Recent state and federal tax reform debates have highlighted the taxation of S-corporations (S-corps). Like other “pass-through” entities, S-corps are not required to pay the corporate income tax, and instead their owners pay personal income taxes on the profits of the corporation after costs have been deducted. In Massachusetts, some owners of pass-through entities like S-corps have voiced concerns about the fact that a proposed additional four percentage point tax on incomes over one million dollars a year would include very high-income owners of pass-through businesses. The fact sheet reviews how these entities are taxed in Massachusetts and other states with higher rates for very high income earners. Based on national data, over 98 percent of owners of S-corps and other pass through entities would not be affected by this reform.

Eleven other states extend taxes on short-term rentals such as Airbnb. The factsheet explains the current Massachusetts exemption for short-term residential rentals and how taxing these bookings would work. It explains recent research on how rentals such as Airbnb can compete with traditional accommodations, and how these operations sometimes resemble a full-time business. It examines how much revenue the room occupancy tax currently generates and how much additional revenue would be raised if rentals such as Airbnb were included.