How long does Massachusetts's R&D credit carry forward?

The credit under M.G.L. c. 63, section 38M is 10 percent of Massachusetts QRE over a base, plus 15 percent of basic research payments. A company can elect a simpler method instead: 10 percent of QRE above half the prior three-year average, or 5 percent of current QRE if any of those years had no QRE.

In any year, the credit can wipe out the first $25,000 of excise in full and 75 percent of the excise above $25,000. It also cannot take the excise below the minimum. Whatever is left carries forward. Ordinary unused credit has 15 years. Credit that was held back only because of the 75 percent limit has no expiry.

Business corporations subject to the chapter 63 excise can claim the credit, and financial institutions can too from 2025. An S corporation can apply it against its own excise, but it cannot pass excess credit through to shareholders, so any carryforward stays with the corporation. Individuals and partnerships cannot claim the credit at all. A startup organized as an LLC taxed as a partnership earns no Massachusetts carryforward from its research, whatever the federal credit looks like.

The general research credit is not refundable, so for a typical software company the carryforward is how the value arrives, which is why the 15-year and indefinite periods matter so much here.

1. Years 1 and 2. The company is pre-profit and owes only the minimum excise. The credit cannot reduce the minimum, so the $30,000 of credit it earns each year all carries forward. The balance is $60,000.
2. Year 3. The excise is $45,000, and the company earns no new credit. The limit is $25,000 (all of the first $25,000) plus $15,000 (75 percent of the $20,000 above it), or $40,000. Assume the $5,000 left owed is above the minimum.
3. After Year 3. $40,000 is used and $20,000 carries forward. Part of that $20,000 was held back only by the 75 percent limit, and that part can carry forward indefinitely. The rest has the 15-year clock. Your CPA works out the split.

A credit earned by a pre-profit company might be used a decade later, after an acquisition or a change of CPA. When it is finally applied, the research behind it has to hold up. That means project records, wage support, and the four-part test analysis from the year the credit was earned. R&D Binder produces the federal Section 41 documentation that the Massachusetts credit rests on, at the time the work is done. Your CPA files the Massachusetts return, and whether your facts qualify is your CPA's call.

• Massachusetts's R&D credit (full overview)
• Massachusetts R&D credit rate
• Massachusetts vs the federal credit
• The Section 41 four-part test
• What is a qualified research expense (QRE)?
• Form 6765 and Section G
• Arizona R&D credit
• California R&D credit
• Idaho R&D credit

• Massachusetts Research Tax Credit (M.G.L. c.63 s.38M) - Massachusetts Department of Revenue
• Massachusetts 2025 Schedule RC instructions - Massachusetts Department of Revenue
• James Moore, Massachusetts R&D tax credit (updated April 2026) - James Moore & Co.