Technical Information Release  TIR 23-6: Tax Provisions in Certain Massachusetts Legislation Enacted in 2022

Date:	03/28/2023
Referenced Sources:	Massachusetts General Laws

This Technical Information Release (“TIR”) explains certain provisions included in legislation enacted in 2022, including “An Act Relating to Economic Growth and Relief for the Commonwealth” (the “Economic Development Act”),[1] “An Act Relative to Military Spouse-Licensure Portability, Education and Enrollment of Dependents” (the “SPEED Act”)[2], “An Act Driving Clean Energy and Offshore Wind” (the “Offshore Wind Act”),[3] and “An Act Relative to Equity in the Cannabis Industry” (the “Cannabis Industry Reform Act”).[4]  The provisions relate to the personal income tax, G.L. c. 62, the corporate excise, G.L. c. 63, and the excise on vaping products, referred to as "electronic nicotine delivery systems," or "ENDS" imposed under G.L. c. 64C, § 7E.

The following provisions are discussed in this TIR:

• Decoupling from Code § 280E for licensed marijuana businesses
• Marijuana accessories manufactured to deliver nicotine subject to the ENDS excise
• Wind Power Incentive Jobs credit
• Wind Power Incentive Investment credit
• National Guard Hire credit

I. Decoupling from Code § 280E for licensed marijuana businesses

The Cannabis Industry Reform Act decouples G.L. c. 62 and G.L. c. 63 from Internal Revenue Code (“Code”) § 280E with respect to licensed marijuana businesses for taxable years beginning on or after January 1, 2022.[5]  Previously, Massachusetts conformed to Code § 280E, which prohibits trade or businesses that traffic in controlled substances from claiming any trade or business deductions provided by the Code, other than for the cost of goods sold.  Because marijuana remains federally classified as a Schedule I controlled substance and is illegal to traffic under federal law,[6] licensed marijuana businesses were unable to claim trade or business expense deductions for purposes of G.L. c. 62 and G.L. c. 63, other than for the cost of goods sold.  The Cannabis Industry Reform Act adds G.L. c. 62, § 2(d)(4) and amends G.L. c. 63, § 30.4 to allow licensed marijuana businesses, including marijuana establishments as defined in G.L. c. 94G, § 1, and medical marijuana treatment centers, as defined in G.L. c. 94I, § 1, to deduct trade or business expenses that they were previously prohibited from deducting.  Such licensed marijuana businesses remain unable to deduct trade or business expenses other than for the cost of goods sold for federal income tax purposes.

II. Marijuana accessories manufactured to deliver nicotine subject to the ENDS excise

The Cannabis Industry Reform Act also amends G.L. c. 64C, § 7E(m) to specifically provide that marijuana accessories that are manufactured to also deliver nicotine are considered to be an ENDS.[7]  This statutory change codifies the Commissioner’s prior administrative position interpreting the ENDS excise.

III. Wind Power Incentive Jobs credit

The Offshore Wind Act, as amended by the Economic Development Act, establishes a refundable Wind Power Incentive Jobs credit for offshore wind companies certified by the Massachusetts Clean Energy Technology Center (the “Center”).  See G.L. c. 62, § 6(bb) and G.L. c. 63, § 38LL.[8]  A certified offshore wind company subject to tax under either G.L. c. 62 or G.L. c. 63 may, to the extent authorized by the offshore wind tax incentive program established in G.L. c. 23J, § 8A(d), claim the credit in an amount determined by the Center, in consultation with the Commissioner of Revenue (“Commissioner”).[9]  A certified offshore wind company claiming the credit must commit to the creation of a minimum of 50 net new permanent full-time employees in Massachusetts.[10]  If the credit exceeds the taxpayer’s liability for the taxable year, 90 percent of such excess credit shall be refunded to the taxpayer.[11]  Excess credit amounts cannot be carried forward to subsequent taxable years.[12]  In the event a taxpayer’s certification as an offshore wind company is revoked, the recapture of the credit may be required.[13]  The credit is subject to the offshore wind tax incentive program’s annual cap of $35,000,000.[14]

For certified offshore wind companies subject to tax under G.L. c. 62, the credit will be attributed on a pro rata basis to the owners, partners, or members of the legal entity, who can claim the credit in a manner determined by the Commissioner.[15]

The Commissioner is to promulgate regulations that establish a process for recapturing the value of the credit where the offshore wind company’s certification is revoked by the Center.[16]

The credit is available for certified offshore wind companies subject to tax under G.L. c. 62 or G.L. c. 63 for taxable years beginning on or after January 1, 2023.  The credit will not be available for taxable years beginning on or after January 1, 2033.[17]

IV. Wind Power Incentive Investment credit

The Offshore Wind Act, as amended by the Economic Development Act, also establishes a refundable Wind Power Incentive Investment credit for offshore wind companies subject to tax under G.L. c. 62 or G.L. c. 63. See G.L. c. 62, § 6(cc) and G.L. c. 63, § 38MM.[18]  A certified offshore wind company may, to the extent authorized by the offshore wind tax incentive program established in G.L. c. 23J, § 8A(d), claim a credit equal to up to 50 percent of its total capital investment in an offshore wind facility.[19]  The total amount of the credit awarded is distributed in equal parts over five taxable years corresponding to the period for which the offshore wind company is certified.[20] 

The eligibility requirements for the Wind Power Incentive Investment credit vary depending on whether the certified offshore wind company owns or leases the offshore wind facility. However, in general, the certified offshore wind company must demonstrate to the Center that (i) it has a total capital investment in an offshore wind facility that equals not less than $35,000,000; and (ii) that the offshore wind facility will employ not less than 200 new full-time employees by the fifth year of the offshore wind company’s certification.[21]  Where the certified offshore wind company is a tenant of an offshore facility, the certified offshore wind company must also demonstrate that it leases an area of the offshore wind facility that represents not less than 25 per cent of the owner’s capital investment in the facility.  Further, in such cases, the amount of credit to be awarded in a taxable year cannot exceed the certified offshore wind company’s total lease payments for leasing the facility in the taxable year.[22] 

A certified offshore wind company claiming the credit may not also claim the Wind Power Incentive Jobs Credit or the Economic Development Incentive Program Credit provided by G.L. c. 62, § 6(g) and G.L. c. 63, § 38N in the same taxable year.[23]  In the event a taxpayer’s certification as an offshore wind company is revoked or the certified offshore wind company fails to create 200 new full-time employees by the fifth year of its certification, recapture of the credit may be required.[24]  The credit is subject to the offshore wind tax incentive program’s annual cap of $35,000,000.[25] 

For certified offshore wind companies subject to tax under G.L. c. 62, the credit will be attributed on a pro rata basis to the owners, partners, or members of the legal entity, who can claim the credit in a manner determined by the Commissioner.[26]

The Commissioner is to promulgate regulations to administer the credit and to establish a process for recapturing the value of the credit where the offshore wind company’s certification is revoked by the Center.[27]

The credit is available for certified offshore wind companies subject to tax under G.L. c. 62 or G.L. c. 63 for taxable years beginning on or after January 1, 2023.  The credit will not be available for taxable years beginning on or after January 1, 2033.[28]

V. National Guard Hire credit

The SPEED Act, as amended by the Economic Development Act, establishes a National Guard Hire Credit for employers who hire members of the Massachusetts national guard. See G.L. c. 62, § 6(aa) and G.L. c. 63, § 38KK.[29]  These provisions allow employers subject to tax under G.L. c. 62 or G.L. c. 63 to claim a non-transferrable and non-refundable credit equal to $2,000 for each member of the Massachusetts national guard hired by the employer.[30] To be eligible for a credit: (i) the employer cannot employ more than 100 employees; (ii) the primary place of employment and the primary residence of the member of the Massachusetts national guard must be in Massachusetts; (iii) the employer must have obtained the applicable certification from the office of the adjutant general that the individual is a member of the Massachusetts national guard not later than the day the Massachusetts national guard member begins work; and (iv) the Massachusetts national guard member must be hired after July 1, 2022.[31]  An employer claiming this credit is eligible for a second credit equal to $2,000 in the subsequent taxable year with respect to such member of the Massachusetts national guard, subject to certification of continued employment during the subsequent taxable year.[32]  Any amount of the credit that exceeds the tax due for a taxable year may be carried forward to any of the three subsequent taxable years.[33]  The credit is subject to an annual cap of $1,000,000 and is available to taxpayers on a first-come, first-served basis.[34] 

For employers subject to tax under G.L. c. 62, the credit will be attributed on a pro rata basis to the owners, partners, or members of the legal entity that hires the eligible employees.[35] For employers subject to a minimum excise under G.L. c. 63, the credit cannot reduce the business corporation’s excise liability below the minimum corporate excise amount.[36]  

The Massachusetts Office of Business Development (“MOBD”), in consultation with the Commissioner, will authorize, administer and determine eligibility for the credit, and promulgate regulations establishing an application process for the credit.[37] The credit is available for employers subject to tax under either G.L. c. 62 or G.L. c. 63 for taxable years beginning on or after January 1, 2023.[38]

                                                                        /s/Geoffrey E. Snyder
                                                                        Geoffrey E. Snyder
                                                                        Commissioner of Revenue
GES:RHF:dbb

March 28, 2023

TIR 23-6

[1] St. 2022, c. 268.

[2] St. 2022, c. 154.

[3] St. 2022, c. 179.

[4] St. 2022, c. 180.

[5] Cannabis Industry Reform Act, §§ 1-2.

[6] 21 U.S.C. § 812(c).

[7] Cannabis Industry Reform Act, § 3.

[8] Offshore Wind Act, §§ 44-45, as amended by the Economic Development Act, §§ 103-104.

[9] G.L. c. 62, § 6(bb)(1); G.L. c. 63, § 38LL(a)(1).

[10] G.L. c. 62, § 6(bb)(2); G.L. c. 63, § 38LL(a)(2).

[11] G.L. c. 62, § 6(bb)(3); G.L. c. 63, § 38LL(a)(3).

[12] Id.

[13] G.L. c. 23J, § 8A(c)(2).

[14] G.L. c. 62, § 6(bb)(4); G.L. c. 63, § 38LL(a)(4).

[15] G.L. c. 62, § 6(bb)(5).

[16] G.L. c. 23J, § 8(c)(2).

[17]  Economic Development Act, §§ 271-273.

[18] Offshore Wind Act, §§ 44-45, as amended by the Economic Development Act, §§ 103-104.

[19] G.L. c. 62, § 6(cc)(2); G.L. c. 63, § 38MM(b).

[20] Id.

[21] G.L. c. 62, § 6(cc)(3)-(4); G.L. c. 63, § 38MM(c)-(d).

[22] G.L. c. 62, § 6(cc)(4); G.L. c. 63, § 38MM(d).

[23] G.L. c. 62, § 6(cc)(5); G.L. c. 63, § 38MM(e).

[24] G.L. c. 23J, § 8A(c)(2).

[25] G.L. c. 62, § 6(cc)(6); G.L. c. 63, § 38MM(f).

[26] G.L. c. 62, § (cc)(7).

[27] G.L. c. 23J, § 8(c)(2); G.L. c. 62, § (cc)(8); G.L. c. 63, § 38MM(g).

[28] Economic Development Act, §§ 271-273.

[29] SPEED Act, §§ 7-8, as amended by the Economic Development Act, §§ 101-102; 104-105.

[30] G.L. c. 62, § 6(aa)(1); G.L. c. 63, § 38KK(a).

[31] G.L. c. 62, § 6(aa)(1)-(2); G.L. c. 63, § 38KK(a)-(b); Economic Development Act, § 269.

[32] G.L. c. 62, § 6(aa)(1); G.L. c. 63, § 38KK(a).

[33] G.L. c. 62, § 6(aa)(4); G.L. c. 63, § 38KK(d).

[34] G.L. c. 62, § 6(aa)(7); G.L. c. 63, § 38KK(g).

[35] G.L. c. 62, § 6(aa)(4).

[36] G.L. c. 63, § 38KK(c).

[37] G.L. c. 62, § 6(aa)(6)-(7); G.L. c. 63, § 38KK(f)-(g).

[38] Economic Development Act, § 269.