State R&D Tax Credits

State R&D Tax Credits


Credit Name: Research and Development Tax Credit

Expiration Date: Tax years beginning before January 1, 2011

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

Credit Carry forward: Carry Forward 7 years

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 Business and Economic Development (DBED) before the credit can be claimed. The credit must be taken for the tax year in which the expenses were incurred. Therefore, an amended return may need to be filed. A copy of the certification from DBED must be included with the return.

Maryland has a total fund of $3M available to each credit (Basic and Growth). Should either group not use the full $3M, the other may have access. If more credits are applied for than available, shares are pro-rated.

Application must be submitted by September 15 in the year following the end of the tax year (9/15/13 for any tax year ending after 1/1/12). DBED will notify taxpayers by December 15 of approved credit amount. Taxpayer may then amend the MD return

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