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Maryland Job Creation Tax Credit
Effective July 1, 2017 certain businesses may be eligible for a job creation tax credit for creating new qualified positions in Maryland. Eligibility is determined by an organization’s ability to establish or expand a business facility in Maryland during any 24-month period within the scope of the program. The focus of this program is to increase investment in counties with an annual average employment less than 75,000 or a median household income less than two-thirds of the statewide median household income.
The current program ends effective January 1, 2020, but has extension potential through the authority of the Maryland General Assembly dependent upon the program’s success. This is not the program’s first operation in the state of Maryland, a similar program was offered to businesses in 2008. The revival of this program would lead an economic analyst to believe there is potential for the program to be extended or flexible with its deadlines. The net gain to the state of Maryland is much greater than the tax incentive to organizations creating a ‘win-win’ situation for businesses operating in the state and the state itself.
What is a “Qualified Position?”
The state has amended its criteria for a “qualified position” to be defined as a position that pays at least 120% of the state minimum wage, a relief from the previous 150% of the federal minimum wage. The state minimum wage is $8.75 an hour as of July 2016 with an expected increase to $9.25 July 2017, and a final adjustment July 1, 2018 to $10.10 an hour in Maryland. Effective January 1, 2017 the federal minimum wage is $9.25 an hour.
Essentially, the previous requirement for this program was a position paying at least $13.88 an hour, via federal minimum wage (150%). Wage requirements have been adjusted to $10.50 an hour (current)/$11.10 an hour (July 2017)/$12.12 an hour (July 2018), via Maryland minimum wage (120%), further incentivizing organizations to create opportunity in lower-income jurisdictions within the state of Maryland. Even with the scheduled mandatory wage adjustments the “120% of state minimum wage” clause makes this more financially attractive to organizations than the previous “150% of federal minimum wage” stipulation.
The tax credit offered is $3,000 times the number of qualified positions created by the entity taking advantage of this tax incentive. The previous credit amount, 2008 program, was $1,000 times the number of qualified positions created, or 2.5% of the wages paid by the entity during the credit year to qualifying positions. There is a clause in the legislation further incentivizing job creation in ‘revitalization areas.’ Revitalization areas are HUD-designated geographic areas authorized by Congress under the National Housing Act to promote homeownership opportunities. Criteria for these areas are derived from statistics of household income, homeownership rate, and FHA-insured mortgage foreclosure activity. The tax credit for these specific areas is $5,000 times the number of qualified positions created (previously $1,500 or 5% of wages paid to qualified employees, 2008 program).
Given current data on the subject and the actions taken by the state of Maryland in recent years this is an important program to create commercial investment in the state while creating well-paying jobs for citizens of low-income/high unemployment areas. This program can be combined with various income tax credit benefits an organization may qualify for, compounding incentives for business investment within the state of Maryland.
Wesley Sprecher
Tips for the Taxpayer
If your organization is looking to create jobs in growing areas and take advantage of tax incentives offered to qualified entities apply today for the ‘Job Creation Tax Credit’ in the state of Maryland. Contact the state of Maryland to see if your business qualifies. Submit an intent letter to the Maryland Department of Commerce, submit a preliminary application and employment affidavit, then submit a final application after qualified positions have been created.
Stay up-to-date with state and local tax rates. Look out for future programs such as this that promote job creation in high unemployment areas, these programs are essential to community development and if capitalized on appropriately can have exponential positive consequences to organizational favor amongst government entities and consumers.
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Allyn’s tax team is staffed with seasoned tax professionals experienced in all aspects of Federal, multi-state and local tax compliance and consulting for large US and global corporations. We use that experience to your advantage.
Allyn files state and local sales and use tax returns in every US taxing jurisdiction. We can manage your tax compliance, create a solid tax process, and provide audit defense for your company. Further, we have experience working with state and local government entities and relish the opportunity to alleviate the administrative burden that comes with program implementation in areas aspiring to spur employment growth.
Contact us and we can provide a customized cost-effective solution to meet your company’s needs. For further information on Allyn Tax services, please contact: tax@allynintl.com.
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