For years, an exclusion from taxable income has been allowed for contributions made on behalf of Massachusetts individuals to cash or deferred arrangement ("CODA") plans (more commonly known as 401(k) plans).  Recently, Massachusetts issued a Working Draft Directive seeking to force contributions made on behalf of sole proprietors and partners of partnerships to be included as part of Massachusetts gross income for tax years beginning after December 31, 2007.  This is a significant shift in policy since in the past these contributions which were excluded from federal gross income were also excluded from Massachusetts gross income.  This policy change seems particularly unfair considering it only affects partners and sole proprietors, not employees of incorporated businesses who offer these plans to all employees.  Click on Full Article to read more.

By Stephanie L. Tenczar, MSA