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Corporate Excise Tax - All Detail

Fiscal Year 2019 Corporate Excise Tax (in Millions)
TAX EXPENDITURE	FY2015	FY2016	FY2017	FY2018	FY2019
2.000 - Exclusions from Gross Income	95.7	114.4	116.3	112.5	110.6
2.100 - Deferrals of Gross Income	0.8	0.8	0.8	0.8	0.8
2.200 - Deductions from Gross Income	159.2	167.7	177.0	187.4	200.5
2.300 - Accelerated Deductions from Gross Income	375.6	520.3	509.7	457.9	418.8
2.400 - Adjustments to Apportionment Formula	336.3	345.1	350.1	354.8	359.9
2.500 - Exclusions from Property Component	298.8	300.5	319.8	340.2	362.4
2.600 - Credits Against Tax	554.5	584.1	610.0	670.3	700.1
2.700 - Entity Exempt from Taxation	5.5	6.1	6.2	5.7	5.7

Fiscal Year 2019 Resource Summary (in Millions)
TAX EXPENDITURE	FY2015	FY2016	FY2017	FY2018	FY2019
Exclusions from Gross Income	95.7	114.4	116.3	112.5	110.6

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item	description	amount
Exclusions from Gross Income		110.6
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." There are two categories of income that are taxable to an S corporation at the entity level: 1) Income that is taxable to the S corporation at the entity level for federal purposes. Generally, S corporations are not subject to an entity-level tax for federal purposes, but some categories of income are taxable. Those amounts are taxable to S corporations in Massachusetts at the regular corporate / financial institution rates; 2) Other income to the corporation is subject to the reduced corporate rates that apply only to S corporations. More details about the tax on the second category of income are following. 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 2017, S corporations with total receipts of $6 million or more are subject to a corporate excise: 1.93%() for non-financial institutions and 2.60%() for financial institutions if receipts are $6 million or more but less than $9 million, and 2.90%() for non-financial institutions and 3.90%() 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. 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 excise rate change. Origin: IRC, S. 1361-1363, M.G.L. c. 62, S. 17A, c. 63, S.32D, LR 99-17. Estimate: $110.6	110.6
2.002	Exemption of Income from the Sale, Lease or Transfer of Certain Patents Income from the sale, lease or transfer of U.S. patents approved by the Massachusetts Department of Energy Resources 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 5 years. Origin: M.G.L. c. 63, § 30.3 Estimate: negligible	negligible

Fiscal Year 2019 Resource Summary (in Millions)
TAX EXPENDITURE	FY2015	FY2016	FY2017	FY2018	FY2019
Deferrals of Gross Income	0.8	0.8	0.8	0.8	0.8

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item	description	amount
Deferrals of Gross Income		0.8
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, § 7518 Estimate: $0.8	0.8

Fiscal Year 2019 Resource Summary (in Millions)
TAX EXPENDITURE	FY2015	FY2016	FY2017	FY2018	FY2019
Deductions from Gross Income	159.2	167.7	177.0	187.4	200.5

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item	description	amount
Deductions from Gross Income		200.5
2.201	Charitable Contributions and Gifts Deduction In computing net income, corporations may deduct charitable donations up to 10% of taxable incomes computed without the deductions. There is a carryover of excess contributions available for 5 succeeding taxable years. Origin: IRC, § 170 (b)(2)(A), (d)(2)(A) Estimate: $25.2	25.2
2.203	Net Operating Loss (NOL) Carry-Forward 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 for tax years beginning on or after January 1, 2010; all carry-forward losses of eligible business corporations are to be carried forward on a post-apportioned basis, after applying the apportionment percentages of the corporations for the taxable year in which the losses are sustained. For further discussion, see TIR 10-15. Origin: IRC, § 172; M.G.L. c. 63, § 30.5 Estimate: $174.1	174.1
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,100%) 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, which is available using the percentage of gross income method of depletion over a depletion deduction based on cost, is a tax expenditure. Origin: IRC, §§ 613, 613A; M.G.L. c. 63, § 30.3 Estimate: $1.2	1.2
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 incomes. Cooperatives meeting certain requirements may deduct dividends on capital stocks and certain payments to patrons such as investment incomes. Under generally accepted rules for taxing corporations, the corporations cannot deduct dividends paid to shareholders. Origin: IRC, §§ 1381-1383 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 costs of renovation from gross incomes. 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 be related to buildings designated as abandoned by the Economic Assistance Coordinating Council. Origin: M.G.L. c. 63, §38O Estimate: Negligible	Negligible

Fiscal Year 2019 Resource Summary (in Millions)
TAX EXPENDITURE	FY2015	FY2016	FY2017	FY2018	FY2019
Accelerated Deductions from Gross Income	375.6	520.3	509.7	457.9	418.8

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item	description	amount
Accelerated Deductions from Gross Income		418.8
2.301	Modified Accelerated Cost Recovery System on Rental Housing Landlords and investors in rental housing may use accelerated methods of depreciation for new and used rental housing. Straight-line depreciation over the property's expected useful life is the generally accepted method for recovering cost, which is close to economic depreciation. However, through the past decades, systems which adopt accelerated depreciation methods have been introduced. The current system is MACRS (Modified Accelerated Cost Recovery System) which was enacted in 1986. This system further accelerated the rate of recovery of depreciation than under ACRS (Accelerated Cost Recovery System) which was enacted in 1981. Differences between MACRS and ACRS are 1) deductions from the 150% declining balance method to 200-percent declining balance; 2) certain assets were reclassified and the number of asset classes (80) was increased; and 3) the recovery period for residential rental property was extended to 27.5 years and for nonresidential real property to 31.5 years. For details, refer to the document, Background and Present Law Relating to Cost Recovery and Domestic Production Activities, which was published by the Joint Committee on Taxation in their homepage on March 6th, 2012. The excess of allowable depreciation over economic depreciation constitutes a tax expenditure, resulting in a deferral of tax or an interest-free loan. Origin: IRC, § 168 Estimate: $3.7	3.7
2.303	Expenditures to Remove Architectural and Transportation Barriers to the Handicapped and Elderly Taxpayers may elect to deduct up to $15,000 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, constitutes a tax expenditure, resulting in a deferral of tax or an interest-free loan. Origin: IRC, § 190 Estimate: $0.4	0.4
2.304	Election to Deduct and Amortize Business Start-up Costs Taxpayers who pay or incur business start-up costs and who subsequently enter the trade or business can elect to expense to the lesser of the amount of start-up expenditures with respect to the active trade or business or $5,000 of the costs. The $5,000 deduction amount is reduced dollar for dollar when the start-up expenses exceed $50,000. The balance of start-up expenses, if any, is amortized over a period of 180 months, starting with the month in which the business begins. The election must be made no later than the date (including extensions) for filing the return for the tax year in which the business begins or is acquired. A taxpayer is deemed to have made an election to deduct and amortize start-up expenses for the tax year in which the active trade or business to which the expenses relate begins. A taxpayer who does not make the election must capitalize the expenses. Origin: IRC, § 195 Estimate: $0.4	0.4
2.305	Modified Accelerated Cost Recovery System for Equipment For depreciable tangible personal property placed in service after 1980, capital costs may be recovered using the Accelerated Cost Recovery System (ACRS), which applies accelerated methods of depreciation over set recovery periods. For property placed in service after 1987, Massachusetts has adopted the Modified Accelerated Cost Recovery System (MACRS), which consists of General Depreciation System (GDS) and Alternative Depreciation System (GDS). GDS generally uses accelerated depreciation, while ADS uses straight-line depreciation. The accelerated depreciation is double declining balance depreciation over specified periods that are substantially shorter than actual useful lives (200% declining balance for 3-, 5-, 7- and 10-year recovery property and 150% declining balance for 15- and 20-year property). The excess of accelerated depreciation over straight-line depreciation constitutes a tax expenditure, resulting in a deferral of tax or an interest-free loan. For the past decade, the federal government has allowed "bonus depreciation" which further accelerates depreciation for assets placed in service in certain years. However, Massachusetts is decoupled from it. For further discussion, see TIR 03-25 . Origin: IRC, § 168 Estimate: $246.8	246.8
2.306	Deduction for Excess First-Year Depreciation Taxpayers may elect to expense certain business assets purchased during the taxable year. American Taxpayer Relief Act of 2012 which was enacted January 1, 2013 increased the benefits, making changes to IRC sec. 179. For tax year 2012, Massachusetts adopted the increased federal amounts provided by IRC sec. 179. The total deduction cannot exceed $500,000; for taxpayers whose investment in eligible assets exceeds $2 million in the year, the $500,000 ceiling is reduced by $1 for each dollar of investment above $2 million. Any remaining cost may be depreciated according to MACRS as described in item 2.305. Federal legislation enacted in December of 2015 extended this benefit for calendar years 2015 through 2019. The annual deduction of $500,000 which is available for 2015 will be indexed to inflation in the future. The immediate deduction constitutes a tax expenditure, resulting in a deferral of tax or an interest-free loan. Origin: IRC, § 179 Estimate: $116.6	116.6
2.307	Modified 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 straight-line depreciation is a tax expenditure. For a more detailed description of accelerated depreciation, see the description for item 2.301. Origin: IRC, § 168 Estimate: $1.6	1.6
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 constitutes a tax expenditure, resulting in a deferral of tax or an interest-free loan. Origin: IRC, § 174 Estimate: $47.5	47.5
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. 30.4. Estimate: $0.1	0.1
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, § 169 Estimate: $1.4	1.4
2.312	Expensing of Alternative Energy Units 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, § 38H Estimate: Not Active	Not Active
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, § 194 Estimate: $0.3	0.3

Fiscal Year 2019 Resource Summary (in Millions)
TAX EXPENDITURE	FY2015	FY2016	FY2017	FY2018	FY2019
Adjustments to Apportionment Formula	336.3	345.1	350.1	354.8	359.9

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item	description	amount
Adjustments to Apportionment Formula		359.9
2.401	Unequal Weighting of Sales, Payroll, and Property in the Apportionment Formula Corporations with a presence in Massachusetts and other states allocate incomes 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 to use a formula that weights sales 100%. For other qualified manufacturers, a 100% sales weight was phased-in over 5 years, and was fully effective January 1, 2000. Corporations other than mutual fund corporations will continue to use a formula that weights sales 50%. Financial institutions and public utility companies weigh all factors equally and do not result in a tax expenditure. 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: It is assumed that a standard apportionment formula gives equal weight to sales, property and payroll. The estimate measures the impact of departing from this standard formula. Origin: M.G.L. c. 63, § 38 (c), (k), (l), (m) Estimate: $359.9	359.9

Fiscal Year 2019 Resource Summary (in Millions)
TAX EXPENDITURE	FY2015	FY2016	FY2017	FY2018	FY2019
Exclusions from Property Component	298.8	300.5	319.8	340.2	362.4

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item	description	amount
Exclusions from Property Component		362.4
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, § 38H(f) Estimate: Not Active	Not Active
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 non-income measure rate on property, $2.60 per $1,000, has been applied. Origin: M.G.L. c. 63, § 30(7) Estimate: $362.4	362.4

Fiscal Year 2019 Resource Summary (in Millions)
TAX EXPENDITURE	FY2015	FY2016	FY2017	FY2018	FY2019
Credits Against Tax	554.5	584.1	610.0	670.3	700.1

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item	description	amount
Credits Against Tax		700.1
2.602	Investment Tax Credit Manufacturing corporations and corporations engaged primarily in research and development, agriculture or commercial fishing are allowed to take a credit of 3% of the cost or other basis for federal income tax purposes of qualifying tangible property acquired, constructed, reconstructed, or erected during the taxable year, after deduction of any federally authorized tax credit taken with respect to such 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 3 years any unused portion of its Investment Tax Credit (ITC). The credit is neither transferable nor refundable. Origin: M.G.L. c. 63, § 31A (i), (j) Estimate: $78.5	78.5
2.603	Vanpool Credit Domestic and foreign corporations are allowed to take 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. This credit is neither transferable nor refundable, and cannot be carried forward. Origin: M.G.L. c. 63, § 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. 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, but is neither transferable nor refundable. As a result of recent legislation, effective for tax years beginning on or after January 1, 2015, a business corporation may elect to calculate its research credit using one of two methods: The first method revises the existing research credit by changing two definitions that affect the calculation of the credit, i.e., the definitions of "base amount" and "fixed base rate". The "base amount" is now defined as "the product of (i) the average annual gross receipts of the taxpayer for the 4 taxable years preceding the credit year"; and (ii) a 'fixed base ratio'." The "fixed-base ratio" is no longer tied to a corporation's aggregate Massachusetts qualified research expenditures for a fixed 5 year period during the 1980s. It is now defined as "the percentage which the average aggregate qualified research expenses for the taxpayer for the third and fourth taxable years preceding the credit year is of the annual average gross receipts for those years, provided, however, that the fixed base ratio shall not exceed 16 per cent". The amount of the credit is equal to the sum of 10% of the excess, if any, of the qualified research expenses for the taxable year over the base amount plus 15% of the basic research expenses determined under I.R.C. § 41(e)(1)(A). The second method, which a taxpayer may elect to use in lieu of the method described above, provides for an alternative simplified research credit, which generally conforms to the methodology of the federal alternative simplified credit provided by I.R.C. § 41(c)(5), as amended and in effect for January 1, 2014. See TIR 14-13 and TIR 14-16 for more information. Origin: M.G.L. c. 63, § 38M Estimate: $280.3	280.3
2.605	Economic Development Incentive Program Credit Under the provisions of the Economic Development Incentive Program (EDIP) established pursuant to M.G.L. c. 23A, the Economic Assistance Coordination Council (EACC) may authorize taxpayers participating in certified projects to claim tax credits under M.G.L. Ch. 62 S. 6(g) and M.G.L. Ch. 63 S. 38N. To be eligible, a project must be certified by EACC. The total dollar amount of the EDIP credit that may be used in a calendar year is $25 million ($30 million for each year from 2015 to 2018). From 2011 to 2016, the annual cap included amounts awarded pursuant to the certified housing development program authorized by G.L. c. 40V. See item 2.622. For projects certified prior to January 1, 2010: The project must be in an economic opportunity area and the credit is 5% of the cost of any property that qualified for the investment tax credit (ITC) allowed by G.L. c. 63, S. 31A. To qualify for the 5% credit, the property must be used exclusively in a certified project within an economic opportunity area. The credit may be carried forward for up to 10 years or indefinitely with certain restrictions. The credit is neither transferable nor refundable. For projects certified on or after January 1, 2010 and before January 1, 2017: Sections 21 to 24 and 47 of chapter 166 of the Acts of 2009 made significant changes to EDIP. Under the amended provisions of the EDIP, the EDIP credits must be awarded by the EACC and those credits were no longer limited to 5% (could be up to 40% of the cost of qualifying property). Further, it was no longer required that all certified projects be in an economic opportunity area. The EDIP credit for certain projects, if authorized by the EACC, may be refundable at the option of the taxpayer. This credit is not transferable. For projects certified on or after January 1, 2017: The credit is no longer calculated based on the cost of property that qualifies for the investment tax credit allowed under G.L. c. 63, S. 31A and is instead determined by the EACC based on factors set out in M.G.L. c. 23A, S. 3D. In addition, limitations on the maximum amount of the credit awarded to particular types of certified projects have been eliminated, and the EACC may designate the credit as refundable for any certified project (subject to a limitation that the EACC may not award more than $5 million in refundable credits per year) and may specify the timing of the refund. For further information, see TIR 16-15. For job creation projects certified on or after January 1, 2015 and before January 1, 2017: Effective for tax years beginning on or after January 1, 2015, the EDIP credit provisions have been expanded to include certified job creation projects. Individuals and entities pursuing certified job creation projects may be awarded a credit of up to $1,000 per job created (up to $5,000 in a Gateway Community as defined in section 3A of chapter 23A or within a city or town whose average seasonally adjusted unemployment rate, as reported by the executive office of labor and workforce development, is higher than the average seasonally adjusted unemployment rate of the commonwealth). The total award per project may not exceed $1 million. The credit for a certified job creation project is allowed for the year subsequent to that in which the jobs are created. Origin: M.G.L. c. 63, S. 38N Estimate: $24.3	24.3
2.606	Credit for Employing Former Full-Employment Program Participants Employers who continue to employ former participants of the §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. For further discussion, see 830 CMR 118.1. Origin: St. 1995, c. 5, § 110(m) Estimate: Not Active	Not Active
2.607	Harbor Maintenance Tax Credit Domestic and foreign corporations are allowed to take 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 liability to less than the minimum excise of $456. The credit may be carried forward for up to 5 years, but is neither refundable nor transferable. Origin: M.G.L. c. 63, § 38P Estimate: $1.4	1.4
2.608	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. Recent legislation extends the Brownfields credit to nonprofit organizations, extends the time frame for eligibility for the credit, and permits the credit to be transferred, sold, or assigned. Under prior law, net response and removal costs incurred by a taxpayer between August 1, 1998 and August 5, 2005, were eligible for the credit provided that the environmental response action before August 5, 2005. As a result of the recent legislation, the environmental response action commencement cut-off date is changed from August 5, 2005 to August 5, 2018, and the time for incurring eligible costs that qualify for the credit is extended to January 1, 2019. See TIR 13-15 for more information. The credit may be carried forward for up to 5 years. 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. 63, § 38Q Estimate: $54.3	54.3
2.609	Low Income Housing Credit The Low-Income Housing Tax Credit (LIHTC) is administered through the Massachusetts Department of Housing and Community Development (DHCD). The LIHTC is non-refundable credit available to corporate excise and personal income taxpayers for the construction or development of low income housing. The amount of credit that a taxpayer may claim for a qualified Massachusetts project is allocated by the DHCD and is subject to an annual cap of $100 million through 2020, and $50 million thereafter (unless otherwise authorized by DHCD). The LIHTC is not subject to the 50% limitation rule for corporate taxpayers. If the taxpayer disposes of the property generating the LIHTC, a portion of the credit is subject to recapture. Under prior law, the Massachusetts low-income housing tax credits were available only to taxpayers who had been allocated federal low-incomehousing tax credits. However, effective August 1, 2010, the legislature authorized DHCD to grant state low-income housing tax credits (within the annual cap) to otherwise eligible projects that do not receive a federal low-income housing credit. The LIHTC is a transferable, non-refundable, five year credit, which may be carried forward for up to 5 years. Effective January 1, 2017, the LIHTC expanded to also provide a non-refundable, single year tax credit for corporate excise and personal income taxpayers that donate real or personal property to certain non-profit entities for use in purchasing, constructing, or rehabilitating a qualified Massachusetts project. This credit is generally limited to 50% but may be increased to 65% of the amount of the donation. The credit must be claimed in the year that the qualifying donation is made and credit amounts that exceed the tax due may be carried forward for up to five years. For further information, see TIR 16-15. Origin: M.G.L. c. 63, § 31H Estimate: $98.0	98.0
2.610	Historic Buildings Rehabilitation Credit To claim historic rehabilitation tax credit ("HRTC"), a historic rehabilitation project must be complete and have been certified by the Massachusetts Historical Commission (MHC), which determines the amount of qualifying expenditures. Filers may claim up to 20% of their qualified rehabilitation expenditures. Unused portions of the HRTC may be carried forward for up to 5 years and transferred or sold to another taxpayer, but are not refundable. Additionally, HRTC awards generally may be transferred. The HRTC 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 personal income tax 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 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. Effective August 13, 2014, MHC is allowed, subject to certain criteria, to transfer HRC awards to taxpayers subject to the personal income tax imposed by G.L.c. 62 that acquire a qualified historic structure. In the case of a multi-phased project the MHC is allowed to transfer HRC awards for any phase that meets the criteria. Effective August 10, 2016, such transfer is also allowed for taxpayers subject to the corporation excise under G.L. c. 63. See TIR 14-13 and 16-15. Origin: M.G.L. c. 63, § 38R Estimate: $48.2	48.2
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 25% 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 by the written election of the taxpayer or 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 million for any one motion picture production; 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 details. Origin: M.G.L. c. 63, § 38X Estimate: $78.0	78.0
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, but is not refundable. Origin: M.G.L. c. 63, § 31L Estimate: $2.5	2.5
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 established the Life Sciences Tax Incentive Program which initially included, among other things, the following credits: the life sciences research credit, the life sciences refundable research credit, the life sciences refundable investment tax credit, and the life sciences FDA user fees credit, effective from January 1, 2009 through December 31, 2018. Effective January 1, 2011, the life sciences refundable jobs credit was added to this program. Since the tax expenditures under this line 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 income tax credits. However, because the Department of Revenue believes that the largest portion of the tax expenditures described in this line item will be in the form of corporate tax credits, it has placed it in this section of the tax expenditure budget. Except for the life sciences research credit, the other credits are refundable up to 90%. Effective for tax years beginning on or after January 1, 2017, an angel investor credit is allowed for individual income taxpayers. The credit will be administered within the cumulative cap of $25 million for all the life sciences incentives. See St. 2016, c. 219, § 72; TIR 16-15. Accordingly, the addition of the angel investor credit is reflected in the tax expenditure estimation of the life sciences tax incentive program, though the angel investor credit will be claimed by individual income taxpayers. Origin: M.G.L. c. 62, S. 6(m), (n), and (r) and c.63, S.38M (j), 38U, 38W and 38CC Estimate: $24.4	24.4
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 cumulative value of the credits authorized pursuant to this section combined with section 6(o) of chapter 62 of the General Laws shall not exceed $4 million annually. A taxpayer who holds a certificate of registration as a dairy farmer pursuant to M.G.L. Ch. 94, sec. 16A is allowed to take a refundable tax credit based on the amount of milk produced and sold. These credits may not be sold or transferred to another taxpayer, but are refundable at 100% of face value. Origin: M.G.L. c. 63, § 38Z Estimate: $0.0	$0.0
2.619	Conservation Land Credit A 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 $75,000. 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 for the combined amount from personal income tax filers and chapter 63 taxpayers. Origin: M.G.L. c. 63, § 38AA Estimate: $0.0	$0.0
2.620	Employer Wellness Program Tax Credit The 2012 Health Care Act established 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 (DPH) 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 DPH 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 DPH is subject to a $15 million annual cap starting calendar year 2013. The Employer Wellness Program Tax Credit is neither refundable nor 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. DPH has promulgated a regulation, 105 CMR 216.000, entitled Massachusetts Wellness Tax Credit Incentive, which sets forth criteria for authorizing and certifying the credit. Origin: St. 2012, c. 224, §§ 41, 41A, 56, 56A, 238, 239, 297, and 298; M.G.L. c. 62, § 6N; M.G.L. c. 63, § 38FF. Estimate: $0.0	$0.0
2.621	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 million 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 million cap in 2014, and an annual cap of $6 million in 2015 to 2019, inclusive. This credit is refundable, but not transferrable and it could be carried over up to 5 years. Effective August 10, 2016, the standard for determining whether a recipient of a prior community investment tax credit allocation is eligible for a subsequent allocation has changed. As of that date, a community partner is eligible to receive a subsequent community investment tax credit allocation if the Department of Housing and Community Development determines that the community partner has made a satisfactory progress towards utilizing any prior allocation it has received. Prior to this change, a community partner was required to have utilized at least 95% of its prior allocation to be eligible for a subsequent allocation. For further information, see TIR 16-15. Origin: St. 2012, c. 238, §§ 29, 30, 35, 36 ; M.G.L. c. 62, § 6M; M.G.L. c. 63, § 38EE Estimate: $3.0	3.0
2.622	Certified Housing Development Tax Credit Certified Housing Development Program provides a credit for certain qualified rehabilitation expenditures with respect to a certified housing development projects created by adding subsection (q) to G.L. c. 62, § 6 and section 38BB to G.L. c. 63. The credit may be up to 10% of the cost of "qualified substantial rehabilitation expenditures" of the market rate units within the projects as defined in G.L. c. 40V, § 1. There is a $5 million ($10 million from January 1, 2015 to December 31, 2018) cap on the amount of credit that may be awarded under the program in a calendar year. The cap is part of an over-all $25 million ($30 million from January 1, 2015 to December 31, 2018) cap imposed on the Economic Development Incentive Program (EDIP) credit authorized pursuant to G.L. c. 62 § 6(g) and c. 63, 38N. Effective January 1, 2017, the certified housing development tax credit is available for 25% of "qualified project expenditures" instead of 10% of "qualified substantial rehabilitation expenditures." The carry forward period for which the credit can be used is changed from 5 to 10 years. In addition, the annual cap is no longer a part of the overall annual cap imposed on the EDIP. For further information, see TIR 16-15. Origin: Origin: St. 2010, c. 240; M.G.L. c. 40V; M.G.L. c. 63, § 38BB Estimate: $6.8	6.8
2.623	Veteran's Hire Tax Credit This newly added tax expenditure item (St. 2017, c. 47) allows business corporations that hire veterans and meet certain requirements a tax credit equal to $2,000 for each qualified veteran hired. The business corporation must (i) employ less than 100 employees; (ii) be certified by the commissioner of veteran's services; and (iii) qualify for and claim the Work Opportunity Credit allowed under I.R.C. § 51, as amended and in effect for the taxable year. In order to claim the credit, the primary place of employment and the primary residence of the qualified veteran must be in Massachusetts. A business corporation must obtain certification that the veteran is a qualified veteran from the Department of Career Services (or any successor agency), no later than the employee's first day of work. A business corporation that is eligible for and claims the credit allowed under this subsection in a taxable year, with respect to a qualified veteran employee, will be eligible for a second credit equal to $2,000 in the subsequent taxable year, subject to certification of the veteran employee's continued employment during the subsequent taxable year. The credit is non-transferrable and non-refundable. However, any excess amount of credit over the tax due may be carried forward up to 3 subsequent taxable years. The total cumulative value of the credits authorized must not exceed $1,000,000 annually. The credit is available for qualified veterans hired after July 1, 2017 for tax years beginning on or after January 1, 2017. See TIR 17-10 for detail. Origin: Origin: St. 2017, c. 47; M.G.L. c. 63, § 38GG Estimate: $0.5	0.5

Fiscal Year 2019 Resource Summary (in Millions)
TAX EXPENDITURE	FY2015	FY2016	FY2017	FY2018	FY2019
Entity Exempt from Taxation	5.5	6.1	6.2	5.7	5.7

Hide tax item language

item	description	amount
Entity Exempt from Taxation		5.7
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 generally exempt from the corporate excise, except are taxable on unrelated business income. Comment: The estimate applies to only state-chartered credit unions. Origin: IRC, §501(c)(14)(A); M.G.L. c. 63, § 30 Estimate: $5.7	5.7
2.702	Tax-Exempt Organizations Corporations considered to be tax-exempt under section 501 of the Internal Revenue Code (such as religious, scientific or educational organizations) are taxable under the corporate excise only on their unrelated business taxable income as defined in section 512 of the Code. They are not taxable on other income and are not subject to the non-income measure or on the minimum excise. This non-taxation creates a tax expenditure. Origin: IRC, § 501; M.G.L. c. 63, § 30 Estimate: N.A.	N.A.
2.703	Exemption for Regulated Investment Companies Regulated Investment Companies are exempt from the corporate excise. This item constitutes a tax expenditure in Massachusetts, though it is not considered a tax expenditure at the federal level. Origin: M.G.L. c. 63, § 68C(8) Estimate: N.A.	N.A.

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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