Code of Massachusetts Regulations › 830 CMR - DEPARTMENT OF REVENUE › Title 830 CMR 62.00 - Income tax › Section 62.5A.1 - Non-resident Income Tax

Current through Register 1525, July 5, 2024
(1)
General
.
(a)
			 Massachusetts source income is generally taxable to non-residents. 830 CMR
			 62.5A.1 sets forth detailed rules for the taxation of this income.
			 Massachusetts source income includes items of gross income derived from or
			 effectively connected with any trade or business, including any employment,
			 carried on by the taxpayer in Massachusetts, whether or not the non-resident is
			 actively engaged in a trade or business or employment in Massachusetts in the
			 year in which the income is received; the participation in any lottery or
			 wagering transaction in Massachusetts; or the ownership of any interest in real
			 or tangible personal property located in Massachusetts. All types of income,
			 including investment income, derived from or effectively connected with the
			 carrying on of a trade or business within Massachusetts are Massachusetts
			 source income. The term may include gain from the sale of a business or of an
			 interest in a business, distributive share income, separation, sick or vacation
			 pay, deferred compensation and nonqualified pension income not prevented from
			 state taxation by the laws of the United States, and income from a covenant not
			 to compete. For rules that apply to non-resident members of professional
			 athletic teams,
see
830
			 CMR 62.5A.2.
Certain types of income received by non-residents from sources
				within Massachusetts are excluded from taxation, such as non-business-related
				interest, dividends and gains from the sale or exchange of intangibles that are
				not derived from or effectively connected with the carrying on of a trade or
				business, and certain qualified pension income.
Massachusetts source income derived from pass-through entities,
				such as partnerships, trusts, estates, limited liability companies (LLCs), or S
				corporations, generally is also subject to Massachusetts income taxation for
				non-residents. The activities of a pass-through entity are attributed to its
				owners, including non-resident partners, members, or shareholders. Thus, if a
				non-resident has an ownership interest in a pass-through entity that is engaged
				in the conduct of a trade or business in Massachusetts, or derives income from
				the ownership of real or tangible personal property in Massachusetts, the
				non-resident is treated as if conducting those activities in his or her
				individual capacity.
The income of a pass-through entity that derives from or is
				effectively connected with the conduct of a trade or business or the ownership
				of real or tangible personal property in Massachusetts retains its character as
				it passes through a tiered structure of pass-through entities before becoming
				income to the non-resident. Thus, income that is derived from a trade or
				business does not convert to non-business-related income as it passes through a
				series of entities. Similarly, Massachusetts source income of any pass-through
				entities engaged in a unitary business that conducts a trade or business in
				Massachusetts is taxable to a non-resident member to the extent it would be
				taxable if received directly by the nonresident.
In the case of multi-tiered unitary businesses where at least
				one entity in the structure is engaged in the conduct of a trade or business or
				the ownership of real or tangible personal property in Massachusetts, and
				income derived from one or more members of the unitary business is taxable in
				another state, the group of entities must apportion its income, as determined
				under 830 CMR 62.5A.1.
When a non-resident earns or derives income from sources both
				in Massachusetts and elsewhere, only that portion of the income earned or
				derived from Massachusetts is taxed. The types of deductions and exemptions
				available to a non-resident with respect to Massachusetts source income are
				generally the same as those granted to a resident.
All transactions involving the taxation of non-residents are
				subject to the sham transaction rule, as defined in 830 CMR 62.5A.1.
To the extent that any rule in 830 CMR 62.5A.1 conflicts with
				that in another regulation, such as
				830
				CMR 62.17A.1, "Massachusetts Taxation of S
				Corporations and their Shareholders," the most recently promulgated rule
				applies.
(b)830 CMR 62.5A.1
			 is organized as follows:
1. General.
2. Definitions.
3. Income Subject to Massachusetts Income
			 Tax.
4. Income Not Subject to
			 Massachusetts Income Tax.
5. Rules
			 for Apportionment of Income for Non-Resident Individuals Working in
			 Massachusetts.
6. Rules for
			 Apportionment of Income to Massachusetts for Non-resident Members of
			 Pass-through Entities.
7.
			 Exemptions.
8.
			 Deductions.
9. Estates of
			 Non-resident Decedents.
10.
			 Non-resident Trusts.
11.
			 Returns.
12. Effective
			 Dates