TAX NEWS - June 2010

Small business tax relief plans getting squeezed as session winds down

BOSTON — Tax sweeteners to boost small business job creation could fall prey to the shrinking legislative calendar and sensitivity about opening up a wide-ranging tax policy debate, the chief sponsor of those proposals, Senate President Therese Murray, told the News Service Tuesday.

In March, Murray announced she would push a series of corporate tax policy changes aimed at helping grow small businesses and spawning new companies. She said Massachusetts had lost nearly 250,000 jobs since 2003 while the national economy added jobs and touted the proposals as part of an effort to brighten the small business climate.

On Tuesday, Murray said legislative rules prevented the Senate from attaching the tax incentives to an economic development bureaucracy reorganization bill that the Senate approved this spring. She said she had hoped the House would initiate the policy changes with its version of the bill, which has not yet emerged. Then, citing a congested legislative to-do list and the July 31 end of formal sessions, Murray said her tax plans might have to wait until next year.

"I don't know if it's possible now because I think if we take up any kind of tax issue, you're going to have people more on the left wanting to add to the taxes and people more on the right wanting to take away some of the things we already have in place so it might be something we have to wait until next year after the election," Murray told the News Service after ticking off legislative efforts to spark economic growth and telling a large group of realtors that job creation was essential to lifting the housing market.

In March, Murray endorsed plans favored by the Greater Boston Chamber of Commerce to extend the net operating loss carry-forward period from five to 20 years, offer a tax credit for new business formation, apply a special 3 percent capital gains tax rate to certain investments made by individual investors in Massachusetts-based start-up companies, and exempt business-to-business downloads of software from the sales tax.

The Plymouth Democrat described the proposals as "relatively low cost" but did not attach an estimate.

House Speaker Robert DeLeo told the News Service Tuesday small business tax incentives are still in play with 53 days remaining for formal legislative sessions.

"Those are on the table. They're being discussed," DeLeo said. "Whether were going to be able to do them is another story."

State tax revenues are barely up over plummeting levels in fiscal 2009, running $70 million short of benchmarks for this fiscal year and state officials are coping with the possibility that nearly $700 million in anticipated federal health care funds may not be delivered for next fiscal year, as many lawmakers expected.

DeLeo said the House was also working "right now" on ways to deliver health insurance premium rate relief to small businesses. The Senate last month approved rate relief legislation that is pending in the House.

"That's still in play too, very much so," said DeLeo, who recently portrayed health care cost control efforts as perhaps too cumbersome for the House to tackle in the weeks remaining before July 31.

Last fall, DeLeo spoke out in favor of a pair of business-related initiatives that have yet to receive legislative attention: plans to correct "unforeseen ramifications" of the so-called water's edge tax regulations and comprehensive regulatory reform. DeLeo last year asserted that "too often the intent of laws passed by legislators gets lost amid a sea of regulation."