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            ASSACHUSETT
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  A                   P L ACIDAM SVBLIBERTAT          N
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            E              N    T O    F          R
                                                          Commonwealth of MassachusettsDepartment of Revenue
General Information                                      2
Filing Requirements                                      4
Instructions                                             5

                                                          2009

                                                          Massachusetts

                                                          Security Corporation

                                                          Excise Return

                                                          355SC

                                                          Schedules and Instructions

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General Information

Who May File Form 355SC? • participate in the filing of a Massachusetts combined return under
MGL Ch. 63, sec. 32B;
Any foreign or domestic corporation organized or doing business in
Massachusetts and which is classified and operating as a valid se- • apportion or allocate income to other states or jurisdictions; or
curity corporation under Massachusetts law may file Form 355SC.
Under Massachusetts General Laws (MGL) Ch. 63, sec. 38B, a se- • take any investment research or Economic Opportunity Area tax
curity corporation is any corporation: credits against the security corporation excise.

• engaged exclusivelyin buying, selling, dealing in or holding secu- How Does a Corporation Apply for
rities on its own behalf and not as a broker; and Security Corporation Classification?
• classified as a security corporation by the Commissioner of Rev- Any corporation wishing to apply for security corporation classifica-
enue. Depending on the nature of its business, a corporation may tion must submit a written application to the Commissioner of Rev-
be classified as either a Class 1 or Class 2 security corporation. enue before the end of the corporation’s taxable year.Applications
received by DOR after the close of the corporation’s taxable
Corporations which do not meet the above qualificationsmay notfileyear are invalid. Applications must contain the following information:
Form 355SC. Nonqualifying corporations doing business in Mass-
achusetts must file Form 355. Nonqualifying corporations which file • The name, legal address and Federal Identification number of the
Form 355SC are subject to penalties. corporation;
For further information regarding the taxation of security corpora- • The taxable year for which classification is being sought;
tions, please refer to DOR Directive 86-33.
• A balance sheet as of the first day of the corporation’s taxable year;
What Is a Class 1 Security Corporation? • A balance sheet as of (or as near to as possible) the date of appli-
Under MGL Ch. 63, sec. 38B(b), a Class 1 security corporation is cation. Note:General balance sheet accounts, such as “Invest-
any foreign or domestic corporation which is engagedexclusivelyin ments,” “Accounts Receivable” or “Marketable Securities,” must
buying, selling, dealing in or holding securities on its own behalf and be accompanied by a detailed schedule listing the type of assets
notas a broker and is a bank holding company as defined under held by the corporation;
sec. 1103 of the Internal Revenue Code (IRC). • An income statement for the period from the first day of the tax-
Class 1 security corporations pay an excise of .33% of Massachusetts able year to the date of application;
gross income or the minimum excise of $456, whichever is greater. • A statement that the corporation’s income for the rest of the tax-
able year will be exclusively from the buying, selling, dealing in or
What Is a Class 2 Security Corporation? holding of securities on its own behalf and not as a broker;
Under MGL Ch. 63, sec. 38B(a), a Class 2 security corporation is
• A statement that the corporation has (or has not) qualified as a
any foreign or domestic corporation which is engaged exclusively
bank holding company under the IRC; and
in buying, selling, dealing in or holding securities on its own behalf
and notas a broker, and is not a bank holding company as defined • The name and telephone number of the corporate officer or repre-
under the IRC. sentative who may be contacted if additional information is needed.
If applying on behalf of the appropriate corporate officer submit a
Class 2 security corporations pay an excise of 1.32% of Mass-
completed Form M-2848, Power of Attorney.
achusetts gross income or the minimum excise of $456, whichever
is greater. Applications should be sent to: Massachusetts Department of Rev-
enue, 200 Arlington Street, Attn: BODA, Security Corporation
What Are the Differences Between the Unit, Room 4300, Chelsea, MA 02150.
Security Corporation Excise and the
For further information on applying for security corporation classifi-
Business Corporation Excise?
cation, please call the Security Corporation Unit at (617) 887-6990.
Unlike business corporations, security corporations pay an excise
based exclusively on gross income. Gross income for security cor- How Often Must a Security Corporation
porations is equal to U.S. gross income plustax-exempt interest Obtain Classification?
from state and local obligations, including Massachusetts. In addi-
Once a corporation has received security corporation classification
tion, security corporation gross income may include a deduction for
from the Commissioner of Revenue, it is not required to be classi-
capital losses sustained during the taxable year to the extent they
fied again unless:
are allowable for federal tax purposes. This deduction may not be
used to offset dividend or interest income, nor be carried over to • it has been notified by the Commissioner that its classification has
other taxable years. It may only be applied to reduce capital gains been revoked; or
realized in the year during which the capital losses are sustained.
Also, security corporations may not: • it is reapplying for security corporation status after electing to have
its classification withdrawn.

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How May a Security Corporation Elect to                               What If the Corporation Changes
Have Its Classification Withdrawn?                                    Activities During the Year?
A corporation which has been classified as a security corporation     A security corporation which has a material change in its activities
may elect to have its classification withdrawn by notifying the Com-  (e.g., merger with another corporation) during the year must notify
missioner of Revenue of its election in writing. This election may be the Commissioner of Revenue in writing of the change before the
made even if the corporation is still engaged exclusively in buying,  end of the taxable year in which the change occurs. Any classified
selling, dealing in or holding securities on its own behalf and not assecurity corporation engaging in disallowed activities during the tax-
a broker. The notice must be on corporate letterhead and signed by    able year will have its security classification revoked and any addi-
the president, vice-president or clerk of the corporation. The notice tional amounts due under the Massachusetts corporation excise for
of withdrawal must be filed and received by DOR before the end of     the year will be assessed.
the corporation’s taxable year. This election should be sent to the
                                                                      For further information on a security corporation’s responsibilities
Security Corporation Unit address listed in the “How Does a Corpo-
                                                                      when changing activities, refer to DOR Directive 86-37.
ration Apply for Security Corporation Classification?” section.
For further information on electing to withdraw your security corpo-
ration classification refer to DOR Directive 86-36.

                                                                                                                             3

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Filing Requirements

When Is Form 355SC Due? Corporate estimated tax payments must be made in quarterly in-
stallments of 40%, 25%, 25% and 10% of the estimated annual tax
Form 355SC, together with payment in full of any tax due, must be
liability.
filed on or before the 15th day of the third month after the close of
the corporation’s taxable year. Security corporation filers should re- Note: New corporations in their first full taxable year with less than
view TIR 04-30, Revised Electronic Filing Requirements, for infor- 10 employees have different estimated payment percentages for
mation regarding the electronic filing mandate. each installment — 30%, 25%, 25% and 20% respectively.
Note: Under Massachusetts corporate law, all corporations in the To avoid a possible underpayment penalty on its taxes, a corpora-
Commonwealth are required to file an annual report form with the tion should, when filing its first payment, estimate its tax to be at
Secretary of State on or before the 15th day of the third month after least equal to the prior year’s tax. Corporations are required to pay
the close of their fiscal year. Annual Report forms can be obtained by the lesser of 100% of the corporation’s prior year tax, 90% of the
calling (617) 727-9440. For further information on this requirement, current year’s tax or 90% of the current year’s tax using the prior
refer to MGL Ch. 156B, sec. 109 and Ch. 181, sec. 4 or call the Sec- year’s apportionment percentage. If the prior year’s tax was the
retary of State’s Corporate Information Line at (617) 727-9640. minimum tax, the corporation should make a payment or payments
equal to the minimum tax to safeguard against a possible under-
Can a Security Corporation Get an payment penalty.
Extension of Time to File?
Note: Any corporation with $1 million or more of federal taxable in-
Yes. An extension of time will be granted for reasonable cause come in any of its three preceding taxable years (“large corpora-
upon request. To request an extension, a corporation must file Form tions”) may not use the prior year’s tax except in calculating their
355-7004, Application for Corporate Extension, on or before the nor- first installment payment. Any reduction in a large corporation’s first
mal due date of the return and pay in full the estimated tax due. installment caused by using the prior year’s tax must be added to
Note: An extension of time to file is not valid if the corporation fails tothe corporation’s second installment.
pay at least 50% of the total tax liability or $456, whichever is greater, For more information on corporate estimated taxes, refer to Regula-
through estimated payments or with Form 355-7004. tion 830 CMR 63B.2.2.
Corporations with $100,000 or more in receipts or sales must sub-
mit their extension request, as well as any accompanying payment, What Is a Valid Return?
electronically. Also, any corporation making a payment of $5,000 or A valid return is a return upon which all required amounts have been
more must make the payment using electronic means. See TIR 04- entered in all appropriate lines on the return. To be valid, an exact,
30 for further information. signed copyof U.S. Form 1120 or 1120RIC as filed must be avail-
able upon request. Copies of all applicable schedules, forms and
What Are the Penalties for Late Returns? supplemental statements must also be available.
Security corporation returns which are not filed on or before the due Supplements enclosed with the return to substantiate or support lines
date are subject to interest and penalty charges. The penalty for must be standard business size, 81⁄2×11. A separate page need not
failure to pay the total payment due with this form is 1% of the tax be enclosed for each supporting document and several supplements
due per month (or fraction thereof), up to a maximum of 25%. A late may be typed on one page as space permits.
payment penalty does not apply to amended returns when the
amount shown on the original return was paid. Failure to meet any of the requirements in this section may result in
a penalty for filing an insufficient return. Such penalty may be as-
The penalty for failure to file a return by the due date is 1% of the sessed at double the amount of tax due.
tax due per month (or fraction thereof), up to a maximum of 25%.
Any tax not paid on or before the due date — without regard to the
extension — is subject to interest charges.

Should the Corporation Be Making
Estimated Tax Payments?
All corporations which reasonably estimate their corporate excise tax
to be in excess of $1,000 for the taxable year are required to make
estimated tax payments to the Commonwealth. Estimated taxes
may be paid in full on or before the 15th day of the third month of
the corporation’s taxable year or in four installments according to
the following schedule. Corporations making estimated payments, if
not required to file electronically, must use Form 355-ES.
Corporations with $100,000 or more in receipts or sales must sub-
mit their estimated payments electronically. See TIR 04-30 for fur-
ther information.

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Line Instructions

Registration Information the following lines which have been deducted from total U.S. in-
come must be entered in line 3 and added back into income:
Enter the corporation’s principal business code and federal identifica-
tion number above the name and address of the corporation. • any losses from U.S. Form 4797, lines 7 and 17, column g; and
Regulated Investment Companies (RIC). Check the box to the • any capital losses carried over from other taxable years, and de-
right of the Federal Identification Number box if the corporation is a ducted on U.S. Schedule D.
RIC. Complete all applicable lines. Leave the Excise, Refund and
Balance Due lines blank and write “RIC-Informational Return” across Any amount required to be added to income in line 3 must be ac-
the front of the return. companied by an explanatory schedule.
Line 3 Lines 8
Check if the corporation is a Class 1 or Class 2 security corporation Any foreign or domestic security corporation which purchases or leases
as classified by the Commissioner of Revenue. For an explanation of shuttle vans as part of an employer-sponsored ridesharing program
the differences between Class 1 and Class 2 security corporations, is eligible for the Massachusetts Vanpool Credit. The credit is equal
please refer to the General Information section of the instructions. to 30% of the total purchase or lease costs for qualifying vans used
in the Commonwealth. To take the Vanpool Credit, complete Sched-
Line 12 ule VP, Vanpool Credit. For further information on this credit, refer to
Any corporation undergoing a voluntary dissolution should notify the Schedule VP or MGL, Ch. 63, sec. 31E.
DOR within 30 days of the vote to dissolve by writing to: Massachu-
Line 9
setts Department of Revenue, Customer Service Bureau, PO Box
7010, Boston, MA 02204. For taxable years beginning on or after January 1, 2006 and before
January 1, 2013, Massachusetts allows two credits for motion pic-
Line 13 ture production companies who meet certain qualification require-
If there have been significant changes in your corporation’s activi- ments. Production companies who incur at least $250,000 of
ties during the taxable year, enclose a statement explaining these production costs in Massachusetts are eligible for income and cor-
changes. Security corporations must notify the Commissioner of porate excise tax credits equal to 20% of the total Massachusetts
Revenue of any change in their activities before the end of their tax- payroll for the production, excluding salaries of $1 million and
able year. higher. In addition, production companies whose Massachusetts
production expenses exceed 50% of the total production cost re-
Computation of Excise ceive an income and corporate excise tax credit of 25% of the total
Massachusetts production expense. The total credit for any one
A new provision applies to security corporations, effective for tax
production is capped at $7 million. Supporting documentation must
years that end on or after October 1, 2004, stating that qualified se-
be available to the Department of Revenue upon request. To claim
curities only include instruments that were initially acquired through
the Film Incentive Credit, enter the Certificate Number issued by the
a public exchange or another arms length secondary market. See
Department of Revenue. For further information on the Film Incen-
TIR 04-21 for further information.
tive Credit, see TIR 06-1. Certificate application forms and addi-
The Computation of Excise section is used to calculate either the tional information are available at www.mass.gov/dor.
Class 1 or Class 2 security corporation excise. The respective ex-
cise rates are: Line 10
A qualified employer participating in the Full Employment Program
• Class 1 security corporation: .33% of Massachusetts gross in- may claim a credit of $100 per month of eligible employment per
come; and employee. The maximum amount of credit that may be applied in all
• Class 2 security corporation: 1.32% of Massachusetts gross income. taxable years with respect to each employee is $1,200. Enter the
amount of Full Employment Credit claimed this year from Schedule
Massachusetts law also provides for a minimum security corpora- FEC. Enclose Schedule FEC with this return. For more information,
tion excise of $456. contact the Department of Transitional Assistance, 600 Washing-
ton Street, Boston, MA 02111.
Line 1
Enter the corporation’s U.S. total income from the appropriate U.S. Line 11
form. Effective for years beginning on or after January 1, 2005 and end-
ing on or before December 31, 2011, taxpayers may be eligible for
Line 2
the Historic Rehabilitation Credit (HRC). To claim this credit, a his-
Enter all interest received on state and municipal bond obligations toric rehabilitation project must be complete and have been certified
not reported in line 1. by the Massachusetts Historical Commission. Unused portions of
Line 3 the credit may be carried forward for a maximum of five years. This
credit may be sold or transferred to another taxpayer. The HRC is
Massachusetts law does not allow security corporations to take de-
not subject to the 50% limitation rule for corporate taxpayers. If the
ductions for ordinary losses in the course of business or for capital
taxpayer disposes of the property generating the HRC, a portion of
losses carried over from other taxable years. Consequently, any of
the credit may be subject to recapture.

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To claim the credit, supporting documentation must be enclosed Refunds
with the return. If the total of lines 19 through 21 exceed line 18, enter the amount
overpaid in line 22.
Line 12
For taxable years beginning on or after January 1, 2006, the Med- The overpayment may be applied in part or in full to 2009 estimated
ical Device Credit is equal to 100% of the user fees actually paid to taxes by entering in line 23 the amount to be credited to 2009 esti-
the United States Food and Drug Administration (USFDA) by a mated taxes. Enter in line 24 the amount of the overpayment to be
medical device company during the taxable year for which the tax is refunded.
due for pre-market submissions (e.g., applications, supplements, or
Balance Due
510(k) submissions) to market new technologies or upgrades,
changes, or enhancements to existing technologies, developed or If line 18 exceeds the total of lines 19 through 21 the balance due
manufactured in Massachusetts. To claim the Medical Device should be entered in line 25. Payment is due on or before the 15th day
Credit, enter the Certificate Number issued by the Department of of the third month after the close of the corporation’s taxable year.
Revenue. For further information on the Medical Device Credit, see Lines 26 and 27
TIR 06-22. Certificate application forms and additional information
The following penalties apply:
are available at www.mass.gov/dor.
Penalty for late payment:The penalty for failure to pay the total
Line 13 payment due with this form is 1% of the tax due per month (or frac-
Taxpayers are allowed a credit for amounts expended to rehabilitate tion thereof), up to a maximum of 25%. A late payment penalty does
contaminated property owned or leased for business purposes and not apply to amended returns when the amount shown on the origi-
located within an economically distressed area. nal return was paid.
The eligibility period for the Brownfields credit has been lengthened.Penalty for failure to file:The penalty for failure to file a tax return
The environmental response action commencement cut-off date by the due date is 1% of the tax due per month (or fraction thereof),
has been extended from August 5, 2005 to August 5, 2011 and the up to a maximum of 25%.
time for incurring eligible costs that qualify for the credit has been
extended to January 1, 2012. Penalty for underpayment of estimated tax:An additional charge
may be imposed on corporations which underpay their estimated
The Brownfields Credit may be transferred, sold or assigned to an- taxes or fail to pay estimated taxes. Form M-2220, Underpayment
other taxpayer with a liability chapter 62 or chapter 63, or to a non-of Massachusetts Estimated Tax by Corporations, is used to com-
profit organization. pute any underpayment penalty.
The Department will issue a certificate to the party receiving the Any corporation which fails to pay its tax when due will be subject to
Brownfields Credit reflecting the amount of the credit received. The interest charges.
party receiving the credit must enclose the certificate with each tax
return to which the credits are being applied. Line 28
Enter the total payment due. Checks for this amount should be
The Brownfields Credit cannot offset more than 50% of the excise
made payable to the Commonwealth of Massachusetts. Checks
due nor reduce the excise below the minimum tax. Any unused
should have the corporation’s Federal Identification number written
credit may be carried forward for five years.
in the lower left corner.
See Schedule BC instructions and TIR 06-16 for further information.
To claim the Brownfield Credit, Schedule BC must be completed Signature
and enclosed with the return. Certificate application forms and addi- When Form 355SC is complete, it must be signed by the treasurer
tional information are available at www.mass.gov/dor. or assistant treasurer or, in their absence or incapacity, by any other
principal corporate officer. If you are signing as an authorized dele-
Line 15 gate of the appropriate corporate officer, check the box below the
The minimum excise for a security corporation is $456. The minimum signature line on Form 355SC and attach Form M-2848, Power of
excise cannot be prorated under anycircumstance, as Massachu- Attorney. The form must also be signed by any paid preparer of the
setts law makes no provision for the proration of the minimum tax. form. The form should be mailed to: Massachusetts Department of
Revenue, PO Box 7067, Boston, MA 02204.
Line 17
All security corporations that wish to contribute to Endangered Wild- Schedule A. Balance Sheet
life Conservation may do so on their corporation excise return. This
Enter the beginning and end-of-year balance sheet amounts for the
amount is added to the excise due. It increases the amount of the
taxable year covered by this return. All values entered on Schedule A
corporation’s payment or reduces the amount of their refund.
must be in accordance with values on U.S. Form 1120 or 1120RIC,
The Natural Heritage and Endangered Species Fund is adminis- Part III. All corporations are required to complete both columns A and
tered by the Massachusetts Department of Fisheries, Wildlife and B. All items in Schedule A should be accompanied by a separate
Environmental Law Enforcement to provide for conservation pro- schedule if an explanation is required.
grams for rare, endangered and nongame wildlife and plants in the
Commonwealth.

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Ownership Information
Line 1
If your corporation owned 50% or more of the voting stock of an-
other corporation orif any single entity, e.g., corporation, individual,
trust, partnership or estate, owned 50% or more of your corpo-
ration’s voting stock, attach a schedule showing name, address,
Federal Identification or Social Security number, and percentage of
ownership amount.
Line 2
Include the highest amount owed toyour corporation during the
taxable year and/or the highest amount owed by your corporation
during the taxable year, whichever is applicable.

Corporate Disclosure Schedule
Chapter 402 of the Acts of 1992 requires the Department of Rev-
enue to conduct an annual analysis of corporate tax liability. To pro-
vide the Department with information necessary to complete this
analysis, corporations are required to report amounts taken federally
for charitable contributions, research expenses and certain types of
depreciation. All corporations must complete the Corporate Disclo-
sure Schedule on their return or the return will be considered insuffi-
cient and will be subject to applicable penalties and interest.

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