Instructions For Schedule Rc - Research Credit

Aggregated Groups

Any corporation which is a member of a controlled group or which is under common control

with any trade or business (whether or not incorporated) must calculate its credit on an

aggregated basis. The entire group first calculates a total credit as if it was a single taxpayer,

aggregating all qualified research expenses and basic research payments made by the

members, eliminating inter-company payments. The members of the group are then allocated

a share of this credit based on their share of the group’s total qualified research expenses and

qualified research payments. See Regulation 830 CMR 63.38M.1 (7).

Separate Calculation for Defense-Related Activities and Other Qualified Activities

Under legislation approved in November of 1995, eligible corporations may, for taxable

years beginning on and after January 1, 1995, calculate the research credit separately for their

defense-related and their non-defense-related activities.

In general, defense-related activities include those activities occurring in Massachusetts in

connection with researching, developing and producing for sale equipment for NASA or

certain military arms, pursuant to a contract or subcontract. For purposes of calculating the

credit, military arms are arms, ammunition, or implements of war specifically designed,

modified, or equipped for military purposes and designated in the munitions list published

pursuant to 22 U.S.C. 2778.

Corporations making this election must also maintain complete records of supporting data

including the accounting methods used in calculating the credit.

Life Sciences Research Credit

For taxable years beginning on or after January 1, 2009, M. G.L. Ch. 63, sec 38W adds a new

Life Sciences Research Credit, to the extent authorized for certified life sciences companies

pursuant to the Life Sciences Tax Incentive Program, to provide qualifying companies with a

means to obtain a research credit for certain expenditures not qualifying for the existing

research credit under M.G.L. Ch. 63, sec. 38M.

Under this new provision, the credit is generally calculated in the same manner as the

research credit under sec. 38M. However, the qualified research expenditures, which form the

basis for the calculation in new sec. 38W, differ from those of sec. 38M in that they can

qualify when the activities are performed both inside and outside of the Commonwealth, to

the extent they relate to legally mandated clinical trial activities.

Limitations on Applying the Credit Against Excise

The credit is limited to the first $25,000 of excise plus 75% of any excise in excess of

$25,000. In addition, the credit cannot reduce the tax below the minimum tax of $456.

Corporations which are members of an aggregated group share a single $25,000 of excise

which is not subject to the 75% limitation. Each corporation is allowed a share of this bracket

determined by the ratio of the corporation’s separately determined excise to the total for all

members of the aggregated group. No member of the group may reduce its excise below the

minimum tax of $456.

Corporations which file a combined under M.G.L. Chapter 63, sec. 32B may share excess

credits with other corporations included in the same combined return to the extent the other

corporations can use additional research credits within the limitations as determined above.

See 830 CMR 63.32B.2 (9) (a) and (c) for rules applicable to the sharing of credits.

Instructions For Schedule Rc - Research Credit - 2012 Page 2