PETITION OF:

SECTION 1. Paragraph four of section thirty of chapter sixty-three of the General Laws is hereby amended by adding the following sentence thereof:—
A deduction shall also be allowed to a biotechnology company for any private financial assistance paid to it that qualifies for the business tax benefit certificate transfer program set forth in section thirty-eight R of this chapter.

SECTION 2. Paragraph (h) of section thirty-one A of chapter sixty-three of the General Laws is hereby amended by deleting the second sentence of said paragraph and replacing it with the following sentence:—
Such credit may be applied against the excise liability of any other corporation pursuant to an election under the provisions of section thirty-two B.

SECTION 3. Section thirty-one C of chapter sixty-three of the General Laws is hereby amended to read as follows:
(a) As used in this section, the following terms shall have the following meanings:—
Biotechnology Company: “A company primarily engaged in commercial biological research and development or the sale of pharmaceutical products.”
“Full-time employee”, an employee as defined in sections one and three of chapter one hundred and fifty-one A and who has been paid by the corporation during its taxable year an amount at least equal to the maximum amount of “wages” with respect to which an employer is required to make contributions pursuant to section fourteen of said chapter and said amount is includable in the numerator of the payroll factor of the income apportionment formula under the provisions of section thirty-eight.
“Increase in the number of full-time employees employed by the corporation”, (i) in the case of a corporation having full-time employees in its taxable year ending last prior to December thirty-first, two thousand and three, the excess of the number of full-time employees employed by the corporation during its taxable year over the number determined by multiplying the number of full-time employees employed by the corporation during its taxable year ending last prior to December thirty-first, two thousand and three, by the applicable coefficient for the taxable year, as herein set forth.
The coefficient shall be one and three hundredths for taxable years ended on or after December thirty-first, two thousand and three, and before December thirty-first, two thousand and four; one and six hundredths for taxable years ended on or after December thirty-first, two thousand and four, and before December thirty-first, two thousand and five; and one and nine hundredths for taxable years ended on or after December thirty-first, two thousand and five, and before December thirty-first, two thousand and six.
(ii) in the case of a corporation not having a taxable year ending prior to December thirty-first, two thousand and three, by reason of recent organization or registration or by reason of not being subject to taxation in the Commonwealth or not having any full-time employees in its taxable year ending last prior to December thirty-first, two thousand and three, the excess of the number of full-time employees employed by the corporation during its taxable year over the number determined by multiplying the number of full-time employees employed by the corporation in the first taxable year in which the corporation may take the credit provided for in this section by the applicable coefficient for the taxable year as herein set forth. The coefficient shall be zero for the first taxable year. The coefficient shall be one and twenty hundredths for the second taxable year. The coefficient shall be one and forty hundredths for the third taxable year.
(b) A biotechnology company that is subject to tax under this chapter shall be allowed a credit as hereinafter provided against its excise due under this chapter. The amount of such credit shall be the amount determined by multiplying one hundred dollars by the increase in the number of full-time employees employed by the corporation during the taxable year, as herein provided.
(c) For a corporation having a taxable year of less than twelve months, herein referred to as a short period, an employee shall be deemed to be a full-time employee if the amount of the remuneration paid to him or her by the corporation during the short period when multiplied by twelve and divided by the number of months in the short period is at least equal to the maximum amount of wages with respect to which an employer is required to make contributions pursuant to section fourteen of chapter one hundred and fifty-one A. The credit for a short period shall be computed in the same manner as for a full taxable year but shall be reduced by multiplying the credit so determined by the number of months in the short period and dividing the result by twelve.
(d) The credit allowed under this section shall be in addition to any other credits allowed under this chapter; provided, however, that the sum of the credits allowed under this chapter shall not reduce the excise to less than the amount due under subsection (b) of section thirty-two or subsection (b) of section thirty-nine.

SECTION 4. Section thirty-eight C of chapter 63 of the General Laws is hereby amended by deleting the third sentence in said section and replacing it with the following sentence:—
A domestic research and development corporation for the purposes of this section is one whose principal activity is research and development and which, during the taxable year, derives more than two-thirds of its receipts from or incurs more than one-third of its expenditures in conducting such activity.

SECTION 5. Section thirty-eight N of chapter 63 of the General Laws is hereby amended by deleting the word “five” in the first sentence of paragraph (a) thereof and replacing it with the word “fifteen”.

SECTION 6. Section thirty-eight N of Chapter 63 of the General Laws is hereby further amended by deleting paragraph (b) thereof and replacing it with the following paragraph:—
(b) Tangible personal property which is leased by a corporation pursuant to an operating lease shall be eligible for the credit allowed by this section; provided, however, that the credit shall be subject to conditions similar to those set forth in paragraph (i) of section thirty-one A of this chapter.

SECTION 7. Chapter 63 of the General Laws is hereby amended by adding the following section after section 38Q thereof:—
Section 38R.
(a) As used in this section, the following terms shall have the following meanings: —
Biotechnology Company: “A company primarily engaged in commercial biological research and development or the sale of pharmaceutical products.”
“Council”, the economic assistance coordinating council in the office of business development.
“Program”, the business tax benefit certificate transfer program.
“Purchasing corporation”, a corporation that is subject to tax under this chapter and that provides financial assistance to a biotechnology company in exchange for a tax benefit certificate.
“Tax benefits”, the net operating loss carryforward described in paragraph five of section thirty of this chapter; the investment credit set forth in section thirty-one A of this chapter; the credit for increased employment set forth in section thirty-one C of this chapter; the vanpool credit set forth in section thirty-one E of this chapter; the credit for research expenses set forth in section thirty-eight M of this chapter; the credit with respect to certified projects set forth in section thirty-eight N of this chapter; the harbor maintenance tax credit set forth in section thirty-eight P of this chapter; and the environmental response action credit set forth in section thirty-eight Q of this chapter.
“Tax benefit amounts eligible for transfer”, in the case of credits, the aggregate amount of credits that the corporation generated but was not able to use as of the close of the last taxable year for which a return was filed, because of limited tax liability or any limitations upon use of credits set forth in this chapter; in the case of net operating loss carryforwards, the aggregate amount of the net operating loss carryforwards that the corporation generated but was not able to use as of the close of the last taxable year for which a return was filed, because of limited tax liability or any limitations upon use of such carryforwards set forth in this chapter, multiplied by the Massachusetts apportionment factor of the corporation that generated the carryforwards for the last taxable year for which a return was filed, multiplied by nine and one-half percent.
(b) The council shall establish a business tax benefit certificate transfer program to allow biotechnology companies doing business in the commonwealth with unused tax benefits to surrender such benefits for use by purchasing corporations in exchange for private financial assistance to be provided by such corporations to assist in the funding of costs incurred by the biotechnology companies.
The private financial assistance shall be used to fund expenses incurred in connection with the operation of the biotechnology company in the commonwealth, including but not limited to costs associated with fixed assets, such as the construction and acquisition and development of real estate, materials, start-up, tenant fit-out, working capital, salaries, research and development expenditures, and any other expenses determined by the council to be necessary to carry out the purposes of the program.
(c) A biotechnology company that wishes to participate in the program shall file an application with the council, on a form prescribed by the council, that sets forth the tax benefit amounts eligible for transfer, the use to which the biotechnology company intends to put the private financial assistance to be provided, the identity of the purchasing corporation, the amount of the financial assistance to be provided, and such other information as the council may require. No such tax benefits may be surrendered unless the purchasing corporation provides financial assistance in an amount at least equal to seventy-five percent of the tax benefit amounts eligible for transfer.
The council shall review such application and, if the proposed transfer meets the requirements set forth in this section, it shall, upon receipt of adequate evidence that the purchasing corporation has provided the specified financial assistance, issue a certificate to the purchasing corporation reflecting the tax benefit amounts transferred, a copy off which shall be attached to each tax return filed by a purchasing corporation in which such tax benefits are used.
(d) The purchasing corporation shall treat the tax benefit amounts purchased under the program as a credit against its excise under this chapter. The purchasing corporation must use the tax benefit amounts so treated in tax returns filed within five years of the issuance of the certificate, after which the benefits will be considered to have expired. The purchasing corporation may not use the tax benefit amounts to reduce the excise to less than the amount due under subsection (b) of section thirty-two, subsection (b) of section thirty-nine or section sixty-seven and any act in addition thereto.
(e) No biotechnology company that has surrendered tax benefits under the program may use such benefits to reduce its tax liability under this chapter.
(f) The commissioner of revenue shall promulgate regulations implementing the provisions of this section.

SECTION 8. Section forty-two B of chapter 63 of the General Laws is hereby amended by deleting the third sentence in said section and replacing it with the following sentence:—
A foreign research and development corporation for the purposes of this section is one whose principal activity in the commonwealth is research and development and which, during the taxable year, derives more than two-thirds of its receipts assignable to the commonwealth from, or incurs more than one-third of its expenditures attributable to the commonwealth in conducting, such activity.

SECTION 9. Chapter sixty-three of the General Laws is hereby amended by adding the following section after section 42B:—
Section 42C.
(a) In the case of the acquisition of assets of a domestic or foreign business corporation by another such corporation (1) in a distribution to which section three hundred and thirty-two of the Code applies; or (2) in a transfer to which section three hundred and sixty-one of the Code applies, but only if the transfer is in connection with a reorganization described in subparagraph (A), (C), (D), (F) or (G) of paragraph (a)(1) of section three hundred and sixty-eight of the Code, the acquiring corporation shall succeed to and take into account, as of the close of the day of distribution or transfer, the net operating loss carryforwards and credits of the distributor or transferor corporation, subject to conditions and limitations similar to those that apply under section three hundred and eighty-one of the Code for federal tax purposes.
(b) The commissioner of revenue shall promulgate regulations implementing the provisions of this section.

SECTION 10. Paragraph (r) of section 6 of chapter sixty-four H of the General Laws is hereby amended by adding the following sentence at the end of said paragraph:—
Nothing in this paragraph shall be construed as precluding qualification for exemption in cases in which otherwise-qualifying materials are purchased by a construction contractor for incorporation into real estate.

SECTION 11. Paragraph (s) of section 6 of chapter sixty-four H of the General Laws is hereby amended by adding the following sentence at the end of said paragraph:—
Nothing in this paragraph shall be construed as precluding qualification for exemption in cases in which otherwise-qualifying machinery or replacement parts thereof are purchased by a construction contractor for incorporation into real estate.

SECTION 12. Section 6 of chapter sixty-four H of the General Laws is hereby amended by adding the following paragraph thereto after paragraph (tt) thereof:—
(uu) Sales of building materials to be incorporated into an industrial plant. For the purpose of this paragraph, the term “industrial plant” shall mean a factory at a fixed location primarily engaged in the manufacture, conversion or processing of tangible personal property to be sold in the regular course of business.

SECTION 13. Section 6 of chapter sixty-four H of the General Laws is hereby further amended by adding the following paragraph thereto after paragraph (uu) thereof:—
(vv) Sales of tangible personal property, including building materials, the cost of which is allowable in determining the credit set forth in section thirty-eight N of this chapter.

SECTION 14. Section nine of this act shall take effect for all open taxable years. Sections ten, eleven, twelve and thirteen of this act shall take effect with respect to purchases made on or after July 1, 2003. All other provisions of this act shall take effect with respect to taxable years ending on or after December thirty-first, two thousand and three; provided, however, that nothing herein shall be construed as precluding the transfer or use under section seven of this act of tax benefit amounts attributable to tax benefits that were generated in periods ending prior to such date.