AuditDetermination of Whether Net State Tax Revenues Exceeded Allowable State Tax Revenues -- Fiscal Year 2019

This is the State Auditor’s review of the state’s tax revenue report for the fiscal year that ended June 30, 2019.

“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, 2019, as prepared by the Commissioner of Revenue.”

The audit checked whether the revenue report was complete and accurate, and 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, 2019 exceeded allowable state tax revenues for that fiscal year.”

If the state collects more than Chapter 62F allows, taxpayers can receive a credit, so this review decides whether that process starts.

“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 year did not produce a Chapter 62F tax credit.

“For the fiscal years ended June 30, 1988 through 2018, 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 was $3.77 billion under the allowable tax revenue limit, not over it.

“As a result of our review and as disclosed in the accompanying report, we have determined that the net state tax revenues of $30,202,588,989 for the fiscal year ended June 30, 2019 were below the allowable state tax revenues of $33,977,241,799 (as defined in Chapter 62F of the General Laws) by the amount of $3,774,652,810.”

Because there were no excess state tax revenues, the report does not call for the Commissioner of Revenue to issue a tax credit for fiscal year 2019.

“For the fiscal year ended June 30, 2019, we have determined that the net state tax revenues of $30,202,588,989 were below the allowable state tax revenues of $33,977,241,799 by $3,774,652,810, resulting in no excess state tax revenues (see Exhibit I).”

The audit confirms that 2019 continued the long pattern since 1988 of collections staying below the Chapter 62F limit.

“For fiscal years 1987 through 2019, net state tax revenues increased approximately 273%, from $8,102,373,437 to $30,202,588,989.”

“Allowable state tax revenues” means the legal revenue limit, which grows based on wage and salary growth in Massachusetts.

“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.”