Origin: 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.
Origin: M.G.L. c. 63, §30(7) ; c. 63, §30.8; c. 63 §39(a)(1)