The corporation income tax applies to every Maryland corporation , even if it has no taxable income or the corporation is inactive. Every other corporation that is subject to Maryland income tax law and has income or losses attributable to sources within Maryland must also file Form 500.
Effective January 1, 2008, the tax is imposed at an 8.25% rate on the Maryland taxable income, defined as Maryland modified income, which is the corporation federal taxable income adjusted by state modifications. Corporations engaged in multistate operations must allocate Maryland modified income using an apportionment formula, generally consisting of receipts, property and payroll factors.
Certain multistate and manufacturing corporations are also subject to reporting requirements.
Form 500A has been eliminated and corporations will now make the calculation of corporation modified income on Form 500. Any corporation with decoupling modifications, such as, Section 10-306.1 related party transactions, or foreign source dividends will now account for those on Form 500 as well.
Maryland corporations may also be eligible for business tax credits which may be claimed against the corporation income tax by electronically filing Form 500CR.
S corporations, partnerships and limited liability companies should not file a corporation income tax return. These businesses must file as pass-through entities using Form 510 Maryland Pass-Through Entity Income Tax Return.