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Maryland Basic Business Taxes

Q1 2014
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 Credit
Businesses that create a minimum number of new full-time positions may be entitled to state income tax credits of up to $1,000 per job or $1,500 per job in a “revitalization area.” Businesses engaged in an eligible activity must create at least 60 new full-time jobs in a 24-month period; this is reduced to 30 new full-time jobs if they are “high wage” jobs, and reduced to 25 new full-time jobs if they are located in a Job Creation Tax Credit “priority funding area.” One Maryland Tax Credit

Businesses that invest in an economic development project in a “qualified distressed county” and create at least 25 new full-time jobs may qualify for up to $5.5 million in state income tax credits. Project tax credits of up to $5 million are based on qualifying costs incurred in connection with the acquisition, construction, rehabilitation and installation of a project. Start-up tax credits of up to $500,000 are available for the expense of moving a business from outside Maryland and for the costs of furnishing and equipping the new location. The credit can be carried forward 14 years and is refundable, subject to certain limitations.

Enterprise Zone Tax Credit
The Enterprise Zone program provides real property and state income tax credits for businesses that locate in a Maryland enterprise zone. The real property tax credit is 80% of the incremental increase in property taxes over the first five years, decreasing 10% annually during the next five years. The income credit is $1,000 credit per new employee. For economically disadvantaged employees, the credit increases to $6,000 per new employee over three years. Enhanced credits are available in enterprise zone focus areas.

Research and Development Tax Credit Program
For Maryland businesses that incur Maryland qualified research and development expenses, the Basic R&D tax credit is 3% of eligible R&D expenses that do not exceed the firm’s average R&D expenses over the last four years and the Growth R&D tax credit is 10% of eligible R&D expenses -in excess of the firm’s average R&D expenses. The credits are capped at $4 million each. If the amount of credits all businesses apply for exceeds the cap, each business receives its pro rata share. Businesses must submit an application to DBED by September 15 for expenses incurred in the previous tax year. The credit is refundable for small businesses.

Biotechnology Investment Tax Credit Program
Maryland’s Biotechnology Investment Tax Credit provides income tax credits for investors in qualified Maryland biotechnology companies. The value of the credit is equal to 50% of an eligible investment made in a qualified Maryland biotechnology company during the taxable year. The maximum amount of the credit cannot exceed $250,000 for investors. If the credit exceeds the tax liability, the remaining credit is refundable. The program has a program cap and credits are awarded on a first come, first serve basis.

Cellulosic Ethanol Technology Research and Development Tax Credit Program
The program provides income tax credits for expenses related to cellulosic ethanol technology research and development conducted in the State. The amount of the tax credit is equal to 10% of the eligible expenses incurred and cannot exceed the tax liability for that year. The maximum amount available in each year is limited to $250,000. Businesses must submit an application to DBED by September 15 for expenses incurred in the previous tax year.

Brownfields Revitalization Incentive Program
A site that qualifies for this incentive program may qualify for real property tax credits as well. The site must be located in a jurisdiction that participates in the BRIP, and owned by an inculpable person. For five years after cleanup, a site may qualify for a real property tax credit between 50% and 70% of the increased value of the site. (In an Enterprise Zone, the tax credit may last for up to 10 years). This credit, combined with other real property tax credits, may not exceed 100% of the tax on the increased value of the site.

BRAC Revitalization and Incentive Zone Program
The purpose of the program is to focus growth in designated growth areas; provide local governments with financial assistance for public infrastructure in these areas; and align other state resources and programs to local governments and businesses for a coordinated State effort on making BRAC zones the focus of BRAC growth. A local jurisdiction with a BRAC Zone receives: payment equal to 100% of state real property tax increment on qualified properties, and payment equal to 50% of the local jurisdiction’s real property tax increment on qualified properties. Funds can be used to pay back Tax Increment Financing bonds and used to pay for infrastructure improvements in the 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 total amount applied for exceeds the cap, each jurisdiction receives pro rata share.

Employer Security Clearance Costs Tax Credit
The program provides income tax credits for businesses that incur costs related to obtaining security clearance for their employees or for the cost of constructing or renovating a sensitive compartmented information facility (SCIF). Businesses may receive a credit of up to $200,000 for security clearance administrative costs, 50% of the costs to construct a single SCIF up to $200,000 or up to $500,000 for the cost of constructing multiple SCIFs. In addition, a qualified small business that performs security-based contracting in Maryland may be eligible for income tax credits for the first year of rental payment for spaces leased in Maryland. The total credit is capped at $2 million. If the amount that businesses apply for exceeds $2 million, each business receives its pro rata share. The program goes into effect for tax years beginning January 1, 2013. Businesses apply to DBED by September 15th for expenses incurred in the previous tax year.

Cybersecurity Investment Tax Credit
The program provides a refundable income tax credit to Qualified Maryland Cybersecurity Companies (QMCCs) that secure investment from an investor. QMCCs receive a credit of 33% of the investment up to $250,000. Companies are limited to participating in the program for only two years and to no more than 15% of the program appropriation in a single fiscal year. The program has a program cap and credits are awarded on a first come, first serve basis. The credit is available for tax years beginning January 1, 2014.

Wineries and Vineyards Tax Credit
Provides an income tax credit of 25% of qualified capital expenses made in connection with the establishment of new wineries or vineyards, or the capital improvements made to existing wineries or vineyards. Total credits applied for may not exceed $500,000 or the credit will be prorated. Businesses must submit an application to DBED by September 15 for expenses incurred in the previous tax year. The credit is available for tax years beginning January 1, 2013.

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:
Dominick E. Murray, Secretary
Maryland Department of Business & Economic Development
401 E. Pratt Street
Baltimore, MD 21202
(410) 767-6300 or (888) CHOOSE MD

Contact for business prospects:
Jayson Knott
Deputy Program Director
Office of Business &
Enterprise Development
(410) 767-6978 or (410) 718-0084

Information on Financial Incentives

Information on Tax Incentives

Guide to Business Tax Credits

Information on State Taxes:
Comptroller of Maryland
80 Calvert St.
P.O. Box 466
Annapolis, MD 21404-0466
410-260-7801 or 800-552-3941

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.

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