Section 38TT.
(a)Every business corporation subject to taxation under section
39 that has a usual place of business in the commonwealth, and is engaged
in manufacturing in the commonwealth, or engaged in the commonwealth in
research and development shall, for the purposes of this chapter, be considered
to be a manufacturing corporation or a research and development corporation.
Every manufacturing corporation shall be taxed in the same manner and shall
have the same duties under this chapter and chapter 62C as other business
corporations subject to taxation under section 39, except insofar as the determination
of the excise under this chapter may be affected by reason of the
exemption from local taxation of the machinery of a manufacturing corporation.
(b)A research and developme
Free access — add to your briefcase to read the full text and ask questions with AI
Section 38TT. (a) Every business corporation subject to taxation under section
39 that has a usual place of business in the commonwealth, and is engaged
in manufacturing in the commonwealth, or engaged in the commonwealth in
research and development shall, for the purposes of this chapter, be considered
to be a manufacturing corporation or a research and development corporation.
Every manufacturing corporation shall be taxed in the same manner and shall
have the same duties under this chapter and chapter 62C as other business
corporations subject to taxation under section 39, except insofar as the determination
of the excise under this chapter may be affected by reason of the
exemption from local taxation of the machinery of a manufacturing corporation.(b) A research and development corporation for the purposes of this section is
a business corporation subject to tax under section 39 whose principal activity
herein is research and development and which, during the taxable year, derives
more than 2/3 of its receipts attributable to the commonwealth from the activity
or incurs more than 2/3 of its expenditures attributable to the commonwealth
allocable to the activity, but a corporation that qualifies as a research and
development corporation only by reason of its expenditures shall not be entitled to the credit provided in section 31A of chapter 63 by virtue of its qualification
as a research and development corporation. A corporation that is engaged in
research and development and that conducts manufacturing activities shall
exclude expenditures related to manufacturing from total expenditures for the
purpose of assessing whether 2/3 of expenditures are allocable to research and
development, whether or not the manufacturing activities of the corporation are
substantial. Receipts from research and development shall include receipts
from the provision of research and development services and from royalties or
fees derived from the licensing of patents, know-how or other technology
developed from research and development. For purposes of this section,
research and development is experimental or laboratory activity having as its
ultimate goal the development of new products, the improvement of existing
products, the development of new uses for existing products, or the development
or improvement of methods for producing products; and does not include
testing or inspection for quality control purposes, efficiency surveys, management
studies, consumer surveys or other market research, advertising or
promotional activities, or research in connection with literacy, historical or
similar projects. Nothing in this section shall be construed to provide for an
exemption from local taxation of the machinery of a corporation considered to be
a research and development corporation which is not considered to be a
manufacturing corporation.(c) For purposes of this section and section 38, the development and sale of
standardized computer software shall be considered a manufacturing activity,
without regard to the manner of delivery of the software to the customer.[ Second paragraph of subsection (c) effective until November 20, 2024. For
text effective November 20, 2024, see below.]To the extent authorized pursuant to the life sciences tax incentive program
established by section 5 of chapter 23I, a certified life sciences company may be
deemed a research and development corporation for purposes of exemptions
under chapters 64H and 64I.[ Second paragraph of subsection (c) as amended by 2024, 238, Sec. 213
effective November 20, 2024 until December 31, 2028. Repealed by 2008, 130,
Sec. 33. See 2008, 130, Sec. 54 as amended by 2011, 9, Sec. 25; 2013, 46, Sec. 57;
and 2018, 112, Sec. 10. See also 2011, 9, Sec. 56 and 2013, 46, Sec. 87 as
amended by 2018, 273, Sec. 26.]To the extent authorized pursuant to the life sciences tax incentive program
established by section 5 of chapter 23I or the climatetech tax incentive program
established in section 16 of chapter 23J, a certified company may be deemed a
research and development corporation for purposes of exemptions under chapters
64H and 64I.(d) For the purposes of this section, a limited partnership that is not a
business corporation but that would otherwise qualify as a research and
development corporation under this section may be considered a research and
development corporation when all partners are corporations solely for purposes of claiming the exemptions available to research and development corporations
under chapters 64H and 64I.[ Subsection (e) effective for tax years beginning on or after January 1, 2023.
See 2023, 50 Secs. 47 and 49.](e) For the purposes of this section, a "manufacturing corporation" shall be a
corporation that is engaged in manufacturing; provided, however, that in order
to be engaged in manufacturing, the corporation shall be engaged, in substantial
part, in transforming raw or finished physical materials by hand or machinery,
and through human skill and knowledge, into a new product possessing a new
name, nature and adapted to a new use.Any operation manufacturing, in substantial part, value-added agricultural
products shall be considered a manufacturing corporation.A manufacturing corporation's activities will be considered to be substantial if
any 1 of the following 5 tests are met:(1) 25 per cent or more of its gross receipts are derived from the sale of
manufactured goods that it manufactures;(2) 25 per cent or more of its payroll is paid to employees working in its
manufacturing operations and 15 per cent or more of its gross receipts are
derived from the sale of manufactured goods that it manufactures;(3) 25 per cent or more of its tangible property is used in its manufacturing
operations and 15 per cent or more of its gross receipts are derived from the
sale of manufactured goods that it manufactures;(4) 35 per cent or more of its tangible property is used in its manufacturing
operations; or(5) the corporation's manufacturing activities are deemed substantial under
relevant regulations promulgated by the commissioner.In determining whether a process constitutes manufacturing, the commissioner
will examine the facts and circumstances of each case.For the purposes of this section, "value-added agricultural products" shall
mean any products of farming or agriculture, as defined in section 1A of chapter
128, which have increased in market value due to some process other than
packaging. Value-added agricultural products shall include, but shall not be
limited to: cheese, butter, buttermilk, yogurt, cream, ice cream, fruit preserves,
fruit juices, fruit sauces, fruit syrups, dried fruit, seeded fruits, peeled or
chopped fruit and vegetables, processed fruit and vegetables, salads, maple
syrup, maple candy, honey and all apicultural products, horticulture nursery and
greenhouse products, topiary plants, bacon, sausage, lard, dried or smoked
meat, wool and fish, seafood and other aquatic products.