Businesses or individuals who contribute to qualified organizations' Community Investment Programs can earn credits for a portion of the value of the money, goods or real property contribution.
Community Investment Tax Credits (CITC) support nonprofit organizations serving as incentives to attract contributions from individuals and businesses to benefit local projects and services.
The credit may be taken against corporate income tax, personal income tax, insurance premiums tax or public service company franchise tax. However, the same credit may not be applied to more than one tax type.
To qualify for the credit:
Contributions of money, goods or real property worth $500 or more are eligible for tax credits. Contributions of services or labor are not eligible. Individuals and businesses may claim a maximum of $250,000 in credits per year, representing a contribution of no more than $500,000.
Contributions must be made to a nonprofit organization approved by the Department of Housing and Community Development (DHCD). The taxpayer must apply to and receive approval by the DHCD for each contribution for which a credit is claimed.
For any tax year, the sum of all CITCs, including any carryover credits, may not exceed the lesser of $250,000 or the total amount of tax otherwise payable by the individual and/or business for the tax year. Excess credits may be carried over for five (5) years.
How the credit is calculated:
The credit is 50% of the value of the approved donation. Each business or individual may claim a credit of up to $250,000. Businesses and individuals claim the CITC by filing an electronic tax return supporting Business Income Tax Credit Form 500CR. An electronic return must be filed to claim this credit against the Maryland income tax, for tax years beginning after December 31, 2012. See exception below.
Important Note: While many individuals claim this credit on Form 502, this is still a business tax credit. Taxpayers must file electronically to use Form 500CR. Prior to Tax Year 2015, this credit did not appear on Form 502CR.
Exception: Beginning 2015, individuals who are eligible to claim the Community Investment Tax Credit (CITC), and who are not PTE members may elect to claim this credit on Part H of Form 502CR, instead of claiming the credit on Form 500CR. Taxpayers electing to use Form 502CR to claim the CITC are not required to file their return electronically. However, an individual may not claim this credit on both Form 500CR and Form 502CR. PTE members who are eligible for this credit must claim the credit on Business Income Tax Credit Form 500CR.
Individuals who anticipate having a carryover of the CITC are advised to use Form 500CR instead of Form 502CR. Individuals who have an existing carryover on Part X of their 2014 Form 500CR may elect to use Form 502CR if their Excess Carryover Credit is attributable only to the CITC.
See Form 500CR Instructions for specific line-by-line instructions. Form 500CR must still be filed electronically.
A copy of the required approval from the DHCD must be attached to the appropriate electronic Maryland Income Tax Return - Form 500 for Corporations, Form 510 and Form 510 Schedule K-1 for Pass-Through Entities, and Form 502 for individuals, electing to use Form 500CR. The Form 500CR section of the electronic return must also be completed.
A copy of the required approval from the DHCD must be attached to Form 502 for those individuals, electing to use Form 502CR.
Insurance premiums tax:
The contributor and the non-profit partner must complete the Certification of Contribution for Tax Credit and submit it to the Maryland Department of Housing and Community Development along with a copy of the check or documentation of the value of donated goods. Businesses claiming the credit against this tax must include their North American Industry Classification System (NAICS) number in the space provided on that form.
Public service company franchise tax:
Form AT3-74 must be submitted with the franchise tax return (SDAT Forms 11 or 11T).
Department of Housing and Community Development
Division of Neighborhood Revitalization
2 N. Charles St., Suite 450
Baltimore, MD 21202