Schedule ABI: Exceptions to the Add Back of Interest Expenses (2025)
Massachusetts · Massachusetts DOR · Used for tax years 2025
Massachusetts Schedule ABI is used to claim exceptions to the requirement to add related-member interest expenses and costs back to net income. It reports the exception amounts claimed and the total to enter on the appropriate corporate return.
Who files this form
Include Schedule ABI with your tax return if you are claiming an exception to the requirement under MGL ch 63, §§ 31J and 31K to add back related-member interest expenses and costs to net income.
Complete a separate Schedule ABI for each transaction with a related member for which you claim an exception.
What you'll need
Have the following information available for the exception you claim:
- 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 where the deduction is claimed.
- Deductible interest amounts and the taxpayer’s tax rate from Form 355, 355U, 355S, or 63 FI.
- For Exceptions 1 and 2, the applicable related-member tax rates and apportionment percentages. Exception 2 also asks for related-member net income, the taxpayer’s apportionment percentage, and total interest expenses or costs incurred to the related member by all other related members, including the taxpayer.
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 debt or liability, including its original date and amount, year-end balance, termination date if it has a fixed term, and interest rate.
How to file
File electronically and include Schedule ABI with your tax return. Paper returns will not be accepted.
- Complete a separate schedule for each related-member transaction for which you claim an exception.
- Complete the applicable exception section.
- Add lines 1 through 3 under “Total Exceptions Claimed.” Enter the total on line 4 and on the appropriate corporate return.
For help with electronic filing, call 617-887-6367. The form directs filers to the DOR electronic filing and payment requirements page for more information.
Common mistakes
- Filing on paper: The return must be filed electronically. Paper returns will not be accepted.
- Combining transactions on one schedule: Complete a separate schedule for each related-member transaction for which you claim an exception.
- Claiming Exceptions 1 and 2 for the same interest: 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 stated conditions: The related member must have reported the interest expense or cost as income. If applicable, the tax reported on that return must have exceeded the minimum tax.
- Including excluded jurisdictions: Do not include a jurisdiction’s tax rate on Exception 1, line 3, or its net income on Exception 2, line 8, if the related member files with you there on a combined or unitary basis.
- Entering more than 1 on Exception 2, line 14: The form caps each entry at “1.”
- Using Exception 3 for a double tax claim: All double tax exception claims must be made by answering the questions in Exception 1 or 2. For Exception 3, select only one basis for the claim.
Questions people ask
What exceptions does Schedule ABI cover?
The form provides a full exception for interest paid, accrued, or incurred to a related member taxed at a similar rate; a partial exception for related-member interest; and an exception based on a supporting statement.
Can I use one schedule for several related-member transactions?
No. Complete a separate schedule for each transaction for which you claim an exception.
What bases can I select for Exception 3?
Select only one: “Business purpose or economic substance” or “Section 31K foreign treaty exception.”
Do I need a supporting statement for Exception 3?
Yes. Prepare it with your tax return in accordance with the Department’s public written statements and make it available to the Commissioner upon request.
What do I enter if the related member is taxable in only one jurisdiction and is not subject to apportionment?
Enter “1” for the related member’s apportionment percentage on Exception 1, line 4, or Exception 2, line 11, as applicable.