Maryland SB 360: Corporate Tax Fairness Act of 2022

Bill Text

EXPLANATION: CAPITALS INDICATE MATTER ADDED TO EXISTING LAW.
[Brackets] indicate matter deleted from existing law.
*sb0360*

SENATE BILL 360
Q3 2lr1260
SB 511/21 – B&T
By: Senators Pinsky, Young, Watson, Jackson, McCray, Lee, Augustine, Smith,
Lam, Kelley, Washington, Rosapepe, Elfreth, and Sydnor
Introduced and read first time: January 21, 2022
Assigned to: Budget and Taxation

A BILL ENTITLED

AN ACT concerning 1

Corporate Tax Fairness Act of 2022 2

FOR the purpose of requiring that certain sales of tangible personal property be included 3
in the numerator of the sales factor used for apportioning a corporation’s income to 4
the State under certain circumstances; requiring certain corporations to compute 5
Maryland taxable income using a certain method; authorizing certain corporations, 6
subject to regulations adopted by the Comptroller, to determine certain income using 7
a certain method; requiring, subject to regulations adopted by the Comptroller, 8
certain groups of corporations to file a combined income tax return reflecting the 9
aggregate income tax liability of all the members of the group; requiring the 10
Comptroller to adopt certain regulations consistent with certain regulations adopted 11
by the Multistate Tax Commission; altering the distribution of certain income tax 12
revenue from corporations; requiring the Comptroller to assess interest and 13
penalties under certain circumstances; and generally relating to the Maryland 14
income tax on corporations. 15

BY repealing and reenacting, with amendments, 16
Article – Tax – General 17
Section 2–613.1, 2–614, 10–402(d), and 10–811 18
Annotated Code of Maryland 19
(2016 Replacement Volume and 2021 Supplement) 20

BY repealing and reenacting, without amendments, 21
Article – Education 22
Section 5–206(b) 23
Annotated Code of Maryland 24
(2018 Replacement Volume and 2021 Supplement) 25

BY repealing and reenacting, with amendments, 26
Article – Education 27

2 SENATE BILL 360

Section 5–206(f) 1
Annotated Code of Maryland 2
(2018 Replacement Volume and 2021 Supplement) 3

BY adding to 4
Article – Tax – General 5
Section 10–402.1 6
Annotated Code of Maryland 7
(2016 Replacement Volume and 2021 Supplement) 8

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 9
That the Laws of Maryland read as follows: 10

Article – Tax – General 11

10–402. 12

(d) (1) (i) In this paragraph: 13

1. “manufacturing corporation” means a domestic or foreign 14
corporation which is primarily engaged in activities that, in accordance with the North 15
American Industrial Classification System (NAICS), United States Manual, United States 16
Office of Management and Budget, 1997 Edition, would be included in Sector 11, 31, 32, or 17
33; and 18

2. “manufacturing corporation” does not include a refiner, as 19
defined in § 10–101 of the Business Regulation Article. 20

(ii) If a manufacturing corporation carries on its trade or business 21
within and outside the State and the trade or business is a unitary business, the part of the 22
corporation’s Maryland modified income derived from or reasonably attributable to trade 23
or business carried on in the State shall be determined using a single sales factor 24
apportionment formula, by multiplying its Maryland modified income by 100% of the sales 25
factor. 26

(iii) In filing its tax return for each year, a manufacturing corporation 27
shall certify that the NAICS Code reported on its Maryland return is consistent with that 28
reported to other government agencies. 29

(iv) If the Comptroller determines that a corporation has submitted 30
information that incorrectly classifies the corporation as a manufacturing corporation 31
under subparagraph (i) of this paragraph, the Comptroller shall reclassify the corporation 32
in an appropriate manner. 33

(2) Except as provided in paragraphs (1) and (3) of this subsection: 34

(i) for a taxable year beginning after December 31, 2017, but before 35

SENATE BILL 360 3

January 1, 2019, if the trade or business is a unitary business, the part of the corporation’s 1
Maryland modified income derived from or reasonably attributable to trade or business 2
carried on in the State shall be determined using a 3–factor apportionment fraction: 3

1. the numerator of which is the sum of the property factor, 4
the payroll factor, and 3 times the sales factor; and 5

2. the denominator of which is 5; 6

(ii) for a taxable year beginning after December 31, 2018, but before 7
January 1, 2020, if the trade or business is a unitary business, the part of the corporation’s 8
Maryland modified income derived from or reasonably attributable to trade or business 9
carried on in the State shall be determined using a 3–factor apportionment fraction: 10

1. the numerator of which is the sum of the property factor, 11
the payroll factor, and 4 times the sales factor; and 12

2. the denominator of which is 6; 13

(iii) for a taxable year beginning after December 31, 2019, but before 14
January