Mass. Gen. Laws » Part I Title IX Chapter 63
Massachusetts General Laws

Mass. Gen. Laws ch. 63, § 39A (2026)

Tax on business subsidiary corporation

✓ current as of July 2026
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Section 39A. The net income of a business corporation which is a subsidiary or parent corporation of another corporation or closely affiliated therewith by stock ownership shall be determined by eliminating all payments to the parent corporation or subsidiary or affiliated corporations in excess of fair value, and by including fair compensation to such business corporation for all commodities sold to or services performed for the parent corporation or subsidiary or affiliated corporations. For the purposes of determining such net income, the commissioner may, in the absence of satisfactory evidence to the contrary, presume that an apportionment by reasonable rules of the consolidated net income of corporations participating in the filing of a consolidated return of net income to the federal government fairly reflects the net income taxable under this chapter, or may otherwise equitably determine such net income by reasonable rules of apportionment of the combined income of the subsidiary, its parent and affiliates or any thereof.

If, in the opinion of the commissioner, the capital of a business corporation, which is a subsidiary or parent corporation of another corporation or closely affiliated therewith by stock ownership, is inadequate for its business needs apart from credit extended or indebtedness guaranteed by the parent or subsidiary or an affiliated corporation, the commissioner shall, in determining net worth under paragraph 8 or 9 of section thirty, determine the value of its net worth properly taxable thereunder and consider such value the taxable net worth, disregarding its indebtedness owed or guaranteed by the parent or subsidiary or an affiliated corporation.

Such a corporation shall incorporate in its tax return required under section eleven of chapter sixty-two C such information as the commissioner may reasonably require for determination of the excise pursuant to the provisions of this section, and failure to so incorporate such information shall subject the corporation and its officers to the penalties provided by section seventy-four of chapter sixty-two C. This section shall be broadly construed to include the situation in which the corporations referenced transact with one another through persons or entities that are not corporations within the meaning of this chapter.

Notes of Decisions
Cited in 10 cases, 1984–2003 · leading case: Polaroid Corp. v. Comm'r of Revenue, 472 N.E.2d 259 (Mass. 1984).
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Polaroid Corp. v. Comm'r of Revenue, 472 N.E.2d 259 (Mass. 1984). · cites it 5× “63, § 39A) promulgated in accordance with the procedures for the adoption of administrative regulations set forth in G.”
Syms Corp. v. Comm'r of Revenue, 765 N.E.2d 758 (Mass. 2002). · cites it 3× “wed the deductions on three alternative grounds: (1) the transfer and leaseback of the marks was a sham and could be disregarded under the “sham transaction doctrine” 1 ; (2) the royalty payments were not deductible as ordinary and necessary business expenses where there was no…”
Sherwin-Williams Co. v. Comm'r of Revenue, 778 N.E.2d 504 (Mass. 2002). · cites it 2× “and that the commissioner had properly disallowed the deductions on three alternative grounds: (1) the transfer and license back of the marks was a sham and could be disregarded under the “sham transaction doctrine”; (2) the royalty payments were not deductible as ordinary and…”
Comm'r of Revenue v. AMIWoodbroke, Inc., 634 N.E.2d 114 (Mass. 1994). · cites it 2× “We *97 know that, in drafting G. L. c. 63, § 39A, “the commissioner was concerned about tax evasion by means of intercorporate transactions that would depress the corporate excess and income of corporations subject to taxation in Massachusetts.”
Overnite Transp. Co. v. Comm'r of Revenue, 764 N.E.2d 363 (Mass. App. Ct. 2002). · cites it 3× “The bureau concluded that any purported interest transfers to Holding necessarily were “excessive” in the sense of G. L. c. 63, § 39A, 7 and properly disallowed as deductions.”
Gillette Co. v. Comm'r of Revenue, 683 N.E.2d 270 (Mass. 1997). · cites it 2× “at 496, we declared that G. L. c. 63, §§ 39A and 42, did not grant the commissioner the authority to impose the unitary method.”
New York Times Sales, Inc. v. Comm'r of Revenue, 667 N.E.2d 302 (Mass. App. Ct. 1996). · cites it 2× “(Times Company or parent), were interest free intercompany loans, and as a result, G. L. c. 63, § 39A, authorized the commissioner to impute interest on such loans to Times Sales as “fair compensation” for the “services” it rendered to Times Company.”
PMAG, Inc. v. Comm'r of Revenue, 705 N.E.2d 1130 (Mass. 1999). · cites it 2× “According to the taxpayer, the commissioner’s sole authority for imposing additional tax liability based on adjustments between related entities is G. L. c. 63, § 39A. 5 While that provision allows the commissioner to *41 make adjustments between related corporations, the…”
New York Times Co. v. Comm'r of Revenue, 693 N.E.2d 682 (Mass. 1998). “But G. L. c. 63, § 39A, which allows the commissioner to use the “unitary business” approach, explicitly requires the commissioner to exercise this authority only pursuant to “reasonable rules of apportionment.”
Tenneco Inc. v. Comm'r of Revenue, 781 N.E.2d 33 (Mass. App. Ct. 2003). “G. L. c. 63, § 39A. What it has not done, however, is grant this authority with respect to utility corporations.”
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