This Technical Information Release (TIR) explains certain provisions contained in sections 20, 25 and 28 of chapter 141 of the Acts of 2003 ("The Act").
A. Changes to the Brownfields Credit
Prior to the Act, taxpayers subject to tax under General Laws chapters 62 and 63 were allowed a credit for incurring eligible costs to remediate a hazardous waste site on property used for business purposes and located within an economically distressed area. See G.L. c. 62, § 6(j) and G.L. c. 63, § 38Q. Prior to the Act, net response and removal costs that the taxpayer incurred between August 1, 1998 and January 1, 2007 were eligible for the credit provided that the taxpayer commenced and diligently pursued an environmental response action before August 5, 2003.
The Act extends the time for incurring eligible costs that qualify for the credit by changing the environmental response action commencement cut-off date from August 5, 2003 to August 5, 2005. Therefore, under the Act, if all other requirements are met, both individual and corporate taxpayers that commence and diligently pursue an environmental response action prior to August 5, 2005 are eligible for the credit.
The effective date of these provisions is November 26, 2003. These provisions modify TIR 00-9, Tax Changes in the Fiscal Year 2001 Budget and TIR 99-13, The Tax Credit Provisions of the Brownfields Act.
B. Changes to the Investment Tax Credit
Under existing law, manufacturing corporations, research and development corporations within the meaning of chapter 63, section 38C or section 42B, or corporations primarily engaged in agriculture or commercial fishing, are allowed a credit against their excise due under chapter 63 for tangible personal property either owned by them or leased pursuant to an operating lease. 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. 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. G.L. c. 63, § 31A(i).
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 section 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. G.L. c. 63, § 31A(j).
Historically, the amount of the credit has fluctuated between 3% and 1% of the eligible costs incurred. The Act amends subsections (k) and (l) of section 31A of chapter 63 by extending the Investment Tax Credit (ITC) available to all eligible corporations at the 3% rate, without reversion back to the 1% rate. The effect of the amendment is to make the ITC's 3% rate permanent.
The effective date of this provision is November 26, 2003. This provision modifies the amendments made to chapter 63, section 31A as amended by section 206 of chapter 26 of the Acts of 2003.
Commissioner of Revenue
March 24, 2004