Schedule ABI: Exceptions to the Add Back of Interest Expenses (2024)
Massachusetts · Massachusetts DOR · Used for tax years 2024
Massachusetts Schedule ABI is used to claim exceptions to the requirement to add back related-member interest expenses and costs to net income. It reports the interest expenses, tax rates, and related-member information used to calculate the exception claimed on a corporate retur
Who files this form
Use 2024 Massachusetts Schedule ABI to claim an exception to the requirement under MGL chapter 63, sections 31J and 31K to add back related member interest expenses and costs to net income.
Include this schedule with your return. Complete a separate Schedule ABI for each transaction with a related member for which you claim an exception.
What you'll need
Have the information needed for your exception claim ready:
- Taxpayer and related member names, federal identification numbers, and tax-year beginning and ending dates.
- The jurisdictions where the related member is taxed on net income, if applicable.
- Unitary business identifier and principal reporting corporation information, if applicable.
- The return and schedule on which the deduction is claimed.
- Deductible interest expense or cost amounts and the tax rates, apportionment percentages, and related member income information requested for your exception.
For Exception 3, prepare a supporting statement with your tax return in accordance with the Department’s public written statements. Make it available to the Commissioner upon request. You will also need details about the underlying debt or liability, including its original date and amount, year-end balance, interest rate, and termination date if it has a fixed term.
How to file
File electronically. The form states that paper returns will not be accepted.
- Complete a separate Schedule ABI for each related member transaction for which you claim an exception.
- Identify where you claimed the deduction: Form 355U, Schedule U-E; Form 355U, Schedule U-MTI; Form 355 or 355S, Schedule E; or other.
- Complete the applicable exception section and transfer its amount to the corresponding line under Total Exceptions Claimed.
- Add lines 1 through 3 of Total Exceptions Claimed. Enter the total on line 4 and on the appropriate corporate return.
- Include Schedule ABI with your electronic return.
For questions about electronic filing, call 617-887-6367. The form also refers filers to TIRs 16-9 and 21-9.
Common mistakes
- Sending a paper return: This return is e-file only. Paper returns will not be accepted.
- Claiming Exceptions 1 and 2 for the same expense: Do not complete Exception 2 if you claimed Exception 1 for the same interest expense or cost add back.
- Using Exception 2 without meeting its conditions: Complete it only if the related member reported the interest expense or cost as income and, if applicable, the tax reported on that return exceeded the minimum tax.
- Including combined or unitary jurisdictions where prohibited: Do not include a jurisdiction’s tax rate on Exception 1, line 3, or its net income on Exception 2, line 8, when the related member files with the taxpayer there on a combined or unitary basis.
- Entering more than 1 on Exception 2, line 14: The form expressly prohibits this.
- Using Exception 3 for a double tax exception claim: All double tax exception claims must be made by answering the questions in Exception 1 or 2.
Questions people ask
Can I use one Schedule ABI for several transactions?
No. Complete a separate schedule for each transaction with a related member for which you claim an exception.
What exceptions does Schedule ABI cover?
Exception 1 is a full exception for interest paid, accrued, or incurred to a related member taxed at a similar rate. Exception 2 is a partial exception for interest paid, accrued, or incurred to a related member. Exception 3 is based on a supporting statement.
What claim bases are listed for Exception 3?
The form lists business purpose or economic substance, and the section 31K foreign treaty exception. Select only one basis.
What apportionment percentage should I enter if the related member is taxable in only one jurisdiction?
For Exception 1, line 4, and Exception 2, line 11, enter “1” if the related member is taxable in only one jurisdiction and therefore is not subject to apportionment.