The CARES Act of 2020: In response to the COVID-19 pandemic, the United States Congress passed the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act. The Act temporarily altered several tax provisions enacted under the Tax Cuts and Jobs Act (TCJA) intended to increase cash flow and reduce the income tax burden on corporations, partnerships, and individuals. Relief includes: the temporary and retroactive reinstatement of Net Operating Loss (NOL) carryback provisions for tax years 2018, 2019, and 2020 previously repealed under the TCJA in Internal Revenue Code (IRC) § 172; a decreased limitation on business interest expenses subject to deduction in tax years 2019 and 2020 under IRC § 163(j); and the elimination of loss limitations imposed on non-corporate taxpayers by the TCJA under IRC § 461(l) for tax years 2018, 2019, and 2020. The CARES Act also provided a technical correction giving qualified business improvements (QIP) a 15-year recovery period, thereby making those assets eligible for 100% bonus depreciation under IRC § 168. For more information on Maryland’s conformity to the CARES Act, see the Tax Alert issued July 24, 2020 at MD taxes
Form 502 Changes
- Local Tax Income Tax Rate: For a complete list of counties and city local tax rates visit the Maryland State website.
Subtractions, Additions, and Credits
- New Subtractions from Income - First Time Home Buyer Savings Account $5,000 subtraction; Donations of certain disposable diapers, certain hygiene products, and certain monetary gifts to a qualifying organization; Unemployment Income Subtraction
- New Additions to Income - Amount of credit for tax paid by the pass-through entity on
your distributive or pro rata share of income; Amount of funds withdrawn from a first-time homebuyer savings account for nonqualifying reasons
- There are no new tax credits for 2021
House Bill 7, Acts of 2021: This bill extends eligibility for the venison donation income tax credit to certain donations made to the Montgomery County Deer Donation Program.
Senate Bill 19, Acts of 2021: This bill adjusts certain eligibility requirements and reduces the percentage value of the Biotechnology Investment Incentive Tax Credit.
Senate Bill 102/House Bill 1252, Acts of 2021: This bill changes the number of training hours required to qualify for the physician and nurse practitioner preceptor income tax credit and extends the tax credit to physician assistant preceptors.
Senate Bill 186, Acts of 2021: This bill establishes an enhanced job creation tax credit for the hiring of a qualified veteran and extends program eligibility to small businesses who hire a qualified veteran. The bill also repeals the Hire Our Veterans Tax Credit.
Senate Bill 196, Acts of 2021: This bill alters the existing Research and Development Tax Credit Program by eliminating the basic credit, limiting the maximum value of the tax credit, and defining net book assets for the purpose of determining small business eligibility.
House Bill 10/Senate Bill 48, Acts of 2021: This bill increases, from $7,500 to $10,000, the amount of the maximum subtraction modification for certain expenses paid or incurred by an individual that are attributable to the individual’s donation of an organ. The bill also alters the definition of “qualified expenses” to include unreimbursed child or elder care expenses, as well as unreimbursed medication expenses.
House Bill 1178, Acts of 2021: This bill allows a subtraction modification for contributions to a first-time homebuyer savings account and certain earnings on the account. The subtraction includes up to $5,000 of the amount contributed by an account holder to a first time homebuyer savings account, as well as any earnings, including interest. If an individual withdraws funds from such account for a purpose other than eligible costs for the purchase of a home, the funds will be taxed as ordinary income and the account holder will be subject to a 10% penalty.
House Bill 711/Senate Bill 622, Acts of 2021: This bill allows a subtraction modification of up to $1,000 for certain qualifying diaper, hygiene products, or monetary donations to diaper banks or other qualified charitable entities by taxpayers in a given calendar year. Senate Bill 885, Acts of 2021, Acts of 2021: This bill creates a refundable income tax credit for 20% of rehabilitation and new construction costs for a qualifying catalytic revitalization project. A qualifying catalytic revitalization project is defined as a substantial renovation of a property formerly owned by the state or federal government that was previously used as a college, K-12 school, hospital, mental health facility, or military facility.
House Bill 1279/Senate Bill 778, Acts of 2021: This bill changes the existing Regional Institution Strategic Enterprise (RISE) Zone Program by establishing a rental assistance program, establishing a Regional Institution Strategic Enterprise Fund, enhancing biotechnology investment incentive and cyber security investment incentive tax credits, limiting the zone size, and limiting existing income and property tax credits to businesses that are located in a RISE zone before January 1, 2023.