Summary of 2009 Tax Legislation for Businesses

The following is a brief summary of Maryland tax legislation affecting businesses 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 more detailed information, see Summary of 2009 Tax Legislation. For information about other tax legislation, visit the Maryland General Assembly's Web site

INCOME TAX

Tax Amnesty Program - Senate Bill 552 (Chapter 277, Acts of 2009)
This Act requires the Comptroller to declare an amnesty period from September 1, 2009 to October 30, 2009, both inclusive, during which the Comptroller shall waive all civil penalties (except previously assessed fraud penalties) and one-half of the interest that would have been imposed on certain delinquent taxpayers for nonreporting of tax liability, underreporting of tax liability, and nonpayment of tax liability.

The amnesty program affects the individual income tax, corporate income tax, withholding tax, sales and use tax, or admissions and amusement tax. The program does not apply to certain large corporations, taxes that were granted amnesty under the 2001 tax amnesty program, or taxpayers who were eligible for the July 1, 2004 - November 1, 2004 settlement period provided by Chapter 557 of the Acts of 2004. This Act takes effect June 1, 2009.

Tax Credits for Qualifying Employees with Disabilities - Sunset Extension
- Senate Bill 604 (Chapter 290, Acts of 2009) -
This Act extends by one year the termination provision and dates of applicability of the tax credit that an employer may claim for wages, child care and transportation expenses for qualified employees with disabilities The new termination date for this Qualifying Employees with Disability Tax Credit is June 30, 2010. This Act takes effect on June 1, 2009.

Income Tax Refund - Direct Deposit - Multiple Accounts - Senate Bill 698 (Chapter 593, Acts of 2009) and House Bill 883 (Chapter 594, Acts of 2009) - These Acts require the Comptroller to directly deposit portions of an income tax refund into at least two accounts at one or more financial institutions, if requested by a refund claimant. These Acts will take effect January 1, 2011.

Biotechnology Investment Incentive Tax Credit - Senate Bill 800 (Chapter 605, Acts of 2009) and House Bill 493 (Chapter 606, Acts of 2009)
These Acts amend the Biotechnology Investment Incentive Tax Credit and clarify that a qualified investor includes both an individual and entity. In addition, the Acts provide that Chapter 518 remains effective as of July 1, 2008, but removes the language that the Chapter applies to all taxable years after December 31, 2008. The Acts provide that for Chapter 518, a tax credit for an investment shall be claimed for the taxable year in which the investments were made. This Act takes effect July 1, 2009.

Workplace Fraud Act of 2009 - Senate Bill 909 (Chapter 188, Acts of 2009)
This Act establishes a presumption that work performed by an individual paid by an employer creates an employer-employee relationship, unless the employer can show that the individual is an exempt person or an independent contractor, as defined by the statute established under this Act and the classifying regulations that the Commissioner of Labor and Industry (the "Commissioner") of the Department of Labor, Licensing, and Regulation (DLLR) shall issue.

This Act specifically prohibits an employer in the construction services and landscaping services industries from:

• improperly misclassifying an employee; or
• knowingly misclassifying an employee.

This Act sets forth the procedures and penalties for employer noncompliance that three areas of State government-labor and industry, workers' compensation, and unemployment insurance-may enforce.

If the Commissioner determines that the employer is in violation for failing to properly classify an employee, the Commissioner shall notify the Comptroller, the Office of Unemployment Insurance, the Maryland Insurance Administration, and the Workers' Compensation Commission to enable these agencies to assure the employer's compliance with the agencies' laws, utilizing their own definitions, standards, and procedures. This Act takes effect October 1, 2009.

Budget Reconciliation and Financing Act of 2009 - House Bill 101 (Chapter 487, Acts of 2009)
This Act contains multiple provisions related to balancing the State budget. The Act reduces the money appropriated for the Maryland-mined Coal tax credit; provides that a certain amount must be added to or subtracted from federal adjusted gross income to determine net operating loss deductions and income from discharge of indebtedness; and provides that Maryland's automatic decoupling provisions do not apply to any change included in the American Recovery and Reinvestment Act of 2009, except for specifically decoupled provisions provided for by statute. Maryland's Budget Reconciliation and Financing Act of 2009 takes effect June 1, 2009 (except for the changes to Tax-General Article §10-210.1(b) enacted by this Act, which will take effect July 1, 2009) and Tax-General Article §8-406(b)(2)(iv) as enacted by this Act shall be applicable to all taxable years beginning after December 31, 2008.

Mandatory Income Tax Return Preparer Requirements - House Bill 810 (Chapter 422, Acts of 2009)
This Act requires that a paid income tax return preparer who has prepared more than 300 qualified returns in the prior taxable year is required to file the returns electronically. For a taxable year beginning after December 31, 2009 but before January 1, 2011, it is more than 200 qualified returns in the prior taxable year. For any taxable year beginning after December 31, 2010, it is more than 100. This Act takes effect July 1, 2009, and shall be applicable to all taxable years beginning after December 31, 2008.

SALES AND USE TAX
Sales and Use Tax Exemption for Veterans' Organization - Senate Bill 44 (Chapter 506, Acts of 2009)
This Act extends by three years the termination date for the sales and use tax exemption for sales to certain veterans' organizations, from June 30, 2009 to June 30, 2012. This Act takes effect June 1, 2009.

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 the Tax-General and Tax-Property Articles 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.

Alternative Energy Tax Incentive Act of 2009 - House Bill 1171 (Chapter 444, Acts of 2009)
This Act expands the Tax-General and Tax-Property Articles to provide an exemption from sales and use tax and real property tax on the sale of residential wind energy equipment installed on residential property that uses wind energy to generate electricity for use in a residential structure on the property. This Act takes effect July 1, 2009.

ADMISSIONS AND AMUSEMENT TAX

Gaming and Bingo - House Bill 193 (Chapter 661, Acts of 2009)
This Act adds a new subtitle in the Economic Development Article. This new subtitle, "Subtitle 8. Special Fund for Preservation of the Cultural Arts in Maryland" provides for this special fund. This new fund is for the purpose of providing emergency grants to cultural arts organizations, including museums, or similar entities in the State. The Act provides that the Comptroller must account for the fund.

The Act also amends the Tax-General Article to provide for a new revenue distribution. The Act provides that the Comptroller shall distribute the revenue from admissions and amusement tax on electronic bingo and electronic tip jars as follows. First, the revenue attributable to a tax rate of 20 percent must be distributed to the General Fund and then the revenue attributable to a tax rate in excess of 20 percent to the Special Fund for Preservation of the Cultural Arts in Maryland.

This Act also extends the termination date for the authority for the operating of certain instant bingo games using electronic machines from July 1, 2009 to July 1, 2012 provided that the machines have been in operation for a one-year period ending December 31, 2007 or that the machines were in operation under a commercial bingo license as of December 31, 2007. This Act takes effect June 1, 2009.

BUSINESS LICENSING

Vending Machine Sales - Bulk Vending Machine Exemption - Senate Bill 174 (Chapter 209, Acts of 2009) and House Bill 171 (Chapter 210, Acts of 2009) These Acts are cross-filed and are identical. These Acts amend §17-1902 of the Business Regulation Article to exempt bulk vending machines, as defined in §11-201.1 of the Tax-General Article, from State licensing requirements for vending machines. These Acts will take effect October 1, 2009