We have reported on a provision in the supplemental budget passed by the Massachusetts House of Representatives. That provision decoupled the Massachusetts tax code from Internal Revenue Code Section 163(j). The governor has also proposed decoupling the Massachusetts tax code from Section 163(j). Section 163(j) contains the federal interest deduction limitation that generally limits taxpayers’ interest expense deductions to 30% of business adjusted taxable income, plus any interest income. Yesterday the Massachusetts Senate voted on its version of the supplemental budget, which does not include a similar provision to decouple the Massachusetts tax code from Section 163(j).

The two versions of the bill will go to a Conference Committee of House and Senate members. The Conference Committee will draft the final supplemental budget, which will go back to the House and Senate for a final vote and then will be sent to the governor for signature. We are watching to see whether the final supplemental budget contains a provision to decouple from Section 163(j). We will issue a follow-up advisory on the decoupling provision when the Conference Committee issues the final supplemental budget, which will likely be in time for the state comptroller to meet the October 31 reporting deadline.