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Massachusetts Tax Incentives
- 1. Commercial MARKET FOCUS A CLOSER LOOK AT MARKET TRENDS Real Estate Value-Addvisors What economic incentives are available to attract companies to the state of Massachusetts? What incentives are available to retain these companies? Executive Summary With an ongoing focus on cost containment, corporate real estate executives have become much more strategic in site selection methodologies. As the corporate decision-making process has become more focused on the total cost of doing business in the long term, the role of state and municipal incentives has become increasingly important as companies seek ways to offset start-up costs, new investments and long-term operating costs. Additionally, states and towns recognize the value of incentives not only in attracting, but in retaining businesses. As a result, incentives, loans and tax credits have been cre- ated to align with specific industries and projects that enhance a community’s economic development policies. ECONOMIC DEVELOPMENT INCENTIVE PROGRAM (EDIP) Incentive Type: Tax exemption/ investment tax credit Eligibility: • Massachusetts employers located in or moving to an Economic Target Area within the Commonwealth of Massachusetts that generate substantial sales outside of Massachusetts. • Massachusetts employers who generate or retain a substantial number of jobs. Industry: Applicable to all industries Contact: Economic Assistance Coordinating Council Massachusetts Office of Business Development 10 Park Plaza, Suite 3730 Boston, MA 02116 (617) 973-8538 Sponsored by the Economic Assistance Coordinating Council (EACC), a division of the Massachusetts Office of Business Development, the Economic Development Incentive Program (EDIP) is targeted toward creating jobs in Massachusetts and retaining companies that already have a presence within the Commonwealth. Eligible projects are separated into the following categories: • Certified Expansion Project: A full-time job creation and investment project within an Economic Target Area (ETA), which is designated as such by the EACC based upon income, unemployment, and other economic characteristics. In addition, the project must be located within a specific Economic Opportunity Area within the ETA and must be approved for local tax incentives. In order to qualify for the incentive, companies must commit to creating at least one full-time job and have at least 25% (or another reasonable percentage as determined by the EACC) of its sales generated outside the Com- monwealth. Qualifying projects are eligible for up to a 10% Investment Tax Credit. • Enhanced Expansion Project: A project conducted anywhere in the Commonwealth which generates 100 or more new full-time jobs within 2 years of receiving the incentive. Qualifying projects are eligible for up to a 10% Investment Tax Credit. The project may also seek local tax incentives. • Manufacturing Retention Project: A project that retains or creates at least 100 full-time, permanent manufacturing jobs within a Gateway Community, which is defined as a municipality with a population greater than 35,000, a median household income below the Commonwealth’s average, and educa- tional attainment rates that are below the Commonwealth’s average. The project must receive municipal approval prior to being considered and may also seek local tax incentives from the city or town. • Abandoned Building Renovation Deduction: The renovation of an abandoned building, which is defined as being at least 75% vacant for 24 months or more. To be eligible, the building must be located within an Economic Opportunity Area. Eligible projects can receive a corporate excise deduction or personal income tax deduction of 10% of the cost of renovation. A DT Z A F FILIATE www.FHOpartners.com
- 2. MARKET FOCUS INVESTMENT TAX CREDIT Incentive Type: Tax credit Eligibility: Companies that engage in manufacturing, certain R&D companies, and corporations engaged primarily in agriculture or commercial fishing. Industry: Manufacturing, R&D, agriculture/commercial fishing Contact: Brenda Reynolds EDIP Coordinator Massachusetts Office of Business Development 10 Park Plaza, Suite 3730 Boston, MA 02116 (617) 973-8538 The Massachusetts Investment Tax Credit is a 3% credit for qualifying businesses against their corporate excise tax to be used for the purchase and lease of qualified tangible property used for business. The goal of the credit is to encourage capital investment and reduce companies’ cost of expansion. The credit includes qualifying tangible property acquired, constructed, reconstructed, or erected during the taxable year, after federal tax deductions are taken on the property. This includes personal property and buildings and structural components of buildings acquired by purchase. If an operating lease is in place, the lessee is only allowed credit for personal property. RESEARCH & DEVELOPMENT TAX CREDIT Incentive Type: Tax credit Eligibility: Available to any foreign or domestic corporation subject to the corporate excise under Chapter 63 Massachusetts Laws. Industry: Research & Development Contact: Massachusetts Office of Business Development 10 Park Plaza, Suite 3730 Boston, MA 02116 (617) 973-8600 The R&D tax credit was designed to remove any obstacles to R&D investment and spur growth and innovation in the Commonwealth. The credit is available to both manufacturers and R&D companies and is divided into two categories: • A 10% credit for Qualified Expenses which is defined as any expense that would qualify for the Federal R&D tax credit. • A 15% credit for Basic Research Payments for costs related to donations or contributions made to research organizations such as hospitals and universities. The R&D tax credit can be taken in conjunction with the state’s Investment Tax Credit of 3% and can reduce the corporation’s tax to the minimum of $456. F HO Par tner s
- 3. MARKET FOCUS SINGLE SALES FACTOR TAX CREDIT Incentive Type: Tax incentive Eligibility: Manufacturers, qualifying defense contractors, and qualifying financial services firms who have multi-state tax filings Industry: Manufacturing, defense contractors, financial services Contact: Massachusetts Office of Business Development 10 Park Plaza, Suite 3730 Boston, MA 02116 (617) 973-8600 The Massachusetts Single Sales Factor significantly reduces the tax burden for manufacturing companies and certain defense contractors and financial services firms. Under the Single Sales Factor, net income subject to Massachusetts tax is determined by multiplying the overall net income by the ratio of Massachusetts sales to overall sales. Many states use a Three-Factor Apportionment, which taxes on sales, property, and payroll as a percent of overall sales, property, and payroll. This is beneficial to larger companies with substantial property and payroll, as they are not penalized for investing or hiring. THE BROWNFIELDS TAX CREDIT Incentive Type: Tax credit Eligibility: • Must own or lease a contaminated site for business purposes and complete a cleanup of the site • Owner or lessee must not have caused the contamination • The site must be located in an Economically Distressed Area Industry: All industries Contact: Catherine Finneran MassDEP Brownfields Coordinator Massachusetts Department of Environmental Protection One Winter Street Boston, MA 02108 (617) 556-1138 The Brownfields Tax Credit is available to businesses that own or lease a contaminated site for business purposes who commit to a complete cleanup of the site, provided they did not cause the contamination. In addition, the site must be located in an Economically Distressed Area. The tax credit is 25% or up to 50% of the cleanup costs depending on the extent and permanence of the cleanup solution. In order to qualify for the credit, the site must be reported to the Department of Environmental Protection, and cleanup costs must be incurred before January 1, 2012 and must be greater than 15% of the value to the property prior to cleanup. In addition, if the tax payer does not maintain the remediation of the site, they are responsible for paying back the difference between the credit taken and the credit allowed for maintaining the remedy. F HO Par tner s
- 4. MARKET FOCUS THE EMERGING TECHNOLOGY FUND (ETF) Incentive Type: Loan Eligibility: Technology companies that are starting up or increasing manufacturing in Massachusetts Industry: Biotechnology, medical devices, telecommunications, electronics, environmental Contact: Mass Development 160 Federal Street Boston, MA 02110 (800) 445-8030 Sponsored by Mass Development, The Emerging Technology Fund (ETF) provides loans for real estate or equipment financing to companies working with emerging technology that have plans to expand in Massachusetts. The goal of the ETF is to provide emerging technology companies with easy access to capital at below market interest rates without a complicated application and approval process. Other requirements are that the company have at least two at-risk parties besides Mass Development and have a strong management team as well as a demonstrated ability to produce and market the product and complete loan repayment. The loan cap for real estate or equipment is $2.5 million or 25% of the total project costs. MASSACHUSETTS FILM INCENTIVE CREDITS Incentive Type: Tax Credit Eligibility: Motion picture production companies who incur at least $50,000 of production costs in Massachusetts Industry: Film production, financial institutions, utility corporations, insurance companies Contact: Patrick Shirley, Supervisor Massachusetts Department of Revenue Film Credit Unit 200 Arlington Street, Room 4300 Chelsea, MA 02150 Phone: 617-887-6725 Massachusetts Film Incentive Credits consist of two tax credits, the Payroll Credit, and Production Expense Credit. These credits only apply to motion pictures companies who have production expenses within Massachusetts of greater than $50,000 per picture in a one-year period. • Payroll Credit A credit of 25% of the total payroll for jobs created within Massachusetts in connection with the filming and production of a motion picture. This excludes employees paid over $1M. • Production Expense Credit A credit of 25% of the Massachusetts production expenses, not including payroll if the Payroll Credit is also being claimed. In order to qualify for the credit, production expenses incurred in Massachusetts must exceed 50% of the total production expenses, or 50% of filming days must take place in Massachusetts. This credit can also include payroll to employees paid over $1M. F HO Par tner s
- 5. MARKET FOCUS ENERGY CREDITS Incentive Type: Tax incentive Eligibility: Applicable to commercial, industrial, residential, and agricultural sectors Industry: All industries Contact: Massachusetts Department of Energy Resources (DOER) 100 Cambridge Street, Suite 1020 Boston, MA 02114 (617) 626-7300 • Alternative Energy and Energy Conservation Patent Exemption A corporate excise tax deduction for income from the sale or lease of a U.S. patent, or personal or real property related to the patent, which the Mas- sachusetts DOER considers beneficial for energy conservation or alternative energy. • Renewable Energy Property Tax Exemption 20-year property tax exemption for solar energy systems and wind energy systems which serve as a primary or auxiliary power system for heating or other energy needs of taxable property in Massachusetts. The exemption is also applicable to hydropower facilities if they enter an agreement with the city or town to instead make a payment of at least 5% of its gross income in the preceding calendar year. The exemption applies to the additional value added to a property by an energy system, not the full amount of the property tax bill. • Excise Tax Exemption for Solar or Wind Powered Systems Exemption for the tangible property portion of the excise tax for solar or wind powered climate control or heating units. This exemption is in effect for the length of the system’s depreciation period. • Excise Tax Deduction for Solar or Wind Powered Systems Massachusetts businesses can deduct the cost of installation of solar or wind powered climate control or heating units, including labor, from net income for state excise tax, so long as the installation is located in Massachusetts and is used exclusively for the business. The system will also not be taxed under the state’s tangible property measure for corporate excise tax and is effective for the length of the system’s depreciation period. MASSACHUSETTS OPPORTUNITY RELOCATION AND EXPANSION (MORE) JOBS CAPITAL PROGRAM Incentive Type: Grant Eligibility: Massachusetts municipalities and corporations that partner together to improve publicly owned infrastructure Industry: All industries Contact: Nayenday Thurman Director of Economic Development Programs 100 Cambridge Street, Suite 1010 Boston, MA 02114 (617) 788-3636 The MORE jobs capital program was designed to provide funding for infrastructure improvements that support local business expansion. Grants must be used for publicly owned infrastructure such as roads, utility extensions, and parking facilities. In order to be eligible for the MORE grant, the project must result in the creation of 100 permanent full time jobs in Massachusetts within 2 years of receiving the grant, maintain such jobs for at least 5 years, generate sales outside Massachusetts, and provide an economic benefit to the public. F HO Par tner s
- 6. TARGET INCENTIVE OUTCOME ELIGIBLE PROGRAM DURATION VALUE ($) INDUSTRIES JOB ECONOMIC PROPERTY ENVIRONMENTAL ECONOMIC ENVIRONMENTAL LOAN GRANT CREDIT CREATION DEVELOPMENT REDEVELOPMENT REMEDIATION MARKET Single Sales Factor Manufacturers, De- Indefinite Varies X X X fense Contractors, Financial Services F HO Par tner s Massachusetts Op- All Indefinite Varies X X X X portunity Relocation and FOCUS Expansion (MORE) Jobs Capital Program Brownfields All Cleanup costs 25% to 50% X X X X must be in- of Cleanup curred before Costs January 1, 2012 Emerging Technology Technology compa- Indefinite $2.5 Million X X In X X Fund nies (biotechnology, or 25% of Special medical devices, total project Cases telecommunica- costs (Real tions, electronics, Estate max: environmental, $2 million, advanced materials Equip- or other emerging ment max: technology $500,000) Energy Credits Commercial, indus- Indefinite Varies X X X X trial, residential and agricultural sectors Economic Development Massachusetts em- Indefinite Up to 10% X X X X X Incentive Program (EDIP) ployers generating investment substantial sales tax credit outside the state Film Incentive Credit Film production, Indefinite 25% or total X X X financial institutions, payroll or utility companies, production insurance com- expenses panies Investment Tax Credit Manufacturing, Indefinite 3% credit X X X X R&D and com- against cor- panies engaged porate excise primarily in agricul- tax ture or commercial fishing R&D Tax Credit Any foreign or Indefinite 10-15% X X X domestic corpora- tion subject to the corporate excise under Chapter 63 Massachusetts laws
- 7. MARKET FOCUS Sources Massachusetts Office of Business Development Economic Development Incentives Program (EDIP) Executive Office of Housing and Economic Development Economic Assistance Coordinating Council Click Here Massachusetts Office of Business Development Executive Office of Housing and Economic Development Brownfields Tax Credit Click Here Massachusetts Department of Environmental Protection Click Here Massachusetts Alliance for Economic Development Click Here Emerging Technology Fund MassDevelopment Investment Tax Credit Click Here Massachusetts Alliance for Economic Development Click Here Massachusetts Alliance for Economic Development Click Here Massachusetts Office of Business Development Executive Office of Housing and Economic Development Massachusetts Opportunity Relocation and Expansion (MORE) Click Here Job Capital Program Massachusetts Office of Business Development R&D Tax Credit Executive Office of Housing and Economic Development Massachusetts Alliance for Economic Development Click Here Click Here Energy Credits Massachusetts Office of Business Development Database of State Incentives for Renewables and Efficiency Executive Office of Housing and Economic Development Click Here Click Here Film Incentive Credit Single Sales Factor Massachusetts Department of Revenue Massachusetts Alliance for Economic Development Click Here Click Here If you have any questions about this publication or how we can help your company with its real estate needs, please feel free to contact any of the following real estate professionals: RESEARCH Bethany Bockmann Ashley Lane bbockman@fhopartners.com alane@fhopartners.com 617.279.4589 617.279.4570 CORPORATE ADVISORY SERVICES GROUP Connor Barnes John Boyle Lauria Brennan Mike Brown cbarnes@fhopartners.com jboyle@fhopartners.com lbrennan@fhopartners.com mbrown@fhopartners.com 617.279.4536 617.279.4563 617.279.4541 617.279.4568 Michael Dalton Bill DeLaney Rick Fahey Joe Fallon mdalton@fhopartners.com bdelaney@fhopartners.com rfahey@fhopartners.com jfallon@fhopartners.com 617.279.4560 617.279.4580 617.279.4564 617.279.4550 Peter Farnum Will Foley Kevin Hanna Brian Hines pfarnum@fhopartners.com wfoley@fhopartners.com khanna@fhopartners.com bhines@fhopartners.com 617.279.4567 617.279.4578 617.279.4535 617.279.4562 Barry Hynes Ted Lyon Mark Mulvey Chuck O’Connor bhynes@fhopartners.com tlyon@fhopartners.com mmulvey@fhopartners.com coconnor@fhopartners.com 617.279.4566 617.279.4579 617.279.4559 617.279.4569 Michael O’Leary Ryan Romano Sean Teague Jon Vacca moleary@fhopartners.com rromano@fhopartners.com steague@fhopartners.com jvacca@fhopartners.com 617.2794585 617.279.4575 617.279.4561 617.279.4587 ASSET ADVISORY GROUP Duncan Gratton John McHugh Glenn Verrette dgratton@fhopartners.com jmchugh@fhopartners.com gverrette@fhopartners.com 617.279.4540 617.279.4547 617.279.4590 F HO Par tner s