AA-1: Application for Section 42 Method of Apportionment (2025)
Massachusetts · Massachusetts DOR · Used for tax years 2025
Massachusetts Form AA-1 is a corporation’s application for permission to use an alternative apportionment method under Section 42. It requires detailed reasons for the request, a description of the proposed method, and a tax computation using that method.
Who files this form
A corporation seeking permission to use a Section 42 alternative apportionment method must apply using Form AA-1. Before applying, it must file a return and pay the tax using the statutory method.
A taxpayer does not need to apply for an apportionment method it is already permitted to use. For example, a Section 38 manufacturer does not need this application to use the single-sales factor method allowed under MGL ch 63, § 38(l)(2).
What you'll need
Prepare the following information and attachments:
- The corporation’s tax year, business code number from its U.S. return, federal identification number, name, principal office address, and principal office location in Massachusetts.
- A statement supported by detailed facts explaining why the statutory allocation and apportionment rules do not reasonably approximate the corporation’s Massachusetts income. You must provide clear and cogent evidence that statutory apportionment does not fairly represent the extent of its Massachusetts business activity.
- A detailed description and written explanation of the proposed alternative method, plus a tax computation using that method.
- Documentation supporting the figures used, including their origin, nature, and relationship to the overall result.
- A properly completed Power of Attorney, Form M-2848, for any authorized representative or employee with whom the application’s contents may be discussed.
How to file
Complete Form AA-1 and attach the required statements, tax computation, and supporting documentation. The responsible corporate officer must sign the declaration and provide their printed name, title, and date. The form also has fields for a paid preparer’s name, signature, address, and date.
The application must be submitted with the return. The form requires applicants to first file a return and pay the tax using the statutory method.
Electronic filing: Taxpayers filing an electronic return may submit Form AA-1 electronically with the return filing and electronic payment. The form refers taxpayers to TIR 21-9 for more information about electronic filing and payment requirements.
Mailing: Make any check or money order payable to the Commonwealth of Massachusetts. Send the application and return to:
Massachusetts Department of Revenue
Rulings and Regulations Bureau
PO Box 9566
Boston, MA 02114
Common mistakes
- Applying before filing and paying under the statutory method. The form says applicants must first file a return and pay the tax using that method.
- Submitting the application separately from the return. The form says the application must be submitted with the return.
- Letting the application arrive late. It will not be considered if the Commissioner receives it after the return’s due date, including valid extensions.
- Treating no response as approval. If the Commissioner does not act within nine months of filing, the application is deemed denied unless the Commissioner and applicant agree in writing to extend the decision period.
Questions people ask
Do I need permission to use a method I am already allowed to use?
No. The form says taxpayers do not need to apply for alternative apportionment when they are otherwise permitted to use the method.
What must I show to support my request?
You must show by clear and cogent evidence that the income attributed to Massachusetts under statutory apportionment does not fairly represent the extent of your corporation’s Massachusetts business activity.
Can the Commissioner ask for more information?
Yes. The Commissioner may request additional information from the applicant.
What happens if I do not receive a decision?
If the Commissioner does not act within nine months from the filing date, the application is deemed denied. The Commissioner and applicant may agree in writing to extend the time for a decision.