Massachusetts General Laws

Mass. Gen. Laws ch. 63, § 38B (2026)

Financial institutions and business corporations engaged exclusively in buying, selling, dealing in or holding securities; excise rate

✓ current as of July 2026

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Section 38B. (a) Every financial institution or business corporation which is engaged exclusively in buying, selling, dealing in, or holding securities on its own behalf and not as a broker, except securities of a DISC, and is not a bank holding company under the Internal Revenue Code, as amended and in effect for the taxable year, and, which either applies to the commissioner to be classified as a security corporation before the end of the taxable year and is so classified, or has been so classified by the commissioner for a prior taxable year and such classification has not been revoked before the end of the taxable year, shall pay, on account of each taxable year, an excise equal to one and thirty-two one hundredths percent of the gross income, as defined in section thirty, received by such corporation during the taxable year or four hundred and fifty-six dollars, whichever is greater.

(b) Every financial institution business corporation which is engaged exclusively in buying, selling, dealing in, or holding securities on its own behalf and not as a broker, except securities of a DISC, and is a bank holding company under the Internal Revenue Code, as amended and in effect for the taxable year, and which either applies to the commissioner to be classified as a security corporation before the end of the taxable year and is so classified, or has been so classified by the commissioner for a prior taxable year and such classification has not been revoked before the end of the taxable year, shall pay, on account of such taxable year, an excise equal to thirty-three one hundredths percent of the gross income, as defined in section thirty, received by such corporation during the taxable year or four hundred and fifty-six dollars, whichever is greater.

(b1/2) For the purposes of subsection (a), ''securities'' includes (1) equity or debt instruments and options, futures and other derivatives, that are traded on and were acquired through a public exchange or another arms length secondary market; (2) bond as defined in and issued pursuant to chapter 23G; (3) cash and cash equivalents, including savings and checking accounts and certificates of deposit, and foreign currencies; (4) interests in a real estate investment trust under section 856 of the Code or a regulated investment company under section 851 of the Code, or a real estate mortgage investment conduit under section 860D of the Code, so long as none of the mortgages owned by the conduit were originated by the holder thereof or by an affiliate of the holder; (5) mortgage-backed securities that are guaranteed by the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Home Loan Bank or the Federal Home Loan Mortgage Corporation; (6) collateralized mortgage obligations, so long as none of the mortgages that underlie the obligation were originated by the holder thereof or by an affiliate of the holder; and (7) any other passive investment vehicles that, in the judgment of the commissioner, should be considered to constitute ''securities'' for the purposes of said subsection (a); ''affiliate'' means a member of an affiliated group as defined under section 1504 of the Code; and ''debt instruments'' shall be deemed to include, but not be limited to, debt obligations of the United States, its agencies or instrumentalities and of any state or political subdivision thereof, their agencies or instrumentalities. Nothing in this subsection shall be construed to limit the instruments that may be held by an investment partnership for purposes of the safe harbor set forth in subsection (b) of section 17 of chapter 62.

(d) Ownership interest in a real estate investment trust which is a related member, as defined in section 31I, shall not be considered a security for the purposes of this section. A real estate investment trust shall have the same meaning as that contained in section 856 of the Code.

Notes of Decisions

Cited in 8 cases, 1963–2003 · leading case: Indus. Fin. Corp. v. State Tax Comm'n, 326 N.E.2d 1 (Mass. 1975).

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Indus. Fin. Corp. v. State Tax Comm'n, 326 N.E.2d 1 (Mass. 1975). · cites it 17× “In each of the taxable years in question, the taxpayer 4 filed timely applications with the Commissioner of Corporations and Taxation (Commissioner) for classification as a domestic securities corporation entitled to favorable tax treatment under G. L. c. 63, § 38B. 5 Each, of…”

Polaroid Corp. v. Comm'r of Revenue, 472 N.E.2d 259 (Mass. 1984). · cites it 3× “, a Massachusetts corporation that is classified as a security corporation under G. L. c. 63, § 38B (a), and is, therefore, subject to a special excise on its gross income (G.”

Commonwealth v. Baker, 330 N.E.2d 794 (Mass. 1975). “See G. L. c. 63, § 38B, as amended through St.”

Mezzanine Capital Corp. v. Comm'r of Revenue, 661 N.E.2d 107 (Mass. App. Ct. 1996). · cites it 5× “For the calendar years ending in 1987, 1988, and 1989, Mezzanine Capital Corporation (taxpayer) filed its Massachusetts tax returns and determined its tax as a domestic security corporation, see G. L. c. 63, § 38B, as in effect prior to St.”

Greenery Sec. Corp. v. Comm'r of Revenue, 787 N.E.2d 1116 (Mass. App. Ct. 2003). · cites it 4× “1 The board concluded that certain short-term notes held by the taxpayer qualified as “securities,” were held for *71 investment, and did not disqualify the taxpayer as a “security corporation” under G. L. c. 63, § 38B. Accordingly, the taxpayer was entitled to preferential…”

Chatham Corp. v. State Tax Comm'n, 285 N.E.2d 420 (Mass. 1972). “On June 28, 1966, Chatham made a timely application for classification as a security corporation under G. L. c. 63, § 38B, for its fiscal year ending June 30, 1966.”

State Tax Comm'n v. PoGM Co., 341 N.E.2d 285 (Mass. 1976). “(PoGM), was entitled to the tax treatment accorded by G. L. c. 63, § 38B, as appearing in St. 1966, c.”

Tait v. Peck, 194 N.E.2d 707 (Mass. 1963). “See G. L. c. 63, § 38B (as amended through St.”

— Mass. Gen. Laws ch. 63, § 38B(c) — 1 case

Mezzanine Capital Corp. v. Comm'r of Revenue, 661 N.E.2d 107 (Mass. App. Ct. 1996). “For the calendar years ending in 1987, 1988, and 1989, Mezzanine Capital Corporation (taxpayer) filed its Massachusetts tax returns and determined its tax as a domestic security corporation, see G. L. c. 63, § 38B, as in effect prior to St.”

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