Massachusetts governor proposes delaying corporate tax cuts

Healey's proposed bill, "An Act to manage federal tax changes in Massachusetts," seeks to delay the implementation of the five most costly OB3 provisions. This delay is intended to prevent the tax cuts from being applied retroactively to past tax years, thereby preserving state revenue. According to Department of Revenue estimates, the governor's bill could save the Commonwealth approximately $463 million in Fiscal Year 2026.

While the governor's proposal delays the impact of these federal changes, it does not permanently eliminate them. Some provisions, such as the full expensing of domestic research and experimental expenditures, are slated to begin in Tax Year 2026, potentially costing the state $87 million in FY 2027. Other changes would commence in Tax Year 2027, leading to estimated combined revenue losses of $260 million in FY 2028 from the five OB3 provisions.

The legislation also addresses the issue of retroactive tax cuts, noting that such incentives cannot influence past investment decisions and primarily serve to enrich corporations at the state's expense. However, the bill does not alter another perceived flaw: the application of tax cuts to corporate profits regardless of where investments are made, potentially rewarding companies for investments outside of Massachusetts.