Origin: Massachusetts allows a corporate excise credit for increased spending on research and development activityactivities conducted in Massachusetts. The credit is available to both general business corporations and financial institutions. The Massachusetts credit is based on the definitions used to determine the federal research credit under Internal Revenue Code (Code) § 41. However, the Massachusetts credit is determined independently of the federal credit.
Corporations can choose between two methods for calculating Massachusetts research credit. Under the general method, the credit equals 10% of the difference between current year Massachusetts qualified research expenses and a base amount. See M.G.L. c. 63, § 38M(a)(1). Massachusetts qualified research expenses are equal to federal qualified research expenses to the extent that such expenses are incurred for research conducted in the Commonwealth. The base amount is a measure of historical research expenses as a percentage of historical gross receipts. See proposed 830 CMR 63.38M.2(4)-(6).
Note that under the general method of determining the credit there is a little-used credit component for contributions by corporations to basic research conducted at universities and eligible research facilities. The credit component equals 15 percent of such contributions in excess of a historical base amount. See M.G.L. c. 63, § 38M(a)(1); IRC § 41 (e)(1)(A). The credit under the general computation is the sum of the qualified research and basic research components.
Under the second method, called the alternative simplified method, the credit is equal to 10% of the difference between the corporation's Massachusetts qualified research expenses for the current taxable year, and 50% of the corporation's average Massachusetts qualified research expenses for the 3 taxable years preceding the taxable year for which the credit is being determined. See M.G.L. c. 63, § 38M(b). The alternative simplified method thus compares current qualified research expenses to historical qualified research expenses without regard to gross receipts.
Regardless of which method the corporation uses to calculate the research credit, the amount of the credit that can be used in a taxable year is limited to 100% of a corporation's first $25,000 of corporate excise liability, plus 75% of the corporation's excise liability in excess of $25,000. This $25,000 threshold applies to the aggregate of affiliated groups of corporations.
In general, the research credit is neither transferable nor refundable. 1 Unused credit can generally be carried forward for 15 years. The credit can be shared among affiliated corporations that are members of the same combined group, subject to limitations.
The research credit acts as a subsidy to corporations conducting research in Massachusetts.
The corporate excise and financial institution excise revenue foregone because of the research credit constitutes a tax expenditure.
Origin: M.G.L. c. 63, § 38M
Corporate Excise Tax
Credits Against Tax
2.604
Research Credit
Massachusetts allows a corporate excise credit for increased spending on research and development activityactivities conducted in Massachusetts. The credit is available to both general business corporations and financial institutions. The Massachusetts credit is based on the definitions used to determine the federal research credit under Internal Revenue Code (Code) <a href="https://www.law.cornell.edu/uscode/text/26/41" target="_blank">§ 41</a>. However, the Massachusetts credit is determined independently of the federal credit.<BR><BR>Corporations can choose between two methods for calculating Massachusetts research credit. Under the general method, the credit equals 10% of the difference between current year Massachusetts qualified research expenses and a base amount. See M.G.L. <a href="https://malegislature.gov/Laws/GeneralLaws/PartI/TitleIX/Chapter63/Section38m" target="_blank">c. 63, § 38M(a)(1)</a>. Massachusetts qualified research expenses are equal to federal qualified research expenses to the extent that such expenses are incurred for research conducted in the Commonwealth. The base amount is a measure of historical research expenses as a percentage of historical gross receipts. See proposed 830 CMR 63.38M.2(4)-(6).<BR><BR>Note that under the general method of determining the credit there is a little-used credit component for contributions by corporations to basic research conducted at universities and eligible research facilities. The credit component equals 15 percent of such contributions in excess of a historical base amount. See M.G.L. <a href="https://malegislature.gov/Laws/GeneralLaws/PartI/TitleIX/Chapter63/Section38m" target="_blank">c. 63, § 38M(a)(1)</a>; IRC <a href="https://www.law.cornell.edu/uscode/text/26/41" target="_blank">§ 41</a> (e)(1)(A). The credit under the general computation is the sum of the qualified research and basic research components.<BR><BR>Under the second method, called the alternative simplified method, the credit is equal to 10% of the difference between the corporation's Massachusetts qualified research expenses for the current taxable year, and 50% of the corporation's average Massachusetts qualified research expenses for the 3 taxable years preceding the taxable year for which the credit is being determined. See M.G.L. <a href="https://malegislature.gov/Laws/GeneralLaws/PartI/TitleIX/Chapter63/Section38m" target="_blank">c. 63, § 38M(b)</a>. The alternative simplified method thus compares current qualified research expenses to historical qualified research expenses without regard to gross receipts.<BR><BR>Regardless of which method the corporation uses to calculate the research credit, the amount of the credit that can be used in a taxable year is limited to 100% of a corporation's first $25,000 of corporate excise liability, plus 75% of the corporation's excise liability in excess of $25,000. This $25,000 threshold applies to the aggregate of affiliated groups of corporations.<BR><BR>In general, the research credit is neither transferable nor refundable. 1 Unused credit can generally be carried forward for 15 years. The credit can be shared among affiliated corporations that are members of the same combined group, subject to limitations.<BR><BR>The research credit acts as a subsidy to corporations conducting research in Massachusetts.<BR><BR>The corporate excise and financial institution excise revenue foregone because of the research credit constitutes a tax expenditure.
<a href="https://malegislature.gov/Laws/GeneralLaws/PartI/TitleIX/Chapter63/Section38m" target="_blank">M.G.L. c. 63, § 38M</a>
612.2
632.6
653.6
675.4
697.9
