Determination of Whether Net State Tax Revenues Exceeded Allowable State Tax Revenues - FY 2012

This is the State Auditor’s review of the Department of Revenue’s yearly calculation comparing actual tax revenue with the maximum amount allowed under Massachusetts law.

“In accordance with the provisions of the Massachusetts General Laws, Chapter 62F, we have reviewed the Report of the Net State Tax Revenues and Allowable State Tax Revenues for the Fiscal Year ended June 30, 2011, as prepared by the Commissioner of Revenue.”

The Auditor checked whether the Department of Revenue’s report was complete and accurate, and whether tax revenue went over the Chapter 62F limit.

“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, 2011 exceeded allowable state tax revenues for the fiscal year then ended.”

If the state collects more than the allowed amount, the Auditor’s decision is final and can lead to taxpayer credits.

“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.”

For taxpayers, the practical question is whether excess revenue would trigger a tax credit; this report found no excess for fiscal year 2011.

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

Actual net tax revenue was about $20.78 billion, while the allowed amount was about $25.06 billion, leaving collections about $4.29 billion under the limit.

“As a result of our review and as disclosed in the accompanying report, we have determined that the net state tax revenues for the fiscal year ended June 30, 2011 of $20,776,233,462.11 were below allowable state tax revenues of $25,063,267,392.61 by the amount of $4,287,033,930.50 as defined in the Massachusetts General Laws, Chapter 62F.”

Because the report found no excess tax revenue, it does not call for a Chapter 62F tax credit for fiscal year 2011.

“For the fiscal year ended June 30, 2011, we have determined that the net state tax revenues of $20,776,233,462.11 were below allowable state tax revenues of $25,063,267,392.61 by $4,287,033,930.50 resulting in no excess state tax revenues.”

This report shows that 2011 was another year in which Massachusetts tax collections stayed below the Chapter 62F cap, continuing the pattern since 1988.

“For the fiscal years ended June 30, 1988 through 2010, 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.”

“Allowable state tax revenues” means the legal ceiling for state tax collections, based on a growth formula tied to Massachusetts wages and salaries; “net state tax revenues” means tax revenue after refunds and abatements.

“This chapter provides that there be established, for each fiscal year beginning with the fiscal year ended June 30, 1987, 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.”