AuditDetermination of Whether Net State Tax Revenues Exceeded Allowable State Tax Revenues - Fiscal Year 2018

This is the State Auditor’s official check of whether Massachusetts tax collections stayed within the limit set by Chapter 62F.

“Chapter 555 of the Acts of 1986 inserted Chapter 62F into the Massachusetts General Laws.”

The Auditor reviewed the Department of Revenue’s report to make sure the numbers were complete and accurate, and to decide whether collections exceeded 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, 2018 exceeded allowable state tax revenues for that fiscal year.”

If tax collections go over the Chapter 62F limit, the state must provide taxpayers with a credit for the excess amount.

“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 this audit did not lead to a tax credit for fiscal year 2018.

“As a result of our audit, we have determined that the net state tax revenues of $28,178,560,547 for the fiscal year ended June 30, 2018 were below the allowable state tax revenues of $32,531,393,763 (as defined in Chapter 62F of the General Laws) by the amount of $4,352,833,216 (see Exhibit I).”

The state collected about $28.18 billion in net tax revenue, which was about $4.35 billion under the allowed amount.

“As a result of our review and as disclosed in the accompanying report, we have determined that the net state tax revenues of $28,178,560,547 for the fiscal year ended June 30, 2018 were below the allowable state tax revenues of $32,531,393,763 (as defined in Chapter 62F of the General Laws) by the amount of $4,352,833,216.”

Because the Auditor found no excess revenue, the report does not require the Revenue Commissioner to issue a Chapter 62F tax credit.

“For the fiscal years ended June 30, 1988 through 2017, 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 report shows income and sales taxes made up most of the state’s tax revenue, so changes in those areas drive much of the overall picture.

“For fiscal year 2018, $22,746,917,387, or 80.7%, of the net state tax revenue was derived from income and sales and use taxes, which are traditionally the largest sources of revenue received by the Commonwealth (see Exhibit III).”