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This Technical Information Release (TIR) explains two provisions in St. 2014, c. 359, An Act Making Appropriations for the Fiscal Year 2014 to Provide for Supplementing Certain Existing Appropriations and for Certain Other Activities (the Supplemental Budget), relating to the corporate excise, G.L. c. 63, and tax administration, G.L. c. 62C.
The Economic Development Act, St. 2014, c. 287, An Act Promoting Economic Growth Across the Commonwealth, revised the research credit provisions in G.L. c. 63, § 38M, effective for tax years beginning on or after January 1, 2015. See TIR 14-13. One of the revisions provides business corporations with the option of electing to have the research credit determined under an alternative simplified method, calculated in a manner similar to the alternative simplified federal credit for qualified research expenses in Internal Revenue Code § 41(c)(5).
The Supplemental Budget made technical corrections to the alternative simplified credit provisions that will be applicable to tax years 2018 and later.
As revised with the technical corrections made by the Supplemental Budget, the Massachusetts alternative simplified credit will now be phased in and applied as follows:
For calendar years 2015, 2016, and 2017, the amount of the alternative simplified credit is equal to 5% of the taxpayer’s qualified research expenses for the taxable year that exceed 50% of the taxpayer’s average qualified research expenses for the 3 taxable years preceding the taxable year for which the credit is being determined.
For calendar years 2018, 2019 and 2020, the amount of the alternative credit will be 7½% of the taxpayer’s qualified research expenses for the taxable year for which the credit is being determined that exceed 50% of the taxpayer’s average qualified research expenses for the preceding 3 taxable years.
For calendar years beginning in calendar year 2021, the amount of the alternative credit will be 10% of the taxpayer’s qualified research expenses for the taxable year for which the credit is being determined that exceed 50% of the taxpayer’s average qualified research expenses for the preceding 3 taxable years.
If the corporation did not have qualified research expenses in any one of the three taxable years preceding the taxable year for which the credit is being determined, the amount of the Massachusetts alternative simplified research credit is equal to 5% of the taxpayer's qualified research expense for the taxable year.
Further guidance regarding the changes to the research credit made in the Economic Development Act, as amended by the Supplemental Budget, including the method for making and the effect of an election on subsequent tax years, will be provided in an amendment to 830 CMR 63.38M.1.
The Supplemental Budget added language to G.L. c. 62C, § 71, regarding notices to taxpayers, which will permit the Commissioner to give electronic notices rather than mailing paper notices to those taxpayers who consent to electronic notification.
G.L. c. 62C, § 71, provides (new language added by the Supplemental Budget in italics):
Section 71. Any notice authorized or required under the provisions of this chapter may be served personally or may be given by mailing the same, postage prepaid, to the person for whom it is intended, addressed to such person at his address as it appears in the records of the commissioner or may be given as the parties otherwise agree, such as by sending electronic notification as provided in chapter 110G.
/s/ Amy Pitter
Commissioner of Revenue
December 23, 2014