Administrative Procedure  AP 303: Manufacturing Corporations

Date:	01/23/2024
Organization:	Massachusetts Department of Revenue
Referenced Sources:	Massachusetts General Laws

303. Manufacturing Corporation Classification

A corporation registered to do business in the Commonwealth may apply to the Department of Revenue (the “Department” or “DOR”) for manufacturing corporation classification. See 830 CMR 58.2.1. 

NOTE:  An LLC taxed as a corporation for federal and Massachusetts purposes may apply for manufacturing corporation classification; however, an LLC taxed as a partnership or that elects to be disregarded as an entity separate from its owner may not apply for manufacturing corporation classification. See DD 00-4. In order to be eligible for consideration to be classified as a manufacturing corporation, an LLC must submit a copy of correspondence it received from the Internal Revenue Service granting its corporate election. In determining whether a corporation is a manufacturing corporation, the corporation may take into account its pro rata share of the manufacturing activities of a partnership in which it is a partner, or an LLC taxed as a partnership of which it is a member. A corporate owner of a single member LLC that elects to be disregarded as an entity separate from its owner may take the manufacturing activities of the LLC into account in determining whether it is a manufacturing corporation.

A corporation classified as a manufacturing corporation by the Department is entitled to an exemption of all its machinery from local property tax. See 830 CMR 58.2.1(4). The exemption applies whether or not the machinery is used directly in manufacturing. A corporation classified as a manufacturing corporation is also entitled to an investment tax credit under G.L. c. 63, § 31A, and an exemption from sales and use tax for certain property used in manufacturing or in research and development under G.L. c. 64H, §§ 6(r) and (s).

A corporation that does not apply for manufacturing corporation classification but that is engaged in manufacturing as defined in 830 CMR 58.2.1(6) may be treated as having manufacturing corporation “status”. See 830 CMR 58.2.1(5). A corporation treated as having manufacturing corporation “status” is entitled to the investment tax credit under G.L. c. 63, § 31A, and the exemption from sales and use tax for certain property used in manufacturing or in research and development under G.L. c. 64H, §§ 6(r) and (s), but is not entitled to the exemption of its machinery from local property tax.

303.1. Applying for Manufacturing Classification

Corporations that are newly organized or registered and have manufacturing activities in their Articles of Organization should submit Form 355Q, Statement Relating to Manufacturing Activities, to the Department.  In order to apply for manufacturing corporation classification, the corporation must send a completed Form 355Q to the Massachusetts Department of Revenue, PO Box 7027, Boston MA 02204, making sure that the corporation's name, address, date of organization and federal identification number are accurate.  Form 355Q must be signed by an officer of the corporation.  See 830 CMR 58.2.1(7).  Incomplete applications will be returned to the corporation without review.

Corporations must file an application with the Department on or before January 31^st of the calendar year for which it seeks manufacturing corporation classification. Applications received after January 31^st will be reviewed for classification for the following calendar year. However, if an application is postmarked by the United States mail on or before January 31^st but arrives at DOR after that date, it will be considered timely filed.

DOR's review of a corporation's application for manufacturing classification may call for more information than is included in the completed Form 355Q.  DOR may need to examine tax returns, books and records and/or to inspect the facilities for which the exemption is requested.  See 830 CMR 58.2.1(7)(b)3.

On or after April 1^st of each year, DOR publishes an Annual List of Corporations Subject to Taxation in Massachusetts or a supplement thereof (the “Annual List”) containing the names and classifications of every corporation subject to the Massachusetts corporate excise.  Corporations determined by DOR to be engaged in manufacturing in Massachusetts on January 1^st of that calendar year are classified on the Annual List as manufacturing corporations. Notification that the Annual List has been published is mailed to all boards of assessors in Massachusetts to be used in assessing local property taxes.

303.2. Additional Responsibilities

A manufacturing corporation must reapply for manufacturing corporation classification if it 1) changes its name, 2) undergoes a merger or consolidation, 3) is revived as a corporation after dissolution, 4) reregisters with the Secretary of State after withdrawing from Massachusetts, or 5) undergoes a material change in its activities.

NOTE:  A manufacturing corporation seeking to be included on the Annual List of Corporations Subject to Taxation in Massachusetts for purposes of determining local property tax benefits should not resubmit a new Form 355Q annually in order to be included on the Annual List. To be included on the Annual List, a manufacturing corporation must file an Annual Certification of Entity Tax Status through MassTaxConnect by April 1^st of the calendar year for which the inclusion on the List is sought (i.e., with respect to the entity’s status as a corporation as of January 1^st of such year). See Directive 12-5.

303.3. Q Subs

A qualified subchapter S subsidiary ("Q Sub") may be classified as a manufacturing corporation only if its S corporation parent has been so classified.  In order to have a Q Sub classified as a manufacturing corporation, the S corporation parent must submit a Form 355Q referencing the name and federal identification number of each Q Sub and describing the combined activities and attributes of the S corporation and each of its Q Subs.  See TIR 13-3.

If manufacturing classification is granted to an S corporation, such S corporation and each of its Q Subs will be listed as manufacturing corporations on the Annual List and may therefore be eligible for local property tax exemptions available to manufacturing corporations. If manufacturing classification is not granted to the S corporation parent, then neither the S corporation nor any of its Q Subs will be identified as a manufacturing corporation on the Annual List. See DD 12-5; TIR 13-3.

303.4. Appealing Denial of Manufacturing Classification

If DOR intends to deny a manufacturing classification request, the Business Income Tax Bureau will notify the corporation. The corporation may then either request a conference at the Office of Appeals or, after the classification request is denied, file an appeal with the Appellate Tax Board. Furthermore, a corporation aggrieved by its classification for the current year may appeal the classification directly to the Appellate Tax Board under G.L. c. 58, § 2, regardless of whether it has applied to the Commissioner for manufacturing corporation classification or received notice from the Commissioner regarding any such application. 

A pre-denial request for a conference must be made within 30 days of the notice.  See AP 628.  However, the request for a conference with the Office of Appeals does not extend the time for filing an appeal with the Appellate Tax Board.

Such appeal must be received by the Board on or before April 30^th of the year for which classification is sought or within 30 days after the date DOR sends its Annual List to the local boards of assessors (See AP 303.1, above), whichever is later.  See 830 CMR 58.2.1(7).  For more information on this appeal process, see AP 629 or write to the Appellate Tax Board, 100 Cambridge Street, 2^nd Floor, Boston, MA  02114.

303.5. Review, Revocation of Classification

DOR may review a corporation's manufacturing classification at any time.  In the event DOR determines the corporation is no longer engaged in manufacturing, it will send the corporation a notice of revocation and a copy to the local board of assessors.  See 830 CMR 58.2.1(9).  See AP 303.4, above, for appeal information.

REMEMBER:

Errors delay processing.  Double check Form 355Q to see that the name, address, federal identification number and date of organization are correct.  Also, make sure that an officer of the corporation has signed in the appropriate place.

For more information contact:

Massachusetts Department of Revenue
Business Income Tax Bureau
Corporate Contact Center
200 Arlington Street
Chelsea, MA 02150
Phone (617) 887‑6367

 

REFERENCES:
G.L. c. 63, §§ 31A, 42B
G.L. c. 64H, §§ 6(r), 6(s)
830 CMR 58.2.1
DD 00-4
DD 12-5
TIR 08-2
TIR 13-3
LR 05-5
LR 06-6
LR 07-1
LR 09-3
LR 11-8
AP 628, Resolution of Disputes at the Office of Appeals
AP 629, Appeals from Denial of Application for Abatement – Appellate Tax Board
Form 355Q, Statement Relating to Manufacturing Activities