Sen. Bruce Tarr files bill to create "super" R&D tax credit limited to in‑state spending

A bill filed Jan. 9, 2025, by Sen. Bruce E. Tarr would establish a "Super Research and Development Tax Credit" allowing business corporations and other taxpayers that already qualify under section 38M to claim an additional credit for qualified research expenses conducted in Massachusetts that exceed a defined base amount. The filing is Senate Bill No. 2080 and was submitted for consideration to the Joint Committee on Revenue.

The measure matters because it would change how Massachusetts incentivizes research and development spending, potentially increasing state tax expenditures while targeting credits to activity conducted in the Commonwealth. The bill also includes limits intended to restrain annual revenue impact and rules for multi‑company filings.

Under the bill, the "super credit base amount" is defined as the taxpayer's average qualified research expenses for the five taxable years immediately preceding the section's effective date, increased by 50 percent. A taxpayer would receive an additional credit equal to the excess of qualified research expenses for the taxable year over that base amount, but only for research conducted in the State. "Qualified research expenses" is linked in the bill to the meaning used in 830 CMR 63.38M.1 and section 38M of Chapter 63.

The credit would be limited in multiple ways. First, a taxpayer could use the credit only up to 50 percent of its tax due after allowing any other credits under Chapter 63. Second, unused portions of the super credit could be carried forward and applied to tax due in any one or more of the next five succeeding taxable years, subject in each year to the same 50 percent-of-tax limitation. Third, the credit could not be used to reduce a corporation's tax liability below the amount of tax due in the preceding taxable year after allowance of other credits, per the bill's text.

For corporations filing a combined return, the bill directs that a credit generated by an individual member corporation must first be applied against that member's tax attributable under the Part. A member corporation with an excess research and development credit may apply its unused credit against another group member's tax to the extent that member can use additional credits under the subsection limits. Unused, unexpired credits remain with the member corporation that generated them and are carried forward consistent with the five‑year carryover rule.

The bill cites and modifies language surrounding Section 38 of Chapter 63 and references existing law under Section 38M and regulation 830 CMR 63.38M.1 as the baseline for qualified research expenses; it also notes that similar matter was filed in the previous legislative session (Senate No. 1935 of 2023‑2024). The filing text does not state an enactment date or a projected revenue estimate.

Procedurally, the filing text lists Sen. Bruce E. Tarr as the petitioner and indicates the matter was sent to the Revenue committee for consideration. No floor votes or committee actions are contained in the filing itself.

Key clarifying details in the bill text include: the base amount calculation (five‑year average increased by 50 percent); the limitation to research performed in Massachusetts; the 50 percent‑of‑tax cap after other credits; a five‑year carryforward of unused credit; and special allocation and carryforward rules for corporations filing combined returns. The filing references existing statutory and regulatory provisions rather than creating a new definition of "qualified research expenses." The filing also notes similar prior legislation from 2023‑2024 but does not provide legislative history beyond that citation.

Affected parties would include Massachusetts business corporations and other taxpayers that currently qualify under section 38M and undertake research in the State; the bill's fiscal impact on state revenue and on individual taxpayers is not provided in the filing.

The next step for the measure is committee consideration by the Joint Committee on Revenue, which must review the bill text, any fiscal notes, and testimony before reporting it to the full Legislature for further action.