Important information for Massachusetts residents who had taxpayers with capital gain transactions reported for the period between April 30, 2002 and December 31, 2002

Governor Mitt Romney signed legislation that prevents thousands of Massachusetts taxpayers from having to pay retroactive taxes on financial transactions that occurred more than three years ago. Under the new law, no additional taxes are due and affected taxpayers may disregard any retroactive bills they received.

Additionally the legislation allowed Taxpayers who paid capital gains from May to December of 2002 to apply for a refund. To lessen the impact of these refunds on the state treasury, payments will be spread out over four years. Anyone owed a refund of $1,000 or less will receive one lump sum. Eligible taxpayers must apply for the refund before June 30, 2006

The Massachusetts Department of Revenue has issued instructions for taxpayers on how to recalculate the tax rate paid on 2002 capital gains and request a tax refund. Taxpayers seeking a refund of taxes previously paid at the 2002 capital gains tax rate of 5.3% must recalculate all capital gains tax paid in 2002 at tax rates from 0% to 5% depending on the length of time the asset was held using the 2002 Schedule B (Interest, Dividends and Certain Capital Gains and Losses), revise the 2002 Schedule D, and enter the necessary information in the 2002 Income Adjustment Form for Capital Gains to determine the amount of the refund due. Taxpayers must then attach the 2002 Income Adjustment Form for Capital Gains, a copy of the recalculated Schedule D, and a copy of the originally filed Federal Schedule D to the Form Peterson CA-6 (Abatement Form).