Maryland Basic Business Taxes 2012
Maryland's economic development, finance and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include enterprise zone tax credits, One Maryland tax credits, and research-and-development tax credits.
Area Development Research Desk (2012)
Corporate income tax:
The state taxes corporations doing business in Maryland at the rate of 8.25 percent of net income allocable to Maryland.
Sales and use taxes:
A 6 percent tax is levied on the sale or use of personal property within the state, including the rental or leasing of such property. Local jurisdictions do not impose a sales tax.
Real property tax:
Property taxes are imposed by the state, counties, and municipalities on real property. Property is taxed on an assessed value, and assessed at 100 percent of market value. Rates vary by locality.
Job creation tax credits:
Maryland provides a $1,000 tax credit to businesses that create new jobs to encourage businesses expanding or relocating to Maryland. To qualify, a business may not claim any employees hired prior to the business notifying the Department of Business and Economic Development (DBED) of its intent to seek certification for the Job Creation Tax Credit. New or expanding firms in the state may be eligible for income tax credits for the creation of at least 60 new qualifying jobs over a two-year period. If specific payroll levels are met, credits may be available to companies creating 30-59 new positions. The job-creation threshold is 25 for tax credits to businesses locating or expanding in designated state priority-funding areas.
Enterprise Zone Tax Credits
Businesses locating in a Maryland Enterprise Zone may be eligible for income tax and real property tax credits in return for job creation and investments. Businesses located in one of two focus areas are also be eligible for personal property tax credits.
• Real property tax credits: Ten-year credit against local real property taxes on a portion of real property improvements. Credit is 80 percent the first five years, and decreases 10 percent annually thereafter to 30 percent in the tenth and last year.
• Income tax credits: One- or three-year credit for creating new jobs. The general credit is a one-time $1,000 credit per new employee. For economically disadvantaged employees, the credit increases to a total of $6,000 per employee distributed over three years.
Research-and-development tax credits:
A 3 percent tax credit for R&D expenses and a 10 percent credit for increases in R&D expenses are available for R&D activities in Maryland. These credits, which use federal definitions of R&D, are subject to limits of $3 million each. If total applications exceed the limits, then the amount is prorated.
One Maryland tax credits:
Businesses can qualify for up to $5.5 million in income tax credits under the One Maryland Income Tax if they invest in an economic development project in a "qualified distressed county." They may qualify for project tax credits of up to $5 million and start-up tax credits of up to $500,000. To qualify, the business must create at least 25 new, full-time positions at the project within 24 months, and the positions must be filled for 12 months.
Biotechnology Investment Tax Credit Program:
Fifty percent of an eligible investment made in a qualified Maryland biotechnology company during the taxable year; for qualified individuals, corporations, and venture capital companies up to $250,000. Applications are reviewed on a first come basis. Qualifications include either an individual or entity who invests at least $25,000 in a Qualified Maryland Biotechnology Company OR being a Qualified Maryland Biotechnology Company headquartered and base of operations in Maryland with fewer than 50 employees that has been active in business no longer than 15 years and certified as a biotechnology company by DBED.
Counties may grant tax credits for cleanup and improvement of qualified brownfield sites. Certain jurisdictions may grant redevelopment/revitalization tax credits to qualified businesses.
BRAC Revitalization and Incentive Zone Program:
The intent behind the creation of the BRAC Revitalization and Incentive Zone (SB 206 BRAC Community Enhancement Act) is to focus growth in areas that are already designated for growth; provide local governments with financial assistance for public infrastructure in these well-defined areas; and align other resources and programs to local governments and businesses located in the BRAC zones for a coordinated state effort on making the zones the focus of BRAC growth. Funds must be used for infrastructure improvements in the designated zone. Each year, the amount to be paid to all local jurisdictions is the amount appropriated in the state budget up to $5,000,000. If the amount applied for exceeds the cap, each jurisdiction receives its pro rata share.
Sales and use tax exemptions:
The following are major business-oriented exemptions from the Maryland sales and use tax:
• Sales of capital manufacturing machinery and equipment, including equipment used for testing finished products; assembling, processing, or refining; in the generation of electricity; or used to produce or repair production equipment.
• Sales of non-capitalized manufacturing machinery and equipment; safety and quality-control equipment used on a production activity site; and equipment used to move a finished product on the production site (including inventory control systems and related software).
• Sales of tangible personal property consumed directly in manufacturing, testing of finished products, assembling, processing, or refining, or in the generation of electricity.
• Sales of fuels used in manufacturing, except those used to heat and light the manufacturing facility. All fuels through a particular meter are exempt if more than half are used directly in manufacturing.
• Sales of customized computer software
• Sales of equipment and material used or consumed in research and development, to include testing of finished products
• Sales of aircraft, vessels, railroad rolling stock, and motor vehicles that will be used principally in the movement of passengers or freight in interstate and foreign commerce. This includes sales of replacement parts and other tangible personal property to be used physically in, on, or by these vehicles.
• Sales of certain end-item testing equipment used to perform a contract for the U.S. Department of Defense and transferred to the federal government.
Maryland State Contact:
Maryland Department of Business & Economic Development
401 E. Pratt Street
Baltimore, MD 21202
(410) 767-6300 or (888) CHOOSE MD
Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.