R&D Tax Alert - July 2017

July 2017

Maryland Expands Research Tax Credit

On July 1, 2017, Senate Bill 200 (“S.B. 200”) became effective. Enacted on May 25, 2017, by the Maryland General Assembly, S.B. 200 expands the total amount of research—or research and development (“R&D”)—corporate and individual income tax credits that the Department of Commerce may approve in a calendar year. The bill is applicable to all Maryland R&D tax credits certified after December 15, 2016.

For tax years ending on or before December 31, 2020, the State of Maryland offers two different state income tax credits for qualified R&D expenses incurred for activities in Maryland:
Type of R&D Credit Equals Cap on Total Credits Allocated Each Year Increase Over Last Year’s Cap
Basic 3% of eligible R&D expenses that do not exceed the Maryland “base amount”
$5.5 million (statewide) 22%
Growth 10% of eligible R&D expenses in excess of the Maryland “base amount” $6.5 million (statewide) 44%

Sole proprietorships, corporations, and pass-through entities—such as partnerships, subchapter S corporations, limited liability companies, and business trusts—may claim the credit.

Qualifying expenditures include wage, contractor, and supply expenses related to a taxpayer’s attempts in Maryland to develop or improve the functionality or performance of its products, manufacturing processes, software, or other components.

To qualify for these credits, an application must be submitted to the State no later than September 15 of the calendar year following the tax year in which the expenses were incurred. Fiscal year taxpayers should apply for credits earned on R&D expenses incurred in the tax year that ends in the calendar year before the application is due.

R&D tax credits generated by qualified “small businesses” and certified after December 15, 2012, are refundable to the extent that they exceed income tax liability. A “small business” is a for-profit entity with a net book value, at the beginning or end of the year in which qualified expenses were incurred, of less than $5 million.         

For more information, please contact one of our R&D Tax Credit Services team leaders:
Jim Feeser
R&D Regional Leader
Atlantic Region
  Chai Hoang
R&D Market Leader
Maryland & Virginia

David Kalman
R&D Market Leader
Pennsylvania & Delaware