A taxpayer is allowed credits equal to percentages of qualified R&D expenses in Maryland. Effective June 1, 2014 there is a $4.5 million limit to the total amount of credit that can be granted to all claimants. There are two credits, the basic credit and the growth credit:
Maryland State Basic Credit
Refundable Tax Credit- Yes*
- The basic credit is the credit for expenses not exceeding the Maryland base amount of 3% of the Maryland qualified R&D expenses paid or incurred by the taxpayer during the tax year
Maryland State Growth Credit
Refundable Tax Credit- Yes*
- The growth credit is granted for 10% of the amount by which the Maryland qualified R&D expenses paid or incurred by the taxpayer during the tax year exceeds the Maryland base amount for the taxpayer
The Maryland base amount is the amount that is the ceiling for the amount of R&D Expenses that qualify for the basic credit and the floor for the amount of qualified R&D expenses that qualify for the growth credit.
R&D Tax credits certified after Dec. 15, 2012 are refundable for “small businesses” to the extent that the tax credits exceed the income tax liability for that taxable year. A small business is defined as one having net book value assets totaling less than $5 million at the beginning or end of the taxable year.*
If the credit in any tax year exceeds the taxpayer’s tax liability for that year, the taxpayer may carry over the excess as a credit for succeeding taxable years until the earlier of:
- the full amount of the excess is used; or
- the expiration of the 7th taxable year after the taxable year in which the Maryland qualified R & D expense was incurred
In the case of a subchapter S corporation, partnership, limited liability company, or business trust, the amount of the credits computed for the pass-through entity shall be allocated among the owners as agreed to in writing by the owners. If there is no written agreement governing the allocation of this credit, the credit shall be allocated in the same proportion as other items are allocated for the taxable year.
How to obtain the credit
By September 15 of the calendar year following the end of the tax year when the Maryland qualified R&D expenses were incurred, the taxpayer must submit an application to the Department of Business and Economic Development (effective October 1, 2015, Department of Economic Competitiveness and Commerce) for the credits. A prescribed form must be used and lists the information that the taxpayer must supply, including the North American Industrial Classification System (NAICS) code number for the business entity and amounts needed to compute the credit that the taxpayer is claiming. To claim the credit, the taxpayer must file an amended return for the tax year when the Maryland R&D expense was incurred, and attach a copy of the Department’s certification of the approved amount and Form 500CR (Maryland Business Income Tax Credits) to the amended return.
Find out if you qualify for the R&D tax credit
SELL YOUR NOL’s AND R&D CREDITS
If your company hasn’t considered the R&D credit in the past because you have net operating losses (NOLs) and could not utilize the credit contact us today to find out which states allow you to sell your credits and losses for up to 95 cents on the dollar. Also, qualified start-up companies can now take a credit on their payroll taxes for their R&D credit, allowing your company to utilize the R&D credit immediately, even if your company does not have taxable income.
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