Maryland R&D Tax Credits
Find out if you qualify for R&D tax credits in Maryland and recharge your business
Businesses that have qualified R&D expenditures in Maryland may qualify for two separate income tax credits, the Basic R&D Tax Credit and the Growth R&D Tax Credit. To qualify for the Basic and/or Growth R&D tax credit, a business must submit an application NO LATER THAN November 15th of the calendar year following the tax year in which the expenses were incurred.
In addition, the credits are refundable for eligible small businesses that submit documentation showing they had net book value assets, at the beginning or end of the tax year ,of less than $5 million (as reported on the balance sheet).
Applicants must apply using an online system. Maryland has a yearly cap on the amount of R&D credits available to applicants. Maryland's Commerce Department will prorate the R&D credits pro rata in the following circumstances:
- the total amount of Basic Credits applied for exceeds $5.5 million; or
- the total amount of Growth Credits applied for exceeds $6.5 million.
Each taxpayer (applicant) will receive an R&D credit Certification Letter with the approved credit amount by February 15th of the following year.
Because application dates follow the filing date for taxes, after receiving the Certification Letter, the taxpayer can file an amended tax return for the certified year, or it may claim the credit on any income tax return filed in any of the subsequent 7 tax years. The business must attach a copy of the Certification Letter to its Maryland income tax return.
The tax credit remains in effect until June 30, 2022, subject to extension by the Maryland General Assembly.
Learn more about Maryland's R&D Tax Credit law here.
R&D Tax Credit Available:
Yes - Expires on January 1, 2022
C-Corporations, S-Corporations, LLCs, Partnerships
Deadline for Tax Filing:
Application due by 11/15 using Commerce's online system
Data Required to Compute Credit:
Claim Period Qualified R&D Expenses (QREs)
What Information is needed?
QREs for Prior 4 Years
Gross Receipts for Prior 4 Years
Refundable Credit for Small Businesses (<$5,000,000 in net book value assets)
20-year carry forward for unused credits
The R&D tax credit equals:
- Basic R&D Tax Credit:
Three percent (3%) of eligible R&D expenses that do not exceed the Maryland Base Amount. If the total credits applied for exceed $5.5 million, the business's Basic tax credit is prorated.
- Growth R&D Tax Credit:
Ten percent (10%) of eligible R&D expenses in excess of the Maryland Base Amount. If the total credits applied for exceed $6.5 million, the business's Growth R&D tax credit is prorated.
Specific Items to Note:
The Maryland Department of Commerce (Commerce) follows the federal definition of qualified R&D and qualified R&D expenses. To qualify the business must incur QRE's, as defined by § 41(b) of the IRC in Maryland. The business must submit an application to Commerce by November 15th for expenses incurred in the previous calendar year.
- Small Business Refund
R&D tax credits certified after December 15, 2012 are refundable for "small business's" to the extent that the tax credits exceed the income tax liability for that taxable year. A small business means a for profit corporation, limited liability company, partnership or sole proprietorship with net book value assets totaling, less than $5,000,000.