Home Tax Professionals Laws and Regulations 2011 State Legislative Summary 2011 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 Maryland Defense Force - Senate Bill 346 and House Bill 11 (Chapters 221 and 222, Acts of 2011) SB346: Maryland Defense Force Senate Bill 346 and House Bill 11 (Chapters 221 and 222 Acts of 2011) The Acts expand the scope of the Honorable Louis L. Goldstein Volunteer Police, Fire, Rescue and Emergency Medical Services Personnel Subtraction Modification Program under § 10-208(i-1) of the Tax-General Article, to include active members of the Maryland Defense Force, who may qualify for an income subtraction modification of $3,500. Effective Date: The Acts will take effect July 1, 2011, and shall be applicable to taxable years beginning after December 31, 2011. Teachers at State and Local Correctional Facilities for Adults and Juveniles - Senate Bill 494 (Chapter 490, Acts of 2011) SB494: Teachers at State and Local Correctional Facilities for Adults and Juveniles The Act expands the Quality Teacher Incentive Credit to allow teachers at a state or local correctional facility or a juvenile facility listed in Section 9-226 of the Human Services Article to claim the credit that was originally only allowed for public school teachers. The Act allows an individual who is a teacher at a state or local correctional facility or a juvenile facility listed in Section 9-226 of the Human Services Article to qualify for the credit if they meet the same criteria that applied for teachers who are employed by a county board of education and teach in a public school. Tax-General Article, Section 10-717 provides that an individual who is a classroom teacher holding a standard professional certificate or an advanced professional certificate may claim a credit against the State income tax for up to $1,500 of tuition paid by the individual during the taxable year for graduate level courses required to maintain certification if the individual: This Act became effective March 25, 2010. successfully completes the courses with a grade of B or better; is employed by a county board of education; teaches in a public school and receives a satisfactory performance evaluation for that teaching; and has not been reimbursed by the county for the tuition paid. Effective Date: This Act shall take effect July 1, 2011 and be applicable to all taxable years after December 31, 20 Maryland Film Production Employment Act - Senate Bill 672 (Chapter 516, Acts of 2011) SB672: Maryland Film Production Employment Act This Act repeals the Film Production Rebate Program and creates the Film Production Activity Credit. The Act defines most relevant terms, using the definitions contained in the former Subtitle 4 of the Economic Development Article. The Act defines "department" and "secretary" to be the Department of Business and Economic Development and its Secretary. The Act adds two more activities to what "film production activity" does not include. "Film production activity" does not include a video, computer, or social networking game or pornography. The Act defines pornography to mean any production for which records are required to be maintained under Section 2257 of Title 18, U.S.C. The Act also deletes the provision that "film production activity" does not include any other activity not necessary to or directly related to the making of a master film, tape, or image. The definition for "total direct costs" provides that the costs are the total costs incurred in the State that are necessary to carry out the production activity. The Act expands the list of costs that are included in "total direct costs." These new additions include set construction and operation; wardrobe, makeup, and related services; editing and related services; travel; food and lodging, and legal and accounting services performed by attorneys or accountants licensed in Maryland. The Act adds to the definition of "total direct costs" to provide that it does not include any salary, wages, or other compensation for personal services of an individual who receives more than $500,000 in salary, wages, or other compensation for personal services in connection with any film production activity. In order to claim the credit, a film production entity must submit an application to DBED before beginning any film production activity. This application should describe the anticipated film production activity and must include a list provided for in §10-729(c)(2). To qualify as a film production entity for this credit, the estimated total direct costs incurred in the State must exceed $500,000. After receiving the application, the Secretary shall determine if the entity qualifies for the credit under this section and then must notify the Comptroller of the estimated amount of total direct costs and taxable year the credit will be claimed. After the production activity is completed, the entity must apply to DBED for a tax credit certificate on the form required by DBED and include required information. The Secretary shall determine the total direct costs that qualify for the tax credit and issue a tax credit certificate. The tax credit certificate for a television series will be issued for 27% of the total direct costs that qualify. For all other activities, the tax credit certificate will be issued for 25% of the total direct costs that qualify for the tax credit. The Secretary must then notify the Comptroller of the amount of the tax credit certificate issued under this subsection. The tax credit is capped at $7,500,000 for each fiscal year and the Secretary may not issue credit certificates exceeding this amount in the aggregate. However, if the Secretary issues less than the cap in any fiscal year, the excess amount may be carried forward and issued under tax credit certificates in a subsequent fiscal year. The Act provides that a qualified film production entity may claim a tax credit against State income tax for film production activities in the state in an amount equal to the amount in the final tax credit certificate approved by the Secretary. The Act provides that this credit is refundable if the tax credit allowed exceeds the total tax otherwise payable by a qualified film production entity for that taxable year. Effective Date: This Act shall take effect July 1, 2011 and be applicable to all taxable years beginning after December 31, 2010. This Act shall abrogate on July 1, 2014 without any further action required by the General Assembly. Qualifying Employees with Disabilities Sunset Extension - Senate Bill 830 (Chapter 558, Acts of 2011) SB830: Tax Credits for Qualifying Employees with Disabilities - Sunset Extension Senate Bill 830 (Chapter 558, Acts of 2011) The Act extends, by one year, to June 30, 2012, the termination date of the Qualifying Employees with Disabilities Tax Credit under § 10-704.7 of the Tax-General Article, for employees hired on or after October 1, 1997 but before July 1, 2012. Effective Date: The Act will take effect June 1, 2011. Qualified Distressed Counties - Senate Bill 891 (Chapter 330, Acts of 2011) SB891: Economic Development Qualified Distressed Counties Senate Bill 891 (Chapter 303, Acts of 2011) For purposes of the One Maryland Economic Development Tax Credit, the Act amends Section 1-101 of the Economic Development Article to amend the definition of a "qualified distressed county" to provide that the definition includes a county that has met at least one of the criteria at some time during the preceding 24-month period. Effective Date: This Act will take effect July 1, 2011. Maryland Clean Energy Incentive Act - Qualified Energy Resources - Senate Bill 958(Chapter 565,Acts of 2011) SB958: Qualified Energy Resources Senate Bill 958 (Chapter 565, Acts of 2011) The Act expands the energy resources that can qualify for the Maryland clean energy incentive tax credit by allowing any nonhazardous waste material that is segregated from other waste materials to qualify as a qualified energy resource. Currently, the Maryland Energy Administration (MEA) can only approve facilities that use waste materials that are solid and cellulosic. Effective Date: The Act will take effect July 1, 2011. Bio-Heating Oil - Senate Bill 959 (Chapter 566, Acts of 2011) SB959: Bio-Heating Oil Credit Senate Bill 959 (Chapter 566, Acts of 2011) The Act expands the credit for bio-heating oil and extends the termination dates for the credit. The Act amends Section 10-727(a)(3) to provide that bio-heating oil means a heating oil derived from the U.S. Environmental Protection Agency approved feedstocks, or accepted under 42 U.S.C. 7545(O) as per the U.S. EPA Renewable Fuel Standard 2 (RFS2) and the accompanying regulations under 40 C.F.R. Part 80 for diesel fuel replacement. The Act further extends the credit until December 31, 2017. The credit now abrogates without further action on June 30, 2018. Effective Date: This Act shall take effect June 1, 2011, and is applicable to all tax years 2008 through 2017. Budget Reconciliation Financing Act of 2011 - House Bill 72 (Chapter 397, Acts of 2011) HB72: Budget Reconciliation Financing Act of 2011 House Bill 72 (Chapter 397, Acts of 2011) This Act prohibits the Motor Vehicle Administration (MVA) from renewing or transferring registration of a vehicle until the applicant has paid all undisputed taxes and unemployment insurance contributions payable to the Comptroller or the Secretary of Labor, Licensing, and Regulation (DLLR), in a manner satisfactory to the Comptroller or the Secretary of DLLR. This Act prohibits the Motor Vehicle Administration (MVA) from renewing a driver's license until the applicant has paid all undisputed taxes and unemployment insurance contributions payable to the Comptroller or the Secretary of Labor, Licensing, and Regulation (DLLR), in a manner satisfactory to the Comptroller or the Secretary of DLLR. MVA shall coordinate with the Comptroller and DLLR to develop procedures and adopt regulations to implement this new legislation. Effective Date: This Act will take effect June 1, 2011. Electric Vehicle Recharging Equipment - House Bill 163 (Chapter 402, Acts of 2011) HB163: Electric Vehicle Recharging Equipment Tax Credit This Act creates a new tax credit for electric vehicle recharging equipment. The Maryland Energy Administration (MEA) will administer the tax credit. An individual or a corporation that receives an initial credit certificate from MEA may claim a credit in the amount equal to 20% of the cost of any qualified electric vehicle recharging equipment placed in service by the taxpayer during the taxable year in which they are claiming the credit. The Act provides that "qualified electric vehicle recharging equipment" means property used for the recharging of motor vehicles propelled by electricity that meets the definition of "qualified alternative fuel vehicle refueling property" in § 30C of the Internal Revenue Code. The Act provides that the credit cannot exceed the lesser of $400 for each individual recharging system or the State income tax for that taxable year. This credit cannot be carried over to any other taxable year. The Act provides for the application process with MEA and the annual limits for amounts of the credit certificates that MEA may issue for each year. The Act also provides that on January 1, 2012, and each year authorized, MEA must provide to the Comptroller a list of all taxpayers in the prior tax year that have been issued an initial credit certificate and the maximum credit allowed for each taxpayer. Effective Date: This Act shall take effect July 1, 2011, and is applicable to all tax years 2011 through 2013. Biotechnology Investment Tax Credit-Qualified Maryland Biotechnology Company - House Bill 587 (Chapter 349, Acts of 2011) HB587: Biotechnology Investment Tax Credit-Qualified Maryland Biotechnology Company This Act provides that, for fiscal years 2012 and 2013 only, a biotechnology company that has been in active business for up to 15 years can qualify as a biotechnology company and be eligible to receive investments for which the Biotechnology Investment Tax Credits can be awarded. Currently, a qualifying biotechnology company may not have been in active business for more than 10 years (or 12 years if the Department of Business and Economic Development determines that the company requires additional time to complete the process of regulatory approval). Effective Date: This Act will take effect June 1, 2011, and shall be applicable to initial tax credit certificates issued for fiscal years beginning on or after July 1, 2011. Sustainable Communities Tax Credit Program-Eligibility - House Bill 601(Chapter 133, Acts of 2011) HB601: Sustainable Communities Tax Credit Program-Eligibility House Bill 601 (Chapter 133, Acts of 2011) This Act expands the eligibility for the Sustainable Communities Tax Credit to allow the Maryland Historic Trust (MHT) to accept an application for a proposed commercial rehabilitation for which a substantial part of the proposed rehabilitation work has begun if the rehabilitation work has been approved under the federal historic tax credit. Effective Date: This Act will take effect July 1, 2011. Earned Income Information Act - House Bill 632(Chapter 352, Acts of 2011) HB632: Earned Income Credit Information Act House Bill 632 (Chapter 352, Acts of 2011) This Act requires the Comptroller to publish the maximum income eligibility for the State earned income tax credit (EIC) on or before January 1 of each calendar year. This Act also requires the Comptroller to notify all employers in Maryland by mail the information on the State EIC. This notice must include the following statements, which each employer must provide electronically or in written form to each employee who may be eligible for the credit: (1) the employee may be eligible for the federal and State earned income tax credits; and (2) the employee may be eligible for the State earned income tax credit. Effective Date: This Act will take effect January 1, 2012. Sustainable Communities Tax Credit Program - House Bill 1196(Chapter 383, Acts of 2011) HB1196: Sustainable Communities Tax Credit Program House Bill 1196 (Chapter 383, Acts of 2011) This Act makes several changes to the Sustainable Communities Tax Credit program. This was a departmental bill introduced by the Maryland Department of Planning. The Act amends Section 5A-303 of the State Finance and Procurement Article. The Act clarifies that the tax credits for high-performance buildings and certified rehabilitation structures apply to commercial rehabilitations only. The Act increases the fee that the Maryland Historic Trust (MHT) can charge for certifying these structures from 1% to 3%. The Act also provides that if the fees paid in any fiscal year are less than the directly related administrative costs of operating the tax credit program, the funds in the reserve fund shall be used for the directly related administrative costs of the program. The Act further provides for how the fees are to be used and funds are to be estimated. The Act also expands MHT's reporting requirement to the Governor. Effective Date: This Act will take effect July 1, 2011. Withholding Statements-Electronic Submission - House Bill 1233(Chapter 161, Acts of 2011) HB 1233:Income Tax Withholding Statements-Electronic Submission House Bill 1233 (Chapter 161, Acts of 2011) AN ACT concerning Income Tax – Withholding Statements – Electronic Submission FOR the purpose of altering the number of statements that certain payors of amounts subject to income tax withholding must be required to submit for purposes of a requirement that certain statements be submitted electronically; repealing an obsolete provision; and generally relating to a requirement to submit certain statements in a certain manner. BY repealing and reenacting, with amendments, Article – Tax – General Section 10–911 Annotated Code of Maryland (2010 Replacement Volume) SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, That the Laws of Maryland read as follows: Article – Tax – General 10–911. (a) Each employer or payor required under § 10–906 of this subtitle to withhold income tax for an employee or a person who receives a payment subject to withholding shall prepare a statement that shows for the previous calendar year: (1) the name of the employer or payor; (2) the name of the employee or person who receives the payment subject to withholding; (3) the total amount that the employer paid to the employee as wages or the total amount that the payor has paid to the person; (4) the total amount of tips that the employee reported; (5) the total amount of income tax that has been withheld under this subtitle; Ch. 161 2011 LAWS OF MARYLAND – 2 – (6) any amount by which income tax required to be withheld on tips exceeds the other net wages paid to the employee; and (7) any other information that the Comptroller requires by regulation. (b) An employer or payor of a payment subject to withholding shall: (1) provide 2 copies of the statement required under subsection (a) of this section to the employee or person who receives a payment subject to withholding on or before January 31 of each year; and (2) submit 1 copy of the statement to the Comptroller on or before February 28 of each year. (c) (1) Except as provided in paragraph (2) of this subsection, an employer or payor shall submit statements required under subsection (a) of this section on magnetic media or in other machine–readable or electronic format that the Comptroller requires by regulation, if: (i) the total number of statements of that statement type that the employer or payor is required to submit equals or exceeds[: 1. 150 for calendar year 2006; or 2. 100 for a calendar year beginning after December 31, 2006] 25; or (ii) a lower threshold applies for federal income tax purposes. (2) The Comptroller: (i) shall adopt regulations to provide a process for an employer or payor that is required to submit statements on magnetic media or in other machine–readable or electronic format under paragraph (1) of this subsection to request a waiver from the requirement; and (ii) may waive the requirement that an employer or payor submit statements on magnetic media or in other machine–readable or electronic format under paragraph (1) of this subsection if the Comptroller determines that the requirement will result in undue hardship to the employer or payor. SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect October 1, 2011. Approved by the Governor, April 12, 2011. SALES AND USE TAX Sale of Electricity Generated by Solar Energy and Residential Wind Energy Equipment-Exemption - Senate Bill 398 (Chapter 461, Acts of 2011) and House Bill 502 (Chapter 462, Acts of 2011) SB398: Sale of Electricity Generated by Solar Energy and Residential Wind Energy Equipment-Esemption Senate Bill 398 (Chapter 461, Acts of 2011) and House Bill 502 (Chapter 462, Acts of 2011) These Acts expand the sales and use tax exemption for the sale of electricity for residential use. The Acts provide that the sales and use tax does not apply to the sale of electricity generated by solar energy equipment or residential wind energy equipment, as defined under Section 11-230 of the Tax-General Article, for use in residential property owned by an eligible customer-generator under Section 7-306 of the Public Utilities Article. Effective Date: This Act will take effect July 1, 2011. Nonprofit Food Vendors-Youth Sporting Events and 4-H Youth Events - House Bill 823 (Chapter 364, Acts of 2011) HB823: Nonprofit Food Vendors-Youth Sporting Events and 4-H Youth Events This Act expands the sales and use tax exemption for sales of food by nonprofit food vendors at a youth sporting event or 4-H event for individuals under 18 years old if there are no facilities for food consumption on the premises, unless the sale is within an enclosure where a charge is made for admission. The exemption includes sales of food, bottled water, soft drinks or carbonated beverages, or candy or confectionary. Effective Date: This Act will take effect July 1, 2011. ADMISSION AND AMUSEMENT TAX Hot Air Balloons-Exemption - House Bill 499 (Chapter 125, Acts of 2011) HB499: Hot Air Balloons Exemption House Bill 499 (Chapter 125, Acts of 2011) This Act amends Section 4-103 of the Tax-General Article to provide that the admissions and amusement tax may not be imposed by a county or municipal corporation on gross receipts of a nontethered hot air balloon. Effective Date: This Act will take effect July 1, 2011 MOTOR FUEL TAX Personal Liability-Limited Liability Companies and Limited Liability Partnerships - Senate Bill 145 Senate Bill 396 (Chapter 31, Acts of 2011) SB145: Personal Liability-Limited Liability Companies and Limited Liability Partnerships Senate Bill 145 (Chapter 31, Acts of 2011) This Act establishes personal liability for unpaid motor fuel tax, interest, and penalties for members of limited liability companies and partners of a limited liability partnership. Personal liability for the unpaid motor fuel taxes extends to any person who exercises direct control over the fiscal management of the company or partnership Effective Date: This Act will take effect October 1, 2011. ESTATE TAX Payment Deferral for Qualified Agricultural Property-Extension of Deferral - Senate Bill 513 (Chapter 241, Acts of 2011) SB513: Payment Deferral for Agricultural Property-Extension Senate Bill 513 (Chapter 241, Acts of 2011) This Act amends §7-307 of the Tax-General Article by adding a new subsection which authorizes the Comptroller to grant an extension of the deferred payment period for payment of estate tax imposed on qualified agricultural property. For decedents dying in 2011, Tax-General Article §7-307 currently directs the Comptroller to allow a payment deferral for up to 3 years from the due date, for Maryland estate tax imposed on qualified agricultural property that passes from the decedent to or for the use of a qualified recipient. If a payment deferral is allowed, the qualified recipient shall pay the deferred Maryland estate tax, without interest, in accordance with a payment schedule prescribed by the Comptroller over a 3 year period beginning in the 4th year after the due date. This Act authorizes the Comptroller to grant an extension of the deferred payment period if the qualified recipient has a pending application to put the land on which the deferred estate tax is due under a permanent land conservation easement with the Maryland Agricultural Land Preservation Foundation, the Rural Legacy Board, or a similar easement purchase program. Effective Date: This Act will take effect October 1, 2011, and shall be applicable to decedents dying after December 31, 2010. BUSINESS LICENSING AND PERMITS Slot Machines for Nonprofit Organizations on the Eastern Shore Expansion and Oversight - House Bill 39 (Chapter 315, Acts of 2011) HB39: Slot Machines for Nonprofit Organizations on the Eastern Shore-Expansion and Oversight House Bill 39 (Chapter 314, Acts of 2011) This Act adds Worcester County to the list of Eastern Shore counties in which eligible nonprofit fraternal, religious, and war veterans' organizations may own and operate up to five slot machines at its principal meeting hall. At least one-half of the gross proceeds must go to charity and the remainder to further the purposes of the organization. This Act also requires the Comptroller's Office to assume the responsibility to license and regulate slot machines operated by eligible organizations located in Eastern Shore counties. However, the Comptroller may not initiate any audit or reporting requirements until July 1, 2012. Effective Date: This Act will take effect June 1, 2011. Alcoholic Beverages - Direct Wine Shipment - Senate Bill 248 and House Bill 1175 (Chapters 204 and 205, Acts of 2011) SB248: Alcoholic Beverages -Direct Wine Shipment These Acts repeal the direct wine seller's permit and establish a direct wine shipper's permit and a common carrier permit to be issued by the Comptroller. A person permitted as a direct wine shipper may engage in shipping wine directly to a resident in the State, for wines ordered or purchased for personal consumption through a computer network. To qualify, the applicant must be (1) a person licensed outside of the State to engage in the manufacture of wine; or (2) a holder of a Class 3 or Class 4 manufacturer's license. A direct wine shipper must ship by a common carrier holding a common carrier permit. A direct wine shipper must ensure that all containers of wine shipped directly to a consumer in the State are conspicuously labeled with: (1) the name of the direct wine shipper; (2) the name and address of the consumer who is the intended recipient; and (3) the words "Contains Alcohol: Signature of Person at Least 21 Years of Age Required for Delivery." To complete delivery, the common carrier must require the signature of the consumer or another individual at the address, and the government-issued photo ID showing that the individual is at least 21 years old. A direct wine shipper is prohibited from shipping more than 18 9-liter cases of wine annually to a single delivery address or delivering wine on Sunday to an address in the State. A direct wine shipper must also (1) report quarterly to the Comptroller's Office the total amount of wine, by type, shipped in the State, the price charged, and the name and address of each purchaser; (2) file a quarterly alcoholic beverage tax return; (3) pay quarterly to the Comptroller's Office all sales and excise taxes due on sales to personal consumers in the State, calculating the amount of the taxes as if the sale was made in the State; (4) maintain for three years complete and accurate records of all information needed to verify compliance; (5) allow the Comptroller's Office to audit the direct wine shipper's records on request; and (6) consent to the jurisdiction of the Comptroller's Office or other State unit and the State courts concerning enforcement. The initial and renewal fee for the direct wine shipper permit is $200; and for the common carrier permit fee, $100. The permits have a term of one year that begins on July 1. The Comptroller must submit a specified report on the impact of direct wine shipping by December 31, 2012. Effective Date: The Acts will take effect July 1, 2011.