General Laws chapter 62, section 6(g) and chapter 63, section 38N authorize a credit against the tax imposed by those chapters to taxpayers that participate in a certified project as defined in G.L. c. 23A, §§ 3A and 3F. The credit, referred to as the economic development incentive program credit (“EDIPC”), is a key component of the Economic Development Incentive Program (“EDIP”) under G.L. c. 23A and is available to a taxpayer only to the extent awarded by the Economic Assistance Coordinating Council (“EACC”) as defined in G.L. c. 23A. EDIP credits authorized by the EACC are subject to an annual cap of $30,000,000. The Act made significant changes to the EDIPC provisions in G.L. c. 62. § 6(g) and G.L. c. 63, § 38N. The changes are effective for projects certified in tax years beginning on or after January 1, 2017.
Under the previous version of the EDIPC, the credit awarded was based on a percentage of the cost of any property that qualified for the credit allowed by G.L. c. 63, § 31A. Pursuant to the Act, the credit is no longer tied to the cost of property that would qualify for the investment tax credit allowed under G.L. c. 63, § 31A. Instead, the amount of credit allowed in each case is determined by the EACC based on numerous factors set forth in G.L. c. 23A § 3D. The previous version of the EDIPC imposed limitations on the maximum amount of credit that the EACC could award to particular types of certified projects, e.g., a certified manufacturing retention project could have received a credit up to 40% of the cost of property that qualified for the ITC. The Act eliminates those limitations from the EDIPC.
Under the Act, the EACC may designate the EDIPC as refundable for any certified project, subject to a limitation that the EACC may not award more than $5 million in refundable credits per year. In addition, the EACC is now authorized to specify the timing of the refund. Under the previous EDIPC, the EACC could award a refundable credit only to a manufacturing retention project or a certified job creation project.
The Act also amends the rules with respect to recapture of the credit. Under the Act, recapture is required only if the EACC revokes the certification of a project. The amount of credit subject to recapture will be proportionate to the corporation’s compliance with the job creation requirements applicable to a certified project. The corporation’s proportion of compliance will be determined by the EACC as part of the revocation process and shall be reported to the corporation and the Department of Revenue (“DOR”) at the time of revocation. The credit is no longer subject to the recapture provision of G.L. c. 63, § 31A(e) which, under the previous version of the EDIPC, would be triggered if property that qualified for the credit was disposed of or ceased to be in qualified use within the meaning of G.L. c. 63, § 31A, or if such property ceased to be used exclusively in a certified project before the end of its useful life.
Under the Act, if a certified project is sold or otherwise disposed of, the EDIPC allowed may be transferred to the purchaser of the certified project, provided that the EDIP contract is assigned to and assumed by the purchaser and approved by the EACC. Under the previous version of the EDIPC, the sale or other disposition of a certified project may have triggered the recapture provisions of G.L. c. 63,
Section 128 of the Act provides that any taxpayer participating in a certified project that intends to claim economic opportunity area credit or EDIPC on returns for tax years beginning on or after January 1, 2016 must enter into an EDIP contract with the EACC. There was no such requirement under the previous version of the EDIPC. Any taxpayer participating in a certified project that fails to enter into an EDIP contract in form and substance acceptable to the Massachusetts Office of Business Development on or before December 31, 2016 shall forfeit such credits.