Examples

(a) Example 1. Qualifying Investments in Qualifying Businesses Not Located in Gateway Municipality. On June 1, 2020, James, a Massachusetts resident, makes a $100,000 qualifying investment in X Corporation, a qualifying business not located in a Gateway Municipality within Massachusetts. Upon approval by the MLSC’s Board of Directors, MLSC certifies to DOR that James and X Corporation entered into an agreement with the MLSC and that James is a taxpayer investor and made a qualifying investment in a qualifying business. The total allowable credit in the agreement is $20,000. As stated in 830 CMR 62.6.5, the credit is equal to 20% of the total qualifying investment made by the taxpayer investor for the taxable year. James may claim the $20,000 credit on his 2020 Massachusetts income tax return.

(b) Example 2. Qualifying Investments in Qualifying Businesses Located in Gateway Municipality. On June 1, 2020, Julia, a Massachusetts resident, makes a $100,000 qualifying investment in X Corporation, a qualifying business located in a Gateway Municipality within Massachusetts. Upon approval by the MLSC’s Board of Directors, MLSC certifies to DOR that Julia and X Corporation entered into an agreement with the MLSC and that Julia is a taxpayer investor who made a qualifying investment in a qualifying business. The total allowable credit in the agreement is $30,000. As stated in 830 CMR 62.6.5, the credit is equal to 30% of the total qualifying investment made by the taxpayer investor for the taxable year. Julia may claim the $30,000 credit on her 2020 Massachusetts income tax return.

(c) Example 3. Qualifying Investments by a Nonresident Taxpayer. On June 1, 2020, Jack, a resident of New York, with no Massachusetts source income as defined in M.G.L. c. 62, § 5A, makes a $100,000 qualifying investment in X Corporation, a Massachusetts qualifying business located in a Gateway Municipality within Massachusetts. Upon approval by the MLSC’s Board of Directors, MLSC certifies to DOR that Jack and X Corporation entered into an agreement and that Jack is a taxpayer investor who made a qualifying investment in a qualifying business. The total allowable credit in the agreement is $30,000. As a non-resident with no Massachusetts source income, Jack is not able to claim the credit for the 2020 taxable year because he has no Massachusetts source income with which to offset the credit. In the following taxable year, Jack plays the Lottery in Massachusetts and wins. Jack now has Massachusetts source income and is required to file a 2021 Form 1-NR/PY nonresident income tax return in Massachusetts. Jack can carry forward the unused credit from 2020 to offset the amount of tax due for the 2021 taxable year. Any unused credit may be carried forward for up to two additional years and used to offset Massachusetts source income, if any, recognized in those years.

REGULATORY AUTHORITY 830 CMR 62.6.5: M.G.L. c. 62; c. 14, § 6(1); M.G.L. c. 62C, § 3; M.G.L. c. 62, § 6(t).

Date of Promulgation: July 24, 2020

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