Effective for real estate closings occurring on or after November 1, 2025, Massachusetts regulation 830 CMR 62B.2.4: "Withholding on Sales of Massachusetts Real Estate" (hereafter, "regulation") requires the withholding of personal income tax or corporate excise tax on sales or exchanges of Massachusetts real estate with a gross sales price of $1 million or more by nonresidents.

General rule

The regulation requires withholding agents to collect and remit income tax or corporate excise tax and submit a return on transfers of real property located in whole, or in part, in Massachusetts when the gross sales price equals or exceeds the withholding threshold, which is currently set at $1 million. For transfers that would otherwise be subject to withholding but for which all the transferors are exempt, withholding agents must submit a return and a Transferor's Certification for each transferor. Unless otherwise provided, the withholding, return, and applicable Transferor's Certifications are due within 10 days of closing.

Transferees must act as the withholding agent for transactions in which there is no withholding agent; if there are multiple transferees, each must act as the withholding agent and withhold on that transferee's proportionate share of the gross sales price.

For transactions in which there are multiple transferors, the withholding treatment of each transferor is determined separately; however, determination of whether the withholding threshold has been met is based on the entire transaction.

The withholding agent must calculate the withholding (1) as set forth in 830 CMR 62B.2.4(3)(c), or (2) at the transferor's election, as the transferor's estimated net gain derived from the transfer multiplied by the tax rate applicable to the transferor. The regulation describes how to calculate the transferor's estimated net gain, determine the applicable tax rate and elect the alternative withholding. Illustrative examples are provided.

Exempt transferors

The regulation exempts from the withholding requirements transfers made by:

• Full-year Massachusetts residents
• Pass-through entities
• Publicly traded partnerships
• Estates of resident decedents or resident trusts
• Corporations with, or a member of a combined group where one member of the group has, a "continuing Massachusetts business presence"¹ that meet certain requirements
• IRC Section 501 exempt organizations, unless the transfer results in unrelated business taxable income to the transferor
• Insurance companies
• The US government, Massachusetts or any political subdivisions thereof or their respective agencies
• The Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Government National Mortgage Association, or a private mortgage insurance company
• Financial institutions that maintain a place of business in Massachusetts
• Real estate investment trusts, if the proceeds from the trust's real estate sales are distributed to its shareholders via dividends

For transactions to which there are multiple transferors, the exemption only applies to those transferors that are exempt. Thus, all other transferors are subject to withholding on the transfer.

Transferors claiming the withholding exemption must certify that they are exempt on the Transferor's Certification.

Other exceptions and like-kind exchanges

In certain instances, withholding may not be required or may be reduced below the required amount if the transferor completes a Transferor's Certification reporting the reason for the reduced withholding. Reduced withholding may be available for the payment of debts, foreclosures, involuntary transfers and for properties only partly located in Massachusetts. Transfers that qualify for nonrecognition of taxable gain may also be subject to reduced withholding, such as a transfer of a principal residence, a transfer between spouses or incident to a divorce, and transfers that qualify for nonrecognition under IRC Section 351 or as tax-free reorganizations under IRC Section 368.

Generally, withholding is not required on any gain deferred for Massachusetts tax purposes as part of a transfer that qualifies as a like-kind exchange under IRC Section 1031². Withholding, however, is required on gain recognized under IRC Section 1031(b), even if the transfer qualifies as a like-kind-exchange. At the time of closing, if an exchange appears to qualify as a like-kind-exchange but ultimately does not qualify as such, the transferor must notify the Commissioner of the failure and remit the applicable withholding amount due within 10 days of the expiration of the statutory period specified in IRC Section 1031(a)(3).

Other provisions

When the transfer is subject to installment sale treatment, the transferor may elect to have withholding apply only on the initial payment made by the transferee at the time of the transfer. The initial withholding return and payment are due within 10 days of closing. For real estate sold under an installment method before November 1, 2025, withholding is not required on payments received after that date.

Withholding agents may rely upon the information provided in a Transferor's Certification taken in good faith. The regulation explains the responsibility and requirements of withholding agents (e.g., filing returns and the Transferor's Certification and making payments) as well as those for transferors (e.g., providing the withholding agent with the Transferor's Certification, liability).

Withholding agents that fail to meet the withholding obligations may be subject to penalties and interest for the failure to properly withhold.

The MA DOR has also posted the draft Transferor's Certification form and instructions, as well as responses to frequently asked questions on the withholding requirements.

Implications

With the promulgation of 830 CMR 62B.2.4, the MA DOR establishes a new withholding requirement for sales of Massachusetts real estate valued at $1 million or more by nonresidents. The new rules provide guidance on calculating the amount of tax that should be withheld as well as transactions to which the withholding requirements apply. Withholding agents, transferors and transferees should review these rules so that they understand the new compliance and tax collection and remittance obligation they may now be subject to. Failure to comply with the new rules could result in the imposition of penalties and interest.