IRS Makes Ruling On Taxing MA Rebate Payments

MASSACHUSETTS —Most Massachusetts residents who got a refund last year under the 62F law will not have to pay federal taxes on those refunds. The IRS released guidance Friday on whether residents would need to pay taxes on refunds issued in 21 states.

The Massachusetts refunds were issued under a little-known 1980s law — 62F — that says tax revenue growth in the state can't exceed the sum of wages and salaries of all state residents in a given fiscal year. The state collected $41.8 billion in tax revenue in fiscal year 2022, which is $2.94 billion more than allowed under against the wages and salaries last year.

The IRS said that payments to residents in Georgia, Massachusetts, South Carolina, and Virginia will be excluded from reportable federal income tax "unless the recipient received a tax benefit in the year the taxes were deducted."

The 62F refunds began going out to Massachusetts residents in November and were equivalent to about 13 percent of the previous tax year's liability.

The IRS also ruled that it would not challenge the taxability of payments related to general welfare and disaster relief. Residents in the following states won't have to report state payments on their 2022 tax return: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, and Alaska.

The 2022 federal income tax filing deadline is Tuesday, April 18.

See related: IRS May Tax Massachusetts Refunds Sent In 2022 Under 62F Law