Maryland enacts favorable tax incentives for manufacturers
TAX ALERT |
On April 11, 2017, Maryland Gov. Hogan signed Senate Bill 317, titled the More Jobs for Marylanders Act of 2017, providing for a comprehensive package of incentives for manufacturers including income and property tax credits and sales and use tax refunds. The legislation also includes several other incentives including depreciation expensing, an apprenticeship credit and workforce development scholarships.
Manufacturer job creation credits
Qualifying business entities may apply to the Department of Commerce to enroll an eligible project in the incentive program if the project is (1) in a Tier-I county (certain distressed or designated county) and the business entity intends to create at least five qualified positions, or (2) in a Tier-II county (counties not designated as Tier-1 counties) and the business intends to create at least 10 qualified positions.
A ‘new business entity’ in a Tier-I county is eligible for the 10-year credit against the state income tax, a credit against the state property tax, a refund of sales and use tax paid during the immediately preceding taxable year, and a waiver of fees charged by the Maryland State Department of Assessments and Taxation. A new business entity must also notify the department of its intent to seek designation of an eligible project before establishing its facility in the state and must offer an ongoing jobs training or education program approved by the department.
New business entities are entitled to a refund for the amount of sales and use tax paid by the business during the immediately preceding calendar year for a sale of qualified personal property or services made on or after Jan. 1, 2018. The property or services purchased must be solely for use at an eligible project enrolled in the incentive program. New business entities may also receive a credit against the state property tax on real property equal to 100 percent of all state property tax that is due, but does not apply to local property tax liabilities.
An ‘existing business entity’ that operates an eligible project is eligible for a credit against the state income tax. The incentives are not available if the business moves its facility to another county in the state after June 1, 2017. An existing business entity must notify the department of its intent to seek designation of an eligible project prior to hiring any employees and must also offer an ongoing jobs training or education program approved by the department.
If the number of qualified positions at the project decreases to a number less than the number established in the first benefit year, the project is removed from the incentive program and all benefits will terminate.
The incentive package also provides conformity to federal allowances for expensing under section 179 and bonus depreciation under section 168 for manufacturing businesses. The changes are effective for property placed into service on or after Jan. 1, 2019.
Apprenticeship training credit
The More Jobs for Marylanders Act provides several other benefits including a credit against the state income tax for the first year of employment of an eligible apprentice. An eligible apprentice is an individual enrolled in an apprenticeship training program registered with the Maryland Apprenticeship and Training Council and has been employed by the taxpayer for at least seven full months of the taxable year. The available credit is the lesser of $1,000 for each eligible apprentice, or the state income tax imposed for the taxable year before the application of allowed credits, the excess of which can be used against the state income tax in succeeding taxable years.
Workforce development scholarships
The More Jobs for Marylanders Act also establishes a scholarship program for eligible students that are either a Maryland resident or had graduated from a Maryland high school, and are enrolled in a workforce development sequence – a program related to job preparation, certification or job skills enhancement, at a public community college in the state. The annual amount of a scholarship award to an eligible student may not exceed $2,000.
The More Jobs for Marylanders Act provides very favorable incentives to manufacturers that are generally effective after June 30, 2017. There are a number of conditions that must be met to qualify for the various incentives. Taxpayers considering expansion or establishing their business in Maryland should speak to their tax advisors about meeting the project qualifications, including application and certification by the department, before beginning an eligible project.