2.500

2.500 Exclusions from Property Component

Tax Expenditure Name
Tax Expenditure Number
FY2022
FY2023
FY2024
FY2025
FY2026
Exclusions from Property Component
2.500
365.9
379.9
399.1
414.6
420.6
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Tax Item
Description
Origin
FY2026
2.501
Nontaxation of Certain Energy Property
This tax expenditure allows a corporate excise deduction for certain alternative energy property. It is not currently active, although the statute authorizing it is still in effect, because the deduction requires certification by a state agency that no longer exists. In the absence of that agency or a successor agency to certify the property, no exemption can be allowed. These circumstances are further explained below. In addition to a tax on net income, the Massachusetts corporate excise also imposes a tax on net worth or tangible personal property. The tax on tangible personal property applies if the book value of the taxpayer's tangible personal property located in Massachusetts and not subject to local taxation is ten percent or more of the taxpayer's total assets (with certain adjustments). If this is the case, the non-income measure of the corporate excise is based on the book value of the corporation's tangible property located in Massachusetts and is not subject to local tax. The statute provides for a deduction from tangible property subject to the excise for "expenditures paid or incurred during the taxable year with respect to the installation of any solar or wind powered climatic control unit and any solar or wind powered water heating unit or any other type unit or system powered thereby." The statute further provides that the exemption is limited to equipment "for which the manufacturer's British thermal unit impact statement has been submitted to the director of the bureau of building construction and which have been certified by said director as complying with applicable provisions of regulations and standards issued by him pursuant to law." Historically, the Bureau of Building Construction was responsible for setting construction standards in Massachusetts. In 1980, it was absorbed by the Division of Capital Planning and Operations ("DCPO"), now the Division of Capital Asset Management & Maintenance ("DCAMM"). The Bureau of Construction's function in certifying alternative energy property was not specifically delegated to any successor agency. No certification standards, guidelines or regulations have been established by DCAMM or any other Massachusetts agencies for corporations seeking to take the alternative energy property deduction. As a result of these circumstances this tax expenditure is not active.
Not Active
2.502
Exemption for Property Subject to Local Taxation
Under M.G.L. c. 63, § 39, all business corporations organized or doing business in Massachusetts are required to pay the corporate excise "for the enjoyment under the protection of the laws of the commonwealth, of the powers, rights, privileges and immunities derived by reason of its existence and operation." The corporate excise is comprised of a net income measure and a non-income measure based on the value of a corporation's property or net worth, depending upon the type of corporation. In calculating the non-income measure, a taxpayer may exclude property subject to local taxation from the value of the business corporation. M.G.L. c. 59, § 5, paragraph sixteen, identifies what property of a business corporation is exempt from local taxation. Generally, the state taxes only the machinery of manufacturing corporations, but it exempts business real estate and tangible personal property. For purposes of estimating revenue loss from this tax expenditure, the state's rate on property (non-income measure), $2.60 per $1,000, has been applied. The incentive to exempt property subject to local taxation from the value of the property/net worth measure was enacted in 1962. Note that corporations are subject to the non-income measure of corporate excise based on different computations depending on whether the corporations are classified as tangible property corporations or intangible property corporations. The determination of whether a corporation is a tangible property corporation or an intangible property corporation is generally made by taking the ratio at book value of: (i) tangible assets located in Massachusetts on the last day of the taxable year and not subject to local taxation to (ii) total assets on the last day of the taxable year (less assets locally taxed and less investments in subsidiary corporations which represent 80% or more of the voting stock of those corporations) multiplied by the income apportionment percentage. If the ratio of (i) to (ii) is 10% or more, the corporation is a "tangible property corporation", if the ratio is less than 10%, the corporation is an "intangible property corporation." For tangible property corporations, the non-income measure of the excise is imposed at a rate of 0.26% on the book value of tangible property located in Massachusetts on the last day of the taxable year and that is not subject to local taxation. For intangible property corporations, the non-income measure of the excise is imposed at a rate of 0.26% on the book value of a corporation's total assets on the last day of the taxable year, less the sum of (i) its liabilities on said date, (ii) the book value of its tangible property situated in Massachusetts on said date and subject to local taxation, and (iii) the book value on said date of its investment in subsidiary corporations which represent 80% or more of the voting stock of said corporations, multiplied by the intangible property corporation's income apportionment percentage.
420.6
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