On May 9, 2019, the Massachusetts Department of Revenue issued for practitioner comment a working draft Technical Information Release ("TIR") addressing the Massachusetts corporate excise and personal income tax ramifications of the federal Opportunity Zone provisions. Due to the different dates upon which Massachusetts conforms to the Internal Revenue Code (the "Code"), corporations will benefit and individuals will not.
Massachusetts generally conforms to the Code for corporate excise purposes, except where expressly decoupled. Therefore, according to the TIR, corporate taxpayers in Massachusetts will be eligible for the Opportunity Zone tax benefits. Corporate excise taxpayers will be eligible to defer capital gain for Massachusetts purposes when invested in a Qualified Opportunity Fund, and will also be eligible for the 10% and 15% reduction in capital gains subject to tax if the Opportunity Fund investment is held for 5 and 7 years, respectively. Finally, corporate excise taxpayers will be eligible to exclude any gain on the sale of an interest in a Qualified Opportunity Fund for Massachusetts purposes if it is held for more than 10 years.
Unfortunately, individuals are not eligible for the Opportunity Zone tax benefits. Massachusetts generally conforms to the provisions of the Code in effect as of January 1, 2005. Therefore, any amendments made to the Code after January 1, 2005 are not adopted by Massachusetts. This includes 2017’s Tax Cuts and Jobs Act, which enacted the Opportunity Zone provisions.