New Maryland Tax Credit for Obtaining Security Clearances and Constructing Sensitive Facilities

The SALT Shaker

Commencing in tax year 2013, businesses will be entitled to a Maryland income tax credit for expenses related to security clearance and costs to construct or renovate a sensitive compartmented information facility located in Maryland, as required by the federal government.  The amount of the credit for security clearance is equal to 100% of the eligible expenses, not to exceed $100,000.  The amount of the credit for sensitive compartmented information facility costs is equal to 50% of eligible costs, not to exceed $100,000 for a single facility or $250,000 for multiple facilities. The statewide amount of credit available for ALL taxpayers is capped at $2.0 million per year.  The process to obtain these new Maryland credits is similar to the R&D tax credit procedure.  Qualified businesses will apply for the credit and receive an allotment of the $2.0 million total that can be claimed by the business on an amended tax return. The act takes effect July 1, 2012 but the credit will not start until tax year 2013. It appears the 2013 credit will include expenses for the period starting July 1, 2012 however, the state has not provided guidance regarding when qualifying expenses commence.

Security Clearance costs will include administrative costs such as:

  • Processing applications requests
  • Maintaining, upgrading or installing computer systems required to obtain federal security clearances and
  • Training employees to administer the application process

We expect that regulations to implement the credit and specify costs eligible for the credit will be issued by the state in the coming weeks.  We will provide more details of the qualified costs when they are available.

 Please contact the KatzAbosch SALT Group if you have any questions regarding this new Maryland tax credit.

The SALT Shaker is prepared by Andy Bareham, Chair of the KatzAbosch SALT Group

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