A tax change designed to help some wealthy Massachusetts residents recover a portion of a lucrative federal tax break they lost four years ago kicked into gear in December, when a group of so-called pass-through businesses paid $876 million in excise taxes to the state.

The figure was disclosed in a Department of Revenue press release issued on Wednesday detailing the state’s tax take for December.

With pass-through businesses, including S corporations, limited liability companies, and some trusts, income flows through the company to the owner or shareholder, who traditionally paid income tax to Massachusetts on the money earned. 

Up until four years ago, the business owners who itemized could deduct all of the Massachusetts income taxes they paid (as well as their property taxes) on their federal tax returns. But the so-called state and local tax deduction, or SALT deduction, was capped at $10,000 in 2017 to help pay for tax cuts sought by President Trump that benefited the wealthy and large corporations. 

Massachusetts last year approved a work-around to restore the deduction for taxpayers associated with pass-through businesses. Instead of the owner or shareholder of the pass-through business making the tax payments, the new Massachusetts law allowed the pass-through companies themselves to pay an equivalent excise tax, which under federal law would be fully deductible on the company’s federal tax return. 

Since the workaround didn’t gain final approval until September, the owners of the pass-through businesses made estimated tax payments of roughly $876 million during 2021 and now will be able to claim most of that money as a refund. 

Gov. Charlie Baker and the Legislature disagreed on how big the refund should be. Baker wanted all the money returned to the business owners, and twice vetoed provisions that would return only 90 percent. Lawmakers overrode his veto both times, and now the business owners will get refunds totaling $784 million and the state will retain nearly $88 million. State lawmakers were counting on $90 million in their budget for this year.

More than 20 other states have approved similar workarounds. 

The Massachusetts workaround dramatically inflated the state’s tax take in December, but the Department of Revenue adjusted the numbers to reflect refunds that will be going out to owners of pass-through businesses later this year.

Even with the adjustments, tax revenues in December continued their upward trajectory. Collections were $520 million, or 18.3 percent, above December 2020 levels and $635 million, or 23.3 percent, above the state’s revenue forecast. For the first six months of the fiscal year, the state has collected $17.8 billion, 24.8 percent above year-ago levels and more than $2 billion higher than the benchmark forecast.

BRUCE MOHL

 

FROM COMMONWEALTH

Rollins targets MBTA: As she heads out the door to become US attorney, Suffolk County District Attorney Rachael Rollins said she has launched a probe investigating whether the MBTA should be criminally charged in connection with a Green Line trolley crash last summer that injured 27 passengers.

– The Green Line crash occurred last July when a trolley operated by Owen Turner slammed into another train from behind. National Transportation Safety Board investigators later determined that Turner’s train accelerated before the crash, and Turner was charged with negligence of a person having care of public conveyance and gross negligence in management of a train. Rollins said Turner’s colleagues and supervisors had been aware of his pattern of reckless behavior but failed to take action.

– The investigation is a bold move, and disclosing it publicly at this early stage is unusual. Rollins’s announcement comes as she is about to hand the reins of the DA’s office to Kevin Hayden, whom Gov. Charlie Baker appointed to replace Rollins on an interim basis. Hayden has been serving as chair of the Sex Offender Registry Board but previously worked in the DA’s office. Read more.

Red flag law rarely used: The red flag gun law, pitched as a way to save lives by allowing family members or a local police department to go through a court process to seize weapons belonging to people perceived as a danger to themselves or others, was used six times in 2021. Read more.

OPINION

Schools are Wu’s biggest challenge: Keri Rodrigues, the founder of Massachusetts Parents United, says the greatest challenge facing Boston Mayor Michelle Wu is turning around the city’s schools, where academic performance continues to lag and more of Boston’s children, particularly children of color, continue to fall through the cracks. Read more.

Tackling school violence: Nikki Flionis and Anne Carrabino say the attack in November on a Dorchester school principal by a 16-year-old student underscores the need for safety in schools – and a more holistic approach. Read more.

 

FROM AROUND THE WEB

MUNICIPAL MATTERS  

Boston Mayor Michelle Wu appoints a five-member panel headed by retired Supreme Judicial Court justice Geraldine Hines to find a new police commissioner. Former police commissioner Ed Davis will also serve on the panel. (WBUR)

Trash pickups are delayed in several North Shore communities because sanitation workers are out sick with COVID. (Salem News)

Columnist Jack Spillane is not impressed with the pomp and circumstance – and free limo rides – for the inaugural ceremonies for New Bedford city councilors and school committee members. (New Bedford Light) 

Cohasset Public Schools sues the Department of Children and Families to get a judge to require DCF investigators to testify in a wrongful termination case brought by a fired principal, related to alleged sexual abuse by a teacher. (Patriot Ledger)

HEALTH/HEALTH CARE

The CEOs of Boston’s four largest health care systems decry the protests Mayor Michelle Wu has faced over her new COVID policies – and redouble their call for people to get vaccinated. (Boston Globe) 

WASHINGTON/NATIONAL/INTERNATIONAL

President Biden took direct aim at Donald Trump – without uttering his name – on the first anniversary of the January 6 Capitol insurrection, saying his predecessor had held ​​“a dagger at the throat of America, at American democracy.” (New York Times) 

BUSINESS/ECONOMY

A husband-and-wife team in Dorchester is building a 14-unit apartment building in the same space as a triple-decker next door. The units, each around 750 square feet, will cost $650 to $800 a month without any state or city subsidies. (Dorchester Reporter) 

Entrepreneur Paul English is launching a new incubator that aims to launch consumer apps. (Boston Globe) 

EDUCATION

From December 23 to January 5, Massachusetts public schools reported nearly 39,000 COVID cases among students and another 12,000 among staff. (MassLive)

Massachusetts will expand its popular test-and-stay program into child care facilities in the coming weeks, allowing young children exposed to COVID in school to be tested daily, as K-12 students are, instead of quarantining. (Boston Globe)

TRANSPORTATION

The Globe’s David Scharfenberg does a deep dive on what would be entailed in delivering on Boston Mayor Michelle Wu’s big plan to free the T. 

CRIMINAL JUSTICE/COURTS

Gov. Charlie Baker appointed Kevin Hayden, the chair of the state Sex Offender Registry Board and a one-time prosecutor in the Suffolk County, to fill the remainder of outgoing DA Rachael Rollins’s term helming the office. (Boston Globe) 

A judge lets federal prosecutors use Boston Marathon bomber Dzhokhar Tsarnaev’s $1,400 COVID stimulus payment to repay some of the money he owes his victims. (Associated Press)

An investigation into the Massachusetts Court Officer Training Academy at Westover Air Force Base finds that recruits were repeatedly hit and strangled during training. The training academy was closed in September due to allegations of hazing and abuse. (MassLive)

MEDIA

Former New York Times columnist Nicholas Kristof is having trouble getting his run for governor in Oregon off the ground. Shemia Fegan, Oregon’s secretary of state, says she won’t allow Kristof’s candidacy because he has been unable to establish residency in the state. Kristof says he will go to court to make his case. (Oregon Capital Chronicle)

Boston Globe editor Brian McGrory praises the staff in a year-end memo and says every part of the Globe is operating at peak performance. (Media Nation)