Governor Deval Patrick's Budget Recommendation - House 2 Fiscal Year 2013

Governor's Budget Recommendation FY 2013

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Corporate Excise Tax - All Detail


Fiscal Year 2013 Corporate Excise Tax (in Millions)
TAX EXPENDITURE
FY2011

FY2012

FY2013
2.000 - Exclusions from Gross Income 72.2 71.3 71.0
2.100 - Deferrals of Gross Income 1.2 1.1 1.1
2.200 - Deductions from Gross Income 142.6 137.8 137.1
2.300 - Accelerated Deductions from Gross Income 255.2 237.0 243.0
2.400 - Adjustments to Apportionment Formula 296.1 273.5 262.2
2.500 - Exclusions from Property Component 200.3 195.5 191.0
2.600 - Credits Against Tax 358.4 416.1 416.0
2.700 - Entity Exempt from Taxation 3.4 3.0 2.6

 

Fiscal Year 2013 Resource Summary (in Millions)
TAX EXPENDITURE FY2011 FY2012 FY2013
Exclusions from Gross Income 72.2 71.3 71.0

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item description amount
Exclusions from Gross Income 71.0
2.001 Small Business Corporations
In general, corporations organized under, or subject to, Chapters 156, 156A, 156B, 156C, 156D, or 180 of Massachusetts General Laws (M.G.L.) or that have privileges, powers, rights or immunities not possessed by individuals or partnerships are subject to corporate excise. Certain corporations with no more than 100 shareholders may elect to be taxed, for both federal and state tax purposes, as "S corporations." The earnings of S corporations with total receipts of less than $6 million are not generally subject to taxation at the corporate level. As of 2012, S corporations with total receipts of $6 million or more are subject to a reduced corporate excise: 1.83%(*) for non-financial institutions and 2.5%(*) for financial institutions if receipts are $6 million or more but less than $9 million, and 2.75%(*) for non-financial institutions and 3.75%(*) for financial institutions if receipts are $9 million or more. In addition, S corporation net earnings (and losses) are attributed directly to shareholders (whether or not they are distributed as dividends) and are taxed at the individual shareholder level, generally at the applicable personal income tax rate (5.85% in tax year 2000, 5.6% in tax year 2001, 5.3% in tax years 2002 and 5.25% in tax year 2012). By contrast, ordinary corporate earnings are taxed twice: once when earned by the corporation at 8.0%(*) for non-financial institutions and 9.0%(*) for financial institutions, and once when distributed to shareholders in the form of dividends, which are generally taxable at the applicable personal income tax rate.

The difference between the manner in which income is taxed to an ordinary business corporation (including its shareholders) and an S corporation and its shareholders constitutes a tax expenditure. Massachusetts first adopted this treatment of corporations in 1986.

(*) See Appendix A for further details on corporate rate change.

Origin:  IRC, S. 1361-1363, M.G.L. c. 62, S. 17A, c. 63, S.32D, LR 99-17.
Estimate:  $71.0
 
71.0
2.002 Exemption of Income from the Sale, Lease or Transfer of Certain Patents
Income from the sale, lease or other transfer of approved patents for energy conservation, and royalties and income from the sale, lease or other transfer of property subject to such patents are excluded from gross income for a period of five years.

Origin:  M.G.L. c. 63, S. 30.3, IRC, S. 30(5)(a)
Estimate:  negligible
 
negligible

 

Fiscal Year 2013 Resource Summary (in Millions)
TAX EXPENDITURE FY2011 FY2012 FY2013
Deferrals of Gross Income 1.2 1.1 1.1

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item description amount
Deferrals of Gross Income 1.1
2.101 Deferral of Tax on Certain Shipping Companies
Certain companies with merchant marine capital construction funds receive up to a 25-year deferral of tax on that portion of their net income, which is set aside for construction, modernization, and major repair of ships.

Origin:  IRC, S. 1177, S. 7518(c), (g)(5)
Estimate:  $1.1
 
1.1

 

Fiscal Year 2013 Resource Summary (in Millions)
TAX EXPENDITURE FY2011 FY2012 FY2013
Deductions from Gross Income 142.6 137.8 137.1

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item description amount
Deductions from Gross Income 137.1
2.201 Charitable Contributions and Gifts Deduction
In computing net income, corporations may deduct charitable donations up to 10% of taxable income computed without the deductions. There is a carryover of excess contributions available for five succeeding taxable years.

Origin:  IRC, S. 170 (b)(2)(A), (d)(2)(A)
Estimate:  $46.5
 
46.5
2.203 Net Operating Loss Carry-Over
There has been a statutory expansion of the general NOL carry-forward period from 5 to 20 years for business corporations, for taxable years beginning on or after January 1, 2010. There has also been a change to the calculation of an NOL carry-forward, and for tax years beginning on or after January 1, 2010; all carry-forward losses of an eligible business corporation are to be carried forward on a post-apportioned basis, applying the apportionment percentage of the corporation for the taxable year in which the loss is sustained. Financial institutions, public utilities, and insurance companies are not allowed to deduct NOL. See TIR 10-15 for details:

Origin:  IRC, S. 172; M.G.L. c. 63, S. 30.5; TIR 10- 15.
Estimate:  $90.6
 
90.6
2.204 Excess Natural Resource Depletion Allowance
Taxpayers in extractive industries (mining or drilling for natural resources) may deduct a percentage of gross mining income as a depletion allowance ("percentage depletion") even if the cost basis of the property has been reduced to zero. The deduction may not exceed 50% (in some cases, 65%) of net income from the property. In the case of oil and gas, percentage depletion is available only to domestic oil and gas sold by "independent producers" (nonintegrated companies). The excess of the deduction available using the percentage of gross income method of depletion over a depletion deduction based on cost is a tax expenditure.

Origin:  IRC, S. 613, 613A; M.G.L. c. 63, S. 30.3.
Estimate:  Negligible
 
Negligible
2.205 Deduction for Certain Dividends of Cooperatives
Farmers' cooperatives and certain corporations acting as cooperatives may deduct patronage dividends and other amounts from gross income. Cooperatives meeting certain requirements may deduct dividends on capital stock and certain payments to patrons such as investment income. Under generally accepted rules for taxing corporations, the corporation cannot deduct dividends paid to shareholders.

Origin:  IRC, S. 1381-1388
Estimate:  N.A.
 
N.A.
2.206 Economic opportunity areas; tax deduction for renovation of abandoned buildings
Businesses renovating eligible buildings in Economic Opportunity Areas may deduct 10% of the cost of renovation from gross income. This deduction may be in addition to any other deduction for which the cost of renovation may qualify. To be eligible for this deduction, renovation costs must relate to buildings designated as abandoned by the Economic Assistance Coordinating Council.

Origin:  IRC, S. 613, 613A ; M.G.L. c. 63, S.38O
Estimate:  Negligible
 
Negligible

 

Fiscal Year 2013 Resource Summary (in Millions)
TAX EXPENDITURE FY2011 FY2012 FY2013
Accelerated Deductions from Gross Income 255.2 237.0 243.0

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item description amount
Accelerated Deductions from Gross Income 243.0
2.301 Accelerated Depreciation on Rental Housing
Landlords and investors in rental housing may use accelerated methods of depreciation for new and used rental housing. Rental housing placed in service after 1986 is depreciated on a straight-line basis over a 27.5 year period. Rental housing placed in service before 1987 was depreciable over shorter periods (generally 19 or 20 years), and, instead of straight-line depreciation, the 175% declining balance method was permitted. Straight-line depreciation over the property's expected useful life is the generally accepted method for recovering the cost of buildings. The excess of allowable depreciation over such generally accepted depreciation is a tax expenditure, resulting in a deferral of tax or an interest-free loan.

Origin:  IRC S. 168
Estimate:  $1.6
 
1.6
2.303 Expenditures to remove architectural and transportation barriers to the handicapped and elderly
Taxpayers may elect to deduct up to $35,000 of the costs of removing architectural or transportation barriers to the handicapped in the year these costs are incurred. The immediate deduction of these expenditures, which would otherwise have to be capitalized and depreciated over a longer period, results in a deferral of tax or an interest-free loan.

Origin:  IRC, S. 190
Estimate:  $0.2
 
0.2
2.304 Five-Year Amortization of Start-Up Costs
Taxpayers may elect to treat certain capital costs of starting a business as deferred expenses and amortize them over five years. Without the election, only costs for particular assets could be recovered through depreciation deductions. Other costs would be part of the basis in the business and generally could not be recovered until the business was sold or discontinued. The election to amortize these costs allows for a deferral of tax or an interest-free loan.

Origin:  IRC, S. 195
Estimate:  $0.2
 
0.2
2.305 The Accelerated Cost Recovery System (ACRS) for Equipment
For depreciable tangible personal property placed in service after 1980, capital costs must be recovered using the federal Accelerated Cost Recovery System (ACRS), which applies accelerated methods of depreciation over set periods. For property placed in service after 1986, the Federal Tax Reform Act of 1986 prescribes revised ACRS depreciation schedules, generally using double-declining balance depreciation over specified periods that are substantially shorter than actual useful lives. The excess of accelerated depreciation over what is considered to be normal depreciation for tangible personal property (double-declining balance over expected useful lifetimes) is a tax expenditure.

Origin:  IRC, S. 168
Estimate:  $171.5
 
171.5
2.306 Deduction for Excess First-Year Depreciation
Taxpayers may elect to expense certain business assets purchased during the taxable year. The total deduction cannot exceed $25,000 ($100,000 in the case of taxable years beginning after 2002 and before 2010); for taxpayers whose investment in eligible assets exceeds $200,000 ($400,000 in the case of taxable years beginning after 2002 and before 2010) in the year, the $25,000 ceiling is reduced by $1 for each dollar of investment above $200,000. Any remaining cost may be depreciated according to ACRS as described in item 2.305. The immediate deduction results in a deferral of tax or an interest-free loan.

Origin:  IRC, S. 179
Estimate:  $3.4
 
3.4
2.307 Accelerated Depreciation on Buildings (other than Rental Housing)
Construction may be depreciated under methods which produce faster depreciation than economic depreciation. The precise rules have been changed repeatedly in recent years by revisions of the federal tax code. For structures (other than housing) placed in service after 1986, federal law requires straight-line depreciation over a 31.5 year life. The excess of accelerated depreciation over economic depreciation is a tax expenditure. For a more detailed description of accelerated depreciation, see item 2.301 above.

Origin:  IRC, S. 168
Estimate:  $4.4
 
4.4
2.308 Expensing Research and Development Expenditures in One Year
Taxpayers may elect to treat research or experimental expenditures incurred in connection with a trade or business as immediately deductible expenses. Under generally accepted accounting principles, at least some of these costs would otherwise be treated as capital expenditures and depreciated or amortized over a period of years. Their immediate deduction results in a deferral of tax or an interest-free loan.

Origin:  IRC, S. 174
Estimate:  $61.1
 
61.1
2.309 Expensing Exploration and Development Costs
Certain capital costs incurred in bringing a known mineral deposit into production are deductible in the year incurred. A portion of domestic mining exploration costs can also be expensed, although they will be recaptured if the mine reaches the production stage. Certain intangible drilling and development costs of domestic oil, gas, and geothermal wells are deductible when made, but to a certain extent may be recaptured upon disposition of oil, gas, or geothermal property to which they are properly chargeable. The immediate expensing of these costs, which would otherwise be capitalized and recovered through depreciation or through depletion as the natural resource is removed from the ground, results in a deferral of tax or an interest-free loan.

Origin:  IRC, S. 193, 263(c), 616, 617; M.G.L. c. 63, S. 30.3.
Estimate:  Negligible
 
Negligible
2.311 Five-Year Amortization of Pollution Control Facilities
Taxpayers may elect to amortize the cost of a certified pollution control facility over a five-year period, allowing for accelerated recovery of these costs. Accelerated recovery is only available for pollution control facilities subsequently added to plants that were in operation before 1976. The excess of accelerated recovery over depreciation deductions otherwise allowable results in a deferral of tax or an interest-free loan.

Origin:  IRC, S. 169
Estimate:  N.A.
 
N.A.
2.312 Alternative energy sources; deduction
In determining net income, a corporation may elect to take an immediate deduction for expenditures made for certain solar or wind powered systems or units located in Massachusetts and used exclusively in the business, in lieu of all other deductions and credits including the deduction for depreciation. Without this provision, such expenditures would have to be capitalized and depreciated. The immediate deduction results in a deferral of tax or an interest-free loan.

Origin:  M.G.L. c. 63, S. 38H
Estimate:  $0.5
 
0.5
2.313 Seven-Year Amortization for Reforestation
Taxpayers may elect to amortize reforestation costs for qualified timber property over a seven-year period. In the absence of this special provision, these costs would be capitalized and depreciated over a longer period or recovered when the timber is sold. The accelerated cost recovery results in a deferral of tax or an interest-free loan.

Origin:  IRC, S. 194
Estimate:  $0.1
 
0.1

 

Fiscal Year 2013 Resource Summary (in Millions)
TAX EXPENDITURE FY2011 FY2012 FY2013
Adjustments to Apportionment Formula 296.1 273.5 262.2

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item description amount
Adjustments to Apportionment Formula 262.2
2.401 Unequal Weighting of Sales, Payroll, and Property in the Apportionment Formula
Corporations with a presence in Massachusetts and other states allocate income to the Commonwealth using a three-factor apportionment formula. A corporation's sales, payroll, and property in Massachusetts are compared to those outside Massachusetts.

Exporters benefit from an apportionment formula that weights sales more heavily than the other factors. Effective January 1, 1996, eligible defense corporations are allowed a formula that weights sales 100%. For other qualified manufacturers, a 100% sales weight was phased-in over five years, and was fully effective January 1, 2000. All corporations other than mutual fund corporations (see below) will continue to use a formula that weights sales 50%.

Effective January 1, 1997 mutual fund corporations are allowed to attribute mutual fund sales to Massachusetts based on the domicile of shareholders in the mutual funds. Effective July 1, 1997, mutual fund corporations are allowed to apportion their income to Massachusetts based solely on the percentage of sales to Massachusetts residents.

Comment: In listing this item, it is assumed that a standard apportionment formula gives equal weight to sales, property and payroll. The estimate is of the impact of departing from this standard formula.

Origin:  M.G.L. c. 63, S. 38 (c), (k), (l), (m)
Estimate:  $262.2
 
262.2

 

Fiscal Year 2013 Resource Summary (in Millions)
TAX EXPENDITURE FY2011 FY2012 FY2013
Exclusions from Property Component 200.3 195.5 191.0

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item description amount
Exclusions from Property Component 191.0
2.501 Nontaxation of Certain Energy Property
Tangible property qualifying for the deduction for expenditures for alternative energy described in item 2.312 is not subject to taxation under the tangible property measure of the corporate excise.

Origin:  M.G.L. c. 63, S. 38H(f)
Estimate:  N.A.
 
N.A.
2.502 Exemption for Property Subject to Local Taxation
In computing the state corporate excise on tangible property, property subject to tax at the local level is exempt. Generally, the state taxes only the machinery of manufacturing corporations and exempts business real estate and tangible personal property.

For purposes of estimating revenue loss from this tax expenditure, the state's rate on property, $2.60 per $1,000, has been applied.

Origin:  M.G.L. c. 63, S. 30(7)
Estimate:  $191.0
 
191.0

 

Fiscal Year 2013 Resource Summary (in Millions)
TAX EXPENDITURE FY2011 FY2012 FY2013
Credits Against Tax 358.4 416.1 416.0

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item description amount
Credits Against Tax 416.0
2.602 Investment Tax Credit
Manufacturing corporations and corporations engaged primarily in research and development, agriculture or commercial fishing are allowed a credit of 3% of the cost of depreciable real and tangible property. Such property must have a useful life of four years or more. The property must be used and located in Massachusetts on the last day of the taxable year. A corporation cannot take the credit on property which it leases to another. A corporation can take the credit on property which it leases from another (for property leased and placed in service on or after July 1, 1994). Generally, eligible corporate lessees making qualifying leasehold improvements may claim the credit. A corporation may carry over to the next succeeding three years any unused portion of its Investment Tax Credit (ITC)

To be consistent with all other estimates in this document, this estimate is based on actual investment tax credit claims of corporations from the most recent Corporate Excise Returns Report, and does not take into account increased tax revenues resulted from greater economic activity induced by the investment tax credit (i.e., the estimate is "static", not "dynamic")

Origin:  M.G.L. c. 63, S. 31A (i), (j)
Estimate:  $56.5
 
56.5
2.603 Vanpool Credit
Business corporations are allowed a credit of 30% of the cost incurred during the taxable year for the purchase or lease of company shuttle vans used in the Commonwealth as part of an employer-sponsored ridesharing program. The shuttle vans must be used for transporting employees.

Origin:  M.G.L. c. 63, S. 31E
Estimate:  Negligible
 
Negligible
2.604 Research Credit
A credit is allowed for corporations which made basic research payments and/or incurred qualified research expenses conducted in Massachusetts during the taxable year. A corporation taking the research credit is limited in the amount that can be taken against the excise in any year. The credit cannot reduce the tax to less than $456. The amount of credit is equal to: 100% of the first $25,000 of excise; and 75% of any amount of excise remaining after the first $25,000. The deduction allowed to a corporation for any research expenses generating a Massachusetts Research Credit must be reduced by the amount of the credit generated. This amount is added back to income on Schedule E, line 13. Any corporation which is a member of a combined group may share excess research credits with other members of the combined group. Corporations which are members of a controlled group or which are under common control with any trade or business (whether or not incorporated) are treated as a single taxpayer for purposes of determining the allowable Research Credit. The credit may be carried-forward for up to 15 years with certain restrictions.

Origin:  M.G.L. c. 63, S. 38M
Estimate:  $110.9
 
110.9
2.605 EDIP/Economic Development Incentive Program Credit
Businesses investing in qualified property in an Economic Opportunity Area are entitled to a credit against tax of 5% of the cost of the property. To qualify for the 5% credit, the property must be used exclusively in a certified project in an Economic Opportunity Area. To be certified, the Economic Assistance Coordinating Council must approve a project. Sections 21 to 24 and 47 of chapter 166 of the Acts of 2009 made significant changes to the Economic Development Incentive Program (EDIP) established pursuant to G.L. c. 23A, including the tax credit provided in G.L. c. 62, S. 6(g) and G.L. c. 63, S. 38N which is a key component of the EDIP. Under the provisions of the Economic Development Incentive Program (EDIP) established pursuant to M.G.L. Ch. 23A, the Economic Assistance Coordination Council (EACC) may authorize taxpayers participating in certified projects to claim tax credits. Certified housing credit has been recently created and managed under this incentive. The credit may be carried-forward for up to 10 years with certain restrictions. The credit is applicable to insurance companies as well.

Origin:  M.G.L. c. 63, S. 38N
Estimate:  $21.7
 
21.7
2.606 Credit for Employing Former Full-Employment Program Participants
Employers who continue to employ former participants of the S.110(1) full employment program in non-subsidized positions are eligible to receive a tax credit equal to $100 per month for each month of non-subsidized employment, up to a maximum of $1,200 per employee, per year.

Origin:  St. 1995, c. 5, S. 110(m); 830 CMR 118.1
Estimate:  Not active
 
Not active
2.607 Harbor Maintenance Tax Credit
Corporations are allowed a credit against the corporate excise for certain harbor maintenance taxes paid to the U.S. Customs Service pursuant to IRC sec. 4461. A corporation is eligible for the credit if the tax paid is attributable to the shipment of break-bulk or containerized cargo by sea and ocean-going vessels through a Massachusetts harbor facility. The credit is not subject to the 50% limitation; however, it may not reduce the tax to less than the minimum excise of $456. A taxpayer may carryover any excess credit to any of the next succeeding five taxable years.

Origin:  M.G.L. c. 63, S. 38P
Estimate:  $1.0
 
1.0
2.608 Brownfields Credit
Taxpayers are allowed a credit for amounts expended to rehabilitate contaminated property owned or leased for business purposes and located within an economically distressed area. The eligibility period for the Brownfields Credit has been lengthened. The environmental response action commencement cut-off date has been extended by c. 240 of the Acts of 2010 from August 5, 2005 to August 5, 2013 and the time for incurring eligible costs that qualify for the credit has been extended to January 1, 2014. The Brownfields Credit may be transferred, sold or assigned to another taxpayer with a liability under chapter 62 or chapter 63, or to a nonprofit organization. The Brownfields Credit cannot offset more than 50% of the excise due nor reduce the excise below the minimum tax. The credit may be carried-forward for up to 5 years. The credit is applicable to insurance companies as well.

Origin:  M.G.L. c. 63, S. 38Q
Estimate:  $24.6
 
24.6
2.609 Low Income Housing Credit
This credit is administered through the Massachusetts Department of Housing and Community Development (DHCD). The Low Income Housing Credit is available to taxpayers that claim a U.S. credit for the construction or development of low income housing. The amount of credit a taxpayer may claim for a qualified Massachusetts project is allocated by the DHCD and is based on a total pool of money awarded to the Commonwealth. The LIHC is not subject to the 50% limitation rule for corporate taxpayers. If the taxpayer disposes of the property generating the LIHC, a portion of the credit may be subject to recapture.

Under prior law, the Massachusetts low-income housing tax credits were available only to taxpayers who had been allocated federal low-income housing tax credits. Effective August 1, 2010, the Act allows the Department of Housing and Community Development to grant state low-income housing credits (within the existing $10 million annual cap) to otherwise eligible projects that do not receive a federal low-income housing credit.

The credit may be carried-forward for up to 5 years and may be transferred or sold to another taxpayer. The credit is applicable to insurance companies as well.

Origin:  M.G.L. c. 63, S. 31H
Estimate:  $38.6
 
38.6
2.610 Historic Buildings Rehabilitation Credit
Effective for years beginning on or after January 1, 2005 and ending on or before December 31, 2017, taxpayers may be eligible for the Historic Rehabilitation Credit (HRC). To claim this credit, a historic rehabilitation project must be complete and have been certified by the Massachusetts Historical Commission. Unused portions of the credit may be carried-forward for up to 5 years and transferred or sold to another taxpayer. The HRC is not subject to the 50% limitation rule for corporate taxpayers. If the taxpayer disposes of the property generating the HRC, a portion of the credit may be subject to recapture.

The expenditure for this item (combined with the Historic Rehabilitation Credit for individual filers, item 1.610) was originally capped at $15 million per year, with a start date for the credit of January 1, 2005 and an end date of December 31, 2009. Chapter 123 of the Acts of 2006 extended the availability of the credit for an additional two years, to December 31, 2011, and increased the annual $15 million cap amount to $50 million. Again, the credit has been extended for an additional six years, to December 31, 2017.

The credit is applicable to insurance companies as well.

Origin:  M.G.L. c. 63, S. 38R; TIR 10-11
Estimate:  $47.5
 
47.5
2.614 Film (or Motion Picture) Credit
For taxable years beginning on or after January 1, 2006 and before January 1, 2023, Massachusetts allows two credits for motion picture production companies who meet certain qualification requirements. Production companies who incur at least $50,000 of production costs in Massachusetts are eligible for income and corporate excise tax credits equal to 20% of the total Massachusetts payroll for the production, excluding salaries of $1 million and higher. In addition, production companies whose Massachusetts production expenses exceed 50% of the total production cost receive an income and corporate excise tax credit of 25% of the total Massachusetts production expense. Supporting documentation is available to the
Department of Revenue upon request.

This tax credit is refundable at 90% of the approved credit amounts. Also the credit may be carried-forward for up to 5 years. In addition, all or any portion of tax credits issued may be transferred, sold or assigned to other taxpayers with tax liabilities under chapter 62 (the individual income tax) or chapter 63 (the corporate or other business excise taxes). For applications submitted prior to January 1, 2007, film tax credits were capped at $7,000,000 for any one motion picture production has; for applications submitted on or after January 1, 2007, there is no cap. Also, the sunset date for the film incentives statute has been extended from January 1, 2013 to January 1, 2023. See TIR 07-15 for more information (See also item 1.611.) The credit is applicable to insurance companies as well.

Origin:  M.G.L. c. 63, S. 38X
Estimate:  $82.6
 
82.6
2.615 Medical Device User Fee Credit
The Medical Device Credit is equal to 100% of the user fees actually paid to the United States Food and Drug Administration (USFDA) by a medical device company during the taxable year for which the tax is due for pre-market submissions (e.g., applications, supplements, or 510(k) submissions) to market new technologies or upgrades, changes, or enhancements to existing technologies, developed or manufactured in Massachusetts. The credit may be carried-forward for up to 5 years. Also the credit may be transferred or sold to another taxpayer. The credit is applicable to insurance companies as well.

Origin:  M.G.L. c. 63, S. 31L
Estimate:  $3.6
 
3.6
2.616 Devens Refundable Tax Credit
Effective July 21, 2006, the Economic Opportunity Area credit is made refundable for certain projects. Notwithstanding subsections (b) to (d), inclusive, of section 38N of chapter 63 of the General Laws, in the event that a credit allowed under said section 38N of said chapter 63 exceeds the tax otherwise due under said chapter 63, the balance of that credit shall be refundable to the taxpayer in the taxable year in which qualified property giving rise to that credit is placed in service. This applies to credits for projects in the biotechnology industry, certified on or after June 1, 2006 and before June 1, 2008 by taxpayers who commit to investment of not less than $650 Million over a period of 8 years and the creation of not fewer than 550 new jobs at the project site. "Project" means the design, planning, permitting, site preparation, construction, development, and operation of infrastructure and other improvements, including demolition of existing structures and design and construction of necessary replacement structures on adjacent or proximate land, and upgrades to the existing electric and gas utility systems serving the Devens Regional Enterprise Zone, as established by chapter 498 of the acts of 1993, to support the operation of a large scale biologics pharmaceutical manufacturing facility, or reasonably required to facilitate complete development, construction, and operation of such a facility. (See item 2.605)

Origin:  M.G.L. c. 63, S. 38N, St. 2006, c. 173, S. 3
Estimate:  $0.0
 
$0.0
2.617 Life Sciences Tax Incentive Program
On June 16, 2008, "An Act Providing for the Investment in and Expansion of the Life Sciences Industry in the Commonwealth" was passed. The Act establishes the Life Sciences Investment Program as well as the Life Sciences Tax Incentive Program. It provides for a $1B dollar investment in the life sciences sector, including $25 million each year for 10 years for the Massachusetts Life Sciences Investment Fund (subject to required authorizations by the Massachusetts Life Sciences Center and to approval by the Secretary of Administration and Finance). These incentives are effective from January 1, 2009 through December 31, 2018. Since the tax expenditures in this item will be subject to approval and their composition will differ from year-to-year, it is not known what proportion will be in the form of corporate tax credits as opposed to other tax expenditures. However, the Department of Revenue believes that the largest portion of the tax expenditure will be in the form of corporate tax credits, and therefore has placed it in this section of the tax expenditure budget. Since July 1, 2010, the Life Sciences Refundable Jobs Credit has been added to this program. The credit is applicable to insurance companies as well.

Origin:  M.G.L. c. 63, S. 31M; 38CC; 38W; 38U
Estimate:  $25.0
 
25.0
2.618 Dairy Farmers Credit
The Massachusetts dairy farmer tax credit was established to offset the cyclical downturns in milk prices paid to dairy farmers and is based on the U.S. Federal Milk Marketing Order for the applicable market, such that when the U.S. Federal Milk Marketing Order price drops below a trigger price anytime during the taxable year the taxpayer will be entitled to the tax credit. The total amount of credits granted cannot exceed $4 million in any year.

A taxpayer who holds a certificate of registration as a dairy farmer pursuant to M.G.L. Ch. 94, sec. 16A is allowed a refundable tax credit based on the amount of milk produced and sold. The dairy farmer tax credit as originally enacted was 90% refundable. Under the recent legislation, the dairy farmer tax credit is now 100% refundable. The credit is applicable to insurance companies as well.

Origin:  M.G.L. c. 63, S. 38Z
Estimate:  $3.6
 
3.6
2.619 Conservation Land Credit(NEW)
Tax credit is allowed for qualified donations of certified land to a public or private conservation agency. The credit is equal to 50% of the fair market value of the qualified donation. The amount of the credit that may be claimed by a taxpayer for each qualified donation cannot exceed $50,000. The credit is refundable but not transferable. The credit is available to both chapter 62 and chapter 63 taxpayers. The credit is applicable to insurance companies as well.

Origin:  M.G.L. c. 63, S. 38AA
Estimate:  $0.5
 
0.5

 

Fiscal Year 2013 Resource Summary (in Millions)
TAX EXPENDITURE FY2011 FY2012 FY2013
Entity Exempt from Taxation 3.4 3.0 2.6

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Entity Exempt from Taxation 2.6
2.701 Exemption of Credit Union Income
Credit unions, which are in effect mutual business organizations, are considered tax-exempt organizations for federal income tax purposes and therefore are exempt from the corporate excise as well.

Comment: The estimate applies to state-chartered credit unions only.

Origin:  IRC, S. 501(c)(14)(A), M.G.L. c. 63, S. 30
Estimate:  $2.6
 
2.6
2.702 Tax-Exempt Organizations
Corporations considered to be tax-exempt under section 501 of the Internal Revenue Code (such as religious, scientific and educational organizations) are exempt from tax under the corporate excise. The non-taxation of their net income and property creates a tax expenditure.

Origin:  IRC, S. 501, M.G.L. c. 63, S. 30
Estimate:  N.A.
 
N.A.
2.703 Exemption for Regulated Investment Companies
Corporate Regulated Investment Companies are exempt from the corporate excise. The non-taxation of their net income and property creates tax expenditure.

Origin:  M.G.L. c. 63, S. 68C(8)
Estimate:  N.A.
 
N.A.

Key:

ORIGIN  
IRCFederal Internal Revenue Code (26 U.S.C.)
M.G.L. Massachusetts General Laws
U.S.C United States Code
ESTIMATES All estimates are in $ millions.


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