Form 355s - Massachusetts S Corporation Excise Return

Line by Line Instructions

complete Schedule C. If line 15 is less than 10%,

Schedule E

Line 4

complete Schedule D. The maximum entry al-

Enter U.S. taxable income before deducting net op-

lowed on line 15 is 9.999999.

erating loss or other special deductions. If the cor-

Taxable Income

poration is the parent of a DISC, income should be

If line 17 of Schedule S is less than $6 million,

Schedule C

reported with no allocation to the DISC.

Schedule E is not required.

If Schedule B, line 15 is 10% or greater, the corpo-

If line 17 of Schedule S is less than $6 million,

ration must complete Schedule C using net book

Line 5

Schedule E is not required, irrespective as to

values to determine the non-income measure of the

Enter any allowable U.S. Wage Credit used in cal-

whether the corporation is required to file a com-

excise. Omit Schedule D.

culating U.S. Form 1120, line 13.

bined report, Form 355U, because it is engaged in

Schedule D

Line 7

a unitary business with a C corporation that is

Schedule D is used by a corporation to calculate

doing business in Massachusetts.

Enter all interest received on state and municipal

its non-income measure excise on the basis of net

obligations not reported in U.S. net income.

If line 17 of Schedule S is $6 million or more and

worth. If line 15 of Schedule B is less than 10%,

the corporation is required to file Form 355U (see

Line 8

complete this schedule. Corporations are allowed

“How Is S Corporation Income Taxed” on page 3),

to deduct the value of investments in, and advances

Massachusetts does not allow a deduction for

check “Yes” in the registration section, line 5, and

to, Massachusetts and foreign subsidiaries. To be a

state, local and foreign income, franchise, excise

complete Schedule E only if (a) the taxable year of

subsidiary, the parent must own 80% or more of

or capital stock taxes. Any such taxes which have

the S corporation does not end on the same day as

the voting stock of the corporation in accordance

been deducted from U.S. net income should be en-

the taxable year of the combined group that is fil-

with IRC sec. 1504.

tered in line 8 and added back into income.

ing the combined report and (b) the S corporation

has income from sources other than the unitary

Line 9

Schedule E-1

business that is taxable in Massachusetts. If both

For Massachusetts purposes, for taxable years

of the above conditions apply, complete Schedule

ending after September 10, 2001, depreciation is

Dividends Deduction

E only with respect to the income that is not in-

to be claimed on all assets, regardless of when

cluded in the combined report. Otherwise enter “0”

Massachusetts corporate excise law does not

they are placed in service, using the method used

on line 5 of the excise calculation page.

allow the dividends received deduction allowed

for U.S. income tax purposes prior to the enact-

under the IRC. However, a deduction is allowed for

All other S corporations with receipts of $6 million

ment of sec. 168(k). For more information, see TIR

95% of the value of all dividends received except:

or more complete Schedule E as described below.

02-11 and TIR 03-25.

◗ dividends from ownership of shares in a corporate

Mutual fund service corporations eligible to appor-

Line 10

trust engaged in business in the Commonwealth;

tion their income under M.G.L. Ch. 63, sec. 38 (m)

A taxpayer must add back to net income any re-

◗ dividends resulting from deemed or actual dis-

must complete two separate copies of Schedule E:

lated member intangible expenses and costs, in-

(1) for income derived from mutual fund sales; and

tributions (except actual distributions of previously

cluding losses incurred in connection with factor-

(2) for non-mutual fund sales income, if any. Tax-

taxed income) from a DISC which is not wholly-

ing or discounting transactions. If you qualify for

able net income from mutual fund sales is gross

owned; or

an exception to the add back requirement, com-

income from mutual fund sales less: (1) any de-

◗ dividends from any class of stock if the corpora-

plete Schedule ABIE. For further information, see

ductions directly traceable to its mutual fund sales:

tion owns less than 15% of the voting stock of the

TIR 03-19.

and (2) a portion of other allowable deductions.

payer corporation.

Other allowable deductions consist of deductions

Line 11

Dividends received from a Regulated Investment

not directly traceable to mutual fund sales or non-

A taxpayer must add back to net income any re-

Company (RIC) or Real Estate Investment Trust

mutual fund sales. To determine the deductible

lated member interest expenses and costs, in-

(REIT) are not eligible for the dividends received

amount of its other allowable deductions a mutual

cluding losses incurred in connection with

deduction, whether the dividend is paid directly

fund service corporation must multiply the total

factoring or discounting transactions. If you qual-

by the RIC or REIT, or indirectly, as through a sub-

amount of its other allowable deductions by a

ify for an exception to the add back requirement,

sidiary or affiliate of the taxpayer.

fraction, the numerator of which is the mutual

complete Schedule ABI. For further information,

fund service corporation’s gross income derived

The total dividends amount on Schedule E-1, line

see TIR 03-19.

from mutual fund sales for the taxable year and

1 is derived from the amount shown on U.S.

the denominator of which is the mutual fund serv-

Form 1120, Schedule C, line 19, less any divi-

Line 12

ice corporation’s total gross income for the tax-

dends received directly or indirectly from RICs or

Massachusetts has decoupled from the American

able year. Taxable net income from non-mutual

REITs as well as any other dividends for which

Jobs Creation Act of 2004, Public Law 108-357.

fund sales consists of any taxable net income not

deduction is not allowed under Massachusetts

For corporate excise purposes, the definition of

derived from mutual fund sales.

law. The amounts excluded from line 1 are also ex-

net income does not include the new federal pro-

cluded from line 8. The dividends shown on lines

If a corporation is not a mutual fund service cor-

duction activity deduction. See TIR 05-5 for fur-

2 through 6 should not be excluded from line 1,

poration, 100% of sales, profits, and income

ther information.

as they will be separately subtracted from line 1 in

should be entered in lines 1 through 12. If the

determining the amount of line 8. For further infor-

corporation has income from business activities

Line 13

mation, see TIR 04-10.

which is taxable both in Massachusetts and any

Enter any adjustments to income not previously re-

other state, Schedule F should be completed and

A schedule showing payers, amounts and percent

ported. For example, enter in this line the amount

the apportionment percentage entered in line 22.

of voting stock owned by class of stock must be

of depreciation or amortization taken this year in

computing U.S. net income for the following:

available upon request.

Form 355s - Massachusetts S Corporation Excise Return - 2012 Page 11

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