Home Tax Professionals Laws and Regulations 2010 State Legislative Summary 2010 State Legislative Summary The following links offer summaries of Maryland tax legislation that was passed during the 2009 session of the General Assembly and signed into law by Governor Martin O'Malley. All references are to the Tax-General Article (TG), Annotated Code of Maryland, unless otherwise noted. For information about other tax legislation, visit the Maryland General Assembly's website. INCOME TAX Research and Development Tax Credit - Sunset Extension - Senate Bill 64 (Chapter 20, Acts of 2010) SB64: Research and Development Tax Credit - Sunset Provision Senate Bill 64 (Chapter 20, Acts of 2010) This Act extends the termination date of the Maryland Research and Development Tax Credit to all taxable years beginning after December 31, 1999 but before January 1, 2020. This Act provides that if a taxpayer files on a fiscal year, for the taxable year that begins in calendar year 2019, they may claim a prorated credit for research and development expenses paid or incurred in the taxable year for that part of the taxable year that falls in calendar year 2019. The Act provides that the Maryland Research and Development Tax Credit will abrogate with no further action on June 30, 2021. This Act takes effect on July 1, 2010. Labor and Employment - Job Creation and Recovery Tax Credit - Senate Bill 106 (Chapter 1, Acts of 2010) SB106: Labor and Employment - Job Creation and Recovery Tax Credit This Act establishes the Job Creation and Recovery Tax Credit to encourage qualified employers conducting or operating a trade or business in Maryland to hire qualified employees for newly-created or certain vacant positions in the State. The amount of the tax credit is based on the number of employees hired and the number of months that they were employed during the tax credit period. An individual, corporation or organization exempt under Section 501(c) of the Internal Revenue Code may claim the credit. Qualified employees must be Maryland residents hired between March 25, 2010 and December 31, 2010 to fill positions that are full-time, for 12 months or more, located in the State, and newly created or have been vacant for at least six months. At the time of hire, the individuals must be receiving unemployment insurance benefits or have exhausted their benefits in the previous 12 months and not working full-time immediately preceding the date of hire. A qualified employer must be certified by the Department of Labor, Licensing, and Regulation to claim up to a total credit of $5,000 per qualified employee multiplied by the number of qualified employees hired, but not to exceed $250,000. The credit amount for each qualified employee is $5,000 for a 12-month period or $416.67 for each month that the qualified employee was in the position. A qualified employer must claim the credit on the employer's tax return for each calendar month of 2010 as that month corresponds to the qualified employer's taxable year. If the credit allowed in a year exceeds the total tax otherwise payable by the qualified employer for the taxable year, the employer may claim a refund for the excess. This Act became effective March 25, 2010. Budget Reconciliation and Financing Act of 2010- Senate Bill 141 (Chapter 484, Acts of 2010) SB141: Budget Reconciliation and Financing Act of 2010 Senate Bill 141 (Chapter 484, Acts of 2010) This Act repeals the requirement that the Comptroller establish a tax add-on system that allows contributions to the Fair Campaign Financing Fund. This Act was effective June 1, 2010. Tax Credits for Qualifying Employees with Disabilities - Sunset Extension - Senate Bill 221 (Chapter 252, Acts of 2010) SB221: Tax Credits for Qualifying Employees with Disabilities - Sunset Extension Senate Bill 221 (Chapter 252, Acts of 2010) This Act extends the termination date of the Maryland Tax Credits for Qualifying Employees with Disabilities under Section 21-309 of the Education Article and Section 10-704.7 of the Tax-General Article by one year to June 30, 2011. The tax credit is applicable to all taxable years beginning after December 31, 1996 but before January 1, 2014, for qualified employees hired on or after October 1, 1997 but before July 1, 2011. Excess tax credits may be carried forward and applied as a credit for taxable years beginning on or after January 1, 2014. This Act was effective June 1, 2010. Income Tax Checkoff for Developmental Disabilities - Senate Bill 318 and House Bill 830 (Chapters 499 and 500, Acts of 2010) SB318-HB830: Income Tax Checkoff for Developmental Disabilities These Acts establish a check-off elective on the Maryland individual income tax returns to give taxpayers an option to contribute to the Waiting List Equity Fund which is administered by the Department of Health and Mental Hygiene to provide certain community-based services for individuals with developmental disabilities. The check-off elective shall be designed to allow each spouse on a joint return to separately designate the spouse's contribution. The contribution will first be deducted from the amount of refund that the taxpayer is to receive, if any, and then added to the amount of tax liability that the taxpayer owes. These Acts take effect July 1, 2010, and shall be applicable to taxable years beginning after December 31, 2009. Individual Tax Preparers - Examination Requirements - Senate Bill 555 and House Bill 873 (Chapters 85 and 86, Acts of 2010) SB555-HB873: Business Occupations and Professions - Individual Tax Preparers - Examination Requirements These Acts were cross-filed and provide that the State Board of Individual Tax Preparers shall give the examination prepared by the Internal Revenue Service or an equivalent examination by an independent national or state regulatory authority as determined by the Board. These Acts take effect July 1, 2010 Office of the Public Defender - Eligibility for Services - Requests for Employment Status and Income Information - House Bill 121 (Chapter 393, Acts of 2010) HB121: Office of the Public Defender - Eligibility for Services - Requests for Employment Status and Income Information House Bill 121 (Chapter 393, Acts of 2010) This Act adds new Section 16-210(b)(3) to the Criminal Procedure Article. This Act authorizes the Office of the Public Defender to submit requests to the Comptroller and the Department of Labor, Licensing, and Regulation for information regarding the income and employment status of applicants for services of the Office relating to eligibility for services. Each request must be accompanied by an authorization for release of information in a format acceptable to the agency to which the request is submitted and signed by the applicant. Requests and responses may be exchanged via facsimile transmission. This Act will take effect October 1, 2010. Clean Energy Incentive Act of 2010 - House Bill 464 (Chapter 493, Acts of 2010) HB464: Clean Energy Incentive Act of 2010 House Bill 464 (Chapter 493, Acts of 2010) This Act extends the termination date of the Maryland Clean Energy Incentive Tax Credit under Section 10-720 of the Tax-General Article by five years to December 31, 2015. A qualified Maryland facility must begin producing qualified energy on or after January 1, 2006, but before January 1, 2016, in order to claim the credit. This Act further provides that in each of the tax years for which the credit may be claimed, the credit is now refundable if the credit allowed for the taxable year exceeds the State income tax. The Maryland Energy Administration may no longer issue initial credit certificates for amounts less than $1,000 This Act takes effect July 1, 2010. Smart, Green, and Growing - The Sustainable Communities Act of 2010 - House Bill 475 (Chapter 487, Acts of 2010) HB475: Smart, Green, and Growing - The Sustainable Communities Act of 2010 This Act creates programs focused on creating, enhancing, supporting and revitalizing sustainable communities consistent with the Obama Administration's interagency partnership announced in June 2009. This Act creates the Smart Growth Subcabinet (Subcabinet) in Section 9-1406 of the State Government Article. The Subcabinet shall work together to create, enhance, support, and revitalize sustainable communities across the State. The Subcabinet will make recommendations to the Department of Business and Economic Development, the Department of Housing and Community Development and the Department of Planning. The Act makes changes to the Heritage Structure Rehabilitation Tax Credit found in Title 5A of the State Finance and Procurement Article. The Act replaces the word "heritage" with "historic" and amends the definition of "certified rehabilitation" to include a qualified rehabilitated structure as well as the existing certified historic structure. The Act adds many new definitions such as Financial Assistance, High Performance Building, Historic Property, Main Street Maryland Community, Main Street Maryland Program, Qualified Rehabilitated Structure, and Smart Growth Subcabinet. The Act amends the definition of "substantial rehabilitation" to mean rehabilitation of a structure for which qualified rehabilitation expenditures, during the 24-month period selected by the individual or entity ending with or within the taxable year, exceed: $5,000 for the rehabilitation of a single-family, owner-occupied residential structure; the greater of $25,000 or 50 percent of the adjusted basis for a qualified rehabilitated structure located in a Main Street Maryland Community; and for all other property the greater of the adjusted basis or $25,000. The Act requires the Director of the Maryland Historical Trust, in connection with the Smart Growth Subcabinet, to adopt regulations that establish procedures and standards for certifying structures and to establish an application process for initial credit certificates for Maryland Sustainable Communities Tax Credits. The application process shall favor the award of tax credits for rehabilitation projects that are located the areas as set forth in Section 5A-303(b)(1)(iv). Not more than 10 percent of the total credit amounts under initial credit certificates in any fiscal year may be issued for the rehabilitation of qualified rehabilitation structures. The Act provides that if a fee charged for a commercial rehabilitation is not received by the Trust within 120 days after the Trust sends notice that the fee is due, the initial credit certificate shall expire. For a building to be a qualified rehabilitated structure, after rehabilitation: 50 percent of the existing external walls must be remaining external walls; 75 percent or more of the existing external walls must be external or internal walls; and 75 percent or more of the existing internal framework must remain. The Act provides that for the taxable year in which a certified rehabilitation is completed, an individual or business entity may claim a tax credit as follows: an amount equal to 20 percent of the individual's or business entity's qualified rehabilitation expenditures for the rehabilitation; an amount equal to 25 percent of the individual's or business entity's qualified rehabilitation expenditures for a rehabilitation that is a qualified historic structure and high performance building; an amount equal to 10 percent of the individual's or business entity's qualified rehabilitation expenditures for the rehabilitation if the building is a qualified rehabilitated structure. The Act provides that the Director may not issue any initial credit certificates for any fiscal year after fiscal year 2014. The Act also provides for recapture based on the structure and time disqualifying work was performed or the structure was disposed. Disposal means to transfer legal title and includes, but is not limited to, a sale, gift, or foreclosure. This Act takes effect June 1, 2010. Refund Anticipation Loans and Checks - House Act 1206 (Chapter 730, Acts of 2010) HB1206: Commercial Law - Consumer Protection - Refund Anticipation Loans and Checks This Act creates Subtitle 38 of the Commercial Law Article to provide for new refund anticipation loan and refund anticipation check requirements for individual tax preparers. This Act requires any facilitator of refund anticipation loans and checks to comply with the requirements of this section. If a facilitator fails to comply with the requirements, they are prohibited from soliciting the execution of, processing, receiving or accepting an application or agreement for a refund anticipation loan or check or facilitating the making of such a loan or check. The Act defines facilitator as a person who, individually or in conjunction or cooperation with another person, processes, receives, or accepts an application or agreement for a refund anticipation loan or refund anticipation check, services or collects on a refund anticipation loan or refund anticipation check, or facilitates the making of a refund anticipation loan or refund anticipation check. A facilitator does not include certain financial institutions such as a bank, savings and loan association or credit union; an affiliate or subsidiary of a bank, savings and loan association, or credit union that, in connection with refund anticipation loans or refund anticipation checks acts solely as a servicer for the financial institution with which it is affiliated or of which it is a subsidiary; or a person who acts solely as an intermediary and does not interact with the public in the making of a refund anticipation loan or refund anticipation check. The Act defines a "refund anticipation loan" as: a loan arranged to be paid directly or indirectly from the proceeds of a consumer's tax refund; and includes the sale, assignment, or purchase of a consumer's tax refund at a discount or for a fee, whether or not the consumer must repay the buyer or assignee if the Internal Revenue Service denies or reduces the consumer's tax refund. This Act requires a facilitator to display certain disclosures. The Act provides that a facilitator must display a schedule of fees charged for facilitating refund anticipation loans and checks along with interest rates charged for certain loan and check amounts The Act also provides that a facilitator must display a notice that explains to consumers that a refund anticipation loan or check is a loan against their income tax refund. The notice also explains that a consumer may receive their refund in the normal course and direct deposited into their account without paying for a loan or other product. The Act provides that this notice must be at least 14 point type on a sign not less than 16 x 20 inches. The Act also provides that a facilitator may not charge any fee other than those disclosed on the schedules. The Act provides that if a consumer does apply through a facilitator for a refund anticipation loan, the facilitator must disclose on a separate form, the fee, applicable interest rate percentage, the time in which the loan will be paid, and the notice as mentioned above. For a refund anticipation check, the notice is very similar but tailored to the check process. The Act provides that the disclosures must be provided in English and the language in which the facilitator and consumer orally communicate. Under the Act, a facilitator may not require a consumer to enter into a refund anticipation loan in order to complete a tax return among other prohibitions. This subsection does not preclude a facilitator from charging a fee to complete an income tax return. The Act provides for multiple violations and penalties that a facilitator will face including violations under Title 13 of the Commercial Law Article and actual and consequential damages. This Act will take effect October 1, 2010. Kids First Express Lane Eligibility Act - House Bill 1375(Chapter 734, Acts of 2010) HB1375: Kids First Express Lane Eligibility Act House Bill 1375 (Chapter 734, Acts of 2010) This Act extends the Kids First Act of 2008 (Ch. 692, Acts of 2008) by three years through 2012. This Act adds a new provision to require the Comptroller and the Secretary of Health and Mental Hygiene to enter into an interagency agreement that allows the sharing of information from the income tax return of a taxpayer for the sole purpose of identifying children who may be eligible for the Maryland Medical Assistance Program or the Maryland Children's Health Program, and enrolling eligible children in these programs. However, the Act prohibits the Comptroller from sharing information if a taxpayer fails to opt-in to the information sharing. This limited exception to the Comptroller's requirement to keep tax information confidential is further subject to the federal Children's Health Insurance Program Reauthorization Act of 2009. This Act takes effect July 1, 2010. Central Collection Unit - Collection of Debts Owed to the State - House Bill 1505 (Chapter 477, Acts of 2010) HB1505: Central Collection Unit - Collection of Debts Owed to the State House Bill 1505 (Chapter 477, Acts of 2010) This Act authorizes the Central Collection Unit (CCU) in the Department of Budget and Management to certify to the Comptroller and the State Lottery Agency certain debts or claims owed to the State. This Act authorizes the Agency to follow certain procedures when a certain debtor wins a certain prize and authorizes prize interception by adding new subsection 3-304(a)(4) to the State Finance and Procurement Article. The Act also adds new Section 3-307 to the State Finance and Procurement Article. Section 3-307 provides for procedures under which the Central Collection Unit may certify a debt to the Maryland State Lottery Agency. The Act also amends Section 13-918 of the Tax-General Article to provide that the Comptroller shall honor interception requests from Central Collection Unit in fourth priority. This Act takes effect July 1, 2010 and applies to every debt or claim owed to the State on or after this effective date. CORPORATE REPORTING Maryland Business Tax Reform Commission - Reporting Requirements - Senate Bill 336 (Chapter 543, Acts of 2010) SB336: Maryland Business Tax Reform Commission - Reporting Requirements Senate Bill 336 (Chapter 543, Acts of 2010) This Act provides that the Commission must present its final report of findings and recommendations to the Governor on or before December 15, 2010. This Act takes effect July 1, 2010. SALES AND USE TAX Sales and Use Tax Exemption - Veterans' Organization - Senate Bill 237 and House Bill 203(Chapters 509 and 510, Acts of 2010) SB237-HB203: Sales and Use Tax Exemption - Veterans' Organizations Senate Bill 237 and House Bill 203 (Chapters 509 and 510, Acts of 2010) These Acts were cross-filed and provide a permanent sales and use tax exemption for veterans organizations organized under Section 501(c)(4) of the Internal Revenue Code. These Acts take effect July 1, 2010. Rebate Programs for Retail Sales - Collection of Sales and Use Tax - Senate Bill 1081(Chapter 650, Acts of 2010) SB621: Sales and Use and Property Tax Exemptions for Solar Energy Equipment and Property Senate Bill 621 (Chapter 574, Acts of 2009) This Act expands the definition of "Solar energy equipment" in Tax-General Article §11-230(a)(3)(i) and Tax-Property Article 7-242(a) to include that the sales and use tax and real property tax does not apply to solar energy equipment that uses solar energy to generate electricity that is supplied to the electric grid. This Act takes effect July 1, 2009. Sales and Use Tax Exemption - Lodging at a Corporate Training Center - House Bill 855(Chapter 706, Acts of 2010) HB855: Sales and Use Tax Exemption - Lodging at a Corporate Training Center House Bill 855 (Chapter 706, Acts of 2010) This Act exempts from the State sales and use tax the sale of a right to occupy a room or lodgings as a transient guest at a dormitory or other lodging facility that: is operated solely in support of a corporate or any other headquarters, training, conference, or awards facility campus; provides lodging solely for employees, contractors, vendors, and other invitees of the corporation that owns the dormitory or lodging facility; and does not offer lodging services to the general public. This Act takes effect July 1, 2010. ESTATE TAX Estate Tax - Pilot Program for Payment Deferral for Qualified Agricultural Property - Senate Bill 396 (Chapter 554, Acts of 2010) SB396: Estate Tax - Pilot Program for Payment Deferral for Qualified Agricultural Property This Act adds a new provision to Title 7 of the Tax-General Article relating to alternate payment schedules for Maryland estate tax imposed on agricultural and personal property used for farming purposes. The new Section 7-307(e) provides for a payment deferral of three years from the due date for Maryland estate tax imposed on property passing from a decedent to or for the use of an individual who enters into an agreement to use the property for farming purposes after the decedent's death. The amount that may be deferred is determined by multiplying the percentage of property of the gross estate that is used for farming purposes times the estate tax due. The amount of tax deferred under this section may not exceed $375,000 as to any decedent. If a payment deferral is allowed, the deferred estate tax shall be paid without interest in accordance with a payment schedule prescribed by the Comptroller over a three-year period beginning in the fourth year after the due date. Interest does not begin on unpaid estate tax until the tax is due under the schedule. To be eligible for the payment deferral, a qualified recipient must file an application and enter into an agreement in a form specified by the Comptroller to use the qualified agricultural property for farming purposes after the decedent's death and file periodic reports or allow periodic inspections as required by the Comptroller. The new provision further provides that on or before October 1, 2013, the Comptroller shall submit a report to the General Assembly, in accordance with Section 2-1246 of the State Government Article, and the Maryland Agricultural Land Preservation Foundation concerning: the number of approved applications for Maryland estate tax payment deferral; the number of agricultural acres in which a Maryland estate tax payment deferral was approved under the payment deferral pilot program; the number of qualified agricultural properties approved for Maryland estate tax payment deferral that apply to preserve agricultural land under the Maryland Agricultural Land Preservation Foundation; the aggregate value of Maryland estate tax payment deferrals approved under the payment deferral pilot program; the aggregate amount of Maryland estate taxes paid due to exceeding the maximum amount eligible for payment deferral under the payment deferral pilot program; and recommendations for implementing a Maryland estate tax payment deferral program in the State. This Act takes effect on July 1, 2010 and will be applicable to decedents dying after December 31, 2010. However, the Act will remain effective only for a period of four years and, at the end of June 30, 2014, with no further action required by the General Assembly, shall be abrogated and of no further force and effect. INHERITANCE TAX Inheritance Tax Exemption - Spouses of Predeceasing Descendants - House Bill 443 (Chapter 674, Acts of 2010) HB443: Maryland Inheritance Tax - Exemption - Spouses of Predeceasing Descendants House Bill 443 (Chapter 674, Acts of 2010) This Act amends Section 7-203(b) of the Tax-General Article to provide an exemption from the inheritance tax for property that passes from a decedent to or for the use of a surviving spouse of a deceased child or of a deceased lineal descendant of a child of the decedent who was married to the child or lineal descendant of the child at the time of the child's or lineal descendant's death. Under the terms of this provision, "surviving spouse" means a surviving spouse who has not remarried. This Act takes effect July 1, 2010, and will be applicable to decedents dying after July 1, 2010.