March 14, 2016
Maryland Business Tax Credits and Incentives for the 2016 Filing Season
It’s tax season in Maryland! Here’s what you need to know about Maryland business tax credits and incentives for the 2016 filing season.
Who Must File
All corporations and associations with income allocable to the State of Maryland are required to file an income tax return with the state on Form 500. The corporate tax rate is 8.25% of the net income allocable to Maryland.
When and How to File
Business income tax returns for the year 2015 must be filed by the 15th day of the third month following the close of the taxable year or period, or by the original due date required for filing the federal return. Form 500 must be filed electronically to claim business income tax credits.
Business Personal Property and Local Taxation Requirements
In Maryland, businesses must pay an annual tax based on the value of their business personal property, including furniture, fixtures, tools, machinery, equipment, etc. The Department of Assessments and Taxation (DAT) administers the valuation process, while the counties and towns collect the tax based on the location of the property.
The DAT automatically registers corporations, limited liability companies, limited partnerships and limited liability partnerships for this tax when these legal entities form. All other businesses, such as sole proprietorships and general partnerships, that own or lease personal property or need a business license are required to:
1) Obtain an identification number by registering with the DAT; and
2) File an annual business personal property return.
Tax credits provide new and existing businesses in various industries and geographic locations the opportunity to reduce costs, spur investment and create jobs through targeted tax incentives. There is one new business tax credit available for the 2016 filing season:
Endow Maryland Tax Credit: A taxpayer who makes a donation to a qualified permanent endowment fund at an eligible community foundation may be eligible for a credit against the Maryland State income tax. The taxpayer must apply to the Maryland Department of Housing and Community Development (DHCD) for a certification for the donation. The credit is limited to 25% of the approved donation (in cash or publicly traded securities) not to exceed $50,000.
Three business tax credits have been modified for the 2016 filing season:
- Maryland Disability Employment Tax Credit for Employees: Employers who hire qualified employees with disabilities are now entitled to a larger tax credit for the first two years of employment. Also, the tax credit for the child care and travel expenses per each qualified employee for each of the first two years of employment has increased to a maximum of $900.
- Qualified Vehicle Tax Credit (Tractor-Trailer Vehicle Registration Tax Credit): Taxpayers who claim this credit must now attach certification to the electronically-filed return. A qualified vehicle is defined as a Class F (Tractor) vehicle. Maryland registration of a Class F Tractor will serve as certification.
- Oyster Shell Recycling Tax Credit: The amount of tax credit allowable for each bushel of oyster shells has increased from $1.00 to $5.00 per bushel, not to exceed $750.00.
Maryland offers a variety of tax incentives, exemptions and credits to help businesses grow and prosper, including:
- Bio-Heating Oil
- Biotechnology Investment Incentive
- Businesses that Create New Jobs
- Cellulosic Ethanol Technology Research and Development
- Clean Energy Incentive
- Community Investment
- Cybersecurity Investment Incentive Tax Credit
- Electric Vehicle Recharging Equipment Tax Credit
- Employer Provided Long-Term Care Insurance
- Employer Security Clearance Costs
- Employment Opportunity Tax Credit
- Enterprise Zone Tax Credit
- Film Production
- First Year Leasing Costs for Qualified Small Business
- Green Building Tax Credit
- Health Enterprise Zone Hiring Tax Credit
- Job Creation
- Long-Term Employment of Ex-Felons Tax Credit
- Maryland Disability Employment
- Mined Coal
- One Maryland Economic Development
- Oyster Shell Recycling
- Qualified Vehicle Tax Credit
- Regional Institution Strategic Enterprise Zone Program
- Small Business Research and Development
- Sustainable Communities
- Wineries and Vineyards
- Work-Based Learning Program Tax Credit
Other Maryland Benefits
In addition to the listed tax incentives and credits, Maryland offers the following benefits:
- No gross receipts tax on manufacturers
- No corporate franchise tax
- No unitary tax on profits
- No income tax on foreign dividends (if the corporation owns 50% or more of the subsidiary)
- No tax on intangible property
- No separate school taxes
Maryland also offers specialized financing and incentive resources for small businesses, veteran-owned businesses and minority- and woman-owned businesses to help with a variety of needs including:
- Modernization of manufacturing equipment
- Land acquisition and infrastructure improvements
- Machinery and equipment purchase
- Development of commercial opportunities
- Financing for the economically disadvantaged
If you would like additional information about Maryland business taxes, visit Maryland Business Taxes or the Maryland Department of Business & Economic Development.
This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material. Websites not belonging to this organization are provided for information only. No endorsement is implied.