Patrick sees tax collection as pivotal

Stepping up process with 15 new hires may yield $61.5m for state

By Todd Wallack
Globe Staff / January 27, 2011

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To help balance the state budget, Governor Deval Patrick is turning to a trusted tool: stepping up tax collections.

In his budget proposal for the next fiscal year, the governor is requesting funds to hire 15 additional employees to boost tax collections and examinations of tax returns, particularly those filed by major corporations operating in multiple states. He also proposed several other changes that would produce larger tax payments from corporations.

“You hunt where the ducks are,’’ said Robert Bliss, Department of Revenue spokesman. In addition to targeting large corporations, Bliss said the new employees would tackle other types of cases, including income tax returns filed by individual taxpayers.

The administration predicted the $1.2 million spent on the new hires would yield $61.5 million in additional tax collections, through increased assessments and settlements with filers. The Department of Revenue is already on track to collect an additional $24 million in tax revenue during the current fiscal year, which ends June 30, through more tax compliance work.

Patrick also proposed tweaking the formula that corporations must use to calculate their state excise tax, resulting in an additional $20 million in collections. The change, which would primarily affect large out-of-state companies would base sales calculations on where services are delivered, rather than where they are originated. Eleven states, including California, have adopted similar measures.

And Patrick suggested delaying the introduction of an arcane deduction for publicly traded corporations — called “FAS 109’’ — for one year to postpone losing $46 million in tax revenue.

In addition, Patrick proposed raising an additional $8.7 million a year by requiring travel companies that resell hotel rooms on the Internet to register with the Department of Revenue and pay taxes on the amount they mark up room prices. (Hotels already collect taxes on the rooms from customers.)

The governor also wants companies that received tax incentives from the Massachusetts Life Sciences Center to forgo pocketing $5 million of the credits until later years. And he wants to limit state funding to the center's investment fund to $10 million, down from the $25 million called for in the 2008 law that created the program.

Patrick estimated the state could reap at least $20 million more a year by expanding the bottle deposit law to apply to noncarbonated drinks, including bottled water, fruit beverages, iced tea, and sports drinks.

The Associated Industries of Massachusetts, which represents many local businesses, said it was still studying the potential impact of all the tax changes, but was particularly concerned about additional enforcement.

“That could be troublesome,’’ said Brian R. Gilmore, executive vice president for AIM, noting that Massachusetts already has more onerous tax policies than other states.

However, business leaders were relieved the governor resisted touching the corporate tax rate, which is scheduled to decline to 8 percent in fiscal 2012, after dropping to 8.25 percent in the current year, based on a tax cut the Legislature adopted in 2008.

“That’s very significant,’’ said Greater Boston Chamber of Commerce chief executive Paul Guzzi.

Todd Wallack can be reached at

Correction: The original version incorrectly referenced how a budget proposal would affect the Massachusetts Life Sciences Center.