Life Science Credits

Learn about the 5 tax credits available to certified life science companies.

Overview

The Life Sciences Investment Program and the Life Sciences Tax Incentive Program were established in 2009.  The Massachusetts Life Science Center was authorized to award:

  • Various tax credits and
  • Other tax incentives to certified life sciences companies.

The five tax credits summarized below are available for tax years beginning on or after January 1, 2009. The 5 tax credits are:

  • Life Sciences Refundable Investment Tax Credit
  • Life Sciences Refundable FDA User Fees Tax Credit
  • Life Sciences Refundable Section 38M Research Tax Credit
  • Life Sciences Research Tax Credit
  • Life Sciences Refundable Jobs Tax Credit.

 These credits are available only to the extent authorized pursuant to the Life Sciences Tax Incentive Program.

Life Sciences Refundable Investment Tax Credit (ITC)

The Life Sciences ITC may be available to certified life sciences companies tax under the personal income tax or corporate excise for tax years.

The Life Sciences ITC is equal to 10% of the cost of qualifying property:

  • Acquired
  • Constructed or
  • Erected during the tax year.

The qualifying property must be used exclusively in Massachusetts.

If the Life Sciences ITC exceeds the personal income tax or corporate excise otherwise due, 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.

Certified life sciences companies qualifying for the Economic Development Incentive Program Credit (EDIPC) may only take such credit to the extent of an additional 2% of the cost of the qualifying property. 

Certified life science companies that are corporations taking the life sciences ITC in a given tax year aren’t allowed to take the 3% investment tax credit or the low income housing credit.

In the event of revocation of a company’s certification as a life sciences company, the recapture of The Life Sciences ITC may be required.

Life Sciences Refundable FDA User Fees Tax Credit

A certified life sciences company may also be eligible for an FDA User Fees credit against its personal income tax or corporate excise for tax years.

This credit is available for user fees paid on or after June 16, 2008, to the U. S. Food and Drug Administration (FDA) upon submission of an application to manufacture a human drug in Massachusetts. This credit, which is available only to the extent authorized pursuant to the Life Sciences Tax Incentive Program, is equal to 100% of the user fees actually paid by the taxpayer, as specified in the certification.

The credit may be claimed in the tax year in which the application for licensure of an establishment to manufacture the drug is approved by the FDA.

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

Certified life sciences companies 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 credits remaining is refundable.

A life sciences company claiming the FDA user fees credit may not also deduct the FDA user fees on its return.

Life Sciences Refundable Section 38M Research Tax Credit

A certified life sciences company subject to the corporate excise may also receive the research credit for a portion of its qualified research expenses under Massachusetts General Laws Chapter 63, Section 38M. For a certified life sciences company, if the research credit allowed exceeds the amount of the credit that may be claimed for the tax year, at the option of the taxpayer and to the extent authorized under the Life Sciences Tax Incentive Program, 90% of the balance of the remaining credits is refundable.

Life Sciences Research Tax Credit

A separate Life Sciences Research Credit may be available to a certified life sciences company for certain expenditures which don't qualify for the Section 38M research credit. 

The Life Sciences Research Credit generally is calculated in the same manner as the research credit under Massachusetts General Laws Chapter 63, Section 38M, except for purposes of the life sciences research credit.

Qualified research expenditures include expenditures for research related to legally mandated clinical trial activities performed both inside and outside of Massachusetts.

 For certified life sciences companies subject to the corporate excise, the credit can reduce the amount due to $456.

Any unused credit may be carried forward for 15 years.

Unlike Massachusetts General Laws Chapter 63, Section 38M research credit, this life sciences research credit isn’t refundable.

Life Sciences Refundable Jobs Tax Credit

A certified life sciences company, to the extent authorized by the Life Sciences Tax Incentive Program, may receive the Life Sciences Refundable Jobs Tax Credit against its personal income tax or the corporate excise for tax years beginning on or after January 1, 2011. 

A taxpayer claiming the credit must commit to the creation of a minimum of 50 net new permanent full-time positions in Massachusetts. 

The Massachusetts Life Sciences Center, in consultation with the Department of Revenue, determines the amount of the Life Sciences Refundable Jobs Credit allowed to a taxpayer.  The credit is subject to all the requirements the Life Sciences Tax Incentive Program.

If the credit claimed by a taxpayer exceeds the tax otherwise due under the personal income tax or the corporate excise in a given tax year, as applicable, 90% 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 may not be carried forward to subsequent tax years.

In the event of revocation of a company’s certification as a life sciences company or other disqualifying events, the recapture of the credit may be required.

Additional information

For more information, details on how amounts are calculated, and important definitions please see:

  • Massachusetts General Laws Chapter 62, Sections 6(M) and 6(N)
  • Massachusetts General Laws Chapter 63, Sections 31M, 38U and 38W
  • Technical Information Release 08-23 and 13-6

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