(1) Purpose of Regulation; Outline; Application of Regulation to Particular Tax Periods

(a) Purpose of Regulation . This regulation, 830 CMR 62.17A.2, sets forth the rules that apply to S corporations under the personal income tax provisions of M.G.L. c. 62, and those that apply under the corporate excise provisions of M.G.L. c. 63. It includes Massachusetts law based upon statutory changes and changes in other legal authority since the effective date of the predecessor regulation, 830 CMR 62.17A.1, which was promulgated July 6, 1990. For federal income tax purposes, a corporation may elect S corporation status if it meets certain requirements under Internal Revenue Code §§ 1361 through 1363, including that the shareholders must consent to the election. Massachusetts recognizes federal S corporation status for purposes of M.G.L. c. 62 and M.G.L. c. 63, and has no separate S corporation election process. Among other things, 830 CMR 62.17A.2 explains the interaction between Federal and Massachusetts S corporation law.

(b) Outline. 830 CMR 62.17A.2 is organized as follows:

(1) Purpose of Regulation; Outline; Application of Regulation to Particular Tax Periods; (2) Definitions; (3) General Rules; (4) Taxation of S Corporation Income to Individual Shareholders under M.G.L. c. 62; Distributive Share Income; (5) Shareholder Basis in S Corporation Stock or Indebtedness; (6) Distributions from an S Corporation to its Shareholders; (7) Post-termination Transition Issues Applicable to S Corporation Shareholders; (8) S corporation Entity-level Taxation in Massachusetts; (9) S corporations that are Subject to Combined Reporting.

(c) Application of regulation to particular tax periods. 830 CMR 62.17A.2, is generally a restatement of Massachusetts law based upon statutory changes and changes in other legal authority since the effective date of the predecessor regulation, 830 CMR 62.17A.1, which was promulgated July 6, 1990. As such, to the extent that the individual provisions of 830 CMR 62.17A.2 reflect statutory changes occurring since the effective date of 830 CMR 62.17A.1, 830 CMR 62.17A.2 applies to all periods relating back to the effective date of such statutory change. In certain cases, 830 CMR 62.17A.2 relates back to an earlier public written statement issued by the Department of Revenue, and in such cases the rules apply as directed in the earlier statement. Rules relating to the taxation of S corporations that were formerly taxed as corporate trusts, or subject to a separate-entity tax as QSubs, or to S corporations that are financial institutions, apply as of the effective date of St. 2008, c. 173, which is generally applicable to tax years beginning on or after January 1, 2009. See St. 2008, c. 173, § 101. For related provisions and effective dates, see 830 CMR 63.30.3, Entity Classification under St. 2008, c. 173 . The predecessor regulation, 830 CMR 62.17A.1, Massachusetts Taxation of S Corporations and Their Shareholders , is hereby superseded. Rules stated in 830 CMR 62.17A.1, such as transitional rules that relate back to the original recognition of S corporations in Massachusetts in 1986, remain applicable to the extent they do not conflict with provisions of this regulation, 830 CMR 62.17A.2, and to the extent they do not conflict with statutory amendments enacted or Department of Revenue rules announced after the promulgation date of 830 CMR 62.17A.1, namely July 6, 1990.