Current through Register 1531, September 27, 2024
(1)
Statement of Purpose; Outline of Topics.
(a)
Purpose. The
purpose of 830 CMR 64H.6.4 is to explain the requirements for an entity to
qualify for exemption from Massachusetts sales tax under M.G.L. c. 64H, §
6(r) and (s) on its purchases of tangible personal property used directly and
exclusively in research and development. This exemption applies to a research
and development corporation or a manufacturing corporation as defined under
M.G.L. c. 63, § 38C or 42B. In the instance of a research and development
corporation the entity must meet either a receipts or expenditures test as
further explained in 830 CMR 64H.6.4(5) and (6). In addition, 830 CMR 64H.6.4
explains the eligibility of research and development corporations and
manufacturing corporations for certain credits and other exemptions. 830 CMR
64H.6.4 does not address eligibility for the Massachusetts research credit
provided by M.G.L. c. 63, § 38M, the rules for which are provided in
830 CMR
63.38M.1.
(b)
Outline of
Topics. 830 CMR 64H.6.4 is organized as follows:
1. Statement of Purpose; Outline of
Topics
2. Definitions
3. General Rule
4. Qualification Requirements for Research
and Development Corporations
5.
Receipts test
6. Expenditures
test
7. Examples
8. Qualification Requirements for
Manufacturing Corporations
9.
Eligibility for Sales Tax Exemptions under M.G.L. c. 64H, § 6(r) and
(s)
10. Credits and Other
Exemptions
(2)
Definitions. For purposes of 830 CMR 64H.6.4, the
following terms have the following meanings unless the context requires
otherwise:
Code. The Internal Revenue Code of the
United States in effect for the taxable year, except as otherwise
provided.
Domestic Corporation. An entity that
is either a corporation organized under or subject to M.G.L. c. 156D that is
taxable under M.G.L. c. 63, § 30 et seq., or a limited
liability company organized under M.G.L. c. 156C that is not classified as a
partnership and that has elected to be taxed as a corporation separate from its
members for federal income tax purposes.
Foreign Corporation. An entity that
has a usual place of business in the Commonwealth and that is either:
(a) a corporation, association or
organization established, organized or chartered under laws other than those of
the Commonwealth that is taxable under M.G.L. c. 63, § 30 et
seq.; or
(b) a foreign
limited liability company taxed as a corporation separate from its members for
federal income tax purposes and for purposes of M.G.L. c. 63, § 30
et seq.
Research and Development. Research and
development is experimental or laboratory activity having as its ultimate goal
the development of new products, the improvement of existing products, the
development of new uses for existing products or the development or improvement
of methods for producing products. Research and development does not include
testing or inspection for quality control purposes, efficiency surveys,
management studies, consumer surveys or other market research, advertising or
promotional activities, or research in connection with literary, historical or
similar projects. Research and development is complete when the product,
process, technique, formula, invention, or software can be reliably reproduced
for sale or commercial use.
(3)
General Rule. An
entity that qualifies under the provisions of M.G.L. c. 63, § 38C or 42B
as a research and development corporation or a manufacturing corporation is
eligible to claim the sales tax exemptions in M.G.L. c. 64H, § 6(r) and
(s) on its purchases of materials, tools, fuel, machinery and replacement parts
used directly and exclusively in research and development. In addition, such
entities may be eligible for certain credits and other exemptions. The
determination of whether an entity qualifies as an eligible research and
development corporation or manufacturing corporation must be made on an annual
basis for the applicable taxable year. A corporation that is not a research and
development corporation solely because it was not in existence in the previous
tax year may utilize current information and reasonable projections of its
business activity for its first year of existence. In calculating an entity's
receipts or expenditures for purposes of 830 CMR 64H.6.4, a taxpayer must use
the same taxable year and method of accounting used for federal income tax
purposes.
(4)
Qualification Requirements for Research and Development
Corporations. To qualify as a research and development
corporation, an entity must meet four separate requirements. First, it must be
either a domestic or foreign corporation. Second, it must be engaged in
research and development in the Commonwealth. Third, its principal activity in
the Commonwealth must be research and development. Fourth, for purposes of
claiming the sales tax exemptions in M.G.L. c. 64H, § 6(r) and (s), it
must meet either a receipts test or an expenditures test, as provided in 830
CMR 64H.6.4(5) or (6), respectively; for other purposes, such as claiming
investment tax credit, it must meet the receipts test (see830
CMR 64H.6.4(10)) . For purposes of the third requirement, principal activity
means the predominant activity of a corporation in Massachusetts relative to
its other activities in Massachusetts. The determination of a corporation's
principal activity is based on the facts and circumstances surrounding the
corporation's operations. An entity having a majority of its Massachusetts
based employees engaged in research and development will be presumed to meet
this requirement. For a corporation qualifying as a research and development
corporation by virtue of meeting the fourth requirement's expenditures test,
the exemptions from sales tax in M.G.L. c. 64H, § 6(r) and (s) apply only
to purchases made on or after November 26, 2003.
(5)
Receipts Test.
(a)
General. In
order to qualify under the receipts test, more than b of a corporation's
Massachusetts receipts must be derived from research and development during the
taxable year. For purposes of this computation, the numerator is the
corporation's gross receipts derived from research and development performed in
Massachusetts and the denominator is the corporation's gross receipts derived
from all activities in Massachusetts.
(b)
Definitions. For
purposes of 830 CMR 64.H.6.4(5)(a), the following definitions apply.
1. Receipts means the total amount, as
determined under the taxpayer's method of accounting, derived by the taxpayer
from all its activities and from all sources, including but not limited to
interest, dividends, and other investment income, subject to the following
exclusions. Receipts do not include the following:
a. proceeds from returns or
allowances;
b. proceeds from
repayments of loans or similar instruments;
c. reimbursements from affiliated companies
for third party charges for administrative expenses that the taxpayer
reasonably incurred and charged out to affiliates;
d. receipts from a transaction not in the
ordinary course of business, such as the sale of an entire business;
e. contributions to the capital of an
enterprise, including amounts paid for stock or other equity instruments;
or
f. amounts paid for debt
instruments issued by an enterprise.
2. Massachusetts receipts are receipts that
are received in consideration for or on account of a taxpayer's activities in
Massachusetts.
3. Receipts derived
from research and development means gross receipts, as determined by the
taxpayer's method of accounting used for federal income tax purposes, realized
from the provision of research and development, as defined in M.G.L. c. 63,
§§ 38C, 42B, and 830 CMR 64H.6.4(6)(2) and royalties or fees derived
from the licensing of patents, know-how or other technology developed from the
taxpayer's research and development activities in Massachusetts. Amounts
received under any grant, contract, or otherwise for research and development
are included within this definition regardless of whether activities conducted
under such grants are excluded from the definition of "
qualified research" under Treasury Code § 41(d)(4)(H).
Receipts derived from a corporation's administrative functions including
financial, personnel, legal, tax, accounting, or planning services are
generally not receipts derived from research and development.
(6)
Expenditures Test.
(a)
General. In
order to qualify under the expenditures test, more than b of a corporation's
Massachusetts expenditures must be allocable to its research and development
activities during the taxable year. For purposes of making this computation,
the numerator is the corporation's total Massachusetts expenditures that are
allocable to research and development activities and the denominator is the
corporation's total Massachusetts expenditures, provided, however, that neither
the numerator or denominator is to include the corporation's manufacturing
expenses or administrative expenditures, as further described in 830 CMR
64H.6.4(6)(c).
(b)
Definitions. For purposes of 830 CMR 64H.6.4(6)(a),
the following definitions apply.
1.
Expenditures means any expenditure paid or incurred in the course of conducting
the taxpayer's business during the taxable year, including but not limited to
expenses related to sales and distribution activities.
2. Except as otherwise provided in 830 CMR
64H.6.4, Massachusetts expenditures allocable to research and development
activities are expenditures that are paid or incurred for research and
development performed in Massachusetts.
3. Expenditures are allocable to research and
development activities if they are paid or incurred, as determined by the
taxpayer's method of accounting used for federal income tax purposes, for
research and development conducted or to be conducted by the taxpayer and that
are treated as research and experimental expenditures under Treasury Code
§ 174 and the applicable regulations promulgated thereunder. The following
expenditures are examples of expenditures that are allocable to research and
development activities.
a.
Funded
Research Expenditures. Expenditures incurred by a corporation
conducting research and development, within the meaning of 830 CMR 64H.6.4, to
the extent funded by any grant or contract, or otherwise by another person or
governmental entity, are considered to be expenditures allocable to research
and development activities.
b.
Costs Incident to Research and Development. Costs
incident to the development or improvement of a product are considered to be
allocable to research and development activities. Such costs include, for
example, the costs of obtaining a taxpayer's own patent, such as attorney's
fees expended in making and perfecting a patent application. However, costs
allocable to research and development activities do not include legal expenses,
patent fees or other costs associated with the acquisition of another's patent,
model, production or process.
c.
Depreciable and Amortizable Property. Expenditures
paid or incurred for the acquisition of depreciable property that is subject to
an allowance for depreciation under Treasury Code §§ 167 and 168,
amortization under Treasury Code § 197, or depletion under Treasury Code
§ 611 are not deductible under Treasury Code §174, irrespective of
whether the property or improvements may be used by the taxpayer in connection
with research and development activities. Nevertheless, allowances for
depreciation, amortization, or depletion of property are considered research
and development expenditures for purposes of Treasury Code § 174, to the
extent that the property to which the allowances relate is used in connection
with research and development in Massachusetts. Accordingly, for purposes of
830 CMR 64H.6.4, such allowances are allocable to research and
development.
d.
Development of Computer Software. Expenditures that
relate to the research and development of computer software may constitute
expenditures allocable to research and development, depending on the facts and
circumstances surrounding the research and the use to which the software is
put. However, the development and sale of standardized computer software may
constitute manufacturing activity, and effective for taxable years beginning on
or after January 1, 2006, the development and sale of standardized computer
software as defined in
830 CMR
64H.1.3(2) is considered a
manufacturing activity, without regard to the manner of delivery of the
software to the customer including electronic delivery. See
M.G.L. c. 63, §§ 38C and 42B.
(c)
Non-includable
Expenditures.
1.
Administrative Expenditures. Expenditures related to a
corporation's administrative functions, such as personnel, legal, tax and
accounting expenses are not includable in either the numerator or the
denominator of the expenditures fraction.
2.
Manufacturing
Expenditures. A corporation that is engaged in research and
development that also conducts manufacturing activities must exclude
expenditures relating to its manufacturing activities from the numerator and
denominator of its expenditures fraction, regardless of whether the
manufacturing activities are substantial. The development and sale of
standardized computer software may constitute manufacturing activity, and
effective for taxable years beginning on or after January 1, 2006, the
development of sale and standardized computer software shall be considered to
be a manufacturing activity without regard to the manner of delivery of the
software to the customer, including electronic delivery. Accordingly, to the
extent that a corporation's development and sale of such software is a
manufacturing activity, expenditures relating to such activity must be excluded
from both the numerator and denominator of the corporation's total expenditures
for purposes of calculating its expenditures allocable to research and
development activities.
(d)
Specific
Expenditures. The following expenditures are either included or
excluded from the numerator or denominator, as noted.
1.
Supplies. Amounts
paid for supplies used or consumed in conducting research and development in
Massachusetts are included in the numerator and denominator.
2.
Payroll
Expenditures. Payroll expenditures paid or incurred for research
and development performed in Massachusetts are included in the numerator and
denominator.
a. If an employee performs
qualified research and development activities and also performs other
activities in Massachusetts, only the wages proportionate to the time spent on
qualified research and development activities are allocable to research and
development and therefore included in the numerator (i.e.,
assuming the activities are performed in Massachusetts). The employee's entire
wages are included in the denominator.
b. If an employee performs research and
development activities both in and outside of Massachusetts, only the wages
proportionate to the time spent on qualified research and development in
Massachusetts are included in the numerator and denominator.
c. The wages of employees who supervise or
are supervised by persons performing qualified research and development are
included in both the numerator and the denominator to the extent the work of
those supervising or being supervised constitutes research and development
performed in Massachusetts.
3.
Third Party
Expenditures. Certain expenditures paid or incurred for research
and development performed by third parties on a corporation's behalf at a
research facility located in Massachusetts are included in the numerator and
the denominator. These include expenditures allowed in Treasury Reg. §
1.174-2(a)(8) and "contract research expenses" as described in Treasury Code
§ 41(b)(3), provided that these expenses are incurred for research and
development performed in Massachusetts. Other third party Massachusetts
expenditures unrelated to research and development are included in the
denominator. In order to claim third party expenditures, a taxpayer must
maintain sufficient documentation substantiating the identity of any parties
conducting the research on the corporation's behalf, the nature of the
research, and the locations where such contract research was
conducted.
4.
Clinical
Trials. Expenditures paid or incurred in conducting clinical
trials performed by the corporation itself, or for services provided by third
parties performing such trials on its behalf, in Massachusetts are included in
the numerator and the denominator. Generally, expenditures incurred in
conducting clinical trials outside Massachusetts are not included in the
numerator or denominator, even if the corporation is headquartered in
Massachusetts, and even if the clinical trials are initiated, managed, and
directed from within Massachusetts. However, the in-state costs of employees
actually supervising, managing and directing clinical trials are includable in
the numerator and denominator even if the trials themselves are conducted
outside of Massachusetts.
5.
Shared Expenditures. Research and development
expenditures that are shared across multiple locations of a corporation will be
attributed to Massachusetts using a proration allocation as provided in
830 CMR
63.38M.1(4)(b)4, without
regard to the 65% limitation imposed by Treasury Code § 41(b)(3) for
purposes of calculating the credit for increasing research activities. When
such expenses relate to amounts paid for research and development services
performed both within and without Massachusetts, the amount of the expense must
be prorated between Massachusetts and non-Massachusetts activity based on the
ratio of days the service provider or tangible personal property was employed
in research and development in Massachusetts to the total number of days the
service provider or tangible personal property was employed in research and
development both within and without Massachusetts.
6.
Computer
Expenses. Expenditures for the use of computers and information
technology to store, collect, manipulate, translate, disseminate, produce,
distribute or process data or information, or expenditures for similar uses of
computers and information technology are included in the numerator and
denominator if they are Massachusetts expenditures and are deductible as
research and development expenditures. In general, unless otherwise provided in
830 CMR 64H.6.4, amounts paid for the right to use computers in the conduct of
a corporation's research and development in Massachusetts are includable
expenditures to the extent that they are treated as inhouse expenses under
Treasury Code § 41(b)(2)(A)(iii). Depending on the facts and
circumstances, eligible computer expenses may include the lease, rental, or
repair of equipment used in research and development at a research facility
located in Massachusetts. In addition, amounts paid to another person for the
right to use computers are included in the numerator and the denominator to the
extent the computer is used in the conduct of performing research and
development that takes place in Massachusetts.
(7)
Examples. The
following examples illustrate the application of the various requirements for
qualification as a research and development corporation.
Example 1: Company A is a
venture-backed start-up corporation that will be engaged in the research and
development of a product constituting tangible personal property. During the
taxable year, the company raises $5,000,000 intended to finance its research
and development activities. It does not receive any other funds from performing
research and development. For purposes of 830 CMR 64H.6.4, such financing,
whether in the form of a contribution to capital or a loan, is not a receipt
derived from research and development and may not be used for purposes of
determining whether Company A has a sufficient amount of receipts from research
and development. However, Company A may qualify as a research and development
corporation if it has the requisite percentage of Massachusetts expenditures
allocable to research and development for the taxable year, provided that it
meets the other requirements for qualification as a research and development
corporation.
Example 2: Company C is organized as a
partnership. It has two incorporated partners. Company C does not qualify as a
research and development corporation. However, the activities of the
partnership are allowed to flow through on a pro rata basis to
corporate partners. If the pro-rata share of the corporate
partners' Massachusetts receipts allocable to research and development exceed
the b threshold, and the corporate partners otherwise qualify, the sales tax
exemptions in M.G.L. c. 64H, § 6(r) and (s), are available to the
corporate partners. However, while purchases of materials and machinery may
qualify for the exemption from sales tax under M.G.L. c. 64H, § 6(r) and
(s) when purchased by the corporate partners, such purchases do not qualify if
purchased by the partnership itself.
Example 3: Company D is a limited
liability company (LLC) organized under M.G.L. c. 156C. In order to qualify for
exemption as a research and development corporation, it must elect to be
treated as a corporation for federal income tax purposes and file federal Form
1120 and a Massachusetts corporate excise return as a separate entity for all
periods for which an exemption is claimed. For 2004, 2005 and 2006, Company D
filed as a corporation for federal and state tax purposes under the
"check-the-box" rules. It can qualify for exemption as a research and
development corporation in the same manner as an incorporated entity for those
years. If Company D does not "check-the-box" to be treated as a corporation for
those years, it does not qualify regardless of any other facts.
Example 4: E Corporation enters into
an agreement under which F Corporation will perform research on E's behalf. E's
contract research expenses paid or incurred in connection with F's research
done on its behalf are includable for purposes of calculating whether b of E's
expenditures are incurred in research and development in Massachusetts, if the
research is performed in Massachusetts. To the extent that E has contract
expenses for other third party Massachusetts expenditures unrelated to research
and development, those are included in the denominator of the expenditures
test.
Example 5: E Corporation developed a
particular technology in Massachusetts. E Corporation grants F Corporation a
license to use this technology. The amounts paid by F to E in connection with
F's use of the technology are includable for purposes of determining whether b
of E's receipts are from research and development in
Massachusetts.
(8)
Qualification Requirements for Manufacturing
Corporations. An entity qualifies as a "manufacturing corporation"
entitled to the sales tax exemption on purchases of tangible personal property
used directly and exclusively in research and development if it:
(a) is a domestic or foreign corporation
within the meaning of the definitions set forth in 830 CMR 64H.6.4(2);
and
(b) is either classified as a
manufacturing corporation by the Commissioner pursuant to M.G.L. c. 58, §
2 or has manufacturing corporation status under
830 CMR 58.2.1(5) and
(6). See
830 CMR
58.2.1: Manufacturing
Corporations.
(9)
Eligibility for Sales Tax
Exemptions under M.G.L. c. 64H, § 6(c) and (s).
(a)
General Rule.
Under M.G.L. c. 64H, § 6(r), the sales tax does not apply to the sale or
use of materials, tools and fuel, or any substitute therefor, which are
consumed and used directly and exclusively in research and development by a
manufacturing corporation or a research and development corporation. Materials,
tools and fuel are "consumed and used" only if their normal useful life is less
than one year or their cost is allowable as an ordinary and necessary business
expense for federal income tax purposes. Nuclear fuel and nuclear fuel
assemblies are regarded as consumed and used even if they do not meet this
test. Under M.G.L. c. 64H, § 6(s), the sales tax does not apply to the
sale or use of machinery, or replacement parts thereof, used directly and
exclusively in research and development by a manufacturing corporation or a
research and development corporation.
(b)
Directly and
Exclusively. For purposes of 830 CMR 64H.6.4, the exemptions in
M.G.L. c. 64H, § 6(r) and (s) apply only to sales of materials, tools,
fuel, machinery and replacement parts used directly and exclusively in research
and development by a research and development corporation or manufacturing
corporation. An item is not considered used directly and exclusively merely
because it is essential to research activities or because its use is required
by law. Tangible personal property, machinery and replacement parts or
equipment used in managerial or sales activities is not directly and
exclusively used in research and development and is therefore subject to tax.
1.
Directly.
Tangible personal property, including materials, tools, fuel, machinery and
replacement parts, is used "directly" in research and development only if it is
used in experimental or laboratory activity that qualifies as research and
development under 830 CMR 64H.6.4. In determining whether any property is
"directly" used, the fact that a particular item of property may be integral
and necessary to the conduct of the activity because its use is required either
by law or practical necessity does not, in and of itself, mean that the
property is directly used in research and development. The following is a
non-exhaustive list of machinery and materials which are not directly used in
research and development:
a. Machinery and
materials used exclusively for the comfort of worker. Examples are air
conditioning and ventilation systems.
b. Machinery and materials used in support
operations, such as a machine shop, in which R&D machinery is assembled,
maintained, or repaired.
c.
Machinery and materials used by the administrative, accounting, and personnel
departments.
d. Machinery and
materials used by plant security, fire prevention, first aid, and hospital
stations.
e. Machinery and
materials used in plant communications and safety.
Example 1: Laboratory supplies for use
in a research laboratory are exempt but supplies, desks and chairs used by
clerical personnel are not exempt.
Example 2: Test tubes, flasks,
reagents, microscopes and slides purchased by a chemical manufacturer for its
research laboratory for developing new pesticides are exempt from sales
tax.
Example 3: Technical books and
journals purchased for a research and development laboratory for use in doing
background research are used directly in research and development.
Example 4: Worcester Widgits, Inc. is
a manufacturing corporation that maintains a chemical laboratory for exclusive
use in developing new heat-resistant plastics. It purchases the following items
for exclusive use in its research and development activities: a computer that
will only be used to process data relating to the heat resistance of the
plastics, test tubes, flasks and reagents, soap for cleaning laboratory
equipment, smocks and gloves for laboratory personnel, an autoclave for
sterilizing laboratory equipment, cleaner and wax for laboratory floors, and
pencils, pens, paper and a typewriter for use in the office of the laboratory's
director. Its purchases of the cleaner and wax for laboratory floors, and the
pencils, pens, paper and typewriter for use in the office of the laboratory's
director, are subject to tax because the items are not used directly in
research and development. Its purchases of the test tubes, flasks, reagents,
soap for cleaning laboratory equipment, and smocks and gloves for laboratory
personnel are exempt from tax if the normal useful life of the items is less
than one year or their cost is allowable as an ordinary and necessary business
expense for federal income tax purposes. Worcester Widgits' purchase of the
computer to be used exclusively in processing data relating to the heat
resistance of the plastics and the autoclave is exempt from
tax.
2.
Exclusively. Materials, tools, fuel, and machinery and
replacement parts are used exclusively in research and development if 100% of
their use is in such function. However, for purposes of 830 CMR 64H.6.4, a
de minimis use will not defeat the exclusivity requirement of
the exemptions in M.G.L. c. 64H, § 6(r) and (s). Whether a use is
de minimis shall be determined by the Commissioner based on
the facts and circumstances of a taxpayer's overall operations.
Example 1: A company purchases a
computer system which it uses directly for research and development. However,
on two separate days during the year the computer is used to generate
management reports that include information with respect to research projects
but also address many other issues facing the company. No other taxable usage
is made of the computer. Although the generation of management reports may be a
taxable usage of research equipment, this use of the computer is de
minimis.
Example 2: Facts are the same as
Example 1, except that instead of generating the two management reports, the
computer is used to generate weekly payroll and employment tax return reports.
The generation of these reports on a regular basis is not a de minimis
taxable usage of the computer. Therefore, the computer is not
considered used exclusively for research and development, and is
taxable.
Example 3: Marblehead Microchips, Inc.
is a manufacturing corporation that maintains a laboratory containing machinery
used 75% of the time for research and development of new products and 25% of
the time for quality control purposes. The machinery is not considered used
exclusively for research and development. Therefore, the corporation's
purchases of the materials and machinery are subject to tax.
Example 4: Company D, a foreign
corporation, performs research and development in Massachusetts. It purchased
computers, other hardware, printers and software for its use in its research
and development department. The computers, other hardware, printers, and
software products were used in data analysis and for documentation of testing
results. The equipment and software were also used in other applications for
purposes related to the conduct of research and development. Word processing
applications were used to generate technical reports, notebook records, and
monthly reports. E-mail applications were used for data acquisition and
calculation programs as well as communication among research colleagues.
Graphics and spreadsheet software played a role in the activities of the
research and development department. Software also supported technical
information storage, retrieval, and dissemination operations for the use of the
research and development staff.
The software required a computer system and its hardware
components to perform these functions. The printers were similarly
indispensable to the effective utilization of the computers in the ways
described in this example. Software, hardware and printers generally function
as a single, interconnected system. Assuming that the computer system is used
solely for exempt purposes or non-exempt purposes that are de
minimis, the computers, hardware, printers, and software qualify as
being used directly and exclusively in research and development.
Example 5: A research and development
corporation purchases gas, electricity, refrigeration and steam which is used
in bulk or in a continuous flow at its research and development facility in
Massachusetts. The electricity is used in all areas of its facility, including
the areas in which its administrative functions are performed. The corporation
may present an Exempt Use Certificate with respect to the exempt portion of the
energy, (e.g., the portion use directly and exclusively in
research and development) if known at the time of purchase. If the exempt
portion is not known at the time of purchase, the taxpayer may present its
vendor with an Exempt Use Certificate and pay use tax on the non-exempt portion
of the energy purchased. If a taxpayer either did not provide a certificate at
the time of the purchase or subsequently determines that all or a portion of
its purchases were exempt from tax, it may subsequently request its vendor to
provide a refund or credit for the tax paid on the portion used directly and
exclusively in research and development. The vendor may apply for an abatement
of the portion of the tax paid in accordance with the rules of the Abatement
regulation,
830 CMR 62C.37.1. The
user must maintain adequate records with respect to the allocation of gas,
electricity, refrigeration and steam used directly and exclusively in research
and development from that used for non-exempt
purposes.
(10)
Credits and Other
Exemptions. Research and development corporations and
manufacturing corporations may be eligible for certain other tax benefits, as
follows:
(a)
Investment Tax Credit
(ITC) under M.G.L. c. 63, § 31A. Corporations treated as
manufacturing corporations and those research and development corporations
qualifying as such by virtue of meeting the receipts test in 830 CMR 64H.6.4(5)
may claim the ITC against the Massachusetts corporate excise for qualifying
property to the extent allowed allowed by M.G.L. c. 63, § 31A. Such
corporations should refer to
830 CMR
58.2.1, Manufacturing Corporations, and the
Commissioner's public written statements interpreting it for rules that apply
to claiming the ITC. However, research and development corporations qualifying
as such solely on the basis of the expenditures test in 830 CMR 64H.6.4(6) are
ineligible to take the ITC credit.
(b)
Local Property Tax Exemption
for Machinery under M.G.L. c. 59, § 5(16)(3). Corporations
that are properly classified by the Commissioner as manufacturing corporations,
are eligible for the exemption from local property tax under M.G.L. c. 59,
§ 5(16)(3) on their machinery. See M.G.L. c. 58, §
2;
830 CMR
58.2.1(4)(a). See
also M.G.L. c. 59, § 5(16)(3). Corporations that are not so
classified are not eligible for this local property tax exemption even if they
are engaged in manufacturing. Research and development corporations that have
been properly classified as such and that have machinery situated in a locality
that has adopted the exemption from local property tax for research and
development corporations provided under M.G.L. c. 59, § 5(16)(3) are also
eligible for the local property tax exemption on such
machinery.
