Maryland Incentives and Workforce Development Guide
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Maryland Department of Business and Economic Development Programs
Maryland Venture Fund: A state-funded seed and early-stage equity fund; an evergreen fund that receives annual allocations from the Maryland State Legislature. The Fund makes direct investments in technology and life science companies and indirect investments in venture capital funds. Approximately 60% of the Fund is invested in technology companies in the areas of software, communications, and IT security, and 40% of the Fund is invested in life sciences companies in the areas of therapeutics, medical devices and diagnostics.
Invest Maryland: The largest venture capital investment in history by the State and was designed to support young companies in high-growth Maryland industries. In 2012, $84 million was raised for the program through an online auction of premium tax credits to insurance companies with operations in Maryland. Of that funding, two-thirds is being managed by private venture firms in invest in innovative early-stage businesses in the State. If successful with investments, the firms will return 100% of the principal and 80% of the profits to the State’s general fund. The remaining third will be invested by the state-run Maryland Venture Fund. The state is expecting to invest in hundreds of innovative early-stage companies.
Challenge Investment Program: Provides financing for seed-stage companies to cover a portion of the initial costs associated with bringing new products to market. Initial investments of $50,000 to $100,000 are made with incremental investments to a maximum of $150,000. These incremental investments are awarded based upon the client’s performance and the client’s ability to achieve milestones set by the Maryland Venture Fund at the time of the initial closing.
Maryland Economic Development Assistance Authority Fund: There are five financing capabilities offered through the Maryland Economic Development Assistance Authority and Fund (MEDAAF), with assistance being provided to the business community and political jurisdictions. To qualify for assistance from MEDAAF, applicants are restricted to businesses located within a priority funding area and an eligible industry sector. With a few exceptions, assistance cannot exceed 70% of the total project costs.
Maryland Innovation Initiative (MII): Created as a partnership between the State of Maryland and five Maryland academic research institutions, the program is designed to promote commercialization of research conducted in the partnership universities and leverage each institution’s strengths. Qualifying Universities, faculty from Qualifying Universities, and other entrepreneurs interested in creating a University Start-up are eligible for funding.
State Small Business Credit Initiative: Passed as part of President Obama’s Small Business Jobs Act of 2010, this initiative awarded Maryland with $23 million to strengthen existing financing programs that support lending to small businesses. The State is allocating the funds to programs that leverage private lending to help finance small businesses that are creditworthy, but are not getting the loans they need to expand and create jobs.
Community Development Block Grant Program: Provides funding to commercial and industrial economic development projects. Program funds are dispersed to a local jurisdiction in the form of a conditional grant and are then used for public improvements or loaned to a business.
Maryland Industrial Development Financing Authority (MIDFA): MIDFA encourages private sector investments through the use of insurance, the issuance of tax-exempt and taxable revenue bonds, and linked deposits. Insurance reduces the lender’s credit risk. All MIDFA projects must be in a Priority Funding Area.
Maryland Small Business Development Financing Authority (MSBDFA): Created to promote the viability and expansion of businesses owned by economically and socially disadvantaged entrepreneurs, MSBDFA clients include all small businesses unable to obtain adequate business financing on reasonable terms through normal financing channels. The program includes a guaranty fund, contract financing, a surety bond program, and an equity participation investment component. This State program is managed by Meridian Management Group.
Small, Minority, and Women-Owned Business Account Video Lottery Terminal Fund (VLT): VLT provides for 1.5% of the proceeds from video lottery terminals (slots) to be distributed in targeted areas surrounding five Maryland casinos: Maryland Live in Anne Arundel County, Hollywood Casino Perryville in Cecil County, Rocky Gap in Allegany County, Ocean Downs in Worcester County and Horsehoe Casino in Baltimore City. At least 50% of the VLT allocations will be deployed to small, minority and women-owned businesses located within a 10-mile radius of the three casinos. The other 50% will be available to small, minority and women-owned businesses located throughout Maryland.
Job Creation Tax Credit: Businesses that create a minimum number of new full-time positions may be entitled to state income tax credits of up to $1,000 per job or $1,500 per job in a “revitalization area.” Businesses engaged in an eligible activity must create at least 60 new full-time jobs in a 24-month period; this is reduced to 30 new full-time jobs if they are “high wage” jobs, and reduced to 25 new full-time jobs if they are located in a Job Creation Tax Credit “priority funding area.” The Job Creation Tax Credit remains in effect until January 1, 2020.
One Maryland Tax Credit: Businesses that invest in an economic development project in a “qualified distressed county” and create at least 25 new full-time jobs may qualify for up to $5.5 million in state income tax credits. Project tax credits of up to $5 million are based on qualifying costs incurred in connection with the acquisition, construction, rehabilitation and installation of a project. Start-up tax credits of up to $500,000 are available for the expense of moving a business from outside Maryland and for the costs of furnishing and equipping the new location. The credit can be carried forward 14 years and is refundable, subject to certain limitations.
Enterprise Zone Tax Credit: The Enterprise Zone program provides real property and state income tax credits for businesses that locate in a Maryland enterprise zone. The real property tax credit is 80% of the incremental increase in property taxes over the first five years, decreasing 10% annually during the next five years. The income credit is $1,000 credit per new employee. For economically disadvantaged employees, the credit increases to $6,000 per new employee over three years. Enhanced credits are available in enterprise zone focus areas.
Research and Development Tax Credit Program: For Maryland businesses that incur Maryland qualified research and development expenses, the Basic R&D tax credit is 3% of eligible R&D expenses that do not exceed the firm’s average R&D expenses over the last four years and the Growth R&D tax credit is 10% of eligible R&D expenses -in excess of the firm’s average R&D expenses. The credits are capped at $4 million each. If the amount of credits all businesses apply for exceeds the cap, each business receives it’s pro rata share. Businesses must submit an application to DBED by September 15 for expenses incurred in the previous tax year. The credit is refundable for small businesses.
Biotechnology Investment Tax Credit Program: Maryland’s Biotechnology Investment Tax Credit provides income tax credits for investors in qualified Maryland biotechnology companies. The value of the credit is equal to 50% of an eligible investment made in a qualified Maryland biotechnology company during the taxable year. The maximum amount of the credit cannot exceed $250,000 for investors. If the credit exceeds the tax liability, the remaining credit is refundable. The program has a program cap and credits are awarded on a first come, first serve basis.
Cellulosic Ethanol Technology Research and Development Tax Credit Program: Provides income tax credits for expenses related to cellulosic ethanol technology research and development conducted in the State. The amount of the tax credit is equal to 10% of the eligible expenses incurred and cannot exceed the tax liability for that year. The maximum amount available for all companies in each year is limited to $250,000. Businesses must submit an application to DBED by September 15 for expenses incurred in the previous tax year.
Brownfields Revitalization Incentive Program: A site that qualifies for this incentive program may qualify for real property tax credits as well. The site must be located in a jurisdiction that participates in the BRIP, and owned by an inculpable person. For five years after cleanup, a site may qualify for a real property tax credit between 50% and 70% of the increased value of the site. (In an Enterprise Zone, the tax credit may last for up to 10 years). This credit, combined with other real property tax credits, may not exceed 100% of the tax on the increased value of the site.
Security Clearance Tax Credit: The program provides income tax credits for businesses that incur costs related to obtaining security clearance for their employees or for the cost of constructing or renovating a sensitive compartmented information facility (SCIF). Businesses may receive a credit of up to $200,000 for security clearance administrative costs, 50% of the costs to construct a single SCIF up to $200,000 or up to $500,000 for the cost of constructing multiple SCIFs. In addition, a qualified small business that performs security-based contracting in Maryland may be eligible for income tax credits for the first year of rental payment for spaces leased in Maryland. The total credit is capped at $2 million. If the amount that businesses apply for exceeds $2 million, each business receives its pro rata share. The program goes into effect for tax years beginning January 1, 2013. Businesses apply to DBED by September 15th for expenses incurred in the previous tax year.
Cybersecurity Investment Tax Credit: The program provides a refundable income tax credit to Qualified Maryland Cybersecurity Companies (QMCCs) that secure investment from an investor. QMCCs receive a credit of 33% of the investment up to $250,000. Companies are limited to participating in the program for only two years. The program has a program cap and credits are awarded on a first come, first serve basis. The credit is available for tax years beginning January 1, 2014.
Wineries and Vineyards Tax Credit: Provides an income tax credit of 25% of qualified capital expenses made in connection with the establishment of new wineries or vineyards, or the capital improvements made to existing wineries or vineyards. Total credits applied for may not exceed $500,000 or the credit will be prorated. Businesses must submit an application to DBED by September 15 for expenses incurred in the previous tax year. The credit is available for tax years beginning January 1, 2013.
Maryland Film Production Tax Credit: A film production project may be entitled to a refundable tax credit against State of Maryland income tax for certain costs incurred in the State that are necessary to carry out a film production activity. Qualified projects can be awarded a maximum of $7.5 million in credits in each fiscal year. Qualifying production activities are eligible for a tax credit of up to 25% of the qualified direct costs for a feature film, and 27% for a television series. If the amount of the tax credit exceeds the total tax liability in the tax year, the entity can claim a refund in the amount of the excess.
Clean Energy Incentive Tax Credit: Businesses that use certain renewable energy sources or waste materials to produce electricity that is sold to an unrelated person may be entitled to an income tax credit. The facility must be placed in service, or co-firing with coal must begin, on or after January 1, 2006, but before January 1, 2016. Sole proprietorships, corporations and pass-through entities, such as partnerships, subchapter S corporations, limited liability companies and business trusts may claim the tax credit.
Community Investment Tax Credit: Businesses and individuals that donate to qualified organizations’ approved projects can earn credits equal to 50% of the value of the money, goods or real property contribution operated by tax exempt organizations (under Internal Revenue Code section 501(c)(3)) are eligible for a tax credit of up to $250,000. This credit is in addition to any charitable contribution deduction that is allowed for these contributions on both the state and federal income tax returns. 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.
Commuter Tax Credit: Maryland-based businesses that provide commuter benefits for employees may be entitled to a tax credit for a portion of the amounts paid during the taxable year. Commuter benefits include certain costs for an employee’s travel to and from home and the workplace, a Guaranteed Ride Home program or a parking “Cash-Out” program. The credit may be taken against corporate income tax, personal income tax, state and local taxes withheld (for tax-exempt organizations) or insurance premiums tax. The same credit may not, however, be applied to more than one tax type. Sole proprietorships, corporations, tax-exempt nonprofit organizations and pass-through entities, such as partnerships, subchapter S corporations, limited liability companies and business trusts may claim the tax credit.
Employer-Provided Long-Term Care Insurance Tax Credit: Employers who provide long-term care insurance as part of an employee benefit package may claim a credit for costs incurred. 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.
Employment Opportunity Tax Credit: Businesses that hire an individual who is receiving Aid to Families with Dependent Children (AFDC) or Family Investment Program (FIP) entitlements may be entitled to a tax credit for wages paid to the employee and for child care and transportation expenses paid on behalf of the employee. The credit may be claimed for individuals hired before July 1, 2009. The credit may be taken against corporate income tax, personal income tax, state and local taxes withheld (for certain tax-exempt organizations only), insurance premiums tax or public service company franchise tax.
Maryland Disability Employment Tax Credit: Businesses that hire people with disabilities may be entitled to a tax credit for wages paid to the employees and for childcare or transportation expenses paid on behalf of the employees. A person with a disability includes a veteran released from the armed forces for a service-related disability. The credit may be claimed for individuals hired before July 1, 2012.
Maryland-Mined Coal Tax Credit: A co-generator, a public service company or an electricity supplier that purchases coal mined in Maryland on or before December 31, 2020 may be eligible for a tax credit.
Sustainable Communities Tax Credit: This credit replaces the Heritage Structure Rehabilitation Tax Credit as of June 1, 2010. This credit is an expansion of the Heritage Structure Tax Credit and alters eligibility requirements of the credit. A refundable credit may be allowed for substantial expenditures incurred to rehabilitate certified structures in Maryland on or after June 1, 2010, but before July 1, 2014.
Telecommunications Property Tax Credit: A telecommunications company that is a public utility is allowed a credit for a portion of the total property taxes paid by the company on its operating real property in Maryland, other than operating land, that is used in its telecommunications business. The credit may be taken only against corporate income tax. Only corporations may claim the tax credit.