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Expanded Corporate Excise Tax Lien PDF Print E-mail
05/23/2009 
TO:        All Massachusetts Agents and Approved Attorneys
 
FROM:  Underwriting Department
  
RE:       Expanded Corporate Excise Tax Lien - Original Memo dated 5/11/2009 and    
             Addendum 
We have recently learned of an amendment to M.G.L.c. 62C, § 51   St.2008, c. 173, § 27, enacted July 3, 2008, (the "amendment") which has increased the number and types of entities potentially subject to the 3 year corporate excise tax lien.
 
Prior to the amendment, the excise tax and the lien created for non-payment applied to "...the sale or transfer, other than in the ordinary course of business, of all or substantially all of the assets situated in the commonwealth of a domestic or foreign business corporation..."
 
In the amendment, the words "domestic or foreign business corporation" are deleted and "business corporation as defined in section 30 of chapter 63" is substituted.  The definition of "business corporation" set forth in c.63, § 30 states: "...any corporation,or any 'other entity' as defined in section 1.40 of chapter 156D...that is classified as a corporation for federal income tax purposes."
 
In Section 1.40 of chapter 156D, "other entity" is defined as follows: "... without limitation, limited partnerships, general partnerships, limited liability partnerships, limited liability companies, joint ventures, joint stock companies, business trusts and profit and not-for-profit unincorporated associations."
 
As a result, the number and type of entities that are potentially subject to excise tax liability are greatly increased, and the statute applies if these entities are classified as corporations for federal income tax purposes - in other words if they file, or should file, federal corporate tax returns.
 
As you know it has been standard practice with a deed from a corporation, to record an excise tax waiver from the Massachusetts Department of Revenue or to include in the deed a representation that the conveyance does not represent a transfer of all or substantially all of the assets of the grantor located in Massachusetts, or similar statement.   As a result of the amendment, it is now necessary to apply these practices to conveyances where a grantor in a deed is an LLC or one of the "other entities" in addition to corporations.
 
The amendment was effective July 3, 2008 and is effective for tax years beginning on or after January 1, 2009.

ADDENDUM:

It is noted that the amendment to M.G.L.c. 62C, § 51 affects conveyances by LLC's and any "other entity" as defined therein only if they are taxed as corporations.  This point is especially applicable to LLC's, since most are taxed as partnerships; the amendment has no effect on such transfers.
 
Where an LLC or any "other entity" as defined in the statute is not affected by the amendment, we think that any concerns are adequately addressed by including in the deed a statement which reads in substance as follows:
 
"The grantor entity (entities) is (are) not classified as a corporation for federal tax purposes for the current taxable year."


Please feel free to contact your local underwriter if you have any questions.
 
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