Income Tax - Expensing of Business Property - Recoupling With Federal Law (Maryland Manufacturing Tax Relief Act of 2022)
Impact
The bill, if enacted, would significantly affect local businesses by easing restrictions related to deductions for business property. This change is particularly important for manufacturing entities that often face substantial costs associated with acquiring new equipment or property. By recoupling with federal law, Maryland aims to promote its manufacturing sector's competitiveness, encouraging investment and growth while possibly generating additional jobs and economic activity within the state.
Summary
House Bill 841, titled the Maryland Manufacturing Tax Relief Act of 2022, seeks to align Maryland's income tax laws with federal regulations regarding the expensing of business property. This bill proposes the repeal of certain modifications to Maryland's income tax system that currently impose stricter limits on deductions for business property expenses than those recognized at the federal level. The aim of the legislation is to relieve the tax burden on businesses, particularly those in the manufacturing sector, by allowing them to treat certain costs as immediate expenses for tax purposes, similar to federal standards.
Contention
Notably, there have been discussions surrounding the potential impact of this bill on state revenues. Critics argue that by expanding the deductions allowable for businesses, the state could forgo significant tax revenues which might otherwise be allocated for public services. However, supporters contend that the long-term economic benefits of stimulating business growth and retaining jobs could outweigh any short-term revenue losses. The balance between fostering a business-friendly environment and ensuring adequate funding for essential public services remains a contentious issue among lawmakers.
Provides for the decoupling of state law from federal law as it relates to the depreciation and expensing of certain property (Item #29) (OR SEE FISC NOTE GF RV)