The following is a summary of Maryland income tax legislation that was passed during the 2008 session of the General Assembly and signed into law by Governor Martin O'Malley. All references are to the Tax-General Article (TG), Annotated Code of Maryland, unless otherwise noted. For information about other tax legislation, visit the Maryland General Assembly's Web site
Cellulosic Ethanol Technology Research and Development Tax Credit
House Bill 140 (Chapter 139, Acts of 2008) - Income Tax - Credit for Cellulosic Ethanol Technology Research and Development
This Act provides for a new Maryland income tax credit, to be added as Tax-General Article § 10-726, for cellulosic ethanol technology qualified research and development expenses incurred in Maryland by an individual or corporation. The total of all such credits cannot exceed $250,000 per year. The credit will not apply to any qualified research and development expenses incurred after December 31, 2016.
"Cellulosic ethanol technology" means technology that is used to develop cellulosic biomass for conversion to ethanol fuel. "Qualified research and development expenses" means expenses incurred for cellulosic ethanol technology research and development that is conducted in Maryland.
Cellulosic ethanol technology produces ethanol from agricultural plant waste such as stalks and husks, and industrial plant waste such as sawdust and paper pulp, instead of producing ethanol from grains such as corn.
This Act provides that an individual or corporation may claim a credit against the state income tax in an amount equal to 10 percent of the qualified research and development expenses paid or incurred by the individual or corporation during the taxable year. By September 15 of the calendar year following the end of the taxable year in which the qualified research and development expenses were incurred, an individual or corporation must submit an application to the Department of Business and Economic Development (DBED) for the credit.
If the total amount of the credits applied for by all individuals and corporations exceeds $250,000 for any calendar year, DBED shall approve a credit for each applicant in an amount equal to the product of multiplying the credit applied for by the applicant times a fraction, the numerator of which is $250,000 and the denominator of which is the total of all credits applied for by all applicants in the calendar year.
By December 15 of the calendar year following the end of the taxable year in which the qualified research and development expenses were incurred, DBED must certify to the individual or corporation the amount of the tax credit approved by DBED for the individual or corporation.
To claim the approved credit allowed, an individual or corporation must file an amended income tax return for the taxable year in which the qualified research and development expenses were incurred, and attach a copy of DBED's certification of the approved credit amount to the amended income tax return.
If the credit allowed in any taxable year exceeds the state income tax for that taxable year, an individual or corporation may apply the excess as a credit against the state income tax for succeeding taxable years until the earlier of either the full amount of the excess is used, or the expiration of the 15th taxable year after the taxable year in which the qualified research and development expenses were incurred.
In determining the amount of the credit, all members of the same controlled group of corporations, as defined under § 41(f) of the Internal Revenue Code, must be treated as a single taxpayer, and the credit allowable to each member shall be its proportionate share of the qualified research and development expenses giving rise to the credit.
This Act provides that the Comptroller shall adopt regulations providing for:
- Determination of the amount of the credit in the case of trades or businesses, whether or not incorporated, that are under common control.
- Pass-through and allocation of the credit in the case of estates and trusts, partnerships, unincorporated trades or businesses, and S corporations.
- Adjustments in the case of acquisitions and dispositions described in § 41(f)(3) of the Internal Revenue Code.
- Determination of the credit in the case of short taxable years.
This Act also provides that DBED and the Comptroller jointly shall adopt regulations to prescribe standards for determining when research or development is considered conducted in Maryland for purposes of determining the credit. In adopting the regulations, DBED and the Comptroller may consider the following:
- The location where services are performed.
- The residence or business location of the person or persons performing services.
- The location where supplies used in research and development are consumed.
- Any other factors that DBED determines are relevant for the determination.
This Act provides that the credit does not apply to qualified research and development expenses incurred after December 31, 2016.
This Act also adds two new subsections to existing sections of the Tax-General Article. § 10-205(j) is added to provide for an addition modification to the federal adjusted gross income of an individual in the amount of a credit claimed for qualified research and development expenses for cellulosic ethanol technology. § 10-306(f) is added to provide for an addition modification to the federal taxable income of a corporation in the amount of a credit claimed for qualified research and development expenses for cellulosic ethanol technology.
This Act takes effect on July 1, 2008, and will be applicable to all taxable years beginning after December 31, 2007.
Tax Credit for Qualifying Employees with Disabilities
House Bill 280(Chapter 658, Acts of 2008) - Tax Credits for Qualifying Employees with Disabilities - Sunset Extension
This Act extends by one year the termination provision and dates of applicability of the tax credit that an employer may claim, pursuant to § 10-704.7 of the Tax-General Article, for wages, child care and transportation expenses for qualified employees with disabilities The new termination date for this Qualifying Employees with Disability Tax Credit is June 30, 2009.
This Act takes effect on July 1, 2008.
Arts and Entertainment Districts - Jewelry and Clothing Designers
House Bill 680 (Chapter 290, Acts of 2008) - Arts and Entertainment Districts - Tax Benefits - Jewelry and Clothing Designers
This Act expands the existing subtraction modification under Tax-General Article § 10-207(v) for income derived from a sale in an arts and entertainment district. The definition of artistic work, provided in § 4-701 of the Economic Development Article was expanded to include original jewelry, clothing, or clothing design created by a qualifying artist. (Note: § 4-701 was formerly codified in Article 83A of the Annotated Code of Maryland, which was repealed by House Bill 1050 of the 2008 Legislative Session. This Act created the new Economic Development Article, which contains the code sections previously contained in Article 83A.) However, § 4-702 specifically excludes tailoring, clothing alteration, and jewelry repair from Subtitle 7 - Arts and Entertainment Districts. As a result, by reference, the subtraction modification under § 10-207(v) is expanded to include income derived from the sale in an arts and entertainment district of original jewelry, clothing, or clothing design created by a qualifying artist. However, also as a result, an individual would not be able to claim income under the subtraction for tailoring, clothing alteration, and jewelry repair.
This Act takes effect July 1, 2008.
Job Creation Tax Credit
House Bill 721 (Chapter 517, Acts of 2008) - Job Creation Tax Credit - Termination Provisions
This Act extends the termination date and the dates of applicability of the tax credits for the Job Creation Tax Credit. The termination date is extended from January 1, 2010 to January 1, 2014. The dates of applicability are extended to all taxable years beginning before January 1, 2014 and may only be claimed for qualified positions at a newly established or expanded business facility that commences operations before January 1, 2013. For any taxable year after January 1, 2014, the tax credits earned in credit years beginning before January 1, 2014 are allowed ratably over a two-year period, may be carried forward, and are subject to recapture. This Act will be codified as § 6-309 of the Economic Development Article of the Annotated Code of Maryland, as established by the 2008 General Assembly in HB 1050.
This Act takes effect on the date that HB 1050 (Chapter 306, Acts of 2008) - Economic Development takes effect, which is October 1, 2008.
Biotechnology Investment Incentive Act Tax Credit
House Bill 723 (Chapter 518, Acts of 2008) - Business and Economic Development - Biotechnology Investment Incentive Act
This Act amends TG § 10-725 to change the eligibility standards and the amounts that can be claimed for the Biotechnology Investment Incentive Tax Credit.
This Act changes the eligibility standards for the credit so that eligibility is no longer restricted only to an individual, a corporation, or a qualified Maryland venture capital firm. Eligibility is expanded by amending the definition of "qualified investor" to include an individual or any other entity that:
- Invests at least $25,000 in a qualified Maryland biotechnology company.
- Is required to file an income tax return in any jurisdiction.
The definition of "qualified investor" is also amended to provide that the term "qualified investor" does not include a qualified pension plan, individual retirement account, or other qualified retirement plan under the Employee Retirement Income Security Act of 1974, as amended, or fiduciaries or custodians under such plans, or similar tax-favored plans or entities under the laws of other countries.
This Act changes the maximum tax credit allowed in an initial tax credit certificate to $250,000 for any qualified investor. It also provides that during any fiscal year, the Secretary of the Department of Business and Economic Development (DBED) cannot certify eligibility for tax credits for investments in a single qualified Maryland biotechnology company that in the aggregate exceed 15 percent of the total appropriations to the Maryland Biotechnology Investment Tax Credit Reserve Fund for that fiscal year.
The definition of the term "biotechnology company" in TG § 10-725 uses the term "company" in the definition without defining the term "company". This Act adds the following definition to TG § 10-725:
- "Company" means any entity of any form duly organized and existing under the laws of any jurisdiction for the purpose of conducting business for profit.
- "Company" does not include a sole proprietorship.
This Act amends the definition of the term "investment'' so that it now reads as follows:
- "Investment" means the contribution of money in cash or cash equivalents expressed in United States dollars, at a risk of loss, to a qualified Maryland biotechnology company in exchange for stock, a partnership or membership interest, or other ownership interest in the equity of the qualified Maryland biotechnology company, title to which ownership interest shall vest in the qualified investor.
- "Investment" does not include debt.
This Act adds two new provisions to the definition of "qualified Maryland biotechnology company" by providing that a qualified Maryland biotechnology company:
- Does not have its securities publicly traded on any exchange.
- Has been in active business no longer than 10 years, except that if DBED determines that the company requires additional time to complete the process of regulatory approval, the company can have been in active business for up to 12 years.
This Act adds new requirements that a qualified investor must meet in order to be eligible for the credit, requiring that the qualified investor must:
- For a company, be duly organized and in good standing in the jurisdiction under the laws under which it is organized.
- For a company, be in good standing and authorized or registered to do business in Maryland.
- Be current in the payment of all tax obligations to Maryland or any unit or subdivision of the State.
- Not be in default under the terms of any contract with, indebtedness to, or grant from Maryland or any unit or subdivision of the State.
- Not own or control, after making the proposed investment, more than 25 percent of the equity interests in the qualified Maryland biotechnology company in which the investment is to be made.
This Act also requires that when a qualified investor submits an application to DBED for an initial tax credit certificate, the application must evidence that the qualified Maryland biotechnology company is:
- In good standing.
- Current in the payment of all tax obligations to Maryland or any unit or subdivision of the State.
- Not in default under the terms of any contract with, indebtedness to, or grant from Maryland or any unit or subdivision of the State.
This Act also requires that, within 10 calendar days after the date on which a qualified investor makes the investment in the qualified Maryland biotechnology company, the qualified investor shall provide to DBED notice and proof of the making of the investment, including:
- The date of the investment.
- The amount invested.
- Proof of the receipt of the invested funds by the qualified Maryland biotechnology company.
- A complete description of the nature of the ownership interest in the equity of the qualified Maryland biotechnology company acquired in consideration of the investment.
- Any reasonable supporting documentation DBED may require.
This Act extends from 30 to 40 calendar days the period, which begins when DBED issues an initial tax credit certificate, during which the qualified investor must provide the notice and proof of the making of the investment to DBED. Failure to do so results in DBED rescinding the initial tax credit certificate.
This Act also adds a new reason that a credit that has been claimed must be recaptured, by providing for recapture if, within two years from the close of the taxable year in which the credit is approved, the qualified Maryland biotechnology company that gave rise to the credit ceases operating as an active business with its headquarters and base of operations in Maryland.
This Act takes effect July 1, 2008, and will be applicable to all taxable years beginning after December 31, 2008.
Kids First Act
House Bill 1391 (Chapter 692, Acts of 2008) - Kids First Act
This Act adds new § 10-211.1 to the Tax-General Article and requires the Comptroller to send a notice to a taxpayer regarding health programs under certain conditions. The Comptroller must send a notice to a taxpayer with a dependent child, if the taxpayer's income on their tax year 2007 return does not exceed the highest eligibility standard for the Maryland Medical Assistance Program or the Maryland Children's Health Program. The notice must indicate that the dependent child may be eligible for the Maryland Medical Assistance Program or the Maryland Children's Health Program and contain a notice with information on how to enroll. This Act requires the Department of Health and Mental Hygiene to develop this notice.
For tax years 2008 and 2009, this Act also requires the Comptroller to include a place on the income tax return where the taxpayer may indicate whether each dependent child for whom they claim an exemption does or does not have health coverage. This Act provides that a taxpayer may not be penalized for not providing this information or for providing inaccurate information.
If the taxpayer reports for tax years 2008 and 2009 that the child does not have health coverage and the taxpayer's income does not exceed the highest income eligibility standard of the Maryland Medical Assistance Program or the Maryland Children's Health Program, the Comptroller must send the taxpayer an application and enrollment instructions for the Maryland Medical Assistance Program and the Maryland Children's Health Program. This Act requires the Comptroller to send only the notice developed by the Department of Health and Mental Hygiene and no other notice or information.
This Act requires the Maryland Health Care Commission and the Office of the Comptroller to study and compile information on exemptions claimed for dependent children and the effect of provisions of the newly enacted § 10-211.1 on the number and percentage of children in the State who are uninsured. The bill requires the Commission and Comptroller to report its findings to the Governor on or before January 1 of calendar years 2009, 2010, and 2011. This Act also requires the Comptroller to publicize the availability of these health programs. The Act provides that the Maryland Health Care Provider Rate Stabilization Fund shall transfer $300,000 to the Comptroller in fiscal years 2010 and 2011 to pay for the mailings of applications and enrollment instructions required to be sent to eligible taxpayers.
This Act takes effect on July 1, 2008 and terminates on June 30, 2011.
College Savings Plans of Maryland
House Bill 1534 (Chapter 548, Acts of 2008) - College Savings Plans of Maryland
This Act authorizes the College Savings Plans of Maryland Board ("Board") to establish a new Maryland Broker-Dealer College Investment Plan ("Broker-Dealer Plan"), the purpose of which is to provide for a college savings plan distributed by brokers and dealers that allows Maryland taxpayers to deduct contributions to the plan from their State and local taxable income beginning with tax year 2008.
This Act adds a new "Subtitle 19B. Maryland Broker-Dealer College Investment Plan" to Title 18 of the Education Article, pursuant to which the Board must administer the Broker-Dealer Plan in compliance with IRS standards for qualified state tuition programs. The Board must adopt procedures for the Broker-Dealer Plan and may issue requests for proposals to evaluate and determine the means for the administration, management, promotion, or marketing of the Broker-Dealer Plan.
A Maryland resident or, at the discretion of the Board, a nonresident of Maryland may participate in and benefit from the Broker-Dealer Plan, the assets and income of which are exempt from state and local taxation. Contributions to this plan may only be made in cash and cash equivalents, and may not exceed the maximum amount set by the Board in accordance with § 529 of the Internal Revenue Code.
This Act amends §§ 10-205, 10-207, and 10-208 of the Tax General Article to include the Broker-Dealer Plan. Pursuant to these tax provisions, an account holder of all investment accounts maintained in the Maryland College Investment Plan and the Maryland Broker-Dealer College Investment Plan may subtract up to $2,500 for each taxable year from their Maryland taxable income for contributions made for each qualified designated beneficiary; excess contributions may be carried over to 10 successive tax years. For purposes of this subtraction limitation, each spouse is treated separately on a joint return such that up to $5,000 subtraction amount is allowed per couple per qualified designated beneficiary. On distribution, the distributed amount, including earnings from contributions, used on behalf of the qualified beneficiary or qualified designated beneficiary for qualified higher education expenses are not subject to state taxes.
This Act also clarifies that the existing Maryland College Investment Plan provides distributions, not refunds, as requested by account holders.
This Act takes effect on October 1, 2008.
U. S. Coast Guard Auxiliary
Senate Bill 12 (Chapter 344, Acts of 2008) - Income Tax - Subtraction Modification - United States Coast Guard Auxiliary - Requirements
This Act expands the existing subtraction modification for qualifying volunteer fire, rescue, or emergency medical services personnel by decreasing the time in which an individual must have been an active member in the U. S. Coast Guard Auxiliary to be eligible for the subtraction from 72 months to 36 months within the previous 10 calendar years. This Act equalized the length of service for members of all qualifying organizations. The U. S. Coast Guard Auxiliary is responsible for providing the Comptroller with a report of which members qualify for the subtraction on or before October 1 of each year. The member must attach a copy of this report to his or her income tax return to qualify for the subtraction modification.
This Act takes effect July 1, 2008 and shall be applicable to all taxable years beginning after December 31, 2007.
Budget Financing Act - New 6.25 Percent Tax Rate
Senate Bill 46 (Chapter 10, Acts of 2008) - Budget Financing Act
This Act repeals the sales and use tax on computer services, and adds a new 6.25 percent personal income tax bracket for Maryland taxable income in excess of $1,000,000.
This Act amends TG § 10-105(a) to add a new provision that for a taxable year beginning after December 31, 2007, but before January 1, 2011, the state income tax for an individual, including spouses filing a joint return or a surviving spouse or a head of household, includes a new bracket of 6.25 percent of Maryland taxable income in excess of $1,000,000.
Because the new 6.2 percent rate applies retroactively to income for the tax year beginning January 1, 2008, this Act also provides that the Comptroller shall waive any interest or penalty imposed on an individual for underpayment of estimated income tax for calendar year 2008, to the extent that the Comptroller determines that the interest or penalty was incurred because of the new 6.25 percent rate.
This Act amends TG § 10-102.1 to provide that the rate for withholding by a pass-through entity for each nonresident individual's distributive share or pro-rata share of the pass-through entity's nonresident taxable income is the sum of the 1.25 percent special nonresident tax and the new 6.25 percent individual rate, for a total of 7.5 percent.
This Act takes effect July 1, 2008, and its income tax provisions will be applicable to all taxable years beginning after December 31, 2007.
Work-Based Learning Programs for Students Tax Credit
Senate Bill 297 (Chapter 571, Acts of 2008) - Tax Credit for Employer Established Work-Based Learning Programs for Students
This Act adds a new § 10-711 to the Tax-General Article to reestablish a tax credit program for approved work-based learning programs for students. An employer may claim a tax credit in the amount equal to 15 percent of the wages paid to secondary or postsecondary students between 16 and 23 years of age who are participating in a work-based learning program approved by the State Department of Education.
The accumulative credit that an employer may claim per student may not exceed $1,500 for all tax years. To the extent that the credit exceeds the tax for a taxable year, the excess credit may be carried forward until the full amount is used or the expiration of the 5th taxable year in which the wages were paid. A maximum of 1,000 students annually may be approved for participation in the tax credit program.
In order to claim the credit, employers must:
- Employ the student for at least 200 hours.
- Provide structured employer-supervised learning that:
- Integrates the student's classroom instruction and provides at least one unit of academic credit.
- Links each student's career interest.
A written approved work-based learning program is required.
This income tax credit will be available to both individuals and corporations and may be claimed against only the state income tax and not the local tax. An insurance company may claim a credit against the premium tax.
This Act shall remain effective for a period of five years and shall have no further force and effect after June 30, 2013; any excess credits may be carried forward and may be applied as credit for taxable years beginning on or after January 1, 2013.
This Act takes effect July 1, 2008 and shall be applicable to all taxable years beginning after December 31, 2008.
State Employment Opportunity Tax Credit
Senate Bill 314 (Chapter 391, Acts of 2008) - State Employment Opportunity tax Credit - Sunset Extension
This Act extends by one year the termination provisions and dates of applicability of the State Employment Opportunity Tax Credit allowed under § 10-704.3 of the Tax-General Article, to employers for certain wages and child care or transportation expenses of qualified employment opportunity employees. The termination provisions are extended to June 30, 2009. The dates of applicability are extended to all taxable years beginning after December 31, 1994 but before January 1, 2012.
This Act takes effect July 1, 2008.
Lawyers - Payments of Taxes and Unemployment Insurance Contributions
Senate Bill 493 (Chapter 410, Acts of 2008) - Lawyers - Payments of Taxes and Unemployment Insurance Contributions
This Act repeals the requirement contained in § 10-313 of the Business Occupations and Professionals Article that the Maryland Client Protection Fund verify with the Comptroller that each lawyer who pays the annual fee has paid all undisputed taxes and unemployment insurance contributions or has made a payment arrangement. The Act requires the Maryland Client Protection Fund to issue a list to the Comptroller of lawyers that have paid the annual fee. The Act allows the Comptroller to refer lawyers who have not paid all undisputed taxes and unemployment insurance contributions or have not made a payment arrangement for the delinquent amounts to Bar Counsel. The Maryland Client Protection Fund must provide the Comptroller with this list by August 31 of each year.
This Act takes effect on June 1, 2008.
Bio-Heating Oil Tax Credit
Senate Bill 565 (Chapter 140, Acts of 2008) - Income Tax Credit - Bio-Heating Oil
This Act adds new § 10-726 to the Tax-General Article to establish a credit against the state income tax for an individual or corporation in the amount of three cents for each gallon of bio-heating oil purchased for space or water heating. For purposes of this credit, bio-heating oil means heating oil with a blend of at least 5 percent biodiesel oil. The credit cannot exceed the lesser of $500 or the state income tax for the taxable year. An individual may not carry forward any excess credit.
The taxpayer must apply to the Maryland Energy Administration (MEA) for an initial credit certificate. The initial credit certificate shall be issued for number of gallons purchased by the taxpayer and must contain the maximum amount of credit that the taxpayer may claim. By January 1, 2009 and each year after, MEA is required to provide the Comptroller with a list of each taxpayer that has been issued an initial credit certificate and the maximum amount of credit allowed for each taxpayer.
This Act takes effect July 1, 2008, and will be applicable to all taxable years beginning after December 31, 2007, but before January 1, 2013. This act will remain effective for a period of five years and at the end of June 30, 2013, without action required by the General Assembly, this act shall be abrogated.
Tax Preparer Act
Senate Bill 817 (Chapter 623, Acts of 2008) - Maryland Individual Tax Preparer Act
This Act creates an eight-member State Board of Individual Tax Preparers ("Board") in the Department of Labor, Licensing, and Regulation to administer a new registration program ("Program") that requires qualified individuals to register to provide individual tax preparation services. The Governor shall appoint the Board members with the advice of the Department's Secretary, the Comptroller, and the Attorney General.
The Board shall adopt rules of professional conduct as appropriate to ensure a high standard for the practice of individual tax preparation; select and administer examinations; establish fees; maintain a list of all authorized individual tax preparers; maintain a record of its proceedings; and maintain records of all complaints regarding individual tax preparers in Maryland. The Board may also adopt any bylaw and regulation necessary to carry out this Act.
The Board is authorized to deny registration, reprimand a registered individual, or suspend or revoke a registration for fraudulently obtaining or using a registration, engaging in criminal activity, or engaging in professional misconduct. The Board may impose a penalty of up to $5,000 for each violation of this Act, with penalties used for enforcement purposes. An individual must be given an opportunity for hearing before the Board before any final action is taken. A person aggrieved by an individual tax preparer may bring an action for damages and civil penalties. Violation of this Act is also an unfair or deceptive trade practice under the Maryland Consumer Protection Act, subject to MCPA's civil and criminal penalties.
An individual who provides tax preparation services has until June 1, 2010 to meet registration requirements. The Board must waive examination requirements for an individual who has at least 15 consecutive years of individual tax preparation experience, has completed at least eight hours of annual continuing education, and is in good standing with federal and state regulatory agencies.
Persons licensed by the State Board of Public Accountancy or a licensing authority in another state, persons admitted to practice law in Maryland or another state, persons employed by government in performance of official duties, persons enrolled to practice before the IRS under Circular 230, and persons serving as an assistant to an individual tax preparer or exempted professional are exempted from registration requirements.
An Individual Tax Preparers Fund ("Fund") is established to approximate the costs associated with the administration and enforcement of this Act. The State Treasurer has the responsibility to hold and invest the Fund, the Comptroller has the duty to account for the money therein, and the Board has the authority to administer it. The Fund consists of registration and renewal of registration fees that the Board shall set and collect from individual tax preparers, and pay to the Comptroller for distribution into the Fund. The Fund also consists of money appropriated from the State budget, as well as other money from any other source accepted for the benefit of the Fund. The Board is subject to evaluation and reestablishment provisions of the Maryland Program Evaluation Act and terminates on July 1, 2016.
This Act takes effect June 1, 2008.
Corporate Income Tax - Reporting and Study
House Bill 664 (Chapter 178, Acts of 2008) and Senate Bill 444 (Chapter 177, Acts of 2008) - Corporate Income Tax - Reporting and Study
This Act amends four sections of the Tax-General Article that were enacted by Chapter 3, Acts of 2007 Special Session.
This Act amends TG § 10-110 by expanding the Maryland Business Tax Reform Commission from 17 to 19 members. One of the new members must be a representative of the Greater Baltimore Committee. The other new member must be "a representative of an organization that represents Maryland manufacturers, appointed by the Governor".
This Act amends TG § 10-402 by providing for a cut-off date of January 1, 2011, after which manufacturing corporations no longer have to submit reports on the difference in tax owed under the single sales factor apportionment method. It also changes the due date, from December 1, 2008 to March 1, 2009, of the Comptroller's report to the Governor and the General Assembly on the use of the single factor method, and changes the due date of subsequent annual reports from December 1 to March 1.
This Act amends TG § 10-804 by removing the requirement that a copy of the federal income tax return must be filed with the Comptroller each year by every individual who reports income or loss on Schedule C or Schedule E of Form 1040. The Comptroller still has the power to make a specific request to an individual for a copy of the federal return.
This Act amends TG § 10-804.1 by significantly reducing the scope of the corporate combined reporting requirements by changing who must report and what information must be reported.
The biggest change in who must report is that § 10-804.1 as passed by the Special Session required corporations which do not have nexus with Maryland to comply with the combined reporting requirements, whereas this Act amends § 10-804.1 to provide that only corporations which have nexus with Maryland are to required comply with the combined reporting requirements. The change in the nexus requirement is accomplished by providing that the combined reporting requirements only apply to corporations that are required to file a Maryland income tax return. Also, this Act limits who must report by changing the definition of "Corporate group" to specify that a corporate group does not include any of the following:
- Any corporation that, for any reason, is not subject to U.S. federal income tax.
- An insurer as defined in § 1-101 of the Insurance Article.
- A regulated investment company, as defined in § 851(a) of the Internal Revenue Code.
This Act significantly reduces the information that a corporate group must be report by eliminating all of the information required in § 10-804.1 as passed by the Special Session, and replacing all that with the following requirements:
- A pro forma "water's edge" combined corporate income tax return filed in accordance with regulations adopted by the Comptroller.
- In a format specified by the Comptroller, specific information on the state income tax differences if Maryland had a throwback rule, and also if Maryland required allocation to Maryland of 100 percent of income that is nonoperational and therefore not apportionable.
This Act removes the criminal penalties for failure to comply and requires the Comptroller to develop and implement a penalty system.
This Act changes the due date, from December of 2008 to March of 2009, of the Comptroller's report to the Governor and the General Assembly concerning the corporate income tax, and changes the due date of subsequent annual reports from December 1 to March 1.
This Act takes effect July 1, 2008, and will be applicable to all taxable years beginning after December 31, 2005 but before January 1, 2011. The reports required for a taxable year beginning before January 1, 2007 shall be submitted as part of a corporation's tax return for the corporation's next taxable year beginning after December 31, 2006.
SALES AND USE TAX
Solar and Geothermal Tax Incentive and Grant Program
House Bill 377 (Chapter 132, Acts of 2008) - Solar and Geothermal Tax Incentive and Grant Program
This Act increases specified grant limits under the Solar Energy and Geothermal Heat Pump grant programs, exempts the sale of specified solar energy and geothermal equipment from the state sales and use tax, and exempts specified solar energy property from the state and local real property taxes.
For the Solar Energy and Geothermal Heat Pump grant programs under §§ 9-2007, 9-2008 of the State Government Article, the grant award limits are increased as follows:
|§ 9-2007 Solar Energy Grant Program
||Residential: lesser of $3,000 or 20 percent of the total installed cost
Nonresidential: lesser of $5,000 or 20 percent of the total installed cost
|Lesser of $10,000 or $2,500 per kilowatt of installed electricity generation capacity
|Solar water heating property
||Lesser of $2,000 or 20 percent of the total installed cost
||Lesser of $3,000 or 30 percent of the total installed cost
|§ 9-2008 Solar Energy Grant Program
|Geothermal property (residential)
||$1,000 Lesser of $1,000 per ton or $3,000
|Geothermal Property (nonresidential)
||Lesser of $1,000 per ton or $10,000.
The Maryland Energy Administration has the discretion to adjust the grant award limits, without legislative approval, to reflect market conditions and the prevailing prices of photovoltaic property, solar water heating property and geothermal heat pump systems.
The grant amounts received under § 9-2007 Solar Energy Grant Program affect the income subtraction that an individual may take pursuant to § 10-207(x) of the Tax-General Article. There is not a similar income subtraction provision for grants received under § 9-2008 Geothermal Heat Pump Grant Program.
This Act adds a new § 11-230 to the Tax-General Article, pursuant to which the sales and use tax does not apply to a sale of geothermal equipment or solar energy equipment. "Geothermal equipment" means equipment that uses ground loop technology to heat and cool a structure. "Solar energy equipment" means equipment that uses solar energy to heat or cool a structure, generate electricity to be used in a structure, or provide hot water for use in a structure. Solar energy equipment does not include equipment that is part of a nonsolar energy system or that uses any type of recreational facility or equipment as a storage medium.
This Act also exempts specified solar energy property from state and local real property taxes. This Act takes effect July 1, 2008. The property tax exemption is applicable to taxable years beginning after June 30, 2008.
Energy Star Product Exemptions - Boilers
House Bill 985 (Chapter 180, Acts of 2008) and Senate Bill 456 (Chapter 179, Acts of 2008) - Sales and Use Tax - Energy Star Product Exemptions - Boilers
This bill expands the definition of "Energy Star product" to include boilers for the purpose of excluding sales from the sales and use tax during a specified tax-free period. During the 2007 Special Session, Chapter 6 (House Bill 5) repealed and reenacted § 11-226 of the Tax-General Article. New § 1-226 provides for a tax-free weekend beginning in calendar year 2011. During this weekend, to be held in February of each year, the sales and use tax does not apply to Energy Star products or solar water heaters.
This Act takes effect on July 1, 2008.
Budget Financing Act - Computer Services
Senate Bill 46 (Chapter 10, Acts of 2008) - Budget Financing Act This Act repeals the sales and use tax on computer services, and adds a new 6.25 percent personal income tax bracket for Maryland taxable income in excess of $1,000,000.
This Act repeals the sales and use tax on computer services imposed by Chapter 3, Acts of the 2007 Special Session, by removing computer service from the list of taxable services in § 11-101(m) of the Tax-General Article. It also restores the previous sales and use tax exemptions that were removed by Chapter 3 for sales of custom computer software services and optional computer software maintenance contracts.
This Act takes effect July 1, 2008, and its income tax provisions will be applicable to all taxable years beginning after December 31, 2007.
BOXING AND WRESTLING TAX
Mixed Martial Arts
House Bill 795 (Chapter 608, Acts of 2008) and Senate Bill 649
(Chapter 607, Acts of 2008) Athletics - Mixed Martial Arts - Regulation by State Athletic Commission - Boxing and Wrestling Tax
These Acts require an individual to be licensed by the State Athletic Commission in order to participate in a contest as a mixed martial arts contestant. The Commission shall adopt regulations to ensure the safety of individuals who participate in amateur or professional mixed martial arts contests.
This Act amends § 6-101 of the Tax-General Article to include a "mixed martial arts" contest in the definition of "boxing or wrestling contest." And pursuant to § 6-102, a tax is now extended to gross receipts derived from a charge for admission to mixed martial arts contests in Maryland, and from charges to view the telecast of mixed martial arts contests in Maryland regardless of the origin of the telecast.
This Act takes effect October 1, 2008.