An individual or business may be allowed a tax credit of up to 50% of an eligible investment in a qualified Maryland biotechnology company (QMBC), up to $250,000. If the QMBC is located in Allegany, Dorechester, Garrett, or Somerset Counties, an individual or business may be allowed a tax credit of up to 75% of an eligible investment, up to $500,000. The investor, after making the proposed investment, cannot own or control more than 25% of the biotechnology company.
The credit may be taken against corporate income tax or personal income tax.
Sole proprietorships, corporations and pass-through entities, such as partnerships, subchapter S corporations, limited liability companies and business trusts, may claim the tax credit.
To qualify for the credit:
Qualified investors must contribute at least $25,000 in cash or cash-equivalent to a QMBC that is certified by the Maryland Department of Commerce (DOC).
A QMBC must:
- Have its headquarters and base of operations in Maryland;
- Have fewer than 50 full-time employees
- Have been in active business for no longer than 10 years from the date it received its first qualified investment; and
- Not have any securities publicly traded companion any exchange.
A QMBC may include a company that has been an active business for up to 12 years, with DOC approval.
Qualified investors are also required to file an income tax return. Credits may be claimed for no more than $250,000 per investment in a qualified biotechnology company, or $500,000 if the company is located in Allegany, Dorchester, Garrett, or Somerset Counties. DOC may not certify tax credits for investments in a single qualified biotechnology company that are in the aggregate more than 15% of the total amount appropriated to the Maryland Biotechnology Investment Tax Credit Reserve Fund for that fiscal year. DOC may not issue initial credit certificates in excess of the amount appropriated to the Reserve Fund for that fiscal year in the state budget as approved by the General Assembly.
At least 30 days before making an investment, the business must submit an initial credit certificate application to DOC. Upon approval (within 30 days of DOCís receipt of the application), the applicant will receive an initial credit certificate stating the amount of the tax credit and will have 30 days to make the investment. Within the following 10 days, the investor must notify DOC that the investment has been made. A final credit certificate will be issued to the applicant stating the amount of the tax credit to which the applicant is entitled. A copy of the final credit certificate must be filed with the taxpayerís income tax return.
How the credit is calculated:
The credit allowed is 50% of an eligible investment contributed during the tax year, not to exceed $250,000 ,or 75% of an eligible investment in a company located in Allegany, Dorchester, Garrett, or Somerset Counties, not to exceed $500,000. The amount in excess of the state tax liability may be refunded. The total amount of final tax credit certificates issued by DOC each year is limited to the amount appropriated to the Reserve Fund in the State budget. Applications are reviewed and approved on a first come, first served basis.
For taxable years beginning after December 31, 2012, this credit is available only with an electronically filed return. A copy of the certification issued by DOC must be included with the electronic return, and the Form 500CR section of the return must be completed.
Exception: Should a fiduciary become eligible to claim this credit (the fiduciary may be a member of a pass-through entity eligible to pass on the Biotechnology Investment Incentive Tax Credit to its members), the fiduciary will use Business Tax Credit Form for a Fiduciary, Form 504CR, as an electronic version of Fiduciary Income Tax Form 504 does not currently exist. A fiduciary may distribute the tax credit to its beneficiaries using Maryland Schedule K-1(504). A copy of the certification issued by DOC must be included with any Form 504CR filed.
However, beneficiaries receiving this tax credit from a fiduciary, must file electronically to claim a business tax credit unless the beneficiary happens to be a fiduciary taxpayer.
Maryland Department of Commerce
Office of Finance Programs, Tax Incentives Group
401 E. Pratt Street
Baltimore, MD 21202
Phone: 410-767-6438 or 410-767-7234 or 1-877-821-0099