| 1 | 1 | | |
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| 2 | 2 | | |
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| 3 | 3 | | EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW. |
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| 4 | 4 | | [Brackets] indicate matter deleted from existing law. |
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| 5 | 5 | | *sb0576* |
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| 6 | 6 | | |
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| 7 | 7 | | SENATE BILL 576 |
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| 8 | 8 | | Q3 3lr1400 |
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| 9 | 9 | | |
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| 10 | 10 | | By: Senators Lewis Young and Rosapepe |
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| 11 | 11 | | Introduced and read first time: February 6, 2023 |
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| 12 | 12 | | Assigned to: Budget and Taxation |
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| 13 | 13 | | |
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| 14 | 14 | | A BILL ENTITLED |
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| 15 | 15 | | |
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| 16 | 16 | | AN ACT concerning 1 |
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| 17 | 17 | | |
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| 18 | 18 | | Corporate Income Tax – Combined Reporting 2 |
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| 19 | 19 | | |
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| 20 | 20 | | FOR the purpose of requiring certain corporations to compute Maryland taxable income 3 |
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| 21 | 21 | | using a certain method; authorizing certain corporations, subject to regulations 4 |
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| 22 | 22 | | adopted by the Comptroller, to determine certain income using a certain method; 5 |
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| 23 | 23 | | requiring, subject to regulations adopted by the Comptroller, certain groups of 6 |
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| 24 | 24 | | corporations to file a combined income tax return reflecting the aggregate income tax 7 |
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| 25 | 25 | | liability of all the members of the group; requiring the Comptroller to adopt certain 8 |
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| 26 | 26 | | regulations consistent with certain regulations adopted by the Multistate Tax 9 |
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| 27 | 27 | | Commission; providing a subtraction modification under the Maryland corporate 10 |
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| 28 | 28 | | income tax for certain changes to a certain combined group’s deferred tax assets or 11 |
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| 29 | 29 | | liabilities that are the result of certain provisions of this Act; prohibiting the 12 |
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| 30 | 30 | | subtraction from being reduced as a result of an event that occurs after the 13 |
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| 31 | 31 | | calculation of the subtraction; providing, under certain circumstances, for the 14 |
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| 32 | 32 | | carryforward of the subtraction; authorizing the Comptroller to review and alter the 15 |
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| 33 | 33 | | amount of the subtraction specified in the statement or claimed on certain tax 16 |
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| 34 | 34 | | returns; and generally relating to the Maryland income tax on corporations. 17 |
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| 35 | 35 | | |
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| 36 | 36 | | BY adding to 18 |
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| 37 | 37 | | Article – Tax – General 19 |
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| 38 | 38 | | Section 10–311 and 10–402.1 20 |
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| 39 | 39 | | Annotated Code of Maryland 21 |
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| 40 | 40 | | (2022 Replacement Volume) 22 |
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| 41 | 41 | | |
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| 42 | 42 | | BY repealing and reenacting, with amendments, 23 |
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| 43 | 43 | | Article – Tax – General 24 |
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| 44 | 44 | | Section 10–811 25 |
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| 45 | 45 | | Annotated Code of Maryland 26 |
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| 46 | 46 | | (2022 Replacement Volume) 27 |
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| 47 | 47 | | |
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| 48 | 48 | | SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 28 2 SENATE BILL 576 |
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| 49 | 49 | | |
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| 50 | 50 | | |
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| 51 | 51 | | That the Laws of Maryland read as follows: 1 |
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| 52 | 52 | | |
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| 53 | 53 | | Article – Tax – General 2 |
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| 54 | 54 | | |
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| 55 | 55 | | 10–311. 3 |
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| 56 | 56 | | |
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| 57 | 57 | | (A) (1) IN THIS SECTION THE F OLLOWING WORDS HAVE THE MEANINGS 4 |
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| 58 | 58 | | INDICATED. 5 |
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| 59 | 59 | | |
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| 60 | 60 | | (2) “COMBINED GROUP ” HAS THE MEANING STAT ED IN § 10–402.1 OF 6 |
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| 61 | 61 | | THIS TITLE. 7 |
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| 62 | 62 | | |
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| 63 | 63 | | (3) “NET DEFERRED TAX ASSE T” MEANS THE AMOUNT BY WHICH THE 8 |
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| 64 | 64 | | DEFERRED TAX ASSETS EXCEED THE DEFERRED TAX LIABILITIES OF A COMBINED 9 |
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| 65 | 65 | | GROUP, COMPUTED IN ACCORDAN CE WITH GENERALLY AC CEPTED ACCOUNTING 10 |
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| 66 | 66 | | PRINCIPLES. 11 |
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| 67 | 67 | | |
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| 68 | 68 | | (4) “NET DEFERRED TAX LIAB ILITY” MEANS THE AMOUNT BY WHICH 12 |
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| 69 | 69 | | THE DEFERRED TAX LAB ILITIES EXCEED THE D EFERRED TAX ASSETS O F A 13 |
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| 70 | 70 | | COMBINED GROUP , COMPUTED IN ACCORDAN CE WITH GENERALLY AC CEPTED 14 |
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| 71 | 71 | | ACCOUNTING PRINCIPLE S. 15 |
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| 72 | 72 | | |
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| 73 | 73 | | (B) THIS SECTION APP LIES ONLY TO A COMBI NED GROUP OF WHICH T HE 16 |
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| 74 | 74 | | MEMBERS, ON OR BEFORE THE DAT E OF ENACTMENT OF TH E PROVISIONS OF § 17 |
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| 75 | 75 | | 10–402.1 OF THIS TITLE BY CHAPTER _____ (H.B. 46) OF THE ACTS OF THE 18 |
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| 76 | 76 | | GENERAL ASSEMBLY OF 2023, WERE: 19 |
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| 77 | 77 | | |
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| 78 | 78 | | (1) PUBLICLY TRADED ; OR 20 |
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| 79 | 79 | | |
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| 80 | 80 | | (2) AFFILIATED WITH A COMBINED GROU P THAT WAS PUBLICLY 21 |
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| 81 | 81 | | TRADED, AND PARTICIPATED IN THE FILING OF THE PU BLICLY TRADED 22 |
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| 82 | 82 | | CORPORATION ’S FINANCIAL STATEMEN TS PREPARED IN ACCOR DANCE WITH 23 |
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| 83 | 83 | | GENERALLY ACCEPTED A CCOUNTING PRINCIPLES . 24 |
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| 84 | 84 | | |
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| 85 | 85 | | (C) (1) SUBJECT TO PARAGRAPH (2) OF THIS SUBSE CTION, IN ADDITION 25 |
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| 86 | 86 | | TO THE MODIFICATIONS UNDER §§ 10–307 AND 10–308 OF THIS SUBTITLE , THE 26 |
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| 87 | 87 | | AMOUNTS DETERMINED U NDER SUBSECTION (D) OF THIS SECTION ARE 27 |
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| 88 | 88 | | SUBTRACTED FROM THE FEDERAL TAXABLE INCO ME OF A COMBINED GRO UP TO 28 |
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| 89 | 89 | | DETERMINE MARYLAND MODIFIED INC OME OF THE COMBINED GROUP IF , AS OF THE 29 |
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| 90 | 90 | | DATE OF ENACTMENT OF § 10–402.1 OF THIS TITLE BY CHAPTER _____ (H.B. 46) OF 30 |
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| 91 | 91 | | THE ACTS OF THE GENERAL ASSEMBLY OF 2023, THE ENACTMENT RESULT ED IN AN 31 |
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| 92 | 92 | | AGGREGATE : 32 |
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| 93 | 93 | | |
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| 94 | 94 | | (I) INCREASE TO THE COMB INED GROUP’S NET DEFERRED TAX 33 SENATE BILL 576 3 |
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| 95 | 95 | | |
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| 96 | 96 | | |
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| 97 | 97 | | LIABILITY; 1 |
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| 98 | 98 | | |
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| 99 | 99 | | (II) DECREASE TO THE COMB INED GROUP’S NET DEFERRED TAX 2 |
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| 100 | 100 | | ASSET; OR 3 |
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| 101 | 101 | | |
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| 102 | 102 | | (III) CHANGE FROM A NET DE FERRED TAX ASSET TO A NET 4 |
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| 103 | 103 | | DEFERRED TAX LIABILI TY. 5 |
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| 104 | 104 | | |
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| 105 | 105 | | (2) THE AMOUNT OF ANY INC REASE, DECREASE, OR CHANGE SHALL 6 |
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| 106 | 106 | | BE DETERMINED WITHOU T REGARD TO THE SUBT RACTION AUTHORIZED UNDER 7 |
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| 107 | 107 | | THIS SECTION. 8 |
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| 108 | 108 | | |
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| 109 | 109 | | (D) (1) SUBJECT TO PARAGRAPHS (2) AND (3) OF THIS SUBSECTION , THE 9 |
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| 110 | 110 | | SUBTRACTION AUTHORIZ ED UNDER THIS SECTIO N IS EQUAL TO ONE–TENTH OF THE 10 |
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| 111 | 111 | | AMOUNT NECESSARY TO OFFSET THE AGGREGATE : 11 |
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| 112 | 112 | | |
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| 113 | 113 | | (I) INCREASE TO THE COMB INED GROUP’S NET DEFERRED TAX 12 |
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| 114 | 114 | | LIABILITY; 13 |
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| 115 | 115 | | |
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| 116 | 116 | | (II) DECREASE TO THE COMB INED GROUP’S NET DEFERRED TAX 14 |
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| 117 | 117 | | ASSET; OR 15 |
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| 118 | 118 | | |
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| 119 | 119 | | (III) CHANGE FROM A NET DE FERRED TAX ASSET TO A NET 16 |
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| 120 | 120 | | DEFERRED TAX LIABILI TY. 17 |
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| 121 | 121 | | |
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| 122 | 122 | | (2) THE AMOUNT OF THE SUB TRACTION AS DETERMIN ED UNDER 18 |
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| 123 | 123 | | PARAGRAPH (1) OF THIS SUBSECTION SHALL BE : 19 |
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| 124 | 124 | | |
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| 125 | 125 | | (I) DIVIDED BY THE RATE DETERMINED UNDER § 10–105(B) OF 20 |
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| 126 | 126 | | THIS TITLE IN EFFECT ON JANUARY 1, 2025; AND 21 |
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| 127 | 127 | | |
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| 128 | 128 | | (II) FURTHER DIVIDED BY T HE MARYLAND APPORTIONMEN T 22 |
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| 129 | 129 | | FRACTION THAT WAS US ED BY THE COMBINED G ROUP IN THE CALCULAT ION OF THE 23 |
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| 130 | 130 | | DEFERRED TAX ASSETS AND DEFERRED TAX LIABILI TIES AS DESCRIBED IN 24 |
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| 131 | 131 | | PARAGRAPH (1) OF THIS SUBSECTION . 25 |
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| 132 | 132 | | |
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| 133 | 133 | | (3) THE SUBTRACTION AUTHO RIZED UNDER THIS SEC TION MAY BE 26 |
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| 134 | 134 | | USED TO REDUCE THE C OMBINED GROUP ’S MARYLAND MODIFIED INC OME FOR 10 27 |
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| 135 | 135 | | CONSECUTIVE TAXABLE YEARS BEGINNI NG WITH THE FIRST TA XABLE YEAR THAT 28 |
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| 136 | 136 | | BEGINS AFTER DECEMBER 31, 2029. 29 |
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| 137 | 137 | | |
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| 138 | 138 | | (4) THE SUBTRACTION CALCU LATED UNDER THIS SEC TION MAY NOT 30 |
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| 139 | 139 | | BE REDUCED AS A RESU LT OF ANY EVENT THAT OCCURS AFTER THE CAL CULATION, 31 |
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| 140 | 140 | | INCLUDING THE DISPOS ITION OR ABANDONMENT OF ANY ASSET. 32 4 SENATE BILL 576 |
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| 141 | 141 | | |
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| 142 | 142 | | |
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| 143 | 143 | | |
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| 144 | 144 | | (5) THE SUBTRACTION AUTHO RIZED UNDER THIS SEC TION: 1 |
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| 145 | 145 | | |
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| 146 | 146 | | (I) SHALL BE CALCULATED WITHOUT REGARD TO TH E FEDERAL 2 |
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| 147 | 147 | | TAX EFFECT; AND 3 |
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| 148 | 148 | | |
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| 149 | 149 | | (II) MAY NOT ALTER THE TA X BASIS OF ANY ASSET . 4 |
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| 150 | 150 | | |
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| 151 | 151 | | (6) IF THE SUBTRACTION DE TERMINED UNDER THIS SECTION 5 |
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| 152 | 152 | | RESULTS IN A SUBTRAC TION THAT EXCEEDS MARYLAND MODIFIED INC OME 6 |
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| 153 | 153 | | COMPUTED WITHOUT REG ARD TO THE SUBTRACTI ON UNDER THIS SECTIO N, THE 7 |
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| 154 | 154 | | AMOUNT OF THE EXCESS MAY BE CARRIED FORWA RD TO SUCCEEDING TAX ABLE 8 |
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| 155 | 155 | | YEARS AND USED TO RE DUCE MARYLAND MODIFIED INC OME IN EACH SUCCEEDI NG 9 |
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| 156 | 156 | | TAXABLE YEAR UNTIL THE EXCESS IS FULLY USED. 10 |
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| 157 | 157 | | |
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| 158 | 158 | | (E) (1) ON OR BEFORE JULY 1, 2026, A COMBINED GROUP THA T INTENDS 11 |
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| 159 | 159 | | TO CLAIM A SUBTRACTI ON UNDER THIS SECTIO N SHALL FILE WITH TH E 12 |
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| 160 | 160 | | COMPTROLLER A STATEMENT THAT SPE CIFIES THE TOTAL AMO UNT OF THE 13 |
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| 161 | 161 | | SUBTRACTION THAT THE COMBINED GR OUP INTENDS TO CLAIM . 14 |
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| 162 | 162 | | |
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| 163 | 163 | | (2) THE STATEMENT SHALL B E ON THE FORM AND CO NTAIN THE 15 |
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| 164 | 164 | | INFORMATION THE COMPTROLLER REQUIRES . 16 |
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| 165 | 165 | | |
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| 166 | 166 | | (3) THE COMPTROLLER MAY REVIE W AND ALTER THE AMOU NT OF: 17 |
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| 167 | 167 | | |
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| 168 | 168 | | (I) THE SUBTRACTION SPEC IFIED IN THE STATEME NT 18 |
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| 169 | 169 | | REQUIRED UNDER PARAG RAPH (1) OF THIS SUBSECTION ; OR 19 |
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| 170 | 170 | | |
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| 171 | 171 | | (II) THE SUBTRACTION CLAI MED ON A TAX RETURN FOR ANY 20 |
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| 172 | 172 | | TAXABLE YEAR . 21 |
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| 173 | 173 | | |
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| 174 | 174 | | 10–402.1. 22 |
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| 175 | 175 | | |
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| 176 | 176 | | (A) (1) IN THIS SECTION THE F OLLOWING WORDS HAVE THE MEANINGS 23 |
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| 177 | 177 | | INDICATED. 24 |
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| 178 | 178 | | |
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| 179 | 179 | | (2) “COMBINED GROUP ” MEANS A GROUP OF COR PORATIONS: 25 |
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| 180 | 180 | | |
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| 181 | 181 | | (I) THAT IS ENGAGED IN A UNITARY BU SINESS; 26 |
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| 182 | 182 | | |
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| 183 | 183 | | (II) IN WHICH MORE THAN 50% OF THE VOTING STOCK OF EACH 27 |
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| 184 | 184 | | MEMBER IS DIRECTLY O R INDIRECTLY OWNED B Y: 28 |
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| 185 | 185 | | |
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| 186 | 186 | | 1. A COMMON OWNER OR CO MMON OWNERS , EITHER 29 SENATE BILL 576 5 |
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| 187 | 187 | | |
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| 188 | 188 | | |
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| 189 | 189 | | CORPORATE OR NONCORP ORATE; OR 1 |
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| 190 | 190 | | |
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| 191 | 191 | | 2. ONE OR MORE MEMBER C ORPORATIONS OF THE 2 |
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| 192 | 192 | | GROUP; 3 |
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| 193 | 193 | | |
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| 194 | 194 | | (III) THE MEMBERS OF WHICH ARE SUBJECT TO THE I NCOME TAX 4 |
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| 195 | 195 | | OR WOULD BE SUBJECT TO THE INCOME TAX IF DOING BUSINESS IN TH E STATE; AND 5 |
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| 196 | 196 | | |
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| 197 | 197 | | (IV) CONSISTING OF ANY OT HER MEMBERS UNDER TH E 6 |
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| 198 | 198 | | CIRCUMSTANCES AND TO THE EXTENT PROVIDED IN REGULATIONS ADOPT ED BY 7 |
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| 199 | 199 | | THE COMPTROLLER TO PREVEN T THE AVOIDANCE OF T AX OR TO REFLECT CLE ARLY 8 |
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| 200 | 200 | | THE INCOME OF ANY ME MBER OF THE COMBINED GROUP FOR ANY PERIOD . 9 |
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| 201 | 201 | | |
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| 202 | 202 | | (3) “COMBINED RETURN ” MEANS A TAX RETURN F OR THE COMBINED 10 |
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| 203 | 203 | | GROUP CONTAINING INF ORMATION AS PROVIDED IN THIS SECTION O R OTHERWISE 11 |
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| 204 | 204 | | REQUIRED BY THE COMPTROLLER . 12 |
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| 205 | 205 | | |
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| 206 | 206 | | (4) “UNITARY BUSINESS ” MEANS A SINGLE ECONO MIC ENTERPRISE 13 |
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| 207 | 207 | | THAT IS MADE EITHER OF SEPARATE PARTS OF A SINGLE BUSINESS EN TITY OR OF A 14 |
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| 208 | 208 | | COMMONLY CONTROLLED GROUP OF BUSINESS EN TITIES THAT ARE SUFF ICIENTLY 15 |
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| 209 | 209 | | INTERDEPEND ENT, INTEGRATED, AND INTERRELATED THR OUGH THEIR ACTIVITIE S 16 |
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| 210 | 210 | | SO AS TO PROVIDE MUT UAL BENEFIT THAT PRO DUCES A SHARING OR E XCHANGE OF 17 |
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| 211 | 211 | | VALUE AMONG THEM AND A SIGNIFICANT FLOW O F VALUE TO THE SEPAR ATE PARTS. 18 |
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| 212 | 212 | | |
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| 213 | 213 | | (B) (1) THE TERM “UNITARY BUSINESS ” SHALL BE CONSTRU ED TO THE 19 |
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| 214 | 214 | | BROADEST EXTENT ALLO WED UNDER THE U.S. CONSTITUTION. 20 |
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| 215 | 215 | | |
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| 216 | 216 | | (2) A BUSINESS CONDUCTED D IRECTLY OR INDIRECTL Y BY ONE 21 |
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| 217 | 217 | | CORPORATION IS A UNI TARY BUSINESS WITH R ESPECT TO THAT PORTI ON OF A 22 |
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| 218 | 218 | | BUSINESS CONDUCTED B Y ANOTHER CORPORATIO N THROUGH ITS DIRECT OR 23 |
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| 219 | 219 | | INDIRECT INTEREST IN A PARTNERSHIP IF THE REQUIREMENTS OF SUBS ECTION 24 |
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| 220 | 220 | | (A)(4) OF THIS SECTION ARE SATISFIED, INCLUDING IF THERE I S SYNERGY AND AN 25 |
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| 221 | 221 | | EXCHANGE AND FLOW OF VALUE BETWEEN THE TW O PARTS OF THE BUSIN ESS AND 26 |
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| 222 | 222 | | THE TWO CORPORATIONS ARE MEMBERS OF THE S AME COMMONLY CONTROLLE D 27 |
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| 223 | 223 | | GROUP. 28 |
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| 224 | 224 | | |
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| 225 | 225 | | (3) A BUSINESS CONDUCTED B Y A PARTNERSHIP SHAL L BE TREATED 29 |
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| 226 | 226 | | AS CONDUCTED BY ITS PARTNERS, WHETHER DIRECTLY HEL D OR INDIRECTLY HELD 30 |
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| 227 | 227 | | THROUGH A SERIES OF PARTNERSHIPS , TO THE EXTENT OF THE PARTNER’S 31 |
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| 228 | 228 | | DISTRIBUTIVE SHARE O F THE PAR TNERSHIP’S INCOME, REGARDLESS OF THE 32 |
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| 229 | 229 | | PERCENTAGE OF THE PA RTNER’S OWNERSHIP INTEREST OR ITS DISTRIBUTIVE OR 33 |
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| 230 | 230 | | ANY OTHER SHARE OF P ARTNERSHIP INCOME . 34 |
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| 231 | 231 | | |
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| 232 | 232 | | (C) (1) EXCEPT AS PROVIDED BY AND SUBJECT TO REGUL ATIONS 35 6 SENATE BILL 576 |
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| 233 | 233 | | |
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| 234 | 234 | | |
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| 235 | 235 | | ADOPTED BY THE COMPTROLLER , FOR ALL TAXABLE YEAR S BEGINNING AFTER 1 |
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| 236 | 236 | | DECEMBER 31, 2024, A CORPORATION ENGAGE D IN A UNITARY BUSIN ESS SHALL 2 |
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| 237 | 237 | | FILE A COMBINED RETU RN, REPORTING AND PAYING TAX ON WORLDWIDE TAX ABLE 3 |
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| 238 | 238 | | INCOME AS A COMBINED GROUP, REFLECTING THE AGGRE GATE INCOME TAX 4 |
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| 239 | 239 | | LIABILITY OF ALL MEM BERS OF THE COMBIN ED GROUP THAT ARE EN GAGED IN A 5 |
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| 240 | 240 | | UNITARY BUSINESS . 6 |
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| 241 | 241 | | |
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| 242 | 242 | | (2) THE TAXABLE INCOME OF A CORPORATION REQUIR ED TO FILE 7 |
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| 243 | 243 | | UNDER § 10–811(A)(2) OF THIS TITLE IS EQU AL TO THE COMBINED G ROUP’S 8 |
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| 244 | 244 | | MARYLAND MODIFIED INC OME AS ADJUSTED UNDE R SUBSECTION (D)(3) OF THIS 9 |
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| 245 | 245 | | SECTION. 10 |
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| 246 | 246 | | |
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| 247 | 247 | | (D) (1) THE MARYLAND MODIFIED INC OME OF THE COMBINED GROUP 11 |
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| 248 | 248 | | EQUALS THE PRODUCT O F: 12 |
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| 249 | 249 | | |
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| 250 | 250 | | (I) THE COMBINED GROUP ’S APPORTIONABLE MARYLAND 13 |
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| 251 | 251 | | MODIFIED INCOME , AS DETERMINED UNDER PARAGRAPH (2) OF THIS SUBSECTION 14 |
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| 252 | 252 | | AND ADJUSTED UNDER P ARAGRAPH (3) OF THIS SUBSECTION ; AND 15 |
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| 253 | 253 | | |
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| 254 | 254 | | (II) THE COMBINED GROUP ’S MARYLAND APPORTIONMEN T 16 |
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| 255 | 255 | | FACTOR, AS DETERMINED UNDER PARAGRAPH (4) OF THIS SUBSECTION . 17 |
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| 256 | 256 | | |
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| 257 | 257 | | (2) (I) SUBJECT TO SUBPARAGRA PHS (II) THROUGH (IV) OF THIS 18 |
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| 258 | 258 | | PARAGRAPH , THE APPORTIONABLE MARYLAND MODIFIED INC OME OF THE 19 |
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| 259 | 259 | | COMBINED GRO UP EQUALS THE SUM OF THE CORPORATION ’S AND EACH MEMBER ’S 20 |
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| 260 | 260 | | MARYLAND MODIFIED INC OME. 21 |
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| 261 | 261 | | |
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| 262 | 262 | | (II) 1. SUBJECT TO SUBSUBPARA GRAPH 2 OF THIS 22 |
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| 263 | 263 | | SUBPARAGRAPH , FOR ANY MEMBER INCOR PORATED IN THE UNITED STATES OR 23 |
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| 264 | 264 | | INCLUDED IN A CONSOL IDATED FEDERAL CORPO RATE INCOME TAX RE TURN, THE 24 |
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| 265 | 265 | | INCOME TO BE INCLUDE D IN THE TOTAL APPOR TIONABLE INCOME OF T HE 25 |
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| 266 | 266 | | COMBINED GROUP IS TH E MARYLAND MODIFIED INC OME AS CALCULATED UN DER § 26 |
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| 267 | 267 | | 10–304 OF THIS TITLE. 27 |
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| 268 | 268 | | |
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| 269 | 269 | | 2. THE INCOME OF EACH ME MBER SHALL BE 28 |
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| 270 | 270 | | CALCULATED ON A SEPA RATE RETURN BASIS AS IF THE MEMBER WERE NOT 29 |
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| 271 | 271 | | CONSOLIDATED FOR FED ERAL INCOME TAX PURP OSES. 30 |
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| 272 | 272 | | |
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| 273 | 273 | | (III) 1. FOR ANY MEMBER NOT IN CLUDED UNDER 31 |
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| 274 | 274 | | SUBPARAGRAPH (II) OF THIS PARAGRAPH , THE INCOME TO BE INC LUDED IN THE 32 |
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| 275 | 275 | | TOTAL INCOME OF THE COMBINED GROUP IS DE TERMINED AS PROVIDED UNDER 33 |
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| 276 | 276 | | THIS SUBPAR AGRAPH. 34 |
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| 277 | 277 | | |
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| 278 | 278 | | 2. A PROFIT AND LOSS STAT EMENT SHALL BE PREPA RED 35 SENATE BILL 576 7 |
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| 279 | 279 | | |
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| 280 | 280 | | |
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| 281 | 281 | | FOR EACH FOREIGN BRA NCH OR CORPORATION I N THE CURRENCY IN WH ICH THE 1 |
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| 282 | 282 | | BOOKS OF ACCOUNT OF THE BRANCH OR CORPOR ATION ARE REGULARLY 2 |
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| 283 | 283 | | MAINTAINED. 3 |
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| 284 | 284 | | |
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| 285 | 285 | | 3. THE PROFIT AND LOSS S TATEMENT SHALL BE 4 |
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| 286 | 286 | | ADJUSTED TO CONFORM TO GENE RALLY ACCEPTED ACCOU NTING PRINCIPLES AS 5 |
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| 287 | 287 | | ADOPTED BY THE UNITED STATES FINANCIAL ACCOUNTING STANDARDS BOARD 6 |
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| 288 | 288 | | FOR THE PREPARATION OF THE PROFIT AND LO SS STATEMENTS , EXCEPT AS 7 |
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| 289 | 289 | | MODIFIED BY REGULATI ON. 8 |
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| 290 | 290 | | |
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| 291 | 291 | | 4. EXCEPT AS OTHERWISE P ROVIDED BY REGULATION , 9 |
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| 292 | 292 | | THE PROFIT AND LOSS STATEMENT OF EACH ME MBER OF THE COMBINED GROUP, 10 |
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| 293 | 293 | | AND THE APPORTIONMEN T FACTORS RELATED TO EACH STATEMENT , WHETHER 11 |
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| 294 | 294 | | UNITED STATES OR FOREIGN , SHALL BE TRANSLATED INTO THE CURRENCY IN 12 |
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| 295 | 295 | | WHICH THE PARENT COM PANY MAINTAINS ITS B OOKS AND RECORDS . 13 |
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| 296 | 296 | | |
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| 297 | 297 | | 5. INCOME APPORTIONED TO THIS STATE SHALL BE 14 |
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| 298 | 298 | | EXPRESSED IN UNITED STATES DOLLARS . 15 |
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| 299 | 299 | | |
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| 300 | 300 | | (IV) IF A UNITARY BUSINESS INCLUDES INCOME FROM A 16 |
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| 301 | 301 | | PARTNERSHIP , THE INCOME TO BE INC LUDED IN THE TOTAL I NCOME OF THE 17 |
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| 302 | 302 | | COMBINED GROUP EQUAL S THE DIRECT AND INDIRECT DISTRIBUTIV E SHARE OF 18 |
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| 303 | 303 | | THE PARTNERSHIP ’S UNITARY BUSINESS I NCOME ALLOCATED TO A NY MEMBER OF 19 |
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| 304 | 304 | | THE COMBINED GROUP . 20 |
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| 305 | 305 | | |
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| 306 | 306 | | (3) THE COMBINED GROUP ’S APPORTIONABLE MARYLAND MODIFIED 21 |
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| 307 | 307 | | INCOME SHALL BE ADJU STED TO ELIMINATE IN TERCOMPANY TRANSACTI ONS AS 22 |
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| 308 | 308 | | DETERMIN ED UNDER THE INTERNAL REVENUE CODE. 23 |
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| 309 | 309 | | |
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| 310 | 310 | | (4) (I) SUBJECT TO SUBPARAGRA PH (II) OF THIS PARAGRAPH , THE 24 |
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| 311 | 311 | | COMBINED GROUP ’S MARYLAND APPORTIONMEN T FACTOR IS A FRACTI ON: 25 |
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| 312 | 312 | | |
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| 313 | 313 | | 1. THE NUMERATOR OF WHI CH IS THE SUM OF THE 26 |
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| 314 | 314 | | CORPORATION ’S AND EACH MEMBER ’S MARYLAND FACTO RS UNDER § 10–402 OF 27 |
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| 315 | 315 | | THIS SUBTITLE; AND 28 |
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| 316 | 316 | | |
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| 317 | 317 | | 2. THE DENOMINATOR OF W HICH IS THE SUM OF T HE 29 |
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| 318 | 318 | | CORPORATION ’S AND EACH MEMBER ’S FACTORS UNDER § 10–402 OF THIS SUBTITLE. 30 |
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| 319 | 319 | | |
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| 320 | 320 | | (II) THE APPORTIONMENT FAC TORS OF PASS –THROUGH 31 |
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| 321 | 321 | | ENTITY MEMBERS ARE I NCLUDED IN THE NUMER ATOR UNDER SUBPARAGRA PH (I)1 32 |
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| 322 | 322 | | OF THIS PARAGRAPH AN D THE DENOMINATOR UN DER SUBPARAGRAPH (I)2 OF THIS 33 |
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| 323 | 323 | | PARAGRAPH TO THE EXT ENT OF THE CORPORATI ON’S DIRECT AND INDIREC T 34 |
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| 324 | 324 | | DISTRIBUTIVE SHARE O F THAT ENTITY. 35 8 SENATE BILL 576 |
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| 325 | 325 | | |
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| 326 | 326 | | |
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| 327 | 327 | | |
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| 328 | 328 | | (E) (1) SUBJECT TO REGULATION S ADOPTED BY THE COMPTROLLE R, A 1 |
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| 329 | 329 | | CORPORATION THAT IS PART OF A COMBINED GROUP MAY ELECT TO DETERMINE ITS 2 |
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| 330 | 330 | | INCOME DERIVED FROM OR ATTRIBUTABLE TO T RADE OR BUSINESS IN THE STATE 3 |
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| 331 | 331 | | USING THE WATER ’S EDGE METHOD AS DES CRIBED IN THIS SUBSE CTION. 4 |
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| 332 | 332 | | |
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| 333 | 333 | | (2) UNDER THE WATER ’S EDGE METHOD , THE COMBINED GROUP FOR 5 |
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| 334 | 334 | | PURPOSES OF THE COMB INED REPORTING METHO D REQUIRED UNDER THI S 6 |
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| 335 | 335 | | SECTION SHALL INCLUD E ONLY THE FOLLOWING AFFILIATED ENTITIES : 7 |
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| 336 | 336 | | |
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| 337 | 337 | | (I) CORPORATIONS THAT AR E INCORPORATED IN TH E UNITED 8 |
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| 338 | 338 | | STATES, EXCLUDING CORPORATIO NS MAKING AN ELECTIO N UNDER §§ 931 9 |
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| 339 | 339 | | THROUGH 934 OF THE INTERNAL REVENUE CODE; 10 |
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| 340 | 340 | | |
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| 341 | 341 | | (II) DOMESTIC INTERNATION AL SALES CORPORATION S, AS 11 |
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| 342 | 342 | | DESCRIBED IN §§ 991 THROUGH 994 OF THE INTERNAL REVENUE CODE; 12 |
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| 343 | 343 | | |
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| 344 | 344 | | (III) ANY CORPORATION OTHE R THAN A BANK , REGARDLESS OF 13 |
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| 345 | 345 | | THE PLACE WHERE IT I S INCORPORATED , IF THE AVERAGE OF TH E CORPORATION ’S 14 |
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| 346 | 346 | | PROPERTY, PAYROLL, AND SALES FACTORS WI THIN THE UNITED STATES IS 20% OR 15 |
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| 347 | 347 | | MORE; 16 |
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| 348 | 348 | | |
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| 349 | 349 | | (IV) EXPORT TRADE CORPORA TIONS, AS DESCRIBED IN §§ 970 17 |
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| 350 | 350 | | AND 971 OF THE INTERNAL REVENUE CODE; 18 |
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| 351 | 351 | | |
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| 352 | 352 | | (V) A FOREIGN CORPORATIO N DERIVING GAIN OR LOSS FROM 19 |
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| 353 | 353 | | DISPOSITION OF AN IN TEREST IN REAL PROPE RTY IN THE UNITED STATES TO THE 20 |
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| 354 | 354 | | EXTENT RECOGNIZED UN DER § 897 OF THE INTERNAL REVENUE CODE; AND 21 |
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| 355 | 355 | | |
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| 356 | 356 | | (VI) UNDER THE CIRCUMSTAN CES AND TO THE EXTEN T 22 |
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| 357 | 357 | | PROVIDED BY REGULATI ONS THAT THE COMPTROLLER ADOPTS : 23 |
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| 358 | 358 | | |
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| 359 | 359 | | 1. A CORPORATION NOT DE SCRIBED IN ITEMS (I) 24 |
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| 360 | 360 | | THROUGH (V) OF THIS PARAGRAPH TO THE EXTENT OF THE CO RPORATION’S INCOME 25 |
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| 361 | 361 | | DERIVED FROM OR ATTR IBUTABLE TO SOURCES WITHIN THE UNITED STATES AND 26 |
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| 362 | 362 | | THE CORPORATION ’S FACTORS ASSIGNABLE TO A LOCATION WITHIN THE UNITED 27 |
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| 363 | 363 | | STATES; OR 28 |
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| 364 | 364 | | |
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| 365 | 365 | | 2. AN AFFILIATED CORPOR ATION THAT IS A 29 |
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| 366 | 366 | | CONTROLLED FOREIGN C ORPORATION , AS DEFINED IN § 957 OF THE INTERNAL 30 |
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| 367 | 367 | | REVENUE CODE. 31 |
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| 368 | 368 | | |
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| 369 | 369 | | (3) THE USE OF THE WATER ’S EDGE METHOD IS SUB JECT TO THE 32 |
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| 370 | 370 | | TERMS AND CONDITIONS THAT THE COMPTROLLER REQUIRES BY REGULATION, 33 SENATE BILL 576 9 |
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| 371 | 371 | | |
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| 372 | 372 | | |
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| 373 | 373 | | INCLUDING ANY CONDIT IONS THAT ARE NECESS ARY OR APPROPRIATE T O PREVENT 1 |
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| 374 | 374 | | THE AVOIDANCE OF TAX OR TO REFLECT CLEARL Y THE INCOME FOR ANY PERIOD. 2 |
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| 375 | 375 | | |
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| 376 | 376 | | (F) (1) (I) AN ELECTION TO USE TH E WATER’S EDGE METHOD IN 3 |
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| 377 | 377 | | ACCORDANCE WITH SUBS ECTION (E) OF THIS SECTION IS EFFECTIVE ONLY IF MA DE 4 |
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| 378 | 378 | | ON A TIMELY FILED OR IGINAL RETURN FOR A TAX YEAR BY EVERY ME MBER OF THE 5 |
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| 379 | 379 | | UNITARY BUSINESS . 6 |
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| 380 | 380 | | |
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| 381 | 381 | | (II) THE COMPTROLLER SHALL DEV ELOP REGULATIONS 7 |
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| 382 | 382 | | GOVERNING THE IMPACT , IF ANY, ON THE SCOPE OR APPL ICATION OF AN ELECTI ON 8 |
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| 383 | 383 | | TO USE THE WATER ’S EDGE METHOD , INCLUDING TERMINATIO N OR DEEMED 9 |
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| 384 | 384 | | ELECTION, RESULTING FROM A CHA NGE IN THE COMPOSITI ON OF THE UNITARY 10 |
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| 385 | 385 | | BUSINESS, THE COMBINED GROUP , THE TAXPAYER MEMBERS , OR ANY OTHER 11 |
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| 386 | 386 | | SIMILAR CHANGE . 12 |
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| 387 | 387 | | |
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| 388 | 388 | | (2) AN ELECTION TO USE TH E WATER’S EDGE METHOD SHALL 13 |
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| 389 | 389 | | CONSTITUTE CONSENT TO THE REASONABLE PRODUCTIO N OF DOCUMENTS AND 14 |
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| 390 | 390 | | TAKING OF DEPOSITION S IN ACCORDANCE WITH THE MARYLAND RULES. 15 |
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| 391 | 391 | | |
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| 392 | 392 | | (3) AT THE DISCRETION OF THE COMPTROLLER , AN ELECTION TO 16 |
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| 393 | 393 | | USE THE WATER ’S EDGE METHOD MAY BE DISREGARDED IN PART OR IN WHOLE, AND 17 |
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| 394 | 394 | | THE INCOME AND APPORTION MENT FACTORS OF ANY MEMBER OF THE TAXPAY ER’S 18 |
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| 395 | 395 | | UNITARY GROUP MAY BE INCLUDED IN THE COMB INED REPORT WITHOUT REGARD 19 |
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| 396 | 396 | | TO THE PROVISIONS OF THIS SECTION, IF ANY MEMBER OF THE UNITARY GROUP 20 |
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| 397 | 397 | | FAILS TO COMPLY WITH ANY PROVISION OF THI S SECTION O R IF A PERSON 21 |
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| 398 | 398 | | OTHERWISE NOT INCLUD ED IN THE WATER ’S EDGE COMBINED GROU P WAS AVAILED 22 |
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| 399 | 399 | | OF A SUBSTANTIAL OBJ ECTIVE OF AVOIDING STATE INCOME TAX . 23 |
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| 400 | 400 | | |
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| 401 | 401 | | (4) (I) SUBJECT TO SUBPARAGRA PHS (II) THROUGH (IV) OF THIS 24 |
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| 402 | 402 | | PARAGRAPH , AN ELECTION TO USE T HE WATER’S EDGE METHOD IS BINDING FOR 25 |
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| 403 | 403 | | AND APPLICABLE TO TH E TAXABLE YEAR IN WH ICH THE ELECTION IS MADE AND ALL 26 |
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| 404 | 404 | | TAXABLE YEARS THEREA FTER FOR A PERIOD OF 10 YEARS. 27 |
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| 405 | 405 | | |
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| 406 | 406 | | (II) AN ELECTION TO USE TH E WATER’S EDGE METHOD MAY BE 28 |
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| 407 | 407 | | WITHDRAWN OR REINSTI TUTED AFTER WITHDRAW AL, BEFORE THE EX PIRATION OF 29 |
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| 408 | 408 | | THE 10–YEAR PERIOD, ONLY ON WRITTEN REQU EST FOR REASONABLE C AUSE AND 30 |
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| 409 | 409 | | ONLY WITH THE WRITTE N PERMISSION OF THE COMPTROLLER . 31 |
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| 410 | 410 | | |
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| 411 | 411 | | (III) IF THE COMPTROLLER GRANTS A WITHDRAWAL OF THE 32 |
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| 412 | 412 | | ELECTION UNDER SUBPA RAGRAPH (II) OF THIS PARAGRAPH , THE COMPTROLLE R 33 |
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| 413 | 413 | | SHALL IMPOSE REASONA BLE CONDITIONS AS NE CESSARY TO PREVENT T HE EVASION 34 |
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| 414 | 414 | | OF TAX OR TO CLEARLY REFLECT INCOME FOR T HE ELECTION PERIOD B EFORE OR 35 |
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| 415 | 415 | | AFTER THE WITHDRAWAL . 36 |
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| 416 | 416 | | 10 SENATE BILL 576 |
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| 417 | 417 | | |
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| 418 | 418 | | |
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| 419 | 419 | | (IV) 1. SUBJECT TO SUBSUBPARA GRAPH 2 OF THIS 1 |
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| 420 | 420 | | SUBPARAGRAPH , ON THE EXPIRATION OF THE 10–YEAR PERIOD, A TAXPAYER MAY 2 |
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| 421 | 421 | | WITHDRAW FROM THE EL ECTION TO USE THE WA TER’S EDGE METHOD . 3 |
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| 422 | 422 | | |
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| 423 | 423 | | 2. THE WITHDRAWAL SHALL BE MADE IN WRITING 4 |
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| 424 | 424 | | WITHIN 1 YEAR BEFORE THE EXPI RATION OF THE ELECTI ON AND IS BINDING FO R A 5 |
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| 425 | 425 | | PERIOD OF 10 YEARS, SUBJECT TO THE SAME CONDITIONS AS APPLIE D TO THE 6 |
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| 426 | 426 | | ORIGINAL ELECTION . 7 |
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| 427 | 427 | | |
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| 428 | 428 | | 3. IF NO WITHDRAWAL IS P ROPERLY MADE UNDER T HIS 8 |
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| 429 | 429 | | SUBPARAGRAPH , THE ELECTION TO USE THE WATER ’S EDGE METHOD SHALL 9 |
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| 430 | 430 | | REMAIN IN EFFECT FOR AN ADDITIONAL 10–YEAR PERIOD, SUBJECT TO THE SAME 10 |
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| 431 | 431 | | CONDITIONS AS APPLIE D TO THE ORIGINAL EL ECTION. 11 |
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| 432 | 432 | | |
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| 433 | 433 | | (G) (1) THE COMPTROLLER SHALL ADO PT REGULATIONS THAT ARE 12 |
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| 434 | 434 | | NECESSARY AND APPROP RIATE TO CARRY OUT T HIS SECTION. 13 |
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| 435 | 435 | | |
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| 436 | 436 | | (2) THE REGULATIONS ADOPT ED BY THE COMPTROLLER SHALL BE 14 |
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| 437 | 437 | | CONSISTENT WITH THE “PRINCIPLES FOR DETERMINING THE EXISTENCE OF A 15 |
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| 438 | 438 | | UNITARY BUSINESS” (REG. IV.1.(B)) OF THE MODEL GENERAL ALLOCATION AND 16 |
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| 439 | 439 | | APPORTIONMENT REGULATIONS, AS ADOPTED BY THE MULTISTATE TAX 17 |
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| 440 | 440 | | COMMISSION. 18 |
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| 441 | 441 | | |
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| 442 | 442 | | 10–811. 19 |
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| 443 | 443 | | |
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| 444 | 444 | | (A) (1) [Each member of] EXCEPT AS PROVIDED BY AND SUBJECT TO 20 |
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| 445 | 445 | | REGULATIONS ADOPTED BY THE COMPTROLLER , an affiliated group of corporations 21 |
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| 446 | 446 | | [shall file a separate income tax return] ENGAGED IN A UNITARY BUSINESS SHALL FILE 22 |
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| 447 | 447 | | A COMBINED INCOME T AX RETURN REFLECTING THE AGGREGATE INCOME TAX 23 |
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| 448 | 448 | | LIABILITY OF ALL THE MEMBERS OF THE AFFIL IATED GROUP THAT ARE ENGAGED IN 24 |
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| 449 | 449 | | A UNITARY BUSINESS . 25 |
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| 450 | 450 | | |
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| 451 | 451 | | (2) THE RETURN REQUIRED U NDER PARAGRAPH (1) OF THIS 26 |
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| 452 | 452 | | SUBSECTION SHALL INC LUDE THE INCOME AND APPORTIONMENT FACTOR S 27 |
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| 453 | 453 | | DETERMINED UNDER § 10–402.1(D) AND (E) OF THIS TITLE, AND ANY OTHER 28 |
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| 454 | 454 | | INFORMATION REQUIRED BY THE COMPTROLLER , FOR ALL MEMBERS OF T HE 29 |
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| 455 | 455 | | COMBINED GROUP WHERE VER LOCATED OR DOING BUSINESS. 30 |
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| 456 | 456 | | |
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| 457 | 457 | | (3) (I) EXCEPT AS PROVIDED IN SUBPARAGRAPH (II) OF THIS 31 |
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| 458 | 458 | | PARAGRAPH , THE COMBINED RETURN SHAL L BE FILED UNDER THE NAME AND 32 |
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| 459 | 459 | | FEDERAL EMPLOYER IDE NTIFICATION NUMBER O F THE PARENT CORPORA TION IF 33 |
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| 460 | 460 | | THE PARENT IS A MEMB ER OF THE COMBINED G ROUP. 34 |
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| 461 | 461 | | |
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| 462 | 462 | | (II) IF THERE IS NO PARENT CORPORATION OR IF TH E PARENT 35 SENATE BILL 576 11 |
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| 463 | 463 | | |
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| 464 | 464 | | |
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| 465 | 465 | | IS NOT A MEMBER OF T HE COMBINE D GROUP, THE MEMBERS OF THE C OMBINED 1 |
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| 466 | 466 | | GROUP SHALL CHOOSE A MEMBER TO FILE THE R ETURN. 2 |
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| 467 | 467 | | |
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| 468 | 468 | | (III) THE FILING MEMBER UND ER SUBPARAGRAPH (I) OR (II) OF 3 |
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| 469 | 469 | | THIS PARAGRAPH SHALL CONTINUE TO FILE THE COMBINED RETURN UNLE SS THE 4 |
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| 470 | 470 | | FILING MEMBER IS NO LONGER THE PARENT CO RPORATION OR NO LONG ER A 5 |
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| 471 | 471 | | MEMBER OF THE COMBIN ED GROUP. 6 |
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| 472 | 472 | | |
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| 473 | 473 | | (4) THE RETURN SHALL BE S IGNED BY A RESPONSIB LE OFFICER OF 7 |
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| 474 | 474 | | THE FILING MEMBER ON BEHALF OF THE COMBIN ED GROUP MEMBERS . 8 |
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| 475 | 475 | | |
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| 476 | 476 | | (5) MEMBERS OF THE COMBIN ED GROUP ARE JOINTLY AND 9 |
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| 477 | 477 | | SEVERALLY LIABLE FOR THE TAX LIABILITY OF THE C OMBINED GROUP INCLUD ED 10 |
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| 478 | 478 | | IN THE COMBINED RETU RN. 11 |
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| 479 | 479 | | |
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| 480 | 480 | | (B) (1) THE COMPTROLLER MAY , BY REGULATION , REQUIRE THAT THE 12 |
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| 481 | 481 | | COMBINED RETURN INCL UDE THE INCOME AND A SSOCIATED APPORTIONM ENT 13 |
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| 482 | 482 | | FACTORS OF ENTITIES THAT ARE NOT INCLUDE D IN THE COMBINED REPORT BUT 14 |
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| 483 | 483 | | THAT ARE MEMBERS OF A UNITARY BUSINESS I N ORDER TO REFLECT P ROPER 15 |
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| 484 | 484 | | APPORTIONMENT OF INC OME OF THE ENTIRE UN ITARY BUSINESS. 16 |
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| 485 | 485 | | |
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| 486 | 486 | | (2) IF THE COMPTROLLER DETERMINE S THAT THE REPORTED 17 |
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| 487 | 487 | | INCOME OR LOSS OF A TAXPAYER ENGAGED IN A UNITARY BUSINESS W ITH A MEMBER 18 |
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| 488 | 488 | | NOT INCLUDED IN THE COMBINED GROUP REPRE SENTS AN AVOIDANCE O R EVASION 19 |
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| 489 | 489 | | OF TAX, THE COMPTROLLER MAY , ON A CASE–BY–CASE BASIS, REQUIRE THAT ALL 20 |
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| 490 | 490 | | OR PART OF THE INCOM E AND ASSOCIATED APP ORTIONMENT FACTORS O F THE 21 |
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| 491 | 491 | | MEMBER BE INCLUDED I N THE TAXPAYER ’S COMBINED RETURN. 22 |
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| 492 | 492 | | |
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| 493 | 493 | | (3) THE COMPTROLLER MAY REQUI RE: 23 |
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| 494 | 494 | | |
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| 495 | 495 | | (I) THE EXCLUSION OF ONE OR MORE FACTORS , THE 24 |
|---|
| 496 | 496 | | INCLUSION OF ONE OR MORE ADDITIONAL FACT ORS, OR THE EMPLOYMENT OF ANY 25 |
|---|
| 497 | 497 | | OTHER METHOD THAT WI LL FAIRLY REPRESENT THE TAXPAYER ’S BUSINESS IN THIS 26 |
|---|
| 498 | 498 | | STATE; OR 27 |
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| 499 | 499 | | |
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| 500 | 500 | | (II) THE EMPLOYMENT OF AN Y OTHER METHOD TO EF FECTUATE 28 |
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| 501 | 501 | | A PROPER REFLECTION OF THE TOTAL AMOUNT OF INCOME SUBJECT TO 29 |
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| 502 | 502 | | APPORTIONMENT AND AN EQUITABLE ALLOCATION AND APPORTIONMENT OF THE 30 |
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| 503 | 503 | | COMBINED GROUP ’S OR ITS MEMBERS ’ INCOME. 31 |
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| 504 | 504 | | |
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| 505 | 505 | | (C) THE COMPTROLLER SHALL ADO PT REG ULATIONS THAT ARE 32 |
|---|
| 506 | 506 | | NECESSARY AND APPROP RIATE TO CARRY OUT T HIS SECTION. 33 |
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| 507 | 507 | | |
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| 508 | 508 | | SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect July 34 12 SENATE BILL 576 |
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| 509 | 509 | | |
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| 510 | 510 | | |
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| 511 | 511 | | 1, 2024, and shall be applicable to all taxable years beginning after December 31, 2024. 1 |
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| 512 | 512 | | |
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| 513 | 513 | | |
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