You request a ruling on behalf of the following parties: *************** (Company), *************** and any certified transferee (Purchasers). The Company asks whether it is eligible for the economic opportunity area credit under G.L. c. 63, § 38N and St. 1998, c. 286. The Company also asks whether it is entitled to sell or otherwise transfer such credit to the Purchasers under those provisions. Purchasers ask whether they may apply the transferred credits against their Massachusetts corporate excise or personal income tax liability for their tax year in which the sale or transfer occurs. Finally, both Company and Purchasers seek a ruling as to their liability for any additional taxes, penalties and interest which may arise subsequent to the sale or transfer of the credits that are the subject of this request.
The following is your representation of the facts upon which we base this letter ruling. Company does business in Massachusetts as a manufacturing corporation. On a date between October 1, 1995 and December 31, 1995, a number of the Company's buildings in which it conducted manufacturing activities were destroyed by fire. Reconstruction of the destroyed property was undertaken by the Company. The Economic Assistance Coordinating Council designated the reconstruction of the Company's facilities a Certified Project within an Economic Opportunity Area under the Massachusetts Economic Development Incentive Program pursuant to G.L. c. 23A. Since the date of the casualty, Company has incurred costs totaling over $********** to replace and reconstruct the Company's facilities. As of January 1, 1999, the assessed value of the replacement property will be at least 100% of the assessed value of the property that was destroyed by the casualty. Company intends to sell or otherwise transfer any tax credits it receives pursuant to G.L. c. 63, § 38N and St. 1998, c. 286 for its tax year ending October 31, 1998, to the Purchasers.
A corporate excise is imposed on every domestic corporation doing business in Massachusetts. G.L. c. 63, § 32. General Laws Chapter 63, section 38N allows an economic opportunity area credit (EOAC) against the excise. The credit is equal to five percent of the cost of eligible property used exclusively in a "certified project" in an "economic opportunity area" as those two terms are defined in G.L. c. 23A. The credit is available to all corporations taxable under G.L. c. 63. See 830 CMR 63.38N.1.
On August 10, 1998, legislation entitled "An Act Extending Existing Economic Incentives to Businesses Rebuilding in the Commonwealth After a Disaster" (the Act) was signed into law. St. 1998, c. 286. The Act applies to any corporation whose qualified property  was involuntarily converted as a result of a casualty suffered between October 1, 1995 and December 31, 1995. St. 1998, c. 286, § 2. Under the Act, the cost upon which the EOAC is calculated includes the full amount of eligible property that replaces such qualified property, without any of the adjustments otherwise required by Internal Revenue Code § 1033. St. 1998, c. 286, § 2(a). The replacement property must be used exclusively in a certified project in an economic opportunity area pursuant to G.L. c. 23A, § 3A. Id. The assessed value of the replacement property must be at least 100% of the assessed value of the property that was involuntarily converted. Id. The amount of the EOAC under the Act is limited to $7,500,000, notwithstanding any other limitation in G.L. c. 63, § 38N. St. 1998, c. 286, § 5.
Based on the facts you have presented to us, we find that Company is entitled to $********** of EOAC for replacement property under G.L. c. 63, § 38N and St. 1998, c. 286. However, Company must meet the required jobs commitment levels for taxable years beginning on or after January 1, 1999 and ending on or before January 1, 2005. See St. 1998, c. 286, § 1. If it does not, any credits authorized under G.L. c. 63, § 38N and the Act are subject to recapture. St. 1998, c. 286, § 4.
In addition, the Act allows a corporation entitled to the EOAC with respect to eligible replacement property to sell, assign, exchange, convey or otherwise transfer the credit attributable to such property to any party, provided that the requirements of Section 4 of Chapter 286 of St. 1998 are met. Based on the facts you have presented to us, and the anticipated certification by Company to the Commissioner of the information specified in Section 4 of the Act, we find that the Company is presently entitled to transfer $********** of EOAC.
Pursuant to the Act, any amounts received by Company from Purchasers as consideration for any EOAC sold or otherwise transferred pursuant to the Act will be considered taxable income to Company under G.L. c. 63. St. 1998, c. 286, § 4. Purchasers will be able to use any EOAC sold or otherwise transferred to them by
Company to offset either the excise imposed under G.L. c. 63 or the tax imposed under G.L. c. 62, for the year in which the purchase or transfer occurs. Id. Any EOAC sold or otherwise transferred to Purchasers will be subject to the fifty percent limitation in G.L. c. 63, § 38N(b) and the minimum excise limitation in G.L. c. 63, §38N(c), or the fifty percent limitation in G.L. c. 62, § 6(g)(1), depending on whether Purchasers use the EOAC to offset their corporate excise liability or their personal income tax liability. See also 830 CMR 63.38N.1(7). To the extent any EOAC is not utilized in such year, any unused EOAC may be carried forward and applied against the Purchasers' tax liability for any one or more of the next succeeding ten taxable years. G.L. c. 63, § 38N(d); G.L. c. 62, § 6(g)(2).
In the event of any recapture of any EOAC sold or otherwise transferred by Company to Purchasers, Company will be solely liable for any additional taxes due as a result of recapture. St. 1998, c. 286, § 4. In the event that the Commissioner should determine that the amount of any EOAC sold or otherwise transferred by Company to Purchasers exceeds the amount of credits which Company was entitled to claim or to transfer under the Act, any excess amount will be assessed against Company. Id. Further, Company will be solely liable for any additional taxes, penalties and interest due as a result. In the event of any such recapture or determination by the Commissioner, Purchasers' right to claim any EOAC will not be limited or otherwise affected.
Very truly yours,
/s/Frederick A. Laskey
Frederick A. Laskey
Commissioner of Revenue
 See G.L. c. 63, § 31A.