State R&D Tax Credits

State R&D Tax Credits

Maryland

Credit Name: Research and Development Tax Credit

Expiration Date: June 30, 2022

Does it apply to C corps and pass-through entities?: Yes

Credit Carry forward: 7 years, refundable for “small businesses”

Description: There are two types of research and development tax credits available to businesses:

  • Basic Research and Development Credit: 3 percent of the Maryland qualified research and development expenses paid during the tax year, up to the Maryland base amount.
  • Growth Research and Development Credit: 10 percent of the Maryland qualified research and development expenses paid during the year that exceed the Maryland base amount.

The Maryland base amount is the average annual gross receipts of the business for the four preceding tax years multiplied by the Maryland base percentage. For most businesses, the Maryland base percentage is the percentage that Maryland research and development expenses for the preceding four tax years is of total gross receipts for those years.

Other Notes: Certification must be obtained from the Maryland Department of Commerce before the credit can be claimed. Application must be submitted online by November 15 in the year following the end of the tax year in which expenses were incurred. Commerce will notify taxpayers by February 15 of the approved credit amount. Therefore, an amended return may need to be filed.

The Basic Credit will be funded to $5.5M. The Growth Credit will be funded to $6.5M. If more credits are applied for than available for either credit, the credits are pro-rated.

Small Business Refund – R&D tax credits certified after December 15, 2012 are refundable for “small business” to the extent that the tax credits exceed the income tax liability for that taxable year. Small business means a for profit corporation, LLC, partnership or sole proprietorship with net book value assets <$5M.

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