By Harry S. Margolis
Is your trust subject to Massachusetts income taxes? Probably it is. But probably it also pays no income tax so it doesn't matter. I'll explain the reasons why below.
In contrast, the 35 trusts in question in the case of Bank of America, N.A., vs. Commissioner of Revenue (SJC-11995, July 11, 2016), do have to pay income taxes. The Bank of America argued that when it acts as trustee, its trusts should not be subject to Massachusetts income tax because (1) as a corporation it's not a "natural person" and (2) it doesn't have sufficient nexus with Massachusetts to be considered an "inhabitant" of the state for this purpose. The Massachusetts Supreme Judicial Court in this decision disagrees, upholding the decision of the Appellate Tax Board to tax the income of these trusts.