Maryland SB 694: Corporate Income Tax - Single Sales Factor Apportionment Exemption - Worldwide Headquartered Company Election

Bill Text

EXPLANATION: CAPITALS INDICATE MATTER ADDED TO EXISTING LAW.
[Brackets] indicate matter deleted from existing law.
*sb0694*

SENATE BILL 694
Q3 0lr1669
SB 1022/19 – B&T
By: Senator Guzzone
Introduced and read first time: February 3, 2020
Assigned to: Budget and Taxation

A BILL ENTITLED

AN ACT concerning 1

Corporate Income Tax – Single Sales Factor Apportionment Exemption – 2
Worldwide Headquartered Company Election 3

FOR the purpose of altering the number of employees that certain worldwide 4
headquartered companies must employ at a certain location in the State in order to 5
elect to use a certain formula to apportion certain income to the State; providing for 6
the application of this Act; and generally relating to the apportionment formula 7
under the Maryland income tax for corporations. 8

BY repealing and reenacting, with amendments, 9
Article – Tax – General 10
Section 10–402 11
Annotated Code of Maryland 12
(2016 Replacement Volume and 2019 Supplement) 13

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 14
That the Laws of Maryland read as follows: 15

Article – Tax – General 16

10–402. 17

(a) In this section, “worldwide headquartered company” means a corporation 18
included in a group of corporations including a parent corporation that: 19

(1) filed a Form 10–Q with the Securities and Exchange Commission for 20
the quarterly period ending June 30, 2017; 21

(2) has its principal executive office in the State; and 22

2 SENATE BILL 694

(3) (I) employs at all times between July 1, 2017, and June 30, 2020, at 1
least 500 full–time employees at the parent corporation’s principal executive office that is 2
located within the State; OR 3

(II) IF THE PARENT CORPORATION IS A FRANCHISOR, EMPLOYS 4
AT ALL TIMES BETWEEN JULY 1, 2017, AND JUNE 30, 2020, AT LEAST 400 FULL–TIME 5
EMPLOYEES AT THE PARENT CORPORATION’S PRINCIPAL EXECUTIVE OFFICE THAT 6
IS LOCATED WITHIN THE STATE. 7

(b) In computing Maryland taxable income, a corporation shall allocate Maryland 8
modified income derived from or reasonably attributable to its trade or business in this 9
State in the following manner: 10

(1) if a corporation carries on its trade or business wholly within the State, 11
the corporation shall allocate to the State all of the Maryland modified income of the 12
corporation; and 13

(2) if a corporation carries on its trade or business within and outside the 14
State, the corporation shall allocate to the State the part of the corporation’s Maryland 15
modified income that is derived from or reasonably attributable to the part of its trade or 16
business carried on in the State, in the manner required in subsection (c), (d), or (e) of this 17
section. 18

(c) (1) Except as provided in subsection (d) or (e) of this section, the part of the 19
corporation’s Maryland modified income derived from or reasonably attributable to trade 20
or business carried on in the State may be determined by separate accounting if practicable. 21

(2) If in any taxable year a corporation is permitted or required to use the 22
separate accounting method in determining all or a portion of its Maryland taxable income, 23
the portion that is separately accounted for to Maryland shall be taxable whether or not 24
the Maryland modified income of the corporation for the taxable year is zero or less. 25

(d) (1) (i) In this paragraph: 26

1. “manufacturing corporation” means a domestic or foreign 27
corporation which is primarily engaged in activities that, in accordance with the North 28
American Industrial Classification System (NAICS), United States Manual, United States 29
Office of Management and Budget, 1997 Edition, would be included in Sector 11, 31, 32, or 30
33; and 31

2. “manufacturing corporation” does not include a refiner, as 32
defined in § 10–101 of the Business Regulation Article. 33

(ii) If a manufacturing corporation carries on its trade or business 34
within and outside the State and the trade or business is a unitary business, the part of the 35
corporation’s Maryland modified income derived from or reasonably attributable to trade 36

SENATE BILL 694 3

or business carried on in the State shall be determined using a single sales factor 1
apportionment formula, by multiplying its Maryland modified income by 100% of the sales 2
factor. 3

(iii) In filing its tax return for each year, a manufacturing corporation 4
shall certify that the NAICS Code reported on its Maryland return is consistent with that 5
reported to other government agencies. 6

(iv) If the Comptroller determines that a corporation has submitted 7
information that incorrectly classifies the corporation as a manufacturing corporation 8
under subparagraph (i) of this paragraph, the Comptroller shall reclassify the corporation 9
in an appropriate manner. 10

(2) Except as provided in paragraphs (1) and (3) of this subsection: 11

(i) for a taxable year beginning after December 31, 2017, but before 12
January 1, 2019, if the trade or business