View corporate excise tax deductions

Corporations might qualify for corporate excise tax deductions. Learn about them here.

Deductions decrease your taxable income, which means you owe less taxes. Corporations are allowed the following deductions:

Deduction Description
Abandoned building renovation deduction A deduction equal to 10% of the costs incurred in renovating qualifying abandoned buildings located in an Economic Opportunity Area (EOA).
Federal bonus depreciation deduction

Massachusetts allows corporations to expense certain depreciable business assets instead of treating them as capital expenditures. Taxpayers are allowed a I.R.C. §179 deduction in the same amount as allowed federally.

Dividend deduction

Massachusetts does not allow the dividends received deduction that's allowed under the Internal Revenue Code. However, a Massachusetts deduction is allowed for 95% of the value of all dividends received, except for:

  • Dividends from owning shares in a corporate trust engaged in business in Massachusetts
  • Dividends from the deemed or actual distributions (except actual distributions of previously taxed income) from a DISC which is not wholly-owned, or
  • Dividends from any class of stock if the corporation owns less than 15% of the payer corporation's voting stock
Net operating loss deduction

Massachusetts only allows a deduction for:

  • Carrying over net operating loss in the first 5 years of a business, starting from the date the corporation was organized, or
  • Losses sustained in taxable year prior to January 1, 2010: Net operating losses sustained in any taxable year can be carried forward for no more than 5 years, and can't be carried back.
  • Losses generated during a taxable year beginning January 1, 2010 or later: Net operating losses sustained can be carried forward for no more than 20 years, and can't be carried back.
Solar and wind power deduction

When figuring out net income, a domestic or foreign business corporation may deduct expenses paid during the taxable year for installing:

  • Any solar or wind-powered climate control
  • Water heating units or systems

Dividend deduction

Massachusetts does not allow the dividends received deduction that's allowed under the Internal Revenue Code. However, a Massachusetts deduction is allowed for 95% of the value of all dividends received, except for:

  • Dividends from owning shares in a corporate trust engaged in business in Massachusetts
  • Dividends from the deemed or actual distributions (except actual distributions of previously taxed income) from a DISC which is not wholly-owned, or
  • Dividends from any class of stock if the corporation owns less than 15% of the payer corporation's voting stock

When calculating net income from business carried on in Massachusetts, a "dividend" is generally any item of federal gross income as defined under I.R.C. § 316 or that is treated as a dividend under any part of the Code.

Documents to submit with abatement/amended tax return

Additional Resources

Net operating loss deduction

Massachusetts only allows a deduction for:

  • Carrying over net operating loss in the first 5 years of a business, starting from the date the corporation was organized, or
  • Losses sustained in taxable year prior to January 1, 2010: Net operating losses sustained in any taxable year can be carried forward for no more than 5 years, and can't be carried back.
  • Losses generated during a taxable year beginning January 1, 2010 or later: Net operating losses sustained can be carried forward for no more than 20 years, and can't be carried back.

Documents to submit with abatement/amended tax return

Additional Resources

Solar and wind power deduction

When figuring out net income, a domestic or foreign business corporation may deduct expenses paid or incurred during the taxable year for installing:

  • Any solar or wind-powered climate control
  • Water heating units or systems

These units or systems must be legally located (have situs) in Massachusetts and must only be used for the corporation's business or trade. Expenses related to ancillary units cannot be deducted. The deduction is available to domestic and foreign corporations.

The deduction is only allowed if both conditions are met:

  1. The net income for the taxable year and all following taxable years must be computed without any exemption, credit, or deduction for such expenditures or depreciation of the property other than the allowed solar and wind power deduction, and
  2. The system or unit must be certified by the Office of Facilities Management, Division of Capital Planning. Call (617) 727-4030 for more information.

If any system or unit qualifies for the deduction, it won't be taxed. For Massachusetts purposes, a corporation cannot take both the solar and wind power deduction along with any other tax credit for the same property, such as:

If eligible units, that a deduction was taken for, are used for purposes other than the corporation's trade or business, add back the previously allowed deduction to taxable income, dollar for dollar, in the year the property stops being in qualified use. Explain the calculation of any such additional income in an attached Schedule and report the amount in Schedule E, Line 10.

In any taxable year that you sell or dispose of property that a deduction has been allowed for, disregard the deduction when computing gain or loss. Compute the gain or loss on the property's sale or disposition as if the deduction wasn't claimed, and the cost or other basis of the property has been reduced by straight-line depreciation (based on the property's useful life). However, if the sale or disposition happened within 3 years of the date the property was placed in service, the basis is 0.

Documents to submit with abatement/amended tax return

  • Verification of Certification issued by the Office of Facilities Management
  • Schedule itemizing the:
    • Cost
    • Allowable federal depreciation
    • Date and place of installation
  • If amounts are prorated, an explanation of the computation

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