Credits Against Tax
| TAX EXPENDITURE | FY2008 | FY2009 | FY2010 |
|---|---|---|---|
| Credits Against Tax | 165.1 | 176.2 | 178.7 |
| item | description | amount |
|---|---|---|
| Credits Against Tax | 178.7 | |
| 1.601 |
Renewable Energy Source Credit
Owners and tenants of residential property located within Massachusetts who are not dependents and who occupy the property as a principal residence are allowed a credit up to $1,000, or an amount equal to 15% of the cost of a renewable energy source. Unused credits may be carried forward for three years. Comment: This tax credit was originally for up to 35% of the cost of a renewable energy source; for tax years commencing after December 31, 1988 and before January 1, 1991, it was limited to 25%. It is currently limited to 15% with the $1,000 cap. This tax credit was originally for up to 35% of the cost of a renewable energy source; for tax years commencing after December 31, 1988 and before January 1, 1991, it was limited to 25%. It is currently limited to 15% with the $1,000 cap. Origin: M.G.L. c. 62, S. 6(d) Estimate: $0.9 |
0.9 |
| 1.602 |
Credit for Removal of Lead Paint
A tax credit is provided in the amount of the cost of removing or covering lead paint on each residential unit up to $1,500. A seven-year carryover of any unused credit is permitted. Origin: M.G.L. c. 62, S. 6(e) Estimate: $1.7 |
1.7 |
| 1.603 |
Economic Opportunity Area Credit & Enhanced Economic Opportunity Area 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. Origin: M.G.L. c. 62, S. 6(g) Estimate: $3.5 |
3.5 |
| 1.604 |
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) Estimate: $0.1 |
0.1 |
| 1.605 |
Earned Income Credit
Effective January 1, 1997, taxpayers were allowed a refundable credit against Massachusetts tax equal to 10% of the amount of the earned income credit claimed on their federal individual income tax returns. Effective January 1, 2001, the allowed percentage was increased to 15%. Origin: M.G.L. c. 62, S. 6(h) Estimate: $93.3 |
93.3 |
| 1.606 |
Septic System Repair Credit
Taxpayers required to repair or replace a failed cesspool or septic system pursuant to the provisions of Title V, as promulgated by the Department of Environmental Protection in 1995, are allowed a credit equal to 40% of the design and construction costs incurred (less any subsidy or grant from the Commonwealth), up to a maximum of $1,500 per tax year and $6,000 in total. Unused credits may be carried forward for up to three years. Origin: M.G.L. c. 62, S. 6(i) Estimate: $18.7 |
18.7 |
| 1.607 |
Low Income Housing Tax Credit
Provides five years of tax credits to developers who set aside a specified percentage of housing units for low-to-moderate income renters. The credits may be sold or transferred to another taxpayer. Origin: M.G.L. c. 62, S. 6I a Estimate: $1.4 |
1.4 |
| 1.608 |
Brownfields Credit
Recent legislation extended the Brownfields credit to nonprofit organizations, extended the time from for eligibility for the credit, and permitted the credit to be transferred, sold, or assigned. Under prior law, net responsive removal costs incurred by a taxpayer between August 1, 1998 and August 5, 2005, taxpayers were allowed a credit for amounts expended to rehabilitate contaminated property owned or leased for business purposes and were located within an economically distressed area. Recent legislation changed the commencement cut-off date from August 5, 2005 to August 5, 2011, and the time for incurring eligible costs that qualify for the credit to January 1, 2012. The amount of the credit varies according to the extent of the environmental remedy. If the taxpayer's permanent solution or remedy operation status includes an activity and use limitation, then the amount of the credit is 25% of the net response and removal costs incurred by the taxpayer. However, if there is no activity and use limitation, then the amount of the credit is 50% of the net response and removal costs. Origin: M.G.L. c. 62, S.6 (j) Estimate: $1.1 |
1.1 |
| 1.609 |
Refundable State Tax Credit Against Property Taxes for Seniors ("Circuit Breaker")
Seniors are eligible for a tax credit to the extent that their property taxes -- or 25% of rent -- exceed 10% of their income. Income limits and a cap on the maximum assessed value of the filer's primary residence apply. The maximum credit is also adjusted annually for inflation. The maximum base credit was $385 for tax year (TY) 2001, $790 for TY02, $810 for TY03, $820 for TY04, $840 for TY05, $870 for TY06, $900 for TY07 and $930 for TY08. Income limits and the maximum credit are adjusted for inflation over a 1999 base year; however, chapter 136 of the Acts of 2005 increased the assessed home valuation to $600,000 and set its base year to 2004. To qualify for this credit, the maximum assessed home value for tax year 2008 must not exceed $793,000. Origin: M.G.L. c. 62, S. 6 (k); The chapter 136 of the Acts of 2005. Estimate: $50.9 |
50.9 |
| 1.610 |
Historic Buildings Rehabilitation Credit
If a structure is listed on the National Historic Register and has been substantially rehabilitated in keeping with its historical character, it may qualify for this credit. To qualify, the project must be certified by the Massachusetts Historical Commission, which determines the amount of qualifying expenditures. Filers may claim up to 20% of their qualified rehabilitation expenditures. Credits may be carried forward for up to 5 years. The expenditure for this item (combined with the Historic Rehabilitation Credit for all business filers, item 2.610) 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. The credits may be sold or transferred to another taxpayer. Origin: M.G.L. c. 62, S. 6 J, Chapter 464 of the Acts of 2004, St. 2006, c. 123, S. 51 and 65 Estimate: $2.5 |
2.5 |
| 1.611 |
Film (or Motion Picture) Credit
Individual income tax filers engaged in the making of a motion picture are allowed two credits: a) Payroll credit: This is a credit for the employment of persons within the Commonwealth in connection with the filming or production of 1 or more motion pictures in the Commonwealth within any consecutive 12 month period. The credit is equal to 25 per cent of the total aggregate payroll paid by a motion picture production company that constitutes Massachusetts source income, when total production costs incurred in the commonwealth equal or exceed $50,000 during the taxable year. The term "total aggregate payroll" may not include the salary of any employee whose salary is equal to or greater than $1,000,000. b) Non-payroll production expense credit: Individual income tax filers are also allowed a credit equal to 25 per cent of all motion picture related Massachusetts production expenses, not including the payroll expenses used to claim the aforementioned payroll credit. To be eligible for this credit, either Massachusetts motion picture production expenses must exceed 50 per cent of the total production expenses for a motion picture or at least 50 per cent of the total principal photography days of the film take place in the Commonwealth. These tax credits are refundable at 90% of the approved credit amounts, or the amount of the tax credit that exceeds the tax due for a taxable year may be carried forward by the taxpayer to any of the 5 subsequent taxable years. Additionally, 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. Origin: "An Act Providing Incentives to the Motion Picture Industry", St. 2005, c. 158, signed into law on November 23, 2005 and "An Act Providing Incentives to the Motion Picture Industry", St. 2007, c. 63; M.G.L. c. 63. Estimate: $4.2 |
4.2 |
| 1.612 |
Home Energy-Efficiency Tax Credit
A credit had been allowed for owners of residential property located in Massachusetts for certain energy efficient heating items purchased between November 1, 2005 and March 31, 2006 for installation in such property. Origin: Chapter 140 of the Acts of 2005 Estimate: N.A. |
N.A. |
| 1.613 |
Medical Device User Fee Credit
Medical device companies that develop or manufacture medical devices in Massachusetts can claim a credit equal to 100% of the user fees paid by them when submitting certain medical device applications and supplements to the United States Food and Drug Administration. The credit is also transferable. For the personal income tax, the credit applies to any qualifying entity organized as a sole proprietorship, partnership, limited liability company, corporate trust or other business where the income is taxed directly. Origin: M.G.L. c. 62, S. 6 1/2, Chapter 145 of the Acts of 2006. Estimate: $0.3 |
0.3 |
Key:
| ORIGIN | |
| IRC | Federal Internal Revenue Code (26 U.S.C.) |
|---|---|
| U.S.C | United States Code |
| M.G.L. | Massachusetts General Laws |
| Rev. Rul.; C.B. | Revenue Ruling; Cumulative Bulletin of the U.S. Treasury |
| ESTIMATES | All estimates are in $ millions. |
Footnote(s):
1 This item and others citing this endnote cover employee fringe benefits. We accept as standard the following treatment of these benefits: the expense incurred by the employer in providing the benefit is properly deductible as a business expense and the benefit is taxed as compensation to the employee as if the employee had received taxable compensation and then used it to purchase the benefit. Of course, there are problems with this analysis. In some cases, the "benefit" is more a condition of employment than a true benefit. For example, a teacher required to have lunch in the school cafeteria may prefer to eat elsewhere even if the school lunch is free. On the other hand, in many cases the provision of tax-free employee benefits is clearly a substitution for taxable compensation.
2 This item and others citing this endnote cover contributory pension plans. The standard tax treatment of these plans is as follows: Component Standard Treatment Contributions: Made out of income that is currently taxed to the employee. Investment Income: Taxed to the employee as "earned" income. Distributions from Pension Funds: Tax-free to the extent they are made out of dollars previously taxed to the employee as contributions or investment income. The non-standard treatment of contributions, investment income, or distributions as described in items 1.006, 1.101, 1.104, and 1.402, results in either nontaxation or deferrals of tax.
3 FY09 estimates for the basic personal exemptions and the no-tax status discussed in the introduction to the personal income tax are (in millions of dollars): Personal exemption for single taxpayers: $287 Personal exemption for married couples: $531 Personal exemption for married taxpayers filing separately: $13 Dependents exemption: $94 Personal exemption for heads of households: $95 No tax status/Limited income credits: $31 It should be noted that Chapter 186 of the Acts of 2002 reduced personal exemptions for tax year by 25% from their 2001 levels effective in tax year 2002; one-quarter of this reduction was restored effective tax year 2005, with additional one-quarter amounts restored in tax years 2006, 2007, and 2008. These changes in personal exemptions are reflected in the estimates above.
top of page