What would you do with $460 million? I can think of a lot that I would do.
I will be honest, giving the money to multi-national corporations, for investments they have already made, wouldn’t crack the Top 10 ideas on my list.
But if the retroactive provisions in Donald Trump’s One Big Brutal Bill (OB3), which gave tax credits for 2025 investments, were allowed to take effect, that’s exactly what would happen here in Massachusetts.
That’s why I have been advocating for Massachusetts to “decouple” from the federal Internal Revenue Code – asking the Governor, asking my colleagues in the Senate, asking my friend Doug Howgate at the Fiscal Year 2027 consensus revenue hearing.
Because we can’t afford to lose $460 million more in revenue that we need to lower health care costs, lower utility bills, fund our K-12 schools, raise wages for direct care workers and early educators and so much more.
Frankly, we need that revenue more than venture capitalists and out-of-state corporations need another tax break.
Especially when the Trump Administration cut $3.7 billion in funding from Massachusetts last year, and with further cuts coming in 2026 as provisions of the OB3 that we can’t prevent take effect – like brutal cuts to SNAP funding and severe cuts to health care.
So I was pleased when I saw that Governor Maura Healey filed legislation to manage the impacts of the federal OB3 on state revenues.
While the Governor’s bill does not fully “decouple” Massachusetts from changes to the federal Internal Revenue Code, it does protect and defend Massachusetts residents and values from some of the most harmful impacts of federal government action. (Personally, I want us to go further to mitigate, so I’ll keep pressing.)
An article from Colin Young at State House News is below, explaining this complex tax policy in more detail.
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Healey offers phase-in plan to manage federal tax change impacts
STATE HOUSE, BOSTON, Jan. 15, 2026…..Gov. Maura Healey moved Thursday to blunt the immediate impact of a state revenue shortfall that has been projected to result from the federal law that Republicans championed this summer by spreading implementation out over two years.
The One Big Beautiful Bill Act that President Donald Trump signed July 4 makes more than 100 changes to the federal tax code, about 30 of which trigger an impact to Massachusetts tax collections, the Department of Revenue said in October.
If the changes proposed by Healey on Thursday do not happen, the administration said, the federal law will automatically reduce Massachusetts tax revenues by more than $460 million this year. But if they are adopted, the governor’s plan would “have a positive impact on state tax revenues for FY26 and FY27,” her office said.
The federal law’s provisions are expected to benefit Massachusetts residents and businesses who may not have to pay all of the taxes the state had been expecting. Healey said Thursday that her proposal (HD 5557) sought to balance the interests of state government and the state’s taxpayers.
“This proposal is based on the recognition that many of our businesses, including our vital research and innovation ecosystem, stand to benefit from the new tax rules, and Massachusetts, in general, will be in a better competitive position compared to our competitor states if these provisions are allowed to take effect,” Healey wrote in her filing letter. “It balances that goal against the reality that our ability to deliver the programs and services paid for through the budget that our communities, schools, workers and most vulnerable residents rely on would be at risk if the revenue impacts are not mitigated.”
Healey’s bill spreads out Massachusetts’s implementation of five key OBBBA provisions over two years.
It allows the section that lets businesses fully deduct domestic research and experimental expenditures in the year those expenses are incurred to take effect as of Jan. 1, 2026. A press release from Healey’s office called that part of the law “tax relief that is particularly important to Massachusetts’ innovation economy.”
Massachusetts would conform with the other four tax provisions in the federal law that were expected to reduce state tax revenues starting with tax year 2027 under Healey’s bill.
Those sections increase the cap on the deductibility of the interest that a business pays on its debt (had been projected to result in $52 million less for the state this fiscal year); increase dollar limits on expensing certain depreciable business assets (projected $25 million impact to the state); a special depreciation allowance that lets businesses deduct the full cost of certain production property in the year it is placed in service (projected $98 million less for the state); and the permanent renewal and enhancement of federal “opportunity zones” tax credits (no state impact in fiscal 2026, but a loss of $18 million for fiscal 2027), according to DOR’s October memo.
Healey said her approach, which needs legislative approval, “will allow Massachusetts to spread the tax revenue impact of the OBBBA provisions over multiple fiscal years while beneficiaries will immediately see the tax benefit of OBBA at the federal level and realize the full benefits at the state level in one to two years.”
“This legislation strikes the right balance, protecting the state’s fiscal stability in the near term while phasing in tax policies that support reinvestment and drive sustainable economic growth over time,” said Economic Development Secretary Eric Paley.
The governor’s bill also proposed a series of other tax-related changes.
Among them is the expansion of an elective pass-through entity excise that the state created in 2021 as a response to the cap on federal deductions for state and local taxes (SALT) that was imposed in 2017. The excise allows eligible taxpayers to use pass-through entities — which are not subject to the SALT cap — to pay their state and federal taxes.
Healey is proposing to extend that allowance to income that is subject to the state’s 4% surtax on high-earning households “thereby unlocking additional federal tax relief for residents without impacting surtax collections.” She said the state could even benefit from the arrangement because it gets to keep a portion of the excise for administrative expenses.
The governor’s bill also includes policy based on a Maryland model that would automatically delay the implementation of federal tax policy changes that carry more than a $20 million impact on state revenue collections by up to one year. Healey also proposes to increase the threshold at which casinos must issue certain tax forms for slot machine winnings from $1,200 to $2,000, in line with a new federal policy, and would require in-state investment to qualify for state Opportunity Zone tax benefits.
Colin Young is the deputy editor for State House News Service and State Affairs Pro Massachusetts. Reach him at colin.young@statehousenews.com.
