Massachusetts R&D Tax Credit (M.G.L. c. 63 §38M)

Massachusetts R&D Tax Credit (M.G.L. c. 63 §38M)

Funds Massachusetts innovation teams with tax credits for qualifying project spending and growth.

Eligibility · United States · US-MA

The Massachusetts Research Tax Credit, established under Massachusetts General Laws Chapter 63, Section 38M, is a state corporate income tax credit available to business corporations subject to the Massachusetts corporate excise that incur qualified research expenses (QREs) from research activities conducted within Massachusetts. The credit mirrors the federal research credit structure: the standard rate is 10% of incremental qualified research expenses over the calculated base amount, plus 15% of basic research payments made to qualified Massachusetts research universities — a Massachusetts-specific feature that rewards industry-university collaboration. Life sciences companies certified by the Massachusetts Life Science Center (MLSC) may additionally access a refundable version of the 38M credit, under which 90% of excess credits are paid as cash rather than carried forward.

The credit is structured as a corporate excise offset, subject to a floor constraint: it may not reduce a taxpayer's liability below the $456 corporate minimum excise. More significantly, the credit is limited in any given year to the first $25,000 of corporate excise due plus 75% of any excise above that threshold. Unused credits carry forward up to 15 years; credits disallowed under the 75% rule carry forward indefinitely. There is no application, no competitive cycle, and no agency discretion — the credit is claimed on the Massachusetts corporate excise return. QREs must be attributable to services and supplies used in Massachusetts-based research to qualify.

For non-life-sciences companies, the credit functions as a straightforward annual entitlement tied to Massachusetts R&D expenditure, making robust QRE documentation the primary lever for maximizing value. Life sciences companies should evaluate whether to pursue MLSC certification, which unlocks the refundable 38M credit — generating immediate cash when the credit exceeds current tax liability — alongside the investment tax credit, FDA user fees credit, and jobs credit available under the broader Massachusetts Life Sciences Tax Incentive Program. Startups with limited near-term taxable income benefit most from the refundable MLSC pathway rather than the standard carryforward mechanism.