Community Investment Tax Credit

Businesses that contribute cash or goods to approved projects operated by tax exempt organizations (under Internal Revenue Code section 501(c)(3)) are eligible for a tax credit of up to $250,000 for tax year 2007. This credit is in addition to any charitable contribution deduction that is allowed for these contributions on both the state and federal income tax returns.

For tax years beginning on or after January 1, 2007, a credit of up to $250,000 may be claimed and contributions of real property to approved projects will qualify for the credit.

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 donate at least $500 in money or goods to an approved project and document the value of the contribution. The documentation may be either a receipt or certification of value of used goods from an independent and unrelated third party. The business must also attach a copy of the fully executed certification to the tax return.

Eligible contributions may include real property, as long as the business making the contribution was able to claim the real property as a contribution on the federal return.

How the credit is calculated:

The credit is 50 percent of the value of the donation. Each business may claim a credit of up to $250,000 for tax year 2007. The total contributions eligible for the tax credits for all approved projects may not be more than $2 million per fiscal 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:

The contributor and the nonprofit partner must complete the Certification of Contribution for Tax Credit and submit it to the Maryland Department of Housing and Community Development along with a copy of the check or documentation of the value of donated goods. Businesses claiming the credit against this tax must include their North American Industry Classification System (NAICS) number in the space provided on that form.

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:

Reginald Stanfield, Director
Office of Programs and Regional Development
Maryland Department of Housing and Community Development
Division of Neighborhood Revitalization
Crownsville, MD 21032-2023
Phone: 410-514-7207
E-mail: stanfield@mdhousing.org