Maryland 2023 Regular Session

Maryland House Bill HB337 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	hb0337
6	6
7	7	HOUSE BILL 337
8	8	Q3 3lr1129
9	9
10	10	By: Delegates Palakovich Carr, Charkoudian, Cullison, Ebersole, Grossman, Hill,
11	11	Ivey, Lehman, R. Lewis, McCaskill, Moon, Ruth, Stewart, Terrasa,
12	12	Washington, Wells, and Wilkins
13	13	Introduced and read first time: January 25, 2023
14	14	Assigned to: Ways and Means
15	15
16	16	A BILL ENTITLED
17	17
18	18	AN ACT concerning 1
19	19
20	20	Income Tax – Capital Gains, Dividends, and Foreign–Derived Intangible Income 2
21	21	– Alterations 3
22	22	(Investing in Marylanders Act of 2023) 4
23	23
24	24	FOR the purpose of providing for an additional State individual income tax rate on the net 5
25	25	capital gains of individuals, subject to certain exceptions; providing addition 6
26	26	modifications under the Maryland income tax for the amount of certain deductions 7
27	27	under the Internal Revenue Code for dividends paid for real estate investment 8
28	28	trusts, foreign–derived intangible income, and certain dividends received from a 9
29	29	foreign corporation; altering a certain addition modification under the Maryland 10
30	30	income tax for certain corporate interest expenses and intangible expenses; altering 11
31	31	a certain subtraction modification under the Maryland income tax for certain 12
32	32	dividends received from a foreign corporation to preclude inclusion of certain income 13
33	33	treated as dividends under the Internal Revenue Code; and generally relating to the 14
34	34	Maryland income tax. 15
35	35
36	36	BY repealing and reenacting, with amendments, 16
37	37	Article – Tax – General 17
38	38	Section 10–105(a), 10–305, 10–306.1, and 10–307(d) 18
39	39	Annotated Code of Maryland 19
40	40	(2022 Replacement Volume) 20
41	41
42	42	BY repealing and reenacting, without amendments, 21
43	43	Article – Tax – General 22
44	44	Section 10–204(a) and 10–307(a) 23
45	45	Annotated Code of Maryland 24
46	46	(2022 Replacement Volume) 25
47	47
48	48	BY adding to 26 2 HOUSE BILL 337
49	49
50	50
51	51	Article – Tax – General 1
52	52	Section 10–204(m) 2
53	53	Annotated Code of Maryland 3
54	54	(2022 Replacement Volume) 4
55	55
56	56	SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 5
57	57	That the Laws of Maryland read as follows: 6
58	58
59	59	Article – Tax – General 7
60	60
61	61	10–105. 8
62	62
63	63	(a) (1) For an individual other than an individual described in paragraph (2) 9
64	64	of this subsection, the State income tax rate is: 10
65	65
66	66	(i) 2% of Maryland taxable income of $1 through $1,000; 11
67	67
68	68	(ii) 3% of Maryland taxable income of $1,001 through $2,000; 12
69	69
70	70	(iii) 4% of Maryland taxable income of $2,001 through $3,000; 13
71	71
72	72	(iv) 4.75% of Maryland taxable income of $3,001 through $100,000; 14
73	73
74	74	(v) 5% of Maryland taxable income of $100,001 through $125,000; 15
75	75
76	76	(vi) 5.25% of Maryland taxable income of $125,001 through $150,000; 16
77	77
78	78	(vii) 5.5% of Maryland taxable income of $150,001 through $250,000; 17
79	79	and 18
80	80
81	81	(viii) 5.75% of Maryland taxable income in excess of $250,000. 19
82	82
83	83	(2) For spouses filing a joint return or for a surviving spouse or head of 20
84	84	household as defined in § 2 of the Internal Revenue Code, the State income tax rate is: 21
85	85
86	86	(i) 2% of Maryland taxable income of $1 through $1,000; 22
87	87
88	88	(ii) 3% of Maryland taxable income of $1,001 through $2,000; 23
89	89
90	90	(iii) 4% of Maryland taxable income of $2,001 through $3,000; 24
91	91
92	92	(iv) 4.75% of Maryland taxable income of $3,001 through $150,000; 25
93	93
94	94	(v) 5% of Maryland taxable income of $150,001 through $175,000; 26
95	95
96	96	(vi) 5.25% of Maryland taxable income of $175,001 through $225,000; 27
97	97	HOUSE BILL 337 3
98	98
99	99
100	100	(vii) 5.5% of Maryland taxable income of $225,001 through $300,000; 1
101	101	and 2
102	102
103	103	(viii) 5.75% of Maryland taxable income in excess of $300,000. 3
104	104
105	105	(3) (I) EXCEPT AS PROVIDED IN SUBPARAGRAPH (II) OF THIS 4
106	106	PARAGRAPH , IF THE MARYLAND TAXABLE INCO ME OF AN INDIVIDUAL DESCRIBED 5
107	107	IN PARAGRAPH (1) OR (2) OF THIS SUBSECTION INCLUDES ANY AMOUNT OF NET 6
108	108	CAPITAL GAIN, AS DEFINED AND DETER MINED UNDER THE INTERNAL REVENUE 7
109	109	CODE, THE STATE INCOME TAX FOR THE INDIVIDUAL IS TH E SUM OF: 8
110	110
111	111	1. THE RATES SPECIFIED IN PARAGRAPH (1) OR (2) OF 9
112	112	THIS SUBSECTION APPL IED TO MARYLAND TAXABLE INCOME ; AND 10
113	113
114	114	2. AN ADDITIONAL 1% OF THE AMOUNT OF NET CAPITAL 11
115	115	GAIN INCLUDED IN THE INDIVIDUAL’S MARYLAND TAXABLE INCO ME. 12
116	116
117	117	(II) TO THE EXTENT INCLUDE D IN CALCULATING NET CAPITAL 13
118	118	GAIN FOR FEDERAL INC OME TAX PURPOSES , ANY AMOUNT OF CAPITA L GAIN FROM 14
119	119	THE SALE OR EXCHANGE OF THE FOLLOWING ASS ETS IS NOT SUBJECT T O THE 15
120	120	ADDITIONAL 1% TAX RATE SPECIFIED I N SUBPARAGRAPH (I)2 OF THIS PARAGRAPH : 16
121	121
122	122	1. ANY RESIDENTIAL DWEL LING SOLD FOR LESS T HAN 17
123	123	$1,000,000 THAT IS THE INDIVIDU AL’S PRIMARY RESIDENCE , INCLUDING THE LAND 18
124	124	ON WHICH THE DWELLIN G IS LOCATED AND ANY ACCESSORY DWELLING U NIT 19
125	125	ASSOCIATED WITH THE RESIDENCE, IF THE DWELLING IS A SINGLE–FAMILY HOME , A 20
126	126	TOWN HOUSE , A ROW HOME , A RESIDENTIAL CONDOM INIUM UNIT, OR A 21
127	127	RESIDENTIAL COOPERAT IVE UNIT; 22
128	128
129	129	2. ASSETS HELD IN: 23
130	130
131	131	A. A CASH OR DEFERRED A RRANGEMENT PLAN UNDE R § 24
132	132	401(K) OF THE INTERNAL REVENUE CODE; 25
133	133
134	134	B. A TAX–SHELTERED ANNUITY OR CUSTODIAL ACCOUNT 26
135	135	UNDER § 403(B) OF THE INTERNAL REVENUE CODE; 27
136	136
137	137	C. A DEFERRED COMPENSAT ION PLAN UNDER § 457(B) 28
138	138	OF THE INTERNAL REVENUE CODE; 29
139	139
140	140	D. AN INDIVIDUAL RETIRE MENT ACCOUNT OR 30
141	141	INDIVIDUAL RETIREMEN T ANNUITY UNDER § 408 OF THE INTERNAL REVENUE 31
142	142	CODE; 32
143	143	4 HOUSE BILL 337
144	144
145	145
146	146	E. A ROTH INDIVIDUAL RETIR EMENT ACCOUNT UNDER § 1
147	147	408A OF THE INTERNAL REVENUE CODE; OR 2
148	148
149	149	F. A DEFINED CONTRIBUTI ON PLAN, A DEFINED BENEFIT 3
150	150	PLAN, OR A SIMILAR RETIREM ENT SAVINGS PLAN ; 4
151	151
152	152	3. CATTLE, HORSES, OR BREEDING LIVESTOC K HELD 5
153	153	FOR MORE THAN 12 MONTHS IF, FOR THE TAXABLE YEAR OF THE SALE OR 6
154	154	EXCHANGE, MORE THAN 50% OF THE INDIVIDUAL ’S GROSS INCOME FOR T HE 7
155	155	TAXABLE YEAR , INCLUDING INCOME FRO M THE SALE OR EXCHAN GE OF CAPITAL 8
156	156	ASSETS, IS FROM FARMING OR R ANCHING; 9
157	157
158	158	4. LAND THAT IS SUBJECT TO A CONSERVATION , 10
159	159	AGRICULTURAL , OR FOREST PRESERVATI ON EASEMENT OR THAT WILL BE SUBJECT 11
160	160	TO A CONSERVATION , AGRICULTURAL , OR FOREST PRESERVATI ON EASEMENT ON 12
161	161	THE SALE OR EXCHANGE OF THE LAND; 13
162	162
163	163	5. PROPERTY USED IN A T RADE OR BUSINESS , THE COST 14
164	164	OF WHICH IS DEDUCTIB LE UNDER § 179 OF THE INTERNAL REVENUE CODE; OR 15
165	165
166	166	6. AFFORDABLE HOUSING OWNED BY A NONPROFIT 16
167	167	ORGANIZATION . 17
168	168
169	169	10–204. 18
170	170
171	171	(a) To the extent excluded from federal adjusted gross income, the amounts under 19
172	172	this section are added to the federal adjusted gross income of a resident to determine 20
173	173	Maryland adjusted gross income. 21
174	174
175	175	(M) THE ADDITION UNDER SU BSECTION (A) OF THIS SECTION INCL UDES ANY 22
176	176	AMOUNT DEDUCTED UNDER § 857 OF THE INTERNAL REVENUE CODE FOR 23
177	177	DIVIDENDS PAID FOR R EAL ESTATE INVESTMEN T TRUSTS. 24
178	178
179	179	10–305. 25
180	180
181	181	(a) To the extent excluded from federal taxable income, the amounts under this 26
182	182	section are added to the federal taxable income of a corporation to determine Maryland 27
183	183	modified income. 28
184	184
185	185	(b) The addition under subsection (a) of this section includes the net capital loss 29
186	186	carryback, as defined in § 1212 of the Internal Revenue Code. 30
187	187
188	188	(c) The addition under subsection (a) of this section includes any taxes based on 31
189	189	net income that are imposed by any state or by a political subdivision of any state. 32
190	190	HOUSE BILL 337 5
191	191
192	192
193	193	(d) The addition under subsection (a) of this section includes the additions 1
194	194	required for an individual under: 2
195	195
196	196	(1) § 10–204(b) of this title (Dividends and interest from another state or 3
197	197	local obligation); 4
198	198
199	199	(2) § 10–204(c)(2) of this title (Federal tax–exempt income); 5
200	200
201	201	(3) § 10–204(e) of this title (Oil percentage depletion allowance); 6
202	202
203	203	(4) § 10–204(i) of this title (Deduction for qualified production activities 7
204	204	income); 8
205	205
206	206	(5) § 10–204(j) of this title (Deduction for costs for security clearance 9
207	207	administrative expenses and construction and equipment costs incurred to construct or 10
208	208	renovate a sensitive compartmented information facility); [and] 11
209	209
210	210	(6) § 10–204(l) of this title (Deduction for donations to qualified permanent 12
211	211	endowment funds); AND 13
212	212
213	213	(7) § 10–204(M) OF THIS TITLE (DEDUCTION FOR DIVIDEN DS PAID 14
214	214	FOR REAL ESTATE INVESTMENT TR USTS). 15
215	215
216	216	(E) THE ADDITION UNDER SU BSECTION (A) OF THIS SECTION INCL UDES ANY 16
217	217	AMOUNT DEDUCTED UNDER: 17
218	218
219	219	(1) § 250 OF THE INTERNAL REVENUE CODE FOR FOREIGN –DERIVED 18
220	220	INTANGIBLE INCOME ; AND 19
221	221
222	222	(2) §§ 243 AND 245A OF THE INTERNAL REVENUE CODE FOR 20
223	223	DIVIDENDS RECEIVED F ROM A FOREIGN CORPORATION . 21
224	224
225	225	10–306.1. 22
226	226
227	227	(a) (1) In this section the following words have the meanings indicated. 23
228	228
229	229	(2) “Aggregate effective tax rate” means the sum of the effective rates of 24
230	230	tax imposed by this State, other states or possessions of the United States, and foreign 25
231	231	nations that have entered into comprehensive tax treaties with the United States 26
232	232	government, where a related member receiving a payment of interest expense or intangible 27
233	233	expense is subject to tax and where the measure of the tax imposed included the payment. 28
234	234
235	235	(3) [“Bank” means: 29
236	236
237	237	(i) a bank holding company as defined in the federal Bank Holding 30
238	238	Company Act of 1956, as amended, or a bank, trust company, savings bank, or savings and 31 6 HOUSE BILL 337
239	239
240	240
241	241	loan association incorporated or chartered under the laws of this State, another state, or 1
242	242	the United States; or 2
243	243
244	244	(ii) a subsidiary or affiliate of an entity described in item (i) of this 3
245	245	paragraph. 4
246	246
247	247	(4)] “Effective rate of tax imposed” means, as to any state, possession of the 5
248	248	United States, or foreign nation, the maximum statutory tax rate imposed by the state, 6
249	249	possession, or foreign nation multiplied by the applicable apportionment rate. 7
250	250
251	251	[(5)] (4) “Intangible expense” means: 8
252	252
253	253	(i) an expense, loss, or cost for, related to, or in connection directly 9
254	254	or indirectly with the direct or indirect acquisition, use, maintenance, management, 10
255	255	ownership, sale, exchange, or any other disposition of intangible property, to the extent the 11
256	256	expense, loss, or cost is allowed as a deduction or cost in determining taxable income for 12
257	257	the taxable year under the Internal Revenue Code; 13
258	258
259	259	(ii) a loss related to or incurred in connection directly or indirectly 14
260	260	with factoring transactions or discounting transactions; 15
261	261
262	262	(iii) a royalty, patent, technical, or copyright fee; 16
263	263
264	264	(iv) a licensing fee; or 17
265	265
266	266	(v) any other similar expense or cost. 18
267	267
268	268	[(6)] (5) “Intangible property” means patents, patent applications, trade 19
269	269	names, trademarks, service marks, copyrights, and similar types of intangible assets. 20
270	270
271	271	[(7)] (6) “Interest expense” means an amount directly or indirectly 21
272	272	allowed as a deduction under § 163 of the Internal Revenue Code for purposes of 22
273	273	determining taxable income under the Internal Revenue Code. 23
274	274
275	275	[(8)] (7) “Related entity” means a person that, under the attribution rules 24
276	276	of § 318 of the Internal Revenue Code, is: 25
277	277
278	278	(i) a stockholder who is an individual or a member of the 26
279	279	stockholder’s family enumerated in § 318 of the Internal Revenue Code, if the stockholder 27
280	280	and the members of the stockholder’s family own directly, indirectly, beneficially, or 28
281	281	constructively, in the aggregate, at least 50% of the value of the taxpayer’s outstanding 29
282	282	stock; 30
283	283
284	284	(ii) a stockholder or a stockholder’s partnership, limited liability 31
285	285	company, estate, trust, or corporation, if the stockholder and the stockholder’s partnership, 32
286	286	limited liability company, estate, trust, or corporation own directly, indirectly, beneficially, 33 HOUSE BILL 337 7
287	287
288	288
289	289	or constructively, in the aggregate, at least 50% of the value of the taxpayer’s outstanding 1
290	290	stock; or 2
291	291
292	292	(iii) a corporation or a party related to the corporation in a manner 3
293	293	that would require an attribution of stock from the corporation to the party or from the 4
294	294	party to the corporation under the attribution rules of § 318 of the Internal Revenue Code, 5
295	295	if the taxpayer owns directly, indirectly, beneficially, or constructively, at least 50% of the 6
296	296	value of the corporation’s outstanding stock. 7
297	297
298	298	[(9)] (8) “Related member” means a person that, with respect to the 8
299	299	taxpayer during all or any portion of the taxable year, is: 9
300	300
301	301	(i) a related entity; 10
302	302
303	303	(ii) a component member, as defined in § 1563(b) of the Internal 11
304	304	Revenue Code; or 12
305	305
306	306	(iii) a person to or from whom there is attribution of stock ownership 13
307	307	in accordance with § 1563(e) of the Internal Revenue Code. 14
308	308
309	309	(b) (1) Except as otherwise provided in this section, in addition to the 15
310	310	modifications under §§ 10–305 and 10–306 of this subtitle, the amounts under paragraph 16
311	311	(2) of this subsection are added to the federal taxable income of a corporation to determine 17
312	312	Maryland modified income. 18
313	313
314	314	(2) The addition under this subsection includes any otherwise deductible 19
315	315	interest expense or intangible expense if the interest expense or intangible expense is 20
316	316	directly or indirectly paid, accrued, or incurred to, or in connection directly or indirectly 21
317	317	with one or more direct or indirect transactions with, one or more related members. 22
318	318
319	319	(c) The addition required under subsection (b) of this section does not apply to 23
320	320	any portion of the interest expense or intangible expense to the extent that the corporation 24
321	321	establishes BY CLEAR AND CONVINC ING EVIDENCE , as determined by the Comptroller, 25
322	322	that: 26
323	323
324	324	(1) the transaction giving rise to the payment of the interest expense or 27
325	325	intangible expense between the corporation and the related member did not have as a 28
326	326	principal purpose the avoidance of any portion of the tax due under this title; 29
327	327
328	328	(2) the interest expense or intangible expense was paid pursuant to 30
329	329	arm’s–length contracts at an arm’s–length rate of interest or price; and 31
330	330
331	331	(3) (i) during the same taxable year, the related member directly or 32
332	332	indirectly paid, accrued, or incurred the interest expense or intangible expense to a person 33
333	333	who is not a related member; OR 34
334	334	8 HOUSE BILL 337
335	335
336	336
337	337	(ii) 1. the related member was subject to a tax measured by its 1
338	338	net income or receipts in this State, another state or possession of the United States, or a 2
339	339	foreign nation that has entered into a comprehensive tax treaty with the United States 3
340	340	government; 4
341	341
342	342	2. a measure of the tax imposed by this State, another state 5
343	343	or possession of the United States, or a foreign nation that has entered into a 6
344	344	comprehensive tax treaty with the United States government included the interest expense 7
345	345	or intangible expense received by the related member from the corporation; 8
346	346
347	347	3. IF APPLICABLE, THE MEASURE OF ANY T AX IMPOSED 9
348	348	BY A FOREIGN NATION THAT HAS ENTERED INTO A C OMPREHENSIVE TAX TRE ATY 10
349	349	WITH THE UNITED STATES GOVERNMENT WAS EQUAL TO OR GREATER THAN THE 11
350	350	TAX IMPOSED BY THIS STATE; and 12
351	351
352	352	[3.] 4. the aggregate effective tax rate imposed on the amounts 13
353	353	received by the related member is equal to or greater than [4%; or 14
354	354
355	355	(iii) in the case of an interest expense, the corporation and the related 15
356	356	member are banks] THE TAX RATE SPECIFIED UNDER § 10–105(B) OF THIS TITLE 16
357	357	MINUS 3%, PROVIDED THAT A RELA TED MEMBER RECEIVING THE INTEREST 17
358	358	EXPENSE OR INTANGIBLE EXPENS E IS NOT CONSIDERED TO BE SUBJECT TO A T AX 18
359	359	MERELY BY VIRTUE OF THE RELAT ED MEMBER ’S INCLUSION IN A COM BINED OR 19
360	360	CONSOLIDATED RE PORT IN ONE OR MORE STATE S. 20
361	361
362	362	(d) (1) Subject to regulations adopted by the Comptroller, the addition 21
363	363	required under subsection (b) of this section does not apply if, in lieu of the [4%] effective 22
364	364	tax rate requirement under subsection [(c)(3)(ii)3] (C)(3)(II)4 of this section, the aggregate 23
365	365	effective tax rate imposed on the amounts received by the recipient is greater than or equal 24
366	366	to the aggregate effective tax rate that would have been imposed on the additional income 25
367	367	of the payor corporation if the interest expense or intangible expense had not been 26
368	368	deducted. 27
369	369
370	370	(2) For purposes of subsection (c)(3)(ii) of this section, the Comptroller may 28
371	371	provide by regulation for an alternative to the effective tax rate requirement of subsection 29
372	372	[(c)(3)(ii)3] (C)(3)(II)4 of this section if: 30
373	373
374	374	(i) the related member: 31
375	375
376	376	1. is subject in another state or in a foreign nation that has 32
377	377	entered into a comprehensive tax treaty with the United States government to a tax that 33
378	378	is measured by gross receipts or is measured by net capital or net worth; and 34
379	379
380	380	2. is not subject in that state or in that foreign nation to a tax 35
381	381	measured by net income or receipts; or 36
382	382	HOUSE BILL 337 9
383	383
384	384
385	385	(ii) under other circumstances demonstrating to the satisfaction of 1
386	386	the Comptroller that avoidance of any portion of the tax due under this title is not a 2
387	387	principal purpose of the transaction giving rise to the payment of the interest expense or 3
388	388	intangible expense between the corporation and the related member, the Comptroller 4
389	389	determines that it is impractical for a related member that is subject to tax in this State, 5
390	390	another state, or a foreign nation that has entered into a comprehensive tax treaty with the 6
391	391	United States government, where the measure of the tax includes the payment to satisfy 7
392	392	the requirements of subsection (c)(3)(ii) of this section. 8
393	393
394	394	(e) (1) (I) If the payor and the recipient are both included in a combined or 9
395	395	consolidated report filed in a jurisdiction: 10
396	396
397	397	[(1)] 1. for purposes of subsection (c)(3)(ii)2 of this section, the 11
398	398	measure of the tax imposed by that jurisdiction shall be deemed to include the interest 12
399	399	expense or intangible expense; and 13
400	400
401	401	[(2)] 2. EXCEPT AS PROVIDED I N SUBPARAGRAPH (II) OF THIS 14
402	402	PARAGRAPH , for purposes of determining the effective rate of tax imposed by the 15
403	403	jurisdiction, the applicable apportionment rate is the lesser of: 16
404	404
405	405	[(i)] A. the apportionment rate of the recipient corporation, 17
406	406	determined by using only that corporation’s factors in the numerators and denominators of 18
407	407	the apportionment formula; or 19
408	408
409	409	[(ii)] B. the apportionment rate of the combined or consolidated 20
410	410	group, determined by combining the recipient corporation’s factors with the factors of other 21
411	411	members of the group included in the combined or consolidated report. 22
412	412
413	413	(II) THE EFFECTIVE RATE OF TAX IMPOSED AS TO AN Y STATE, 23
414	414	POSSESSION OF THE UNITED STATES, OR FOREIGN NATION SHALL BE ZERO IF: 24
415	415
416	416	1. THE RELATED MEMBER ’S NET INCOME TAX LIA BILITY 25
417	417	IN THE JURISDICTION IS REPORTED ON A COMBINED OR CONSOLID ATED RETURN 26
418	418	THAT INCLUDES THE PAYOR AND THE RECIPIENT; AND 27
419	419
420	420	2. THE REPORTED TRANSAC TIONS BETWEEN THE PAYOR 28
421	421	AND THE RECIPIENT ARE ELIMINATED OR OF FSET. 29
422	422
423	423	(2) FOR PURPOSES OF DETER MINING THE EFFECTIVE RATE OF TAX 30
424	424	IMPOSED BY A JURISDI CTION, IF A RELATED MEMBER ’S NET INCOME IS ELIM INATED 31
425	425	OR OFFSET BY A CREDI T OR SIMILAR ADJUSTM ENT THAT IS DEPENDEN T ON THE 32
426	426	RELATED MEMBER EITHE R MAINTAINING OR MAN AGING INTANGIBLE PROPERTY OR 33
427	427	COLLECTING INTEREST INCOME IN THE JURISDICTION, THE MAXIMUM STATUTOR Y 34
428	428	RATE OF TAX IMPOSED BY THE JURISDICTION SHALL BE DECREASED T O REFLECT 35 10 HOUSE BILL 337
429	429
430	430
431	431	THE STATUTORY RATE O F TAX THAT APPLIES T O THE RELATED MEMBER AS 1
432	432	EFFECTIVELY REDUCED BY THE CREDIT OR SIMILAR AD JUSTMENT. 2
433	433
434	434	(f) (1) In addition to the modifications under §§ 10–305 and 10–306 of this 3
435	435	subtitle, subject to paragraph (2) of this subsection, to determine Maryland taxable income, 4
436	436	an amount is subtracted from the federal taxable income of a corporation equal to the 5
437	437	amount received as royalties, interest, or similar income from intangibles from a related 6
438	438	member to the extent the related member, with respect to the payment, is subject to the 7
439	439	addition modification under subsection (b) of this section or a similar addition modification 8
440	440	of another state or of a foreign nation that has entered into a comprehensive tax treaty with 9
441	441	the United States government for intangible expenses or interest expenses paid to related 10
442	442	members. 11
443	443
444	444	(2) The subtraction modification under this subsection is not allowed to the 12
445	445	extent that: 13
446	446
447	447	(i) the transaction giving rise to the payment of the interest expense 14
448	448	or intangible expense had as a principal purpose the avoidance of State income taxes; 15
449	449
450	450	(ii) the interest expense or intangible expense was not paid pursuant 16
451	451	to arm’s–length contracts at an arm’s–length rate of interest or price; or 17
452	452
453	453	(iii) the aggregate effective tax rate imposed on the amounts received 18
454	454	by the recipient exceeds the aggregate effective tax rate imposed on the income of the payor 19
455	455	corporation. 20
456	456
457	457	(g) This section may not be construed: 21
458	458
459	459	(1) to require a corporation to include in or add to its net income more than 22
460	460	once any amount of interest expense or intangible expense that the corporation pays, 23
461	461	accrues, or incurs to a related member; or 24
462	462
463	463	(2) to limit or negate any other authority provided to the Comptroller under 25
464	464	this article, including: 26
465	465
466	466	(i) the authority to make adjustments under § 10–109 or § 10–402(e) 27
467	467	of this title; or 28
468	468
469	469	(ii) the authority to enter into agreements and compromises 29
470	470	otherwise allowed by law. 30
471	471
472	472	(h) The Comptroller shall adopt any regulations that are necessary or appropriate 31
473	473	to implement this section. 32
474	474
475	475	10–307. 33
476	476	HOUSE BILL 337 11
477	477
478	478
479	479	(a) To the extent included in federal taxable income, the amounts under this 1
480	480	section are subtracted from the federal taxable income of a corporation to determine 2
481	481	Maryland modified income. 3
482	482
483	483	(d) (1) IN THIS SUBSECTION , “DIVIDEND” DOES NOT INCLUDE ANY 4
484	484	AMOUNT TREATED AS A DIVIDEND UNDER § 245 OR § 1248 OF THE INTERNAL 5
485	485	REVENUE CODE. 6
486	486
487	487	(2) The subtraction under subsection (a) of this section includes dividends 7
488	488	received from a corporation if: 8
489	489
490	490	[(1)] (I) the receiving corporation owns, directly or indirectly, 50% or 9
491	491	more of the paying corporation’s outstanding shares of capital stock; and 10
492	492
493	493	[(2)] (II) the paying corporation is organized under the laws of a foreign 11
494	494	government. 12
495	495
496	496	SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect July 13
497	497	1, 2023, and shall be applicable to all taxable years beginning after December 31, 2022. 14