Businesses may be eligible to claim a credit against the State income tax for a portion of the costs incurred to obtain federal security clearances and to construct or renovate certain sensitive compartmented information facilities.
To qualify for the credit:
Businesses must submit an application to the Maryland Department of Commerce (DOC) by September 15 of the calendar year following the end of the tax year for which the costs were incurred. DOC shall certify the amount of the approved credit by December 15 of the calendar year following the end of the tax year in which the costs were incurred.
The credit can be taken for tax years beginning after December 31, 2012, but before January 1, 2022.
The Department of Commerce may not exceed $2 million in credits for any calendar year. If the total amount of credits applied for by all businesses exceeds $2 million, the credits will be approved on a pro-rata basis.
How the credit is calculated:
The credit is the sum of:
- Security clearance administrative expenses, not to exceed $200,000;
- 50% of the construction and equipment costs to construct or renovate a single Sensitive Compartmented Information Facility (SCIF) not exceed $200,000 the total amount of construction and equipment costs incurred to construct or renovate multiple SCIFs for which a credit can be claimed may not exceed $500,000; and
- Expenses incurred for rental payments owed during the first year of a rental agreement for spaces leased in the State if the individual or corporation is a Qualified Small Business that performs security-based contracting, not to exceed $200,000.
If the credit is more than the State tax liability, the unused credit may be carried forward for succeeding tax years until fully used.
Add Back Requirement:
Whenever a credit is claimed against the income tax for Security Administrative Expenses or the costs associated with a SCIF, an addition modification must be made in the amount of the credit claimed in Part J-I, line 3 of the Form 500CR. The add back requirement does not apply to a Qualified Small Business claiming the credit for First-Year Leasing Costs.
Special Rules for 2013 Expenses:
During the 2103 Legislative Session, the Maryland General Assembly amended certain provisions of the bill which authorized this tax credit that were effective for Tax Years beginning in 2013. As a result, there are some special provisions that apply when claiming the 2013 tax credit. Contact DOC, or go to their website, if you are claiming the 2013 credit and need more information.
To claim the ESCC tax credit, a business must submit an application to the Maryland Department of Commerce by September 15th following the tax year in which the related expenses and costs were incurred. By December 15th of that year, the Maryland Department of Commerce will certify the approved amount. To claim the credit, the applicant must: 1) file an electronic Maryland income tax return with the Comptroller of Maryland for any taxable year after the taxable year in which the costs were incurred; or 2) file an electronic amended Maryland income tax return with the Comptroller of Maryland. A copy of the Maryland Department of Commerce certification must be included with the return.
Maryland Department of Commerce (DOC)
Division of Business Development, Tax Incentives Group
World Trade Center
401 East Pratt Street, 17th Floor
Baltimore, MD 21202
Phone: 410-767-6438 or 410-767-4041