Brownfields Credit for Rehabilitation of Contaminated Property

Taxpayers are allowed a credit against their tax liability for net response and removal costs incurred to rehabilitate contaminated property owned or leased for business purposes and located within an economically distressed area. The credit is calculated on Schedule BC - Brownfields Credit.

The Fiscal Year 2014 Budget  (St. 2013, c. 38)
New legislation extends the Brownfields Credit, previously scheduled to expire on August 5, 2013, for five additional years. Taxpayers subject to the personal income tax or corporate excise under General Laws Chapters 62 and 63 and tax-exempt organizations within the meaning of I.R.C. § 501(c) are allowed a transferable credit for incurring eligible costs to remediate a hazardous waste site on property used for business purposes and located within an economically distressed area.

The credit may be either 50% or 25% of the “net response and removal costs” as that term is defined in G.L. c. 21E, § 2, depending upon whether an activity or use limitation has been imposed. To qualify, the taxpayer must “commence and diligently pursue” the relevant environmental response action(s) on or before August 5, 2018.  Also, the net response and removal costs must be incurred prior to January 1, 2019.

An Act Relative to Economic Investments in the Commonwealth to Promote Job Creation, Economic Stability, and Competitiveness in the Massachusetts Economy (St. 2006, c. 123):
Effective June 24, 2006:

  • Credit is available to nonprofit organizations;
  • Credits may be transferred, sold or assigned to another taxpayer with a liability.

The credit is available to the following taxpayers:

  • Corporate trusts;
  • Corporations;
  • Corporations included in a combined return;
  • Nonprofit organizations;
  • Partnerships;
  • S corporations;
  • Sole proprietors;
  • Trusts.

Eligible property where all three conditions must be met:

  1. the property is owned or leased by the taxpayer for business purposes
  2. the property has been reported to the Department of Environmental Protection (DEP)
  3. the property is located in an economically distressed area. A list of economically distressed areas can be obtained from the Massachusetts Office of Business Development, One Ashburton Place, Room 2101, Boston, MA 02108. Tel: 617-788-3670 Toll Free outside of Massachusetts: 1-877-BIZTEAM.

Amount of the Credit for All Taxpayers, Including New Environmental Response Action Cut-off Date:
In general, the amount of the credit varies according to the extent of the environmental remedy; it is either 25% or 50% of certain environmental response and removal costs incurred between August 1, 1998 and January 1, 2014, provided that the taxpayer commences and diligently pursues an environmental response action before August 5, 2013.

Limitations on the Credit: 
There are two types of limitations on the credit: 

  • Fifty-percent limitation for Chapter 62 taxpayers: the maximum amount of credit that may be taken may not exceed fifty percent (50%) of the tax liability for the taxable year;
  • Fifty-percent limitation for domestic and foreign corporations: the maximum amount of credit that may be taken may not exceed fifty percent (50%) of the excise for the taxable year;
  • Minimum excise limitation for domestic and foreign corporations: the credit may not be used to reduce the tax liability below the minimum excise which is currently $456.

Carryover of Credit:
An unused credit may be carried over for up to five succeeding tax years. However, in no event may the taxpayer apply the credit in any taxable year in which it has ceased to maintain the remedy operation status or the permanent solution for which the credit was granted.
 
Corporations Filing Combined Returns:
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.

Financial Aid Received by All Taxpayers:
Taxpayers may claim this credit even if they receive financial assistance from the Brownfields Development Fund or from the Redevelopment Access to Capital (RAC) Program. However, the amount of state funds received from either of these funds must be deducted from the expense base for which the credit is available.

With reference to RAC, the amount of state financial assistance is calculated as the amount of state funds paid on behalf of the borrower for participation in the program. If the taxpayer has borrowed funds subject to a state guarantee in order to finance the expenses of remediation, the amount of the loan is permitted to be included in the expense base for which the credit is available. However, if the borrower defaults on the loan and the guarantee is invoked, any credit taken for the amount of the loan will be recaptured as taxes due in the year the loan is paid. 


Certified Housing Development Credit

An Act Relative to Economic Development Reorganization (St. 2010, c. 240):
Effective January 1, 2011, a new tax credit is available to Individuals or entities for certain qualified rehabilitation expenditures with respect to a certified housing development project. The credit is available to a taxpayer only to the extent awarded by the Massachusetts Department of Housing and Community Development (DHCD) as established pursuant to G.L. c. 23B. The DHCD may award a taxpayer a credit of up to ten percent of the costs of qualified substantial rehabilitation expenditures of the market rate units within the certified housing development projects.

The credit is allowed for the taxable year in which DHCD gives the Commissioner of DOR written notification of completion of the certified housing development project. Qualified substantial rehabilitation expenditures applicable to the credit are deemed made on the date that DHCD gives the Commissioner such written notification.

Transfer of the Credit:
Taxpayers eligible for the credit may, with prior notice to and under rules adopted by the Commissioner, transfer the credits, in whole or in part, to any individual or entity, and the transferee will be entitled to apply the credits against its tax liability imposed by G.L. c. 62 or c. 63. A transferee must apply the credit against its tax liability in the year the credit is transferred, provided that the transferee may not use the credit in any tax year before DHCD notifies the Commissioner of the completion of the certified housing development project.

If a partnership or a limited liability company treated as a partnership for Massachusetts income tax purposes generates the credit, the credit, if transferred, must be transferred by the partnership or the limited liability company. Credits passed through to individual partners or members may not be transferred by the partners or members.

Carry Forward of the Credit:
If the credit available for use for any taxable year exceeds the taxpayer's or a transferee's tax liability for that taxable year, the taxpayer or transferee may carry forward and apply in any subsequent taxable year the portion of those credits, as reduced from year to year, which exceed the tax for the taxable year. However, in no event may the taxpayer or transferee carry the credit forward to a taxable year beginning more than 5 years after the taxable year in which DHCD gave the Commissioner written notification of completion of the certified housing development project to which the credit pertains.


Community Investment Credit

An Act Relative to Infrastructure Investment, Enhanced Competitiveness and Economic Growth in the Commonwealth (Jobs Act):
Pursuant to St. 2012, c. 238, and codified at G.L. c 62, § 6M and G.L. c. 63, § 38EE, a Community Investment Tax Credit is allowed for tax years beginning on or after January 1, 2014 to individuals or entities subject to taxation under MGL, Chapters 62 and 63 for qualified investments made on or after January 1, 2014. Qualified investments include certain cash contributions made to a community partner or a community partnership fund. 

The credit, set to expire December 31, 2019, is equal to 50% of the total qualified investment made by the taxpayer for the taxable year. No credit is allowed  for qualified investments of less than $1,000. In any one taxable year, the total amount of the credit that may be claimed for qualified investments may not exceed $1,000,000. The credit is allowed for the taxable year in which the qualified investment is made.The total cumulative value of all the credits authorized may  not exceed $3,000,000 in taxable year 2014 and $6,000,000 in each of taxable years 2015 through 2019.  

Pursuant to the Supplemental Budget, the Community Investment Tax Credit has been made refundable but not transferable. Alternatively, at the option of the taxpayer, the credit may be carried forward 5 years. If a taxpayer elects to carry forward a credit balance, then the option to claim a credit refund does not apply.

Purpose of the Community Investment Credit:
This credit supports the implementation of the community partner’s community investment plan, a plan that engages local residents and businesses to work together to create community development programs, projects, and activities aimed at improving urban, rural or suburban communities as well as creating and expanding economic opportunities for low and moderate income households.  

Certification:
The Department of Housing and Community Development must certify that the taxpayer made a qualified investment to a community partner or to a community partnership fund and issue a certificate to the taxpayer that establishes that the prerequisites to claiming the credit in 830 CMR 62.6M.1 have been met. 


Conservation Land Tax Credit

Chapter 509 of the Acts of 2008, Sections 1 - 4: 
Effective for taxable years beginning on or after January 1, 2011, a tax credit is allowed for qualified donations of certified land to a public or private conservation agency. The credit is equal to 50% of the fair market value of the qualified donation not to exceed $50,000. This credit is available to both individuals and corporations and is refundable but not transferable.

Qualified Donation is a donation, or the donated portion of a bargain sale, made in perpetuity that is recorded in a Registry of Deeds, of a fee simple or less-than-fee simple interest in real property. A qualified donation includes a conservation, agricultural preservation, or watershed preservation restriction, provided that such less-than-fee simple interest meets the requirements for a qualified conservation contribution.

Certified Land is an interest in real property, the donation or bargain sale of which has been certified by the Secretary to have sufficient natural resources to qualify to be in the public interest for natural resource protection and be protected in perpetuity. Certified land includes drinking water supplies, wildlife habitats and biological diversity, agricultural and forestry production, recreational opportunities, and scenic and cultural values of statewide or regional significance.

Bargain Sale is the sale of an interest in real property at an amount below fair market value as evidenced by a qualified appraisal, when a portion of the value of the interest in real property is a qualified donation.

Executive Office of Energy and Environmental Affairs (EEA.)
The certification process is conducted by the Executive Office of Energy and Environmental Affairs (EEA.) EEA has promulgated a regulation entitled conservation Land Tax Credit which sets forth criteria for authorizing and certifying the credit.

To qualify for the credit, all of the following requirements must be met:

  1. the taxpayer must obtain a qualified appraisal prepared by a qualified appraiser that substantiates the fair market value of the qualified donation;
  2. A summary of the qualified appraisal or, if requested by the Secretary of EEA, the appraisal itself is to be filed with the Secretary as part of the certification process; upon request, the summary or the qualified appraisal itself and the certification is to be transferred by the Secretary to the Commissioner;
  3. The Secretary of EEA must certify that the taxpayer made a qualified donation, in perpetuity, of certified land to a public or private conservation agency and issue a certificate to the taxpayer that establishes that the prerequisites to claiming the credit have been met.

Note: No credit will be allowed unless the certificate number is included in the space provided on the return filed by the Taxpayer with the Department for the taxable year in which the credit is claimed or such other validation as the Commissioner may require is provided.

Taxpayers claiming this credit may not claim any other credit or deduction otherwise allowable during any one tax year with respect to the same interest in certified land. 

Refundable Tax Credit:
The credit is refundable but not transferable. The credit will first be applied against tax, as first reduced by any other available credits; any unused credit will be refunded to the taxpayer. 

P
ass-Through Entities:

  • Not Taxed at Entity Level
    In the case of a qualified donation of certified land by a pass-through entity that is not taxable at the entity level, such as a partnership, the credit allowed shall be passed through to the entity's partners or owners in proportion to the partners' or owners' interests in such entity. The total aggregate amount of the credit passed through by such entity and claimed by its partners or owners for each qualified donation shall not exceed $50,000.
  • Taxed at Entity Level :
    A trust or subchapter S corporation subject to tax at the entity level in any year may claim the credit allowed for the taxable year. Alternatively, the credit from the taxable year may be passed through to beneficiaries or to shareholders in proportion to their interests in the entity. These alternatives are mutually exclusive. The total aggregate amount of the credit passed through by such entities and claimed by their beneficiaries or shareholders for each qualified donation shall not exceed $50,000. 

Dairy Farmer Tax Credit

The Massachusetts dairy farmer tax credit was established to offset the cyclical downturns in milk prices paid to dairy farmers and is based on the U.S. Federal Milk Marketing Order for the applicable market. When the U.S. Federal Milk Marketing Order price drops below a trigger price anytime during the taxable year, the taxpayer will be entitled to the tax credit. The dairy farmer tax credit as originally enacted was 90% refundable. Effective July 1, 2009, the dairy farmer tax credit is now 100% refundable. The total amount of credits granted cannot exceed $4 million in any year.

A taxpayer who holds a certificate of registration as a dairy farmer pursuant to G.L. c. 94, § 16A is allowed a refundable tax credit based on the amount of milk produced and sold. The credit may be claimed against the taxes due under G.L. c. 63 or G.L. c. 62. The Commissioner will apply the credit against the taxpayer's liability as reported on its tax return, first reduced by any other available credits, and then refund the balance of the credit to the taxpayer. The credit is non-transferable.

Chapter 68 of the Acts of 2011:
The Department of Food and Agriculture regulations for the implementation of this credit will provide that when the Massachusetts Board of Food and Agriculture determines that an error has been made in calculating the trigger price or in reporting or collecting data used in the calculation of the trigger price or the credit, the Commissioner of Agricultural Resources will recalculate, with or without amendments, the trigger price or tax credit. 


Economic Opportunity Area Credit (EOAC) (projects certified prior to January 1, 2010)

Projects Certified Prior to January 1, 2010:
Taxpayers who participated in a certified project as defined in M.G.L. c. 23A, s. 3A were allowed a credit against their tax liabilities equal to 5% of the cost of qualifying property purchased for business use within an economic opportunity area (EOA). To claim this credit, no specific administration authorization was required form the Economic Assistance Coordination Council (EACC), established pursuant to M.G.L. c. 23A.

The credit was available to the following taxpayers:

  • Corporations;
  • Partnerships;
  • S Corporations;
  • Sole proprietors;
  • Trusts.

Eligible property:

  1. the property had to qualify for ITC Credit if it was purchased by a manufacturing corporation or a business corporation engaged primarily in research and development; and
  2. the property had to be used exclusively in a certified project within an economic opportunity area as defined in Chapter 23A. A certified project was a project that had been approved by the Economic Assistance Coordinating Council (EACC) for participation in the Economic Development Incentive Program administered by the EACC.

Limitations on the Credit:

  • Fifty-percent limitation for Chapter 62 taxpayers: the maximum amount of credit that may be taken could not exceed fifty percent (50%) of the tax liability for the taxable year;
  • Fifty-percent limitation for Chapter 63 taxpayers: the maximum amount of credit that may be taken could not exceed fifty percent (50%) of the excise tax for the taxable year;
  • Minimum excise limitation for business corporations: the credit could not be used to reduce the tax liability below the minimum excise which is currently $456.

Carryover of Credit:
A taxpayer that did not use the full amount of the credit generated in a taxable year could carry over the unused amount of the credit as follows: 

  • unlimited carryover - for Tax Years Beginning before January 1, 2010:
    Credits not used in a taxable year because of the fifty percent limitation may still be carried over indefinitely;
  • ten year carryover - for Tax Years Beginning on or after January 1, 2010:
    Credits not used in a taxable year because of the fifty percent limitation may be carried over to the next taxable year for a maximum of ten successive taxable years;
  • ten year carryover:
    Credits not used in a taxable year because they exceeded the taxpayer's tax liability or because of the minimum excise limitation could be carried over to the next taxable year for a maximum of ten successive taxable years;
  • five year limitation:
    No credit could be carried over to a taxable year beginning more than five years after the certified project or economic opportunity area ceases to qualify as such.

Interaction with Certain Credits for Corporations:
For Massachusetts purposes, with respect to the same property, a corporation could not take both an EOAC credit and

S corporations could either claim the credit against its corporate liability or pass it through to its shareholders. Whatever choice was made determined how any unused credit carry forwards were taken in subsequent years, i.e., if the initial credit flowed through to the S Corp shareholders, then any unused credit had to be taken by the shareholders.

Corporations Filing Combined Returns:
For tax years beginning before January 1, 2009, if a corporation filed a combined return of income under G.L., c. 63, s. 32B, a tax credit generated by a member of a combined group had to first be applied against the separately determined excise attributable to that member, subject to the limitations stated above. Any excess credit could be applied against the excise of another group member, to the extent that such other member corporation could use additional credits, again subject to the limitations stated above. An unused, unexpired credit generated by a member corporation could be carried over from year to year by the individual corporation that generated the credit.

Qualifying Economic Opportunity Areas:
For further information, taxpayers were instructed to contact the Massachusetts Office of Business Development, 10 Park Place, Suite 3720, Boston, MA 02116, (617) 973-8600.


Economic Development Incentive Program Credit (EDIPC) (projects certified on or after January 1, 2010)

Taxpayers who participate in a "certified project" as defined in M.G.L. c. 23A, s. 3A are allowed a credit against their tax liabilities up to a specified percentage of the cost of qualifying property. For projects certified on or after January 1, 2010, the EDIPC is available only to the extent awarded by the Economic Assistance Coordination Council (EACC.)

The term "certified project" is defined as either:

  • an "expansion project" located in an "economic opportunity area" as defined in Chapter 23A;
  • an "enhanced expansion project" located anywhere in Massachusetts; or
  • a "manufacturing retention project" located in a "gateway municipality" as defined in Chapter 23A."

Credit Amount:

  • For certified expansion projects, the credit awarded may be up to ten percent of the cost of qualifying property;
  • For certified enhanced expansion project, the credit awarded may be up to ten percent of the cost of qualifying property;
  • For certified manufacturing retention projects, the credit awarded may be as high as forty percent of the cost of such property. Upon filing a return and complying with any additional procedures, any credit that exceeds the excise for the taxable year will be refunded to the taxpayer.

The credit is available to the following taxpayers:

  • Corporations;
  • Partnerships;
  • S Corporations;
  • Sole proprietors;
  • Trusts.

Eligible Property:

  1. the property that would qualify for ITC Credit if it was purchased by a manufacturing corporation or a business corporation engaged primarily in research and development; and
  2. the property must be used exclusively in a certified project.

Limitations on the Credit: 
For tax years beginning on or after January 1, 2010, without regard to the date on which the project was certified, the following limitation on the credit apply. These limitations do not apply in instances where the credit is refunded:

  • Fifty-percent limitation for Chapter 62 taxpayers: the maximum amount of credit that may be taken may not exceed fifty percent (50%) of the tax liability for the taxable year;
  • Fifty-percent limitation for Chapter 63 taxpayers: the maximum amount of credit that may be taken may not exceed fifty percent (50%) of the excise for the taxable year;
  • Minimum excise limitation for business corporations: the credit may not be used to reduce the tax liability below the minimum excise which is currently $456.

Carryover of Credit
For projects certified on or after January 1, 2010, to the extent allowed by the EACC, any EDIPC not used because it exceeds the excise for the current taxable year or because of other limitations may be carried over to subsequent taxable years as follows:

  • ten year carryover - credits not used because of the fifty percent limitation, because of the minimum excise limitation, or because it exceeded the taxpayer's tax liability for the current taxable year may be carried over for ten years;
  • five year limitation - no credit can be carried over to a taxable year beginning more than five years after a project ceases to be certified.

Interaction with Certain Credits for Corporations:
The EDIPC may not be taken or is limited for any property if one of the following credits has been taken with respect to the same property:

S corporations may either claim the credit against its corporate liability or pass it through to its shareholders. Whatever choice is made will determine how any unused credit carry forwards is taken in subsequent years, i.e., if the initial credit flows through to the S Corp shareholders, then any unused credit must be taken by the shareholders.

Corporations - Included in a Combined Group:
In general, for tax years beginning on or after January 1, 2009, the EDIPC that may be validly claimed by a taxable member of a combined group and that is attributable to the combined group's unitary business may be shared with other taxable members of the combined group to the extent such sharing of the credit is consistent with the statutory requirement for claiming the credit. A tax credit generated by a member of a combined group must first be applied against the separately determined excise attributable to that member, subject to the limitations stated above. Any excess credit may be applied against the excise of another group member, to the extent that such other member corporation can use additional credits, again subject to the limitations stated above. An unused, unexpired credit generated by a member corporation may be carried over from year to year by the individual corporation that generated the credit.  


Employer Wellness Program Credit

An Act Improving the Quality of Health Care and Reducing Costs through Increased Transparency, Efficiency and Innovation (Health Care Act):
Effective for tax years beginning on or after January 1, 2013, a Massachusetts business that employs 200 or fewer workers may qualify for a tax credit for up to 25% of the cost of implementing a “certified wellness program” for its employees. The credit is set to expire on December 31, 2017. 

Purpose of the Employer Wellness Program Credit:
The Employer Wellness Program Credit is an element of the most recent amendments to the Massachusetts health care reform legislation. The purpose of the credit is to provide incentives for business to recognize the benefits of wellness programs. Wellness programs implemented by business have resulted in both savings to their premiums as well as overall savings to the cost of health care. The goal of this tax credit is to provide smaller businesses with an expanded opportunity to implement these programs.

Certification:
A taxpayer seeking to claim the credit must apply to the Department of Public Health (DPH) for certification of its wellness program. DPH will approve a dollar amount of credit for a qualifying taxpayer and issue a certificate to be provided in connection with filing a tax return in order to claim the credit. The amount of the credit that may be claimed by a taxpayer cannot exceed $10,000 in any tax year.


Film Incentive Credit

Chapters 158 and 167 of the Acts of 2005:
For film credit applications that are received on or after January 1, 2006, motion picture production companies may claim two different tax credits against either their personal income tax or corporate excise liabilities. Each credit has its own qualification requirements and taxpayers may qualify for and claim both credits. The credits are:

  • Payroll Credit; and
  • Production Expense Credit

An Act Providing Incentives to the Motion Picture Industry (St. 2007, c. 63):
For film credit applications that are received on or after January 1, 2007, the following changes have taken place:

  • 90% of any payroll and production expense credits not used in the year may be refunded to a taxpayer, at the taxpayer's election;
  • the minimum expenditure threshold required to be met in a twelve-month period has been lowered from $250,000 to $50,000;
  • the payroll credit has been increased to apply to 25% of a taxpayer's qualifying expenditures;
  • the $7,000,000 limitation on the amount of credits taken on any one motion picture has been eliminated;
  • a "digital media project" is now included in the definition of a "motion picture"; and
  • the sunset date for the film incentives statute has been extended from January 1, 2013 to January 1, 2023.

The credits may be used or transferred by any taxpayer, including financial institutions, utility corporations and insurance companies, and by corporations that are exempt from taxation under IRC § 501. Insurance companies may apply the credit against the insurance premiums tax. Corporations that are exempt from tax under IRC § 501 may apply the credit against the tax on unrelated business income. Flow-through entities may pass the film credits through to partners, members or owners in proportion to their sharing of other tax or economic attributes of the entity.

Payroll Credit:
A taxpayer is allowed a credit equal to 25 percent (20 percent for 2006) of the total qualifying aggregate payroll for the employment of persons within the Commonwealth in connection with the filming and production of a motion picture. To determine the qualifying aggregate payroll, only actual payments to employees may be used, and only if such payments constitute Massachusetts source income to the recipient.

The qualifying aggregate payroll shall not include any payments made to an employee when the total payments made to, or to be made to, such employee in connection with the motion picture are equal to or greater than $1,000,000 ("High Salary Employee"). Such High Salary Employee's entire salary, not merely the amount of his or her salary equal to or greater than $1,000,000, is excluded from the payroll credit.

To qualify for the payroll credit the taxpayer must incur in the Commonwealth total production expenses of at least $50,000 ($250,000 for 2006) in a consecutive twelve-month period ("the $50K qualification period"). If the taxpayer engages in the making of more than one motion picture in the Commonwealth, the preceding requirement must be met for each motion picture . If the taxpayer seeks to assert a $50K qualification period in connection with two or more motion pictures, the common expenses between the motion pictures, if any, must be reasonably apportioned between the motion pictures. For purposes of satisfying the requirements of the $50K qualification period, multiple episodes of a "television series" or multiple "commercials" that are created for the same client may be aggregated to qualify as a single motion picture.

Only aggregate payroll paid by the taxpayer during the $50K qualification period will qualify for the payroll credit. The $250K qualification period serves as the "determination" period in that the taxpayer must incur in the Commonwealth at least $50,000 of total production expenses during the consecutive twelve month period to be eligible for the payroll credit. Also, this same period serves as the "qualification" period in that only qualified aggregate payroll expenses paid during this determination period qualify for the payroll credit. In some cases, the taxpayer may be able to choose between one or more possible $50K qualification periods. However, only one $50K qualification period is allowed for each motion picture and only the aggregate payroll expense incurred within the chosen period qualifies for the payroll credit . A taxpayer may choose to have a $50K qualification period that is less than 12 months, but may not subsequently reopen or extend this qualification period in order to claim more qualifying expenses. In addition, as noted below, the $50K qualification period is the same for the payroll credit, the production expense credit and the sales tax exemption. Consequently, the choice of the $50K qualification period (including choosing a period shorter than 12 months) may have a bearing on the application of the production expense credit and the sales tax exemption, as further discussed below.

Production Expense Credit:
A taxpayer is allowed to claim a credit equal to 25 per cent of its Massachusetts production expenses, not including the qualifying aggregate payroll expenses included in the calculation of the taxpayer's payroll credit, so long as such taxpayer is eligible to claim the payroll credit in connection with the same motion picture. To qualify for the 25% production credit, the taxpayer's Massachusetts production expenses must exceed 50 per cent of its total production expenses incurred in connection with the motion picture or, alternatively, at least 50 per cent of the taxpayer's total principal photography days spent filming the motion picture must take place in the Commonwealth.

When a taxpayer makes salary payments to a High Salary Employee that would otherwise constitute qualifying aggregate payroll but for the fact that the employee is a High Salary Employee, those payments may be included in the calculation of the production expense credit. The entire salary paid to a High Salary Employee that is equal to or greater than $1,000,000 may be used to calculate the production expense credit including the portion of such salary that is less than $1,000,000 (provided that such entire salary is excluded from the payroll credit, for which it does not qualify). 

Limitations on the Credit:
Minimum excise limitation for domestic and foreign corporations: the credit may not be used to reduce the tax liability below the minimum excise which is currently $456.

Carryover of Credits:
An unused credit may be carried over for up to five succeeding tax years. Transferees, buyers or assignees may use and carry forward the credits to any of the five subsequent taxable years subsequent to the first taxable year the credits were allowed to the initial transferor. Transferring, selling or assigning a credit does not extend the five-year carry forward period.

Refundable Payroll and Production Expense Credits Not Used:
For film credit applications that are received on or after January 1, 2007, the payroll and production expense credits are refundable with certain limitation. At the written request of the taxpayer, the credits will be applied against taxpayer's liability, first reduced by any other available credits; any film credit remaining will be refunded at 90 percent.

A taxpayer that elects to claim a refund of the film credit is not permitted to seek a partial refund and a partial transfer or carryover of the credit. However, the refund can be applied as an estimated payment for the subsequent tax year.


Historic Rehabilitation Credit

Under the Massachusetts Historic Rehabilitation Tax Credit program, a certified rehabilitation project of a qualified historic structure is eligible to receive up to 20% of qualified rehabilitation expenditures in state tax credits. The credit is not to exceed $50,000,000 per year.

Section 35 of Chapter 131 of the Acts of 2010:
Effective July 1, 2010, the Commissioner, in consultation with the Massachusetts Historical Commission, is authorized to allocate credits for an additional six years to December 31, 2017. The credit was previously due to expire after December 31, 2011.


Life Sciences Credits

An Act Providing for the Investment in and Expansion of the Life Sciences Industry in the Commonwealth" (the Act). St. 2008, c. 130:
The Act establishes the Life Sciences Investment Program as well as the Life Sciences Tax Incentive Program to provide various tax incentives for qualifying life sciences companies.

For taxable years beginning on or after January 1, 2009, new credits may be available for corporate excise and personal income taxpayers that qualify as certified life sciences companies, only to the extent authorized pursuant to the Life Sciences Tax Incentive Program: 

  1. Life Sciences Investment Tax Credit; 
  2. FDA User Fees Credit; and
  3. Life Sciences Research Credit (c. 63 taxpayers only)

Life Sciences Investment Tax Credit
A new investment Tax Credit (ITC) may be available equal to 10% of the cost of qualifying property acquired, constructed or erected during the taxable year and used exclusively in the Commonwealth.

This credit can apply to purchases made on or after January 1, 2009 even if a construction project started before that date. The scope of qualifying property for purposes of the new credit is the same as that provided by the existing ITC under M.G.L. Ch. 63, sec. 31A.

Other Credit Limitations of Life Sciences Companies or Persons:

  • Economic Opportunity Area Credit (EOAC) - if also qualifying for the EOAC for the same property, EOAC is allowed to the extent of an additional 2% of the cost of the qualifying property;
  • Investment Tax Credit (ITC) - is not allowed under M.G.L. Ch. 63, sec. 31A for the same qualifying property;
  • Low-Income Housing Credit - is not allowed under M.G.L. Ch. 63, sec. 31H for the same qualifying property.

Refundable Amount

FDA User Fees Credit
A new credit may be available for user fees paid on or after June 16, 2008 to the U. S. Food and Drug Administration (U.S.F.D.A.) upon submission of an application to manufacture a human drug in the Commonwealth.

This credit is equal to 100% of the user fees actually paid by the taxpayer, as specified in the certification, and may be claimed in the taxable year in which the application for licensure of an establishment to manufacture the drug is approved by the U.S.F.D.A.

To be eligible for the credit, more than 50% of the research and development costs for the drug must have been incurred in Massachusetts.

Refundable Amount

Life Sciences Research Credit
A new credit may be available to provide qualifying companies with a means to obtain a research credit for certain expenditures not qualifying for the existing research credit under c. 63, § 38M.

Under this new provision, the credit is generally calculated in the same manner as the research credit under section 38M. However, the qualified research expenditures which form the basis for the calculation in new section 38W differ from those of section 38M in that they can qualify when the activities are performed both inside and outside of the Commonwealth, to the extent they relate to legally mandated clinical trial activities.

The credit can reduce the corporate excise to the minimum excise of $456 and may be carried forward for 15 years.

Refundable credit, not allowed

An Act Making Appropriations for the Fiscal Year 2012…  (St. 2011, c 68):  
For taxable years beginning on or after January 1, 2011, a taxpayer, to the extent authorized by the Life Sciences Tax Incentive Program, may be allowed a refundable jobs credit against the tax liability imposed under G.L. c. 62, the personal income tax, or G.L. c. 63, the corporate excise.  

Life Sciences - Jobs Credit
A taxpayer claiming a life sciences refundable jobs credit must commit to the creation of a minimum of 50 net new permanent full-time positions in Massachusetts.  The amount of life sciences jobs credit allowed to a taxpayer will be determined by the Massachusetts Life Sciences Center in consultation with the Department of Revenue.

Refundable Amount

Life Sciences Credits - Refundable Amount
There are different credits which the Massachusetts Life Sciences Center, with the approval of the Secretary of Administration and Finance, may authorize a taxpayer to have refunded in lieu of carrying forward such credit to a future year.

  • If a life sciences ITC exceeds the tax otherwise due under the corporate excise, as applicable, 90% of the balance of such credit may, at the option of the taxpayer and to the extent authorized pursuant to the Life Sciences Tax Incentive Program, be refundable to the taxpayer for the tax year in which the qualified property giving rise to such credit is placed in service. If such refund is elected by the taxpayer, then the carryover provisions for this credit that would otherwise apply shall not be available.
  • Taxpayers may use the FDA user fees credit to reduce their tax to zero. To the extent authorized pursuant to the Life Sciences Tax Incentive Program, 90% of the balance of credit remaining is refundable. The deduction otherwise allowable for user fees qualifying for the credit is disallowed.
  • Unlike the regular research credit, as amended by the new subsection (j) of section 38M, described above, the new life sciences research credit under M.G.L. Ch. 63, sec. 38W is not refundable. 
  • If a life sciences jobs credit claimed by a taxpayer exceeds the tax otherwise due under the personal income tax or the corporate excise, as applicable, 90 percent of the balance of such credit may, to the extent authorized by the Life Sciences Tax Incentive Program, be refundable to the taxpayer.  Excess credit amounts shall not be carried forward to subsequent taxable years.

Low Income Housing Credit

Low income housing credits are available to individual taxpayers, partnerships, and corporations that have a qualified low-income housing project located in Massachusetts. The Department of Housing and Community Development will allocate the low income housing credit from a pool of available credits granted under I.R.C. § 42 of the Internal Revenue Code among qualified low income housing projects.

An Act Relative to Economic Development Reorganization (St. 2010, c. 240):
Effective August 1, 2010, the Department of Housing and Community Development may grant state low-income housing credits (within the existing $10 million annual cap) to otherwise eligible projects that do not receive a federal low-income housing credit.

Note: Individuals that live in but do not own low-income housing projects are not eligible for this credit.

A qualified Massachusetts project is a "qualified low-income housing project" as defined in I.R.C. § 42 which is located in Massachusetts, meets the requirements of M.G.L. c. 62, s. 6I or c.63, s. 31H and whose owner enters into a regulatory agreement with the Department of Housing and Community Development. 

Carryover of the Credit:
If the credit exceeds the tax due, the excess credit may be carried forward for up to five succeeding tax years.


Medical Device Tax Credit

Chapters 144 and 145 of the Acts of 2006:
For taxable years beginning on or after January 1, 2006, a medical device company may claim a credit equal to 100% of the user fees actually paid by it to the United States Food and Drug Administration ("USFDA") during the taxable year for which the tax is due for pre-market submissions (e.g., applications, supplements, and 510(k) submissions) to market new technologies, developed or manufactured in Massachusetts..

Medical device companies include:

  • domestic corporations organized under G.L. c. 156B or 156D;
  • limited liability companies organized under G.L. c. 156C and subject to G.L. c. 63;
  • foreign corporations subject to G.L. c. 63;
  • sole proprietorships, partnerships, limited liability companies, corporate trusts, corporations and other businesses, the income of which is taxed directly to the business or its owners under G.L. c. 62.


"Medical device"
means an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent or other similar or related article, including a component part or accessory, which is recognized in the official National Formulary or the United States Pharmacopeia, or any supplement thereto, intended for use in the diagnosis of disease or other conditions or in the cure, mitigation, treatment or prevention of disease in humans or other animals and which does not achieve any of its primary intended purposes through chemical action within or on the body of a human or other animal and which is not dependent upon being metabolized for the achievement of its primary intended purposes.

"User fees" means the fees required to be paid to the USFDA when submitting certain medical device applications and supplements to them, as set fourth in the Federal Food, Drug, and Cosmetic Act, 21 U.S.C.A. § 379j and the Medical Device User Fee Stabilization Act of 2005, P.L. 109-43.

Unused Credit Transferred;
Any unused credits may be transferred to a purchasing company in exchange for private financial assistance to be provided by such company. No credits may be transferred however unless the purchasing company provides financial assistance in an amount at least equal to 75% of the medical device tax credit amounts eligible for transfer. The private financial assistance is to be used to fund expenses incurred in connection with the operation of the medical device company in Massachusetts, including expenses associated with fixed assets such as construction, acquisition, and development of real estate, as well as expenses for materials, start-up, tenant fit-out, working capital, salaries, and research and development.

A medical device company that wishes to transfer unused credits must file with the Department of Revenue ("DOR") an application on a form to be issued by DOR that will include the following:

  1. the medical device tax credit amounts eligible for transfer;
  2. the use to which the medical device company intends to put the private financial assistance to be provided;
  3. the identity of the purchasing company;
  4. the amount of financial assistance to be provided; and
  5. such other information as the Commissioner of Revenue deems necessary.

DOR will review each application for compliance with the above requirements and if satisfied, it will issue, upon receipt of a notarized statement signed under the pains and penalties of perjury by an authorized representative of the medical device company that the purchasing company has provided the specified financial assistance, a certificate to the purchasing company reflecting the credit amount transferred. This certificate is to be attached to each tax return filed by a purchasing company in which a medical device tax credit is claimed.

Carryover of the Credit:
If the credit exceeds the tax due, the purchasing company must use the credit transferred to it on tax returns filed by it within 5 years of the issuance of the certificate, after which period the credit will expire. The credit cannot be used to reduce a purchasing company's excise liability under chapter 63 below $456 or its income tax liability under chapter 62 below zero.


Recapture Rules

General Rules for:

Recapture Rules that Apply to Above Credits: 
If eligible property for which any of these credits 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.


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

Brownfields Credit

  • Complete Form BCA, Brownfields Credit Application pdf format of Form BCA which DOR’s Audit Bureau will review . After its review, the Audit Bureau will issue a certificate number and amount of credit eligible for use:
    • For individuals, enter the amount of credit allowed on either Mass Form 1 or 1-NR/PY, Schedule Z, Part 1, Line 4. Also enter the certificate number;
    • For corporations, enter the amount of credit allowed on Mass Form 355, Schedule CR, Line 7. Also enter the certificate number.

Conservation Land Tax Credit

  • Enter the amount of refundable credit on either Mass Form 1 or 1-NR/PY, Schedule RF, Line 3.  Also, enter the certificate number.
  • For corporations, enter the amount of refundable credit on Mass Form 355, Schedule RF, Line 3. Also, enter the certificate number.

Dairy Farmer Tax Credit

  • Enter the amount of refundable credit on either Mass Form 1 or 1-NR/PY, Schedule RF, Line 2.  Also, enter the certificate number.
  • For corporations, enter the amount refundable credit on Mass Form 355, Schedule RF, Line 2. Also, enter the certificate number.

Economic Development Incentive Program Credit (EDIPC), Formerly Economic Opportunity Area Credit (EOAC)

  • For EOAC complete and enclose Schedule EOAC, Economic Opportunity Area Credit pdf format of Schedule EOAC and enter the amount of credit allowed on either Mass Form 1 or 1-NR/PY, Schedule Z, Part 1, Line 2.
  • For EDIPC, enter the amount of credit allowed on either Mass Form 1 or 1-NR/PY, Schedule Z, Part 1, Line 2. Also, enter the certificate number.
  • Nonresidents and part-year residents qualify for this credit if the EOAC is located in Massachusetts.
  • For corporations, complete and enclose Schedule EOAC and enter the amount of credit allowed on Mass Form 355, Schedule CR, Line 1.  Also, enter the certificate number.

Employer Wellness Program Credit

  • Enter the amount of credit allowed on either Mass Form 1 or 1-NR/PY, Schedule Z, Part 1, Line 9. Also enter the certificate number.
  • For corporations, enter the amount of credit allowed on Mass Form 355, Schedule CR, Line 12. Also enter the certificate number.

Film Incentive Credit

  • Enter the amount of credit allowed on either Mass Form 1 or 1-NR/PY, Schedule Z, Part 1, Line 7. Also enter the certificate number.
  • For corporations, enter the amount of credit on Mass Form 355, Schedule CR, Line 10.  Also, enter the certificate number.

Film Incentive Credit (Credits Not Used)

  • Complete and enclose Schedule RFC, Refundable Film Credit pdf format of Schedule RFC and enter the refundable amount of credit allowed on either Mass Form 1 or 1-NR/PY, Schedule RF, Line 1. 
  • For corporations, complete and enclose Schedule RFC and enter the refundable amount of credit allowed on either Mass Form 355, Schedule RF, Line 1.

Historic Rehabilitation Credit  

  • Enter the amount of credit allowed on either Mass Form 1 or 1-NR/PY, Schedule Z, Part 1, Line 6. Also enter the certificate number.
  • For corporations, enter the amount of credit allowed on Mass Form 355, Schedule CR, Line 9. Also enter the certificate number.

Life Science Credits 

  • For corporations, enter the amount of credit allowed on Mass Form 355, Schedule CR, Lines 12- 14. Also enter the certificate number.

Life Science Credits (Refundable) 

  • For corporations, enter the amount refundable credit on Mass Form 355, Schedule RF, Line 3.

Low Income Housing Credit

  • Enter the amount of credit allowed on either Mass Form 1 or 1-NR/PY, Schedule Z, Part 1., Line 5. Also enter the building identification number.
  • For corporations, enter the amount of credit allowed on Mass Form 355, Schedule CR, Line 8. Also enter the certificate number.

Medical Device Credit

  • Enter the amount of credit allowed on either Mass Form 1 or 1-NR/PY, Schedule Z, Part 1, Line 8. Also enter the certificate number.
  • For corporations, enter the amount of credit allowed on Mass Form 355, Schedule CR, Line 11. Also enter the certificate number.

Massachusetts References:

Brownfields Credit

Certified Housing Development Credit

Community Investment Credit

Conservation Land Tax Credit

  • M.G.L. Chapters. 62C and 62D
  • M.G.L. Chapter 62, Section 6(p)(1) as added by St. 2008, c. 509, ss. 1- 4; as amended by St. 2010, c. 409, ss. 4-13
  • M.G.L. Chapter 63, Section 38AA
  • M.G.L. Chapter 184, Section 31
  • Working Draft 830 CMR 62.6.4
  • 830 CMR 62.6.4: Conservation Land Tax Credit

Dairy Farmer Tax Credit

Economic Development Incentive Program Credit (EDICP) Formerly Economic Opportunity Area Credit (EOAC)

Employer Wellness Program Credit

Film Incentive Credit

Historic Rehabilitation Credit

Life Science Credit

Low Income Housing Credit

Medical Device Credit