March 3, 2017
Maryland Business Tax Credits and Incentives for the 2017 Filing Season
It’s that time of year again, Maryland! Here’s everything you need to know about Maryland business tax credits and incentives for the 2017 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 2016 must be filed by April 18 (the first weekday after April 15 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 state Department of Assessments and Taxation (DAT) administers the valuation process, however individual 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 are two new business tax credits available for the 2017 filing season:
Aerospace, Electronics, or Defense Contract Tax Credit: Businesses or individuals who operate an Aerospace, Electronics, or Defense Contract Tax Credit Project may be eligible for an income tax credit. The income tax credit is based on the number of qualified positions created or retained for an Aerospace, Electronics, or Defense Contract Tax Credit Project. The maximum credit amount is $2,500,000 per Aerospace, Electronics, or Defense Contract Tax Credit Project.
Preservation and Conservation Easements Tax Credit: Individuals or members of a Pass-Through Entity (PTE) may be eligible for a credit for an easement conveyed to the Maryland Environmental Trust, the Maryland Agricultural Land Preservation Foundation, or the Maryland Department of Natural Resources to preserve open space, natural resources, agriculture, forest land, watersheds, significant ecosystems, viewsheds or historic properties if:
- The easement is perpetual;
- The easement is accepted and approved by the Board of Public Works; and
- The fair market value of the property before and after the conveyance of the easement is substantiated by a certified real estate appraiser.
Four business tax credits have been modified for the 2017 filing season:
- Biotechnology Investment Incentive Tax Credit: The $250,000 cap on this credit has been increased to $500,000 for an investment in a Qualified Maryland Biotechnology Company located in Allegany County, Dorchester County, Garrett County, or Somerset County. The credit is 75%, rather than 50%, of an investment in a Maryland Biotechnology Company located in these counties.
- Clean Energy Incentive Tax Credit: Facilities that produce electricity from a qualified energy resource co-fired with coal no longer qualify for this credit.
- Commuter Tax Credit: The credit is now the lesser of 50% of provided commuter benefits or $100 per month for each employee. Previously, the credit was the lesser of 50% of provided commuter benefits or $50 per month for each employee. In addition, the number of required passengers in a qualifying vanpool vehicle has decreased from eight adults to six adults.
- Cybersecurity Investment Incentive Tax Credit: The $250,000 cap on this credit has been increased to $500,000 for investments in Maryland Cybersecurity Companies located in Allegany County, Dorchester County, Garrett County, or Somerset County. This credit is now 50%, rather than 33%, of an investment in a Maryland Cybersecurity Companies located in these counties.
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
- Endow Maryland Tax Credit
- Enterprise Zone Tax Credit
- Film Production
- Green Building Tax Credit
- Health Enterprise Zone Hiring Tax Credit
- Heritage Structure Rehabilitation 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
- Small Business Research and Development
- Sustainable Communities
- Wineries and Vineyards
- Work-Based Learning Program Tax Credit
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 purchases
- 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.