LEGISLATIVE REPORT

By James Arnie

The 2023 session of the Maryland General Assembly convened on Wednesday, January 11, 2023, and adjourned at midnight on Monday, April 10, 2023 Both Houses provided for in-person committee hearings the entire session; however, individuals could sign up for “virtual” testifying on any specific bill

During the 90-day session, there were 1,301 bills were introduced in the House (does not include 394 bond bills and 4 resolutions) and 974 bills introduced in the Senate (does not include 386 bond bills and 5 resolutions). In 2022, there were 1,011 bills introduced in the Senate and 1,487 bills introduced in the House. (Remember, 2022 was an election year for the Maryland General Assembly representatives)

A total of 153 bills were referred to the Society for review to determine if they were significant and should the Society testify “in favor of” or “in opposition to” any bills. These bills were applicable to the categories as follows: Corporate Income Tax, 16; Cyber Security, 1; Estates and Trusts, 11; Financial Literacy, 2; Personal Income Tax, 61; Personal Property Tax, 3; Regulatory, 10; Sales and Use Tax, 19; and Small Businesses, 30. In 2022, there were 163 bills referred to the Society for review.

During the 2023 session, the Society presented inperson testimony in favor of six bills that the Comptroller of Maryland had introduced (There were three bills, and each bill had a cross-filed bill for a total of six bills). In addition, the Society presented written testimony that was “in support of” ten bills and “in opposition to” four bills. The bills listed below, by tax type, were passed during the 2023 session of the Maryland General Assembly.

Personal Income Tax

Income Tax – Subtraction Modification – Union Dues

HB 0002 Signed by the Governor – Chapter 0513

The subtraction allowed under this bill includes the amount of union dues paid by an individual during the taxable year that were allowed as a deduction under Section 162 of the Internal Revenue Code prior to January 1, 2018, without regard to the limitation imposed by Section 67 of the Internal Revenue Code. Applicable to all taxable years beginning after December 31, 2022.

Income Tax – Subtraction Modification for Adoption Expenses – Alterations

HB 0180 Signed by the Governor – Chapter 0551

SB 0141 Signed by the Governor – Chapter 0550

This bill alters the value of the subtraction modification under the Maryland income tax for the adoption of a child Specifically, for a taxpayer who adopts a child with a special need, the value of the subtraction increases to $12,000, regardless of whether the child is a Maryland resident at the time of adoption For a taxpayer who adopts a child without a special need, the value of the subtraction increases to $10,000, regardless of whether the child is a Maryland resident at the time of adoption. Applicable to the tax year 2023 and beyond.

Income Tax Checkoff – Maryland Veterans Trust Fund

HB 0316 Signed by the Governor – Chapter 0618

SB 0354 Signed by the Governor – Chapter 0617

Establishes the Maryland Veterans Trust Fund (MVTF) checkoff on the individual income tax return form. After the Comptroller deducts administrative expenses, the contributions are credited to MVTF. Applicable to all taxable years beginning after December 31, 2024.

Income Tax – Out-of-State Taxes Paid by Pass-Through Entities – Addition Modification

SB 0240 Signed by the Governor – Chapter 0445

The addition under this bill includes the amount of a credit that is claimed under Section 10-703 of this title and is based on a tax imposed on any pass-through entity by another state that is deductible in determining the pass-through entity’s income under the Internal Revenue Code Applicable to all taxable years beginning after December 31, 2022

Income Tax – Work Opportunity Tax Credit – Technical Correction

SB 0242 Signed by the Governor – Chapter 0020

Corrected the reference to the Internal Revenue Code in defining “federal work opportunity credit,” means the work opportunity tax credit allowed under Section (51) 38 of the Internal Revenue Code Bill takes effect July 1, 2023

Income Tax – Child and Dependent Care Tax Credit –Alterations

SB 0243 Signed by the Governor – Chapter 0021

Altered the eligibility for the State child and dependent care tax credit to resident taxpayers Applicable to all taxable years beginning after December 31, 2022

Office of Statewide Broadband – Study of Broadband Expansion Incentives

HB 0551 Signed by the Governor – Chapter 0440

Requires the Office of Statewide Broadband (OSB) within the Department of Housing and Community Development (DHCS) to study and make recommendations regarding (1) how the state can incentivize broadband service providers to expand broadband infrastructure to communities that are unserved or underserved, including through either regulatory or financial incentives; (2) how the State can ensure that federal broadband infrastructure grants are deployed to best serve the needs of Marylanders; and (3) how other states have encouraged private investment in broadband networks and how this State might implement similar measures; and on or before January 1, 2024, submit its findings and recommendations to the Governor and, in accordance with Section 2-1257 of the State Government Article, the General Assembly Effective July 1, 2023

Income Tax – Subtraction Modification for Military Retirement Income (Keep Our Heroes Home Act)

HB 0554 Signed by the Governor – Chapter 0613

SB 0553 Signed by the Governor – Chapter 0614

Enhances the existing military retirement income tax subtraction modification by increasing the maximum amount of military retirement income received by an individual that may be exempted from Maryland income tax Specifically, the bill increases the maximum value of the subtraction modification from $5,000 to $12,500 for individuals younger than 55 and from $15,000 to $20,000 for individuals aged 55 and older Applicable to all taxable years beginning after December 31, 2022

Income Tax Credit – Food Donations by Qualified Farms – Sunset Repeal and Alterations (Farmers Feeding Families Act)

HB 0584 Signed by the Governor – Chapter 0454

Permanently extends the State income tax credit for eligible food donations by qualified farms In addition, it increases the value of the credit from 50% to 100% of eligible food donations and from 75% to 100% of the value of donated certified organic produce (subject to an existing $5,000 limit) Finally, states it’s the intent of the General Assembly that the Maryland Department of Agriculture (MDA) continue to fund the credit program's marketing and facilitate eligible food donations by qualified farms, as specified. Applicable to all taxable years beginning after December 31, 2022

Income Tax – Student Loan Debt Relief Tax Credit –Alterations

HB 0680 Signed by the Governor – Chapter 0738

Increases, from $9 million to $18 million, the maximum amount of student debt relief tax credits the Maryland Higher Education Commission (MHEC) may approve for any taxable year; (2) requires MHEC to annually reserve $9 million of the authorized credits for State employees, as specified; (3) requires MHEC to prioritize tax credit recipients and amounts based on whether the qualified taxpayers graduated from institutions of higher education in the State at which at least 40% of attendees are eligible to receive federal Pell Grants; (4) extends from two to three years from the close of the tax year for which a credit is claimed- the timeframe within which the individual who claims the credit must use the credit for repayment of the individual’s eligible student loan debt; and (5) requires MHEC to engage in specified outreach regarding the tax credit program Applies to the tax year 2023 and beyond; the provision relating to the expanded timeframe for using the credit applies retroactively to credits claimed after the tax year 2019 Effective July 1, 2023

Family Prosperity Act of 2023

SB 0552 Signed by the Governor – Chapter 0003

HB 0547 Signed by the Governor – Chapter 0004

Permanently extends the temporary expansions to the Maryland earned income credit that was enacted under Chapters 39 and 40 of 2021 and further eliminates an existing limit on the value of the State refundable earned income credit for individuals without qualifying children In addition, the bill permanently extends and alters eligibility for the State child tax credit originally enacted under Chapter 40. Applicable to all taxable years beginning after December 31, 2022.

Income Tax – Automated External Defibrillator Tax Credit (Joe Sheya Act)

HB 1074 Signed by the Governor – Chapter 0306

SB 0624 Signed by the Governor – Chapter 0307

Allowing an individual or a business entity to claim a credit against the State income tax for the purchase of an automated external defibrillator during the taxable year. The credit allowed (1) is applicable for only one automated external defibrillator purchased for use at a restaurant location in the State with an annual gross income of at least $400,000, and (2) may be claimed only once by an individual or business entity for each restaurant location For any taxable year, the credit allowed may not exceed the lesser of (1) $1,500; or (2) the State income tax imposed for the taxable year, calculated before the application of the credits allowed under this section and under Sections 10701 and 10-701 1 but after the application of any other credit allowed under this subtitle. Any unused amount of the credit may not be carried over to any other taxable year. Applicable to all taxable years beginning after December 31, 2022, but before January 1, 2028 It shall remain effective for a period of 5 years, and, at the end of June 30, 2028, this Act, with no further action required by the General Assembly, shall be abrogated and of no further force and effect The act takes effect July 1, 2023

Income Tax – Credit for Federal Security Clearance Costs – Alterations

SB 0721 Signed by the Governor – Chapter 0438

Reauthorizes an individual or a corporation that employs not more than 500 employees to claim credits against the State income tax for (1) security clearance administrative expenses, not to exceed $200,000; expenses incurred for rental payments owed during the first year of a rental agreement for spaces leased in the State if the individual or corporation is a small business that performs security-based contracting, not to exceed $200,000; and (3) subject to paragraph 2 below, construction and equipment costs incurred to construct or renovate a single SCIF in an amount equal to the lesser of 50% of the costs or $200,000 The maximum amount of credits authorized to be awarded each year is $2M

(2) The total amount of construction and equipment costs incurred to construct or renovate multiple SCIFs for which an individual or a corporation is eligible to claim as a credit against the State income tax is $500,000. Applicable to taxable years beginning after December 31, 2022, but before January 1, 2028.

Corporate Income Tax

Corporations and Associations – Revisions

HB 0209 Signed by the Governor – Chapter 0560

Alters numerous miscellaneous provisions of the Corporations and Associations Article, including those relating to (1) the issuance of stock or convertible securities as part of a conversion; (2) stock certificates, scrip, and limited liability company (LLC) certificates issued in bearer form; (3) remote participation at stockholders’ meetings; (4) conversions of a close corporation; (5) directors of a nonstock corporation; (6) dissolution of a real estate investment trust (REIT); and (7) the Maryland Control Share Acquisition Act and statutory trusts The act shall take effect on October 1, 2023

Film Production Activity Income Tax Credit – Alterations and Maryland Entertainment Council

SB 0452 Signed by the Governor – Chapter 0434

Alters the film production activity tax credit by (1) expanding eligible film production activities; (2) expanding eligible costs; (3) increasing the amount of eligible costs that qualify; and (4) increasing the maximum amount of credits the Department of Commerce may award each year (from $12 0 million) to $15 0 million for fiscal 2024, $17 5 million for fiscal 2025, and $20 0 million for fiscal 2026 The bill also establishes the Maryland Entertainment Council to assess Maryland’s existing assets, opportunities, and competitive position with the film, television, and entertainment industry, study specified related topics, and make related recommendations.

Applicable to all taxable years beginning after December 31, 2022 The act takes effect July 1, 2023 Section 2 of this Act shall remain effective for a period of 2 years and, at the end of June 20, 2025, Section 2 of this Act, with no further action required by the General Assembly, shall be abrogated, and no further force and effect

Income Tax – Captive Real Estate Investment Trusts –Alterations

SB 0968 Signed by the Governor – Chapter 0478

Modifies the definition of a “captive real estate investment trust (REIT)” for purposes of the Maryland income tax addition modification for the amount of the federal dividends paid deduction claimed by a captive REIT Specifically, the bill excludes from the definition of a captive REIT a corporation, trust, or association that otherwise meets the ownership requirements for status as a captive REIT and is more than 50% owned or controlled by (1) an entity organized as a trust in which a listed Australian property trust owns or controls, directly or indirectly, 75% or more of the voting power or value of the beneficial interest or shares of the trust or (2) a qualified foreign entity, as defined by the bill Applicable to all taxable years beginning after December 31, 2022

Sales And Use Tax

Sales and Use Tax Exemption – Redevelopment Areas in Baltimore County – Sunset Extension

SB 0174 Signed by the Governor – Chapter 0017

HB 0237 Signed by the Governor – Chapter 0018

Extends the termination date of a sales and use tax exemption for the sale of specified construction materials and warehousing equipment in Baltimore County (property previously owned at any time by Bethlehem Steel Corporation, or any of its subsidiaries and was, as of January 1, 2016, the subject of an approved application for participation in the Voluntary Cleanup Program under Title 7, Subtitle 5 of the Environment Article) from June 30, 2026, to June 30, 2036

Home Amenity Rentals – Sales and Use Tax Imposed and Local Tax Authorized

SB 0691 Enacted Under Article II, Section 17(c) of the Maryland Constitution – Chapter 0805

Imposes the State sales and use tax on specified home amenity rentals; and authorizes counties and municipalities to impose a home amenity rental tax

“Home Amenity” means any portion, whether indoors or outdoors, of a residential property, excluding bedrooms or any portion of the property intended for sleeping quarters, that is occupied by the hour and for not more than 15 hours consecutively. Effective July 1, 2024.

Estates And Trusts

Maryland Estate Tax – Portability – Time Period for Election

HB 0179 Signed by the Governor – Chapter 0714

SB 0055 Signed by the Governor – Chapter 0713

Altering the period of time within which a person is required to file a Maryland estate tax return for the purpose of allowing a surviving spouse to take into account the deceased spousal unused exclusion amount to be consistent with the time for making a federal election; and applying the Act retroactively to any decedents dying on or after January 1, 2019

Estates and Trusts – Registers of Wills – Electronic Filing and Signatures

HB 0244 Signed by the Governor – Chapter 0661

SB 0253 Signed by the Governor – Chapter 0660

Requires a register of wills to accept any document, except an original will, that is filed electronically through a system established by the register and in accordance with the Maryland Rules; however, the bill does not prohibit the filing of a document in paper form with a register Prohibits a register from refusing to accept any document based on the manner in which it was signed “Sign” means, with present intent to authenticate or adopt a record, to (1) execute or adopt a tangible symbol or (2) attach to or logically associate with the record an electronic symbol, sound, or process.

Estates and Trusts – Trusts – Decanting (Maryland Trust Decanting Act)

SB 0446 Signed by the Governor – Chapter 0716

HB 0687 Signed by the Governor – Chapter 0715

Establishes the Maryland Trust Decanting Act, which provides specified authority to an authorized fiduciary to distribute property of a first trust to one or more second trusts or to modify the terms of a first trust It must be construed to apply retroactively and must be applied to and interpreted to affect any trust created before, on, or after October 1, 2023 (the bills effective date) that has its principal place of administration in this State or is governed by the law of this State.

Estates and Trusts – Registered Domestic Partnerships

SB 0792 Signed by the Governor – Chapter 0647

Allows for registered domestic partnerships to have the same effect as marriage under various provisions of the Estates and Trusts Article of the Maryland Code Among other things, it establishes (1) the requirements that must be met for a domestic partnership to be registered with the register of wills and how the domestic partnership may be terminated and (2) the benefits for which the surviving partner of a registered domestic partnership qualifies Also removes certain terms from the definition of “child” under the Estates and Trusts Article and alters provisions governing the distribution of an intestate estate (an estate not distributed by a will)

Regulatory

Office of the Comptroller – Taxpayer Advocate Division

SB 0660 Signed by the Governor – Chapter 0444

HB 0707 Signed by the Governor – Chapter 0443

Establish a Taxpayer Advocate Division in the Comptroller’s Office to assist taxpayers and their representatives in resolving certain taxpayer problems and complaints and represent taxpayers’ interests in a certain manner This will be accomplished by adding four new positions to the Taxpayer Advocate Division and transforming the Ombudsman Office into the Taxpayer Advocate Division. The act will take effect July 1, 2023.

Modernization of State Financial Systems – 21st Century Financial Systems Enterprise

SB 0659 Signed by the Governor – Chapter 0022

HB 0709 Signed by the Governor – Chapter 0023

Requiring the Office of the Comptroller, the Office of the State Treasurer, the Department of Budget and Management, the Department of Information Technology, and the Department of General Services, in consultation with a representative of the Modernize Maryland Oversight Commission, to develop, implement, manage, and oversee the 21st Century Financial Enterprise; and requiring the Office of the Comptroller to report to the General Assembly on or before December 31, 2023, and every six months thereafter, ending with the final report due on or before January 1, 2027 The act shall take effect July 1, 2023

Corporations – Filing Requirements for Dissolution and Termination of Registration or Qualification – Repeal

HB 0999 Signed by the Governor – Chapter 0457

Repeals a prohibition against the State Department of Assessments and Taxation (SDAT) from accepting articles of dissolution of a corporation for record unless specified reports have been filed Also repeals a requirement that SDAT issues a certificate of termination to a foreign corporation if all specified reports have been filed Effective July 1, 2023

Comptroller and State Department of Assessments and Taxation – Enhancing Access to Property Tax Benefits –Report

HB 0665 Signed by the Governor – Chapter 0662

Requires the Comptroller and the State Department of Assessments and Taxation (SDAT) to confer during the 2023 legislative interim to identify ways the Comptroller could collaborate with SDAT to enhance access and raise awareness of specified property tax benefits available to taxpayers Effective June 1, 2023, and remains effective for a period of 1 year and 1 month At the end of June 20, 2024, this Act, with no further action required by the General Assembly, shall be abrogated and of no further force and effect.

Corporations and Associations – Electronic Copies Fee –Repeal

SB 0723 Signed by the Governor – Chapter 0070

Repeals a $1 per-page fee for electronic copies of any paper that is recorded or filed with the State Department of Assessments and Taxations (SDAT) The act shall take effect October 1, 2023

Small Businesses

Disclosure of Tax Information – Maryland Small Business Retirement Savings Board – Authorization

HB 0086 Signed by the Governor – Chapter 0337

SB 0189 Signed by the Governor – Chapter 0338

Authorizing the disclosure of a business entity’s federal employer identification number, name, physical address, mailing address, contact name, e-mail address, and phone number to the Maryland Small Business Retirement Savings Board and its authorized contractors to administer the Maryland Small Business Retirement Savings Program and Trust. Effective June 1, 2023.

Fair Wage Act of 2023

SB 0555 Signed by the Governor – Chapter 0002

Accelerated the increase in the State minimum wage rate for all employers to $15 00 per hour beginning January 1, 2024

Effective July 1, 2023

Labor and Employment – Noncompete and Conflict of Interest Provisions – Application of Prohibition

SB 0591 Signed by the Governor – Chapter 0266

An employee who earns equal to or less than 150% of the State minimum wage rate established under Section 3-413 of this title, a non-compete or conflict of interest provision in an employment contract or a similar document or agreement that restricts the ability of an employee to enter into employment with a new employer or to become selfemployed in the same or similar business or trade shall be null and void as being against the public policy of the State. Effective October 1, 2023.