Job Creation and Recovery Tax Credit

Description:

Businesses operating or conducting business in Maryland that hire certain workers for newly-created or certain vacant positions in the State may be entitled to a tax credit. The amount of the tax credit is based on the number of employees hired and the number of months that they were employed during the tax credit period.

The credit may be taken against corporate income tax or personal income 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:

All employees must be Maryland residents hired on or after March 25, 2010 but before January 1, 2011. At the time of hire, individuals must be receiving unemployment insurance benefits or have exhausted their benefits in the previous 12 months and not working full-time immediately preceding the date of hire.

The new positions must be:

• full-time;
• positions that require an employee to be employed without interruption for 12 months or more;
• located in Maryland; and
• newly created or have been vacant for at least 6 months.

The business must certify each employee with The Department of Labor, Licensing and Regulation (DLLR) by submitting an online application. The application includes such information as the Social Security number of each employee and the date of hire. See a sample application.

How the credit is calculated:

The credit allowed depends on the number of months the employee was in the position. The credit is $5,000 multiplied by the number of employees hired by the employer between March 25, 2010 and January 1, 2011.

The amount of credit that may be claimed in each year is prorated based on the number of employees and number of months employed during the businesses’ taxable year. Employers will multiply $416.67 by the number of months an employee was employed during that year and claim that amount on their return.

The total credit cannot exceed $250,000 for any employer under this program. The amount in excess of the state tax liability may be refunded. The total amount of credits approved by DLLR each year is limited; initial credit certificates will be issued on a first-come-first-served basis.

Documentation required:

A copy of the required certification must be filed with the taxpayer's income tax return.

Personal income tax:

For tax year 2009 only, you must attach new Form 500JR to your income tax return (Form 502 or Form 505). For 2010 and 2011, the Comptroller's Office will be updating Form 500CR to include this credit. If the business is a pass-through entity, Form 500JR must be prepared for the pass-through entity and submitted with the entity's income tax return (Form 510). A Form 510 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 Form 500JR that is submitted with their personal (Form 502 or 505), corporate (Form 500) or pass-through entity (Form 510) income tax returns.

For more information, contact:

Maryland Department of Labor, Licensing and Regulation
Tax Credit Programs
110 N. Eutaw Street
Baltimore, MD 21201
Phone: 410-767-2996
E-mail: taxcredit@dllr.state.md.us Link to DLLR information:
http://www.dllr.state.md.us/taxcredit/jcrtcflyer.pdf