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Richard Jones and Daniel Ryan were quoted in the article "Mass. Gov. Seeks To Expand Taxation Of Nonresident Gains," published by Law360 Tax Authority [sub.req'd] on January 23, 2025.

The article discusses how Gov. Maura Healey's $59.6 billion budget proposal would apply the investee apportionment method to gains that nonresidents receive from sales of interest in pass-through entities, such as partnerships, in Massachusetts. The proposal also allows the state to tax gains from sales of interests in pass-through entities by nonresident corporations, even if they are not part of a unitary business. This language responds to a recent Massachusetts Supreme Judicial Court ruling in favor of a taxpayer in VAS Holdings & Investments LLC v. Commissioner of Revenue.

Rich said that he views the state justices' conclusion of the constitutionality of investee apportionment as an outlier and that controversy over the policy will persist. "U.S. Supreme Court precedent has held that a seller has to have a sufficient connection with a state for gain to be subject to tax," said Rich, adding that "states shouldn't be able to tax a nonresident investor if a unitary relationship isn't present."

"Even though the Massachusetts Supreme Judicial Court has spoken on the constitutionality of this," Rich said, "I don't think that it's the last word because other states may not come up with the same conclusion in light of the U.S. Supreme Court's jurisprudence."

The budget proposal also includes limiting capital gains tax benefits for opportunity zone investments to federally designated zones in Massachusetts and capping the state's charitable contribution deduction. Dan noted it's unclear whether the budget plan would limit capital gains tax breaks for investments that were already made in opportunity zones in other states or if the restriction would apply only to prospective investments. "There needs to be some clarification in the statute as far as how they're going to administer it," Dan said.