Montigny files bill to tighten corporate 'tax haven' reporting for water’s-edge filers

BOSTON — Sen. Mark C. Montigny filed legislation Jan. 17 that would amend Section 32B of Chapter 63 of the Massachusetts General Laws to tighten reporting around corporate use of low-tax foreign jurisdictions and to require expanded disclosure by companies that make a water’s-edge election.

The bill, filed as Senate No. 2041 (Docket No. 2221), would add an explicit list of jurisdictions the measure treats as tax havens, require the commissioner to submit a biannual public report with recommendations to the Legislature, and permit the commissioner to require taxable members making a water’s-edge election to submit a domestic disclosure spreadsheet within six months after filing their federal income tax return.

If enacted as written, the bill would insert a new subsection into Section 32B that lists jurisdictions “including Andorra, Anguilla, Antigua and Barbuda, Aruba, the Bahamas, Bahrain, Barbados, Belize, Bermuda, British Virgin Islands, Cayman Islands, Cook Islands, Cyprus, Dominica, Gibraltar, Grenada, Guernsey-Sark-Alderney, Hong Kong, Isle of Man, Jersey, Liberia, Liechtenstein, Luxembourg, Malta, Mauritius, the Kingdom of the Netherlands, San Marino, Seychelles, Singapore, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Switzerland, Turks and Caicos Islands, U.S. Virgin Islands, and Vanuatu.” The bill also sets a rule that a jurisdiction is a tax haven for the purposes of the section if during the tax year it has no or a nominal effective tax on the relevant income and meets at least two of three enumerated criteria.

Those criteria are: that income reported to the suspected tax haven is disproportionately large compared with property, payroll and sales factors; that the jurisdiction’s rules or administrative practices encourage disproportionate reporting (for example by limiting information exchange or lacking transparency); and that the jurisdiction is recognized by experts or marketed as a corporate tax haven. The bill further lists five illustrative practices that could show a jurisdiction “encourage[s]” disproportionate reporting, such as facilitating foreign-owned entities without substantive local presence or creating regimes that are favorable for tax avoidance.

The proposed reporting changes would require the commissioner to produce a biannual report to the Legislature with recommendations for additions or removals from the tax-haven list, and to make that report public. The disclosure spreadsheet the commissioner may require would have to provide "full disclosure of the income reported to each state for the year, the tax liability for each state, the method used for allocating or apportioning income to the states, and the identity of the water’s-edge group and those of its United States affiliated corporations." The bill allows the commissioner to require the same information for income reported to the jurisdictions listed as tax havens.

The filing includes a legislative reference showing the subject placement as "Revenue," indicating the bill’s referral to the Senate committee that handles tax and revenue matters. The text also notes a similar matter filed in the previous session (Senate No. 1880 of 2023–2024).

The bill, as introduced, is a proposal and would require action by the Legislature and, if passed, the governor’s approval before becoming law. It does not, by itself, change existing administrative practice until enacted and implemented by the Department of Revenue and any affected companies.

Docket: Senate No. 2041; Senate Docket No. 2221; filed Jan. 17, 2025.