Dividend Deduction

Massachusetts does not allow the dividends received deduction allowed under the Internal Revenue Code. However, a Massachusetts deduction is allowed for 95% of the value of all dividends received except:

  • dividends from ownership of shares in a corporate trust engaged in business in the Commonwealth;
  • dividends resulting from the deemed or actual distributions(except actual distributions of previously taxed income) from a DISC which is not wholly-owned; or
  • dividends from any class of stock if the corporation owns less than 15% of the voting stock of the payer corporation.

Dividend Defined:
For purposes of computing net income from business carried on within the Commonwealth, a "dividend" is generally defined as any item of federal gross income as defined under I.R.C. § 316 or that is treated as a dividend under any other provision of the Code.


Net Operating Loss Deduction

Massachusetts only allows a deduction for:

  • net operating loss carryovers in the first five (5) years of a business measured from the date of the corporation's organization; or
  • on or after 12/31/89, net operating losses sustained in any taxable year to be carried forward for not more than five years and may not be carried back.

Solar and Wind Power Deduction

In determining net income, a domestic or foreign business corporation may deduct expenditures paid or incurred during the taxable year with respect to the installation of any solar or wind powered climate control or water heating units or systems. These units or systems must have situs in the commonwealth and must be used exclusively in the trade or business of such corporation. Expenditures for ancillary units are not allowed.

The deduction is allowed only if both conditions are met:

  1. the net income for the taxable year and all succeeding taxable years must be computed without any exemption, credit or deduction for such expenditures or depreciation of the property other than the Solar and Wind Power Deduction allowed; and
  2. the system or unit must be certified by the Office of Facilities Management, Division of Capital Planning, 617-727-4030.


The Corporation Must Be Taxed under the Non-Income Measure of Excise:
If any system or unit qualifies for the Solar and Wind Power Deduction, it will not be taxed under the tangible property measure of the excise.

The deduction is available to domestic and foreign corporations.

Solar and Wind Power Deduction with Certain Credits:
For Massachusetts purposes, a corporation may not take both a deduction for solar and wind powered installation and any other credit against tax with respect to the same property such as:

Deduction Addback:
If eligible units, for which a deduction was taken, are used other than exclusively in the corporation's trade or business, the deduction previously allowed must be added back to taxable income dollar for dollar in the year the property ceases to be in qualified use. The computation of any such additional income should be explained in an attached Schedule and the amount should be reported in Schedule E, Line 10.

In any taxable year when property is sold or otherwise disposed of with respect to which a deduction has been allowed, such deduction is disregarded in computing gain or loss. The gain or loss on the sale or other disposition of the property is computed as if the deduction was not claimed, and the cost or other basis of the property had been reduced by straight-line deprecation based on the useful life of such property. However, if such sale or disposition occurs within three years of the date such property is placed in service, the basis is zero.


Documentation to Submit with Abatement/Amended Tax Return:

Dividend Deduction

  • Massachusetts Schedule E-1 - Dividends Deduction;
  • Schedule showing payers, amounts and percent of voting stock owned by class of stock.

Net Operating Loss Deduction

  • For losses claimed for a year in which the corporation had no nexus, pro-forma returns showing what losses should be;
  • Amended Massachusetts Schedule E-2 - Loss Carryover Deduction.

Solar and Wind Power Deduction

  • Verification of Certification by the Office of Facilities Management;
  • Schedule itemizing the cost, the allowable federal depreciation, date and place of installation;
  • If amounts are prorated, an explanation of the computation.

Massachusetts References:

Dividend Deduction

Net Operating Loss Deduction

Solar and Wind Power Deduction
 

  • M.G.L. Chapter 63, Section 31A; 31H; 38N; 38H
  • LR 82-106: Solar or Wind-Powered Installations

Federal References:

Solar and Wind Power Deduction

  • I.R.C. § 48