The Maryland legislature has increased the income tax credit for employer costs related to obtaining federal security clearances and constructing or renovating sensitive compartmented information facilities (SCIF) within Maryland (L. 2013, c. 482, § 1). The legislation also enacted an additional credit for first year rental payments for spaces leased in Maryland by a small business performing security-based contracting. The modifications to the Maryland Employer Security Clearance Costs (ESCC) Tax Credit take effect on July 1, 2013.
ESCC-eligible costs include administrative expenses for processing in-state employee applications for federal security clearances; training in-state employees to administer such applications; the installation, maintenance, and upgrading of required computer systems; construction and equipment expenses incurred to build or renovate SCIFs; and rent payments incurred by a small business security contractor during the first year of a rental agreement for leased spaces in the state. The recently enacted legislation increased the credit amounts:
• from $100,000 to $200,000 for security clearance administrative expenses;
• from $100,000 to $200,000 for construction and equipment expenses related to a single SCIF;
• from $250,000 to $500,000 for construction and equipment expenses related to multiple SCIFs;
• and added a $200,000 credit for small business rental payments.
Despite increasing the ESCC credit amounts that a taxpayer may claim, the legislation decreased, from $4 million to $2 million, the total amount of credits that the Department of Business and Economic Development (DBED) may approve in a single calendar year. Each applicant’s credit will be limited ratably if the total credits applied for exceed $2 million in any calendar year, as opposed to the credit being awarded on a first-come, first-served basis. Thus, depending on the number of applicants and credits applied for, the increases discussed above could be nullified by the decrease in the total credit amounts that can be awarded. The credit is not refundable, but any excess may be carried forward to subsequent years until the entire amount is exhausted.
If you have any questions, please contact your Aronson tax advisor or Michael L. Colavito at 301.231.6200.