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Home > Tax Expenditure Budget > Summary > Corporate Excise Tax > Credits Against Tax

Credits Against Tax

Fiscal Year 2010 Resource Summary (in Millions)
TAX EXPENDITURE	FY2008	FY2009	FY2010
Credits Against Tax	236.7	292.6	287.9

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item	description	amount
Credits Against Tax		287.9
2.602	Investment Tax Credit Manufacturing corporations, research and development corporations and corporations engaged primarily in agriculture or commercial fishing are entitled to a credit against tax for investments in qualified tangible property. The amount of the credit is 3% of the cost or other basis of the property for federal income tax purposes. Total credits taken by a given corporation in a taxable year cannot exceed 50% of tax liability. Unused credits may be carried over to subsequent years. If property qualifying for the investment credit is disposed of or no longer in use, a corporation must repay in the year of disposition the portion of the credit allocable to the remaining useful life of the property. Origin: M.G.L. c. 63, S. 31A Estimate: $58.5	58.5
2.603	Vanpool Credit (VPC) A corporation may take a credit against excise due equal to 30% of the cost incurred during the taxable year for the purchase or lease of company shuttle vans used in the Commonwealth for employee transportation. Origin: M.G.L. c. 63, S. 31D, 31E, and 31F Estimate: $0.1	0.1
2.604	Research Credit Corporations are entitled to a credit against tax for research and development expenditures. The amount of the credit is equal to the sum of 10% of qualified research expenses each year in excess of a base amount, and 15% of basic research payments, in excess of a base amount. The credit is limited to the first $25,000 of excise plus 75% of any excise in excess of $25,000. Unused credits may be carried over to subsequent years. Effective January 1, 1995, qualified defense corporations may calculate this credit separately for defense related research expenditures and non-defense-related expenditures. Origin: M.G.L. c. 63, S. 38M Estimate: $91.2	91.2
2.605	Economic Opportunity Area Credit (EOAC) 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. 63, S. 38N Estimate: $20.0	20.0
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) Estimate: Negligible	Negligible
2.607	Credit for Harbor Maintenance Taxes Paid Effective July 1, 1996, a credit against the corporate excise is provided for federal harbor maintenance taxes paid. Origin: M.G.L. c. 63, S. 38P Estimate: $0.8	0.8
2.608	Brownfields Credit Effective for tax years beginning on or after January 1, 1999, 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 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. Chapter 123 of the Acts of 2006, extended the availability of the Brownfields credit to a nonprofit organization, made the credit transferable, and lengthened the time frame for eligibility for the credit. Prior to the Act, net response and removal costs that the taxpayer incurred between August 1, 1998 and August 5, 2005 were eligible for the credit provided that the taxpayer commenced and diligently pursued an environmental response action before August 5, 2005. The Act changed this cut-off date from August 5, 2005 to August 5, 2011, and extends the time for incurring eligible costs that qualify for the credit to January 1, 2012. Origin: M.G.L. c. 63, S. 38Q, St. 2006, c. 123, S. 49 and 63 Estimate: $2.1	2.1
2.609	Low Income Housing Credit Effective January 1, 2001, a credit against the corporate excise is provided for low-income housing projects. The Department of Housing and Community Development allocates the low income housing credit from a pool of available credits granted under section 42 of the Internal Revenue Code among qualified low-income housing projects. A taxpayer allocated a federal low-income housing credit may also be eligible for a state credit based on the credit amount allocated to a low-income housing project that the taxpayer owns. The credits may be sold or transferred to another taxpayer. Many of these credits are claimed by financial institutions and insurance companies, which are not included in this tax expenditure budget. The Department of Revenue estimates that in fiscal year 2008 approximately $16.2 million in low income housing credits were claimed by financial institutions and insurance companies in addition to $2.7 million that was claimed by corporations. The Department estimates that in fiscal year 2009 approximately $15.8 million in low income housing credits will be claimed by financial institutions and insurance companies in addition to $2.9 million claimed by corporations, and that in fiscal year 2010 approximately $15.5 million will be claimed by financial institutions and insurance companies, in addition to the amount shown for corporations in this tax expenditure. (See Item 1.607) Origin: M.G.L. c. 63, S. 31H Estimate: $3.1	3.1
2.610	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. The start date for the credit is January 1, 2005, with an end date of December 31, 2009. 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 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. The credits may be sold or transferred to another taxpayer. The Department of Revenue estimates that in fiscal year 2008, in addition to $12.8 million that was claimed by corporations, approximately $15.8 million in historic buildings rehabilitation credits were claimed by financial institutions and insurance companies, which are not included in this tax expenditure budget. The Department estimates that in each of the fiscal years 2009 and 2010 approximately $26.3 million in historic rehabilitation credits will be claimed by financial institutions and insurance companies in addition to the amount shown for corporations in this tax expenditure. Origin: M.G.L. c. 63, S. 38R, St. 2006, c. 123, S. 51 and 65 Estimate: $21.3	21.3
2.611	Jobs Incentive Payment for Biotechnology and Medical Device Companies A biotechnology or medical device manufacturing company that creates 10 or more eligible jobs in the commonwealth during a single calendar year shall be entitled to a jobs incentive payment if its weighted average employment for such year reflects a net increase of at least 10 jobs over the company's weighted average employment for the prior calendar year. The jobs incentive payment shall be equal to 50% multiplied by the applicable Massachusetts income tax rate for the salary paid to the persons who perform the newly created eligible jobs for the calendar year in question. Effective for tax years beginning on or after January 1, 2006, Chapter 123 of the Acts of 2006 expands the job incentive payment program to include marine science technology companies. Origin: M.G.L. c. 62C, S. 67D, St. 2006, c. 123, S. 56, 57 and 58 Estimate: $2.5	2.5
2.612	Solar Heat Credit Massachusetts allows a credit of up to $300 for the installation of a solar hot water heating system in a commercial building between November 1, 2005 and March 31, 2006. Origin: M.G.L. c. 63, S. 38T. For further information, see TIR 05-18. St. 2005, c. 140, S. 9 amending M.G.L. c. 63 by inserting new section 38T Estimate: Expired	Expired
2.613	Home Energy Efficiency Credit The owner of residential property located in Massachusetts was allowed a credit for certain energy efficient items purchased between November 1, 2005 and March 31, 2006 for installation in residential property. Qualifying purchases included home insulation, new window insulation, advanced programmable thermostats, solar hot water systems, fuel-efficient furnaces, boilers, oil, gas, propane or electric heating systems, certain weather sealing and other approved purchases. Origin: For further information, see TIR 05-18 and "Act Relative to Heating Energy Assistance and Tax Relief", St. 2005, c. 140, signed into law on November 22, 2005; M.G.L. c. 63 Estimate: Expired	Expired
2.614	Film (or Motion Picture) Credit Corporations 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 (See also item 1.611.) The Department of Revenue estimates that financial institutions and insurance companies will claim $62.0 million in fiscal years 2009 and $47.7 million in fiscal year 2010 in film tax credits, which are not covered in this tax expenditure budget. This is in addition to the $48.1 million that will be claimed by corporations and is shown in this tax expenditure. Origin: See "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: $48.1	48.1
2.615	Medical Device User Fee Credit For taxable years beginning on or after January 1, 2006, 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. Origin: M.G.L. c. 63, S. 31L, TIR 06-22, The Chapters 144 and 145 of the Acts of 2006 Estimate: $3.3	3.3
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 generated by projects in the biotechnology industry, certified on or after June 1, 2006 and before June 1, 2008. "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, The Chapter 173 of the Acts of 2006 Estimate: $12.0	12.0
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" (the Act) (St. 2008, c. 130) was passed. The Act establishes the Life Sciences Investment Program as well as the Life Sciences Tax Incentive Program pursuant to chapter 23I of the General Laws. See St. 2008, c. 130, S. 13, codified at G.L. c. 23I, S. 5(a), (d), respectively. It provides for a one billion dollar investment in the life sciences sector, including $25 million each year for 10 years for the Massachusetts Life Sciences Investment Fund established by G.L. c. 23I, S. 6(subject to yearly appropriation by the Massachusetts Legislature), and $25 million each year for 10 years in various tax incentives for qualifying life sciences companies on a competitive basis (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. St. 2008, c.130, S. 52-54. The various tax incentives include the following: Life Sciences Investment Tax Credit (ITC), FDA User Fees Credit, Extension of Net Operating Losses (NOLs) from 5 to 15 years, Elimination of the Throwback Provision in the Sales Factor Used in Apportioning Corporate Income, Refundable Research Credit, Life Sciences Research Credit, Deduction for Qualified Clinical Testing Expenses for Orphan Drugs, Life Sciences Companies Deemed to be Research and Development Corporations for Sales Tax Purposes, Sales Tax Exemptions for Property for Use in the Development of Certain Facilities and Utility Systems. 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 the largest portion of the tax expenditure will be in the form of corporate tax credits, has placed it in this section of the tax expenditure budget. Origin: Origin: M.G.L. c. 62, 63, Chapter 130 of the Acts of 2008. DOR-TIR 08-23 Estimate: $25.0	25.0

Key:

ORIGIN
IRC	Federal 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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