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HB101: Budget Reconciliation and Financing Act of 2009

House Bill 101 (Chapter 487, Acts of 2009)

This Act contains multiple provisions related to balancing the State budget. There are a few provisions that directly impact the Comptroller.

This Act amends Tax-General Article 8-406(b)(2)(iv) to reduce the money appropriated for the Maryland-mined Coal tax credit. The total amount of credits approved by the State Department of Assessments and Taxation (the "Department") for a calendar year beginning after December 31, 2008, but before January 1, 2013 may not exceed $4,500,000. The total amount of credits approved by the Department for a calendar year beginning after December 31, 2012, but before January 1, 2015 may not exceed $6,000,000. The total amount of credits approved by the Department for a calendar year beginning after December 31, 2014, but before January 1, 2021 did not change and that amount may not exceed $3,000,000.

This Act amends Tax-General Article 10-210.1(b)(2) to provide that in addition to the modifications under 10-204 through 10-210 of Subtitle 2, to determine the Maryland adjusted gross income of an individual, an amount is added to or subtracted from federal adjusted gross income to determine the net operating loss deduction allowed under 172 of the Internal Revenue Code without regard to an election under 172(b)(1)(H) of the Internal Revenue Code for a carryback period of up to five years.

The Act also adds Tax-General Article 10-210.1(b)(4) to provide that in addition to the modifications under 10-204 through 10-210 of Subtitle 2, to determine the Maryland adjusted gross income of an individual, an amount is added to or subtracted from federal adjusted gross income to reflect the recognition of income from discharge of indebtedness and the allowance of any deduction with respect to original issue discount without regard to 108(i) of the Internal Revenue Code.

The provisions of 10-210.1(b) of the Tax-General Article as amended by this Act shall be applicable to any taxable year to which 108(i), 168(k), 172(b)(1)(H), or 179 of the Internal Revenue Code, as amended by the American Recovery and Reinvestment Act of 2009 (P.L. 111-5), apply.

The Act also provides that, notwithstanding the changes to 10-210.1(b)(2) of the Tax-General Article as enacted by this Act, the provisions of former 10-210.1(b)(2) of the Tax-General Article as in effect prior to the July 1, 2009 effective date of Section 2 of this Act shall continue to apply to net operating loss carryovers in the case of net operating losses for taxable years ending during 2001 or 2002, to which the provisions of former 172(b)(1)(H) as in effect prior to the amendment of that section by the American Recovery and Reinvestment Act of 2009 (P.L. 111-5) applied.

The Act provides in Section 24 of the Act that notwithstanding any other provision of law, 10-108(a) of the Tax-General Article does not apply to any amendment of the Internal Revenue Code that was enacted by the American Recovery and Reinvestment Act of 2009 ("ARRA") (P.L. 111-5). This provision means that Maryland's automatic decoupling provisions do not apply to any change included in the ARRA. This means that Maryland is coupled to any amendment of the Internal Revenue Code provided for in the ARRA unless Maryland has specifically decoupled from an amendment by statute. The effect of this provision is that Maryland is coupled with three provisions in the ARRA that would flow through to the Maryland tax calculation. Those three provisions are the federal Earned Income Credit (EIC) increase, the unemployment insurance benefits exclusion, and the sales and use tax deduction for new vehicle purchases.

The ARRA provides for an increase in the federal EIC for families with three or more children and for married individuals filing a joint return. Since Maryland's nonrefundable EIC is up to one-half the federal EIC, and the state's refundable EIC one quarter of the federal EIC, there will be an increased credit at the state level. This will increase the local refundable EIC as well. This increase is only valid for tax years 2009 and 2010. It sunsets at the end of the 2010 tax year.

The ARRA also excludes up to $2,400 of unemployment insurance benefits from federal adjusted gross income for tax year 2009. While this change would normally be automatically decoupled, it will not be due to the provision in this Act. It will flow through to the Maryland tax calculation.

Finally, the ARRA provides for a one-time deduction for the sales or excise tax paid on the purchase of a new vehicle, claimed as either as an addition to the federal standard deduction or as an itemized deduction. For taxpayers who claim the exemption as an additional federal standard deduction, the exemption will not flow through to Maryland tax. In addition, this provision will not affect taxpayers who already deduct the sales tax instead of state income taxes as an itemized deduction, since the sales tax paid on a car is already included in that deduction. A taxpayer, who normally takes the standard deduction at the federal and state level, may switch from the standard deduction to itemized deductions at the federal level in order to take advantage of this deduction at the state level. A taxpayer would have to itemize at the federal level to be able to itemize at the state level and receive the benefit of the deduction for sales or excise tax paid on the purchase of a new vehicle through this method.

The ARRA allows income recognized from the cancellation of debt (CODI) in 2009 and 2010 to be deferred for five years. However, House Bill 101 explicitly decouples Maryland income tax law from this change. Therefore, this amendment will not affect Maryland income tax calculations.

This Act takes effect June 1, 2009 (except for the changes to Tax-General Article 10-210.1(b) enacted by this Act, which take effect July 1, 2009) and Tax-General Article 8-406(b)(2)(iv) as enacted by this Act shall be applicable to all taxable years beginning after December 31, 2008.



 
Links for 2009
Tax Law and Regulations
State Regulations
Legislative Summaries
  HB1399
  SB698-HB883
  SB44
  SB174-HB171
  SB909
  HB193
  HB1171
  SB554
  SB552
  SB604
  SB800-HB493
  HB101
  SB156
  SB621
  HB810
 
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