March 1, 2018
Maryland Business Tax Credits and Incentives for the 2018 Filing Season
It’s tax season, Maryland! Here’s everything you need to know about Maryland business tax credits and incentives for the 2018 filing season.
If you would like additional information about Maryland business tax deductions, credits and incentives, visit Maryland Business Taxes or the Maryland Department of Business & Economic Development.
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 percent of the net income allocable to Maryland.
When and How to File
Business income tax returns for the year 2017 must be filed by April 17 or by the original due date required for filing the federal return. Maryland form 500 must be filed electronically to claim business income tax deductions and 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 Maryland 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 corporate tax incentives. There are three new business tax credits available for the 2018 filing season:
Apprentice Employee Tax Credit: Certain taxpayers may be eligible for an income tax credit for the first year of employment of eligible apprentices. The income tax credit is based on the number of eligible apprentices employed by the taxpayer. “Eligible apprentice” means an individual who is enrolled in an apprenticeship program registered with the Maryland Apprenticeship and Training Council. Eligible apprentices must have been employed by the taxpayer for at least seven full months of the taxable year.
Qualified Farms Tax Credit: A qualified farm that makes an eligible food donation is eligible for a tax credit amount equal to 50 percent of the value of the eligible food donation. A qualified farm that makes a donation of certified organic produce is eligible for a tax credit amount equal to 75 percent of the value of the donated certified organic produce. Certification of the tax credit is issued by an individual or organization authorized by the State Department of Agriculture to receive eligible food donations from a qualified farm and to issue the qualified farm a tax credit certificate. For any taxable year, the aggregate amount of credits authorized for a qualified farm may not exceed $5,000 unless the Maryland Secretary of Agriculture increases the credit limitation for a qualified farm to an amount not to exceed $10,000. If the allowable credit amount exceeds the state income tax, the unused credit may be carried forward each subsequent year until the allowable credit is used up or five years, whichever first occurs.
Qualified Veteran Employees Tax Credit: A credit may be claimed by a small business for each qualified veteran employee hired. The credit for each qualified veteran employee may not exceed 30 percent of up to the first $6,000 of wages paid to the qualified veteran employee during the first year of employment. A small business qualifying for this tax credit is required to apply to the Maryland Department of Commerce for a tax credit certificate. A copy of the Maryland Department of Commerce certification must be included with the tax return of the small business to claim this tax credit.
One business tax credit has been modified for the 2018 filing season:
- Biotechnology Investment Incentive Tax Credit: The definition of “biotechnology company” has been expanded to include a company that will, within two months, become primarily engaged in the research, development or commercialization of innovative and proprietary technology that comprises, interacts with or analyzes biological material including biomolecules, cells, tissues or organs. Previously, the company had to be engaged in these activities at the time of investment. The definition also extended the time period in which the company has been in business. A qualified company cannot be in business longer than 12 years (previously 10). The Department of Commerce can extend this time period to 15 years if it determines the company needs additional time to complete process of regulatory approval. If a company receives an investment but fails to satisfy the requirements of biotechnology company within two months, the Department of Commerce shall revoke the tax credit certificates issued and recapture tax credits already claimed by the qualified investor.
Maryland offers a variety of corporate tax incentives, write-offs, exemptions and credits to help businesses grow and prosper, including:
- Aerospace, Electronics or Defense Contract
- Apprentice Employee
- 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
- Employer Provided Long-Term Care Insurance
- Endow Maryland Tax Credit
- Enterprise Zone Tax Credit
- Film Production
- Health Enterprise Zone Hiring Tax Credit
- Heritage Structure Rehabilitation
- Job Creation
- Maryland Disability Employment
- Maryland Employer Security Clearance Costs
- Mined Coal
- One Maryland Economic Development
- Oyster Shell Recycling
- Qualified Farms
- Qualified Vehicle Tax Credit
- Qualified Veteran Employees
- Small Business Research and Development
- Wineries and Vineyards
In addition to the tax incentives and credits for businesses listed above, 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 percent or more of the subsidiary)
- No tax on intangible property
- No separate school taxes
Maryland also offers specialized financing and tax 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
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.