June 25, 2021
Guidance has been issued by the Maryland Comptroller’s Office regarding the taxation of pass-through entities. If the income PTE election is made, the amount of the credit for taxes paid by the entity attributable to the member’s share of the entity’s taxable income must be added back to the income. A pass-through entity’s taxable income is defined as “the portion of a pass–through entity’s income under the federal Internal Revenue Code, calculated without regard to any deduction for taxes based on net income that are imposed by any state or political subdivision of a state, that is derived from or reasonably attributable to the trade or business of the pass–through entity in this State.” A Maryland electing pass-through entity must file a Maryland Form 511 and is not allowed to file a composite return on behalf of any members while a Maryland non-electing pass-through must file a Maryland Form 510 and can file a composite return for qualified non-resident individual members.
June 9, 2021
Effective June 1, 2021, and retroactively applicable to all taxable years beginning after June 30, 2018, Maryland will provide a refund of the disabled active duty service members and disabled veterans property tax exemption under certain circumstances. A disabled active duty service member, disabled veteran, or surviving spouse can apply for a refund of Maryland state, county, and municipal corporation property tax paid on the dwelling house while the exemption was available, only if the individual applies for the exemption during the three-year period beginning with the calendar year in which the individual initially became eligible for the exemption. In the taxable years in which the exemption was authorized but not granted, the state, county, or municipal corporation must pay the refund to such individual who receives the exemption for any property tax paid, and interest on the amount of the refund if the individual applied for the refund and the refund is not made within 60 days after the individual applied for the refund. For more information, please visit the Maryland Department of Veterans Affairs website.
Effective October 1, 2021, Maryland will institute a Whistleblower Reward Program. Under the program, a whistleblower who voluntarily provides original information to the Maryland Comptroller in a sworn affidavit that, because of the original information, results in a final assessment in a covered enforcement action, or a successful outcome against a taxpayer in a related action, is entitled to receive a monetary award of at least 15%, but not exceeding 30%, of the taxes, penalties, and interest collected through the enforcement action or related action. The covered enforcement action must relate to an enforcement action brought by the comptroller concerning: (1) the state and county income tax liability of a taxpayer whose federal adjusted gross income is at least $250,000, or the state and county tax liability of a business whose annual gross receipts or sales are at least $2 million; and (2) taxes in dispute exceeding $250,000. Also, as a separate matter, the legislation alters the statute of limitations for tax collections by increasing the amount of time from when a tax is due until when it can be collected from 7 to 10 years, and the amount of time from when a tax is assessed until when the assessment can be collected from 7 to 10 years. More information on the program will be posted as it becomes available.
June 3, 2021
Effective June 1, 2021, the purpose of Maryland’s Regional Institution Strategic Enterprise (RISE) zone program is expanded to incentivize the location of innovative start-up businesses based on technology developed, licensed, or poised for commercialization at or in collaboration with qualified Maryland institutions. Existing income and property tax credits under the program are limited to businesses that locate in a RISE zone before January 1, 2023. The program credits and benefits terminate on January 1, 2028. Additionally, effective July 1, 2021 and applicable to all taxable years beginning after December 31, 2020, the biotechnology investment incentive credit of 75% of the investment in a qualified Maryland biotechnology company is available if the company is located in a RISE zone. The cybersecurity investment incentive credit of 50% of the investment in a qualified Maryland cybersecurity company is available if the company is located in a RISE zone.
Effective July 1, 2021, Maryland will provide a vendor collection sales and use tax credit for qualified job training organizations who timely file sales and use tax returns. The credit is equal to 100% of the gross amount of sales and use tax that the vendor is to pay to the Maryland Comptroller. For any calendar year, the total amount of credits that a vendor can claim cannot exceed $100,000. A vendor must apply to the Maryland Secretary of Labor for certification. To qualify, the organization must: (1) be located in Maryland; (2) be exempt from taxation under Internal Revenue Code Section 501(c)(3); (3) conduct retail sales of donated items; (4) provide job training and employment services to individuals with workplace disadvantages or disabilities; and (5) use a majority of its revenue for job training and job placement programs that assist individuals with growth in employment hours, for individuals with low income, workplace disadvantages, disabilities, or barriers to employment, or for veterans. A vendor who claims this credit cannot claim other vendor credits.
May 26, 2021
Effective October 1, 2021, Maryland State Department of Assessments and Taxation (SDAT) will provide an additional year for domestic corporations, limited liability companies (LLCs), limited liability partnerships, limited partnerships, and statutory trusts, to file annual reports with the State before being placed on a list whereby their charter will be forfeited. This 1-year grace period applies only to these specifically stated Maryland (i.e., domestic) legal entities. For specific text of the bill, please see L. 2021, H839 (c. 335).
Further, effective July 1, 2021 and pursuant to L. 2021, H647 (c. 142), Maryland SDAT has repealed required fees for certain business filings. The $100 nonrefundable processing fees for filing articles of dissolution and certificates of cancellation are repealed, and there is no processing fee for documents filed to dissolve, cancel, or terminate an entity (i.e., previously, the fee was $25 for these documents).
May 21, 2021
The Maryland RELIEF Act of 2021 provides for a Sales and Use Tax Discount for small businesses in lieu of the standard vendor discount. This discount is available for the filing periods of March, April, and May of 2021. The relief is a credit on the sales and use tax returns in the amount of the lesser of $3,000 or the sales and use tax collected during the filing period and may not exceed $9,000 for the total three-month period.
For monthly filers, the credit for the March, April, and May filing periods will be taken on the respective monthly return normally filed the following month. For quarterly filers, the credit for March can be applied to the return for the quarter ending March 2021. For April and May, the credit can be applied to the return quarter ending June 2021 up to $3,000.
In order to qualify for the RELIEF Credit, the business must:
The RELIEF credit is automatic on the bFile site for eligible taxpayers starting May 17th, 2021. If a return for the periods eligible has already been filed by an eligible business, the return can be amended to take the RELIEF credit. In order to amend the sales and use tax return for the credit, the taxpayer must email email@example.com and must include the following information:
For monthly and quarterly filers, return periods ending March, April, and May 2021 have an extended deadline of July 15th, 2021. You may take advantage of the relief credit and the extended deadline.
Please see the bulletin for more information.
May 5, 2021
The Maryland Comptroller’s Office issued guidance for small businesses who may qualify for a Sales and Use Tax Credit under the Maryland Recovery for the Economy, Livelihoods, Industries, Entrepreneurs, and Families (RELIEF) Act of 2021. Eligible vendors can claim an increased tax credit for March, April, and May 2021, usually filed in April, May, and June. The filing deadlines for that period were extended to July 15, 2021.
Vendors must file their sales and use tax return or consolidated return using the Comptroller’s bFile system. Note that the gross amount of sales and use tax collected during the monthly reporting period may not exceed $6,000, and the vendor must not take the standard vendor credit to claim the RELIEF Act credit. In addition, the credit cannot apply to sales and use taxes collected by a marketplace facilitator.
Vendors reporting $6,000 or less in gross collected sales tax for the reporting period may elect to take up to $3,000 as a tax credit. If the gross sales tax collected is $3,000 or less, then the vendor may claim the sales tax reported as a credit. However, vendors not eligible for the RELIEF Act credit may still claim the vendor tax credit, even when filing by the extended July 15th deadline.
Once the bFile system is updated, vendors can claim the RELIEF Act vendor credit by filing their sales and use tax return. Businesses that filed their monthly SUT return for the period ending March 31, 2021, but did not claim the RELIEF Act credit can amend their March return.
If you would like to discuss this credit and how it may apply to your business, please contact a member of the State and Local tax team.
April 28, 2021
The Maryland Comptroller’s Office has updated its guidance on the Maryland RELIEF Act, which was enacted as a result of the federal American Rescue Plan Act’s unemployment compensation exclusion of up to $10,200 for qualifying individuals. For Maryland purposes, any amount of unemployment compensation in excess of $10,200 that is included at the federal level is eligible for a subtraction modification at the Maryland level, subject to Maryland’s income caps for the subtraction. Taxpayers who qualify for the federal exclusion, but do not qualify for the Maryland subtraction, need not add back the amount excluded from federal AGI as the exclusion flows to the Maryland return. Under the Maryland RELIEF Act, the subtraction for unemployment benefits received is only available to taxpayers with a filing status of single, married filing separate, or dependent with a federal AGI that does not exceed $75,000, and filers with married filing joint, head of household, or surviving spouse status with a federal AGI that does not exceed $100,000. For specific details, please see the Maryland Tax Alert on this subject.
April 23, 2021
Effective July 1, 2021, and applicable to all Maryland research and development tax credits certified after February 15, 2021, the 3% basic research and development tax credit is eliminated, but the 10% growth credit continues to be available. For each calendar year, the maximum amount of the credit that can be approved by the Maryland Department of Commerce is increased to $12 million, but $3.5 million of that amount will be reserved for small business applicants. The Department will not be permitted to approve a tax credit for any single applicant in an amount exceeding $250,000. In determining small business eligibility, “net book value assets” means the total of a business’s net value of assets, including intangibles but not including liabilities, minus depreciation and amortization. For specific details, please consult the bill enacting such changes (L. 2021, S196 (c. 114)).
Effective June 1, 2021, and applicable to all initial credit certificates issued after June 30, 2021, Maryland’s biotechnology investment incentive tax credit permits an initial tax credit for 33% (previously, 50%) of an investment in a qualified Maryland biotechnology company, not to exceed $250,000. However, if the company is located in Allegany, Dorchester, Garrett, or Somerset Counties, the credit is 50% (previously, 75%) of the investment in the company, not to exceed $500,000. A “qualified investor” does not include a founder or current employee of the company if the company has been in active business for more than five years. In addition to existing requirements, a “qualified Maryland biotechnology company” means a biotechnology company that the qualified investors in the company have not received more than $7 million in tax credits in the aggregate.
Effective June 1, 2021, and applicable to all initial credit certificates issued after June 30, 2021, Maryland’s cybersecurity investment incentive tax credit will be known as the “Innovation Investment Incentive Tax Credit” in order to reflect the expansion of the credit to technology companies rather than only cybersecurity companies. Per the amended law, “Technology company” means a company organized for profit that is engaged in the research, development, or commercialization of innovative and proprietary technology. However, a “qualified Maryland technology company” does not include a technology company that is or has been certified as a qualified Maryland biotechnology company. A “qualified investor” does not include a founder or current employee of the company if the company has been in active business for more than five years.
April 14, 2021
Maryland’s legislature passed a bill this week (SB0787/255361/1) that will push the effective date of the tax on gross revenues from digital advertising services to tax years beginning after December 31, 2021 (previously was set to take effect for tax years beginning after December 31, 2020). The first estimated payment for companies subject to such tax would have been due April 15, 2021. Among the amendments to Senate Bill 787, taxpayer subject to the digital advertising tax will be prohibited from directly passing the cost of the tax on to their customers by means of a separate fee, surcharge, or line-item. For specific details of the new tax, please see Senate Bill 787 or reach out to Withum’s SALT team with questions.
April 7, 2021
The Maryland Tax Court had previously held a taxpayer was entitled to a refund for sales taxes it paid when, as part of housekeeping supervisory services it provided to three non-profit hospital clients, it purchased cleaning supplies used at each of the hospitals. The taxpayer’s original refund request was based on the argument the purchased supplies were resold to the hospitals; while the reseller theory was rejected, but the Tax Court nevertheless granted the refund on the basis that the taxpayer purchased the supplies as an agent for tax-exempt/non-profit hospitals. Reversing and remanding the decision, the Maryland Court of Special Appeals found the taxpayer had no agency relationship with the hospitals due to the fact that, among other things, the contracts between the taxpayer and hospitals were at arm’s length, and the taxpayer had no duty to act primarily for the benefit of the hospitals.
March 23, 2021
Maryland Comptroller Peter Franchot alerts taxpayers that the state 2020 income tax filing deadline has been extended to July 15, 2021. No interest or penalties will be assessed if returns are filed and taxes owed are paid by the new deadline. The extension applies to individual, pass-through, fiduciary, and corporate income tax returns, including first and second quarter estimated payments. The extension is due to recently enacted and pending state and federal legislation that impact 2020 tax filings and provide economic relief related to the coronavirus (COVID-19) pandemic. The comptroller must make extensive revisions to previously released forms and software programs used by tax filers and tax software vendors. ( News Release, Maryland Comptroller’s Office, 03/11/2021 ; Tax Alert: Extension of Time to File and Waiver of Interest and Penalty for Certain Filers, Maryland Comptroller’s Office, 03/11/2021 ; News Release, Maryland Comptroller’s Office, 03/18/2021 .)
March 17, 2021
As a result of recent and pending state and federal COVID-19 relief legislation, Maryland State Comptroller Peter Franchot announced extension of the tax filing deadline to July 15, 2021 for individual taxpayers, passthrough entities, fiduciaries, and corporate income tax returns. No interest or penalties will be assessed if returns are filed and taxes owed are paid by the new deadline. The due date of the Tobacco Floor Tax payment (originally due June 13, 2021), as well as any sales and use tax returns that would have been due in March, April and May of 2021, will also now be due on July 15, 2021.
March 16, 2021
Beginning March 14, 2021, Maryland imposes a 6% sales/use tax on digital products received or used by purchasers in the state. The Maryland tax authority has issued guidance on the new law explaining that digital products include the following, among other items, when delivered electronically:
Unlike Maryland, most states do not characterize SaaS or downloaded software as digital products, so this expansive characterization by the Maryland tax authority could come as a surprise SaaS providers.
The new law will impact many technology companies’ Maryland sales tax obligations. We recommend that businesses review their Maryland sales tax nexus and compliance activity under the new law to determine if they are now required to collect and remit sales tax. Please call a member of Withum’s State and Local Tax team with any questions.
November 16, 2020
On November 9, 2020, the IRS (Notice 2020-75) informed it intends to issue proposed regulations supporting the use of Pass-Through Entity (PTE) SALT Workarounds. This taxpayer-friendly development would affirm that a pass-through entity’s owners or shareholders would not be limited in the amount deducted for state and local tax. Please review the article below regarding Notice 2020-75.
Learn more in our recent insight here.
May 2, 2020
The Maryland Department of Assessments and Taxation extended the 2020 deadline to submit Annual Reports, and Personal Property Tax Returns to July 15, 2020, as part of the Governor Hogan’s response to COVID-19.
March 21, 2020
The Maryland Comptroller’s Office will conform with the Internal Revenue Service’s 90-day extension of federal income tax payments from April 15 to July 15, 2020. Individual and Corporate Income taxpayers will be afforded the same relief for state Income Tax payments. No interest or penalty for late payments will be applied if 2019 tax payments are made by July 15, 2020. Taxpayers must file for an extension for the filing of Federal taxes by April 15.
Fiscal year filers with tax years ending January 1, 2020, through March 31, 2020, are also eligible for the July 15, 2020 payment extension. The due date for March quarterly estimated payments are extended to July 15, 2020.
Business-related tax filing deadlines are also extended. The June 1 extension applies to certain business returns with due dates during March, April and May 2020 for businesses filing sales and use, withholding, admissions & amusement, alcohol, tobacco, and motor fuel taxes, as well as tire recycling fee and bay restoration fee returns.
Business taxpayers who file and pay by June 1, 2020 will receive an automatic waiver of interest and penalties. Learn more here.
The Maryland Controller has implemented provisions to extend business-related tax filing deadlines. For certain business returns with due dates during March, April and May 2020, taxpayers have been provided an extension through June 1st. The extension applies to those businesses filing sales and use tax, withholding tax, and admissions & amusement tax, as well as alcohol, tobacco and motor fuel excise taxes, tire recycling fee and bay restoration fee returns. Furthermore, business taxpayers who file and pay by the extended due date will be granted a waiver of interest and penalties.
The Internal Revenue Service advised that high-deductible health plans (HDHPs) can pay for 2019 Novel Coronavirus-related testing and treatment, without jeopardizing their status. This also means that an individual with an HDHP that covers these costs may continue to contribute to a health savings account (HSA).
In Notice 2020-15 (PDF), posted on IRS.gov, the IRS said that health plans that otherwise qualify as HDHPs will not lose that status merely because they cover the cost of testing for or treatment of COVID-19 before plan deductibles have been met. The IRS also noted that, as in the past, any vaccination costs continue to count as preventive care and can be paid for by an HDHP.
This notice applies only to HSA-eligible HDHPs. Employees and other taxpayers in any other type of health plan with specific questions about their own plan and what it covers should contact their plan.
More on Taxes and the Coronavirus Pandemic.
Disclaimer: Please note this is the information that is readily available at this time, it is subject to change so please consult your Withum tax advisor.