Maryland Governor Martin O’Malley has signed into law legislation enhancing both the research and development tax credit and the biotechnology investment tax credit. The research and development tax credit will become a refundable credit and some companies that have been in business for more than 10 years will now be eligible for the biotechnology investment tax credit. Additional details on these changes are outlined below.
Research and Development Tax Credit
The research and development tax credit has been modified to allow a “small business” to receive a refund if the amount of the credit in any year exceeds the state income tax for that year. This is a change from companies receiving the credit being required to carryover any unused credit. “Small business” means a for-profit corporation, limited liability company, partnership, or sole proprietorship with net book value assets totaling, at the beginning or the end of the taxable year for which Maryland qualified research and development expenses are incurred, as reported on the balance sheet, less than $5 million. This change applies to all Maryland research and development tax credits certified after December 15, 2013. The legislation (L. 2013, H386 (c. 109) also increases from $6 million to $8 million the aggregate amount of credits that the Department of Business and Economic Development can approve in each calendar year.
Biotechnology Investment Tax Credits
The eligibility for Maryland’s Biotechnology Investment Tax Credit has also been expanded by legislation recently signed into law by the governor (L. 2013, S779 (c. 75). Under the current version of the credit, companies that have been in active business for more than 10 years generally don’t meet the definition of “Qualified Maryland Biotechnology Company” and are ineligible for a potential investment that would qualify for the credit. The amendment to the law, which applies to credit certificates issued after June 30, 2013, specifies that a “Qualified Maryland Biotechnology Company” will include a biotechnology company that has been in active business for up to 10 years from the date the company first received an investment by an investor eligible for the tax credit. Thus, a company that receives an initial qualifying investment will have an additional ten years to receive further qualifying investments.