AN ACT ESTABLISHING A MEDICAL DEVICE TAX CREDIT.
Whereas, The deferred operation of this act would tend to defeat its purpose, which is to provide forthwith a medical device tax credit, therefore it is hereby declared to be an emergency law, necessary for the immediate preservation of the public convenience.
Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same as follows:
Chapter 62 of the General Laws is hereby amended by inserting after section 6 the following section:—
Section 6½. (a) As used in this section the following words shall, unless the context clearly requires otherwise, have the following meanings:—
“Department”, the department of revenue.
“Medical device”, an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent or other similar or related article, including a component part or accessory, which is recognized in the official National Formulary or the United States Pharmacopeia, or any supplement thereto, intended for use in the diagnosis of disease or other conditions or in the cure, mitigation, treatment or prevention of disease in humans or other animals and which does not achieve any of its primary intended purposes through chemical action within or on the body of a human or other animal and which is not dependent upon being metabolized for the achievement of its primary intended purposes.
“Medical device company”, a sole proprietorship, partnership, limited liability company, corporate trust, corporation or other business: (i) the income of which is taxed directly to the business or its owners under this chapter; and (ii) that has a facility located in the commonwealth which develops or manufactures medical devices.
“Medical device tax credit”, the tax credit established under this section that a medical device company generated but was unable to claim as of the close of the last taxable year for which a return was filed because of limited tax liability.
“Private financial assistance”, the proceeds of the sale of available tax credits under this section.
“User fees”, the monetary amount actually paid by a medical device company to the United States Food and Drug Administration during the taxable year for pre-market approval to market new technologies developed or manufactured in the commonwealth or for a clearance under section 510(k) of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. 360e and 360, to market upgrades, changes or enhancements to existing technologies that are developed or manufactured in the commonwealth as stipulated in United States Public Law 107-250, federal Medical Device User Fee and Modernization Act.
(b) There shall be allowed to any medical device company as a credit against any tax liability imposed under this chapter an amount equal to 100 per cent of the cost of user fees paid by that medical device company during the taxable year for which the tax is due.
(c) The department shall establish a medical device tax credit transfer program to allow medical device companies doing business in the commonwealth with unused medical device tax credits to transfer those credits for use by a purchasing company in exchange for private financial assistance to be provided by that company to assist in the funding of costs incurred by the medical device companies. The private financial assistance shall be used to fund expenses incurred in connection with the operation of the medical device company in the commonwealth, including costs associated with fixed assets, such as the construction, acquisition and development of real estate, materials, start-up, tenant fit-out, working capital, salaries, research and development expenditures, and any other expenses determined by the department to be necessary to carry out the purposes of the program. A medical device company that wishes to participate in the program shall file an application with the department on a form prescribed by the department that sets forth the medical device tax credit amounts eligible for transfer, the use to which the medical device company intends to put the private financial assistance to be provided, the identity of the purchasing company, the amount of the financial assistance to be provided and such other information as the department may require. No medical device tax credits may be surrendered unless the purchasing company provides financial assistance in an amount equal to at least 75 per cent of the medical device tax credit amounts eligible to transfer.
The department shall review the application and, if the proposed transfer meets the requirements of this section, the department shall, upon receipt of a notarized statement signed under the pains and penalties of perjury by an authorized representative of the medical device company that the purchasing company has provided the specified financial assistance, issue a certificate to the purchasing company reflecting the medical device tax credit amounts transferred, a copy of which shall be attached to each tax return by a purchasing company in which the medical device tax credits are used. The purchasing company shall treat the medical device tax credit amounts purchased under the program as a credit against its tax liability under this chapter. The purchasing company must use the medical device tax credit amounts so treated in tax returns filed within 5 years of the issuance of the certificate, after which period the credits will expire. The purchasing company may not use the medical device tax credit amounts to reduce the income tax to less than the amount due under section 4. No medical device company surrendering medical device tax credits under the program may use the benefits to reduce its tax liability under this chapter.
(d) The commissioner shall promulgate rules and regulations relative to the administration and enforcement of this section.
Approved July 8, 2006.