Instructions For Schedule Rc - Research Credit

Instructions For Schedule Rc - Research Credit - 2012

2012 Instructions for Schedule RC

Research Credit

What Is the Research Credit?

The Research Credit is a tax credit available to corporations who incur certain expenses for

research conducted in Massachusetts. The credit closely parallels the federal research credit

available under sec. 41 of the Internal Revenue Code (IRC) as of August 12, 1991.

For further information, see Regulation 830 CMR 63.38M.1.

Who Is Eligible for the Credit?

Any business corporation subject to the Massachusetts corporate excise under Chapter 63 of

the Massachusetts General Laws (M.G.L.) is eligible for the credit. An S corporation may

apply the research credit against its excise due under Chapter 63, but may not share any

excess credit with its shareholders.

How Is the Research Credit Determined?

Generally, the Massachusetts research credit adopts the definitions and calculations for the

federal research credit under sec. 41 of the Internal Revenue Code (IRC) as in effect on

August 12, 1991. There is an additional requirement that the expenditures must be for

research conducted within Massachusetts.

The amount of the credit equals 15% of the incremental basic research payments, plus 10%

of the incremental qualified research expenses. Both basic research payments and qualified

research expenses are defined under IRC, sec. 41. Incremental expenses and payments are

those which exceed certain base amounts.

Effect of Election to Use Massachusetts Gross Receipts

The base amount for the determination of incremental qualified research expenses is the

largest of 50% of the qualified research expenses or the product of the Massachusetts fixed-

base percentage and the corporation’s average annual gross receipts for the last four years.

Taxpayers may elect to calculate the base amount considering only Massachusetts receipts.

Taxpayers electing to compute average annual gross receipts in this computation must also

use only Massachusetts receipts in calculating the Massachusetts fixed base percentage.

Corporations elect to use either Massachusetts or federal gross receipts in determining the

base amount in the first year in which they claim the credit. An election is binding for the

three consecutive tax years beginning in the year the choice is first made. Thereafter the

corporation may alter its choice prospectively in any subsequent taxable year, provided that

any change shall also be binding for the three year period commencing with the year of the

change. An election may not be changed by filing an amended return or claim for abatement.

See Regulation 830 CMR 63.38M.1 (5) (d) 3.

Instructions For Schedule Rc - Research Credit - 2012