Harbor Maintenance Tax Credit

A corporation subject to corporate excise may claim a dollar-for-dollar state tax credit equal to the amount of "qualifying harbor maintenance tax" (HMT) it pays to the federal government for "port use" at one of three Massachusetts ports during the taxable year. The eligible ports for loading and unloading of commercial cargo located in Massachusetts are limited to Boston, Gloucester and Fall River. The credit applies to qualified harbor maintenance tax paid on or after July 1, 1996.

Qualified Harbor Maintenance Tax (HMT):

HMT is a federal tax enacted pursuant to the Harbor Maintenance Revenue Act of 1986, which provides for the conservation and improvement of the nation's water resources. The purpose of the HMT is to support the development and maintenance of U.S. ports and harbors by requiring that certain shippers, importers, exporters, and vessel operators pay for the benefit of using these resources.

Limitation of Credit:
The credit is available for taxes paid pursuant to I.R.C. §§ 4461 and 4462. But, taxes paid with respect to passengers, the shipment of bulk cargo or the shipment of any other cargo or item of commerce not included in the meaning of "break-bulk" or "containerized cargo", are not eligible for this credit:

  • "Break-bulk cargo" means general goods, commodities or wares, which are customarily shipped in, boxed, bagged, crated or unitized form, and held in the vessel's general holding area. This term also includes road motor vehicles and other odd-size cargo;
  • "Containerized cargo" means general goods, commodities or wares that are shipped in non-disposable, reusable, commercial sized shipping containers that are customarily used on sea and ocean going vessels for the convenient shipment of such goods, commodities or wares.

The credit is available to domestic and foreign corporations.

To claim the credit, the following three eligibility requirements must be met:

  1. the harbor maintenance credit can only be taken in the year it was paid;
  2. the tax must be paid with respect to "break-bulk" or "containerized cargo". Taxes paid for the transport of passengers or for the shipment of bulk cargo or for the shipment of any other cargo not included within the definition of "break-bulk" or "containerized" cargo are not eligible for the credit;
  3. the tax must be paid with respect to shipment by sea and ocean-going vessels through ports located in Massachusetts.

Minimum Excise, Maximum Amount of Credits, Carryover:
The credit may not reduce the corporate excise due below the minimum excise, currently $456.

The credit is not subject to the fifty percent limitation of G.L. c. 63, s. 32C. Any unused credit may be carried forward, reduced from year to year, from the year earned for five succeeding taxable years.

Combined Return Filing:
Effective for tax years beginning on or after January 1, 2009, if a corporation files a combined return of income under G.L., c. 63, s. 32B, a tax credit generated by a member of a combined group may be shared as detailed in the combined reporting regulation at 830 CMR 63.32B.2.


Investment Tax Credit (ITC)

Manufacturing corporations, business corporations engaged primarily in research and development, or corporations primarily engaged in agriculture or commercial fishing may take a credit against their excise due for property either owned by them or leased pursuant to an operating lease.

Property Owned:
The amount of the credit allowed for owners is 3% of the cost or other basis for federal income tax purposes of qualifying tangible property acquired, constructed, reconstructed, or erected during the taxable year, after the deduction of any federally authorized tax credit taken with respect to such property.

Property Leased:
The amount of the credit afforded to lessee corporations with respect to tangible personal property is 3% of the lessor's adjusted basis in the property for federal income tax purposes at the beginning of the lease term, multiplied by a fraction, the numerator of which is the number of days of the taxable year during which the lessee corporation leases the tangible personal property and the denominator of which is the number of days in the useful life of the property.

In addition, corporations renting or leasing tangible property from regional business development corporations or authorities authorized under chapter 40D, or regional business development corporations organized as non-profit corporations, otherwise qualifying for the credit under chapter 63, Section 31A(j), are eligible for such credit and will be deemed to have acquired such eligible property by purchase as defined under § 179(d) of the federal Internal Revenue Code, as amended and in effect for the taxable year. The amount of the credit is 3% of the value of qualifying property leased and placed in qualified used during the taxable year.

Historically, the amount of the credit has fluctuated between 3% and 1% of the eligible costs incurred.

Qualifying tangible property must meet all of the criteria below:

  • tangible personal property and other tangible property including buildings and structural components of buildings acquired by purchase per I.R.C. § 179(d);
  • used by the corporation in the commonwealth;
  • situated in the commonwealth on the last day of the taxable year; and
  • depreciable under I.R.C. § 167 and having a useful life of four years or more or is considered recovery property under I.R.C. § 168.

Manufacturing Corporation "Status":
A corporation that does not apply for manufacturing corporation classification but is engaged in manufacturing activity as defined in 830 CMR 58.2.1(6) is granted manufacturing corporation "status" and may claim the investment tax credit.

Investment Tax Credit with Certain Credits:
For Massachusetts purposes, a corporation may not take both a credit for ITC and the Economic Opportunity Area Credit allowed by M.G.L. c.63, s. 38N.

Investment Tax Credit with Certain Deductions:
For Massachusetts purposes, a corporation may not take both a credit for ITC and the deductions allowed by M.G.L. c.63, ss. 38D and H.

Minimum Excise, Maximum Amount of Credits, Carryover:
The credit may not reduce the corporate excise due below the minimum excise, currently $456.

The maximum amount of credits, otherwise allowable in any one taxable year to a corporation, may not exceed fifty per cent of its excise. A corporation may carry over and apply to its excise for one or more of the next succeeding three taxable years the portion of those credits, as reduced from year to year .

Combined Return Filing:

Effective for tax years beginning on or after January 1, 2009, if a corporation files a combined return of income under G.L., c. 63, s. 32B, a tax credit generated by a member of a combined group may be shared as detailed in the combined reporting regulation at 830 CMR 63.32B.2.

Recapture Rules that Apply to ITC:
i
f eligible property for which ITC has been taken is disposed of or ceases to be in qualified use prior to the end of its useful life, the difference between the credit taken and the credit allowed for actual use must be added back as additional taxes due in the year of disposition. The amount of credit allowed for actual use is determined by multiplying the original credit by the ratio which the months of qualified use bear to the total months of useful life.

Useful life of property is the same as that used by the corporation for federal depreciation purposes. No recapture is necessary if the property has been in qualified use for more than 12 consecutive years for purposes of the ITC. Property ceases to be in qualified use as of the effective date that the commissioner revokes a corporation's manufacturing classifications or status.

Property originally purchased and used in MA, but later transferred to another state is subject to the recapture rules unless the useful life of the property has already expired.


Research Credit

A domestic or foreign corporation is allowed a credit against its excise tax equal to the sum of ten (10) percent of the excess, if any, of the qualified research expenses for the taxable year, over the base amount; and fifteen percent of the basic research payments determined under I.R.C. § 41(e)(1)(A). 


Vanpool Credit

A domestic or foreign corporation may claim a credit equal to 30% of the cost incurred during the taxable year for the purchase or lease of company shuttle vans used by the corporation in an employer-sponsored ride sharing program in the commonwealth.

Specifically, the credit allowed is:

  • 30% of the total cost for purchases incurred during the taxable year for company shuttle van;
  • 30% of the cost of the lease payments incurred during the taxable year, excluding insurance, maintenance, fuel, drivers' salaries, finance charges or other operating expenses.

The credit does not apply to the purchase or lease costs of vehicles, which would otherwise be required as part of the employer's business activities, in the absence of a ride sharing program. Qualifying shuttle vans must be used for transporting employees or students from their homes or public transportation facilities to a place of employment or to a campus in the Commonwealth. To qualify, a shuttle van must be used by the corporation in Massachusetts and situated in the Commonwealth on the last day of the corporation's taxable year.

For purposes of the vanpool credit, an "employee" is an individual who:

  • works more than 8 hours per week for an employer for remuneration, or
  • is a full-time student at a college, university or other post-secondary educational institution and who commutes between home and campus on a regular basis.


For purposes of the vanpool credit, an "employer" is

  • a person or entity for whom services are performed by employees, except government agencies; or
  • a private educational institution which enrolls students at higher than the secondary level.


A "company shuttle van" is a highway vehicle which meets all of the following requirements:

  1. the van has a seating capacity of at least seven adults, including the driver;
  2. at least 80% of its mileage can be reasonably expected to be from the transportation of students and employees and that the transportation must be from a residence, home or a public transportation facility to a place of employment or educational institution; and
  3. at least half of its adult seating capacity is occupied on average, not including the driver.


Taxable Year in which to Take the Credit:
For purchased vehicles, the vanpool credit may only be taken in the taxable year in which the qualifying vehicles were acquired and placed in service. For qualifying leased vehicles, the credit may be taken in those taxable years in which a lease or contract payment is incurred.

Minimum Excise, Maximum Amount of Credits, Carryover:
The maximum amount of credits, otherwise allowable in any one taxable year to a corporation, may not reduce the excise below the greater of the minimum excise, currently $456, or fifty percent of its excise before credits. A corporation may carry over and apply to its excise for any subsequent taxable year the portion of those credits, as reduced from year to year, not allowed.

Combined Return Filing for Corporations:
Effective for tax years beginning on or after January 1, 2009, if a corporation files a combined return of income under G.L., c. 63, s. 32B, a tax credit generated by a member of a combined group may be shared as detailed in the combined reporting regulation at 830 CMR 63.32B.2.

Credit Prorated:
With respect to property which is disposed of or ceases to be in qualified use prior to the end of the taxable year in which the credit is to be taken, the amount of the credit is that portion of the credit which represents the ratio which the months of qualified use bear to the months of useful life.

Credit Recapture:
If property on which credit has been taken is disposed of or ceases to be in qualified use prior to the end of its useful life, the difference between the credit taken and the credit allowed for actual use generally must be added back as additional taxes due in the year of disposition. No recapture is necessary if the property has been in qualified use for more than four consecutive years. The amount of credit allowed for actual use is determined by multiplying the original credit by the ratio which the months of qualified use bear to the months of useful life.

"Useful life" of property is the same as that used by the corporation for depreciation purposes when computing federal income tax liability.

A depreciation deduction may be taken on any qualifying shuttle van. However, the basis upon which the depreciation is taken must first be reduced by the amount of the allowable credit. 


Where to Report on Original Tax Return; What to Enclose:

Harbor Maintenance Tax Credit

  • Enter the amount of credit on Mass Form 355, Schedule CR, Line 6

Investment Tax Credit (ITC)

  • Enter the amount of credit on Mass Form 355, Schedule CR, Line 3

Research Credit

  • Enter the amount of credit on Mass Form 355, Schedule CR, Line 5

Vanpool Credit

  • Enter the amount of credit on Mass Form 355, Schedule CR, Line 4

Documentation to Submit with Abatement/Amended Tax Return:

Harbor Maintenance Tax Credit

  • Massachusetts Schedule HM - Harbor Maintenance Tax Credit;
  • When requested, proof that the harbor maintenance tax was paid to the federal government.

Investment Tax Credit (ITC)

  • Amended Massachusetts Schedule H - Investment Tax Credit and Carryovers;
  • Massachusetts Form 355Q - Statement Relating to Manufacturing Activities to prove that a corporation is engaged in manufacturing activities.

Note:
The 355Q submitted for an abatement claim cannot be used to apply for formal manufacturing classification. 

Recapture Rules for ITC and EOAC

  • Fixed Assets and Depreciation schedules (indicating the disposition of assets during the taxable year).
  • Massachusetts Schedule H-2 -Recapture Offset Worksheet

Research Credit:

  • If filing combined, Amended Massachusetts Schedule RC - Research Credit, or RC-A - Research Credit - Aggregation;
  • Separate and completed Research Credit Worksheet packet for each company and tax year related to the abatement application.

Vanpool Credit:

  • Massachusetts Schedule VP - Vanpool Credit;
  • Schedule H - Investment Tax Credit and Carryovers.

Massachusetts References:

Harbor Maintenance Tax Credit

Investment Tax Credit (ITC)

Recapture Rules for ITC and EOAC

Research Credit:

Vanpool Credit:

Federal References:

Harbor Maintenance Tax Credit

  • I.R.C. §§ 4461; 4462