Sen. Bruce E. Tarr files bill to restore business interest deduction in Massachusetts

Sen. Bruce E. Tarr filed Senate Bill No. 2091 on Jan. 17, 2025, proposing amendments to Massachusetts tax law that would change how the state treats the federal limitation on business interest deductions. The filing would modify definitions in chapters 62 and 63 of the Massachusetts General Laws so that section 163(j) of the Internal Revenue Code (the federal limitation on business interest) “shall not apply” for purposes of determining the amount of business interest deductible under state law. The bill was submitted for referral to the Senate Committee on Revenue; no committee action or floor votes are recorded in the filing.

The proposal would (1) amend the definition of “Code” in section 1 of chapter 62 to exclude application of IRC section 163(j) when determining business interest deductible under state law; (2) replace the definition of “Code” in section 1 of chapter 63 so that, for specified provisions including sections 163(j), 381(c)(20), 382(d)(3) and 382(k)(1), the Code “shall mean the Code as amended and in effect for tax years beginning before Jan. 1, 2018”; and (3) amend section 30 of chapter 63’s net income definition to incorporate the same pre-2018 treatment for the listed IRC sections and to state that certain deductions allocable to classes of income not included in a corporation’s taxable net income under subsection (a) of section 38 shall not be allowed. The filing closes with an effectiveness clause stating the act “shall be effective for taxable years beginning after Dec. 31, 2017.”

If enacted as written, the change would make Massachusetts conform to pre-2018 federal law for the specified IRC sections in the limited ways the bill describes, effectively allowing a state-level deduction of business interest that would otherwise be limited under IRC section 163(j). The text of the filing does not estimate fiscal impact, specify budget offsets, or provide legislative findings or sponsor commentary in the submitted document. The bill text identifies a list of IRC provisions that remain explicitly included or excluded in the defined term “Code,” and it references both individual and corporate income tax chapters (62 and 63) in Massachusetts law.

No public hearings, fiscal notes, or votes are included in the filing submitted with the docket entry. As filed, the bill is a legislative proposal awaiting committee referral and subsequent legislative consideration. Further status, amendments, fiscal estimates, or legislative debate are not contained in the filing record provided.

Details: Senate Bill No. 2091 was presented by Bruce E. Tarr (First Essex and Middlesex) and filed Jan. 17, 2025, for referral to the Senate Committee on Revenue. The act’s final section sets the effective date for taxable years beginning after Dec. 31, 2017.