Businesses located in a Maryland Enterprise Zone or in a Regional Institution Strategic Enterprise (RISE) zones, as defined in Section 5-1401(e) of the Economic Development Article, may be eligible for income tax credits based upon wages paid to qualifying employees.
Go to the Department of Commerce (DOC) to see the list of Maryland Enterprise Zones by region.
There are two types of income tax credits for firms in an enterprise zone; a general income tax credit and a larger income tax credit for hiring economically disadvantaged employees.
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 hire at least one employee who:
- Is a new employee or an employee rehired after being laid off for more than one year;
- Worked for the business for at least 35 hours per week for six months or more;
- Earns at least 150% of the federal minimum wage;
- Spends 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 located in the enterprise zone or focus area, whichever is later; and
- Is not hired to replace an individual employed by the business within the last four years.
If the individual is economically disadvantaged, the business must obtain certification from the Maryland Department of Labor.
How the credit is calculated:
The income tax credit is $1,000 for each qualified new employee filling a newly created position in an enterprise zone, or $1,500 for each qualified new employee in a focus area.
The tax credit for economically disadvantaged employees is for a three-year period for each qualified employee, earned at the following amounts:
In order to receive the tax credit, an economically disadvantaged employee must remain in the position for three years. However, if the disadvantaged employee leaves the firm and is replaced by another employee who is also certified as disadvantaged, the firm may take the remainder of the credit as if the original employee had remained.
If the credit allowed in any tax year exceeds the State income tax for that tax year, a business entity may apply the excess as a credit against the State income tax for succeeding tax years until the earlier of the full amount of the excess is used or the expiration of the 5th tax year from the date on which the business entity hired the qualified employee to whom the credit first applies.
The business must include certification with the electronic return which shows the business is located in a Maryland enterprise zone. For Tax Years after December 31, 2012, this credit must be claimed in the Form 500CR section of an electronically filed Maryland return.
Maryland has more than 30 enterprise zones. Counties and municipalities are responsible for certifying a business as eligible for the tax credits. Contac the county or municipal enterprise zone administrator for more information. DOC has a list of jurisdictions with enterprise zones on its website.
Maryland Department of Commerce
Office of Finance Programs, Tax Incentives Group
401 E. Pratt Street
Baltimore, MD 21202
Phone: 410-767-6438 or 410-767-4041
Economically disadvantaged employees are those who are certified as such by:
Maryland Department of Labor
Division of Workforce Development and Adult Learning
1100 N. Eutaw St.
Baltimore, MD 21201