In a series of votes Thursday, the state House of Representatives and Senate rejected Republican Gov. Charlie Baker's veto of a one-year delay to the reinstatement of the state's charitable contributions deduction. The Legislature also rejected Baker's request for a full credit against a pass-through member's share of an entity-level tax instead of a 90% credit.
The House voted 124-35 to undo the veto, while the Senate voted 34-6 to undo the veto and 36-4 to reject the proposed pass-through tax amendment. The vote leaves the deduction delayed for an additional year and returns the original pass-through entity tax provision with a 90% credit to Baker for consideration.
Baker had signed the fiscal year 2022 budget into law on July 16 while returning to the Legislature the proposed entity-level tax for pass-through businesses and vetoing a provision delaying the reinstatement of the state's charitable contributions deduction to Jan. 1, 2023.
The charitable tax deduction has been suspended since 2002 and was again delayed by last year's budget. In his letter to the Legislature, Baker said that the deduction should go into effect next year, citing the state's strong revenues and the needs of nonprofits and charitable organizations.
Baker also returned the pass-through provision to the state Legislature with proposed amendments that would increase a member's credit from 90% of their share in the entity's tax to 100% of their tax share, saying that taxpayers should collect the full benefit as struggling businesses emerge from the COVID-19 pandemic.
The Legislature also voted against Baker's various proposed amendments and vetoes for a number of other provisions in the budget.
In a news release shared with Law360, Senate President Karen Spilka, D-Ashland, said that the Senate refuses to compromise on measures it believes are important to the state's recovery from the pandemic.
"Our fiscal year 2022 budget was carefully crafted and debated to ensure the success of our efforts to get back to better by focusing on resources and services that are critical to everyday life in the commonwealth," Spilka said.
The news release also said the Senate chose to continue delaying the charitable tax deduction amid uncertainty about the state's fiscal outlook, including once federal assistance winds down.
In a statement to Law360, House Speaker Ronald Mariano, D-Quincy, said the delay "will allow us to debate permanent changes to the tax code not solely based on current revenues, but considering its long-term impact on taxpayers, charitable organizations and tax collections."
A spokesperson for Baker declined to comment on the record.
The offices for Republican leadership in the House and Senate did not immediately respond to requests for comment Monday.
--Editing by Vincent Sherry.
Update: This story has been updated with comment from Mariano.
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