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Credits Against Tax
| TAX EXPENDITURE | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|---|---|---|---|---|
| Credits Against Tax | 217.9 | 229.6 | 249.0 | 255.8 | 263.7 |
| item | description | amount |
|---|---|---|
| Credits Against Tax | 263.7 | |
| 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. Credit is neither transferable nor refundable. Origin: M.G.L. c. 62, S. 6(d) Estimate: $1.7 |
1.7 |
| 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. Credit is neither transferable nor refundable. Origin: M.G.L. c. 62, S. 6(e) Estimate: $2.9 |
2.9 |
| 1.603 |
EDIP/Economic Development Incentive Program Credit
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. Businesses investing in qualified property in an Economic Opportunity Area are entitled to a tax credit against the cost of the property. The EDIP credit provisions have been expanded to include "certified job creation projects" To qualify for the 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, subject to a cap; see item # 2.605 for more details. Credit is not transferable, but is refundable for specified project types. Origin: M.G.L. c. 62, S. 6(g) Estimate: $3.7 |
3.7 |
| 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: Not Active |
Not Active |
| 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%. Note that, since the state credit amount is based on the federal, and changes, temporary or permanent, to the calculation of the federal credit will be automatically reflected in credit claims made against state tax. Note that while credit is refundable, it is not transferable. Origin: M.G.L. c. 62, S. 6(h) Estimate: $136.3 |
136.3 |
| 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. Credit is neither transferable nor refundable. Origin: M.G.L. c. 62, S. 6(i) Estimate: $9.5 |
9.5 |
| 1.607 |
Low Income Housing Credit
The Low-Income Housing Credit is administered by the Massachusetts Department of Housing and Community Development (DHCD) for the purpose of promoting the construction or development of low income housing. 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 annual cap) to otherwise eligible projects that do not receive a federal low-income housing credit. Note that the annual cap will temporarily increase from $50 million per year to $100 million per year for tax years 2013 and 2014. The credits may be carried forward for up to 5 years; they may be transferred or sold to another taxpayer, but are not refundable. See also Corporate item 2.609. Origin: M.G.L. c. 62, S. 6I a Estimate: $1.0 |
1.0 |
| 1.608 |
Brownfields Credit
Taxpayers are allowed to take 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. Recent legislation extended the Brownfields credit to nonprofit organizations, extended the deadline for incurring eligible costs, and permitted the credit to be transferred, sold, or assigned. As a result of the recent legislation, the environmental response action commencement cut-off date has been extended to August 5, 2018, and the time for incurring eligible costs that qualify for the credit to January 1, 2019. See TIR 13-15 for more information. 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. Note that although recent legislation made these credits transferable to another taxpayer, they are not refundable. The credit may be carried forward for up to 5 years. Origin: M.G.L. c. 62, S.6 (j) Estimate: $4.8 |
4.8 |
| 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, $930 for TY08, $960 for TY09, $970 for TY10, $980 for TY11, $1,000 for TY12 $1,030 for TY13, $1,050 for TY14, and $1,070 for TY15. Income limits and the maximum credit are adjusted for inflation over a 1999 base year; the assessed home valuation base year is 2004. See "Appendix A" for current year values. The credits may not be sold or transferred to another taxpayer, but are refundable. Origin: M.G.L. c. 62, S. 6 (k) Estimate: $77.6 |
77.6 |
| 1.610 |
Historic Buildings Rehabilitation Credit
To claim this credit, a historic rehabilitation project must be complete and have been certified by the Massachusetts Historical Commission, which determines the amount of qualifying expenditures. Filers may claim up to 20% of their qualified rehabilitation expenditures. The expenditure for this item (combined with the Historic Rehabilitation Credit for corporate income tax 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 2 years, to December 31, 2011. Again, Chapter 131 of the Acts of 2010 extended the availability of the credit for an additional 6 years to December 31, 2017, with an annual cap of $50 million. Chapter 165 of the Acts of 2014, further extends this credit, including the $50 million annual limit, for an additional five years to December 31, 2022. Origin: M.G.L. c. 62, S. 6J Estimate: $7.5 |
7.5 |
| 1.611 |
Film (or Motion Picture) Credit
See also Corporate item 2.614. 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 percent 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 percent 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 percent of the total production expenses for a motion picture or at least 50 percent 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. Note that these credits are transferable, or refundable at 90% of face value. Origin: M.G.L. c. 62, S. 6 (l); Estimate: $2.1 |
2.1 |
| 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. Note that although these credits are transferable to another taxpayer, they are not refundable. Origin: M.G.L. c. 62, S. 6 1/2, Ch. 145 of the Acts of 2006. Estimate: Negligible |
Negligible |
| 1.614 |
Dairy Farmers Credit
A taxpayer who holds a certificate of registration as a dairy farmer pursuant to section 16A of chapter 94 may be allowed a refundable income tax credit based on the amount of milk produced and sold. The total cumulative value of the credits authorized pursuant to this section combined with section 38Z of chapter 63 shall not exceed $4,000,000 annually. See corporate item 2.618 for more details. These credits may not be sold or transferred to another taxpayer, but are refundable at 100% of face value. Origin: M.G.L. c. 62, S. 6 (o) Estimate: $3.3 |
3.3 |
| 1.615 |
Conservation Land Credit
Filers who donate land for conservation in perpetuity for the use of all citizens of the Commonwealth can receive a credit of up to $50,000. Approval of the donation is required from the Secretary of the Office of Energy & Environment Affairs. The credits may not be sold or transferred to another taxpayer, but are refundable. The total credits that may be approved are capped at $2.0 million annually. Origin: M.G.L. c. 62, S. 6 (p), Ch. 509 Acts of 2008 S. 1-4. Estimate: $2.0 |
2.0 |
| 1.616 |
Employer Wellness Program Tax Credit
The 2012 Health Care Act establishes an Employer Wellness Program Tax Credit that is effective for tax years beginning on or after January 1, 2013 and is set to expire on December 31, 2017. The Employer Wellness Program Tax Credit was created to provide incentives for business to recognize the benefits of wellness programs with the goal of providing smaller businesses with an expanded opportunity to implement these programs. The credit is available to both chapter 62 and chapter 63 taxpayers (personal income taxpayers and corporate & business excise taxpayers). The Department of Public Health will administer the credit program by: 1) determining standards for an Employer Wellness Program that will qualify for the credit; 2) approving a dollar amount of credit for a qualifying taxpayer and issue a certificate to be filed with the appropriate tax return; 3) by developing regulations and procedures with the Department of Revenue to implement the credit program. A business will apply to the Department of Public Health describing the proposed wellness program to be implemented by the business and providing an estimated budget and applicable taxpayer identification number. The credit is set at 25 percent of the costs associated with implementing a "certified wellness program." The maximum amount of Employer Wellness Program Credits available to a taxpayer is $10,000 in any tax year. The total amount of Employer Wellness Program Credits authorized by the Department of Public Health is subject to a $15,000,000 annual cap starting calendar year 2013. The Employer Wellness Program Tax Credit is non-refundable and non-transferrable. However, the portion of the Employer Wellness Program Tax Credit that exceeds the tax for the taxable year may be carried forward and applied against such taxpayer's tax liability in any of the succeeding 5 taxable years. Origin: St. 2012, c. 224, S. 41, 41A, 56, 56A, 238, 239, 297, and 298. M.G.L. c. 62, S. 6N; M.G.L. c. 63, S. 38FF. Estimate: $7.5 |
7.5 |
| 1.617 |
Community Investment Tax Credit
The 2012 Jobs Act provides a Community Investment Tax Credit that is effective January 1, 2014 and is set to expire on December 31, 2019. It was created to enable local residents and stakeholders to work with and through community development corporations to partner with nonprofit, public and private entities to improve economic opportunities for low and moderate income households and other residents in urban, rural and suburban communities across the commonwealth. The credit is available to both chapter 62 and chapter 63 taxpayers (personal income taxpayers and corporate & business excise taxpayers). The Department of Housing and Community Development will administer the credit program by: 1) issuing a certification to a taxpayer after the taxpayer makes a qualified investment; 2) authorizing a dollar amount of credit for a qualified investment; 3) developing regulations and procedures with the Department of Revenue to implement the Community Investment Credit. The certification will be acceptable as proof that the expenditures related to such investment constitute qualified investments for purposes of the community investment credit. The Community Investment Credit is set at 50 percent of the total qualified investments made by a taxpayer in a "community partner," i.e., a "community development corporation" or a "community support organization," selected by the Department of Housing and Community Development through a competitive process. A qualified investment must be in the form of a cash contribution of at least $1,000. A taxpayer may invest in more than one community partner, but may not claim more than $1,000,000 of credits in any single taxable year. A taxpayer must claim the credit in the taxable year in which a qualified investment is made. The total amount of Community Investment Credits is subject to a $3,000,000 cap in 2014, and an annual cap of $6,000,000 in 2015 to 2019, inclusive. This credit is non-refundable, but it is transferrable and it could be carried over up to five years. Origin: St. 2012, c. 238, S. 29, 30, 35, 36; M.G.L. c. 62, S. 6M; M.G.L. c. 63, S. 38EE Estimate: $3.0 |
3.0 |
| 1.618 |
Farming and Fisheries Income Tax Credit
Personal income taxpayers who are primarily engaged in agriculture, farming or commercial fishing qualify for an investment credit, similar to that available to manufacturing, R&D corporations and corporations primarily engaged in agriculture or commercial fishing. The amount of the credit is 3% of the cost or other basis for federal income tax purposes of qualifying property acquired, constructed or erected during the tax year. Qualifying property is defined as tangible personal property and other tangible property including buildings and structural components thereof which are located in MA, used solely in farming, agriculture or fishing, and are depreciable with a useful life of at least 4 years. The same credit is allowed to lessees, calculated as follows: 3% of a lessor's adjusted basis in qualifying property for federal income tax purposes at the beginning of the lease term, multiplied by a fraction, the numerator of which is the number of days of the tax year during which the lessee leases the qualifying property and the denominator of which is the number of days in the useful life of the property. Where the lessee is eligible for the credit, the lessor is generally not eligible, with the exception of "equine-based businesses where care and boarding of horses is a function of the agricultural activity". There is also a recapture provision, i.e., if the property on which a credit is taken is disposed of or ceases to be in qualified use prior to the end of its useful life, the difference between the credit taken and allowed for actual use must be added back as additional taxes due in the year of disposition, unless the property has been in qualified use for more than 12 years. This credit is effective for tax years beginning on or after January 1, 2015. Origin: Section 50 of St. 2014, c. 287, establishing M.G.L. c. 62, S. 6 (s). Estimate: $0.9 |
0.9 |
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 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 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 employees. 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 employees 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 3 FY16 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: $321 Personal exemption for married couples: $562 Personal exemption for married taxpayers filing separately: $15 Dependents exemption: $89 Personal exemption for heads of households: $103 Limited income credits: $12 No tax status: $15
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