Maryland 2022 Regular Session

Maryland House Bill HB457 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1
2	2
3	3	EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
4	4	[Brackets] indicate matter deleted from existing law.
5	5	hb0457
6	6
7	7	HOUSE BILL 457
8	8	Q3 2lr0337
9	9
10	10	By: Delegates Lehman, Palakovich Carr, R. Lewis, Moon, Ruth, and Stewart
11	11	Introduced and read first time: January 20, 2022
12	12	Assigned to: Ways and Means
13	13
14	14	A BILL ENTITLED
15	15
16	16	AN ACT concerning 1
17	17
18	18	Corporate Income Tax – Throwback Rule and Combined Reporting 2
19	19
20	20	FOR the purpose of requiring that certain sales of tangible personal property be included 3
21	21	in the numerator of the sales factor used for apportioning a corporation’s income to 4
22	22	the State under certain circumstances; requiring certain corporations to compute 5
23	23	Maryland taxable income using a certain method; authorizing certain corporations, 6
24	24	subject to regulations adopted by the Comptroller, to determine certain income using 7
25	25	a certain method; requiring, subject to regulations adopted by the Comptroller, 8
26	26	certain groups of corporations to file a combined income tax return reflecting the 9
27	27	aggregate income tax liability of all the members of the group; requiring the 10
28	28	Comptroller to adopt certain regulations consistent with certain regulations adopted 11
29	29	by the Multistate Tax Commission; providing a subtraction modification under the 12
30	30	Maryland corporate income tax for certain changes to a certain combined group’s 13
31	31	deferred tax assets or liabilities that are the result of certain provisions of this Act; 14
32	32	prohibiting the subtraction from being reduced as a result of an event that occurs 15
33	33	after the calculation of the subtraction; providing, under certain circumstances, for 16
34	34	the carryforward of the subtraction; authorizing the Comptroller to review and alter 17
35	35	the amount of the subtraction specified in the statement or claimed on certain tax 18
36	36	returns; requiring the Comptroller to assess interest and penalties under certain 19
37	37	circumstances; and generally relating to the Maryland income tax on corporations. 20
38	38
39	39	BY repealing and reenacting, with amendments, 21
40	40	Article – Tax – General 22
41	41	Section 10–402(d) and 10–811 23
42	42	Annotated Code of Maryland 24
43	43	(2016 Replacement Volume and 2021 Supplement) 25
44	44
45	45	BY adding to 26
46	46	Article – Tax – General 27
47	47	Section 10–311 and 10–402.1 28
48	48	Annotated Code of Maryland 29 2 HOUSE BILL 457
49	49
50	50
51	51	(2016 Replacement Volume and 2021 Supplement) 1
52	52
53	53	SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 2
54	54	That the Laws of Maryland read as follows: 3
55	55
56	56	Article – Tax – General 4
57	57
58	58	10–402. 5
59	59
60	60	(d) (1) (i) In this paragraph: 6
61	61
62	62	1. “manufacturing corporation” means a domestic or foreign 7
63	63	corporation which is primarily engaged in activities that, in accordance with the North 8
64	64	American Industrial Classification System (NAICS), United States Manual, United States 9
65	65	Office of Management and Budget, 1997 Edition, would be included in Sector 11, 31, 32, or 10
66	66	33; and 11
67	67
68	68	2. “manufacturing corporation” does not include a refiner, as 12
69	69	defined in § 10–101 of the Business Regulation Article. 13
70	70
71	71	(ii) If a manufacturing corporation carries on its trade or business 14
72	72	within and outside the State and the trade or business is a unitary business, the part of the 15
73	73	corporation’s Maryland modified income derived from or reasonably attributable to trade 16
74	74	or business carried on in the State shall be determined using a single sales factor 17
75	75	apportionment formula, by multiplying its Maryland modified income by 100% of the sales 18
76	76	factor. 19
77	77
78	78	(iii) In filing its tax return for each year, a manufacturing corporation 20
79	79	shall certify that the NAICS Code reported on its Maryland return is consistent with that 21
80	80	reported to other government agencies. 22
81	81
82	82	(iv) If the Comptroller determines that a corporation has submitted 23
83	83	information that incorrectly classifies the corporation as a manufacturing corporation 24
84	84	under subparagraph (i) of this paragraph, the Comptroller shall reclassify the corporation 25
85	85	in an appropriate manner. 26
86	86
87	87	(2) Except as provided in paragraphs (1) and (3) of this subsection: 27
88	88
89	89	(i) for a taxable year beginning after December 31, 2017, but before 28
90	90	January 1, 2019, if the trade or business is a unitary business, the part of the corporation’s 29
91	91	Maryland modified income derived from or reasonably attributable to trade or business 30
92	92	carried on in the State shall be determined using a 3–factor apportionment fraction: 31
93	93
94	94	1. the numerator of which is the sum of the property factor, 32
95	95	the payroll factor, and 3 times the sales factor; and 33
96	96
97	97	2. the denominator of which is 5; 34 HOUSE BILL 457 3
98	98
99	99
100	100
101	101	(ii) for a taxable year beginning after December 31, 2018, but before 1
102	102	January 1, 2020, if the trade or business is a unitary business, the part of the corporation’s 2
103	103	Maryland modified income derived from or reasonably attributable to trade or business 3
104	104	carried on in the State shall be determined using a 3–factor apportionment fraction: 4
105	105
106	106	1. the numerator of which is the sum of the property factor, 5
107	107	the payroll factor, and 4 times the sales factor; and 6
108	108
109	109	2. the denominator of which is 6; 7
110	110
111	111	(iii) for a taxable year beginning after December 31, 2019, but before 8
112	112	January 1, 2021, if the trade or business is a unitary business, the part of the corporation’s 9
113	113	Maryland modified income derived from or reasonably attributable to trade or business 10
114	114	carried on in the State shall be determined using a 3–factor apportionment fraction: 11
115	115
116	116	1. the numerator of which is the sum of the property factor, 12
117	117	the payroll factor, and 5 times the sales factor; and 13
118	118
119	119	2. the denominator of which is 7; 14
120	120
121	121	(iv) for a taxable year beginning after December 31, 2020, but before 15
122	122	January 1, 2022, if the trade or business is a unitary business, the part of the corporation’s 16
123	123	Maryland modified income derived from or reasonably attributable to trade or business 17
124	124	carried on in the State shall be determined using a 3–factor apportionment fraction: 18
125	125
126	126	1. the numerator of which is the sum of the property factor, 19
127	127	the payroll factor, and 6 times the sales factor; and 20
128	128
129	129	2. the denominator of which is 8; and 21
130	130
131	131	(v) for a taxable year beginning after December 31, 2021, if the trade 22
132	132	or business is a unitary business, the part of the corporation’s Maryland modified income 23
133	133	derived from or reasonably attributable to trade or business carried on in the State shall 24
134	134	be determined using a single sales factor apportionment formula, by multiplying its 25
135	135	Maryland modified income by 100% of the sales factor. 26
136	136
137	137	(3) (i) Each year a worldwide headquartered company that filed a 27
138	138	federal corporate income tax return for the taxable year may elect to calculate its Maryland 28
139	139	modified income derived from or reasonably attributable to trade or business carried on in 29
140	140	the State using a 3–factor apportionment fraction: 30
141	141
142	142	1. the numerator of which is the sum of the property factor, 31
143	143	the payroll factor, and twice the sales factor; and 32
144	144
145	145	2. the denominator of which is 4. 33
146	146	4 HOUSE BILL 457
147	147
148	148
149	149	(ii) To determine under subparagraph (i) of this paragraph the 1
150	150	Maryland modified income of a corporation or group of corporations that is a worldwide 2
151	151	headquartered company that filed a federal corporate income tax return for the taxable 3
152	152	year, gross income from intangible investments, including dividends, interest, royalties, 4
153	153	and capital gains from the sale of intangible property, shall be included in the calculation 5
154	154	of the numerator based on the average of the property and payroll factors. 6
155	155
156	156	(4) The property factor under paragraphs (2) and (3) of this subsection shall 7
157	157	include: 8
158	158
159	159	(i) rented and owned real property; and 9
160	160
161	161	(ii) tangible personal property located in the State and used in the 10
162	162	trade or business. 11
163	163
164	164	(5) (I) SALES OF TANGIBLE PER SONAL PROPERTY SHALL BE 12
165	165	INCLUDED IN THE NUME RATOR OF THE SALES F ACTOR UNDER PARAGRAP H (1), (2), 13
166	166	OR (3) OF THIS SUBSECTION IF: 14
167	167
168	168	1. THE PROPERTY IS DELI VERED OR SHIPPED TO A 15
169	169	PURCHASER WITHIN THE STATE, REGARDLESS OF THE FR EE ON BOARD (F.O.B.) 16
170	170	POINT OR OTHER CONDI TIONS OF THE SALE ; OR 17
171	171
172	172	2. THE PROPERTY IS SHIP PED FROM AN OFFICE , A 18
173	173	STORE, A WAREHOUSE , A FACTORY, OR ANY OTHER PLACE O F STORAGE IN THE 19
174	174	STATE AND THE CORPORA TION IS NOT TAXABLE IN THE STATE OF THE PURCHASER . 20
175	175
176	176	(II) FOR PURPOSES OF SUBPA RAGRAPH (I) OF THIS 21
177	177	PARAGRAPH , A CORPORATION IS TAX ABLE IN A STATE IF: 22
178	178
179	179	1. IN THAT STATE THE CO RPORATION IS SUBJE CT TO A 23
180	180	NET INCOME TAX , FRANCHISE TAX MEASUR ED BY NET INCOME , FRANCHISE TAX FOR 24
181	181	THE PRIVILEGE OF DOI NG BUSINESS, OR CORPORATE STOCK T AX; OR 25
182	182
183	183	2. THAT STATE HAS JURIS DICTION TO SUBJECT T HE 26
184	184	TAXPAYER TO A NET IN COME TAX, REGARDLESS OF WHETHE R, IN FACT, THE STATE 27
185	185	IMPOSES A TAX. 28
186	186
187	187	SECTION 2. AND BE IT FURTHER ENACTED, That the Laws of Maryland read 29
188	188	as follows: 30
189	189
190	190	Article – Tax – General 31
191	191
192	192	10–311. 32
193	193	HOUSE BILL 457 5
194	194
195	195
196	196	(A) (1) IN THIS SECTION THE F OLLOWING WORDS HAVE THE MEANINGS 1
197	197	INDICATED. 2
198	198
199	199	(2) “COMBINED GROUP ” HAS THE MEANING STATED IN § 10–402.1 OF 3
200	200	THIS TITLE. 4
201	201
202	202	(3) “NET DEFERRED TAX ASSE T” MEANS THE AMOUNT BY WHICH THE 5
203	203	DEFERRED TAX ASSETS EXCEED THE DEFERRED TAX LIABILITIES OF A COMBINED 6
204	204	GROUP, COMPUTED IN ACCORDAN CE WITH GENERALLY AC CEPTED ACCOUNTING 7
205	205	PRINCIPLES. 8
206	206
207	207	(4) “NET DEFERRED TAX LIABILI TY” MEANS THE AMOUNT BY WHICH 9
208	208	THE DEFERRED TAX LAB ILITIES EXCEED THE D EFERRED TAX ASSETS O F A 10
209	209	COMBINED GROUP , COMPUTED IN ACCORDAN CE WITH GENERALLY AC CEPTED 11
210	210	ACCOUNTING PRINCIPLE S. 12
211	211
212	212	(B) THIS SECTION APPLIES ONLY TO A COMBINED G ROUP THA T ON OR 13
213	213	BEFORE THE DATE OF E NACTMENT OF THE PROV ISIONS OF § 10–402.1 OF THIS TITLE 14
214	214	BY CHAPTER _____ (H.B. _____) (2LR0337) OF THE ACTS OF THE GENERAL 15
215	215	ASSEMBLY OF 2022, THE MEMBERS OF WHICH WERE: 16
216	216
217	217	(1) PUBLICLY TRADED ; OR 17
218	218
219	219	(2) AFFILIATED WITH A CO MBINED GROUP THAT WAS PUBLI CLY 18
220	220	TRADED, AND PARTICIPATED IN THE FILING OF THE PU BLICLY TRADED 19
221	221	CORPORATION ’S FINANCIAL STATEMEN TS PREPARED IN ACCOR DANCE WITH 20
222	222	GENERALLY ACCEPTED A CCOUNTING PRINCIPLES . 21
223	223
224	224	(C) (1) SUBJECT TO PARAGRAPH (2) OF THIS SUBSECTION , IN ADDITION 22
225	225	TO THE MODIFICATIONS UNDER §§ 10–307 AND 10–308 OF THIS SUBTITLE , THE 23
226	226	AMOUNTS DETERMINED U NDER SUBSECTION (D) OF THIS SECTION ARE 24
227	227	SUBTRACTED FROM THE FEDERAL TAXABLE INCO ME OF A COMBINED GRO UP TO 25
228	228	DETERMINE MARYLAND MODIFIED INC OME OF THE COMBINED GROUP IF, AS OF THE 26
229	229	DATE OF ENACTMENT OF § 10–402.1 OF THIS TITLE BY CHAPTER _____ (H.B. _____) 27
230	230	(2LR0337) OF THE ACTS OF THE GENERAL ASSEMBLY OF 2022, THE ENACTMENT 28
231	231	RESULTED IN AN AGGRE GATE: 29
232	232
233	233	(I) INCREASE TO THE COMB INED GROUP’S NET DEFERRED TAX 30
234	234	LIABILITY; 31
235	235
236	236	(II) DECREASE TO THE COMB INED GROUP’S NET DEFERRED TAX 32
237	237	ASSET; OR 33
238	238
239	239	(III) CHANGE FROM A NET DE FERRED TAX ASSET TO A NET 34 6 HOUSE BILL 457
240	240
241	241
242	242	DEFERRED TAX LIABILI TY. 1
243	243
244	244	(2) THE AMOUNT OF ANY INC REASE, DECREASE, OR CHANGE SHALL 2
245	245	BE DETERMINED WITHOU T REGARD TO THE SUBT RACTION AUTHORIZED UNDER 3
246	246	THIS SECTION. 4
247	247
248	248	(D) (1) SUBJECT TO PARAGRAPHS (2) AND (3) OF THIS SUBSECTION , THE 5
249	249	SUBTRACTION AUTHORIZ ED UNDER THIS SECTIO N IS EQUAL TO ONE–TENTH OF THE 6
250	250	AMOUNT NECESSARY TO OFFSET THE AGGREGATE : 7
251	251
252	252	(I) INCREASE TO THE COMB INED GROUP’S NET DEFERRED TAX 8
253	253	LIABILITY; 9
254	254
255	255	(II) DECREASE TO THE COMB INED GROUP’S NET DEFERRED TAX 10
256	256	ASSET; OR 11
257	257
258	258	(III) CHANGE FROM A NET DE FERRED TAX ASSET TO A NET 12
259	259	DEFERRED TAX LIABILI TY. 13
260	260
261	261	(2) THE AMOUNT OF THE SUB TRACTION AS DETERMIN ED UNDER 14
262	262	PARAGRAPH (1) OF THIS SUBSECTION SHALL BE : 15
263	263
264	264	(I) DIVIDED BY THE RATE DETERMINED UNDER § 10–105(B) OF 16
265	265	THIS TITLE IN EFFECT ON JANUARY 1, 2024; AND 17
266	266
267	267	(II) FURTHER DIVIDED BY T HE MARYLAND APPORTIONMEN T 18
268	268	FRACTION THAT WAS US ED BY THE COMBINED G ROUP IN THE CALCULAT ION OF THE 19
269	269	DEFERRED TAX ASSETS AND DEFER RED TAX LIABILITIES AS DESCRIBED IN 20
270	270	PARAGRAPH (1) OF THIS SUBSECTION . 21
271	271
272	272	(3) THE SUBTRACTION AUTHO RIZED UNDER THIS SEC TION MAY BE 22
273	273	USED TO REDUCE THE C OMBINED GROUP ’S MARYLAND MODIFIED INC OME FOR 10 23
274	274	CONSECUTIVE TAXABLE YEARS BEGINNING WITH THE FIRST TAXABLE YE AR THAT 24
275	275	BEGINS AFTER DECEMBER 31, 2028. 25
276	276
277	277	(4) THE SUBTRACTION CALCU LATED UNDER THIS SECTION M AY NOT 26
278	278	BE REDUCED AS A RESU LT OF ANY EVENT THAT OCCURS AFTER THE CAL CULATION, 27
279	279	INCLUDING THE DISPOS ITION OR ABANDONMENT OF ANY ASSET. 28
280	280
281	281	(5) THE SUBTRACTION AUTHO RIZED UNDER THIS SEC TION: 29
282	282
283	283	(I) SHALL BE CALCULATED WITHOUT REGARD TO TH E FEDERAL 30
284	284	TAX EFFECT; AND 31
285	285	HOUSE BILL 457 7
286	286
287	287
288	288	(II) MAY NOT ALTER THE TA X BASIS OF ANY ASSET . 1
289	289
290	290	(6) IF THE SUBTRACTION DE TERMINED UNDER THIS SECTION 2
291	291	RESULTS IN A SUBTRAC TION THAT EXCEEDS MARYLAND MODIFIED INC OME 3
292	292	COMPUTED WITHOUT REG ARD TO THE SUBTRACTI ON UNDER THIS SECTIO N, THE 4
293	293	AMOUNT OF THE EXCESS MAY BE CARRIED FORWA RD TO SUCCEEDING TAX ABLE 5
294	294	YEARS AND USED TO RE DUCE MARYLAND MODIFIED INC OME IN EACH SUCCEEDI NG 6
295	295	TAXABLE YEAR UNTIL T HE EXCESS IS FULLY U SED. 7
296	296
297	297	(E) (1) ON OR BEFORE JULY 1, 2025, A COMBINED GROUP THA T INTENDS 8
298	298	TO CLAIM A SUBTRACTION UNDER THIS SECTION S HALL FILE WITH THE 9
299	299	COMPTROLLER A STATEMENT THAT SPE CIFIES THE TOTAL AMO UNT OF THE 10
300	300	SUBTRACTION THAT THE COMBINED GROUP INTEN DS TO CLAIM. 11
301	301
302	302	(2) THE STATEMENT SHALL B E ON THE FORM AND CO NTAIN THE 12
303	303	INFORMATION THE COMPTROLLER REQUIRES . 13
304	304
305	305	(3) THE COMPTROLLER MAY REVIE W AND ALTER THE AMOU NT OF: 14
306	306
307	307	(I) THE SUBTRACTION SPEC IFIED IN THE STATEME NT 15
308	308	REQUIRED UNDER PARAG RAPH (1) OF THIS SUBSECTION ; OR 16
309	309
310	310	(II) THE SUBTRACTION CLAI MED ON A TAX RETURN FOR ANY 17
311	311	TAXABLE YEAR . 18
312	312
313	313	10–402.1. 19
314	314
315	315	(A) (1) IN THIS SECTION THE F OLLOWING WORDS HAVE THE MEANINGS 20
316	316	INDICATED. 21
317	317
318	318	(2) “COMBINED GROUP ” MEANS A GROUP OF COR PORATIONS: 22
319	319
320	320	(I) THAT IS ENGAGED IN A UNITARY BUSINESS ; 23
321	321
322	322	(II) IN WHICH MORE THAN 50% OF THE VOTING STOCK OF EACH 24
323	323	MEMBER IS DIRECTLY OR INDIRECT LY OWNED BY: 25
324	324
325	325	1. A COMMON OWNER OR CO MMON OWNERS , EITHER 26
326	326	CORPORATE OR NONCORP ORATE; OR 27
327	327
328	328	2. ONE OR MORE MEMBER C ORPORATIONS OF THE 28
329	329	GROUP; 29
330	330
331	331	(III) THE MEMBERS OF WHICH ARE SUBJECT TO THE I NCOME TAX 30 8 HOUSE BILL 457
332	332
333	333
334	334	OR WOULD BE SUBJECT TO THE INCOME TAX IF DOING BUS INESS IN THE STATE; AND 1
335	335
336	336	(IV) CONSISTING OF ANY OT HER MEMBERS UNDER TH E 2
337	337	CIRCUMSTANCES AND TO THE EXTENT PROVIDED IN REGULATIONS ADOPT ED BY 3
338	338	THE COMPTROLLER TO PREVEN T THE AVOIDANCE OF T AX OR TO REFLECT CLE ARLY 4
339	339	THE INCOME OF ANY ME MBER OF THE COMBINED GROU P FOR ANY PERIOD . 5
340	340
341	341	(3) “COMBINED RETURN ” MEANS A TAX RETURN F OR THE COMBINED 6
342	342	GROUP CONTAINING INF ORMATION AS PROVIDED IN THIS SECTION OR O THERWISE 7
343	343	REQUIRED BY THE COMPTROLLER . 8
344	344
345	345	(4) “UNITARY BUSINESS ” MEANS A SINGLE ECONO MIC ENTERPR ISE 9
346	346	THAT IS MADE EITHER OF SEPARATE PARTS OF A SINGLE BUSINESS EN TITY OR OF A 10
347	347	COMMONLY CONTROLLED GROUP OF BUSINESS EN TITIES THAT ARE SUFF ICIENTLY 11
348	348	INTERDEPENDENT , INTEGRATED, AND INTERRELATED THR OUGH THEIR ACTIVITIE S 12
349	349	SO AS TO PROVIDE MUT UAL BENEFIT THAT PR ODUCES A SHARING OR EXCHANGE OF 13
350	350	VALUE AMONG THEM AND A SIGNIFICANT FLOW O F VALUE TO THE SEPAR ATE PARTS. 14
351	351
352	352	(B) (1) THE TERM “UNITARY BUSINESS ” SHALL BE CONSTRUED T O THE 15
353	353	BROADEST EXTENT ALLO WED UNDER THE U.S. CONSTITUTION. 16
354	354
355	355	(2) A BUSINESS CONDUCTED D IRECTLY OR INDIRECTLY BY O NE 17
356	356	CORPORATION IS A UNI TARY BUSINESS WITH R ESPECT TO THAT PORTI ON OF A 18
357	357	BUSINESS CONDUCTED B Y ANOTHER CORPORATIO N THROUGH ITS DIRECT OR 19
358	358	INDIRECT INTEREST IN A PARTNERSHIP IF THE REQUIREMENTS OF SUBS ECTION 20
359	359	(A)(4) OF THIS SECTION ARE SATISFIED, INCLUDING IF THERE I S SYNERGY AND AN 21
360	360	EXCHANGE AND FLOW OF VALUE BETWEEN THE TW O PARTS OF THE BUSIN ESS AND 22
361	361	THE TWO CORPORATIONS ARE MEMBERS OF THE S AME COMMONLY CONTROL LED 23
362	362	GROUP. 24
363	363
364	364	(3) A BUSINESS CONDUCTED B Y A PARTNERSHIP SHAL L BE TREATED 25
365	365	AS CONDUCT ED BY ITS PARTNERS , WHETHER DIRECTLY HEL D OR INDIRECTLY HELD 26
366	366	THROUGH A SERIES OF PARTNERSHIPS , TO THE EXTENT OF THE PARTNER’S 27
367	367	DISTRIBUTIVE SHARE O F THE PARTNERSHIP ’S INCOME, REGARDLESS OF THE 28
368	368	PERCENTAGE OF THE PA RTNER’S OWNERSHIP INTEREST OR ITS DISTRIBUTI VE OR 29
369	369	ANY OTHER SHARE OF P ARTNERSHIP INCOME . 30
370	370
371	371	(C) (1) EXCEPT AS PROVIDED BY AND SUBJECT TO REGUL ATIONS 31
372	372	ADOPTED BY THE COMPTROLLER , FOR ALL TAXABLE YEAR S BEGINNING AFTER 32
373	373	DECEMBER 31, 2023, A CORPORATION ENGAGE D IN A UNITARY BUSIN ESS SHALL 33
374	374	FILE A COMBINED R ETURN, REPORTING AND PAYING TAX ON WORLDWIDE TAX ABLE 34
375	375	INCOME AS A COMBINED GROUP, REFLECTING THE AGGRE GATE INCOME TAX 35
376	376	LIABILITY OF ALL MEM BERS OF THE COMBINED GROUP THAT ARE ENGAG ED IN A 36
377	377	UNITARY BUSINESS . 37 HOUSE BILL 457 9
378	378
379	379
380	380
381	381	(2) THE TAXABLE INCOME OF A CORPORATION REQUIR ED TO FILE 1
382	382	UNDER § 10–811(A)(2) OF THIS TITLE IS EQU AL TO THE COMBINED G ROUP’S 2
383	383	MARYLAND MODIFIED INC OME AS ADJUSTED UNDE R SUBSECTION (D)(3) OF THIS 3
384	384	SECTION. 4
385	385
386	386	(D) (1) THE MARYLAND MODIFIED INC OME OF THE COMBINED GROUP 5
387	387	EQUALS THE PRODUCT O F: 6
388	388
389	389	(I) THE COMBINED GROUP ’S APPORTIONABLE MARYLAND 7
390	390	MODIFIED INCOME , AS DETERMINED UNDER PARAGRAPH (2) OF THIS SUBSECTION 8
391	391	AND ADJUSTED UNDER P ARAGRAPH (3) OF THIS SUBSECTION ; AND 9
392	392
393	393	(II) THE COMBINED GROUP ’S MARYLAND APPORTIONMEN T 10
394	394	FACTOR, AS DETERMINED UNDER PARAGRAP H (4) OF THIS SUBSECTION . 11
395	395
396	396	(2) (I) SUBJECT TO SUBPARAGRA PHS (II) THROUGH (IV) OF THIS 12
397	397	PARAGRAPH , THE APPORTIONABLE MARYLAND MODIFIED INC OME OF THE 13
398	398	COMBINED GROUP EQUAL S THE SUM OF THE COR PORATION’S AND EACH MEMBER ’S 14
399	399	MARYLAND MODIFIED INC OME. 15
400	400
401	401	(II) 1. SUBJECT TO SUBSUBPARA GRAPH 2 OF THIS 16
402	402	SUBPARAGRAPH , FOR ANY MEMBER INCOR PORATED IN THE UNITED STATES OR 17
403	403	INCLUDED IN A CONSOL IDATED FEDERAL CORPO RATE INCOME TAX RETU RN, THE 18
404	404	INCOME TO BE INCLUDE D IN THE TOTAL APPOR TIONABLE INCOME OF T HE 19
405	405	COMBINED GROUP IS TH E MARYLAND MODIFIED INC OME AS CALCULATED UN DER § 20
406	406	10–304 OF THIS TITLE. 21
407	407
408	408	2. THE INCOME OF EACH ME MBER SHALL BE 22
409	409	CALCULATED ON A SEPA RATE RETURN BASIS AS IF THE MEMBER WERE N OT 23
410	410	CONSOLIDATED FOR FED ERAL INCOME TAX PURP OSES. 24
411	411
412	412	(III) 1. FOR ANY MEMBER NOT IN CLUDED UNDER 25
413	413	SUBPARAGRAPH (II) OF THIS PARAGRAPH , THE INCOME TO BE INC LUDED IN THE 26
414	414	TOTAL INCOME OF THE COMBINED GROUP IS DE TERMINED AS PROVIDED UNDER 27
415	415	THIS SUBPARAGRAPH . 28
416	416
417	417	2. A PROFIT AND LOSS STAT EMENT SHALL BE PREPA RED 29
418	418	FOR EACH FOREIGN BRA NCH OR CORPOR ATION IN THE CURRENC Y IN WHICH THE 30
419	419	BOOKS OF ACCOUNT OF THE BRANCH OR CORPOR ATION ARE REGULARLY 31
420	420	MAINTAINED. 32
421	421
422	422	3. THE PROFIT AND LOSS S TATEMENT SHALL BE 33
423	423	ADJUSTED TO CONFORM TO GENERALLY ACCEPTE D ACCOUNTING PRINCIP LES AS 34 10 HOUSE BILL 457
424	424
425	425
426	426	ADOPTED BY THE UNITED STATES FINANCIAL ACCOUNTING STANDARDS BOARD 1
427	427	FOR THE PREPARATION OF THE PROFIT AND LO SS STATEMENTS , EXCEPT AS 2
428	428	MODIFIED BY REGULATI ON. 3
429	429
430	430	4. EXCEPT AS OTHERWISE P ROVIDED BY REGULATIO N, 4
431	431	THE PROFIT AND LOSS STATEMENT OF EACH ME MBER OF THE COMBINED GROUP, 5
432	432	AND THE APPORTIONMENT FACTOR S RELATED TO EACH ST ATEMENT, WHETHER 6
433	433	UNITED STATES OR FOREIGN , SHALL BE TRANSLATED INTO THE CURRENCY IN 7
434	434	WHICH THE PARENT COM PANY MAINTAINS ITS B OOKS AND RECORDS . 8
435	435
436	436	5. INCOME APPORTIONED TO THIS STATE SHALL BE 9
437	437	EXPRESSED IN UNITED STATES DOLLARS. 10
438	438
439	439	(IV) IF A UNITARY BUSINESS INCLUDES INCOME FROM A 11
440	440	PARTNERSHIP , THE INCOME TO BE INC LUDED IN THE TOTAL I NCOME OF THE 12
441	441	COMBINED GROUP EQUAL S THE DIRECT AND IND IRECT DISTRIBUTIVE S HARE OF 13
442	442	THE PARTNERSHIP ’S UNITARY BUSINESS I NCOME ALLOCATED TO A NY MEMBER OF 14
443	443	THE COMBINED GROUP . 15
444	444
445	445	(3) THE COMBINED GROUP ’S APPORTIONABLE MARYLAND MODIFIED 16
446	446	INCOME SHALL BE ADJU STED TO ELIMINATE IN TERCOMPANY TRANSACTI ONS AS 17
447	447	DETERMINED UNDER THE INTERNAL REVENUE CODE. 18
448	448
449	449	(4) (I) SUBJECT TO SUBPARAGRA PH (II) OF THIS PARAGRAPH , THE 19
450	450	COMBINED GROUP ’S MARYLAND APPORTIONMEN T FACTOR IS A FRACTI ON: 20
451	451
452	452	1. THE NUMERATOR OF WHI CH IS THE SUM OF THE 21
453	453	CORPORATION ’S AND EACH MEMBER ’S MARYLAND FACTORS UNDE R § 10–402 OF 22
454	454	THIS SUBTITLE; AND 23
455	455
456	456	2. THE DENOMINATOR OF W HICH IS THE SUM OF THE 24
457	457	CORPORATION ’S AND EACH MEMBER ’S FACTORS UNDER § 10–402 OF THIS SUBTITLE. 25
458	458
459	459	(II) THE APPORTIONMENT FAC TORS OF PASS –THROUGH 26
460	460	ENTITY MEMBERS ARE I NCLUDED IN THE NUMER ATOR UNDER SUBPARAGR APH (I)1 27
461	461	OF THIS PARAGRAPH AN D THE DENOMINATOR UN DER SUBPARAGRAPH (I)2 OF THIS 28
462	462	PARAGRAPH TO THE EXT ENT OF THE CORPORATI ON’S DIRECT AND INDIREC T 29
463	463	DISTRIBUTIVE SHARE O F THAT ENTITY. 30
464	464
465	465	(E) (1) SUBJECT TO REGULATION S ADOPTED BY THE COMPTROLLER , A 31
466	466	CORPORATION THAT IS PART OF A COMBINED GROUP MAY ELECT TO DETERMINE ITS 32
467	467	INCOME DERIVED FROM OR ATTR IBUTABLE TO TRADE OR BUSINESS IN THE STATE 33
468	468	USING THE WATER ’S EDGE METHOD AS DES CRIBED IN THIS SUBSE CTION. 34
469	469	HOUSE BILL 457 11
470	470
471	471
472	472	(2) UNDER THE WATER ’S EDGE METHOD , THE COMBINED GROUP FOR 1
473	473	PURPOSES OF THE COMB INED REPORTING METHO D REQUIRED UNDER THI S 2
474	474	SECTION SHALL INCLUDE ONLY T HE FOLLOWING AFFILIA TED ENTITIES: 3
475	475
476	476	(I) CORPORATIONS THAT AR E INCORPORATED IN TH E UNITED 4
477	477	STATES, EXCLUDING CORPORATIO NS MAKING AN ELECTIO N UNDER §§ 931 5
478	478	THROUGH 934 OF THE INTERNAL REVENUE CODE; 6
479	479
480	480	(II) DOMESTIC INTERNATION AL SALES CORPORATIONS , AS 7
481	481	DESCRIBED IN §§ 991 THROUGH 994 OF THE INTERNAL REVENUE CODE; 8
482	482
483	483	(III) ANY CORPORATION OTHE R THAN A BANK , REGARDLESS OF 9
484	484	THE PLACE WHERE IT I S INCORPORATED , IF THE AVERAGE OF TH E CORPORATION ’S 10
485	485	PROPERTY, PAYROLL, AND SALES FACTORS WI THIN THE UNITED STATES IS 20% OR 11
486	486	MORE; 12
487	487
488	488	(IV) EXPORT TRADE CORPORA TIONS, AS DESCRIBED IN §§ 970 13
489	489	AND 971 OF THE INTERNAL REVENUE CODE; 14
490	490
491	491	(V) A FOREIGN CORPORATIO N DERIVING GAIN OR L OSS FROM 15
492	492	DISPOSITION OF AN IN TEREST IN REAL PROPE RTY IN THE UNITED STATES TO THE 16
493	493	EXTENT RECOGNIZED UN DER § 897 OF THE INTERNAL REVENUE CODE; AND 17
494	494
495	495	(VI) UNDER THE CIRCUMSTAN CES AND TO THE EXTEN T 18
496	496	PROVIDED BY REGULATI ONS THAT THE COMPTROLLER ADOPTS : 19
497	497
498	498	1. A CORPORATION NOT DE SCRIBED IN ITEMS (I) 20
499	499	THROUGH (V) OF THIS PARAGRAPH TO THE EXTENT OF THE CORPOR ATION’S INCOME 21
500	500	DERIVED FROM OR ATTR IBUTABLE TO SOURCES WITHIN THE UNITED STATES AND 22
501	501	THE CORPORATION ’S FACTORS ASSIGNABLE TO A LOCATION WITHIN THE UNITED 23
502	502	STATES; OR 24
503	503
504	504	2. AN AFFILIATED CORPOR ATION THAT IS A 25
505	505	CONTROLLED FOREIGN C ORPORATION, AS DEFINED IN § 957 OF THE INTERNAL 26
506	506	REVENUE CODE. 27
507	507
508	508	(3) THE USE OF THE WATER ’S EDGE METHOD IS SUB JECT TO THE 28
509	509	TERMS AND CONDITIONS THAT THE COMPTROLLER REQUIRES BY REGULATION , 29
510	510	INCLUDING ANY CONDIT IONS THAT ARE NECESS ARY OR APPROPRIATE T O PREVENT 30
511	511	THE AVOIDANCE OF TAX OR TO REFLECT CLEARLY T HE INCOME FOR ANY PE RIOD. 31
512	512
513	513	(F) (1) (I) AN ELECTION TO USE TH E WATER’S EDGE METHOD IN 32
514	514	ACCORDANCE WITH SUBS ECTION (E) OF THIS SECTION IS E FFECTIVE ONLY IF MAD E 33
515	515	ON A TIMELY FILED OR IGINAL RETURN FOR A TAX YEAR BY EVERY MEMBER OF THE 34 12 HOUSE BILL 457
516	516
517	517
518	518	UNITARY BUSINESS . 1
519	519
520	520	(II) THE COMPTROLLER SHALL DEV ELOP REGULATIONS 2
521	521	GOVERNING THE IMPACT , IF ANY, ON THE SCOPE OR APPL ICATION OF AN ELECTI ON 3
522	522	TO USE THE WATER ’S EDGE METHOD , INCLUDING TERMINATIO N OR DEEMED 4
523	523	ELECTION, RESULTING FROM A CHA NGE IN THE COMPOSITION OF THE UNITARY 5
524	524	BUSINESS, THE COMBINED GROUP , THE TAXPAYER MEMBERS , OR ANY OTHER 6
525	525	SIMILAR CHANGE . 7
526	526
527	527	(2) AN ELECTION TO USE TH E WATER’S EDGE METHOD SHALL 8
528	528	CONSTITUTE CONSENT T O THE REASONABLE PRO DUCTION OF DOCUMENTS AND 9
529	529	TAKING OF DEPOSITION S IN ACCORDANCE WITH T HE MARYLAND RULES. 10
530	530
531	531	(3) AT THE DISCRETION OF THE COMPTROLLER , AN ELECTION TO 11
532	532	USE THE WATER ’S EDGE METHOD MAY BE DISREGARDED IN PART OR IN WHOLE, AND 12
533	533	THE INCOME AND APPOR TIONMENT FACTORS OF ANY MEMBER OF THE TA XPAYER’S 13
534	534	UNITARY GROUP M AY BE INCLUDED IN TH E COMBINED REPORT WI THOUT REGARD 14
535	535	TO THE PROVISIONS OF THIS SECTION, IF ANY MEMBER OF THE UNITARY GROUP 15
536	536	FAILS TO COMPLY WITH ANY PROVISION OF THI S SECTION OR IF A PE RSON 16
537	537	OTHERWISE NOT INCLUD ED IN THE WATER ’S EDGE COMBINED GROU P WAS AVAILED 17
538	538	OF A SUBSTANTIAL OBJ ECTIVE OF AVOIDING STATE INCOME TAX . 18
539	539
540	540	(4) (I) SUBJECT TO SUBPARAGRA PHS (II) THROUGH (IV) OF THIS 19
541	541	PARAGRAPH , AN ELECTION TO USE T HE WATER’S EDGE METHOD IS BIN DING FOR 20
542	542	AND APPLICABLE TO TH E TAXABLE YEAR IN WH ICH THE ELECTION IS MADE AND ALL 21
543	543	TAXABLE YEARS THEREA FTER FOR A PERIOD OF 10 YEARS. 22
544	544
545	545	(II) AN ELECTION TO USE TH E WATER’S EDGE METHOD MAY BE 23
546	546	WITHDRAWN OR REINSTI TUTED AFTER WITHDRAW AL, BEFORE THE EXPIRATIO N OF 24
547	547	THE 10–YEAR PERIOD, ONLY ON WRITTEN REQU EST FOR REASONABLE C AUSE AND 25
548	548	ONLY WITH THE WRITTE N PERMISSION OF THE COMPTROLLER . 26
549	549
550	550	(III) IF THE COMPTROLLER GRANTS A WITHDRAWAL OF THE 27
551	551	ELECTION UNDER SUBPA RAGRAPH (II) OF THIS PARAGRAPH , THE COMPTROLLER 28
552	552	SHALL IMPOSE REASONA BLE CONDITIONS AS NE CESSARY TO PREVENT T HE EVASION 29
553	553	OF TAX OR TO CLEARLY REFLECT INCOME FOR THE ELECT ION PERIOD BEFORE OR 30
554	554	AFTER THE WITHDRAWAL . 31
555	555
556	556	(IV) 1. SUBJECT TO SUBSUBPARA GRAPH 2 OF THIS 32
557	557	SUBPARAGRAPH , ON THE EXPIRATION OF THE 10–YEAR PERIOD, A TAXPAYER MAY 33
558	558	WITHDRAW FROM THE EL ECTION TO USE THE WA TER’S EDGE METHOD. 34
559	559
560	560	2. THE WITHDRAWAL SHALL BE MADE IN WRITING 35
561	561	WITHIN 1 YEAR BEFORE THE EXPI RATION OF THE ELECTI ON AND IS BINDING FO R A 36 HOUSE BILL 457 13
562	562
563	563
564	564	PERIOD OF 10 YEARS, SUBJECT TO THE SAME CONDITIONS AS APPLIE D TO THE 1
565	565	ORIGINAL ELECTION . 2
566	566
567	567	3. IF NO WITHDRAWAL IS P ROPERLY MADE UNDER THIS 3
568	568	SUBPARAGRAPH , THE ELECTION TO USE THE WATER ’S EDGE METHOD SHALL 4
569	569	REMAIN IN EFFECT FOR AN ADDITIONAL 10–YEAR PERIOD, SUBJECT TO THE SAME 5
570	570	CONDITIONS AS APPLIE D TO THE ORIGINAL EL ECTION. 6
571	571
572	572	(G) (1) THE COMPTROLLER SHALL ADO PT REGULATIONS THAT ARE 7
573	573	NECESSARY AND APPROPRI ATE TO CARRY OUT THI S SECTION. 8
574	574
575	575	(2) THE REGULATIONS ADOPT ED BY THE COMPTROLLER SHALL BE 9
576	576	CONSISTENT WITH THE “PRINCIPLES FOR DETERMINING THE EXISTENCE OF A 10
577	577	UNITARY BUSINESS” (REG. IV.1.(B)) OF THE MODEL GENERAL ALLOCATION AND 11
578	578	APPORTIONMENT REGULATIONS, AS ADOPTED BY THE MULTISTATE TAX 12
579	579	COMMISSION. 13
580	580
581	581	10–811. 14
582	582
583	583	(A) (1) [Each member of] EXCEPT AS PROVIDED BY AND SUBJECT TO 15
584	584	REGULATIONS ADOPTED BY THE COMPTROLLER , an affiliated group of corporations 16
585	585	[shall file a separate income tax return] ENGAGED IN A UNITARY BUSINESS SHALL FILE 17
586	586	A COMBINED INCOME TA X RETURN REFLECTING THE AGGREGATE INCOME TAX 18
587	587	LIABILITY OF ALL THE MEMBERS OF THE AFFIL IATED GROUP THAT ARE ENGAGED IN 19
588	588	A UNITARY BUSINESS . 20
589	589
590	590	(2) THE RETURN REQUIRED U NDER PARAGRAPH (1) OF THIS 21
591	591	SUBSECTION SHALL INCLU DE THE INCOME AND AP PORTIONMENT FACTORS 22
592	592	DETERMINED UNDER § 10–402.1(D) AND (E) OF THIS TITLE, AND ANY OTHER 23
593	593	INFORMATION REQUIRED BY THE COMPTROLLER , FOR ALL MEMBERS OF T HE 24
594	594	COMBINED GROUP WHERE VER LOCATED OR DOING BUSINESS. 25
595	595
596	596	(3) (I) EXCEPT AS PROVIDED IN SUBPARAGRAPH (II) OF THIS 26
597	597	PARAGRAPH , THE COMBINED RETURN SHALL BE FILED UNDER THE NAME AND 27
598	598	FEDERAL EMPLOYER IDE NTIFICATION NUMBER O F THE PARENT CORPORA TION IF 28
599	599	THE PARENT IS A MEMB ER OF THE COMBINED G ROUP. 29
600	600
601	601	(II) IF THERE IS NO PARENT CORPORATION OR IF TH E PARENT 30
602	602	IS NOT A MEMBER OF T HE COMBINED GROUP , THE MEMBERS OF THE C OMBINED 31
603	603	GROUP SHALL CHOOSE A MEMBER TO FILE THE R ETURN. 32
604	604
605	605	(III) THE FILING MEMBER UND ER SUBPARAGRAPH (I) OR (II) OF 33
606	606	THIS PARAGRAPH SHALL CONTINUE TO FILE THE COMBINED RETURN UNLESS THE 34
607	607	FILING MEMBER IS NO LONGER THE PARENT CO RPORATION OR NO LONG ER A 35 14 HOUSE BILL 457
608	608
609	609
610	610	MEMBER OF THE COMBIN ED GROUP. 1
611	611
612	612	(4) THE RETURN SHALL BE S IGNED BY A RESPONSIB LE OFFICER OF 2
613	613	THE FILING MEMBER ON BEHALF OF THE COMBIN ED GROUP MEMBERS . 3
614	614
615	615	(5) MEMBERS OF TH E COMBINED GROUP ARE JOINTLY AND 4
616	616	SEVERALLY LIABLE FOR THE TAX LIABILITY OF THE COMBINED GROUP I NCLUDED 5
617	617	IN THE COMBINED RETU RN. 6
618	618
619	619	(B) (1) THE COMPTROLLER MAY , BY REGULATION , REQUIRE THAT THE 7
620	620	COMBINED RETURN INCL UDE THE INCOME AND A SSOCIATED APPORTIONM ENT 8
621	621	FACTORS OF ENTITIES THAT ARE NOT INCLUDE D IN THE COMBINED RE PORT BUT 9
622	622	THAT ARE MEMBERS OF A UNITARY BUSINESS I N ORDER TO REFLECT P ROPER 10
623	623	APPORTIONMENT OF INC OME OF THE ENTIRE UN ITARY BUSINESS. 11
624	624
625	625	(2) IF THE COMPTROLLER DETERMINE S THAT THE REPORTED 12
626	626	INCOME OR LOSS OF A TAXPAYER E NGAGED IN A UNITARY BUSINESS WITH A MEMB ER 13
627	627	NOT INCLUDED IN THE COMBINED GROUP REPRE SENTS AN AVOIDANCE O R EVASION 14
628	628	OF TAX, THE COMPTROLLER MAY , ON A CASE–BY–CASE BASIS, REQUIRE THAT ALL 15
629	629	OR PART OF THE INCOM E AND ASSOCIATED APP ORTIONMENT F ACTORS OF THE 16
630	630	MEMBER BE INCLUDED I N THE TAXPAYER ’S COMBINED RETURN . 17
631	631
632	632	(3) THE COMPTROLLER MAY REQUI RE: 18
633	633
634	634	(I) THE EXCLUSION OF ONE OR MORE FACTORS , THE 19
635	635	INCLUSION OF ONE OR MORE ADDITIONAL FACT ORS, OR THE EMPLOYMENT OF ANY 20
636	636	OTHER METHOD THAT WI LL FAIRLY REPRESENT THE TAXPAYER ’S BUSINESS IN THIS 21
637	637	STATE; OR 22
638	638
639	639	(II) THE EMPLOYMENT OF AN Y OTHER METHOD TO EF FECTUATE 23
640	640	A PROPER REFLECTION OF THE TOTAL AMOUNT OF INCOME SUBJECT TO 24
641	641	APPORTIONMENT AND AN EQUITABLE ALLOCATION AND APPORTIONMENT OF THE 25
642	642	COMBINED GROUP ’S OR ITS MEMBERS’ INCOME. 26
643	643
644	644	(C) THE COMPTROLLER SHALL ADO PT REGULATIONS THAT ARE 27
645	645	NECESSARY AND APPROP RIATE TO CARRY OUT T HIS SECTION. 28
646	646
647	647	SECTION 3. AND BE IT FURTHER ENACTED, That, for a taxable year beginning 29
648	648	after December 31, 2021, but before January 1, 2023, notwithstanding §§ 13–602 and 30
649	649	13–702 of the Tax – General Article, the Comptroller shall assess interest and penalties 31
650	650	under §§ 13–602 and 13–702 of the Tax – General Article if a corporation pays estimated 32
651	651	income tax for the taxable year in an amount less than 90% of the tax required to be shown 33
652	652	on the corporation’s income tax return for the taxable year. 34
653	653
654	654	SECTION 4. AND BE IT FUR THER ENACTED, That Section 1 of this Act shall be 35 HOUSE BILL 457 15
655	655
656	656
657	657	applicable to all taxable years beginning after December 31, 2021. 1
658	658
659	659	SECTION 5. AND BE IT FURTHER ENACTED, That Section 2 of this Act shall take 2
660	660	effect July 1, 2023, and shall be applicable to all taxable years beginning after December 3
661	661	31, 2023. 4
662	662
663	663	SECTION 6. AND BE IT FURTHER ENACTED, That, except as provided in Section 5
664	664	5 of this Act, this Act shall take effect July 1, 2022. 6