PETITION OF:

SECTION 1. Chapter 63 of the General Laws, as appearing in the 1998 Official Edition, is hereby amended by inserting after Section 31G the following new section:—

Section 31H. (a) A manufacturing corporation, or a business corporation engaged primarily in research and development, which has been deemed to be such under section thirty-eight C or

forty-two B, shall be allowed a credit as hereinafter provided against its excise due under this chapter. The amount of such credit shall be ten percent of the cost or other basis of qualifying

Green Chemistry tangible property acquired, constructed, reconstructed, or erected during the taxable year, after deduction there from of any federally authorized tax credit taken with respect to such property.

Qualifying Green Chemistry tangible property shall be tangible personal property and other tangible property including buildings and structural components of buildings acquired by purchase, as defined under section one hundred and seventy-nine (d) of the Federal Internal Revenue Code as amended and in effect for the taxable year not taxable under chapter sixty A; and either (1) used by the corporation in the commonwealth in research and development activities in the commonwealth to develop or enhance Green Chemistry; and which:

1. is depreciable under section one hundred and sixty-seven of said Code and has a useful life of four years or more, or

2. is considered recovery property under section one hundred and sixty-eight of said Code; or

(2) provided to a qualified organization for use in research and development activities in the commonwealth to develop or enhance Green Chemistry; and which would, if it were in the

hands of the taxpayer:

1. be depreciable under section one hundred and sixty-seven of said Code and have a useful life of four years or more, or 2. be considered recovery property under section one hundred

and sixty-eight of said code.

For purposes of this section, “Green Chemistry” means the use of any chemical product, process, substitution, technology, principle or methodology, including but not limited to:

1. such use in all aspects and types of chemical processes including synthesis, catalysis, monitoring, separations, and reaction conditions that reduce or eliminate potentially negative

impacts on human health or the environment relative to current operating practice,

2. such use in industrial or commercial applications, and

3. research and development of alternative chemical processes or products that are potentially non-toxic or less toxic to human health or the environment or that are potentially non-hazardous or less hazardous than substances or processes that are currently in use.

For purposes of this section “qualified organization” means any educational organization which: (a) is an institution of higher education within the meaning of section 3304(f) of the Code; (b) is

described in section 170(b)(1)(A)(ii) of the Code; and (c) has its principal location in the commonwealth.

A manufacturing corporation, or a business corporation engaged primarily in research and development, which has been deemed to be such under section thirty-eight C or forty-two B, shall be allowed a credit against its excise due under this chapter for tangible property leased pursuant to an operating lease as hereinafter provided. The amount of such credit afforded to a lessee corporation with respect to such property shall be ten percent 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 shall be the number of days of the taxable year during which the lessee corporation leases the property and the denominator of which shall be the number of days in the useful life of such property. Such useful life shall be the same as that used by the lessor for depreciation purposes when computing federal income tax liability. An operating lease shall be any contract or agreement to lease or rent for a license to use such property provided that:

i. said lease does not constitute a purchase as defined under section one hundred and seventy-nine (d) of the Code, as amended and in effect for the taxable year,

ii. such property is not taxable under chapter sixty A,

iii. such property is used by the lessee corporation in the commonwealth,

iv. such property is situated in the commonwealth throughout

the entire lease term, and

v. such property:

1. is depreciable by the lessor under section one hundred and sixty-seven of said Code and has a useful life of four years or more, or

2. is considered recovery property under section one hundred

sixty-eight of said Code.

Such credit shall not be available to a lessee if such lessee has previously received a credit with respect to the leased property.

The commissioner shall by regulation require such documentation of the lessor and lessee as to substantiate the credit claimed under this section.

(b) A corporation shall not be allowed a credit under paragraph

(a) with respect to tangible personal property and other tangible property, including buildings and structural components of buildings, which it leases as a lessor. For the purposes of the preceding

sentence, any contract or agreement to lease or rent or for a license to use such property shall be considered a lease.

(c) The credit allowed under this section for any taxable year shall not reduce the excise to less than the amount due under section thirty-two (b) or thirty-nine (b) and amounts qualifying for

the credit under this section shall not be eligible for the credit provided in section thirty-one A.

(d) A corporation may elect to deduct the amount allowable under section thirty-eight D or the credit under this section, but not both. Any such election must be made on or before the due

date of filing the return, including any extension of time, and shall be irrevocable.

(e) With respect to property which is disposed of or ceases to be in qualified use prior to the end of the taxable year in which the credit is to be taken, the amount of the credit shall be that portion

of the credit provided for in paragraph (a) which represents the ratio which the months of qualified use bear to the months of useful life. If property on which credit 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; provided, however, if such property is disposed of or ceases to be in qualified use after it has been in qualified use for more than twelve consecutive years, it shall not be necessary to add back the credit as provided in this paragraph. The amount

of credit allowed for actual use shall be determined by multiplying the original credit by the ratio which the months of qualified use bear to the months of useful life. For the purposes of this paragraph, useful life of property shall be the same as that used by the corporation for depreciation purposes when computing federal income tax liability.

(f) A corporation renting or leasing tangible property otherwise qualifying for the credit under this section from a regional business development corporation or authority authorized under

chapter forty D or a regional business development corporation organized as a non-profit corporation under any special act shall be deemed to have acquired such property by purchase as defined under Section 179(d) of the Federal Internal Revenue Code, as amended and in effect for the taxable year, for the purposes of this section and shall be eligible for the credit under paragraph (a).

The amount of such credit shall be ten per cent of the value of qualifying property leased and placed in qualified use during the taxable year. Such value shall be the cost of such property to the regional business development corporation. The books and records of such corporation shall for the purposes of this section be open to the commissioner for inspection. For the purposes of this section, a termination or cessation of such rental or lease for any reason other than a transfer of ownership of such property to the lessee shall be considered a disposition of such property. No further credit shall be allowed to such lessee or any successor corporation, as the case may be, on account of such property in the event of successive rentals or leases, replacement, alteration or

change of the property rented or leased; transfer of ownership of such property to the lessee; or the merger, consolidation or other reorganization of such lessee.

(g) Any corporation entitled to a credit for any taxable year in accordance with the provisions of paragraphs (a) to (f), inclusive, may carry over and apply to its excise for any one or more of

the next succeeding fifteen taxable years, the portion, as reduced from year to year, of its credit which exceeds its excise for the taxable year.

(h) In the case of corporations filing a combined return of income under section thirty-two B, a credit generated by an individual member corporation under the provisions of this section shall first be applied against the excise attributable to that company under section thirty-two or thirty-nine, subject to the limitations of paragraphs (c) and (d). A member corporation with an excess research and development credit may apply its excess credit against the excise of another group member, to the extent that such other member corporation can use additional credits under the limitations of said paragraphs (c) and (d). Unused, unexpired credits generated by a member corporation shall be carried over from year to year by the individual corporation that generated

the credit.

SECTION 2. This act shall take effect upon passage and all investments commencing with fiscal year 2001 will be eligible for the credit.