Determination of Whether Net State Tax Revenues Exceeded Allowable State Tax Revenues

This is the State Auditor’s review of whether Massachusetts tax collections stayed within the limit set by Chapter 62F for the fiscal year that ended June 30, 2016.

“In accordance with the provisions of Chapter 62F of the Massachusetts General Laws, we have reviewed the Report of the Net State Tax Revenues and Allowable State Tax Revenues for the fiscal year ended June 30, 2016, as prepared by the Commissioner of Revenue.”

The Auditor had to check the Department of Revenue’s report for accuracy and decide whether tax collections went over the legal cap.

“Our review was conducted for the purposes of ensuring the completeness and accuracy of the report and determining whether the net state tax revenues for the fiscal year ended June 30, 2016 exceeded allowable state tax revenues for that fiscal year.”

If tax revenue goes over the allowed amount, the state must arrange a tax credit for taxpayers.

“Thereafter, the Commissioner shall take all the necessary action to effectuate a tax credit equal to the total amount of such excess.”

For ordinary taxpayers, the practical result is that there was no Chapter 62F credit from this fiscal year because the state did not exceed the limit.

“For the fiscal years ended June 30, 1988 through 2015, the State Auditor determined that net state tax revenues were less than allowable state tax revenues; therefore, no tax credit was required to be effectuated by the Commissioner of Revenue for those years.”

The state collected about $25.8 billion in net tax revenue, while the allowed amount was about $29.5 billion, leaving collections about $3.7 billion under the cap.

“As a result of our audit, we have determined that the net state tax revenues of $25,801,807,368 for the fiscal year ended June 30, 2016 were below the allowable state tax revenues of $29,477,204,724 (as defined in Chapter 62F of the General Laws) by the amount of $3,675,397,356.”

Because there were no excess tax revenues, the report does not call for a taxpayer credit for fiscal year 2016.

“For the fiscal year ended June 30, 2016, we have determined that the net state tax revenues of $25,801,807,368 were below allowable state tax revenues of $29,477,204,724 by $3,675,397,356, resulting in no excess state tax revenues.”

The finding is legally important because the Auditor’s decision on whether there is excess revenue is final under the law.

“The law further states that the determination of the State Auditor as to the existence and the amount of excess state tax revenues shall be conclusive.”

“Allowable state tax revenues” means the maximum amount of tax revenue the state could collect under the Chapter 62F formula, which is tied to growth in Massachusetts wages and salaries.

“This chapter provides for the establishment, for each fiscal year beginning with the fiscal year ended June 30, 1987, of a state tax revenue growth limit, calculated on the basis of the level of growth in total wages and salaries of the citizens of the Commonwealth.”