massachusetts does conform to select OBBBA provisions, including:
- Full deduction for domestic research and experimentation expenditures (estimated by the DOR to result in a $288 million revenue loss)
- Creation of a special depreciation allowance for Qualified Production Property (estimated $98 million loss)
- Restoration of a higher business interest expensing limitation (estimated $52 million loss)
- Increased dollar limitations for expensing certain depreciable business assets (estimated $25 million loss)
Looking Forward
Although the DOR has issued this draft guidance regarding the Commonwealth’s conformity with most OBBBA provisions affecting the determination of business income, due to the $664 million projected cost to the Commonwealth’s coffers, it is possible, if not probable, that the Legislature will enact legislation in the next several months which “decouples” Massachusetts from several OBBBA provisions, and this legislation could have retroactive effects.
Consequently, business taxpayers should be cautious in relying on the draft guidance as summarized below at least until the Legislature enacts a 2026-2027 budget next year.
Please see below for a summary of Massachusetts’ position on the various OBBA income tax and corporate excise tax conformity.
Massachusetts Conformity with OBBBA
| Act Section | Massachusetts Income Tax Conformity | Massachusetts Corporate Excise Conformity |
|---|---|---|
| Sec. 70105. Extension and enhancement of deduction for qualified business income. | No | N/A* |
| Sec. 70108. Extension and modification of limitation on deduction for qualified residence interest. | No | N/A* |
| Sec. 70109. Extension and modification of limitation on casualty loss deduction. | No | N/A |
| Sec. 70110. Termination of miscellaneous itemized deductions other than educator expenses. | No | N/A |
| Sec. 70112. Extension and modification of qualified transportation fringe benefits. | No | N/A |
| Sec. 70112. Extension and modification of qualified transportation fringe benefits. | No | N/A |
| Sec. 70113. Extension and modification of limitation on deduction and exclusion for moving expenses. | No | N/A |
| Act Section | Massachusetts Income Tax Conformity | Massachusetts Corporate Excise Conformity |
|---|---|---|
| Sec. 70114. Extension and modification of limitation on wagering losses. | Yes | Yes |
| Sec. 70115. Extension and enhancement of increased limitation on contributions to ABLE accounts. | Yes | N/A* |
| Sec. 70117. Extension of rollovers from qualified tuition programs to ABLE accounts permitted. | Yes | N/A |
| Sec. 70118. Extension of treatment of certain individuals performing services in the Sinai Peninsula and enhancement to include additional areas. | No | N/A |
| Sec. 70120. Limitation on individual deductions for certain state and local taxes, etc. | No | N/A |
| Sec. 70201. Deduction for tip income. | No | N/A |
| Sec. 70202. Deduction for overtime pay. | No | N/A |
| Sec. 70203. Interest deduction for loans to purchase domestic cars. | No | N/A |
| Sec. 70204. Trump accounts and contribution pilot program. | No | N/A |
| Sec. 70301. Full expensing for certain business property. | No | No |
| Sec. 70302. Full expensing of domestic research and experimental expenditures. | Yes | Yes |
| Sec. 70303. Modification of limitation on business interest. | Yes | Yes |
| Sec. 70305. Exceptions from limitations on deduction for business meals. | Yes | Yes |
| Sec. 70306. Increased dollar limitations for deducting the cost of certain depreciable business assets. | Yes | Yes |
| Act Section | Massachusetts Income Tax Conformity | Massachusetts Corporate Excise Conformity |
|---|---|---|
| Sec. 70307. Special depreciation allowance for qualified production property. | Yes | Yes |
| Sec. 70311. Modifications related to foreign tax credit limitation. | No | N/A* |
| Sec. 70312. Modifications to determination of deemed paid credit for taxes properly attributable to tested income. | Yes | N/A |
| Sec. 70313. Sourcing certain income from the sale of inventory produced in the United States. | No | N/A |
| Sec. 70321. Modification of deduction for foreign-derived deduction eligible income and net CFC tested income. | No | N/A |
| Sec. 70322. Determination of deduction eligible income. | No | N/A |
| Sec. 70323. Rules related to deemed intangible income. | Yes | N/A |
| Sec. 70341. Coordination of business interest limitation with interest capitalization provisions. | Yes | N/A |
| Sec. 70342. Definition of adjusted taxable income for business interest limitation. | Yes | N/A |
| Sec. 70351. Permanent extension of look-through rule for related controlled foreign corporations. | Yes | No |
| Sec. 70352. Repeal of election for one-month deferral in determination of taxable year of specified foreign corporations. | Yes | Yes |
| Sec. 70353. Restoration of limitation on downward attribution of stock ownership in applying constructive ownership rules. | Yes | Yes |
| Sec. 70354. Modifications to pro rata share rules. | Yes | Yes |
| Sec. 70404. Enhancement of the dependent care assistance program. | Yes | Yes |
| Act Section | Massachusetts Income Tax Conformity | Massachusetts Corporate Excise Conformity |
|---|---|---|
| Sec. 70412. Exclusion for employer payments of student loans. | No | N/A |
| Sec. 70413. Additional expenses treated as qualified higher education expenses for purposes of 529 accounts. | Yes | N/A |
| Sec. 70414. Certain postsecondary credentialing expenses treated as qualified higher education expenses for purposes of 529 accounts. | Yes | N/A |
| Sec. 70421. Permanent renewal and enhancement of opportunity zones. | Yes | Yes |
| Sec. 70424. Permanent and expanded reinstatement of partial deduction for charitable contributions of individuals who do not elect to itemize. | No | N/A |
| Sec. 70425. 0.5% floor on individual deduction of charitable contributions. | No | N/A |
| Sec. 70426. 1% floor on deduction of charitable contributions made by corporations. | N/A | Yes |
| Sec. 70430. Exception to percentage of completion method of accounting for certain residential construction contracts. | Yes | Yes |
| Sec. 70431. Expansion of qualified small business stock gain exclusion. | No | N/A |
| Sec. 70434. Treatment of certain qualified sound recording productions. | Yes | Yes |
| Sec. 70435. Exclusion of interest on loans secured by rural or agricultural real property. | No | Yes |
| Sec. 70438. Extension of rules for treatment of certain disaster-related personal casualty losses. | No | N/A |
| Act Section | Massachusetts Income Tax Conformity | Massachusetts Corporate Excise Conformity |
|---|---|---|
| Sec. 70439. Restoration of taxable REIT subsidiary asset test. | Yes | Yes |
| Sec. 70507. Termination of energy efficient commercial buildings deduction. | Yes | Yes |
| Sec. 70509. Termination of cost recovery for energy property. | Yes | Yes |
| Sec. 70524. Income from hydrogen storage, carbon capture, advanced nuclear, hydropower, and geothermal energy added to qualifying income of certain publicly traded partnerships. | Yes | Yes |
| Sec. 70601. Modification and extension of limitation on excess business losses of noncorporate taxpayers. | No | N/A |
| Sec. 70603. Excessive employee remuneration from controlled group members and allocation of deduction. | Yes | Yes |
*”N/A”, or “not applicable,” indicates a provision does not apply to income taxpayers or corporate excise taxpayers, as indicated.
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