Maryland recently amended its Opportunity Zone Enhancement program by:
- limiting the enhanced benefits to certain tax years;
- restricting eligibility under the biotechnology investment and cyber security investment incentive programs;
- enacting certain minimum wage requirements; and
- altering application and reporting requirements.
What is the Maryland Opportunity Zone Enhancement Program?
The Maryland Opportunity Zone Enhancement program, enacted in 2019, authorizes increased incentives for businesses located within federal opportunity zones.
Which Credit Programs May Be Enhanced?
Businesses within an opportunity zone may qualify for enhanced incentives under the following existing state tax credit programs:
- One Maryland Economic Development;
- More Jobs for Marylanders;
- enterprise zone;
- biotechnology investment;
- cyber security investment; and
- job creation.
What are the Enhancements?
“Level 1” enhanced incentives designated are in addition to the standard credit available under each program. A business or opportunity fund qualifies for a Level 1 enhancement if it meets program requirements and provides specified information to the Department of Commerce.
Additional “Level 2” enhancements are available beyond the enhanced credit. A business or qualified opportunity fund is eligible for a Level 2 enhancement if:
- the entity meets Level 1 requirements; and
- opportunity zone residents are represented on governing or advisory boards of a qualifying business, or if a community benefits agreement or strategic industry partnership is negotiated and agreed upon.
For example, the More Jobs for Marylanders basic credit is equal to the total wages paid for qualified positions multiplied by 5.75%. The Level 1 opportunity zone enhancement increases the credit to 6% of the total amount of wages for each qualified position. The Level 2 enhancement is equal to 6.25% of the total amount of wages paid for each qualified position.
What Changes Were Made to the Program?
In 2020, the state made several amendments to the program:
- benefits are limited to tax years 2019 through 2026;
- enhanced biotechnology and cyber security incentives are limited to investments made in newly established or expanded businesses located in opportunity zones on or after March 1, 2018; and
- businesses in a county with a minimum wage exceeding the state minimum wage must pay the greater of 120% of the state or county minimum wage.
Eligible businesses must also file impact reports that include information on progress toward:
- creating and maintaining jobs;
- promoting entrepreneurship, including among women- and minority-owned businesses;
- providing affordable housing;
- creating access to healthy food;
- promoting environmental sustainability; and
- benefitting the communities in the opportunity zone in a manner not otherwise specified.
By Amber Harker, J.D.