EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
[Brackets] indicate matter deleted from existing law.
*hb0046*
HOUSE BILL 46
Q3 3lr0316
HB 457/22 – W&M (PRE–FILED) CF 3lr1400
By: Delegates Lehman, Hill, Palakovich Carr, Pena–Melnyk, Ruth, Solomon, and
Terrasa
Requested: August 5, 2022
Introduced and read first time: January 11, 2023
Assigned to: Ways and Means
A BILL ENTITLED
AN ACT concerning 1
Corporate Income Tax – Combined Reporting 2
FOR the purpose of requiring certain corporations to compute Maryland taxable income 3
using a certain method; authorizing certain corporations, subject to regulations 4
adopted by the Comptroller, to determine certain income using a certain method; 5
requiring, subject to regulations adopted by the Comptroller, certain groups of 6
corporations to file a combined income tax return reflecting the aggregate income tax 7
liability of all the members of the group; requiring the Comptroller to adopt certain 8
regulations consistent with certain regulations adopted by the Multistate Tax 9
Commission; providing a subtraction modification under the Maryland corporate 10
income tax for certain changes to a certain combined group’s deferred tax assets or 11
liabilities that are the result of certain provisions of this Act; prohibiting the 12
subtraction from being reduced as a result of an event that occurs after the 13
calculation of the subtraction; providing, under certain circumstances, for the 14
carryforward of the subtraction; authorizing the Comptroller to review and alter the 15
amount of the subtraction specified in the statement or claimed on certain tax 16
returns; and generally relating to the Maryland income tax on corporations. 17
BY adding to 18
Article – Tax – General 19
Section 10–311 and 10–402.1 20
Annotated Code of Maryland 21
(2022 Replacement Volume) 22
BY repealing and reenacting, with amendments, 23
Article – Tax – General 24
Section 10–811 25
Annotated Code of Maryland 26
(2022 Replacement Volume) 27 2 HOUSE BILL 46
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 1
That the Laws of Maryland read as follows: 2
Article – Tax – General 3
10–311. 4
(A) (1) IN THIS SECTION THE F OLLOWING WORDS HAVE THE MEANINGS 5
INDICATED. 6
(2) “COMBINED GROUP ” HAS THE MEANING STAT ED IN § 10–402.1 OF 7
THIS TITLE. 8
(3) “NET DEFERRED TAX ASSE T” MEANS THE AMOUNT BY WHICH THE 9
DEFERRED TAX ASSETS EXCEED TH E DEFERRED TAX LIABI LITIES OF A COMBINED 10
GROUP, COMPUTED IN ACCORDAN CE WITH GENERALLY AC CEPTED ACCOUNTING 11
PRINCIPLES. 12
(4) “NET DEFERRED TAX LIAB ILITY” MEANS THE AMOUNT BY WHICH 13
THE DEFERRED TAX LAB ILITIES EXCEED THE D EFERRED TAX ASSE TS OF A 14
COMBINED GROUP , COMPUTED IN ACCORDAN CE WITH GENERALLY AC CEPTED 15
ACCOUNTING PRINCIPLE S. 16
(B) THIS SECTION APPLIES ONLY TO A COMBINED G ROUP OF WHICH THE 17
MEMBERS, ON OR BEFORE THE DAT E OF ENACTMENT OF TH E PROVISIONS OF § 18
10–402.1 OF THIS TITLE BY CHAPTER _____ (H.B. 46) OF THE ACTS OF THE 19
GENERAL ASSEMBLY OF 2023, WERE: 20
(1) PUBLICLY TRADED ; OR 21
(2) AFFILIATED WITH A CO MBINED GROUP THAT WA S PUBLICLY 22
TRADED, AND PARTICIPATED IN THE FILING OF THE PU BLICLY TRADED 23
CORPORAT ION’S FINANCIAL STATEMEN TS PREPARED IN ACCOR DANCE WITH 24
GENERALLY ACCEPTED A CCOUNTING PRINCIPLES . 25
(C) (1) SUBJECT TO PARAGRAPH (2) OF THIS SUBSECTION , IN ADDITION 26
TO THE MODIFICATIONS UNDER §§ 10–307 AND 10–308 OF THIS SUBTITLE , THE 27
AMOUNTS DETERMINED U NDER SUBSECTION (D) OF THIS SECTION ARE 28
SUBTRACTED FROM THE FEDERAL TAXABLE INCO ME OF A COMBINED GRO UP TO 29
DETERMINE MARYLAND MODIFIED INC OME OF THE COMBINED GROUP IF, AS OF THE 30
DATE OF ENACTMENT OF § 10–402.1 OF THIS TITLE BY CHAPTER _____ (H.B. 46) OF 31
THE ACTS OF THE GENERAL ASSEMBLY OF 2023, THE ENACTMENT RESULT ED IN AN 32
AGGREGATE : 33 HOUSE BILL 46 3
(I) INCREASE TO THE COMB INED GROUP’S NET DEFERRED TAX 1
LIABILITY; 2
(II) DECREASE TO THE COMB INED GROUP’S NET DEFERRED TAX 3
ASSET; OR 4
(III) CHANGE FROM A NET DE FERRED TAX ASSET TO A NET 5
DEFERRED TAX LIABILI TY. 6
(2) THE AMOUNT OF ANY INC REASE, DECREASE, OR CHANGE SHALL 7
BE DETERMINED WITHOU T REGARD TO THE SUBT RACTION AUTHORIZED U NDER 8
THIS SECTION. 9
(D) (1) SUBJECT TO PARAGRAPHS (2) AND (3) OF THIS SUBSECTION , THE 10
SUBTRACTION AUTHORIZED UNDER THIS SECTION IS EQUA L TO ONE–TENTH OF THE 11
AMOUNT NECESSARY TO OFFSET THE AGGREGATE : 12
(I) INCREASE TO THE COMB INED GROUP’S NET DEFERRED TAX 13
LIABILITY; 14
(II) DECREASE TO THE COMB INED GROUP’S NET DEFERRED TAX 15
ASSET; OR 16
(III) CHANGE FROM A NET DE FERRED TAX ASSET TO A NET 17
DEFERRED TAX LIABILI TY. 18
(2) THE AMOUNT OF THE SUB TRACTION AS DETERMIN ED UNDER 19
PARAGRAPH (1) OF THIS SUBSECTION S HALL BE: 20
(I) DIVIDED BY THE RATE DETERMINED UNDER § 10–105(B) OF 21
THIS TITLE IN EFFECT ON JANUARY 1, 2025; AND 22
(II) FURTHER DIVIDED BY T HE MARYLAND APPORTIONMEN T 23
FRACTION THAT WAS US ED BY THE COMBINED G ROUP IN THE CALCULAT ION OF THE 24
DEFERRED TAX ASSETS AND DEFERRED TAX LIA BILITIES AS DESCRIBE D IN 25
PARAGRAPH (1) OF THIS SUBSECTION . 26
(3) THE SUBTRACTION AUTHORIZE D UNDER THIS SECTION MAY BE 27
USED TO REDUCE THE C OMBINED GROUP ’S MARYLAND MODIFIED INC OME FOR 10 28
CONSECUTIVE TAXABLE YEARS BEGINNING WITH THE FIRST TAXABLE YE AR THAT 29
BEGINS AFTER DECEMBER 31, 2029. 30
(4) THE SUBTRACTION CALCU LATED UNDER THIS SECTION MAY NOT 31 4 HOUSE BILL 46
BE REDUCED AS A RESU LT OF ANY EVENT THAT OCCURS AFTER THE CAL CULATION, 1
INCLUDING THE DISPOS ITION OR ABANDONMENT OF ANY ASSET. 2
(5) THE SUBTRACTION AUTHO RIZED UNDER THIS SEC TION: 3
(I) SHALL BE CALCULATED WITHOUT REGARD TO TH E FEDERAL 4
TAX EFFECT; AND 5
(II) MAY NOT ALTER THE TA X BASIS OF ANY ASSET . 6
(6) IF THE SUBTRACTION DE TERMINED UNDER THIS SECTION 7
RESULTS IN A SUBTRAC TION THAT EXCEEDS MARYLAND MODIFIED INC OME 8
COMPUTED WITHOUT REG ARD TO THE SUBTRACTI ON UNDER THIS SECTIO N, THE 9
AMOUNT OF THE EXCESS MAY BE CARRIED FORWA RD TO SUCCEEDING TAX ABLE 10
YEARS AND USED TO RE DUCE MARYLAND MODIFIED INC OME IN EACH SUCCEEDI NG 11
TAXABLE YEAR UNTIL T HE EXCESS IS FULLY U SED. 12
(E) (1) ON OR BEFORE JULY 1, 2026, A COMBINED GROUP THA T INTENDS 13
TO CLAIM A SUBTRACTION U NDER THIS SECTION SH ALL FILE WITH THE 14
COMPTROLLER A STATEMENT THAT SPE CIFIES THE TOTAL AMO UNT OF THE 15
SUBTRACTION THAT THE COMBINED GROUP INTEN DS TO CLAIM. 16
(2) THE STATEMENT SHALL B E ON THE FORM AND CO NTAIN THE 17
INFORMATION THE COMPTROLLER REQUIRES . 18
(3) THE COMPTROLLER MAY REVIE W AND ALTER THE AMOU NT OF: 19
(I) THE SUBTRACTION SPEC IFIED IN THE STATEME NT 20
REQUIRED UNDER PARAG RAPH (1) OF THIS SUBSECTION ; OR 21
(II) THE SUBTRACTION CLAI MED ON A TAX RETURN FOR ANY 22
TAXABLE YEAR . 23
10–402.1. 24
(A) (1) IN THIS SECTION THE F OLLOWING WORDS HAVE THE MEANINGS 25
INDICATED. 26
(2) “COMBINED GROUP ” MEANS A GROUP OF COR PORATIONS: 27
(I) THAT IS ENGAGED IN A UNITARY BUSINESS ; 28
(II) IN WHICH MORE THAN 50% OF THE VOTING STOCK OF EACH 29
MEMBER IS DIRECTLY OR INDIRECT LY OWNED BY: 30 HOUSE BILL 46 5
1. A COMMON OWNER OR CO MMON OWNERS , EITHER 1
CORPORATE OR NONCORP ORATE; OR 2
2. ONE OR MORE MEMBER C ORPORATIONS OF THE 3
GROUP; 4
(III) THE MEMBERS OF WHICH ARE SUBJECT TO THE I NCOME TAX 5
OR WOULD BE SUBJECT TO THE INCOME TAX IF DOING BUSINESS IN THE STATE; AND 6
(IV) CONSISTING OF ANY OT HER MEMBERS UNDER TH E 7
CIRCUMSTANCES AND TO THE EXTENT PROVIDED IN REGULATIONS ADOPT ED BY 8
THE COMPTROLLER TO PREVEN T THE AVOIDANCE OF T AX OR TO REFLECT CLE ARLY 9
THE INCOME OF ANY ME MBER OF THE COMBINED GROUP FOR ANY PERIOD . 10
(3) “COMBINED RETURN ” MEANS A TAX RETURN F OR THE COMBINED 11
GROUP CONTAINING INF ORMATION AS PROVIDED IN THIS SECTION OR O THERWISE 12
REQUIRED BY THE COMPTROLLER . 13
(4) “UNITARY BUSINESS ” MEANS A SINGLE ECONO MIC ENTERPRISE 14
THAT IS MADE EITHER OF SEPARATE PARTS OF A SINGLE BUSINESS EN TITY OR OF A 15
COMMONLY CONTROLLED GROUP OF BUSINESS EN TITIES THAT ARE SUFF ICIENTLY 16
INTERDEPENDENT , INTEGRATED, AND INTERRELATED THR OUGH THEIR ACTIVITIE S 17
SO AS TO PROVIDE MUT UAL BENEFIT THAT PRODUCES A SHARING O R EXCHANGE OF 18
VALUE AMONG THEM AND A SIGNIFICANT FLOW O F VALUE TO THE SEPAR ATE PARTS. 19
(B) (1) THE TERM “UNITARY BUSINESS ” SHALL BE CONSTRUED T O THE 20
BROADEST EXTENT ALLO WED UNDER THE U.S. CONSTITUTION. 21
(2) A BUSINESS CONDUCTED DIRECTLY OR INDIRECT LY BY ONE 22
CORPORATION IS A UNI TARY BUSINESS WITH R ESPECT TO THAT PORTI ON OF A 23
BUSINESS CONDUCTED B Y ANOTHER CORPORATIO N THROUGH ITS DIRECT OR 24
INDIRECT INTEREST IN A PARTNERSHIP IF THE REQUIREMENTS OF SUBS ECTION 25
(A)(4) OF THIS SECTION AR E SATISFIED, INCLUDING IF THERE I S SYNERGY AND AN 26
EXCHANGE AND FLOW OF VALUE BETWEEN THE TW O PARTS OF THE BUSIN ESS AND 27
THE TWO CORPORATIONS ARE MEMBERS OF THE S AME COMMONLY CONTROL LED 28
GROUP. 29
(3) A BUSINESS CONDUCTED B Y A PARTNERSHIP SHAL L BE TREATED 30
AS CONDUCTED BY ITS PAR TNERS, WHETHER DIRECTLY HEL D OR INDIRECTLY HELD 31
THROUGH A SERIES OF PARTNERSHIPS , TO THE EXTENT OF THE PARTNER’S 32
DISTRIBUTIVE SHARE O F THE PARTNERSHIP ’S INCOME, REGARDLESS OF THE 33
PERCENTAGE OF THE PA RTNER’S OWNERSHIP INTEREST OR ITS DISTRIBUTIVE OR 34
ANY OTHER SHARE OF P ARTNERSHIP INCOME . 35 6 HOUSE BILL 46
(C) (1) EXCEPT AS PROVIDED BY AND SUBJECT TO REGUL ATIONS 1
ADOPTED BY THE COMPTROLLER , FOR ALL TAXABLE YEAR S BEGINNING AFTER 2
DECEMBER 31, 2024, A CORPORATION ENGAGE D IN A UNITARY BUSIN ESS SHALL 3
FILE A COMBINED RETURN , REPORTING AND PAYING TAX ON WORLDWIDE TAX ABLE 4
INCOME AS A COMBINED GROUP, REFLECTING THE AGGRE GATE INCOME TAX 5
LIABILITY OF ALL MEM BERS OF THE COMBINED GROUP THAT ARE ENGAG ED IN A 6
UNITARY BUSINESS . 7
(2) THE TAXABLE INCOME OF A CORPORATION RE QUIRED TO FILE 8
UNDER § 10–811(A)(2) OF THIS TITLE IS EQU AL TO THE COMBINED G ROUP’S 9
MARYLAND MODIFIED INC OME AS ADJUSTED UNDE R SUBSECTION (D)(3) OF THIS 10
SECTION. 11
(D) (1) THE MARYLAND MODIFIED INC OME OF THE COMBINED GROUP 12
EQUALS THE PRODUCT O F: 13
(I) THE COMBINED GROUP ’S APPORTIONABLE MARYLAND 14
MODIFIED INCOME , AS DETERMINED UNDER PARAGRAPH (2) OF THIS SUBSECTION 15
AND ADJUSTED UNDER P ARAGRAPH (3) OF THIS SUBSECTION ; AND 16
(II) THE COMBINED GROUP ’S MARYLAND APPORTIONMEN T 17
FACTOR, AS DETERMINED UNDER PARAGRAPH (4) OF THIS SUBSECTION . 18
(2) (I) SUBJECT TO SUBPARAGRA PHS (II) THROUGH (IV) OF THIS 19
PARAGRAPH , THE APPORTIONABLE MARYLAND MODIFIED INC OME OF THE 20
COMBINED GROUP EQUAL S THE SUM OF THE COR PORATION’S AND EACH MEMBER ’S 21
MARYLAND MODIFIED INC OME. 22
(II) 1. SUBJECT TO SUBSUBPARA GRAPH 2 OF THIS 23
SUBPARAGRAPH , FOR ANY MEMBER INCOR PORATED IN THE UNITED STATES OR 24
INCLUDED IN A CONSOL IDATED FEDERAL CORPO RATE INCOME TAX RETU RN, THE 25
INCOME TO BE INCLUDE D IN THE TOTAL APPOR TIONABLE INCOME OF T HE 26
COMBINED GROUP IS THE MARYLAND MODIFIED INC OME AS CALCULATED UN DER § 27
10–304 OF THIS TITLE. 28
2. THE INCOME OF EACH ME MBER SHALL BE 29
CALCULATED ON A SEPA RATE RETURN BASIS AS IF THE MEMBER WERE N OT 30
CONSOLIDATED FOR FED ERAL INCOME TAX PURP OSES. 31
(III) 1. FOR ANY MEMBE R NOT INCLUDED UNDER 32
SUBPARAGRAPH (II) OF THIS PARAGRAPH , THE INCOME TO BE INC LUDED IN THE 33
TOTAL INCOME OF THE COMBINED GROUP IS DE TERMINED AS PROVIDED UNDER 34
THIS SUBPARAGRAPH . 35 HOUSE BILL 46 7
2. A PROFIT AND LOSS STAT EMENT SHALL BE PREPA RED 1
FOR EACH FOREIGN BRA NCH OR CORPORATION IN THE CURRENCY IN WHICH TH E 2
BOOKS OF ACCOUNT OF THE BRANCH OR CORPOR ATION ARE REGULARLY 3
MAINTAINED. 4
3. THE PROFIT AND LOSS S TATEMENT SHALL BE 5
ADJUSTED TO CONFORM TO GENERALLY ACCEPTE D ACCOUNTING PRINCIP LES AS 6
ADOPTED BY THE UNITED STATES FINANCIAL ACCOUNTING STANDARDS BOARD 7
FOR THE PREPARATION OF THE PROFIT AND LO SS STATEMENTS , EXCEPT AS 8
MODIFIED BY REGULATI ON. 9
4. EXCEPT AS OTHERWISE P ROVIDED BY REGULATIO N, 10
THE PROFIT AND LOSS STATEMENT OF EACH ME MBER OF THE COMBINED GROUP, 11
AND THE APPORTIONMENT FA CTORS RELATED TO EAC H STATEMENT , WHETHER 12
UNITED STATES OR FOREIGN , SHALL BE TRANSLATED INTO THE CURRENCY IN 13
WHICH THE PARENT COM PANY MAINTAINS ITS B OOKS AND RECORDS . 14
5. INCOME APPORTIONED TO THIS STATE SHALL BE 15
EXPRESSED IN UNITED STATES DOLLARS . 16
(IV) IF A UNITARY BUSINESS INCLUDES INCOME FROM A 17
PARTNERSHIP , THE INCOME TO BE INC LUDED IN THE TOTAL I NCOME OF THE 18
COMBINED GROUP EQUAL S THE DIRECT AND IND IRECT DISTRIBUTIVE S HARE OF 19
THE PARTNERSHIP ’S UNITARY BUSINESS I NCOME ALLOCATED TO ANY MEMBER OF 20
THE COMBINED GROUP . 21
(3) THE COMBINED GROUP ’S APPORTIONABLE MARYLAND MODIFIED 22
INCOME SHALL BE ADJU STED TO ELIMINATE IN TERCOMPANY TRANSACTI ONS AS 23
DETERMINED UNDER THE INTERNAL REVENUE CODE. 24
(4) (I) SUBJECT TO SUBPARAGRA PH (II) OF THIS PARAGRAPH , THE 25
COMBINED GROUP ’S MARYLAND APPORTIONMEN T FACTOR IS A FRACTI ON: 26
1. THE NUMERATOR OF WHI CH IS THE SUM OF THE 27
CORPORATION ’S AND EACH MEMBER ’S MARYLAND FACTORS UNDE R § 10–402 OF 28
THIS SUBTITLE; AND 29
2. THE DENOMINATOR OF W HICH IS THE SUM OF THE 30
CORPORATION ’S AND EACH MEMBER ’S FACTORS UNDER § 10–402 OF THIS SUBTITLE. 31
(II) THE APPORTIONMENT FAC TORS OF PASS –THROUGH 32
ENTITY MEMBERS ARE I NCLUDED IN THE NUMER ATOR UNDER SUBPARAGR APH (I)1 33
OF THIS PARAGRAPH AN D THE DENOMINATOR UN DER SUBPARAGRAPH (I)2 OF THIS 34 8 HOUSE BILL 46
PARAGRAPH TO THE EXT ENT OF THE CORPORATI ON’S DIRECT AND INDIREC T 1
DISTRIBUTIVE SHARE OF THAT ENT ITY. 2
(E) (1) SUBJECT TO REGULATION S ADOPTED BY THE COMPTROLLER , A 3
CORPORATION THAT IS PART OF A COMBINED GROUP MAY ELECT TO DETERMINE ITS 4
INCOME DERIVED FROM OR ATTRIBUTABLE TO T RADE OR BUSINESS IN THE STATE 5
USING THE WATER ’S EDGE METHOD AS DESCRIBED IN THIS SUBSECTION . 6
(2) UNDER THE WATER ’S EDGE METHOD , THE COMBINED GROUP FOR 7
PURPOSES OF THE COMB INED REPORTING METHO D REQUIRED UNDER THI S 8
SECTION SHALL INCLUD E ONLY THE FOLLOWING AFFILIATED ENTITIES : 9
(I) CORPORATIONS THAT AR E INCORPORATED IN THE UNITED 10
STATES, EXCLUDING CORPORATIO NS MAKING AN ELECTIO N UNDER §§ 931 11
THROUGH 934 OF THE INTERNAL REVENUE CODE; 12
(II) DOMESTIC INTERNATION AL SALES CORPORATION S, AS 13
DESCRIBED IN §§ 991 THROUGH 994 OF THE INTERNAL REVENUE CODE; 14
(III) ANY CORPORATION OTHER THAN A BANK, REGARDLESS OF 15
THE PLACE WHERE IT I S INCORPORATED , IF THE AVERAGE OF TH E CORPORATION ’S 16
PROPERTY, PAYROLL, AND SALES FACTORS WI THIN THE UNITED STATES IS 20% OR 17
MORE; 18
(IV) EXPORT TRADE CORPORA TIONS, AS DESCRIBED IN §§ 970 19
AND 971 OF THE INTERNAL REVENUE CODE; 20
(V) A FOREIGN CORPORATIO N DERIVING GAIN OR L OSS FROM 21
DISPOSITION OF AN IN TEREST IN REAL PROPE RTY IN THE UNITED STATES TO THE 22
EXTENT RECOGNIZED UN DER § 897 OF THE INTERNAL REVENUE CODE; AND 23
(VI) UNDER THE CIRCU MSTANCES AND TO THE EXTENT 24
PROVIDED BY REGULATI ONS THAT THE COMPTROLLER ADOPTS : 25
1. A CORPORATION NOT DE SCRIBED IN ITEMS (I) 26
THROUGH (V) OF THIS PARAGRAPH TO THE EXTENT OF THE CO RPORATION’S INCOME 27
DERIVED FROM OR ATTR IBUTABLE TO SOURCES WITHIN THE UNITED STATES AND 28
THE CORPORATION ’S FACTORS ASSIGNABLE TO A LOCATION WITHIN THE UNITED 29
STATES; OR 30
2. AN AFFILIATED CORPOR ATION THAT IS A 31
CONTROLLED FOREIGN C ORPORATION , AS DEFINED IN § 957 OF THE INTERNAL 32
REVENUE CODE. 33
HOUSE BILL 46 9
(3) THE USE OF THE WATER ’S EDGE METHOD IS SUBJECT TO THE 1
TERMS AND CONDITIONS THAT THE COMPTROLLER REQUIRES BY REGULATION , 2
INCLUDING ANY CONDIT IONS THAT ARE NECESS ARY OR APPROPRIATE T O PREVENT 3
THE AVOIDANCE OF TAX OR TO REFLECT CLEARL Y THE INCOME FOR ANY PERIOD. 4
(F) (1) (I) AN ELECTION TO USE THE WATER ’S EDGE METHOD IN 5
ACCORDANCE WITH SUBS ECTION (E) OF THIS SECTION IS E FFECTIVE ONLY IF MAD E 6
ON A TIMELY FILED OR IGINAL RETURN FOR A TAX YEAR BY EVERY ME MBER OF THE 7
UNITARY BUSINESS . 8
(II) THE COMPTROLLER SHALL DEV ELOP REGULATIONS 9
GOVERNIN G THE IMPACT, IF ANY, ON THE SCOPE OR APPL ICATION OF AN ELECTI ON 10
TO USE THE WATER ’S EDGE METHOD , INCLUDING TERMINATIO N OR DEEMED 11
ELECTION, RESULTING FROM A CHA NGE IN THE COMPOSITI ON OF THE UNITARY 12
BUSINESS, THE COMBINED GROUP , THE TAXPAYER MEMBERS , OR ANY OTHER 13
SIMILAR CHANGE . 14
(2) AN ELECTION TO USE TH E WATER’S EDGE METHOD SHALL 15
CONSTITUTE CONSENT T O THE REASONABLE PRO DUCTION OF DOCUMENTS AND 16
TAKING OF DEPOSITION S IN ACCORDANCE WITH THE MARYLAND RULES. 17
(3) AT THE DISCRETION OF THE COMPTROLLER , AN ELECTION TO 18
USE THE WATER ’S EDGE METHOD MAY BE DISREGARDED IN PART OR IN WHOLE, AND 19
THE INCOME AND APPOR TIONMENT FACTORS OF ANY MEMBER OF THE TA XPAYER’S 20
UNITARY GROUP MAY BE INCLUDED IN THE COMB INED REPORT WITHOUT REGARD 21
TO THE PROVISIONS OF THIS SECTION, IF ANY MEMBER OF THE UNITARY GROUP 22
FAILS TO COMPLY WITH ANY PROVISION OF THI S SECTION OR IF A PE RSON 23
OTHERWISE NOT INCLUD ED IN THE WATER ’S EDGE COMBINED GROU P WAS AVAILED 24
OF A SUBSTANTIAL OBJ ECTIVE OF AVOIDING STATE INCOME TAX . 25
(4) (I) SUBJECT TO SUBPAR AGRAPHS (II) THROUGH (IV) OF THIS 26
PARAGRAPH , AN ELECTION TO USE T HE WATER’S EDGE METHOD IS BIN DING FOR 27
AND APPLICABLE TO TH E TAXABLE YEAR IN WH ICH THE ELECTION IS MADE AND ALL 28
TAXABLE YEARS THEREA FTER FOR A PERIOD OF 10 YEARS. 29
(II) AN ELECTION TO USE T HE WATER’S EDGE METHOD MAY BE 30
WITHDRAWN OR REINSTI TUTED AFTER WITHDRAW AL, BEFORE THE EXPIRATIO N OF 31
THE 10–YEAR PERIOD, ONLY ON WRITTEN REQU EST FOR REASONABLE C AUSE AND 32
ONLY WITH THE WRITTE N PERMISSION OF THE COMPTROLLER . 33
(III) IF THE COMPTROLLER GRANTS A WITHDRAWAL OF THE 34
ELECTION UNDER SUBPA RAGRAPH (II) OF THIS PARAGRAPH , THE COMPTROLLER 35
SHALL IMPOSE REASONA BLE CONDITIONS AS NE CESSARY TO PREVENT T HE EVASION 36
OF TAX OR TO CLEARLY REFLECT INCOME FOR T HE ELECTION PERIOD B EFORE OR 37 10 HOUSE BILL 46
AFTER THE WITHDRAWAL . 1
(IV) 1. SUBJECT TO SUBSUBPARA GRAPH 2 OF THIS 2
SUBPARAGRAPH , ON THE EXPIRATION OF THE 10–YEAR PERIOD, A TAXPAYER MAY 3
WITHDRAW FROM THE EL ECTION TO USE THE WA TER’S EDGE METHOD . 4
2. THE WITHDRAWAL SHALL BE MADE IN WRITING 5
WITHIN 1 YEAR BEFORE THE EXPI RATION OF THE ELECTION AN D IS BINDING FOR A 6
PERIOD OF 10 YEARS, SUBJECT TO THE SAME CONDITIONS AS APPLIE D TO THE 7
ORIGINAL ELECTION . 8
3. IF NO WITHDRAWAL IS P ROPERLY MADE UNDER T HIS 9
SUBPARAGRAPH , THE ELECTION TO USE THE WATER ’S EDGE METHOD SHALL 10
REMAIN IN EF FECT FOR AN ADDITION AL 10–YEAR PERIOD, SUBJECT TO THE SAME 11
CONDITIONS AS APPLIE D TO THE ORIGINAL EL ECTION. 12
(G) (1) THE COMPTROLLER SHALL ADO PT REGULATIONS THAT ARE 13
NECESSARY AND APPROP RIATE TO CARRY OUT T HIS SECTION. 14
(2) THE REGULATIONS ADOPT ED BY THE COMPTROLLER SHALL BE 15
CONSISTENT WITH THE “PRINCIPLES FOR DETERMINING THE EXISTENCE OF A 16
UNITARY BUSINESS” (REG. IV.1.(B)) OF THE MODEL GENERAL ALLOCATION AND 17
APPORTIONMENT REGULATIONS, AS ADOPTED BY THE MULTISTATE TAX 18
COMMISSION. 19
10–811. 20
(A) (1) [Each member of] EXCEPT AS PROVIDED BY AND SUBJECT TO 21
REGULATIONS ADOPTED BY THE COMPTROLLER , an affiliated group of corporations 22
[shall file a separate income tax return] ENGAGED IN A UNITARY BUSINESS SHALL FILE 23
A COMBINED INCOME TA X RETURN REFLECTING THE AGGRE GATE INCOME TAX 24
LIABILITY OF ALL THE MEMBERS OF THE AFFIL IATED GROUP THAT ARE ENGAGED IN 25
A UNITARY BUSINESS . 26
(2) THE RETURN REQUIRED U NDER PARAGRAPH (1) OF THIS 27
SUBSECTION SHALL INC LUDE THE INCOME AND APPORTIONMENT FACTOR S 28
DETERMINED UNDER § 10–402.1(D) AND (E) OF THIS TITLE, AND ANY OTHER 29
INFORMATION REQUIRED BY THE COMPTROLLER , FOR ALL MEMBERS OF T HE 30
COMBINED GROUP WHERE VER LOCATED OR DOING BUSINESS. 31
(3) (I) EXCEPT AS PROVIDED IN SUBPARAGRAPH (II) OF THIS 32
PARAGRAPH , THE COMBINED RETURN SHALL BE FILE D UNDER THE NAME AND 33
FEDERAL EMPLOYER IDE NTIFICATION NUMBER O F THE PARENT CORPORA TION IF 34
THE PARENT IS A MEMB ER OF THE COMBINED G ROUP. 35 HOUSE BILL 46 11
(II) IF THERE IS NO PARENT CORPORATION OR IF TH E PARENT 1
IS NOT A MEMBER OF T HE COMBINED GROUP , THE MEMBERS OF THE C OMBINED 2
GROUP SHALL CHOOSE A MEMBER TO FILE THE R ETURN. 3
(III) THE FILING MEMBER UND ER SUBPARAGRAPH (I) OR (II) OF 4
THIS PARAGRAPH SHALL CONTINUE TO FILE THE COMBINED RETURN UNLE SS THE 5
FILING MEMBER IS NO LONGER THE PARENT CO RPORATION OR NO LONG ER A 6
MEMBER OF THE COMBINED GR OUP. 7
(4) THE RETURN SHALL BE S IGNED BY A RESPONSIB LE OFFICER OF 8
THE FILING MEMBER ON BEHALF OF THE COMBIN ED GROUP MEMBERS . 9
(5) MEMBERS OF THE COMBIN ED GROUP ARE JOINTLY AND 10
SEVERALLY LIABLE FOR THE TAX LIABILITY OF THE COMBINED GR OUP INCLUDED 11
IN THE COMBINED RETU RN. 12
(B) (1) THE COMPTROLLER MAY , BY REGULATION , REQUIRE THAT THE 13
COMBINED RETURN INCL UDE THE INCOME AND A SSOCIATED APPORTIONM ENT 14
FACTORS OF ENTITIES THAT ARE NOT INCLUDE D IN THE COMBINED RE PORT BUT 15
THAT ARE MEMBERS OF A UNITARY BUSINESS IN O RDER TO REFLECT PROP ER 16
APPORTIONMENT OF INC OME OF THE ENTIRE UN ITARY BUSINESS. 17
(2) IF THE COMPTROLLER DETERMINE S THAT THE REPORTED 18
INCOME OR LOSS OF A TAXPAYER ENGAGED IN A UNITARY BUSINESS W ITH A MEMBER 19
NOT INCLUDED IN THE COMBINED GROUP REPRESENTS AN AVOIDANCE OR EVASION 20
OF TAX, THE COMPTROLLER MAY , ON A CASE–BY–CASE BASIS, REQUIRE THAT ALL 21
OR PART OF THE INCOM E AND ASSOCIATED APP ORTIONMENT FACTORS O F THE 22
MEMBER BE INCLUDED I N THE TAXPAYER ’S COMBINED RETURN . 23
(3) THE COMPTROLLER M AY REQUIRE: 24
(I) THE EXCLUSION OF ONE OR MORE FACTORS , THE 25
INCLUSION OF ONE OR MORE ADDITIONAL FACT ORS, OR THE EMPLOYMENT OF ANY 26
OTHER METHOD THAT WI LL FAIRLY REPRESENT THE TAXPAYER ’S BUSINESS IN THIS 27
STATE; OR 28
(II) THE EMPLOYMENT OF AN Y OTHER METHO D TO EFFECTUATE 29
A PROPER REFLECTION OF THE TOTAL AMOUNT OF INCOME SUBJECT TO 30
APPORTIONMENT AND AN EQUITABLE ALLOCATION AND APPORTIONMENT OF THE 31
COMBINED GROUP ’S OR ITS MEMBERS ’ INCOME. 32
(C) THE COMPTROLLER SHALL ADO PT REGULATIONS THAT ARE 33
NECESSARY AND APPROPRIATE TO CARRY OUT THIS SECTION . 34 12 HOUSE BILL 46
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect July 1
1, 2024, and shall be applicable to all taxable years beginning after December 31, 2024. 2