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General Information

All financial institutions subject to Massachusetts General Laws

dividends, interest, royalties, capital gain net income, rental income

(MGL) Ch. 63, sections 1 through 2B and which do any or all of their

and all other income.

business in Massachusetts and which is not part of combined group

If an S corporation that is liable for the income measure is not part

required to file Form 355U must complete and file Massachusetts

of a combined group (see below), it must complete Massachusetts

Form 63FI.

Schedule A with Form 63FI and must complete a pro-forma U.S.

Financial institutions that are members of a combined group engaged

Form 1120 which must be available upon request. A financial institu-

tion S corporation that is not liable for an income measure of excise

in a unitary business are required to file a combined return under

M.G.L. c. 63, s. 32B. See 830 CMR 63.32B.2 for additional informa-

must still file Form 63FI but must enter “0” on line 1 of the tax calcula-

tion. A financial institution that is a member of such a combined group

tion and is not required to complete Schedules A, B or D. A financial

files Form 355U instead of Form 63FI. Financial institutions that are

institution S corporation must always complete Schedule S and sub-

not members of such a group are not allowed participation in the fil-

mit Schedules SK-1 and is liable for the minimum excise of $456.

ing of combined returns.

Requirement for Financial Institution S

Major 2012 Tax Law Changes

Corporations to File a Combined Report

There are several significant changes that apply to corporate tax-

An S corporation that is doing business in the state is subject to

payers for tax year 2012.

combined reporting within the meaning of Ch. 63, sec.32B, when it is

engaged in a unitary business with one or more other corporations,

The regular financial institution excise rate has been reduced from

including one or more S corporations. In such cases, if the S corpo-

9.5% to 9.0%.

ration is liable for an income measure of excise, it is required to be

The tax rate for S corporation qualified taxable income and passive

included in a combined report, and is to compute its net income sub-

income has been reduced from 9.5% to 9.0%.

ject to tax and its income measure along with the other members of

the group on Form 355U.

If the S corporation has income taxable in Massachusetts of $6 mil-

lion or more but less than $9 million, the income measure rate has

Further, even where an S corporation is not itself liable for an income

been reduced from 2.8% to 2.5%.

measure of excise, it is required to include its income in a combined

report if any member of the combined group is a C corporation that is

If the S corporation has income taxable in Massachusetts of $9 mil-

subject to Massachusetts tax. Where one or more S corporations that

lion or more, the income measure rate has been reduced from 4.2%

are taxable in Massachusetts are members of a combined group

to 3.75%.

that is composed entirely of S corporations and the S corporations

S Corporation Financial Institutions

are not liable for the income measure of excise, the S corporations

are not required to file Form 355U. Further, where one or more S

Financial institutions that are S corporations for federal purposes are

corporations that are taxable in Massachusetts are members of a

now taxed as financial institution S corporations. Items of S corpora-

combined group that is composed entirely of one or S corporations

tion income, loss and deduction are passed through the S corpora-

and one or more C corporations and the S corporations are not li-

tion to the shareholders, and reported and taxed on their return. For

able for the income measure of the excise and each of the C corpo-

taxable years beginning on or after January 1, 2009, financial insti-

rations is not taxable in Massachusetts, the S corporations are not

tution S corporations with income that is taxed to the S corporation

required to file Form 355U. (Note that in the latter cases, Form 355U

for federal income tax purposes is still taxable on such income at the

would be required irrespective as to whether the S corporations were

regular financial institution rate of 9% but all other income of the S

liable for the income measure of the excise if one or more of the C

corporation is taxable at a lower rate and is not subject to tax at the

corporations were subject to Massachusetts tax).

corporate level if receipts are less than $6 million.

In any case where one or more S corporations that are members of

Financial institution S corporations with receipts of $9 million or more

a combined group are not required to file Form 355U, such members

pay an income measure of excise at a rate of 3.75% on income allo-

are also not required to complete Form 63FI, Schedule A.

cated or apportioned to Massachusetts. S corporations with receipts

of at least $6 million but less than $9 million pay tax at a rate of 2.5%.

A financial institution S corporation that is a member of a combined

S corporations with receipts of less than $6 million are not subject to

group filing form 355U must also file Form 63FI for the purpose of

the income measure of excise. Financial institution S corporations

submitting Schedules S and SK-1. Such a corporation completes

must calculate the tax using the correct rate.

Schedule E (apportionment), if required to determine shareholder in-

come derived from sources within the commonwealth, without regard

To determine if an S corporation is liable for the income measure of

to the combined reporting apportionment rules. An S corporation sub-

the corporate excise, complete Massachusetts Schedule S, lines 1

ject to this requirement does not report on Schedule A any income

through 17. If line 17 of Schedule S is at least $6 million, an income

included in the combined report.

measure of corporation excise will be due. If line 17 of Schedule S is

less than $6 million, Schedule E is not required. If an S corporation

Who Must File and Pay the Financial

and any other entity share common ownership and are engaged in a

Institution Excise?

unitary business, then the total receipts less inter-company transac-

The Massachusetts financial institution excise applies to banks, trust

tions of all such entities must be combined according to the rules of

companies and federal or state savings and loan associations exist-

Regulation 830 CMR 62.17A.1(11)(e) and (f), to determine the dollar

ing by authority of the United States, or any state or a foreign coun-

amount of such S corporation’s total receipts. “Total receipts” means

try. It also applies to bank holding companies and subsidiaries of

gross receipts or sales, less returns and allowances, and includes

bank holding companies, savings and loan holding companies, cor-

porations subject to supervision by the Massachusetts Division of

Instructions For Form 63 Fi - Massachusetts Financial Institution Excise Tax Return - 2012 Page 2

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