Commuter Tax Credit

Maryland-based businesses that provide commuter benefits for employees may be entitled to a tax credit for a portion of the amounts paid during the taxable year. Commuter benefits include certain costs for an employee's travel to and from home and the workplace, a Guaranteed Ride Home program or a parking "Cash-Out" program.

The credit may be taken against corporate income tax, personal income tax, state and local taxes withheld (for tax-exempt organizations) or insurance premiums tax. The same credit may not, however, be applied to more than one tax type.

Sole proprietorships, corporations, tax-exempt nonprofit organizations and pass-through entities, such as partnerships, subchapter S corporations, limited liability companies and business trusts may claim the tax credit.

To qualify for the credit:

The company must pay a portion of the cost of an employee's travel between the employee's home and workplace, including the purchase of transit instruments (tickets, passes, vouchers, fare cards, smart cards and tokens). In addition, the workplace must be located in Maryland and travel must take place in either:

A mass transit vehicle such as an MTA Bus, MTA Commuter Bus, MTA Light Rail, MARC Train, WMATA Metrobus, WMATA Metrorail, or other qualified mass transit system; or
A van-pool which can seat at least eight adults, is used primarily (80 percent of total annual mileage) to transport individuals between home and the workplace and is used primarily (80 percent of total annual mileage) to transport at least four employees per trip.

In addition, a business may also qualify for a credit for a portion of the cost paid to provide their employees a Guaranteed Ride Home and/or a parking "Cash-Out" program.

Each tax year, before businesses file for the new Commuter Tax Credit against any of the applicable taxes, they must have a Commuter Tax Credit registration form on file with the Maryland Mass Transit Administration. The application is available from the MTA Marketing Department, 6 St. Paul St., Baltimore, MD 21202-1614, or online at www.commuterchoicemaryland.com.

How the credit is calculated:

The tax credit is 50 percent of the cost of providing the commuter benefits up to a maximum of $50 per month (based on a $100 employer contribution) for each employee.

If the credit is more than the state tax liability, the unused credit may not be carried forward to any other tax year.

A tax-exempt organization may estimate the amount of the tax credit for qualifying employees for the taxable year. The total amount of the estimated credit should be divided evenly over the number of periods for filing withholding returns (Form MW 506). For example, if quarterly returns are required, then the total estimated credit should be divided by four. Each payment to the Comptroller would be reduced by the pro rata amount of the credit.

Alternatively, the tax-exempt organization could apply the credit against the tax on unrelated business taxable income.

Documentation required:

Businesses must submit the Maryland Commuter Tax Credit registration form to the MTA.

Corporate income tax:

Form 500CR must be completed and submitted with the income tax return (Form 500).

Personal income tax:

Form 500CR must be completed and submitted with the income tax return (Form 502 or 505). If the business is a pass-through entity, Form 500CR must be prepared for the pass-through entity and submitted with the entity's income tax return (Form 510). A modified federal Schedule K-1 provided by the pass-through entity to its members must separately state their shares of the credit. Individuals or entities must attach this statement to the Form 500CR submitted with their personal (Form 502 or 505), corporate (Form 500), or pass-through entity (Form 510) income tax returns.

Insurance premiums tax:

Documentation of the credit shall be maintained by the taxpayer in their files and be made available to the Insurance Commissioner, on request, in accordance with COMAR 31.06.04.03. The documentation should include documents from the agency granting the credit and a list of the names and telephone numbers for the taxpayer's staff who are directly involved in granting the credits. All information shall be retained for a minimum of three years from the date of the filing of the final tax return on which the credit is taken.

State and local income taxes withheld:

Form 500CR must be submitted with Form MW 508, the Maryland Annual Employer Withholding Reconciliation Report.

For more information, contact:

Buddy Alves
MTA Marketing Department
6 St. Paul St.
Baltimore, MD 21202-1614
Phone: 410-767-8750
Fax: 410-333-2203
E-mail: balves@mtamaryland.com

or:

Revenue Administration Division
Comptroller of Maryland
Annapolis, MD 21411-0001
Phone: 410-260-7980 from Central Maryland,
1-800-MD TAXES from elsewhere
E-mail: taxhelp@comp.state.md.us