By being a part of the first 13 colonies, Massachusetts has had a long and rich history. From the arrival of the pilgrims, the first Thanksgiving celebration, to all the patriotic battles in order to form this nation, Massachusetts has been at the forefront of many things. In present day, one might say it is tough to live in this state due to the high costs of living; however its long history has allowed the state to establish solid foundations for the education and health of its citizens. Based on our research, the quality of life in Massachusetts is great, it just comes at a high price.

Business Climate

Whether the business climate of Massachusetts is good or bad depends on your perspective. The state is among the worst when it comes to business costs (labor and taxes) and cost of living, however the state has some very bright spots. In terms of quality of life, education, technology and innovation, Massachusetts is one of the best. Massachusetts has been able to capitalize on the financial and technology industry. The state is the home to many brokerage firms, insurance and tech companies. The state has also taken advantage of its geography as its fishing industry nets more than 2.5 million pounds of fish every year. Despite the high costs of living, the state provides a bountiful supply of highly-educated graduates from top-rated schools, notably Harvard University. The state is seeing an influx of start-up companies due to the skilled labor force. Massachusetts’ ability to provide a high quality of living and innovation likely offsets the cost of doing business.

Taxes

Receiving the nickname “Taxachusetts” in the past, the state of Massachusetts has always ranked largely unfriendly when it comes to state and local taxes. Yet, according to the Tax Foundation’s 2015 State Business Tax Climate Index, Massachusetts sits in the middle of the pack as it ranks 24th out of 50.

Massachusetts levies a flat rate of 8.0% for its corporate income tax rate – 13th highest in the nation. On the other hand its individual income tax rate is at a flat rate of 5.15% which is 21st lowest among other states that impose individual income taxes. Surprisingly, in 2012, the state income tax collections per person for both corporate and individuals were among the top 5 in the nation. The state’s tax rates are not the highest, however they still manage to collect more than others.

Another important figure for businesses is that Massachusetts levies a 6.25% general sales or use tax on consumers, which is above the national median of 5.95%.

Tax Credits & Incentives

As we’ve mentioned earlier, Massachusetts provides a wealthy supply of skilled labor as well as innovation. The state uses those attributes to focus on job creation and technology.

Economic Development Incentive Program (EDIP): This program is a partnership between the companies, local community and state government in order to foster job creation and stimulate business growth. Companies are able to receive state and local tax incentives through full-time job creation, job retention, and private investments. Since its reformation in 2010, the EDIP has been one of the most effective programs in the state. There is $25 million of available credit through the EDIP each year.

  1. TheEconomic Assistance Coordinating Council (EACC) is the administering and governing body of the Economic Development Incentive Program (EDIP).
  1. The EACC categorizes the projects the may certify as:
    • Expansion Projects (EP)
    • Enhanced Expansion Projects (EEP)
    • Manufacturing, Retention & Job Growth Projects (MRP)
    • Job Creation Projects (JCP)
    • Tax Increment Financing – Local Incentive (TIF)
  1. EDIP Investment Tax Credits are granted at the discretion of the EACC. Determination of the incentive are based on the eligibility requirements within the following criteria: job creation, capital investment, municipality involvement, and industry, geographical and substantial out-of-state sales requirements. The minimum criteria requirements for each project differ.

Research & Development Tax Credit Program: The R&D credit is designed to reduce obstacles to investments and promote growth and innovation. This credit is available to any foreign or domestic corporation that is subject to corporate taxes in Massachusetts.

  1. The Massachusetts R&D tax credit program is split into two categories:
    • A 10% credit for Qualified Expenses which are defined as any research expense incurred would qualify for the Federal R&D tax credit.
    • A 15% credit for Basic Research Payments which are costs related to donations and contributions made to research organizations such as hospitals and universities.
  1. Massachusetts’ credit is permanent, while other states have temporary credits.
  1. The R&D tax credit can be taken in conjunction with the state’s Investment Tax Credit of 3% (or 5% as part of the EDIP)

Investment Tax Credit Program (ITC): Massachusetts offers a 3% credit for qualifying business against their Massachusetts corporate excise tax. The credit is used for the purchase and lease of qualified tangible property used in the course of business operations.

  1. The credit is 3% of the cost of qualifying tangible property acquired or constructed which may include buildings and structural components of buildings.

Random Facts

  • The original Thanksgiving Day was celebrated in Plymouth in 1621.
  • Boston built the first subway system in the United States in 1897.
  • Norfolk County is the birthplace of four United States presidents: John Adams, John Quincy Adams, John F. Kennedy, and George Herbert W. Bush.
  • James Naismith invented the game of basketball in 1891 in Springfield.
  • William Morgan invented the game of volleyball in 1895 in Holyoke.
  • Massachusetts observes a legal holiday called Patriot’s Day which lands on the third Monday of April each year.
EDIP investment massachusetts tax tax credit