Work-Based Learning Program Credit

Businesses that hire students as part of an approved work-based learning program in the state may be entitled to a tax credit for a portion of the wages paid to these individuals. (Note: credit is scheduled to end June 30, 2004.)

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 establish a work-based learning program and have the program approved by the Maryland State Department of Education. The business must also hire at least one student for placement in the program that is at least 16, but less than 23 years old or who turns 23 years old while in the program, and is enrolled in a secondary or post-secondary school in Maryland. The business must also employ each student for at least 200 hours.

How the credit is calculated:

The credit is 15 percent of the wages paid to each student during the taxable year. Cumulative credits for all years cannot exceed $1,500 per student.

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 submitted with the income tax return (Form 500).

Personal income tax:

Form 500CR must be 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 each individual partner, shareholder or member must separately state their share of the credit. The individual must attach this statement to the Form 500CR submitted with their personal income tax return (Form 502 or 505).

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, 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 State Department of Education
Division of Career Technology and Adult Learning
200 W. Baltimore Street
Baltimore, MD 21201
Phone: 410-767-0182
E-mail: jmholly@msde.state.md.us