Schedule ABIE: Exceptions to the Add Back of Intangible Expenses (2024)

Who files this form

Enclose Schedule ABIE with your return if you are claiming an exception to the requirement under MGL ch 63, §§ 31I and 31K to add back related-member intangible expenses and costs to net income. This includes losses from factoring or discounting transactions.

Complete a separate schedule for each transaction with a related member for which you claim an exception.

What you'll need

Have the information needed for your claim ready:

• Names, federal identification numbers, and tax-year beginning and ending dates for the taxpayer and related member.
• The jurisdictions where the related member is taxed on net income, if applicable.
• The unitary business identifier and principal reporting corporation information, if applicable.
• The return and schedule where the deduction is claimed.
• For Exceptions 1 and 2, the applicable tax-return figures, including expense amounts, tax rates, apportionment percentages, and, for Exception 2, related-member net income.
• For Exceptions 3 and 4, applicable agreement termination dates, contract dates, study or appraisal dates, and details about the transaction.

For Exception 3 or 4, you must 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.

How to file

Enclose Schedule ABIE with your tax return. Use a separate schedule for each related-member transaction for which you claim an exception.

Indicate where the deduction is taken: Form 355U, Schedule U-E; Form 355U, Schedule U-MTI; Form 355 or Form 355S, Schedule E; or Other.

Transfer the amounts from the applicable exception sections to lines 1 through 4 of “Total Exceptions Claimed.” Add those lines and enter the total on line 5 and on the appropriate corporate return.

The supplied form does not give a mailing address or e-file directions.

Common mistakes

• Do not use one schedule for multiple transactions. Complete a separate schedule for each transaction for which an exception is claimed.
• Do not complete Exception 2 for the same intangible expense or cost for which you claimed Exception 1.
• Complete Exception 2 only if the related member reported the intangible expense as income and, if applicable, the tax reported on that return exceeded the minimum tax.
• In Exception 1, line 3, do not include a jurisdiction’s tax rate if the related member files there with you on a combined or unitary basis. In Exception 2, line 8, do not include income amounts for such a jurisdiction.
• Do not enter more than “1” on Exception 2, line 14.
• Select only one claim basis in Exception 3 or 4, and prepare the required supporting statement.
• Make all double tax exception claims through Exception 1 or 2, not Exception 3 or 4.

Questions people ask

Can I include several related-member transactions on one Schedule ABIE?

No. Complete a separate schedule for each transaction for which you claim an exception.

What types of exceptions does the schedule cover?

Exception 1 is a full exception for intangible expenses or costs paid, accrued, or incurred to a related member taxed at a similar rate. Exception 2 is a partial exception for related-member intangible expenses or costs. Exception 3 covers intangible expense or cost claims based on a supporting statement. Exception 4 covers factoring or discounting loss claims based on a supporting statement.

What claim bases are listed for Exceptions 3 and 4?

Both list business purpose or economic substance and the MGL ch 63, § 31K foreign treaty exception. Exception 3 also lists the conduit exception. Select only one basis in the applicable section.

What if the related member is taxed 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.

Official sources

• https://www.mass.gov/lists/dor-tax-forms-and-instructions