Cash in on Maryland’s lucrative government-sponsored research credit – R&D incentivizes businesses to pursue innovation.
The Research and Development tax is a permanent federal program, and many states, including Maryland, have adopted their own statewide incentives, using the nation’s program as a model. Enacted on July 1, 2017, Senate Bill 200 (“S.B. 200”) makes way for even more Maryland businesses to benefit from the lucrative tax credits awarded to companies by the state’s Department of Commerce.
What are the benefits of Maryland’s R&D tax credits?
In Maryland, the total amount of credits any business receives depends on the amount of eligible expenses incurred with a limit of $12 million for all businesses that apply. The Basic R&D tax credit provides businesses with 3% of eligible R&D expenses less than or equal to Maryland’s base amount. If the total credits applied for exceeds $4.5 million, the business’s Basic tax credit is prorated.
Maryland’s Growth R&D tax credit offers companies 10% of eligible R&D expenditures over Maryland’s base amount. If the total credits applied for are over $4.5 million, the business’s Growth R&D tax credit is prorated.
Small businesses are especially rewarded through R&D in the state of Maryland. A small business is defined as a for-profit corporation, LLC, partnership or sole proprietorship whose net profits are less than $5 million for the tax year. This credit is refundable for cash, in an effort to further drive business growth and innovation from smaller companies.
What is the first step to applying?
According to the Maryland state website, applications for the state of Maryland R&D tax credits must be received no later than September 15th of the calendar year following the tax year in which the expenses were incurred. Maryland Commerce will issue a tax credit certificate with the approved credit amount by February 15th. If a business has already filed their taxes for the current tax year, they can apply to amend their taxes for that tax year, as well as the previous seven tax years.
Qualifying expenditures include wage, contractor, and supply expenses related to a taxpayer’s attempts in Maryland to develop or improve the functionality or performance of its products, manufacturing processes, software, or other components.
Maryland states that the first step to determining the business’s R&D tax credits are to collect the gross receipts for the tax year for which you are claiming credits, as well as the preceding four years. Keep in mind that the R&D credits are limited to activities performed within the state only. This process are best tackled with a team of national tax experts who can guide business owners through these steps one by one.
If you think your business qualifies for any Research and Development tax savings, call National Tax Group at (561) 257-3436 to start your free analysis.