Saving on Maryland Taxes for Manufacturing Companies

Does your manufacturing facility want significant tax incentives that last up to 10 years? Through the recent legislation, More Jobs for Marylanders Act, Maryland manufacturers are now eligible for 10 years of tax incentives based on job creation.

New manufacturers in a Qualified Distressed County (QDC) such as Baltimore City that create  5 manufacturing jobs can receive a 10-year State income tax credit, state property tax exemption, sales and use tax refunds for specific purchases, and a waiver of all SDAT fees. In addition, existing manufacturing businesses within the QDC can receive a refundable credit against their Maryland income tax liability of up to 5.75% while existing manufacturing businesses located outside a QDC still qualify for the refundable income tax credit as long as they create 10 manufacturing jobs.  To be eligible for these incentives, jobs created must be full-time, pay at least 120% of State minimum wage, and be filled for 12 months. Effective dates for these program benefits began in July 2017 for property tax credits and continued through June 2020 to qualify for any program.

An important piece of this new legislation includes a benefit for all new and existing manufacturing companies in the state, regardless of participating in the program or not.  Currently, federal tax allows bonus depreciation under Section 168(k) and enhanced expensing under IRC Section 179, but Maryland decouples from the provision in the federal tax law. However, as a result of this legislation manufacturers will be able to claim for Maryland tax purposes these accelerated deductions for equipment placed in service on or after January 1^st, 2019.  They can deduct capital expenditures for new qualifying equipment of up to $510,000 per year, and deduct up to 30% of the adjusted basis of certain qualified property placed in service after 2019 as a depreciation expense. This promotes additional investment in new equipment and helps manufacturers that need capital to reinvest in their business; because this should free up capital quickly, it will be much easier for manufacturers to hire new employees and compete more efficiently with surrounding states.

The More Jobs for Marylanders Act aims to boost Maryland’s workforce by providing the Partnership for Workforce Quality $1 million to supply matching grants for manufacturers that provide exceptional worker training programs. In addition, $1 million has been provided to the Workforce Development Scholarships for eligible students enrolled in job training programs at community colleges.

If you are a part of our thinking about joining the Maryland manufacturing community, this program is a perfect incentive to hire and properly train new employees especially in areas where Maryland is in most need of help to create jobs. Your company will receive incredible tax benefits while also giving back to the community. For new companies, this is the perfect way to start off your business; by saving money through these incentives, you can invest additional money into quickly planting your business in Maryland and watching it flourish and succeed.

At MKS&H, our CPAs assist new or existing manufacturing companies to have a smooth, painless application process with becoming certified by the Maryland Department of Commerce. Once Commerce determines if your company is a business entity that qualifies, they will send an application to your company to complete your certification. MKS&H can streamline the entire process from application to return filings.  Once the application process is complete, your company has a full year to create the required amount of jobs. Contact MKS&H today to get started.

Article Contributed by Alyssa Lawrence
Staff Accountant

About MKS&H: McLean, Koehler, Sparks & Hammond (MKS&H) is a professional service firm with offices in Hunt Valley and Frederick. MKS&H helps owners and organizational leaders become more successful by putting complex financial data into truly meaningful context. But deeper than dollars and data, our focus is on developing an understanding of you, your culture and your business goals. This approach enables our clients to achieve their greatest potential.

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