830 CMR, § 64H.6.4

Current through Register 1533, October 25, 2024

Section 64H.6.4 - Research and Development

(1)Statement of Purpose; Outline of Topics.

(a)Purpose. The purpose of 830 CMR 64H.6.4 is to explain the requirements for an entity to qualify for exemption from Massachusetts sales tax under M.G.L. c. 64H, § 6(r) and (s) on its purchases of tangible personal property used directly and exclusively in research and development. This exemption applies to a research and development corporation or a manufacturing corporation as defined under M.G.L. c. 63, § 38C or 42B. In the instance of a research and development corporation the entity must meet either a receipts or expenditures test as further explained in 830 CMR 64H.6.4(5) and (6). In addition, 830 CMR 64H.6.4 explains the eligibility of research and development corporations and manufacturing corporations for certain credits and other exemptions. 830 CMR 64H.6.4 does not address eligibility for the Massachusetts research credit provided by M.G.L. c. 63, § 38M, the rules for which are provided in 830 CMR 63.38M.1.

(b)Outline of Topics. 830 CMR 64H.6.4 is organized as follows:

1. Statement of Purpose; Outline of Topics

2. Definitions

3. General Rule

4. Qualification Requirements for Research and Development Corporations

5. Receipts test

6. Expenditures test

7. Examples

8. Qualification Requirements for Manufacturing Corporations

9. Eligibility for Sales Tax Exemptions under M.G.L. c. 64H, § 6(r) and (s)

10. Credits and Other Exemptions

(2)Definitions. For purposes of 830 CMR 64H.6.4, the following terms have the following meanings unless the context requires otherwise:

Code. The Internal Revenue Code of the United States in effect for the taxable year, except as otherwise provided.

Domestic Corporation. An entity that is either a corporation organized under or subject to M.G.L. c. 156D that is taxable under M.G.L. c. 63, § 30 et seq., or a limited liability company organized under M.G.L. c. 156C that is not classified as a partnership and that has elected to be taxed as a corporation separate from its members for federal income tax purposes.

Foreign Corporation. An entity that has a usual place of business in the Commonwealth and that is either:

(a) a corporation, association or organization established, organized or chartered under laws other than those of the Commonwealth that is taxable under M.G.L. c. 63, § 30 et seq.; or

(b) a foreign limited liability company taxed as a corporation separate from its members for federal income tax purposes and for purposes of M.G.L. c. 63, § 30 et seq.

Research and Development. 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. Research and development 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 literary, historical or similar projects. Research and development is complete when the product, process, technique, formula, invention, or software can be reliably reproduced for sale or commercial use.

(3)General Rule. An entity that qualifies under the provisions of M.G.L. c. 63, § 38C or 42B as a research and development corporation or a manufacturing corporation is eligible to claim the sales tax exemptions in M.G.L. c. 64H, § 6(r) and (s) on its purchases of materials, tools, fuel, machinery and replacement parts used directly and exclusively in research and development. In addition, such entities may be eligible for certain credits and other exemptions. The determination of whether an entity qualifies as an eligible research and development corporation or manufacturing corporation must be made on an annual basis for the applicable taxable year. A corporation that is not a research and development corporation solely because it was not in existence in the previous tax year may utilize current information and reasonable projections of its business activity for its first year of existence. In calculating an entity's receipts or expenditures for purposes of 830 CMR 64H.6.4, a taxpayer must use the same taxable year and method of accounting used for federal income tax purposes.

(4)Qualification Requirements for Research and Development Corporations. To qualify as a research and development corporation, an entity must meet four separate requirements. First, it must be either a domestic or foreign corporation. Second, it must be engaged in research and development in the Commonwealth. Third, its principal activity in the Commonwealth must be research and development. Fourth, for purposes of claiming the sales tax exemptions in M.G.L. c. 64H, § 6(r) and (s), it must meet either a receipts test or an expenditures test, as provided in 830 CMR 64H.6.4(5) or (6), respectively; for other purposes, such as claiming investment tax credit, it must meet the receipts test (see830 CMR 64H.6.4(10)) . For purposes of the third requirement, principal activity means the predominant activity of a corporation in Massachusetts relative to its other activities in Massachusetts. The determination of a corporation's principal activity is based on the facts and circumstances surrounding the corporation's operations. An entity having a majority of its Massachusetts based employees engaged in research and development will be presumed to meet this requirement. For a corporation qualifying as a research and development corporation by virtue of meeting the fourth requirement's expenditures test, the exemptions from sales tax in M.G.L. c. 64H, § 6(r) and (s) apply only to purchases made on or after November 26, 2003.

(5)Receipts Test.

(a)General. In order to qualify under the receipts test, more than b of a corporation's Massachusetts receipts must be derived from research and development during the taxable year. For purposes of this computation, the numerator is the corporation's gross receipts derived from research and development performed in Massachusetts and the denominator is the corporation's gross receipts derived from all activities in Massachusetts.

(b)Definitions. For purposes of 830 CMR 64.H.6.4(5)(a), the following definitions apply.

1. Receipts means the total amount, as determined under the taxpayer's method of accounting, derived by the taxpayer from all its activities and from all sources, including but not limited to interest, dividends, and other investment income, subject to the following exclusions. Receipts do not include the following:

a. proceeds from returns or allowances;

b. proceeds from repayments of loans or similar instruments;

c. reimbursements from affiliated companies for third party charges for administrative expenses that the taxpayer reasonably incurred and charged out to affiliates;

d. receipts from a transaction not in the ordinary course of business, such as the sale of an entire business;

e. contributions to the capital of an enterprise, including amounts paid for stock or other equity instruments; or

f. amounts paid for debt instruments issued by an enterprise.

2. Massachusetts receipts are receipts that are received in consideration for or on account of a taxpayer's activities in Massachusetts.

3. Receipts derived from research and development means gross receipts, as determined by the taxpayer's method of accounting used for federal income tax purposes, realized from the provision of research and development, as defined in M.G.L. c. 63, §§ 38C, 42B, and 830 CMR 64H.6.4(6)(2) and royalties or fees derived from the licensing of patents, know-how or other technology developed from the taxpayer's research and development activities in Massachusetts. Amounts received under any grant, contract, or otherwise for research and development are included within this definition regardless of whether activities conducted under such grants are excluded from the definition of " qualified research" under Treasury Code § 41(d)(4)(H). Receipts derived from a corporation's administrative functions including financial, personnel, legal, tax, accounting, or planning services are generally not receipts derived from research and development.

(6)Expenditures Test.

(a)General. In order to qualify under the expenditures test, more than b of a corporation's Massachusetts expenditures must be allocable to its research and development activities during the taxable year. For purposes of making this computation, the numerator is the corporation's total Massachusetts expenditures that are allocable to research and development activities and the denominator is the corporation's total Massachusetts expenditures, provided, however, that neither the numerator or denominator is to include the corporation's manufacturing expenses or administrative expenditures, as further described in 830 CMR 64H.6.4(6)(c).

(b)Definitions. For purposes of 830 CMR 64H.6.4(6)(a), the following definitions apply.

1. Expenditures means any expenditure paid or incurred in the course of conducting the taxpayer's business during the taxable year, including but not limited to expenses related to sales and distribution activities.

2. Except as otherwise provided in 830 CMR 64H.6.4, Massachusetts expenditures allocable to research and development activities are expenditures that are paid or incurred for research and development performed in Massachusetts.

3. Expenditures are allocable to research and development activities if they are paid or incurred, as determined by the taxpayer's method of accounting used for federal income tax purposes, for research and development conducted or to be conducted by the taxpayer and that are treated as research and experimental expenditures under Treasury Code § 174 and the applicable regulations promulgated thereunder. The following expenditures are examples of expenditures that are allocable to research and development activities.

a.Funded Research Expenditures. Expenditures incurred by a corporation conducting research and development, within the meaning of 830 CMR 64H.6.4, to the extent funded by any grant or contract, or otherwise by another person or governmental entity, are considered to be expenditures allocable to research and development activities.

b.Costs Incident to Research and Development. Costs incident to the development or improvement of a product are considered to be allocable to research and development activities. Such costs include, for example, the costs of obtaining a taxpayer's own patent, such as attorney's fees expended in making and perfecting a patent application. However, costs allocable to research and development activities do not include legal expenses, patent fees or other costs associated with the acquisition of another's patent, model, production or process.

c.Depreciable and Amortizable Property. Expenditures paid or incurred for the acquisition of depreciable property that is subject to an allowance for depreciation under Treasury Code §§ 167 and 168, amortization under Treasury Code § 197, or depletion under Treasury Code § 611 are not deductible under Treasury Code §174, irrespective of whether the property or improvements may be used by the taxpayer in connection with research and development activities. Nevertheless, allowances for depreciation, amortization, or depletion of property are considered research and development expenditures for purposes of Treasury Code § 174, to the extent that the property to which the allowances relate is used in connection with research and development in Massachusetts. Accordingly, for purposes of 830 CMR 64H.6.4, such allowances are allocable to research and development.

d.Development of Computer Software. Expenditures that relate to the research and development of computer software may constitute expenditures allocable to research and development, depending on the facts and circumstances surrounding the research and the use to which the software is put. However, the development and sale of standardized computer software may constitute manufacturing activity, and effective for taxable years beginning on or after January 1, 2006, the development and sale of standardized computer software as defined in 830 CMR 64H.1.3(2) is considered a manufacturing activity, without regard to the manner of delivery of the software to the customer including electronic delivery. See M.G.L. c. 63, §§ 38C and 42B.

(c)Non-includable Expenditures.

1.Administrative Expenditures. Expenditures related to a corporation's administrative functions, such as personnel, legal, tax and accounting expenses are not includable in either the numerator or the denominator of the expenditures fraction.

2.Manufacturing Expenditures. A corporation that is engaged in research and development that also conducts manufacturing activities must exclude expenditures relating to its manufacturing activities from the numerator and denominator of its expenditures fraction, regardless of whether the manufacturing activities are substantial. The development and sale of standardized computer software may constitute manufacturing activity, and effective for taxable years beginning on or after January 1, 2006, the development of sale and standardized computer software shall be considered to be a manufacturing activity without regard to the manner of delivery of the software to the customer, including electronic delivery. Accordingly, to the extent that a corporation's development and sale of such software is a manufacturing activity, expenditures relating to such activity must be excluded from both the numerator and denominator of the corporation's total expenditures for purposes of calculating its expenditures allocable to research and development activities.

(d)Specific Expenditures. The following expenditures are either included or excluded from the numerator or denominator, as noted.

1.Supplies. Amounts paid for supplies used or consumed in conducting research and development in Massachusetts are included in the numerator and denominator.

2.Payroll Expenditures. Payroll expenditures paid or incurred for research and development performed in Massachusetts are included in the numerator and denominator.

a. If an employee performs qualified research and development activities and also performs other activities in Massachusetts, only the wages proportionate to the time spent on qualified research and development activities are allocable to research and development and therefore included in the numerator (i.e., assuming the activities are performed in Massachusetts). The employee's entire wages are included in the denominator.

b. If an employee performs research and development activities both in and outside of Massachusetts, only the wages proportionate to the time spent on qualified research and development in Massachusetts are included in the numerator and denominator.

c. The wages of employees who supervise or are supervised by persons performing qualified research and development are included in both the numerator and the denominator to the extent the work of those supervising or being supervised constitutes research and development performed in Massachusetts.

3.Third Party Expenditures. Certain expenditures paid or incurred for research and development performed by third parties on a corporation's behalf at a research facility located in Massachusetts are included in the numerator and the denominator. These include expenditures allowed in Treasury Reg. § 1.174-2(a)(8) and "contract research expenses" as described in Treasury Code § 41(b)(3), provided that these expenses are incurred for research and development performed in Massachusetts. Other third party Massachusetts expenditures unrelated to research and development are included in the denominator. In order to claim third party expenditures, a taxpayer must maintain sufficient documentation substantiating the identity of any parties conducting the research on the corporation's behalf, the nature of the research, and the locations where such contract research was conducted.

4.Clinical Trials. Expenditures paid or incurred in conducting clinical trials performed by the corporation itself, or for services provided by third parties performing such trials on its behalf, in Massachusetts are included in the numerator and the denominator. Generally, expenditures incurred in conducting clinical trials outside Massachusetts are not included in the numerator or denominator, even if the corporation is headquartered in Massachusetts, and even if the clinical trials are initiated, managed, and directed from within Massachusetts. However, the in-state costs of employees actually supervising, managing and directing clinical trials are includable in the numerator and denominator even if the trials themselves are conducted outside of Massachusetts.

5.Shared Expenditures. Research and development expenditures that are shared across multiple locations of a corporation will be attributed to Massachusetts using a proration allocation as provided in 830 CMR 63.38M.1(4)(b)4, without regard to the 65% limitation imposed by Treasury Code § 41(b)(3) for purposes of calculating the credit for increasing research activities. When such expenses relate to amounts paid for research and development services performed both within and without Massachusetts, the amount of the expense must be prorated between Massachusetts and non-Massachusetts activity based on the ratio of days the service provider or tangible personal property was employed in research and development in Massachusetts to the total number of days the service provider or tangible personal property was employed in research and development both within and without Massachusetts.

6.Computer Expenses. Expenditures for the use of computers and information technology to store, collect, manipulate, translate, disseminate, produce, distribute or process data or information, or expenditures for similar uses of computers and information technology are included in the numerator and denominator if they are Massachusetts expenditures and are deductible as research and development expenditures. In general, unless otherwise provided in 830 CMR 64H.6.4, amounts paid for the right to use computers in the conduct of a corporation's research and development in Massachusetts are includable expenditures to the extent that they are treated as inhouse expenses under Treasury Code § 41(b)(2)(A)(iii). Depending on the facts and circumstances, eligible computer expenses may include the lease, rental, or repair of equipment used in research and development at a research facility located in Massachusetts. In addition, amounts paid to another person for the right to use computers are included in the numerator and the denominator to the extent the computer is used in the conduct of performing research and development that takes place in Massachusetts.

(7)Examples. The following examples illustrate the application of the various requirements for qualification as a research and development corporation.

Example 1: Company A is a venture-backed start-up corporation that will be engaged in the research and development of a product constituting tangible personal property. During the taxable year, the company raises $5,000,000 intended to finance its research and development activities. It does not receive any other funds from performing research and development. For purposes of 830 CMR 64H.6.4, such financing, whether in the form of a contribution to capital or a loan, is not a receipt derived from research and development and may not be used for purposes of determining whether Company A has a sufficient amount of receipts from research and development. However, Company A may qualify as a research and development corporation if it has the requisite percentage of Massachusetts expenditures allocable to research and development for the taxable year, provided that it meets the other requirements for qualification as a research and development corporation.

Example 2: Company C is organized as a partnership. It has two incorporated partners. Company C does not qualify as a research and development corporation. However, the activities of the partnership are allowed to flow through on a pro rata basis to corporate partners. If the pro-rata share of the corporate partners' Massachusetts receipts allocable to research and development exceed the b threshold, and the corporate partners otherwise qualify, the sales tax exemptions in M.G.L. c. 64H, § 6(r) and (s), are available to the corporate partners. However, while purchases of materials and machinery may qualify for the exemption from sales tax under M.G.L. c. 64H, § 6(r) and (s) when purchased by the corporate partners, such purchases do not qualify if purchased by the partnership itself.

Example 3: Company D is a limited liability company (LLC) organized under M.G.L. c. 156C. In order to qualify for exemption as a research and development corporation, it must elect to be treated as a corporation for federal income tax purposes and file federal Form 1120 and a Massachusetts corporate excise return as a separate entity for all periods for which an exemption is claimed. For 2004, 2005 and 2006, Company D filed as a corporation for federal and state tax purposes under the "check-the-box" rules. It can qualify for exemption as a research and development corporation in the same manner as an incorporated entity for those years. If Company D does not "check-the-box" to be treated as a corporation for those years, it does not qualify regardless of any other facts.

Example 4: E Corporation enters into an agreement under which F Corporation will perform research on E's behalf. E's contract research expenses paid or incurred in connection with F's research done on its behalf are includable for purposes of calculating whether b of E's expenditures are incurred in research and development in Massachusetts, if the research is performed in Massachusetts. To the extent that E has contract expenses for other third party Massachusetts expenditures unrelated to research and development, those are included in the denominator of the expenditures test.

Example 5: E Corporation developed a particular technology in Massachusetts. E Corporation grants F Corporation a license to use this technology. The amounts paid by F to E in connection with F's use of the technology are includable for purposes of determining whether b of E's receipts are from research and development in Massachusetts.

(8)Qualification Requirements for Manufacturing Corporations. An entity qualifies as a "manufacturing corporation" entitled to the sales tax exemption on purchases of tangible personal property used directly and exclusively in research and development if it:

(a) is a domestic or foreign corporation within the meaning of the definitions set forth in 830 CMR 64H.6.4(2); and

(b) is either classified as a manufacturing corporation by the Commissioner pursuant to M.G.L. c. 58, § 2 or has manufacturing corporation status under 830 CMR 58.2.1(5) and (6). See830 CMR 58.2.1: Manufacturing Corporations.

(9)Eligibility for Sales Tax Exemptions under M.G.L. c. 64H, § 6(c) and (s).

(a)General Rule. Under M.G.L. c. 64H, § 6(r), the sales tax does not apply to the sale or use of materials, tools and fuel, or any substitute therefor, which are consumed and used directly and exclusively in research and development by a manufacturing corporation or a research and development corporation. Materials, tools and fuel are "consumed and used" only if their normal useful life is less than one year or their cost is allowable as an ordinary and necessary business expense for federal income tax purposes. Nuclear fuel and nuclear fuel assemblies are regarded as consumed and used even if they do not meet this test. Under M.G.L. c. 64H, § 6(s), the sales tax does not apply to the sale or use of machinery, or replacement parts thereof, used directly and exclusively in research and development by a manufacturing corporation or a research and development corporation.

(b)Directly and Exclusively. For purposes of 830 CMR 64H.6.4, the exemptions in M.G.L. c. 64H, § 6(r) and (s) apply only to sales of materials, tools, fuel, machinery and replacement parts used directly and exclusively in research and development by a research and development corporation or manufacturing corporation. An item is not considered used directly and exclusively merely because it is essential to research activities or because its use is required by law. Tangible personal property, machinery and replacement parts or equipment used in managerial or sales activities is not directly and exclusively used in research and development and is therefore subject to tax.

1.Directly. Tangible personal property, including materials, tools, fuel, machinery and replacement parts, is used "directly" in research and development only if it is used in experimental or laboratory activity that qualifies as research and development under 830 CMR 64H.6.4. In determining whether any property is "directly" used, the fact that a particular item of property may be integral and necessary to the conduct of the activity because its use is required either by law or practical necessity does not, in and of itself, mean that the property is directly used in research and development. The following is a non-exhaustive list of machinery and materials which are not directly used in research and development:

a. Machinery and materials used exclusively for the comfort of worker. Examples are air conditioning and ventilation systems.

b. Machinery and materials used in support operations, such as a machine shop, in which R&D machinery is assembled, maintained, or repaired.

c. Machinery and materials used by the administrative, accounting, and personnel departments.

d. Machinery and materials used by plant security, fire prevention, first aid, and hospital stations.

e. Machinery and materials used in plant communications and safety.

Example 1: Laboratory supplies for use in a research laboratory are exempt but supplies, desks and chairs used by clerical personnel are not exempt.

Example 2: Test tubes, flasks, reagents, microscopes and slides purchased by a chemical manufacturer for its research laboratory for developing new pesticides are exempt from sales tax.

Example 3: Technical books and journals purchased for a research and development laboratory for use in doing background research are used directly in research and development.

Example 4: Worcester Widgits, Inc. is a manufacturing corporation that maintains a chemical laboratory for exclusive use in developing new heat-resistant plastics. It purchases the following items for exclusive use in its research and development activities: a computer that will only be used to process data relating to the heat resistance of the plastics, test tubes, flasks and reagents, soap for cleaning laboratory equipment, smocks and gloves for laboratory personnel, an autoclave for sterilizing laboratory equipment, cleaner and wax for laboratory floors, and pencils, pens, paper and a typewriter for use in the office of the laboratory's director. Its purchases of the cleaner and wax for laboratory floors, and the pencils, pens, paper and typewriter for use in the office of the laboratory's director, are subject to tax because the items are not used directly in research and development. Its purchases of the test tubes, flasks, reagents, soap for cleaning laboratory equipment, and smocks and gloves for laboratory personnel are exempt from tax if the normal useful life of the items is less than one year or their cost is allowable as an ordinary and necessary business expense for federal income tax purposes. Worcester Widgits' purchase of the computer to be used exclusively in processing data relating to the heat resistance of the plastics and the autoclave is exempt from tax.

2.Exclusively. Materials, tools, fuel, and machinery and replacement parts are used exclusively in research and development if 100% of their use is in such function. However, for purposes of 830 CMR 64H.6.4, a de minimis use will not defeat the exclusivity requirement of the exemptions in M.G.L. c. 64H, § 6(r) and (s). Whether a use is de minimis shall be determined by the Commissioner based on the facts and circumstances of a taxpayer's overall operations.

Example 1: A company purchases a computer system which it uses directly for research and development. However, on two separate days during the year the computer is used to generate management reports that include information with respect to research projects but also address many other issues facing the company. No other taxable usage is made of the computer. Although the generation of management reports may be a taxable usage of research equipment, this use of the computer is de minimis.

Example 2: Facts are the same as Example 1, except that instead of generating the two management reports, the computer is used to generate weekly payroll and employment tax return reports. The generation of these reports on a regular basis is not a de minimis taxable usage of the computer. Therefore, the computer is not considered used exclusively for research and development, and is taxable.

Example 3: Marblehead Microchips, Inc. is a manufacturing corporation that maintains a laboratory containing machinery used 75% of the time for research and development of new products and 25% of the time for quality control purposes. The machinery is not considered used exclusively for research and development. Therefore, the corporation's purchases of the materials and machinery are subject to tax.

Example 4: Company D, a foreign corporation, performs research and development in Massachusetts. It purchased computers, other hardware, printers and software for its use in its research and development department. The computers, other hardware, printers, and software products were used in data analysis and for documentation of testing results. The equipment and software were also used in other applications for purposes related to the conduct of research and development. Word processing applications were used to generate technical reports, notebook records, and monthly reports. E-mail applications were used for data acquisition and calculation programs as well as communication among research colleagues. Graphics and spreadsheet software played a role in the activities of the research and development department. Software also supported technical information storage, retrieval, and dissemination operations for the use of the research and development staff.

The software required a computer system and its hardware components to perform these functions. The printers were similarly indispensable to the effective utilization of the computers in the ways described in this example. Software, hardware and printers generally function as a single, interconnected system. Assuming that the computer system is used solely for exempt purposes or non-exempt purposes that are de minimis, the computers, hardware, printers, and software qualify as being used directly and exclusively in research and development.

Example 5: A research and development corporation purchases gas, electricity, refrigeration and steam which is used in bulk or in a continuous flow at its research and development facility in Massachusetts. The electricity is used in all areas of its facility, including the areas in which its administrative functions are performed. The corporation may present an Exempt Use Certificate with respect to the exempt portion of the energy, (e.g., the portion use directly and exclusively in research and development) if known at the time of purchase. If the exempt portion is not known at the time of purchase, the taxpayer may present its vendor with an Exempt Use Certificate and pay use tax on the non-exempt portion of the energy purchased. If a taxpayer either did not provide a certificate at the time of the purchase or subsequently determines that all or a portion of its purchases were exempt from tax, it may subsequently request its vendor to provide a refund or credit for the tax paid on the portion used directly and exclusively in research and development. The vendor may apply for an abatement of the portion of the tax paid in accordance with the rules of the Abatement regulation, 830 CMR 62C.37.1. The user must maintain adequate records with respect to the allocation of gas, electricity, refrigeration and steam used directly and exclusively in research and development from that used for non-exempt purposes.

(10)Credits and Other Exemptions. Research and development corporations and manufacturing corporations may be eligible for certain other tax benefits, as follows:

(a)Investment Tax Credit (ITC) under M.G.L. c. 63, § 31A. Corporations treated as manufacturing corporations and those research and development corporations qualifying as such by virtue of meeting the receipts test in 830 CMR 64H.6.4(5) may claim the ITC against the Massachusetts corporate excise for qualifying property to the extent allowed allowed by M.G.L. c. 63, § 31A. Such corporations should refer to 830 CMR 58.2.1, Manufacturing Corporations, and the Commissioner's public written statements interpreting it for rules that apply to claiming the ITC. However, research and development corporations qualifying as such solely on the basis of the expenditures test in 830 CMR 64H.6.4(6) are ineligible to take the ITC credit.

(b)Local Property Tax Exemption for Machinery under M.G.L. c. 59, § 5(16)(3). Corporations that are properly classified by the Commissioner as manufacturing corporations, are eligible for the exemption from local property tax under M.G.L. c. 59, § 5(16)(3) on their machinery. See M.G.L. c. 58, § 2; 830 CMR 58.2.1(4)(a). See also M.G.L. c. 59, § 5(16)(3). Corporations that are not so classified are not eligible for this local property tax exemption even if they are engaged in manufacturing. Research and development corporations that have been properly classified as such and that have machinery situated in a locality that has adopted the exemption from local property tax for research and development corporations provided under M.G.L. c. 59, § 5(16)(3) are also eligible for the local property tax exemption on such machinery.

830 CMR, § 64H.6.4