Maryland 2022 Regular Session

Maryland Senate Bill SB360 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	sb0360
6	6
7	7	SENATE BILL 360
8	8	Q3 2lr1260
9	9	SB 511/21 – B&T
10	10	By: Senators Pinsky, Young, Watson, Jackson, McCray, Lee, Augustine, Smith,
11	11	Lam, Kelley, Washington, Rosapepe, Elfreth, and Sydnor
12	12	Introduced and read first time: January 21, 2022
13	13	Assigned to: Budget and Taxation
14	14
15	15	A BILL ENTITLED
16	16
17	17	AN ACT concerning 1
18	18
19	19	Corporate Tax Fairness Act of 2022 2
20	20
21	21	FOR the purpose of requiring that certain sales of tangible personal property be included 3
22	22	in the numerator of the sales factor used for apportioning a corporation’s income to 4
23	23	the State under certain circumstances; requiring certain corporations to compute 5
24	24	Maryland taxable income using a certain method; authorizing certain corporations, 6
25	25	subject to regulations adopted by the Comptroller, to determine certain income using 7
26	26	a certain method; requiring, subject to regulations adopted by the Comptroller, 8
27	27	certain groups of corporations to file a combined income tax return reflecting the 9
28	28	aggregate income tax liability of all the members of the group; requiring the 10
29	29	Comptroller to adopt certain regulations consistent with certain regulations adopted 11
30	30	by the Multistate Tax Commission; altering the distribution of certain income tax 12
31	31	revenue from corporations; requiring the Comptroller to assess interest and 13
32	32	penalties under certain circumstances; and generally relating to the Maryland 14
33	33	income tax on corporations. 15
34	34
35	35	BY repealing and reenacting, with amendments, 16
36	36	Article – Tax – General 17
37	37	Section 2–613.1, 2–614, 10–402(d), and 10–811 18
38	38	Annotated Code of Maryland 19
39	39	(2016 Replacement Volume and 2021 Supplement) 20
40	40
41	41	BY repealing and reenacting, without amendments, 21
42	42	Article – Education 22
43	43	Section 5–206(b) 23
44	44	Annotated Code of Maryland 24
45	45	(2018 Replacement Volume and 2021 Supplement) 25
46	46
47	47	BY repealing and reenacting, with amendments, 26
48	48	Article – Education 27 2 SENATE BILL 360
49	49
50	50
51	51	Section 5–206(f) 1
52	52	Annotated Code of Maryland 2
53	53	(2018 Replacement Volume and 2021 Supplement) 3
54	54
55	55	BY adding to 4
56	56	Article – Tax – General 5
57	57	Section 10–402.1 6
58	58	Annotated Code of Maryland 7
59	59	(2016 Replacement Volume and 2021 Supplement) 8
60	60
61	61	SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 9
62	62	That the Laws of Maryland read as follows: 10
63	63
64	64	Article – Tax – General 11
65	65
66	66	10–402. 12
67	67
68	68	(d) (1) (i) In this paragraph: 13
69	69
70	70	1. “manufacturing corporation” means a domestic or foreign 14
71	71	corporation which is primarily engaged in activities that, in accordance with the North 15
72	72	American Industrial Classification System (NAICS), United States Manual, United States 16
73	73	Office of Management and Budget, 1997 Edition, would be included in Sector 11, 31, 32, or 17
74	74	33; and 18
75	75
76	76	2. “manufacturing corporation” does not include a refiner, as 19
77	77	defined in § 10–101 of the Business Regulation Article. 20
78	78
79	79	(ii) If a manufacturing corporation carries on its trade or business 21
80	80	within and outside the State and the trade or business is a unitary business, the part of the 22
81	81	corporation’s Maryland modified income derived from or reasonably attributable to trade 23
82	82	or business carried on in the State shall be determined using a single sales factor 24
83	83	apportionment formula, by multiplying its Maryland modified income by 100% of the sales 25
84	84	factor. 26
85	85
86	86	(iii) In filing its tax return for each year, a manufacturing corporation 27
87	87	shall certify that the NAICS Code reported on its Maryland return is consistent with that 28
88	88	reported to other government agencies. 29
89	89
90	90	(iv) If the Comptroller determines that a corporation has submitted 30
91	91	information that incorrectly classifies the corporation as a manufacturing corporation 31
92	92	under subparagraph (i) of this paragraph, the Comptroller shall reclassify the corporation 32
93	93	in an appropriate manner. 33
94	94
95	95	(2) Except as provided in paragraphs (1) and (3) of this subsection: 34
96	96
97	97	(i) for a taxable year beginning after December 31, 2017, but before 35 SENATE BILL 360 3
98	98
99	99
100	100	January 1, 2019, if the trade or business is a unitary business, the part of the corporation’s 1
101	101	Maryland modified income derived from or reasonably attributable to trade or business 2
102	102	carried on in the State shall be determined using a 3–factor apportionment fraction: 3
103	103
104	104	1. the numerator of which is the sum of the property factor, 4
105	105	the payroll factor, and 3 times the sales factor; and 5
106	106
107	107	2. the denominator of which is 5; 6
108	108
109	109	(ii) for a taxable year beginning after December 31, 2018, but before 7
110	110	January 1, 2020, if the trade or business is a unitary business, the part of the corporation’s 8
111	111	Maryland modified income derived from or reasonably attributable to trade or business 9
112	112	carried on in the State shall be determined using a 3–factor apportionment fraction: 10
113	113
114	114	1. the numerator of which is the sum of the property factor, 11
115	115	the payroll factor, and 4 times the sales factor; and 12
116	116
117	117	2. the denominator of which is 6; 13
118	118
119	119	(iii) for a taxable year beginning after December 31, 2019, but before 14
120	120	January 1, 2021, if the trade or business is a unitary business, the part of the corporation’s 15
121	121	Maryland modified income derived from or reasonably attributable to trade or business 16
122	122	carried on in the State shall be determined using a 3–factor apportionment fraction: 17
123	123
124	124	1. the numerator of which is the sum of the property factor, 18
125	125	the payroll factor, and 5 times the sales factor; and 19
126	126
127	127	2. the denominator of which is 7; 20
128	128
129	129	(iv) for a taxable year beginning after December 31, 2020, but before 21
130	130	January 1, 2022, if the trade or business is a unitary business, the part of the corporation’s 22
131	131	Maryland modified income derived from or reasonably attributable to trade or business 23
132	132	carried on in the State shall be determined using a 3–factor apportionment fraction: 24
133	133
134	134	1. the numerator of which is the sum of the property factor, 25
135	135	the payroll factor, and 6 times the sales factor; and 26
136	136
137	137	2. the denominator of which is 8; and 27
138	138
139	139	(v) for a taxable year beginning after December 31, 2021, if the trade 28
140	140	or business is a unitary business, the part of the corporation’s Maryland modified income 29
141	141	derived from or reasonably attributable to trade or business carried on in the State shall 30
142	142	be determined using a single sales factor apportionment formula, by multiplying its 31
143	143	Maryland modified income by 100% of the sales factor. 32
144	144
145	145	(3) (i) Each year a worldwide headquartered company that filed a 33
146	146	federal corporate income tax return for the taxable year may elect to calculate its Maryland 34 4 SENATE BILL 360
147	147
148	148
149	149	modified income derived from or reasonably attributable to trade or business carried on in 1
150	150	the State using a 3–factor apportionment fraction: 2
151	151
152	152	1. the numerator of which is the sum of the property factor, 3
153	153	the payroll factor, and twice the sales factor; and 4
154	154
155	155	2. the denominator of which is 4. 5
156	156
157	157	(ii) To determine under subparagraph (i) of this paragraph the 6
158	158	Maryland modified income of a corporation or group of corporations that is a worldwide 7
159	159	headquartered company that filed a federal corporate income tax return for the taxable 8
160	160	year, gross income from intangible investments, including dividends, interest, royalties, 9
161	161	and capital gains from the sale of intangible property, shall be included in the calculation 10
162	162	of the numerator based on the average of the property and payroll factors. 11
163	163
164	164	(4) The property factor under paragraphs (2) and (3) of this subsection shall 12
165	165	include: 13
166	166
167	167	(i) rented and owned real property; and 14
168	168
169	169	(ii) tangible personal property located in the State and used in the 15
170	170	trade or business. 16
171	171
172	172	(5) (I) SALES OF TANGIBLE PER SONAL PROPERTY SHALL BE 17
173	173	INCLUDED IN THE NUMERATOR OF THE SAL ES FACTOR UNDER PARA GRAPH (1), (2), 18
174	174	OR (3) OF THIS SUBSECTION I F: 19
175	175
176	176	1. THE PROPERTY IS DELI VERED OR SHIPPED TO A 20
177	177	PURCHASER WITHIN THE STATE, REGARDLESS OF THE FR EE ON BOARD (F.O.B.) 21
178	178	POINT OR OTHER CONDI TIONS OF THE SALE ; OR 22
179	179
180	180	2. THE PROPERTY IS SHIP PED FROM AN OFFICE , A 23
181	181	STORE, A WAREHOUSE , A FACTORY, OR ANY OTHER PLACE O F STORAGE IN THE 24
182	182	STATE AND THE CORPORA TION IS NOT TAXABLE IN THE STATE OF THE PURCHASER . 25
183	183
184	184	(II) FOR PURPOSES OF SUBPA RAGRAPH (I) OF THIS 26
185	185	PARAGRAPH , A CORPORATION IS TAXABLE IN A STAT E IF: 27
186	186
187	187	1. IN THAT STATE THE CO RPORATION IS SUBJECT TO A 28
188	188	NET INCOME TAX , FRANCHISE TAX MEASUR ED BY NET INCOME , FRANCHISE TAX FOR 29
189	189	THE PRIVILEGE OF DOI NG BUSINESS, OR CORPORATE STOCK T AX; OR 30
190	190
191	191	2. THAT STATE HAS JURIS DICTION TO SUBJ ECT THE 31
192	192	TAXPAYER TO A NET IN COME TAX, REGARDLESS OF WHETHE R, IN FACT, THE STATE 32
193	193	IMPOSES A TAX. 33
194	194	SENATE BILL 360 5
195	195
196	196
197	197	SECTION 2. AND BE IT FURTHER ENACTED, That the Laws of Maryland read 1
198	198	as follows: 2
199	199
200	200	Article – Education 3
201	201
202	202	5–206. 4
203	203
204	204	(b) There is the Blueprint for Maryland’s Future Fund. 5
205	205
206	206	(f) The Fund consists of: 6
207	207
208	208	(1) Revenue distributed to the Fund under Title 9, Subtitles 1D and 1E of 7
209	209	the State Government Article and §§ 2–4A–02, 2–605.1, 2–613.1, 2–1302.1, and 8
210	210	2–1303 of the Tax – General Article; 9
211	211
212	212	(2) Money appropriated in the State budget for the Fund; and 10
213	213
214	214	(3) Any other money from any other source accepted for the benefit of the 11
215	215	Fund. 12
216	216
217	217	Article – Tax – General 13
218	218
219	219	2–613.1. 14
220	220
221	221	After making the distribution required under § 2–613 of this subtitle, of the 15
222	222	remaining income tax revenue from corporations, the Comptroller shall distribute: 16
223	223
224	224	(1) [6%] 5.5% to the Higher Education Investment Fund established under 17
225	225	§ 15–106.6 of the Education Article; and 18
226	226
227	227	(2) [9.15% to the General Fund] 7.6% TO THE BLUEPRINT FOR 19
228	228	MARYLAND’S FUTURE FUND ESTABLISHED UNDE R § 5–206 OF THE EDUCATION 20
229	229	ARTICLE. 21
230	230
231	231	2–614. 22
232	232
233	233	(a) [(1) Except as provided in paragraph (2) of this subsection, after] AFTER 23
234	234	making the distributions required under §§ 2–613 and 2–613.1 of this subtitle, the 24
235	235	Comptroller shall distribute monthly [17.2%] 15.5% of the remaining income tax revenue 25
236	236	from corporations to a special fund to be distributed as provided in subsection (b) of this 26
237	237	section. 27
238	238
239	239	[(2) The percent of the remaining income tax revenue from corporations 28
240	240	distributed to a special fund to be distributed as provided in subsection (b) of this section 29
241	241	shall be: 30
242	242	6 SENATE BILL 360
243	243
244	244
245	245	(i) 24% for the fiscal year beginning July 1, 2011; 1
246	246
247	247	(ii) 9.5% for the fiscal year beginning July 1, 2012; and 2
248	248
249	249	(iii) 19.5% for each fiscal year beginning on or after July 1, 2013, but 3
250	250	before July 1, 2016.] 4
251	251
252	252	(b) (1) [(i) Except as provided in subparagraph (ii) of this paragraph, from] 5
253	253	FROM the special fund, the Comptroller shall distribute an amount equal to [17.2%] 15.5% 6
254	254	of the cost to administer the income tax on corporations to an administrative cost account. 7
255	255
256	256	[(ii) The percent of the cost to administer the income tax on 8
257	257	corporations that is distributed to an administrative cost account shall be: 9
258	258
259	259	1. 24% for the fiscal year beginning July 1, 2011; 10
260	260
261	261	2. 9.5% for the fiscal year beginning July 1, 2012; and 11
262	262
263	263	3. 19.5% for each fiscal year beginning on or after July 1, 12
264	264	2013, but before July 1, 2016.] 13
265	265
266	266	(2) After making the distribution required under paragraph (1) of this 14
267	267	subsection, the Comptroller shall distribute the balance in the special fund to the Gasoline 15
268	268	and Motor Vehicle Revenue Account in the Transportation Trust Fund. 16
269	269
270	270	10–402.1. 17
271	271
272	272	(A) (1) IN THIS SECTION THE F OLLOWING WORDS HAVE THE MEANINGS 18
273	273	INDICATED. 19
274	274
275	275	(2) “COMBINED GROUP ” MEANS A GROUP OF COR PORATIONS: 20
276	276
277	277	(I) THAT IS ENGAGED IN A UNITARY BUSINESS ; 21
278	278
279	279	(II) IN WHICH MORE THAN 50% OF THE VOTING STOCK OF EACH 22
280	280	MEMBER IS DIRECTLY O R INDIRECTLY OWNED BY : 23
281	281
282	282	1. A COMMON OWNER OR CO MMON OWNERS , EITHER 24
283	283	CORPORATE OR NONCORP ORATE; OR 25
284	284
285	285	2. ONE OR MORE MEMBER C ORPORATIONS OF THE 26
286	286	GROUP; 27
287	287
288	288	(III) THE MEMBERS OF WHICH ARE SUBJECT TO THE I NCOME TAX 28
289	289	OR WOULD BE SUBJECT TO THE INCOME TAX IF DOING BUSINESS IN TH E STATE; AND 29 SENATE BILL 360 7
290	290
291	291
292	292
293	293	(IV) CONSISTING OF ANY OT HER MEMBERS UNDER TH E 1
294	294	CIRCUMSTANCES AND TO THE EXTENT PROVIDED IN REGULATIONS ADOPT ED BY 2
295	295	THE COMPTROLLER TO PREVEN T THE AVOIDANCE OF T AX OR TO REFLECT CLE ARLY 3
296	296	THE INCOME OF ANY ME MBER OF THE COM BINED GROUP FOR ANY PERIOD. 4
297	297
298	298	(3) “COMBINED RETURN ” MEANS A TAX RETURN F OR THE COMBINED 5
299	299	GROUP CONTAINING INF ORMATION AS PROVIDED IN THIS SECTION OR O THERWISE 6
300	300	REQUIRED BY THE COMPTROLLER . 7
301	301
302	302	(4) “UNITARY BUSINESS ” MEANS A SINGLE ECONO MIC ENTERPRISE 8
303	303	THAT IS MADE EITHER OF SEPAR ATE PARTS OF A SINGL E BUSINESS ENTITY OR OF A 9
304	304	COMMONLY CONTROLLED GROUP OF BUSINESS EN TITIES THAT ARE SUFF ICIENTLY 10
305	305	INTERDEPENDENT , INTEGRATED, AND INTERRELATED THR OUGH THEIR ACTIVITIE S 11
306	306	SO AS TO PROVIDE MUT UAL BENEFIT THAT PRO DUCES A SHARING OR EXCHANGE OF 12
307	307	VALUE AMONG THEM AND A SIGNIFICANT FLOW O F VALUE TO THE SEPAR ATE PARTS. 13
308	308
309	309	(B) (1) THE TERM “UNITARY BUSINESS ” SHALL BE CONSTRUED T O THE 14
310	310	BROADEST EXTENT ALLO WED UNDER THE U.S. CONSTITUTION. 15
311	311
312	312	(2) A BUSINESS CONDUCTED D IRECTLY OR INDIRE CTLY BY ONE 16
313	313	CORPORATION IS A UNI TARY BUSINESS WITH R ESPECT TO THAT PORTI ON OF A 17
314	314	BUSINESS CONDUCTED B Y ANOTHER CORPORATIO N THROUGH ITS DIRECT OR 18
315	315	INDIRECT INTEREST IN A PARTNERSHIP IF THE REQUIREMENTS OF SUBS ECTION 19
316	316	(A)(4) OF THIS SECTION ARE SATISFIED, INCLUDING IF THERE IS SYN ERGY AND AN 20
317	317	EXCHANGE AND FLOW OF VALUE BETWEEN THE TW O PARTS OF THE BUSIN ESS AND 21
318	318	THE TWO CORPORATIONS ARE MEMBERS OF THE S AME COMMONLY CONTROL LED 22
319	319	GROUP. 23
320	320
321	321	(3) A BUSINESS CONDUCTED B Y A PARTNERSHIP SHAL L BE TREATED 24
322	322	AS CONDUCTED BY ITS PARTNERS, WHETHER DIRECTLY HEL D OR INDIRECTLY HELD 25
323	323	THROUGH A SERIES OF PARTNERSHIPS , TO THE EXTENT OF THE PARTNER’S 26
324	324	DISTRIBUTIVE SHARE O F THE PARTNERSHIP ’S INCOME, REGARDLESS OF THE 27
325	325	PERCENTAGE OF THE PA RTNER’S OWNERSHIP INTEREST OR ITS DISTRIBUTIVE OR 28
326	326	ANY OTHER SHARE OF PARTNE RSHIP INCOME. 29
327	327
328	328	(C) (1) EXCEPT AS PROVIDED BY AND SUBJECT TO REGUL ATIONS 30
329	329	ADOPTED BY THE COMPTROLLER , FOR ALL TAXABLE YEAR S BEGINNING AFTER 31
330	330	DECEMBER 31, 2022, A CORPORATION ENGAGE D IN A UNITARY BUSIN ESS SHALL 32
331	331	FILE A COMBINED RETU RN, REPORTING AND PAYING TAX ON WORLDWIDE TAXABLE 33
332	332	INCOME AS A COMBINED GROUP, REFLECTING THE AGGRE GATE INCOME TAX 34
333	333	LIABILITY OF ALL MEM BERS OF THE COMBINED GROUP THAT ARE ENGAG ED IN A 35
334	334	UNITARY BUSINESS . 36
335	335	8 SENATE BILL 360
336	336
337	337
338	338	(2) THE TAXABLE INCOME OF A CORPORATION REQUIR ED TO FILE 1
339	339	UNDER § 10–811(A)(2) OF THIS TITLE IS EQU AL TO THE COMBINED G ROUP’S 2
340	340	MARYLAND MODIFIED INC OME AS ADJUSTED UNDE R SUBSECTION (D)(3) OF THIS 3
341	341	SECTION. 4
342	342
343	343	(D) (1) THE MARYLAND MODIFIED INC OME OF THE COMBINED GROUP 5
344	344	EQUALS THE PRODUCT O F: 6
345	345
346	346	(I) THE COMBINED GROUP ’S APPORTIONABLE MARYLAND 7
347	347	MODIFIED INCOME , AS DETERMINED UNDER PARAGRAPH (2) OF THIS SUBSECTION 8
348	348	AND ADJUSTED UNDER P ARAGRAPH (3) OF THIS SUBSECTION ; AND 9
349	349
350	350	(II) THE COMBINED GROUP ’S MARYLAND APPORTIONMEN T 10
351	351	FACTOR, AS DETERMINED UNDER PARAGRAPH (4) OF THIS SUBSECTION. 11
352	352
353	353	(2) (I) SUBJECT TO SUBPARAGRA PHS (II) THROUGH (IV) OF THIS 12
354	354	PARAGRAPH , THE APPORTIONABLE MARYLAND MODIFIED INC OME OF THE 13
355	355	COMBINED GROUP EQUAL S THE SUM OF THE COR PORATION AND EACH ME MBER’S 14
356	356	MARYLAND MODIFIED INC OME. 15
357	357
358	358	(II) 1. SUBJECT TO SUBSU BPARAGRAPH 2 OF THIS 16
359	359	SUBPARAGRAPH , FOR ANY MEMBER INCOR PORATED IN THE UNITED STATES OR 17
360	360	INCLUDED IN A CONSOL IDATED FEDERAL CORPO RATE INCOME TAX RETU RN, THE 18
361	361	INCOME TO BE INCLUDE D IN THE TOTAL APPOR TIONABLE INCOME OF T HE 19
362	362	COMBINED GROUP IS TH E MARYLAND MODIFIE D INCOME AS CALCULAT ED UNDER § 20
363	363	10–304 OF THIS TITLE. 21
364	364
365	365	2. THE INCOME OF EACH ME MBER SHALL BE 22
366	366	CALCULATED ON A SEPA RATE RETURN BASIS AS IF THE MEMBER WERE N OT 23
367	367	CONSOLIDATED FOR FED ERAL INCOME TAX PURP OSES. 24
368	368
369	369	(III) 1. FOR ANY MEMBER NOT IN CLUDED UNDER 25
370	370	SUBPARAGRAPH (II) OF THIS PARAGRAPH , THE INCOME TO BE INC LUDED IN THE 26
371	371	TOTAL INCOME OF THE COMBINED GROUP IS DE TERMINED AS PROVIDED UNDER 27
372	372	THIS SUBPARAGRAPH . 28
373	373
374	374	2. A PROFIT AND LOSS STAT EMENT SHALL BE PREPA RED 29
375	375	FOR EACH FOREIGN BRA NCH OR CORPORATION I N THE CURRENCY IN WHICH THE 30
376	376	BOOKS OF ACCOUNT OF THE BRANCH OR CORPOR ATION ARE REGULARLY 31
377	377	MAINTAINED. 32
378	378
379	379	3. THE PROFIT AND LOSS S TATEMENT SHALL BE 33
380	380	ADJUSTED TO CONFORM TO GENERALLY ACCEPTE D ACCOUNTING PRINCIP LES AS 34
381	381	ADOPTED BY THE UNITED STATES FINANCIAL ACCOUNTING STANDARDS BOARD 35 SENATE BILL 360 9
382	382
383	383
384	384	FOR THE PREPARATION OF THE PROFIT AND LO SS STATEMENTS , EXCEPT AS 1
385	385	MODIFIED BY REGULATI ON. 2
386	386
387	387	4. EXCEPT AS OTHERWISE P ROVIDED BY REGULATIO N, 3
388	388	THE PROFIT AND LOSS STATEMENT OF EACH ME MBER OF THE COMBINED GROUP, 4
389	389	AND THE APPORTIONMEN T FACTORS RE LATED TO EACH STATEM ENT, WHETHER 5
390	390	UNITED STATES OR FOREIGN , SHALL BE TRANSLATED INTO THE CURRENCY IN 6
391	391	WHICH THE PARENT COM PANY MAINTAINS ITS B OOKS AND RECORDS . 7
392	392
393	393	5. INCOME APPORTIONED TO THE STATE SHALL BE 8
394	394	EXPRESSED IN UNITED STATES DOLLARS . 9
395	395
396	396	(IV) IF A UNITARY BUSINESS INC LUDES INCOME FROM A 10
397	397	PARTNERSHIP , THE INCOME TO BE INC LUDED IN THE TOTAL I NCOME OF THE 11
398	398	COMBINED GROUP EQUAL S THE DIRECT AND IND IRECT DISTRIBUTIVE S HARE OF 12
399	399	THE PARTNERSHIP ’S UNITARY BUSINESS I NCOME ALLOCATED TO A NY MEMBER OF 13
400	400	THE COMBINED GROUP. 14
401	401
402	402	(3) THE COMBINED GROUP ’S APPORTIONABLE MARYLAND MODIFIED 15
403	403	INCOME SHALL BE ADJU STED TO ELIMINATE IN TERCOMPANY TRANSACTI ONS AS 16
404	404	DETERMINED UNDER THE INTERNAL REVENUE CODE. 17
405	405
406	406	(4) (I) SUBJECT TO SUBPARAGRA PH (II) OF THIS PARAGRAPH , THE 18
407	407	COMBINED GROUP ’S MARYLAND APPORTIONMEN T FACTOR IS A FRACTI ON: 19
408	408
409	409	1. THE NUMERATOR OF WHI CH IS THE SUM OF THE 20
410	410	CORPORATION ’S AND EACH MEMBER ’S MARYLAND FACTORS UNDE R § 10–402 OF 21
411	411	THIS SUBTITLE; AND 22
412	412
413	413	2. THE DENOMINATOR OF W HICH IS THE SUM OF T HE 23
414	414	CORPORATION ’S AND EACH MEMBER’S FACTORS UNDER § 10–402 OF THIS SUBTITLE. 24
415	415
416	416	(II) THE APPORTIONMENT FAC TORS OF PASS –THROUGH 25
417	417	ENTITY MEMBERS ARE I NCLUDED IN THE NUMER ATOR UNDER SUBPARAGRAPH (I)1 26
418	418	OF THIS PARAGRAPH AN D THE DENOMINATOR UN DER SUBPARAGRAPH (I)2 OF THIS 27
419	419	PARAGRAPH TO TH E EXTENT OF THE CORP ORATION’S DIRECT AND INDIREC T 28
420	420	DISTRIBUTIVE SHARE O F THAT ENTITY. 29
421	421
422	422	(E) (1) SUBJECT TO REGULATION S ADOPTED BY THE COMPTROLLER , A 30
423	423	CORPORATION THAT IS PART OF A COMBINED GROUP MAY ELECT TO DETERMINE ITS 31
424	424	INCOME DERIVED FROM OR ATTRIBUTABLE TO TRADE OR BUSINESS IN THE STATE 32
425	425	USING THE WATER ’S EDGE METHOD AS DES CRIBED IN THIS SUBSE CTION. 33
426	426
427	427	(2) UNDER THE WATER ’S EDGE METHOD , THE COMBINED GROUP FOR 34 10 SENATE BILL 360
428	428
429	429
430	430	PURPOSES OF THE COMB INED REPORTING METHO D REQUIRED UNDER THI S 1
431	431	SECTION SHALL INCLUD E ONLY THE FOLLO WING AFFILIATED ENTI TIES: 2
432	432
433	433	(I) CORPORATIONS THAT AR E INCORPORATED IN TH E UNITED 3
434	434	STATES, EXCLUDING CORPORATIO NS MAKING AN ELECTIO N UNDER §§ 931 4
435	435	THROUGH 934 OF THE INTERNAL REVENUE CODE; 5
436	436
437	437	(II) DOMESTIC INTERNATION AL SALES CORPORATION S, AS 6
438	438	DESCRIBED IN §§ 991 THROUGH 994 OF THE INTERNAL REVENUE CODE; 7
439	439
440	440	(III) ANY CORPORATION OTHE R THAN A BANK , REGARDLESS OF 8
441	441	THE PLACE WHERE IT I S INCORPORATED , IF THE AVERAGE OF TH E CORPORATION ’S 9
442	442	PROPERTY, PAYROLL, AND SALES FACTORS WI THIN THE UNITED STATES IS 20% OR 10
443	443	MORE; 11
444	444
445	445	(IV) EXPORT TRADE CORPORA TIONS, AS DESCRIBED IN §§ 970 12
446	446	AND 971 OF THE INTERNAL REVENUE CODE; 13
447	447
448	448	(V) A FOREIGN CORPORATIO N DERIVING GAIN OR L OSS FROM 14
449	449	DISPOSITION OF AN IN TEREST IN REAL PROPE RTY IN THE UNITED STATES TO THE 15
450	450	EXTENT RECOGNIZED UN DER § 897 OF THE INTERNAL REVENUE CODE; AND 16
451	451
452	452	(VI) UNDER THE CIRCUMSTAN CES AND TO THE EXTEN T 17
453	453	PROVIDED BY REGULATI ONS THAT THE COMPTROLLER ADOPTS : 18
454	454
455	455	1. A CORPORATION NOT DE SCRIBED IN ITEMS (I) 19
456	456	THROUGH (V) OF THIS PARAGRAPH TO THE EXTENT OF THE CO RPORATION’S INCOME 20
457	457	DERIVED FROM OR ATTR IBUTABLE TO SOURCES WITHIN THE UNITED STATES AND 21
458	458	THE CORPORATION ’S FACTORS ASSIGNABLE TO A LOCATION WITHIN THE UNITED 22
459	459	STATES; OR 23
460	460
461	461	2. AN AFFILIATED CORPOR ATION THAT IS A 24
462	462	CONTROLLED FOREIGN C ORPORATION , AS DEFINED IN § 957 OF THE INTERNAL 25
463	463	REVENUE CODE. 26
464	464
465	465	(3) THE USE OF THE WATER ’S EDGE METHOD IS SUB JECT TO THE 27
466	466	TERMS AND CONDITIONS THAT THE COMPTROLLER REQUIRES BY REGULATION , 28
467	467	INCLUDING ANY CONDIT IONS THAT ARE NECESS ARY OR APPROPRIATE T O PREVENT 29
468	468	THE AVOIDANCE OF TAX OR TO REFLECT CLEARLY THE INCOME F OR ANY PERIOD. 30
469	469
470	470	(F) (1) (I) AN ELECTION TO USE TH E WATER’S EDGE METHOD IN 31
471	471	ACCORDANCE WITH SUBS ECTION (E) OF THIS SECTION IS E FFECTIVE ONLY IF MAD E 32
472	472	ON A TIMELY FILED , ORIGINAL RETURN FOR A TAX YEAR BY EVERY MEMBER OF THE 33
473	473	UNITARY BUSINE SS. 34 SENATE BILL 360 11
474	474
475	475
476	476
477	477	(II) THE COMPTROLLER SHALL DEV ELOP REGULATIONS 1
478	478	GOVERNING THE IMPACT , IF ANY, ON THE SCOPE OR APPL ICATION OF AN ELECTI ON 2
479	479	TO USE THE WATER ’S EDGE METHOD , INCLUDING TERMINATIO N OR DEEMED 3
480	480	ELECTION, RESULTING FROM A CHA NGE IN THE COMPOSITI ON OF THE UNITARY 4
481	481	BUSINESS, THE COMBINED GROUP , THE TAXPAYER MEMBERS , OR ANY OTHER 5
482	482	SIMILAR CHANGE . 6
483	483
484	484	(2) AN ELECTION TO USE TH E WATER’S EDGE METHOD SHALL 7
485	485	CONSTITUTE CONSENT T O THE REASONABLE PRO DUCTION OF DOCUMENTS AND 8
486	486	TAKING OF DEPOSITION S IN ACCORDANCE WITH THE MARYLAND RULES. 9
487	487
488	488	(3) AT THE DISCRETION OF THE COMPTROLLER , AN ELECTION TO 10
489	489	USE THE WATER ’S EDGE METHOD MAY BE DISREGARDED IN PART OR IN WHOLE, AND 11
490	490	THE INCOME AND APPOR TIONMENT FACTORS OF ANY MEMBER OF THE TA XPAYER’S 12
491	491	UNITARY GROUP MAY BE INCLUDED IN THE COM BINED REPORT WITHOUT REGARD 13
492	492	TO THE PROVISIONS OF THIS SECTION, IF ANY MEMBER OF THE UNITARY GROUP 14
493	493	FAILS TO COMPLY WITH ANY PROVISION OF THI S SECTION OR IF A PE RSON 15
494	494	OTHERWISE NOT INCLUD ED IN THE WATER ’S EDGE COMBINED GROU P WAS AVAILED 16
495	495	OF A SUBSTANTIAL OBJ ECTIVE OF AVOIDING STATE INCOME TAX . 17
496	496
497	497	(4) (I) SUBJECT TO SUBPARAGRA PHS (II) THROUGH (IV) OF THIS 18
498	498	PARAGRAPH , AN ELECTION TO USE T HE WATER’S EDGE METHOD IS BIN DING FOR 19
499	499	AND APPLICABLE TO TH E TAXABLE YEAR IN WH ICH THE ELECTION IS MADE AND ALL 20
500	500	TAXABLE YEARS THE REAFTER FOR A PERIOD OF 10 YEARS. 21
501	501
502	502	(II) AN ELECTION TO USE TH E WATER’S EDGE METHOD MAY BE 22
503	503	WITHDRAWN OR REINSTI TUTED AFTER WITHDRAW AL, BEFORE THE EXPIRATIO N OF 23
504	504	THE 10–YEAR PERIOD, ONLY ON WRITTEN REQU EST FOR REASONABLE C AUSE AND 24
505	505	ONLY WITH THE WRITTE N PERMISSION OF THE COMPTROLLER . 25
506	506
507	507	(III) IF THE COMPTROLLER GRANTS A WITHDRAWAL OF THE 26
508	508	ELECTION UNDER SUBPA RAGRAPH (II) OF THIS PARAGRAPH , THE COMPTROLLER 27
509	509	SHALL IMPOSE REASONA BLE CONDITIONS AS NE CESSARY TO PREVENT T HE EVASION 28
510	510	OF TAX OR TO CLEARLY REFLECT INCO ME FOR THE ELECTION PERIOD BEFORE OR 29
511	511	AFTER THE WITHDRAWAL . 30
512	512
513	513	(IV) 1. SUBJECT TO SUBSUBPARA GRAPH 2 OF THIS 31
514	514	SUBPARAGRAPH , ON THE EXPIRATION OF THE 10–YEAR PERIOD, A TAXPAYER MAY 32
515	515	WITHDRAW FROM THE EL ECTION TO USE THE WA TER’S EDGE METHOD . 33
516	516
517	517	2. THE WITHDRA WAL SHALL BE MADE IN WRITING 34
518	518	WITHIN 1 YEAR BEFORE THE EXPI RATION OF THE ELECTI ON AND IS BINDING FO R A 35
519	519	PERIOD OF 10 YEARS, SUBJECT TO THE SAME CONDITIONS AS APPLIE D TO THE 36 12 SENATE BILL 360
520	520
521	521
522	522	ORIGINAL ELECTION . 1
523	523
524	524	3. IF NO WITHDRAWAL IS P ROPERLY MADE UNDER T HIS 2
525	525	SUBPARAGRAPH , THE ELECTION TO USE THE WATER ’S EDGE METHOD SHALL 3
526	526	REMAIN IN EFFECT FOR AN ADDITIONAL 10–YEAR PERIOD, SUBJECT TO THE SAME 4
527	527	CONDITIONS AS APPLIE D TO THE ORIGINAL EL ECTION. 5
528	528
529	529	(G) (1) THE COMPTROLLER SHALL ADO PT REGULATIONS THAT ARE 6
530	530	NECESSARY AND APPROP RIATE TO CARRY OUT THIS SE CTION. 7
531	531
532	532	(2) THE REGULATIONS ADOPT ED BY THE COMPTROLLER SHALL BE 8
533	533	CONSISTENT WITH THE “PRINCIPLES FOR DETERMINING THE EXISTENCE OF A 9
534	534	UNITARY BUSINESS” (REG. IV.1.(B)) OF THE MODEL GENERAL ALLOCATION AND 10
535	535	APPORTIONMENT REGULATIONS, AS ADOPTED BY THE MULTISTATE TAX 11
536	536	COMMISSION. 12
537	537
538	538	10–811. 13
539	539
540	540	(A) (1) [Each member of] EXCEPT AS PROVIDED BY AND SUBJECT TO 14
541	541	REGULATIONS ADOPTED BY THE COMPTROLLER , an affiliated group of corporations 15
542	542	[shall file a separate income tax return] ENGAGED IN A UNITARY BUSINESS SHALL FILE 16
543	543	A COMBINED INCOME TA X RETURN REFLECTING THE AGGREGATE INCOME TAX 17
544	544	LIABILITY OF ALL THE MEMBERS OF THE AFFIL IATED GROUP THAT ARE ENGAGED IN 18
545	545	A UNITARY BUSINESS . 19
546	546
547	547	(2) THE RETURN REQUIRED U NDER PARAGRAPH (1) OF THIS 20
548	548	SUBSECTION SHALL INC LUDE THE INCOME AND APPORTION MENT FACTORS 21
549	549	DETERMINED UNDER § 10–402.1(D) AND (E) OF THIS TITLE, AND ANY OTHER 22
550	550	INFORMATION REQUIRED BY THE COMPTROLLER , FOR ALL MEMBERS OF T HE 23
551	551	COMBINED GROUP WHERE VER LOCATED OR DOING BUSINESS. 24
552	552
553	553	(3) (I) EXCEPT AS PROVIDED IN SUBPARAGRAPH (II) OF THIS 25
554	554	PARAGRAPH , THE COMBINED RETURN SHALL BE FILED UNDER THE NAME AND 26
555	555	FEDERAL EMPLOYER IDE NTIFICATION NUMBER O F THE PARENT CORPORA TION IF 27
556	556	THE PARENT IS A MEMB ER OF THE COMBINED G ROUP. 28
557	557
558	558	(II) IF THERE IS NO PARENT CORPORATION OR IF TH E PARENT 29
559	559	IS NOT A MEMBER OF T HE COMBINED GROUP , THE MEMBERS OF THE C OMBINED 30
560	560	GROUP SHALL CHOOSE A MEMBER TO FILE THE R ETURN. 31
561	561
562	562	(III) THE FILING MEMBER UND ER SUBPARAGRAPH (I) OR (II) OF 32
563	563	THIS PARAGRAPH SHALL CONTINUE TO FILE THE COMBINED RETURN UNLE SS THE 33
564	564	FILING MEMBER IS NO LONGER THE PARENT CORPORATI ON OR NO LONGER A 34
565	565	MEMBER OF THE COMBIN ED GROUP. 35 SENATE BILL 360 13
566	566
567	567
568	568
569	569	(4) THE RETURN SHALL BE S IGNED BY A RESPONSIB LE OFFICER OF 1
570	570	THE FILING MEMBER ON BEHALF OF THE COMBIN ED GROUP MEMBERS . 2
571	571
572	572	(5) MEMBERS OF THE COMBIN ED GROUP ARE JOINT LY AND 3
573	573	SEVERALLY LIABLE FOR THE TAX LIABILITY OF THE COMBINED GROUP I NCLUDED 4
574	574	IN THE COMBINED RETU RN. 5
575	575
576	576	(B) (1) THE COMPTROLLER MAY , BY REGULATION , REQUIRE THAT THE 6
577	577	COMBINED RETURN INCL UDE THE INCOME AND A SSOCIATED APPORTIONM ENT 7
578	578	FACTORS OF ENTITIES THAT ARE NOT INCLUDED IN THE COMBINED REPORT BUT 8
579	579	THAT ARE MEMBERS OF A UNITARY BUSINESS I N ORDER TO REFLECT P ROPER 9
580	580	APPORTIONMENT OF INC OME OF THE ENTIRE UN ITARY BUSINESS. 10
581	581
582	582	(2) IF THE COMPTROLLER DETERMINE S THAT THE REPORTED 11
583	583	INCOME OR LOSS OF A TAXPAYER ENGAGED I N A UNITARY BUSINESS WITH A MEMBER 12
584	584	NOT INCLUDED IN THE COMBINED GROUP REPRE SENTS AN AVOIDANCE O R EVASION 13
585	585	OF TAX, THE COMPTROLLER MAY , ON A CASE–BY–CASE BASIS, REQUIRE THAT ALL 14
586	586	OR PART OF THE INCOM E AND ASSOCIATED APP ORTIONMENT FACTORS O F THE 15
587	587	MEMBER BE INCL UDED IN THE TAXPAYER ’S COMBINED RETURN . 16
588	588
589	589	(3) THE COMPTROLLER MAY REQUI RE: 17
590	590
591	591	(I) THE EXCLUSION OF ONE OR MORE FACTORS , THE 18
592	592	INCLUSION OF ONE OR MORE ADDITIONAL FACT ORS, OR THE EMPLOYMENT OF ANY 19
593	593	OTHER METHOD THAT WI LL FAIRLY REPRESENT THE TAXPAYER ’S BUSINESS IN TH E 20
594	594	STATE; OR 21
595	595
596	596	(II) THE EMPLOYMENT OF AN Y OTHER METHOD TO EF FECTUATE 22
597	597	A PROPER REFLECTION OF THE TOTAL AMOUNT OF INCOME SUBJECT TO 23
598	598	APPORTIONMENT AND AN EQUITABLE ALLOCATION AND APPORTIONMENT OF THE 24
599	599	COMBINED GROUP ’S OR ITS MEMBERS ’ INCOME. 25
600	600
601	601	(C) THE COMPTROLLER SHALL ADO PT REGULATIONS THAT ARE 26
602	602	NECESSARY AND APPROP RIATE TO CARRY OUT T HIS SECTION. 27
603	603
604	604	SECTION 3. AND BE IT FURTHER ENACTED, That, for a taxable year beginning 28
605	605	after December 31, 2021, but before January 1, 2023, notwithstanding §§ 13–602 and 29
606	606	13–702 of the Tax – General Article, the Comptroller shall assess interest and penalties 30
607	607	under §§ 13–602 and 13–702 of the Tax – General Article if a corporation pays estimated 31
608	608	income tax for the taxable year in an amount less than 90% of the tax required to be shown 32
609	609	on the corporation’s income tax return for the taxable year. 33
610	610
611	611	SECTION 4. AND BE IT FURTHER ENACTED, That Section 1 of this Act shall be 34
612	612	applicable to all taxable years beginning after December 31, 2021. 35 14 SENATE BILL 360
613	613
614	614
615	615
616	616	SECTION 5. AND BE IT FURTHER ENACTED, That Section 2 of this Act shall take 1
617	617	effect July 1, 2023, and shall be applicable to all taxable years beginning after December 2
618	618	31, 2022. 3
619	619
620	620	SECTION 6. AND BE IT FURTHER ENACTED, That, except as provided in Section 4
621	621	5 of this Act, this Act shall take effect July 1, 2022. 5
622	622