Manufacturing Machinery and Equipment (MME) Exemptions


Manufacturing Machinery and Equipment (MME) Exemptions

As provided by §1281(72) and §12-94f of the Connecticut General Statutes (CGS)

Effective for the October 1, 2008 Grand List


CGS §1281(72) allows a fiveyear, 100% property tax exemption for eligible machinery and equipment acquired and installed in a manufacturing or biotechnology facility. For the October 1, 2008 Grand List, eligible property must be acquired and installed in a facility on or after October 2, 2003. The State of Connecticut reimburses each municipality for tax losses due to this exemption. In accordance with CGS §12-94b, the Assessor of each town annually certifies to the Office of Policy and Management (OPM) the amount of exemptions reflected on the Grand List, by filing Form M-65a (Assessors Report of Property Tax Exemptions Granted For Newly- Acquired Manufacturing Machinery and Equipment). For the October 1, 2008 Grand List, the Assessor must submit Form M-65a to OPM on or before March 15, 2009. The State of Connecticut remits reimbursement for 2008 Grand List exemptions in December 2009.

Pursuant to CGS §12-94b, OPM may audit 2008 Grand List reimbursement claims not later than December 15, 2010. The reimbursement a municipality receives in December of 2010 reflects changes due to the 2008 Grand List resulting from a modification OPM makes after December 15, 2009.

CGS §12-94c sets forth the method by which property eligible for this exemption is valued for assessment purposes. The value of such property (against which the 70% assessment ratio is applied) is its depreciated acquisition cost. Assessors must use the following depreciation schedule to establish the value of the machinery and equipment exempt under CGS §1281(72).

Assessment Year Following Acquisition/Installation / Depreciated Value as Percentage of Acquisition Cost Basis
1st year / 90%
2nd year / 80%
3rd year / 70%
4th year / 60%
5th year / 50%

After the last assessment year in which manufacturing machinery and equipment is exempt under CGS §1281(72), it becomes eligible for exemption pursuant to CGS §12-94f. This legislation also allows a property tax exemption for certain machinery and equipment that is six years old or older as of October 1, 2006. (See questions #48 through #56, beginning on Page 10 of these Guidelines.)

Part I of these Guidelines (Questions # 1 to #56) contains machinery and equipment eligibility criteria and application provisions that should help taxpayers understand the requirements of these exemption programs. Part II of these Guidelines (i.e., Questions #57 to #100) contains information for taxpayers and Assessors concerning the administration of these machinery and equipment exemption programs.

Currently OPM's contact for this program is Patricia Kiely. Her telephone number is (860) 418-6399. Her e-mail address is .



1.  Are there eligibility changes to the 2008 Grand List MME exemption under CGS §12-81(72)?


2.  What are the criteria for the MME exemption under CGS §1281(72)?

In order to qualify for exemption the property must be:

1)  “New” or “newly acquired” on or after October 2, 2003;

2)  “Machinery” or “equipment” (as defined below);

3)  Installed in a “manufacturing facility”;

4)  Tangible personal property, that is

5)  Either 5 or 7 year property as defined by the IRS; and

6)  Predominantly used for manufacturing purposes.

In order to qualify for exemption the applicant must:

1)  Include such property (and the purchase price thereof) in a Personal Property Declaration submitted to the Assessor. Lessees are also required to file a Lessee's Report with the Assessor; and

2)  Annually file Form M-65 (Manufacturing Machinery and Equipment Exemption Claim) with the Assessor of the municipality in which the machinery or equipment is installed by November 1, or obtain an extension of the filing date pursuant to the provisions of CGS 12-81k.

3.  What is the definition of "machinery" for the purposes of this exemption?

"Machinery" means the basic machine itself, including all of its component parts and contrivances such as belts, pulleys, shafts, moving parts, operating structures and all equipment or devices used or required to control, regulate or operate the machinery, including, without limitation, computers and data processing equipment, together with all replacement and repair parts therefore, whether purchased separately or in conjunction with a complete machine, and regardless of whether the machine or component parts thereof are assembled by the taxpayer or another party.

4.  What is the definition of "equipment" for the purposes of this exemption?

"Equipment" means any device separate from machinery but essential to a manufacturing, processing or fabricating process.

5.  What is the difference between "new" and "newly-acquired"?

"New" describes newly produced (for example, brand new) and does not include rebuilt or refurbished equipment. "Newly-acquired" describes used or second-hand machinery or equipment, including rebuilt or refurbished machinery and equipment.

6.  What does “acquired" mean?

"Acquired" means that the taxpayer takes physical possession of the property for which exempt status is sought. For example, a milling machine for which a purchase order was issued on August 16, 2007 may have been delivered to and installed in a manufacturing facility on January 23, 2008. Since the date of possession is subsequent to October 1, 2007, the milling machine will qualify for this exemption on the 2008 Grand List, provided all other eligibility criteria are met.

7.  Is leased property eligible for this exemption?

Yes. CGS §1281(72) uses the word "acquired" rather than purchased, so a lessee of manufacturing machinery/equipment may qualify for the exemption, provided the lessee meets all other criteria.

8.  If a manufacturer acquires machinery and equipment through a lease and subsequently buys the machinery and equipment, is the machinery and equipment eligible for another 5-year exemption term as “newly acquired”?

No. The property is eligible for the balance of the five-year exemption period if it has not enjoyed the entire term of exemption since its acquisition through the leasing process and is purchased by the original lessee. Once the full five-year exemption term under CGS §1281(72) expires, the machinery or equipment is eligible for exemption under the provisions of CGS § 12-94f.

9.  Is property that has been sold to a financing institution and leased back to the (original lessee) manufacturer eligible for exemption?

Yes, but only for the balance of the initial five-year exemption term for which the original lessee (manufacturer) qualified. Any assets acquired by the manufacturer prior to the current five-year term are not eligible for a new term of exemption if they are part of the purchase/lease-back package.

See Question #47, Page 9, of these Guidelines.

10.  Can machinery or equipment be acquired by other than purchase or lease?

Yes, such property may have been (1) constructed by the owner with brand new purchased parts or materials; or (2) developed and internally produced by the owner. These Guidelines refer to such property to as "selfconstructed".

11.  What is the purchase price for self-constructed property?

The purchase price for self-constructed property is the "unit cost", which is determined in accordance with the following provisions:

(1) If new parts or materials are purchased and used by an owner to construct a machine which is installed in his manufacturing facility, the cost of acquisition includes the price paid for the new parts/materials, the cost to transport the parts to the facility and the cost of the labor to effect construction and installation; (the name and address of the vendor or contractor should be provided on the M-65 Claim by the applicant), or

(2) If machinery or equipment is internally developed, produced and installed by a manufacturer, the cost of acquisition is the total cost of development, production and installation (including the cost of labor) for each such item of machinery/equipment (the vendor or contractor from whom components or services were purchased should be listed on the M-65 Claim).

12.  Is construction in progress, or "CIP," eligible for exemption under this program?

No, the machinery/equipment must be installed in a condition or state of readiness and availability for specifically assigned manufacturing functions.

Please note, however, that CGS §12-71(b) exempts CIP, under the following definition:

“…machinery or equipment which would be eligible for exemption under subsection (72) of section 12-81 once installed and which can not or which has not begun manufacturing, processing or fabricating; being used for research or development, including experimental or laboratory research and development, design or engineering directly related to manufacturing; the significant servicing, overhauling or rebuilding of machinery and equipment for industrial use or the significant overhauling or rebuilding of other products on a factory basis; measuring or testing or metal finishing; or being used in the production of motion pictures, video or sound recordings.”

13.  Does the term "tangible personal property" encompass the definition used for federal income tax purposes, or that used for local property tax purposes?

As this is a property tax exemption program, the Assessor's definition of tangible personal property is applicable. There may be areas of conflict, since a taxpayer may, for IRS purposes, depreciate certain items as personal property that the Assessor classifies as real property.

For example, a newspaper publisher purchases a large printing press that necessitates the installation of a reinforced concrete subfloor. The manufacturer regards the cost of the subfloor as part of the installation cost of the press and may combine the two costs and depreciate both as personal property on the federal level. The cost of the subfloor, however, would not be eligible for the exemption under CGS §1281(72), since it would be classified by the Assessor as a real property improvement.

14.  What does "installed" mean?

The word "installed" means that the property has been placed in service in a manufacturing facility. A machine so installed is in a condition or state of readiness and availability for specifically assigned manufacturing function(s).

15.  What does "manufacturing facility” mean?

"Manufacturing facility" means that portion of a plant, building or other real property improvement used for any manufacturing purpose delineated in CGS §12-81(72).

16.  What does "manufacturing" mean?

“Manufacturing” is the activity of converting or conditioning tangible personal property by changing the form, composition, quality or character of the property for ultimate sale at retail, or use in the manufacturing of a product to be ultimately sold at retail.

17.  What are the allowable uses of machinery and equipment for purposes of this exemption?

The following uses are delineated in CGS §12-81(72):

(1) Manufacturing, processing or fabricating;

(2) Research and development, including experimental or laboratory research and development, design or engineering directly related to manufacturing;

(3) The significant servicing, overhauling or rebuilding of machinery and equipment for industrial use;

(4) The significant overhauling or rebuilding of other products on a factory basis;

(5) Measuring or testing;

(6) Metal finishing;

(7) The production of motion pictures, video and sound recordings;

(8) Biotechnology; and

(9) Recycling (i.e., the processing of solid waste to reclaim material). Section 84 of Public Act 06-186 amended the provisions of CGS §12-81(72), as amended by Section 10 of Public Act 06-83, to make certain machinery and equipment acquired on or after July 1, 2006 and used in connection with recycling eligible for this exemption as of October 1, 2006. Pursuant to this legislation, "recycling" means the processing of solid waste to reclaim material, as defined in CGS §22a-260.

18.  What does "predominant use" mean?

"Predominant use" means that the personal property, for which the exemption is sought, is used for a manufacturing purpose more than fifty percent (50%) of the time that it is actually used.

19.  What does "5-year or 7-year property," mean?

According to §168(e) of the Internal Revenue Service (IRS) Code of 1986, property is classified under as follows:

Property shall be treated as: If it has a class life (in years) of:

5 year property...... more than 4 but less than 10

7 year property...... 10 or more but less than 16

Note: Some assets used in qualified manufacturing activities have a short class life (and therefore a different IRS Classification), and do not qualify for exemption under the statutory requirement for IRS Classification applied to all manufacturing assets. OPM will request IRS filings with supporting detail in cases where exemption eligibility is in question.

20.  What does "fabricating" mean?

“Fabricating” means to make, build, create, produce or assemble components or tangible personal property work in a new or different manner.

21.  What does "processing" mean?

“Processing” means the physical application of the materials and labor in a manufacturing process.

22.  What does "measuring or testing" mean?

“Measuring and testing” includes nondestructive and destructive measuring or testing and the alignment and calibration of machinery, equipment and tools, in the furtherance of the manufacturing, processing or fabricating of tangible personal property.

23.  What does “biotechnology” mean?

“Biotechnology” means the application of technologies, including recombinant DNA techniques, biochemistry, molecular and cellular biology, genetics and genetic engineering, biological cell fusion techniques, and new bioprocesses, using living organisms, or parts of organisms, to produce or modify products, to improve plants or animals, to develop microorganisms for specific uses, to identify targets for small molecule pharmaceutical development, to transform biological systems into useful processes and products or develop microorganisms for specific uses.

24.  What does “recycling” mean?

"Recycling" means the processing of “unwanted or discarded solid, liquid, semisolid or contained gaseous material, including but not limited to, demolition debris, material burned or otherwise processed at a resources recovery facility or incinerator, material processed at a recycling facility…”

Under this definition, machinery or equipment that a Material Resource Recovery Facility or a Volume Reduction Plant uses in connection with recycling solid waste is eligible for exemption, provided the machinery and equipment that the facility or plant uses is acquired and installed on or after July 1, 2006. The Connecticut Department of Environmental Protection (DEP) issues permits for the operation of such facilities or plants.