Maryland employers, including organizations exempt from taxation under §501(c)(3) or (4) of the Internal Revenue Code, may claim a tax credit for a portion of the eligible costs of providing commuter benefits to participating employees.
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.
To qualify for the credit:
Maryland employers who qualify for the credit must complete the Maryland Commuter Tax Credit Registration Form and submit the form to the Maryland Transit Administration (MTA).
The credit is applicable to the following transit instruments: MTA passes, fare cards, smart cards or vouchers used by employees to ride publicly or privately owned transit systems except taxi services, company Vanpool programs, company guaranteed Ride Home programs, and company Cash in Lieu of Parking programs.
The employer must pay a portion of the cost of an employee's travel between the employee's home and workplace, including the purchase of transit instruments (tickets, passes, vouchers, fare cards, smart cards and tokens). In addition, the workplace must be located in Maryland and travel must take place in either:
- A mass transit vehicle such as an MTA Bus, MTA Commuter Bus, MTA Light Rail, MARC Train, WMATA Metrobus, WMATA Metrorail, or other qualified mass transit system; or
- A vanpool which can seat at least eight adults, is used primarily to transport individuals between home and the workplace.
In addition, a business may also qualify for a credit for a portion of the amount paid to provide their employees a Guaranteed Ride Home and/or a parking "Cash-Out" program.
Each tax year, before businesses file for the new Commuter Tax Credit against any of the applicable taxes, they must have a Maryland Commuter Tax Credit registration form on file with the Maryland Mass Transit Administration, Office of Communications and Marketing.
How the credit is calculated:
The tax credit is 50% of the cost of providing the commuter benefits up to a maximum of $50 per month for each employee.
If the credit is more than the state tax liability, the unused credit may not be carried forward to any other tax year.
A tax-exempt organization may estimate the amount of the tax credit for qualifying employees for the tax year. The total amount of the estimated credit should be divided evenly over the number of periods for filing withholding returns (Form MW506). For example, if quarterly returns are required, then the total estimated credit should be divided by four. Each payment to the Comptroller would be reduced by the pro rata amount of the credit.
Alternatively, the tax-exempt organization could apply the credit against the tax on unrelated business taxable income.
Businesses must submit the Maryland Commuter Tax Credit registration form to the MTA.
For taxable years beginning after December 31, 2012, the income tax credit is available only on an electronically-filed income tax return for the tax year in which the credit is being claimed. The Form 500CR section of the return must be completed.
Insurance premiums tax: Documentation of the credit shall be maintained by the taxpayer in their files and be made available to the Insurance Commissioner, on request, in accordance with COMAR 31.06.04.03. The documentation should include documents from the agency granting the credit and a list of the names and telephone numbers for the taxpayer's staff who are directly involved in granting the credits. All information shall be retained for a minimum of three years from the date of the filing of the final tax return on which the credit is taken.
State and local income taxes withheld: Form MW508CR must be submitted with Form MW508, the Maryland Annual Employer Withholding Reconciliation Report to claim this credit against Maryland income tax withheld. If the tax-exempt entity is required to file the MW508 electronically, then MW508CR must be filed with an amended MW508A as the MW508CR is not available electronically at this time.
Mass Transit Administration, Marketing Division
6 St. Paul Street, 2nd Floor
Baltimore, MD 21202-1614