Tax Credit Gives Boost to Boston

The state of Massachusetts, and Boston in particular, have drawn sustenance from the ocean and its maritime industries for more than 300 years. Now, as the 21st century approaches, U.S. ports, including the Port of Boston, have to reinvent themselves to meet the changing global economy.

One of the biggest challenges facing U.S. ports is the passing of the The Harbor Maintenance Tax (HMT) law by the U.S. Congress. HMT, the federal tax created under the 1986 U.S. Water Resources Development Act, is assessed on the value of goods imported and exported through most U.S. seaports. At the rate of $1.25 per $1,000 worth of goods, the HMT is a particular burden for the Port of Boston and other Massachusetts ports.

The Port of Boston is further affected because it is the closest major American seaport to Canada. As a result of this proximity to Canada, transport buyers have, in the past, chosen to bypass Boston and pay additional trucking charges in order to route cargo via the Port of Montreal, where no HMT is assessed. The HMT is assessed based on the value of the shipped goods (ad valorem), and Boston’s imports and exports are typically of higher value than those at other U.S. seaports. This creates an additional incentive for diverting Boston-bound shipments through Canada.

To stop the continuous hemorrhage of business to Canada, Massachusetts Governor Weld, on Aug. 9, 1996, signed an act relative to credit for Harbor Maintenance Tax paid. The passage of this law has enabled the state to offer a dollar-for-dollar tax credit to corporations that pay the HMT on goods moving on ocean-going vessels through Massachusetts ports (Boston, Fall River, Gloucester). The Harbor Maintenance Tax Credit (HMTC) can be applied against current and future Massachusetts corporate excise liability paid in the Commonwealth. Any unused credit can be carried forward and applied in any of the succeeding five taxable years.

The HMTC is subject to these limitations:

• The credit only applies to cargo shipped on or after July 1, 1996.
• It is applied only against corporate taxes paid in Massachusetts.
• The HMTC applies only to containerized and break-bulk cargo, including vehicle shipments. Break-bulk cargo includes goods shipped in boxes, bagged, crated, or in unitized form.
• Cargo must be carried on ocean-going vessels through Massachusetts ports.
• This credit does not apply to shipment of bulk cargo or passengers. “Bulk cargo” consists of unsegregated mass commodities—coal, grains, and petroleum—which are carried loose.
• The credit applies to HMT assessments made on cargo only relative to its loading or unloading at a Massachusetts port. Transport buyers who claim HMTC on their Massachusetts corporate state income tax return should keep records verifying that the dollar amounts claimed relate to ocean shipments through any Massachusetts port.

One year after the HMTC was signed into law, Massachusetts companies doing business through the Port of Boston are realizing a healthy reduction in transportation costs. “A combination of factors, including the HMTC, have impacted cargo volumes in the Port of Boston,” according to Massport CEO and Executive Director Peter Blute.

Containerized cargo tonnage climbed 12.4 percent, and total tonnage for 1997 increased 6.79 percent in TEUs. Growth in import automobile processing at the port climbed to 70,000 in 1997. The first year of the HMTC has been a great success for Massport, for Boston, and for Massachusetts shippers.

Massachusetts was the first, and remains the only state in the nation to offer a dollar-for-dollar HMTC on imports and exports, regardless of customer volumes. Recently, the U.S. Supreme Court found the HMT unconstitutional to exporters only, granting importers continuous eligibility to benefit from the Harbor Maintenance Tax Credit.