What Happened?

As a reminder for Massachusetts employers, the state is using a draft 2025 filing‑season conformity framework because the One Big Beautiful Bill Act (OBBBA) took effect after Massachusetts’ IRC tie‑in date.

Overview

• Personal income tax: Massachusetts uses the IRC as of January 1, 2024, to determine gross income; mid‑2025 OBBBA changes do not flow through.

• Result: Massachusetts does not conform to OBBBA’s “no tax on tips” (§70201) or “no tax on overtime” (§70202); those amounts remain taxable for Massachusetts.

• Business items: Massachusetts does conform to several corporate‑side provisions (e.g., domestic R&E expensing, business interest updates, special depreciation) under existing conformity rules for corporate excise.

Why this matters:

• Payroll and communications: Employers should not change Massachusetts withholding or state return treatment for tips/overtime; employees may still claim federal deductions where eligible, but not on MA returns.

• Planning: Corporate tax teams should model OBBBA business‑side impacts that do conform, while watching for possible legislative decoupling.

Key Risks for Employers

• Misapplied payroll rules: Treating tips/overtime as non‑taxable for Massachusetts could cause under‑withholding and notices.

• Employee confusion: Workers may expect Massachusetts relief based on federal headlines (IRS Notice 2025‑69); ensure clear Massachusetts vs. federal messaging.

• Policy change risk: The draft could change, and the Legislature may decouple from costly provisions—monitor DOR updates.

Next steps: Monitor the DOR TIR page for the final TIR and any updates; keep TIR 24‑14 handy for MA’s IRC tie‑in context; for federal filings on tips/overtime, use IRS Notice 2025‑69.

For additional details:

• Massachusetts – Working Draft TIR: Massachusetts Conformity to Certain Provisions in Public Law No. 119-21

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