Section 30: Definitions; value of tangible property; net worth
Section 30. When used in this section and in sections 31 to 52, inclusive, the following terms shall have the following meanings, and the terms ''business corporation,'' ''disregarded entity,'' and ''partnership,'' defined in paragraphs 1, 2 and 16 of this section, shall, unless otherwise provided, also have the following meanings and effect for purposes of all sections of this chapter:—
1. ''Business corporation'', any corporation, or any ''other entity'' as defined in section 1.40 of chapter 156D, whether the corporation or other entity may be formed, organized, or operated in or under the laws of the Commonwealth or any other jurisdiction, and whether organized for business or for non-profit purposes, that is classified for the taxable year as a corporation for federal income tax purposes.
2. ''Disregarded entity'', an entity that is disregarded as a separate entity from its owner for federal income tax purposes. Such an entity shall similarly be disregarded for purposes of this chapter, and without limitation, all income, assets, and activities of the entity shall be considered to be those of the owner.
3. ''Gross income'', gross income as defined under the provisions of the Federal Internal Revenue Code, as amended and in effect for the taxable year, plus the interest from bonds, notes and evidences of indebtedness of any state, including this commonwealth; provided, however, that gross income of corporations taxable under section thirty-eight B shall, in addition to the foregoing, include a deduction for losses from the sale or exchange of capital assets sustained during the taxable year to the extent allowable by the Federal Internal Revenue Code.
4. ''Net income'', gross income less the deductions, but not credits, allowable under the provisions of the Code, as amended and in effect for the taxable year; provided, however, that any deduction otherwise allowable which is allocable, in whole or in part, to 1 or more classes of income not included in a corporation's taxable net income, as determined under subsection (a) of section 38, shall not be allowed. In the case of a corporation exempt from taxation under section 501 of the Code, ''net income'' means unrelated business taxable income, as defined in section 512 of the Code. In lieu of disallowing any deduction allocable, in whole or in part, to dividends not included in a corporation's taxable net income, 5 per cent of such dividends shall be includable therein, as provided in said subsection (a) of said section 38. For the purposes of this section and said subsection (a) of said section 38, the term ''dividend'' shall include, but not be limited to, amounts included in federal gross income pursuant to sections 951 and 951A of the Code. For the purposes of this section, any dividend received directly or indirectly from a real estate investment trust, as provided in sections 856 to 859, inclusive, of the Code, for the taxable year of the trust in which a dividend is paid, shall not be: (i) treated as a dividend; and (ii) included as part of the dividends received deduction otherwise available to the taxpayer under paragraph (1) of said subsection (a) of said section 38. Any dividend received directly or indirectly from a regulated investment company, as provided in sections 851 to 855, inclusive, of the Code, shall not be included as part of the dividends received deduction otherwise available under said paragraph (1) of said subsection (a) of said section 38.
The following deductions shall be allowed: (i) a deduction for that portion of wages or salaries paid or incurred for the taxable year equal to the amount of the credit allowable for the taxable year under section 51 of the Code and otherwise disallowed under section 280C of said Code; and (ii) a deduction for any amount paid or incurred during the taxable year in carrying on the trade or business of a marijuana establishment, as defined in section 1 of chapter 94G, or a medical marijuana treatment center, as defined in section 1 of chapter 94I, that would have been deductible under the Code, but for section 280E of said Code.
Deductions with respect to the following items shall not be allowed:
(i) dividends received;
(ii) losses sustained in other taxable years, except for the net operating losses as provided in paragraph 5 of this section;
(iii) taxes on or measured by income, franchise taxes measured by net income, franchise taxes for the privilege of doing business and capital stock taxes imposed by any state;
(iv) the deduction allowed by section 168(k) of said Code;
(v) except as otherwise provided in section 31J, interest expense paid, accrued or asserted in connection with a dividend of a note or similar obligation stating the requirement that such interest is to be paid by the corporation that dividends such obligation to its shareholders;
(vi) the deduction allowed by section 199 of the Code;
(vii) the deduction described in section 163(e)(5) of the Code to the extent increased by amendments to section 163(e)(5)(F) and section 163(i)(1) of the Code, inserted by section 1232 of the federal American Recovery and Reinvestment Act of 2009, Pub. L. 111–5; and
(viii) the deductions allowed by sections 245A, 250 and 965(c) of the Code.
5. (a) For purposes of this chapter, the Massachusetts net operating loss incurred in a taxable year shall mean the amount by which the deductions allowed under paragraph four, including the dividends-received deduction allowed in section thirty-eight (a)(1) and not including the deductions for net operating losses under this paragraph, exceed gross income for the taxable year as defined in paragraph three of this section.
(b) Massachusetts net operating losses which are sustained in taxable years ending on or after December thirty-first, nineteen hundred and eighty-nine, shall be allowed as a deduction in determining net income; provided, further, that such deduction shall be limited to a percentage of the net income for the taxable year as follows:
(1) twenty-five percent of net income for taxable years ending on or after December thirty-first, nineteen hundred and ninety, and before December thirty-first, nineteen hundred and ninety-one;
(2) fifty percent of the net income for taxable years ending on or after December thirty-first, nineteen hundred and ninety-one, and before December thirty-first, nineteen hundred and ninety-two;
(3) seventy-five percent of net income for taxable years ending on or after December thirty-first, nineteen hundred and ninety-two, and before December thirty-first, nineteen hundred and ninety-three; and
(4) and one hundred percent of net income for taxable years ending on or after December thirty-first nineteen hundred and ninety-three.
Losses sustained in any taxable year prior to January 1, 2010, may be carried forward for not more than 5 years and may not be carried back. Losses sustained in any taxable year beginning on or after January 1, 2010, may be carried forward for not more than 20 years and may not be carried back.
(c)(i) For the first five consecutive taxable years of a corporation, measured from the date of its organization, whether or not organized under the laws of the commonwealth, so much of the loss as determined under section one hundred and seventy-two of the Federal Internal Revenue Code, as amended and in effect for the taxable year, and adjusted for any differences between Massachusetts taxable net income and federal taxable income, as is represented by net operating loss carryovers for taxable years ending December thirty-first, nineteen hundred and seventy-five, and thereafter may be deducted;
(ii) provided, however, that such carryover losses shall not be allowed to any corporation fifty percent or more of whose voting stock is owned by another corporation whether or not such owning corporation is taxable in this commonwealth;
(d) A business corporation that incurs losses before the corporation becomes subject to tax liability in the commonwealth shall not be allowed to carry those losses forward under this section.
(e) Notwithstanding any other provision of this section, when a corporation is allowed to carry forward net operating losses under this section, the loss shall be determined and carried forward by multiplying the loss by the corporation's apportionment percentage as determined under this chapter for the taxable year in which the loss is sustained, with respect to the business that generated the loss and is to be deducted by the corporation from its taxable net income allocated or apportioned to the commonwealth. The commissioner shall adopt rules or regulations to implement this section and to coordinate the application of this section with the other provisions of this chapter.
6. ''Taxable year'', any fiscal or calendar year or period for which the corporation is required to make a return to the federal government.
7. The value of a corporation's tangible property taxable under clause (1) of subsection (a) of section thirty-nine shall be the book value of such of its tangible property situated in the commonwealth on the last day of the taxable year as is not subject to local taxation nor taxable under section sixty-seven. For purposes of this paragraph, ''book value'' means the original cost of such property, less the depreciation or amortization taken against such property on the books of the corporation maintained for making financial reports to shareholders. If the commissioner finds that a corporation has transferred its tangible property under clause (1) of subsection (a) of section thirty-nine for the purpose of reducing its excise under this chapter, he may determine the amount of its tangible property taxable under said section on the basis of the average of such tangible property held during the taxable year.
8. The net worth of a business corporation taxable under section 39 shall be calculated as follows: (a) the book value of its total assets on the last day of the taxable year shall be reduced by the sum of (1) its liabilities on said date, (2) the book value of its tangible property situated in the commonwealth on said date and subject to local taxation, less the interest of any mortgagee therein, and (3) the book value on said date of its investment in subsidiary business corporations which represent 80 per cent or more of the voting stock of said subsidiary business corporations or, in the case of a subsidiary business corporation which does not have voting stock, the book value of its investment in such business corporation which represents 80 per cent or more ownership interest; (b) the amount determined in (a) shall be multiplied by such corporation's income apportionment percentage, as determined under section 38. In determining the book value of any asset, the commissioner may disallow any reserve, in whole or in part, established with respect thereto which, in his judgment, is not reasonable and proper.
9. Notwithstanding paragraph 8, the net worth of a business corporation taxable under clause (1) of subsection (a) of section 39 that is a qualified real estate investment trust shall be such portion of the book value of its total assets less its liabilities on the last day of the taxable year as the book value of its tangible assets situated in the commonwealth on said date and not subject to local taxation plus the amount of its intangible assets on said date allocable to the commonwealth, as hereinafter determined, bear to the book value of its total assets on said date. The intangible assets allocated to the commonwealth shall be calculated as follows: (a) the book value of its total intangible assets on the last day of the taxable year shall be reduced by the book value on said date of its investment in and advances to subsidiary business corporations which represent 80 per cent or more of the voting stock of said corporations, or in the case of a subsidiary business corporation which does not have voting stock, the book value of its investment in such business corporation which represents an 80 per cent or more ownership interest; (b) the amount determined in (a) shall be multiplied by such corporation's income apportionment percentage, as determined under section 38. In determining the book value of an asset, the commissioner may disallow a reserve, in whole or in part, with respect thereto which, in the commissioner's judgment, is not reasonable and proper. For the purpose of this paragraph, ''qualified real estate investment trust'' shall mean a business corporation that both qualifies as a real estate investment trust under section 856 of the Federal Internal Revenue Code and that is required to file with the Securities and Exchange Commission annual and other reports as specified in section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; and ''advances'' shall mean such interests in a corporation where a corporation-shareholder relationship exists, determined under such regulations as the commissioner may issue and under section 385 of the Federal Internal Revenue Code as in effect for the taxable year and the regulations issued thereunder.
10. ''Tangible property corporation'', a corporation whose tangible property situated in the commonwealth on the last day of the taxable year and not subject to local taxation is 10 per cent or more of such portion of its total assets on the last day of the taxable year less those assets as are situated in the commonwealth on the last day of the taxable year and are subject to local taxation, less its investment on that date in subsidiary corporations which represent 80 per cent or more of the voting stock of those corporations, as shall be found by multiplying that amount by the corporation's income apportionment percentage, as determined under section 38, or a corporation which, in the judgment of the commissioner, should be so classified. For the purposes of this paragraph, the assets of the corporation shall be valued at their book value.
11. ''Intangible property corporation'', a corporation whose tangible property situated in the commonwealth on the last day of the taxable year and not subject to local taxation is less than 10 per cent of such portion of its total assets on the last day of the taxable year less those assets as are situated in the commonwealth on the last day of the taxable year and are subject to local taxation, less its investment on that date in subsidiary corporations which represent 80 per cent or more of the voting stock of those corporations, as shall be found by multiplying that amount by the corporation's income apportionment percentage, as determined under section 38, or a corporation which, in the judgment of the commissioner, should be so classified. For the purposes of this paragraph, the assets of the corporation shall be valued at their book value.
12. In any case in which the effective date or applicability of any provision of this chapter is expressed in terms of taxable years beginning or ending with reference to a specified date which is the first or last day of a month, with respect to a corporation which has elected to make a return to the federal government on the basis of an annual period which varies from fifty-two to fifty-three weeks, its taxable year shall be treated as beginning with the first day of the calendar month beginning nearest to the first day of such taxable year, or as ending with the last day of the calendar month ending nearest to the last day of such taxable year.
13. ''State'', any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, and any foreign country or a political subdivision of any of the foregoing.
14. ''DISC''—a corporation which meets the requirements of section 992(a)(1) of the Federal Internal Revenue Code, as amended
15. ''Wholly-owned DISC''—a DISC all of whose outstanding shares, except directors' qualifying shares, are owned by a single corporation, either directly or indirectly through other corporations all of whose shares are owned directly or indirectly by such corporation.
16. ''Partnership'', any entity that is classified as a partnership for federal income tax purposes for the taxable year.
17. Notwithstanding the last sentence in subparagraph (b) of paragraph 5, to the extent authorized pursuant to the life sciences tax incentive program established by section 5 of chapter 23I, losses sustained in any taxable year by a taxpayer engaged in business as a life sciences company as defined by section 2 of chapter 23I may, to the extent approved pursuant to said life sciences tax incentive program, be carried forward for not more than 15 years; provided, however, that said losses shall not be carried back.