Form 355s - Massachusetts S Corporation Excise Return

Line by Line Instructions

same type generated in the same tax period that

captures in Part 2, the amount available should

Schedule S

have never been used to reduce excise. Include

reflect the reduction by those offsets.

both credits carried over from the prior year and

Distributive Income

Lines 1 through 5

credits which expired unused.

Note: In the following Schedule S and SK-1 instruc-

Enter in column a the amount of credit available

tions only certain items are addressed in detail.

Example

for use in the current year. Credits available which

Lines without specific instructions are considered

Manufacturing Corporation begins business in year

are subject to the 3-year carryover limitation are

to be self-explanatory.

1 and generates $30,000 in ITC. In year 2, Manu-

entered on the line appropriate for the tax year in

facturing Corporation generates $10,000 in ITC. It

which the credit was generated. Credits no longer

Line 1

generates no credits in years 3 or 4. All property is

subject to the 3-year time limit are shown on line

Enter the total amount of gross receipts or sales

acquired in the first month of the year and has a

5. If carryover credits were offset against poten-

from U.S. Form 1120S, line 1c. Returns and al-

useful life of 10 years. In each year, Manufactur-

tial recaptures in Part 2, the amount actually avail-

lowances are subtracted in reaching this amount.

ing’s excise before credits is $7,000 and it uses

able should reflect the reduction by those offsets.

$3,500 of ITC (a total of $14,000 in credits used)

Line 11

Enter in, column b, the amount of credits origi-

all of which is from the earliest available credit (the

nating in each tax year being used in the current

Enter the total amount of other income not in-

year 1 amount). Under the provisions of M.G.L.

year. M.G.L. Ch. 63, sec. 32C limits the amount of

cluded in lines 1 through 10. Include income from

Ch. 63, sec. 32C, a further $3,500 in ITC becomes

these credits that may be used in any year by pro-

U.S. Form 1120S, line 5, and U.S. Form 1120S,

available for carryforward to any future period in

hibiting a taxpayer from taking credits that will re-

Schedule K, lines 10. If an S corporation is a part-

each of the 4 tax years (a total of $14,000, all of

duce the tax below 50% of the excise due before

ner in a partnership, include the amount of its dis-

which is also from the earliest available credit,

credits. If the taxpayer has available and will be

tributive share of the partnership’s total receipts

which is the year 1 amount). At the end of year 4,

taking other credits that are also subject to the

not included in lines 1 through 10. Include all tax-

the remainder of the year 1 credit ($30,000 less

section 32C limitation (e.g. the Brownfields Credit

exempt income. Also enter any other items in-

$14,000 used less $14,000 converted equals

under sec 38Q) the maximum amount of invest-

cluded in an entity’s gross income under IRC sec.

$2,000) expires unused.

ment tax credit allowed is reduced by the amount

61 and not included in lines 1 through 10.

At the beginning of January in year 5, Manufac-

of such other credits taken. Taxpayers may chose

Also include in line 11 any difference that results

turing sells all of its assets, triggering recapture.

which credits to use but the total of all such cred-

from the annualization of income for a short pe-

its subject to the section 32C limitation may not

The potential recapture on the year 1 assets is

riod return.

$30,000 × 72 ÷ 120 = $18,000. This is partially

exceed 50% of the excise before credits. Credits

may also not reduce a corporation’s tax below the

offset by the $2,000 of the expired credits. A fur-

Line 13

$456 minimum excise.

ther $14,000 is offset by reducing the unlimited

Enter only those receipts from intercompany trans-

carryforward generated in year 1 that is still avail-

actions that are included in lines 1 through 11. Do

Enter in column c, the amount of credits originat-

able and unused. There is a net recapture tax of

not include receipts from related entities included

ing in each tax year converted to unlimited carry-

$2,000 related to the year 1 assets.

in 15 below.

over status. Credits that could have been used

except for the 50% limitation in M.G.L. Ch. 63,

The potential recapture on the year 2 assets is

Line 15

$10,000 × 84 ÷ 120 = $7,000. This is offset by re-

sec 32C may be used in any subsequent year,

Enter here the aggregated total receipts less re-

without regard to the normal 3 year time limit

ducing the carryover available from year 2 by the

ceipts from intercompany transactions for all enti-

provided in Ch.63, sec. 31A. The taxpayer may

same amount. There is no recapture tax related to

ties other than the S corporation that share

choose which credits to treat as converted to un-

the year 2 assets. Manufacturing still has $3,000

common ownership and are engaged in a unitary

limited status, but the total of all such credits des-

of year 2 credits available for use. They will expire

business with the S corporation according to

ignated for unlimited carryover may not exceed

at the end of the current year.

Regulation 830 CMR 62.17A.1 (11)(e) and (f).

50% of the current year excise before credits.

Completing the Schedule

Enclose a supporting schedule for each entity

Enter in lines 2 through 4, column d the amount

Enter $25,000 in line 1 (the total potential ITC re-

clearly stating all items of total receipts and inter-

of credits originating in each tax year and still

capture from all years).

company transactions.

subject to the 3-year time limit which are carried

Enter $2,000 in line 2a (the amount of credits ex-

over to future years. Note that any credits on line

Line 18

pired unused).

1(a) not used or converted expire at the end of

Enter the amount of ordinary income or loss from

Enter $7,000 in line 2b (the amount of the reduc-

the current year.

U.S. 1120S, line 21. Do not include interest, divi-

tion in year 2 credits).

dends, and other portfolio income included in line

Part 4. Reconciliation of

Enter $14,000 in line 2e (the amount of the re-

21. Enter such income on lines 23 through 29.

Massachusetts Tangible Property

duction in the unlimited carryover).

Corporations claiming an ITC in Part 1 or claiming

Line 19

Enter $2,000 in line 3 (the total recapture tax

an ITC carryforward in Part 3, whether or not used

If reporting other income or loss from U.S. Form

added to excise this year).

in the current year, must complete Part 4 based

1120S, Schedule K, line 10, enclose a statement

on the book value of their capital assets located in

and explain.

Part 3. Calculation of Available

Massachusetts.

Credits

Line 20

Enter the amount of each credit available for use

Enter total foreign, state or local income, franchise,

in the current year based on the year generated. If

excise or capital stock taxes deducted from U.S.

carryover credits were offset against potential re-

Form 355s - Massachusetts S Corporation Excise Return - 2012 Page 15

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