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

This is the State Auditor's review of whether Massachusetts collected more in state taxes than Chapter 62F allowed for the year ending June 30, 2012.

“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, 2012, as prepared by the Commissioner of Revenue.”

The audit was required by state law to check the Revenue Commissioner's report and decide whether tax collections exceeded the allowed limit.

“Pursuant to Chapter 62F of the Massachusetts General Laws (inserted by St. 1986, C, 555, S. 2), the State Auditor is required to (1) review and ensure the completeness and accuracy of the Commissioner of Revenue’s Report of the Net State Tax Revenues and Allowable State Tax Revenues for the fiscal year ended June 30, 2012 and (2) independently determine whether net state tax revenues exceeded allowable state tax revenues and report the determination and amount of any excess state tax revenues for the fiscal year ended June 30, 2012.”

If tax collections go over the legal limit, the state must give taxpayers a credit; the auditor's decision controls whether that happens.

“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 fiscal year 2012 because revenues were under the cap.

“For the fiscal years ended June 30, 1988 through 2011, 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 $21.38 billion in net taxes, while it was allowed about $25.24 billion, leaving it about $3.85 billion below the cap.

“As a result of our review, we have determined that the net state tax revenues for the fiscal year ended June 30, 2012 of $21,384,338,827.60 were below allowable state tax revenues of $25,236,379,380.49 by the amount of $3,852,040,552.89 as defined in the Massachusetts General Laws, Chapter 62F.”

Because there was no excess, the report does not call for a tax credit or refund process for fiscal year 2012.

“If the State Auditor determines an excess of state tax revenues, she shall report that determination and the amount by which allowable state tax revenues were exceeded to the Governor, the President of the Senate, the Speaker of the House, the respective Chairmen of the Committees on Ways and Means of the Senate and House, and the Commissioner.”

The report shows Massachusetts tax revenue was still well under the legal limit in 2012, even though net tax revenues had risen sharply since 1987.

“For fiscal years 1987 through 2012, net state tax revenues increased 164% from $8,102,373,437.21 to $21,384,338,827.60.”

“Allowable state tax revenues” means the maximum amount of state tax revenue allowed under the Chapter 62F formula, based on the prior year's allowed amount and a wage-growth factor.

“As defined in Section 2 of Chapter 62F, “allowable state tax revenues” for a fiscal year means the following: beginning after June 30, 1986, an amount equal to the greater of the allowable state tax revenues for the immediately preceding fiscal year multiplied by the allowable state tax growth factor for the current year, or in any case no less than the allowable state tax revenues for the preceding fiscal year.”