Massachusetts State R&D Tax Credits
In Massachusetts, businesses can claim a credit against the excise tax due 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 payments determined under IRC § 41(e)(1)(a)
Effective January 1, 2015, a corporation may elect to calculate its research and development credit using one of two methods. The first method is similar to the last except uses different definitions for “base amount” and “fixed base rate” that affect the calculation of the credit. Corporations may choose to claim an alternative simplified credit calculated over a period of three years phased in over six years.
If the taxpayer didn’t have qualified research expenses in any one of the three taxable years preceding the taxable year for which the credit is being determined, the amount of the credit is equal to 5 percent of the taxpayer’s qualified research expense for the taxable year. The amount of credit is limited to:
- 100 percent of the corporation’s first $25,000 of corporate excise tax liability; and
- 75 percent of such liability over $25,000
How to obtain the credit?
File Schedule RC, Research Credit and Instructions.
Refundable/Transferable Tax Credit – No
A corporation may carry over for an unlimited period of time any portion of the credit that is disallowed under the 75 percent limitation. Any credits disallowed that aren’t given unlimited status may be carried forward for 15 years.
S corporations may apply the credit against their corporate excise liability under the non-income or, if applicable, the income measure of the corporate excise. The credit does not flow through to the individual shareholders of an S corporation.
Find out if you qualify for the R&D tax credit
States and the R&D Credit: