ISSUE: When a corporation cannot use all of its available credits in the current year, which credits should it use first?

DISCUSSION: A corporation with available credits cannot necessarily use all those credits against its excise since credits cannot reduce the excise below the greater of the minimum tax or 50% of the excise before credits. G.L. c. 63, §§ 31A(c), 32C. See DOR-D 88-24. When some of the corporation's available credits may lapse, the credits should be taken in the order specified below and in Schedule H. This ordering will prevent the unnecessary lapsing of credits, since it gives priority of use to credits which will lapse first.

Order of Use

(1) Credits which will lapse in the current year unless used or converted to unlimited status. These are:

(a) Credits for building in a poverty area, G.L. c. 63, § 38E.

(b) Vanpool credits, G.L. c. 63, § 31E.

(c) Investment tax credit carryovers in their last year of life, G.L. c. 63, § 31A(g).

(2) Investment tax credit carryovers which will lapse if not used or converted to unlimited status by the end of the next tax year, G.L. c. 63, § 31A(g).

(3) Investment tax credit carryovers which will lapse if not used or converted to unlimited status by the end of the second succeeding tax year, G.L. c. 63, § 31A(g).

(4) Current year investment tax credits. This is the investment tax credit from qualified property placed in service this year, G.L. c. 63, § 31A(a).

(5) Unlimited credit carryovers, G.L. c. 63, §§ 31E(d), 32C.

DIRECTIVE: When a corporation has several types of available credits and those credits exceed the maximum which can be used in the current year, it should follow the order of the above list to prevent the unnecessary lapsing of credits.

REFERENCE: G.L. c. 63, §§ 31A(a), (c), (g), 31E, 32C, 38E.

/s/Stephen W. Kidder
Stephen W. Kidder
Commissioner of Revenue

December 31, 1988

DD 88-23

This Directive represents the official position of the Department of Revenue on the application of the law to the facts as stated. The Department and its personnel will follow this Directive, and taxpayers may rely upon it, unless it is revoked or modified pursuant to 830 CMR 62C.01(5)(e). In applying this Directive, however, the effect of subsequent legislation, regulations, court decisions, Directives, and TIRs must be considered, and Department personnel and taxpayers may rely upon this Directive only if the facts, circumstances and issues presented in other cases are substantially the same as those set forth in this Directive.