Maryland enacted legislation creating income, sales, and property tax incentives for qualified taxpayers that bring large-scale projects to the state. The legislation creates the Promoting ext-Raordinary Innovation in Maryland’s Economy (PRIME) Program. Taxpayers enrolled into the program are eligible for program benefits for up to 10 consecutive years.
The legislation is designed to lure Amazon’s second headquarters project to Maryland. However, any other taxpayer with a qualifying project can apply for enrollment in the program.
Tax Incentives Under PRIME Program
To qualify for enrollment in the PRIME Program, a taxpayer must:
- be a Fortune 100 company; and
- establish an eligible project.
Before establishing a project, notice of the taxpayer’s intent and an application for enrollment must be submitted.
Eligible Project Under PRIME
To establish an eligible project, a taxpayer must show that it is committed to spending at least $500 million on the project. It must also submit a project plan that, over a 17-year period, commits to:
- filling at least 40,000 qualified jobs at the project facility with an average compensation of at least $100,000; and
- spending a total of $4.5 billion.
Certificates of Eligibility
Qualified taxpayers will receive a certificate that certifies the eligibility of the project enrolled in the program. The certificate will be updated as needed to reflect increases in the number of qualified jobs. In addition, the certificate provides
- the duration of the certification; and
- additional information needed for the taxpayer to receive a program benefit.
Income Tax Credit for PRIME Taxpayers
Taxpayers enrolled in the PRIME Program can claim a refundable income tax credit equal to 5.75% of the wages paid for qualified jobs. The credit can be claimed for 10 tax years for each job.
To be eligible for the credit, the taxpayer must:
- pay employees in qualified jobs an average salary of at least $100,000; and
- fill the required number of qualified jobs within 17 years of enrolling in the program.
Sales and Use Tax Exemption for PRIME Purchases
Personal property and services purchased by the taxpayer under the program are exempt from Maryland sales and use tax.
The Comptroller must issue exemption certificates to qualified taxpayers. The exemption certificates must:
- be renewed annually; and
- may not be renewed for more than 10 consecutive years.
Property Tax Credit for PRIME Property
Another benefit of the program is a state and local property tax credit of 50% of the increase in assessment on qualified property. Taxpayers may begin taking the credit in tax years after June 30, 2018.
Qualified property is real property where an eligible project is located.
Taxpayers can claim the credit for up to 10 consecutive years, as long as the property is still qualified.
Revocation and Recapture of Tax Benefits
Program benefits will end if the number of qualified jobs goes below the number claimed in the first year. In addition, the taxpayer’s certification may be revoked, in whole or in part, if:
- the taxpayer made false representations; or
- the expenditures and hiring of employees by the taxpayer are significantly below the estimates in the project plan.
If the taxpayer’s certification is revoked, program benefits received by the taxpayer may be recaptured.
Duration of Program
Generally, the PRIME Program applies to tax years beginning after 2017. However, the program will end if no taxpayers are certified by the end of 2021.
Ch. 350 (S.B. 877), Laws 2018, effective June 1, 2018, applicable as noted