Instructions For Form 500cr - Business Income Tax Credits

2013

BUSINESS INCOME TAX

MARYLAND

FORM

CREDITS INSTRUCTIONS

500CR

PART K - RESEARCH AND DEVELOPMENT TAX CREDITS

qualify, a company can be any entity of any form (except a sole

proprietorship) that is duly organized and existing under the laws

Businesses that incur qualified research and development

of any jurisdiction for the purpose of conducting business for profit,

expenses in Maryland may be entitled to tax credits. The total

and must be primarily engaged in the research, development, or

of research and development credits for all businesses may not

commercialization of innovative and proprietary technology that

exceed $8,000,000 per year.

comprises, interacts with, or analyzes biological material including

Part K-I – Research and Development Tax Credits for

biomolecules (DNA, RNA, or protein), cells, tissues or organs.

Businesses Not Certified as a “Small Business”

The QMBC must:

There are two credits. The Basic Credit is 3% of the qualified

• Have its headquarters and base of operations in Maryland;

Maryland research and development expenses paid during the

tax year, up to a base amount. The Growth Credit is 10% of the

• Have fewer than 50 full-time employees;

Maryland research and development expenses paid during the tax

• Have been in active business no longer than 10 years;

year that exceed the base amount.

• Have been certified as a biotechnology company by DBED;

Certification must be obtained from the Maryland Department of

and,

Business and Economic Development (DBED) before the credit

• Must not have any securities publicly traded on any

can be claimed. The credit must be taken for the tax year in which

exchange.

the expenses were incurred. Therefore, an electronic amended

return may need to be filed. A copy of the certification from DBED

A QMBC includes:

must be included with the return.

• A company that has been in active business for up to 12

Whenever this credit is claimed against the income tax, an addition

years, with DBED approval;

modification must be made for the tax year in which the research

• For fiscal years 2012 and 2013 only, a company that has

and development expenses were paid.

been in active business for up to 15 years; or,

Claiming the Tax Credit

• A company that has been in active business no longer

The business will enter the DBED-certified Basic Credit (3%) on

than 10 years from the date the company first received a

line 1, Part K-I.

qualified investment.

On line 2, Part K-I, the business will enter the amount of the

The investor:

DBED-certified Growth Credit (10%).

• Can be an individual or any entity (except a retirement

Line 3, Part K-I, will reflect the sum of line 1 and line 2. This

plan), and must make an investment of at least $25,000 in

amount is carried to line 11, Part W. Also, this amount is an

a QMBC (but not own more than 25% of the equity interests

addition modification on the tax return.

in the company after making the investment);

Part K-II – Research and Development Tax Credits

• Must be required to file an income tax return in any

for Businesses Certified as a “Small Business”

jurisdiction; and,

If a business that is eligible to claim the Research and Development

• Must apply for and receive final certification from DBED to

Tax Credit is a “small business,” the credit is calculated in basically

claim the Biotechnology Investment Incentive Tax Credit.

the same manner, but Part K-II is used.

The amount of the credit is 50% of the investment in the qualified

A “Small Business” is defined as a for-profit corporation, limited

Maryland biotechnology company, not to exceed $250,000. The

liability company, partnership or sole-proprietorship with net

investment must be the contribution of money in cash or cash

book value assets totaling at the beginning or the end of the tax

equivalents expressed in United States dollars, at risk of loss,

year for which the Maryland qualified research and development

to a QMBC in exchange for stock, a partnership or membership

expenses are incurred, as reported on the balance sheet, less

interest, or other ownership interest in the equity of the company

than $5,000,000.

title to which ownership shall vest in the qualified investor. The

investment cannot include debt. See §10-725 of the Tax-General

Claiming the Tax Credit

Article and Code of Maryland Regulations 24.05.03.

The business will enter the DBED-certified Basic Credit (3%) on

For questions on application and certification processes or for

line 4, Part K-II.

additional information on this credit program, contact:

On line 5, Part K-II, the business will enter the amount of the

Maryland Department of Business and Economic Development

DBED-certified Growth Credit (10%).

Office of Finance Programs, Tax Incentives Group

Line 6, Part K-II, will reflect the sum of line 4 and line 5. This

401 E. Pratt St.

amount is carried to line 6, Part Y. Also, this amount is an addition

Baltimore, MD 21202

modification on the tax return.

410-767-6438 or 410-767-4980

For certification and further information contact:

Maryland Department of Business and Economic Development

Specific Requirements

Office of Finance Programs, Tax Incentives Group

The investor may claim the tax credit for the amount provided

401 E. Pratt St.

in the final certificate. If the credit amount exceeds the tax due,

Baltimore, MD 21202

then a refund for the excess amount may be claimed. The credit

410-767-6438 or 410-767-4980

cannot be claimed until the date of issuance of the final certificate.

It must be claimed on the Maryland income tax return for the tax

year in which the investor makes the investment in the QMBC.

PART L - BIOTECHNOLOGY INVESTMENT INCENTIVE TAX

Both the final certificate received from DBED and a statement of

CREDIT

affidavit (see below) as prepared by the investor are required to

be included with your return for the Biotechnology Investment

General Requirements A credit is available for an investment

Incentive Tax Credit to be allowed. Complete Part L using the

in a qualified Maryland biotechnology company (QMBC). To

13-49

Instructions For Form 500cr - Business Income Tax Credits - 2013 Page 7

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