Job Creation Tax Credit

Businesses that expand or establish a facility in Maryland before January 1, 2010, resulting in the creation of new positions in the state may be entitled to a tax credit. The amount of the tax credit is based on the number of positions created or on the wages paid to the new employees hired to fill those positions.

The credit may be taken against corporate income tax, personal income tax, insurance premiums tax or public service company franchise tax. The same credit may not, however, be applied to more than one tax type.

Sole proprietorships, corporations 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 business must create at least 60 new full-time positions as part of the new or expanded business facility in Maryland. If the positions are highly paid, the company must create at least 30 positions.

If the new or expanded facility is located in a priority funding area, the number of new positions the company must create is reduced to 25. Please contact the Maryland Department of Business and Economic Development at 410-767-4980 or 410-767-6438 to find out if your property is located in a priority funding area.

Before filling these new positions, the company must notify the Department of Business and Economic Development of its intention to seek certification.

The new positions must be:

Full-time.
Permanent.
Paid at least 150 percent of the federal minimum wage.
Located in Maryland.
Filled.

How the credit is calculated:

The credit allowed depends on where in Maryland the facility is located:

If the facility is located in a revitalization area (as defined in the statute), the credit is the lesser of $1,500 multiplied by the number of employees hired to fill the new positions, or 5 percent of the wages paid to employees hired to fill the new positions.
If the facility is not located in a revitalization area, the credit is reduced to the lesser of $1,000 multiplied by the number of employees hired to fill the new positions, or 2.5 percent of the wages paid to employees hired to fill the new positions.

Half of the allowable credit is claimed in the first year and the remaining half in the following taxable year. The total credit earned by any one company may not exceed $1 million for any credit year.

If the credit is more than the tax liability, the unused credit may be carried forward for the next five tax years.

Documentation required:

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.

Public service company franchise tax:

Form AT3-74 must be submitted with the franchise tax return (SDAT forms 11 or 11T).

For more information, contact:

Maryland Department of Business and Economic Development
Division of Business Development, Tax Incentives Group
217 E. Redwood Street
Baltimore, MD 21202
Phone: 410-767-6438 or 410-767-4980
E-mail: taxincentives@choosemaryland.org