The Maryland Entrepreneur's Guide/Tax Credit and Incentive Programs
Chapter 2 Maryland Financing Programs
Chapter 5 Business Enterprise Programs
Chapter 6 Opportunities for Business Growth
Chapter 7 Tax Credit and Incentive Programs
Chapter 8 Intellectual Property Protection
Conditions of Use; Contributor's Disclaimer
TAX CREDIT INCENTIVE PROGRAMS
editEnterprise Zones
editMaryland Department of Business and Economic Development has an enterprise zone tax incentive program. Eligible businesses that locate or expand their operations in designated Enterprise Zones or create new jobs in Enterprise Zones may receive various State income or real estate tax credits. For more information see http://www.choosemaryland.org/businessresources/pages/enterprisezones.aspx.
To qualify:
(1) The business must apply to the local zone administration for certification.
(2) The qualified employee must have been hired after the business is located in the Enterprise Zone or after the Enterprise Zone is designated as such; work for at least 35 hours per week for 6 months,earn at least 150% of the federal minimum wage and, spend at least 50% of the workday either in the enterprise zone or on activities of the business resulting from its location in the enterprise zone or focus area; is hired after the date the enterprise zone was created or the date the business is located in the enterprise zone or focus area, which ever is later; and is hired to a new position.
(3) If the employee is economically disadvantaged, the business must also obtain certification of eligibility for the credit from the Maryland Department of Labor, Licensing and Regulation. The tax credits are based on the wages during the tax year to each qualified employee.
Empowerment Zones (federal)
editMaryland Department of Business and Economic Development Division of Business Development, Tax Incentives Group has an Empowerment Zone tax incentive. A federal Empowerment Zone, one of only six in the nation, encompasses 6.8 square miles in three separate locations of Baltimore City, two of which are zoned for heavy industrial use. For more information, please see http://www.hud.gov/offices/cpd/economicdevelopment/programs/rc/index.cfm.
One Maryland Economic Development Real Property Tax Credit
editBusinesses that establish or expand a business facility in a priority funding area or as part of a Maryland Board of Public Works projects and are located in certain “distressed” Maryland counties, may be entitled to tax credits related to new or expanded facilities. The credits may be applied against corporate income tax, personal income tax or insurance premiums tax, but may not be applied to more than one type. For more information, please see http://business.marylandtaxes.com/taxinfo/taxcredit/onemd/default.asp.
Eligibility.
(1) Businesses that establish or expand a business facility in a priority funding area or as part of a project approved by the Board of Public Works, and that are located in a "distressed" Maryland county, may be entitled to a tax credit for costs related to the new or expanded facility. A “distressed” county has, for the most recent 24-month period, an average rate of unemployment that is 150 percent higher than the statewide average or an average per-capita personal income that is equal to or less than 67 percent of the statewide average, and includes a county (including Baltimore City) that no longer meets one of these requirements, but did so at some time during the preceding 12-months.
(2) Businesses are required to notify the Maryland Department of Business and Economic Development of its intent to seek certification before either new employees are hired to fill qualified new positions or eligible costs are incurred.
(3) In order to qualify the business must create at least 25 positions at the new or expanded business facility over a two-year period that are:
(a) Full-time.
(b) Of indefinite duration.
(c) Paid at least 150 percent of the federal minimum wage.
(d) Located in a qualified distressed county in Maryland.
(e) Filled.
(4) To qualify for the project tax credit, the business must also spend at least $500,000 in project costs on the project. No minimum expenditure is required for the "start-up" tax credit. The business must also submit a copy of the certification from the Department of Business and Economic Development with the tax return.
Job Creation Tax Credit
editBusinesses that expand or establish new facilities in Maryland that results in the creation of new jobs may be entitled to a tax credit based upon the number of positions created or the wages paid to the new employees. For more information, please see http://business.marylandtaxes.com/taxinfo/taxcredit/jobcreation/default.asp.
To qualify for the credit, businesses must create at least 60 new full-time positions, and if the positions are highly paid, it must create at least 30 positions.
If the new or expanded facility is located in a priority funding area, the number of new positions the company must create is reduced to 25.
Before filling these new positions, the company must notify the Department of Business and Economic Development of its intention to seek certification. The new positions must be:
(1) Full-time.
(2) Permanent.
(3) Paid at least 150 percent of the federal minimum wage.
(4) Located in Maryland.
(5) Filled.
Research and Development Tax Credits
editBusinesses that incur qualified research and development expenses in Maryland are entitled to a credit, but the total credits for all businesses cannot exceed $6 million per year, and is available for tax years on or after January 1, 2008, but beginning before January 1, 2011. For more information, please see http://business.marylandtaxes.com/taxinfo/taxcredit/randd/default.asp.
The credit may be taken against corporate income tax or personal income taxes.
To qualify, the business must invest in research and development activities in Maryland during the tax year and apply for the credit with the Maryland Department of Business and Economic Development by 15 of the year following the tax year in which the expenses were incurred. The Maryland Department of Business and Economic Development will certify the amount of credit available to the business by December 15.
There are two types of research and development tax credits available to businesses:
(1) Basic Research and Development Credit: 3 percent of the Maryland qualified research and development expenses paid during the tax year, up to the Maryland base amount.
(2) Growth Research and Development Credit: 10 percent of the Maryland qualified research and development expenses paid during the year that exceed the Maryland base amount.
he business must file an amended income tax return (Form 500X or 502X) and submit a copy of the certification received from the Maryland Department of Business and Economic Development with the amended return. Additional forms would need to be attached depending on whether the credit is being applied toward corporate or personal taxes.
Bio Heating Oil Tax Credit
editBusinesses may claim a credit for each gallon of heating oil blended with biodiesel purchased for space or water heating. For any tax year, the credit allowed under this section may not exceed $500, or the state income tax for that tax year. The credit is available for the tax years beginning on or after January 1, 2008, but before January 1, 2013. For more information, please see http://energy.maryland.gov/residential/bioheatgrant.html and http://business.marylandtaxes.com/taxinfo/taxcredit/bioheatingoil/default.asp.
The credit may be taken against corporate income tax or personal income tax.
The business must purchase “Bio–heating oil” with a blend of at least 5 percent biodiesel.
Business must receive an initial credit certificate from the Maryland Energy Administration (MEA) to claim a credit against the state income tax for a tax year in an amount equal to three cents for each gallon of bio–heating oil purchased for space or water heating. If the credit is more than the tax liability, the unused credit may not be carried forward to any future tax years.
Biotechnology Investment Incentive Tax Credit
editBusinesses may be allowed a tax credit against corporate or personal income tax of up to 50 percent of the amount contributed during the tax year to a qualified Maryland biotechnology company. Sole Proprietorships, corporations and pass-through entities, such as partnerships, subchapter S corporations, limited liability companies and business trusts may claim the tax credit. For more information, please see http://business.marylandtaxes.com/taxinfo/taxcredit/biotech.asp and http://www.choosemaryland.org/businessresources/pages/biotechnologyinvestmenttaxcredit.aspx.
Qualified investors must contribute at least $25,000, in cash or cash-equivalent, to a “qualified biotechnology company” that is certified by the Maryland Department of Business and Economic Development based on a number of criteria. Qualified investors must also be required to file an income tax return to any jurisdiction. Credits may be claimed for no more than $250,000 per investment in a qualified biotechnology company.
DBED may not certify tax credits for investments in a single qualified biotechnology company that are in the aggregate more than 15 percent of the total amount appropriated to the Maryland Biotechnology Investment Tax Credit Reserve Fund for that fiscal year. DBED may not issue initial credit certificates in excess of the mount appropriated to the Reserve Fund for that fiscal year in the state budget as approved by the General Assembly.
A qualified biotechnology company must have:
• Its headquarters and base of operations in Maryland;
• Fewer than 50 full-time employees.
• No publicly traded securities; and
• Been in active business no longer than 10 years or 12 years, if approved by DBED.
A least 30 days before making an investment, the business must submit an initial credit certificate application to DBED. Upon approval (within 30 days of DBED’s receipt of the application), the applicant will receive an initial credit certificate stating the amount of the tax credit and will have 30 days to make the investment. Within the following 10 days, the investor must notify DBED that the investment has been made. A final credit certificate will be issued to the applicant stating the amount of the tax credit to which the applicant is entitled. A copy of the final credit certificate must be filed with the taxpayer’s income tax return.
The credit allowed is 50 percent of the amount contributed during the tax year, not to exceed $500,000. The amount in excess of the state tax liability may be refunded. The total amount of credits approved by DBED each year is limited; initial credit certificates will be issued on a first-come-first-served basis. A portion of this credit may be subject to recapture under certain circumstances.
Businesses that Create New Jobs Credit
editSole proprietorships, corporations and pass-through entities, such as partnerships, subchapter S corporations, limited liability companies and business trusts located in Maryland that create new positions and establish or expand business facilities in the state may be entitled to a tax credit against corporate income tax, personal income tax or insurance premiums tax. The credit may be applied to only one of these tax types in addition to the property tax. To be eligible for the tax credit, businesses must first have been granted a property tax credit by a local government of Maryland for creating the new jobs. For more information, please see http://taxes.marylandtaxes.com/Business_Taxes/General_Information/Business_Tax_Credits/Businesses_That_Create_New_Jobs_Tax_Credit.shtml.
The business must create at least 25 new positions as part of the new or expanded business facility in Maryland (5,000 square feet or more). Businesses located in smaller counties (population of 30,000 or less) must create at least ten new positions.
An enhanced credit is instead available for businesses that create or expand a new business facility in Maryland of 250,000 square feet or more and:
(1) Employ 2,500 employees
(2) Create 500 new positions that pay at least 150 percent of the minimum wage OR
(3) Create 1,250 new positions that are paid at least 150 percent of the minimum wage.
In Montgomery County only, a business can:
(1) Spend at least $150 million to obtain at least 700,000 square feet of new or expanded business premises (through the purchase, construction, or lease of a new premises); and
(2) Employ at least 1,100 individuals including at least 500 in new positions. All of the positions must receive employer-provided subsidized health care benefits, be paid at least 150 percent of the minimum wage, and be located in or neighboring the new, expanded or renovated premises.
The new positions must be all of the following:
(1) Located in Maryland.
(2) Part of the new or expanded business facility in Maryland.
(3) Permanent.
(4) Full-time of indefinite duration (For Montgomery County (and Washington County for tax years 2007 and later), the position can be a contract position of definite duration lasting at least 12 months with an unlimited renewal option).
(5) Filled for at least one year.
The business must then apply to, and receive certification from, the local government in which the facility is located for a property tax credit.
The county or city government will notify the State Department of Assessments and Taxation (SDAT) that the property tax credit has been approved. SDAT will calculate and certify the amount of the allowable tax credit to the Comptroller.
The credits are calculated as a percentage of the local property tax liability on the new or expanded portion of the facility. Those percentages are as follows:
(1) Property Tax Credit:
• 1st and 2nd taxable years: 52 percent
• 3rd and 4th taxable years: 39 percent
• 5th and 6th taxable years: 26 percent
• Remaining taxable years: 0 percent
(2) Credit against the personal or corporate income tax, or the insurance premiums tax:
• 1st and 2nd taxable years: 28 percent
• 3rd and 4th taxable years: 21 percent
• 5th and 6th taxable years: 14 percent
• Remaining taxable years: 0 percent
The enhanced property tax credit is a flat percentage of 58.5 percent for the local property tax credit and 31.5 percent for the state tax credit in each of the first 12 tax years.
If the credit is more than the state tax liability, the unused credit may be carried forward for the next five taxable years.
With respect to claiming the credit against insurance premium taxes, documentation of the credit must be maintained by the taxpayer in their files and be made available to the Insurance Commissioner, on request, in accordance with COMAR 31.06.04.03. The documentation should include documents from the agency granting the credit, and a list of the names and telephone numbers for the taxpayer's staff who are directly involved in granting the credits. All information shall be retained for a minimum of three years from the date of the filing of the final tax return on which the credit is taken.
Cellulosic Ethanol Technology Research and Development Tax Credit
editSole proprietorships, corporations and pass through entities, such as partnerships, subchapter S corporations, limited liability companies and business trusts that incur qualified research and development expenses for cellulosic ethanol technology in Maryland are entitled to a tax credit. The total credits for all businesses may not exceed $250,000 per year.
This credit is available for tax years beginning after December 31, 2007, but before January 1, 2017. The credit may be taken against corporate income tax or personal income tax.
The business must invest in research and development activities in Maryland related to “Cellulosic Ethanol Technology,” which is technology that is used to develop cellulosic biomass for conversion to ethanol fuel.
The business must also submit an application for the credit to the Maryland Department of Business and Economic Development (DBED) by September 15 of the calendar year following the end of the tax year in which the qualified research and development expenses were incurred. DBED certify the amount of credit available to the business by December 15.
The amount of the tax credit is equal to 10 percent of the qualified research and development expenses paid or incurred during the tax year. DBED may not approve more than $250,000 in credits for any calendar year. If the aggregate amount of credits applied for exceeds $250,000, each applicant will receive a prorated share of the total credit amount. If the credit is more than the state tax liability, the unused credit may be carried forward for the next 15 years.
The business must file an amended income tax return (Form 500X or 502X) and submit a copy of the certification received from the Maryland Department of Business and Economic Development with the amended return. Additional forms would need to be attached depending on whether the credit is being applied toward corporate or personal taxes.
For more information, please see http://www.choosemaryland.org/businessresources/Pages/CellulosicEthanol.aspx and http://business.marylandtaxes.com/taxinfo/taxcredit/cullulosicethanol/default.asp.
Clean Energy Incentive Tax Credit
editBusinesses that use certain renewable energy sources or waste materials to produce electricity that is sold to an unrelated person may be entitled to an income tax credit. The facility must be placed in service, or co-firing with coal must begin, on or after January 1, 2006, but before January 1, 2011. Sole proprietorships, corporations and pass-through entities, such as partnerships, subchapter S corporations, limited liability companies and business trusts may claim the tax credit.
The business must produce electricity during the tax year using primarily "qualified energy resources" (see Internal Revenue Code Section 45) which includes any solid, non-hazardous, cellulosic waste material that is segregated from other waste materials and is derived from the following:
(1) Forest-related resources, including mill residues (except sawdust and wood shavings), forest thinnings, slash, or brush, but excluding old-growth timber.
(2) Waste pallets, crates, dunnage, landscape or right-of-way trimmings.
(3) Agricultural sources (orchard tree crops, vineyard, grain, legumes, sugar, and other crop by-products or residues).
“Qualified energy resources” also includes methane gas or other combustible gases resulting from the decomposition of organic materials from an agricultural operation or from a landfill or a wastewater treatment plant using either anaerobic or thermal decomposition, or a combination of both.
The business must apply for and receive an initial credit certificate from the Maryland Energy Administration (MEA) before claiming this credit. The initial credit certificate must state the amount of electricity the taxpayer expects to produce in a qualified Maryland facility over the five-year period specified in the initial credit certificate. The total amount of the credit stated in the initial credit certificate cannot exceed $2.5 million.
The credit is 0.85 cents for each kilowatt hour of electricity produced at a Maryland facility using qualified energy resources during the five-year period after the facility is originally placed in service. If the facility produces electricity from qualified energy resources co-fired with coal, the credit is reduced to 0.5 cents per kilowatt hour of electricity produced during the five-year period beginning on the date of the initial co-firing. The credit claimed each year cannot exceed one-fifth of the credit amount stated in the initial credit certificate. If at least an average of 10 percent of the maximum credit amount stated on the initial credit certificate is not claimed over a three-year period, the MEA may cancel a portion of the amount stated on the initial credit certificate.
If the credit is more than the state tax liability, the unused credit may be carried forward for the next ten tax years. The MEA cannot issue an initial credit certificate after December 31, 2010, and the total of the maximum credit amounts on initial credit certificates issued through that date cannot exceed $25 million.
A copy of the initial credit certificate issued by the MEA must be submitted with the income tax return.
For more information, please see Revenue Administration Division Comptroller of Maryland Annapolis, MD 21411-0001 Phone: 410-260-7980 from Central Maryland, 1-800-MD TAXES from elsewhere E-mail: taxhelp@comp.state.md.us Website: http://business.marylandtaxes.com/taxinfo/taxcredit/cleanenergy/default.asp
Chris Rice Maryland Energy Administration 60 West Street, Suite 60 Annapolis, Md. 21401 Phone: 410-260-7655 1-800-72 ENERGY E-mail: crice@energy.state.md.us Website: http://energy.maryland.gov/residential/cleanenergygrants.html
Commuter Tax Credit
editMaryland-based businesses that provide commuter benefits for employees may be entitled to a tax credit for a portion of the amounts paid during the taxable year. Commuter benefits include certain costs for an employee's travel to and from home and the workplace, a Guaranteed Ride Home program or a parking "Cash-Out" program.
The credit may be taken against corporate income tax, personal income tax, state and local taxes withheld (for tax-exempt organizations) or insurance premiums tax. The same credit may not, however, be applied to more than one tax type.
The company must pay a portion of the cost of an employee's travel between the employee's home and workplace, including the purchase of transit instruments (tickets, passes, vouchers, fare cards, smart cards and tokens). In addition, the workplace must be located in Maryland and travel must take place in either:
(1) A mass transit vehicle such as an MTA Bus, MTA Commuter Bus, MTA Light Rail, MARC Train, WMATA Metrobus, WMATA Metrorail, or other qualified mass transit system; or
(2) A van-pool which can seat at least eight adults, is used primarily (80 percent of total annual mileage) to transport individuals between home and the workplace and is used primarily (80 percent of total annual mileage) to transport at least four employees per trip.
In addition, a business may also qualify for a credit for a portion of the cost paid to provide their employees a Guaranteed Ride Home and/or a parking "Cash-Out" program.
Each tax year, before businesses file for the new Commuter Tax Credit against any of the applicable taxes, they must have a Commuter Tax Credit registration form on file with the Maryland Mass Transit Administration. The application is available online at http://www.commuterchoicemaryland.com.
The tax credit is 50 percent of the cost of providing the commuter benefits up to a maximum of $50 per month (based on a $100 employer contribution) for each employee. If the credit is more than the state tax liability, the unused credit may not be carried forward to any other tax year.
Businesses must submit the Maryland Commuter Tax Credit registration form to the MTA.
Documentation of the credit for purposes of receiving a credit against insurance premiums tax shall be maintained by the taxpayer in their files and be made available to the Insurance Commissioner, on request, in accordance with COMAR 31.06.04.03. The documentation should include documents from the agency granting the credit and a list of the names and telephone numbers for the taxpayer's staff who are directly involved in granting the credits. All information shall be retained for a minimum of three years from the date of the filing of the final tax return on which the credit is taken.
For more information, please see http://business.marylandtaxes.com/taxinfo/taxcredit/commuter/default.asp.
Community Investment Tax Credit
editBusinesses that contribute cash or goods to approved projects operated by tax exempt organizations (under Internal Revenue Code section 501(c)(3)) are eligible for a tax credit of up to $250,000. This credit is in addition to any charitable contribution deduction that is allowed for these contributions on both the state and federal income tax returns.
The credit may be taken against corporate income tax, personal income tax, insurance premiums tax or public service company franchise tax. The same credit may not, however, be applied to more than one tax type. Sole proprietorships, corporations and pass-through entities, such as partnerships, subchapter S corporations, limited liability companies and business trusts may claim the tax credit.
Beginning in 2010, individuals, including fiduciaries, whoa re not business entities may apply for and receive a tax credit for contributions to approved projects.
To qualify for the credit:
The business must donate at least $500 in money or goods to an approved project and document the value of the contribution. The documentation may be either a receipt or certification of value of used goods from an independent and unrelated third party. The business must also attach a copy of the fully executed certification to the tax return.
How the credit is calculated:
The credit is 50 percent of the value of the donation. Each business may claim a credit of up to $250,000 beginning with tax years on or after 1/1/2007. The total contributions eligible for the tax credits for all approved projects may not be more than $2 million per fiscal year.
If the credit is more than the tax liability, the unused credit may be carried forward for the next five tax years.
Documentation required:
Corporate income tax:
Form 500CR must be completed and submitted with the income tax return (Form 500).
Personal income tax:
Form 500CR must be completed and submitted with the income tax return (Form 502 or 505). If the business is a pass-through entity, Form 500CR must be prepared for the pass-through entity and submitted with the entity's income tax return (Form 510). A modified federal Schedule K-1 provided by the pass-through entity to its members must separately state their shares of the credit. Individuals or entities must attach this statement to the Form 500CR submitted with their personal (Form 502 or 505), corporate (Form 500) or pass-through entity (Form 510) income tax returns.
Insurance premiums tax:
The contributor and the non-profit partner must complete the Certification of Contribution for Tax Credit and submit it to the Maryland Department of Housing and Community Development along with a copy of the check or documentation of the value of donated goods. Businesses claiming the credit against this tax must include their North American Industry Classification System (NAICS) number in the space provided on that form.
Public service company franchise tax:
Form AT3-74 must be submitted with the franchise tax return (SDAT Forms 11 or 11T).
For more information, contact:
Karen M. Forbes Assistant Director, Community Access and Partnership Maryland Department of Housing and Community Development Division of Neighborhood Revitalization 10 N. Calvert Street, Suite 444 Baltimore, Md. 21202 Phone: 410-209-5800 E-mail:Forbes@mdhousing.org Website: http://www.neighborhoodrevitalization.org
Employer-Provided Long-term Care Insurance Credit
editEmployers who provide long-term care insurance as part of an employee benefit package may claim a credit for costs incurred.
The credit may be taken against corporate income tax, personal income tax, insurance premiums tax or public service company franchise tax. The same credit may not, however, be applied to more than one tax type.
Sole proprietorships, corporations and pass-through entities, such as partnerships, subchapter S corporations, limited liability companies and business trusts may claim the tax credit.
To qualify for the credit:
The company must provide long-term care insurance benefits to one or more employees during the taxable year as part of an employee benefit package.
How the credit is calculated:
The credit allowed is 5 percent of the costs. The total claimed for a taxable year for all employees may not exceed $5,000, or $100 per employee, whichever is less.
If the credit is more than the tax liability, the unused credit may be carried forward for the next five tax years.
Documentation required:
Corporate income tax:
Form 500CR must be completed and submitted with the income tax return (Form 500).
Personal income tax:
Form 500CR must be completed and submitted with the income tax return (Form 502 or 505). If the business is a pass-through entity, Form 500CR must be prepared for the pass-through entity and submitted with the entity's income tax return (Form 510). A modified federal Schedule K-1 provided by the pass-through entity to its members must separately state their shares of the credit. Individuals or entities must attach this statement to the Form 500CR submitted with their personal (Form 502 or 505), corporate (Form 500) or pass-through entity (Form 510) income tax return.
Insurance premiums tax:
Documentation of the credit shall be maintained by the taxpayer in their files and be made available to the Insurance Commissioner, on request, in accordance with COMAR 31.06.04.03. The documentation should include documents from the agency granting the credit and a list of the names and telephone numbers for the taxpayer's staff who are directly involved in granting the credits. All information shall be retained for a minimum of three years from the date of the filing of the final tax return on which the credit is taken.
Public service company franchise tax:
Form AT3-74 must be submitted with the franchise tax return (SDAT forms 11 or 11T).
For more information, contact:
Revenue Administration Division Comptroller of Maryland Annapolis, MD 21411-0001 Phone: 410-260-7980 from Central Maryland, 1-800-MD TAXES from elsewhere E-mail: taxhelp@comp.state.md.us Website: http://business.marylandtaxes.com/taxinfo/taxcredit/longtermcare/default.asp
or:
State Department of Assessments and Taxation 301 W. Preston Street Baltimore, MD 21201-2395 Phone: 410-767-1191 E-mail: taxcredits@dat.state.md.us
Employment Opportunity Tax Credit
editBusinesses that hire an individual who is receiving Aid to Families with Dependent Children (AFDC) or Family Investment Program (FIP) entitlements may be entitled to a tax credit for wages paid to the employee and for child care and transportation expenses paid on behalf of the employee. The credit may be claimed for individuals hired before July 1, 2009.
The credit may be taken against corporate income tax, personal income tax, state and local taxes withheld (for certain tax-exempt organizations only), insurance premiums tax or public service company franchise tax. The same credit may not, however, be applied to more than one tax type.
The company must hire at least one employee that received AFDC or FIP payments for any three months during the 18-month period before employment by the company. The employee cannot be closely related to the owners of the business.
Certification must be obtained from the Department of Labor, Licensing and Regulation that the individual is a qualified employee.
The credit is allowed for the first two years of employment of the individual for both the wages paid and the child care or transportation expenses paid on behalf of the employee as follows: (1) First year
(a) Wages: 30 percent of the first $6,000 paid in the first year (a maximum allowable credit of $1,800).
(b) Child care or transportation expenses: Up to $600 of expenses paid in the first year.
(2) Second year
(a) Wages: 20 percent of the first $6,000 of wages paid in the second year (a maximum allowable credit of $1,200).
(b) Child care or transportation expenses: Up to $500 of expenses paid in the second year.
If the employee has been a recipient of AFDC or Temporary Cash Assistance for any 18 months during the last 48 months and is employed by the business for a full year, the credit increases to 40 percent of the first $10,000 of wages paid to the employee during the first year of employment. The credit for child care or transportation expenses may also be taken for the first and second years as shown above. If the credit is more than the state tax liability, the unused credit may be carried forward for the next five tax years. For more information, please see http://www.dllr.state.md.us/employment/eotc.shtml and http://business.marylandtaxes.com/taxinfo/taxcredit/employment/default.asp.
Green Building Tax Credit
editNOTE: This information reflects Maryland law regarding the Green Buildings Tax Credit. However, all credits have been allocated through the current program's end. Unless the program is extended or receives additional funding, no additional credits may be authorized.
Heritage Structure Rehabilitation Tax Credit
editAs of June 1, 2010, the Sustainable Communities Tax Credit replaces the Heritage Structure Rehabilitation Credit.
A credit may be allowed for substantial expenditures incurred in a 24-month period to rehabilitate a certified heritage structure located in Maryland. The credit is available for owner-occupied residential property, as well as income-producing property. Credits may not be authorized after June 30, 2010.
The credit may be taken against corporate income, personal income or insurance premium tax.
Sole proprietorships, corporations, tax-exempt nonprofit organizations and pass-through entities, such as partnerships, subchapter S corporations, limited liability companies and business trusts may claim the tax credit.
To qualify for the credit:
The business must complete a heritage preservation certification application and submit the application for approval to the Maryland Historical Trust (MHT).
After certification by MHT, the form is returned to you. A copy of the certified form (Part 3) from MHT must accompany your Maryland income tax return.
How the credit is calculated:
The credit is 20 percent of the total expenditures incurred during the 24 month rehabilitation period. For the rehabilitation of commercial structures, the credit cannot be more than the maximum amount specified under the initial credit certificate, which is based on estimated expenditures. If the application was submitted to MHT before June 1, 2002, the credit based on actual expenditures can be up to $250,000 more than the amount shown on the initial credit certificate.
The credit is claimed in the year in which the rehabilitation is completed; however, it cannot be claimed until the Part 3 certification is approved.
For property certified before July 1, 2001, a business could have received a mortgage credit certificate. In lieu of taking the credit, the certificate may be transferred to the mortgage holder who may then take a credit against their income tax in an amount equal to the face value of the certificate.
For certifications received after June 30, 2001, the amount in excess of the state tax liability can be refunded.
Credits for tax years 2002 and later are limited to $3 million. For non-commercial properties, the credit is $50,000 per property for applications received by MHT after June 30, 2004.
The rehabilitation of a structure that received approval by the MHT on or before February 1, 2001, is subject to the provisions of the law in effect prior to the 2002 legislative changes.
The MHT will not accept applications for the approval of plans for commercial rehabilitations if a substantial part of the work has been completed if the applicant has already submitted three or more applications for a combined total of more than $500,000 in that year.
The total amount of credits approved by MHT for properties located in certain areas of the state during each fiscal year is subject to certain limitations.
A pro-rated percentage of the credit is subject to recapture if disqualifying work is performed during a five-year period, beginning with the year in which the certified rehabilitation was completed.
Documentation required:
Corporate income tax:
Form 502H must be completed and submitted with the income tax return (Form 500) along with the MHT certification.
Personal income tax:
Form 502H must be completed and submitted with the income tax return (Form 502 or 505) along with the MHT certification. If the business is a pass-through entity, Form 502H must be prepared for the pass-through entity and submitted with the entity's income tax return (Form 510). A modified federal Schedule K-1 provided by the pass-through entity to members must separately state their shares of the credit. Individuals or entities must attach this statement to the Form 502H submitted with their personal (Form 502 or 505), corporate (Form 500) or pass-through entity (Form 510) income tax returns.
Insurance premiums tax:
Documentation of the credit shall be maintained by the taxpayer in their files and be made available to the Insurance Commissioner, on request, in accordance with COMAR 31.06.04.03. The documentation should include documents from the agency granting the credit and a list of the names and telephone numbers for the taxpayer's staff who are directly involved in granting the credits. All information shall be retained for a minimum of three years from the date of the filing of the final tax return on which the credit is taken.
For more information, contact:
Collin Ingraham Maryland Historical Trust 100 Community Place Crownsville, MD 21032-2023 Phone: 410-514-7628 E-mail: goodrow@dhcd.state.md.us Website: http://mht.maryland.gov/taxcredits_resources.html
Long-term Employment of Ex-Felons Tax Credit
editBusinesses that operate in Maryland and hire one or more ex-felons during the period from January 1, 2007, through December 31, 2011, who are employed by the business for at least one year, may be entitled to a credit.
The credit may be taken against corporate, personal income tax, or state and local taxes withheld (certain tax exempt organizations only). The credit may not be applied to more than one tax type.
Sole proprietorships, corporations, pass-through entities (partnerships, subchapter S corporations, limited liability companies, business trusts) and tax-exempt, nonprofit organizations may claim the tax credit.
To qualify for the credit:
The company must hire at least one ex-felon between January 1, 2007, and December 31, 2011, and employ that person for a minimum of one year.
The company must also obtain certification from the Maryland Department of Labor, Licensing and Regulation that the individual is a qualified ex-felon.
How the credit is calculated:
For the first year, the credit is 30 percent of the first $6,000 paid to a qualified individual with a maximum credit of $1,800. In the second year, the credit is 20 percent of the first $6,000 paid with a maximum credit of $1,200.
If the credit is more than the state tax liability, the unused credit may be carried forward for the next five tax years.
A tax-exempt organization may estimate the amount of the tax credit for qualifying employees for the taxable year. The total amount of the estimated credit should be divided evenly over the number of periods for filing withholding returns (Form MW 506). For example, if quarterly returns are required, then the total estimated credit should be divided by four. Each payment to the Comptroller would be reduced by the pro rata amount of the credit.
Alternatively, the tax-exempt organization could apply the credit against the tax on unrelated business taxable income.
Documentation required:
Corporate income tax:
Form 500CR must be completed and submitted with income tax return (Form 500)
Personal income tax:
Form 500CR must be completed and submitted with income tax return (Form 502 or Form 505). If the business is a pass-through entity, Form 500CR must be prepared for the pass-through entity and submitted with the entity's income tax return (Form 510). A modified federal Schedule K-1 provided by the pass-through entity to its members must separately state their shares of the credit. Individuals or entities must attach this statement to the Form 500CR submitted with the personal (Form 502 or 505), corporate (Form 500) or pass-through entity (Form 510) income tax returns.
State and local income taxes withheld:
Form 500CR must be submitted with Form MW 508, Maryland Annual Employer Withholding Reconciliation Report.
The credit cannot be claimed if either the Employment Opportunity Tax Credit or the Maryland Disability Employment Tax Credit is claimed for the same employee.
For more information, contact:
David Ghee Maryland Department of Labor, Licensing and Regulation Division of Employment and Training 1100 N. Eutaw Street Baltimore, MD 21201 Phone: 410-767-2080 E-mail: ghee@careernet.state.md.us
Please see also http://business.marylandtaxes.com/taxinfo/taxcredit/lteoef/default.asp
Maryland Disability Employment Tax Credit
editBusinesses that hire people with disabilities may be entitled to a tax credit for wages paid to the employees and for child care or transportation expenses paid on behalf of the employees. A person with a disability includes a veteran released from the armed forces for a service-related disability. The credit may be claimed for individuals hired before July 1, 2011.
The credit may be taken against corporate income tax, personal income tax, state and local taxes withheld (for certain tax-exempt organizations only), insurance premiums tax or public service company franchise tax. The same credit may not, however, be applied to more than one tax type.
Sole proprietorships, corporations, tax-exempt nonprofit organizations and pass-through entities, such as partnerships, subchapter S corporations, limited liability companies and business trusts may claim the tax credit.
To qualify for the credit:
The company must hire an individual with a disability and obtain a determination from the Division of Rehabilitation Services (DORS) of the Maryland State Department of Education, or the Maryland Department of Labor, Licensing and Regulation (DLLR) for a disabled veteran, that the individual is a qualified employee with a disability.
How the credit is calculated:
The credit is allowed for the first two years of employment of the disabled individual for both the wages paid and the child care or transportation expenses paid on behalf of the employee as follows:
First Year
Wages: 30 percent of the first $6,000 paid in the first year for a maximum allowable credit of $1,800 (20 percent for employees hired before July 1, 2000). Child care or transportation expenses: Up to $600 of expenses paid in the first year Second Year
Wages: 20 percent of the first $6,000 of wages paid in the second year for a maximum allowable credit of $1,200. Child care or transportation expenses: Up to $500 of expenses paid in the second year. If the credit is more than the tax liability, the unused credit may be carried forward for the next five tax years.
The credit may not be claimed if the Employment Opportunity Tax Credit was claimed for the same employee.
A tax-exempt organization may estimate the amount of the tax credit for qualifying employees for the taxable year. The total amount of the estimated credit should be divided evenly over the number of periods for filing withholding returns (Form MW506). For example, if quarterly returns are required, then the total estimated credit should be divided by four. Each payment to the Comptroller would be reduced by the pro rata amount of the credit.
Alternatively, the tax-exempt organization could apply the credit against the tax on unrelated business taxable income.
Documentation required:
Corporate income tax:
Form 500CR must be completed and submitted with the income tax return (Form 500).
Personal income tax:
Form 500CR must be completed and submitted with the income tax return (Form 502 or 505). If the business is a pass-through entity, Form 500CR must be prepared for the pass-through entity and submitted with the entity's income tax return (Form 510). A modified federal Schedule K-1 provided by the pass-through entity to its members must separately state their shares of the credit. Individuals or entities must attach this statement to the Form 500CR submitted with their personal (Form 502 or 505), corporate (Form 500) or pass-through entity (Form 510) income tax returns.
State and local income taxes withheld:
Form 500CR must be submitted with Form MW 508, the Maryland Annual Employer Withholding Reconciliation Report.
Insurance premiums tax:
Documentation of the credit shall be maintained by the taxpayer in their files and be made available to the Insurance Commissioner, on request, in accordance with COMAR 31.06.04.03. The documentation should include documents from the agency granting the credit and a list of the names and telephone numbers for the taxpayer's staff who are directly involved in granting the credits. All information shall be retained for a minimum of three years from the date of the filing of the final tax return on which the credit is taken.
Public service company franchise tax:
Form AT3-74 must be submitted with the franchise tax return (SDAT forms 11 or 11T).
For more information, contact:
David Ghee Maryland Department of Labor, Licensing and Regulation Division of Employment and Training 1100 N. Eutaw Street Baltimore, MD 21201 Phone: 410-767-2080 E-mail: ghee@careernet.state.md.us
or:
Maryland State Department of Education Division of Rehabilitation Services 2301 Argonne Drive Baltimore, MD 21218 Phone: 1-888-554-0334 E-mail: dors@dors.state.md.us
Please see also http://business.marylandtaxes.com/taxinfo/taxcredit/disability/default.asp and http://www.dllr.state.md.us/employment/mdetc.shtml
Maryland-Mined Coal Tax Credit
editA co-generator, a public service company, or an electricity supplier that purchases coal mined in Maryland on or before December 31, 2020 may be eligible for a tax credit.
The credit may be taken against corporate income tax, personal income tax or public service company franchise tax. The same credit may not, however, be applied to more than one tax type.
Sole proprietorships, corporations and pass-through entities, such as partnerships, subchapter S corporations, limited liability companies and business trusts may claim the tax credit.
To qualify for the credit:
The business must purchase Maryland-mined coal during the tax year. To take the credit against the income tax, an application must be submitted to the State Department of Assessments and Taxation (SDAT). An electricity supplier must not have been an electric company before July 1, 1999, and both co-generators and electricity suppliers must not be subject to the public service company franchise tax. The total amount of credits approved by SDAT for the tax years 2007 and later are limited. In addition, $2,250,000 of the credits must be reserved for Maryland-mined coal for use in a Maryland facility.
How the credit is calculated:
The credit is $3 per ton of Maryland-mined coal purchased during the tax year, but cannot exceed the credit amount approved by SDAT.
If the credit is more than the tax liability, the unused credit may not be carried forward to future taxable years.
Documentation required:
Corporate income tax:
Form 500CR must be completed and submitted with the income tax return (Form 500).
Personal income tax:
Form 500CR must be completed and submitted with the income tax return (Form 502 or 505). If the business is a pass-through entity, Form 500CR must be prepared for the pass-through entity and submitted with the entity's income tax return (Form 510). A modified federal Schedule K-1 provided by the pass-through entity to its members must separately state their shares of the credit. Individuals and entities must attach this statement to the Form 500CR submitted with their personal (Form 502 or 505), corporate (Form 500) or pass-through entity (Form 510) income tax returns.
Public service company franchise tax:
Computation and schedule must be submitted with the franchise tax return (SDAT Form 11).
For more information, contact:
Revenue Administration Division Comptroller of Maryland Annapolis, MD 21411-0001 Phone: 410-260-7980 from Central Maryland, 1-800-MD-TAXES from elsewhere E-mail: taxhelp@comp.state.md.us
or:
State Department of Assessments and Taxation 301 W. Preston Street Baltimore, MD 21201-2395 Phone: 410-767-1191 E-mail: taxcredits@dat.state.md.us
Please see also: http://business.marylandtaxes.com/taxinfo/taxcredit/coal/default.asp
Telecommunications Property Tax Credit
editA telecommunications company that is a public utility is allowed a credit for a portion of the total property taxes paid by the company on its operating real property in Maryland, other than operating land, that is used in its telecommunications business.
The credit may be taken only against corporate income tax.
Only corporations may claim the tax credit.
To qualify for the credit:
The business must be a public utility that is a telecommunications company. The business must also have paid property taxes on its operating real property in Maryland, other than operating land, that is used in its telecommunications business.
How the credit is calculated:
The credit is 60 percent of the total state, county and municipal corporation property taxes paid by the public utility during the taxable year on its operating real property used in its telecommunications business, other than operating land. The credit cannot exceed the state income tax liability after deducting other allowable income tax credits.
If the credit is more than the tax liability, the unused credit may not be carried forward to any future tax years.
Documentation required:
Corporate income tax:
Form 500CR must be completed and submitted with the income tax return (Form 500).
For more information, contact:
Revenue Administration Division Comptroller of Maryland Annapolis, MD 21411-0001 Phone: 410-260-7980 from Central Maryland, 1-800-MD-TAXES from elsewhere E-mail: taxhelp@comp.state.md.us
or:
State Department of Assessments and Taxation 301 W. Preston Street Baltimore, MD 21201-2395 Phone: 410-767-1191 E-mail: taxcredits@dat
Please see also: http://business.marylandtaxes.com/taxinfo/taxcredit/telecomm/default.asp.
Water Quality Improvement Tax Credit
editA credit may be claimed for the additional commercial fertilizer costs necessary to convert agricultural production to a certified nutrient management plan. However, this credit cannot be earned for any tax year beginning on or after January 1, 2009.
The credit may be taken against corporate income tax or personal income tax only for expenses incurred before January 1, 2009.
Sole proprietorships, corporations and pass-through entities, such as partnerships, subchapter S corporations, limited liability companies and business trusts may claim the tax credit.
To qualify for the credit:
The business must submit a nutrient management plan and information related to the purchase and use of commercial fertilizer to the Maryland Department of Agriculture.
The business must receive the following certifications from the Maryland Department of Agriculture:
The business has submitted a nutrient management plan The additional commercial fertilizer costs are necessary to comply with a nutrient management plan. The amount of the tax credit that the business is eligible to claim for the taxable year. The business must submit a copy of the certification from the Maryland Department of Agriculture with its income tax return.
How the credit is calculated:
The credit allowed:
Is 50 percent of the certified additional commercial fertilizer costs necessary to convert agricultural production to a nutrient management plan. May be claimed for up to three consecutive years. May not exceed $4,500 in any tax year. If the credit is more than the tax liability, the unused credit may be carried forward for the next five tax years.
Documentation required:
Corporate income tax:
Form 500CR must be completed and submitted with the income tax return (Form 500).
Personal income tax:
Form 500CR must be completed and submitted with the income tax return (Form 502 or 505). If the business is a pass-through entity, Form 500CR must be prepared for the pass-through entity and submitted with the entity's income tax return (Form 510). A modified federal Schedule K-1 provided by the pass-through entity to its members must separately state their shares of the credit. Individuals or entities must attach this statement to the Form 500CR submitted with their personal (Form 502 or 505), corporate (Form 500) or pass-through entity (Form 510) income tax returns.
For more information, contact:
Maryland Department of Agriculture Office of Resource Conservation Annapolis, MD 21401 Phone: 410-841-5863 E-mail: lawren1@mda.state.md.us
Please see also http://business.marylandtaxes.com/taxinfo/taxcredit/waterquality/default.asp