Fillable Form 500dm - Maryland Decoupling Modification

2014

DECOUPLING MODIFICATION

MARYLAND

FORM

INSTRUCTIONS

500DM

General Instructions

income, the decoupling modification must include an adjustment for these

changes. If the net change for these items reduces taxable income, enter

Purpose of Form

as a negative amount (-). See Administrative Release 38 for scenarios

Maryland has decoupled from certain federal provisions, as listed at the top

with examples of certain items that affect decoupling.

of Form 500DM, by enacting addition and subtraction modifications which

Line 6 – Net Decoupling Modification

eliminate the effect of the changes on Maryland and local taxes. This form

is used to determine the amount of the required modification.

Net the amounts from lines 1 through 5 and enter on line 6. If line 6 is

positive, include this amount in the appropriate line of the Maryland tax

Use of Pro Forma Returns

return being filed. Also enter the appropriate code letter(s) in the box(es)

Separate (pro forma) federal and Maryland returns must be prepared for

provided for the type of addition modification (either depreciation or NOL,

use in completing Form 500DM. In addition to calculating depreciation and

or both).

NOL deductions without the benefits afforded under the federal provisions

If line 6 is negative, include this amount as a positive number in the

from which Maryland has decoupled, pro forma returns also will help

appropriate line of the Maryland tax return being filed. Enter the appropriate

to determine other related items that affect Maryland and local income

code letter(s) in the box(es) provided for the type of subtraction modification

tax liability (e.g., income items, addition and subtraction modifications,

(either depreciation or NOL, or both). See the table at the bottom of Form

deductions and credits).

500DM for the line numbers and code letters to use.

Additional Information

Note: there is no separate code for line 3 as this decoupling would not

For more information regarding these modifications, see Administrative

occur if there was no entry on line 4, and therefore, code dm would be

Release 38 at

used for multiple decoupling.

Specific Instructions

Infrequently, the only decoupling that may exist on the return may be for

Column 1 – Federal Return as Filed

“Other Changes.” In this case, use the code for the decoupling issue that

gave rise to the “Other Changes.”

Column 1 (lines 1 through 4) is used for the amounts reported on the

federal return which include the impacts of the Decoupled Provisions.

Line 7 – Decoupling from Pass-Through Entity

Column 2 – Federal Return Without Decoupled Provisions

Enter any decoupling modification resulting from income received from a

pass-through entity on line 7 and use code dp on the member’s return as

Column 2 (lines 1 through 4) is for the amounts which would have been

an addition or subtraction. If line 7 is positive, include this amount as an

reported on the federal return without regard to the Decoupled Provisions.

addition on the appropriate line for addition on the Maryland tax return

Column 3 – Change – increase/decrease (-)

being filed. If line 7 is negative, include this amount as a positive number

L ines 1 and 2 – Subtract the amount in Column 2 from the amount in

on the appropriate line for subtraction on the Maryland tax return being

Column 1. Enter in Column 3.

filed. See Income from a PTE below.

Lines 3 and 4 – Subtract the amount in Column 1 from the amount in

Credits

Column 2. Enter in Column 3.

For Maryland income tax credits affected by the Decoupling Provisions, enter

Line 5 is for the change to taxable income in other related items

on the return to be filed credits as calculated on the Maryland pro forma

(calculated before and after application of the Decoupled Provisions) that

return without the Decoupling Provisions.

would affect taxable income.

Note: If a credit for a tax paid to another state was claimed on the original

I f the change decreases taxable income, enter the amount with a minus

return and the tax liability to the other state and/or Maryland changes as

sign (-) in front of the number.

a result of the treatment of decoupling provisions in either state, a revised

Line 1 – Depreciation Deductions

Form 502CR must be completed using the Maryland and the other state’s

returns as filed, including all amendments and modifications.

Use line 1 only for the depreciation expense deductions.

Pass-Through Entities (PTE)

Line 2 – NOL Deductions

If the entity is a PTE (partnership, S-corporation, limited liability company

Use line 2 for NOL deductions. For Columns 1 and 2, limit the deductions

or business trust), no adjustment is made on the PTE’s Maryland income

for non-corporation taxpayers so that the deduction may not exceed the

tax return (Form 510). However, Form 500DM must be submitted with

federal modified taxable income as determined on federal Form 1045,

Form 510 and the PTE must provide each partner, shareholder or member

Schedule B. If more than one loss year, attach a schedule providing the

a statement showing their share of the decoupling modification.

amounts on line 2 applicable to each loss year. For corporation taxpayers

filing Form 500, the impact of the decoupling on the NOL Deduction is no

Income from a PTE

longer calculated on Form 500DM with the other decoupling modifications.

Each partner, shareholder or member that has a decoupling modification

Instead, a pro forma or adjusted federal taxable income is first computed

from a PTE also must complete Form 500DM. Enter the decoupling

to include the effect of the other decoupling modifications, and then the pro

modification from the PTE on line 7 of Form 500DM. Use code dp under

forma or adjusted federal NOL is applied to reduce the pro forma or adjusted

other additions or subtractions on the return being filed by the member.

federal taxable income, to no less than zero. For more information about

(Do not include in lines 1 through 4). Also use this amount to adjust the

these deductions, see Administrative Release 18 which is available

income from the PTE on the pro forma federal return to determine if other

related changes exist. Other related changes would be entered on line 5

Line 3 – Deferred Deduction for Original Issue Discount (OID)

of Form 500DM. Do not include any decoupling modification from a PTE on

the Maryland pro forma return.

Use line 3 to reflect the subtraction to income resulting from Maryland’s

decoupling from the federal deferral of deduction for OID. The deferral or

Attachment of Forms

deduction must be claimed in debt-for-debt exchanges, unless the deduction

• Original Return Attach the completed Form 500DM to the Maryland

was deferred by a pass-through entity. If the deduction was deferred by a

income tax return to be filed. Pro forma returns used to complete

pass-through entity, use line 7. On line 7, partners, shareholders or members

this form are not to be filed with the Comptroller or the IRS,

should report only their share of the deferred deduction. In those years

but should be retained with your tax records.

when the Internal Revenue Code permits the deduction, line 3 will reflect

• Amended Return Attach the completed Form 500DM, schedules and

an addition to income.

pro forma returns to the amended return to be filed.

Line 4 – Deferred Discharge of Indebtedness Income

For questions concerning Form 500DM contact:

Use line 4 to report the addition to income resulting from Maryland

Revenue Administration Division

decoupling with the federal deferral of income arising from business in

110 Carroll Street

debtedness discharged by reacquisition of a debt instrument, unlessthe

Annapolis, Maryland 21411-0001

income was deferred by a pass-through entity. If the income was deferred

410-260-7980 or

by a pass-through entity, use line 7. On line 7, partners, shareholders or

toll-free at 1-800-MDTAXES or (410-638-2937)

members should report only their share of the deferred income. In those

years when the Internal Revenue Code requires the ratable inclusion of this

income, line 4 will reflect a subtraction to income.

Line 5 – Other Changes

Decoupling also may affect other items included in federal adjusted gross

income and allowable itemized deductions, as well as Maryland addition and

subtraction modifications. Because these items also affect Maryland taxable

COM/RAD-24

Form 500dm - Maryland Decoupling Modification - 2014 Page 2

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