EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
[Brackets] indicate matter deleted from existing law.
*sb0576*
SENATE BILL 576
Q3 3lr1400
By: Senators Lewis Young and Rosapepe
Introduced and read first time: February 6, 2023
Assigned to: Budget and Taxation
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
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 28 2 SENATE BILL 576
That the Laws of Maryland read as follows: 1
Article – Tax – General 2
10–311. 3
(A) (1) IN THIS SECTION THE F OLLOWING WORDS HAVE THE MEANINGS 4
INDICATED. 5
(2) “COMBINED GROUP ” HAS THE MEANING STAT ED IN § 10–402.1 OF 6
THIS TITLE. 7
(3) “NET DEFERRED TAX ASSE T” MEANS THE AMOUNT BY WHICH THE 8
DEFERRED TAX ASSETS EXCEED THE DEFERRED TAX LIABILITIES OF A COMBINED 9
GROUP, COMPUTED IN ACCORDAN CE WITH GENERALLY AC CEPTED ACCOUNTING 10
PRINCIPLES. 11
(4) “NET DEFERRED TAX LIAB ILITY” MEANS THE AMOUNT BY WHICH 12
THE DEFERRED TAX LAB ILITIES EXCEED THE D EFERRED TAX ASSETS O F A 13
COMBINED GROUP , COMPUTED IN ACCORDAN CE WITH GENERALLY AC CEPTED 14
ACCOUNTING PRINCIPLE S. 15
(B) THIS SECTION APP LIES ONLY TO A COMBI NED GROUP OF WHICH T HE 16
MEMBERS, ON OR BEFORE THE DAT E OF ENACTMENT OF TH E PROVISIONS OF § 17
10–402.1 OF THIS TITLE BY CHAPTER _____ (H.B. 46) OF THE ACTS OF THE 18
GENERAL ASSEMBLY OF 2023, WERE: 19
(1) PUBLICLY TRADED ; OR 20
(2) AFFILIATED WITH A COMBINED GROU P THAT WAS PUBLICLY 21
TRADED, AND PARTICIPATED IN THE FILING OF THE PU BLICLY TRADED 22
CORPORATION ’S FINANCIAL STATEMEN TS PREPARED IN ACCOR DANCE WITH 23
GENERALLY ACCEPTED A CCOUNTING PRINCIPLES . 24
(C) (1) SUBJECT TO PARAGRAPH (2) OF THIS SUBSE CTION, IN ADDITION 25
TO THE MODIFICATIONS UNDER §§ 10–307 AND 10–308 OF THIS SUBTITLE , THE 26
AMOUNTS DETERMINED U NDER SUBSECTION (D) OF THIS SECTION ARE 27
SUBTRACTED FROM THE FEDERAL TAXABLE INCO ME OF A COMBINED GRO UP TO 28
DETERMINE MARYLAND MODIFIED INC OME OF THE COMBINED GROUP IF , AS OF THE 29
DATE OF ENACTMENT OF § 10–402.1 OF THIS TITLE BY CHAPTER _____ (H.B. 46) OF 30
THE ACTS OF THE GENERAL ASSEMBLY OF 2023, THE ENACTMENT RESULT ED IN AN 31
AGGREGATE : 32
(I) INCREASE TO THE COMB INED GROUP’S NET DEFERRED TAX 33 SENATE BILL 576 3
LIABILITY; 1
(II) DECREASE TO THE COMB INED GROUP’S NET DEFERRED TAX 2
ASSET; OR 3
(III) CHANGE FROM A NET DE FERRED TAX ASSET TO A NET 4
DEFERRED TAX LIABILI TY. 5
(2) THE AMOUNT OF ANY INC REASE, DECREASE, OR CHANGE SHALL 6
BE DETERMINED WITHOU T REGARD TO THE SUBT RACTION AUTHORIZED UNDER 7
THIS SECTION. 8
(D) (1) SUBJECT TO PARAGRAPHS (2) AND (3) OF THIS SUBSECTION , THE 9
SUBTRACTION AUTHORIZ ED UNDER THIS SECTIO N IS EQUAL TO ONE–TENTH OF THE 10
AMOUNT NECESSARY TO OFFSET THE AGGREGATE : 11
(I) INCREASE TO THE COMB INED GROUP’S NET DEFERRED TAX 12
LIABILITY; 13
(II) DECREASE TO THE COMB INED GROUP’S NET DEFERRED TAX 14
ASSET; OR 15
(III) CHANGE FROM A NET DE FERRED TAX ASSET TO A NET 16
DEFERRED TAX LIABILI TY. 17
(2) THE AMOUNT OF THE SUB TRACTION AS DETERMIN ED UNDER 18
PARAGRAPH (1) OF THIS SUBSECTION SHALL BE : 19
(I) DIVIDED BY THE RATE DETERMINED UNDER § 10–105(B) OF 20
THIS TITLE IN EFFECT ON JANUARY 1, 2025; AND 21
(II) FURTHER DIVIDED BY T HE MARYLAND APPORTIONMEN T 22
FRACTION THAT WAS US ED BY THE COMBINED G ROUP IN THE CALCULAT ION OF THE 23
DEFERRED TAX ASSETS AND DEFERRED TAX LIABILI TIES AS DESCRIBED IN 24
PARAGRAPH (1) OF THIS SUBSECTION . 25
(3) THE SUBTRACTION AUTHO RIZED UNDER THIS SEC TION MAY BE 26
USED TO REDUCE THE C OMBINED GROUP ’S MARYLAND MODIFIED INC OME FOR 10 27
CONSECUTIVE TAXABLE YEARS BEGINNI NG WITH THE FIRST TA XABLE YEAR THAT 28
BEGINS AFTER DECEMBER 31, 2029. 29
(4) THE SUBTRACTION CALCU LATED UNDER THIS SEC TION MAY NOT 30
BE REDUCED AS A RESU LT OF ANY EVENT THAT OCCURS AFTER THE CAL CULATION, 31
INCLUDING THE DISPOS ITION OR ABANDONMENT OF ANY ASSET. 32 4 SENATE BILL 576
(5) THE SUBTRACTION AUTHO RIZED UNDER THIS SEC TION: 1
(I) SHALL BE CALCULATED WITHOUT REGARD TO TH E FEDERAL 2
TAX EFFECT; AND 3
(II) MAY NOT ALTER THE TA X BASIS OF ANY ASSET . 4
(6) IF THE SUBTRACTION DE TERMINED UNDER THIS SECTION 5
RESULTS IN A SUBTRAC TION THAT EXCEEDS MARYLAND MODIFIED INC OME 6
COMPUTED WITHOUT REG ARD TO THE SUBTRACTI ON UNDER THIS SECTIO N, THE 7
AMOUNT OF THE EXCESS MAY BE CARRIED FORWA RD TO SUCCEEDING TAX ABLE 8
YEARS AND USED TO RE DUCE MARYLAND MODIFIED INC OME IN EACH SUCCEEDI NG 9
TAXABLE YEAR UNTIL THE EXCESS IS FULLY USED. 10
(E) (1) ON OR BEFORE JULY 1, 2026, A COMBINED GROUP THA T INTENDS 11
TO CLAIM A SUBTRACTI ON UNDER THIS SECTIO N SHALL FILE WITH TH E 12
COMPTROLLER A STATEMENT THAT SPE CIFIES THE TOTAL AMO UNT OF THE 13
SUBTRACTION THAT THE COMBINED GR OUP INTENDS TO CLAIM . 14
(2) THE STATEMENT SHALL B E ON THE FORM AND CO NTAIN THE 15
INFORMATION THE COMPTROLLER REQUIRES . 16
(3) THE COMPTROLLER MAY REVIE W AND ALTER THE AMOU NT OF: 17
(I) THE SUBTRACTION SPEC IFIED IN THE STATEME NT 18
REQUIRED UNDER PARAG RAPH (1) OF THIS SUBSECTION ; OR 19
(II) THE SUBTRACTION CLAI MED ON A TAX RETURN FOR ANY 20
TAXABLE YEAR . 21
10–402.1. 22
(A) (1) IN THIS SECTION THE F OLLOWING WORDS HAVE THE MEANINGS 23
INDICATED. 24
(2) “COMBINED GROUP ” MEANS A GROUP OF COR PORATIONS: 25
(I) THAT IS ENGAGED IN A UNITARY BU SINESS; 26
(II) IN WHICH MORE THAN 50% OF THE VOTING STOCK OF EACH 27
MEMBER IS DIRECTLY O R INDIRECTLY OWNED B Y: 28
1. A COMMON OWNER OR CO MMON OWNERS , EITHER 29 SENATE BILL 576 5
CORPORATE OR NONCORP ORATE; OR 1
2. ONE OR MORE MEMBER C ORPORATIONS OF THE 2
GROUP; 3
(III) THE MEMBERS OF WHICH ARE SUBJECT TO THE I NCOME TAX 4
OR WOULD BE SUBJECT TO THE INCOME TAX IF DOING BUSINESS IN TH E STATE; AND 5
(IV) CONSISTING OF ANY OT HER MEMBERS UNDER TH E 6
CIRCUMSTANCES AND TO THE EXTENT PROVIDED IN REGULATIONS ADOPT ED BY 7
THE COMPTROLLER TO PREVEN T THE AVOIDANCE OF T AX OR TO REFLECT CLE ARLY 8
THE INCOME OF ANY ME MBER OF THE COMBINED GROUP FOR ANY PERIOD . 9
(3) “COMBINED RETURN ” MEANS A TAX RETURN F OR THE COMBINED 10
GROUP CONTAINING INF ORMATION AS PROVIDED IN THIS SECTION O R OTHERWISE 11
REQUIRED BY THE COMPTROLLER . 12
(4) “UNITARY BUSINESS ” MEANS A SINGLE ECONO MIC ENTERPRISE 13
THAT IS MADE EITHER OF SEPARATE PARTS OF A SINGLE BUSINESS EN TITY OR OF A 14
COMMONLY CONTROLLED GROUP OF BUSINESS EN TITIES THAT ARE SUFF ICIENTLY 15
INTERDEPEND ENT, INTEGRATED, AND INTERRELATED THR OUGH THEIR ACTIVITIE S 16
SO AS TO PROVIDE MUT UAL BENEFIT THAT PRO DUCES A SHARING OR E XCHANGE OF 17
VALUE AMONG THEM AND A SIGNIFICANT FLOW O F VALUE TO THE SEPAR ATE PARTS. 18
(B) (1) THE TERM “UNITARY BUSINESS ” SHALL BE CONSTRU ED TO THE 19
BROADEST EXTENT ALLO WED UNDER THE U.S. CONSTITUTION. 20
(2) A BUSINESS CONDUCTED D IRECTLY OR INDIRECTL Y BY ONE 21
CORPORATION IS A UNI TARY BUSINESS WITH R ESPECT TO THAT PORTI ON OF A 22
BUSINESS CONDUCTED B Y ANOTHER CORPORATIO N THROUGH ITS DIRECT OR 23
INDIRECT INTEREST IN A PARTNERSHIP IF THE REQUIREMENTS OF SUBS ECTION 24
(A)(4) OF THIS SECTION ARE SATISFIED, INCLUDING IF THERE I S SYNERGY AND AN 25
EXCHANGE AND FLOW OF VALUE BETWEEN THE TW O PARTS OF THE BUSIN ESS AND 26
THE TWO CORPORATIONS ARE MEMBERS OF THE S AME COMMONLY CONTROLLE D 27
GROUP. 28
(3) A BUSINESS CONDUCTED B Y A PARTNERSHIP SHAL L BE TREATED 29
AS CONDUCTED BY ITS PARTNERS, WHETHER DIRECTLY HEL D OR INDIRECTLY HELD 30
THROUGH A SERIES OF PARTNERSHIPS , TO THE EXTENT OF THE PARTNER’S 31
DISTRIBUTIVE SHARE O F THE PAR TNERSHIP’S INCOME, REGARDLESS OF THE 32
PERCENTAGE OF THE PA RTNER’S OWNERSHIP INTEREST OR ITS DISTRIBUTIVE OR 33
ANY OTHER SHARE OF P ARTNERSHIP INCOME . 34
(C) (1) EXCEPT AS PROVIDED BY AND SUBJECT TO REGUL ATIONS 35 6 SENATE BILL 576
ADOPTED BY THE COMPTROLLER , FOR ALL TAXABLE YEAR S BEGINNING AFTER 1
DECEMBER 31, 2024, A CORPORATION ENGAGE D IN A UNITARY BUSIN ESS SHALL 2
FILE A COMBINED RETU RN, REPORTING AND PAYING TAX ON WORLDWIDE TAX ABLE 3
INCOME AS A COMBINED GROUP, REFLECTING THE AGGRE GATE INCOME TAX 4
LIABILITY OF ALL MEM BERS OF THE COMBIN ED GROUP THAT ARE EN GAGED IN A 5
UNITARY BUSINESS . 6
(2) THE TAXABLE INCOME OF A CORPORATION REQUIR ED TO FILE 7
UNDER § 10–811(A)(2) OF THIS TITLE IS EQU AL TO THE COMBINED G ROUP’S 8
MARYLAND MODIFIED INC OME AS ADJUSTED UNDE R SUBSECTION (D)(3) OF THIS 9
SECTION. 10
(D) (1) THE MARYLAND MODIFIED INC OME OF THE COMBINED GROUP 11
EQUALS THE PRODUCT O F: 12
(I) THE COMBINED GROUP ’S APPORTIONABLE MARYLAND 13
MODIFIED INCOME , AS DETERMINED UNDER PARAGRAPH (2) OF THIS SUBSECTION 14
AND ADJUSTED UNDER P ARAGRAPH (3) OF THIS SUBSECTION ; AND 15
(II) THE COMBINED GROUP ’S MARYLAND APPORTIONMEN T 16
FACTOR, AS DETERMINED UNDER PARAGRAPH (4) OF THIS SUBSECTION . 17
(2) (I) SUBJECT TO SUBPARAGRA PHS (II) THROUGH (IV) OF THIS 18
PARAGRAPH , THE APPORTIONABLE MARYLAND MODIFIED INC OME OF THE 19
COMBINED GRO UP EQUALS THE SUM OF THE CORPORATION ’S AND EACH MEMBER ’S 20
MARYLAND MODIFIED INC OME. 21
(II) 1. SUBJECT TO SUBSUBPARA GRAPH 2 OF THIS 22
SUBPARAGRAPH , FOR ANY MEMBER INCOR PORATED IN THE UNITED STATES OR 23
INCLUDED IN A CONSOL IDATED FEDERAL CORPO RATE INCOME TAX RE TURN, THE 24
INCOME TO BE INCLUDE D IN THE TOTAL APPOR TIONABLE INCOME OF T HE 25
COMBINED GROUP IS TH E MARYLAND MODIFIED INC OME AS CALCULATED UN DER § 26
10–304 OF THIS TITLE. 27
2. THE INCOME OF EACH ME MBER SHALL BE 28
CALCULATED ON A SEPA RATE RETURN BASIS AS IF THE MEMBER WERE NOT 29
CONSOLIDATED FOR FED ERAL INCOME TAX PURP OSES. 30
(III) 1. FOR ANY MEMBER NOT IN CLUDED UNDER 31
SUBPARAGRAPH (II) OF THIS PARAGRAPH , THE INCOME TO BE INC LUDED IN THE 32
TOTAL INCOME OF THE COMBINED GROUP IS DE TERMINED AS PROVIDED UNDER 33
THIS SUBPAR AGRAPH. 34
2. A PROFIT AND LOSS STAT EMENT SHALL BE PREPA RED 35 SENATE BILL 576 7
FOR EACH FOREIGN BRA NCH OR CORPORATION I N THE CURRENCY IN WH ICH THE 1
BOOKS OF ACCOUNT OF THE BRANCH OR CORPOR ATION ARE REGULARLY 2
MAINTAINED. 3
3. THE PROFIT AND LOSS S TATEMENT SHALL BE 4
ADJUSTED TO CONFORM TO GENE RALLY ACCEPTED ACCOU NTING PRINCIPLES AS 5
ADOPTED BY THE UNITED STATES FINANCIAL ACCOUNTING STANDARDS BOARD 6
FOR THE PREPARATION OF THE PROFIT AND LO SS STATEMENTS , EXCEPT AS 7
MODIFIED BY REGULATI ON. 8
4. EXCEPT AS OTHERWISE P ROVIDED BY REGULATION , 9
THE PROFIT AND LOSS STATEMENT OF EACH ME MBER OF THE COMBINED GROUP, 10
AND THE APPORTIONMEN T FACTORS RELATED TO EACH STATEMENT , WHETHER 11
UNITED STATES OR FOREIGN , SHALL BE TRANSLATED INTO THE CURRENCY IN 12
WHICH THE PARENT COM PANY MAINTAINS ITS B OOKS AND RECORDS . 13
5. INCOME APPORTIONED TO THIS STATE SHALL BE 14
EXPRESSED IN UNITED STATES DOLLARS . 15
(IV) IF A UNITARY BUSINESS INCLUDES INCOME FROM A 16
PARTNERSHIP , THE INCOME TO BE INC LUDED IN THE TOTAL I NCOME OF THE 17
COMBINED GROUP EQUAL S THE DIRECT AND INDIRECT DISTRIBUTIV E SHARE OF 18
THE PARTNERSHIP ’S UNITARY BUSINESS I NCOME ALLOCATED TO A NY MEMBER OF 19
THE COMBINED GROUP . 20
(3) THE COMBINED GROUP ’S APPORTIONABLE MARYLAND MODIFIED 21
INCOME SHALL BE ADJU STED TO ELIMINATE IN TERCOMPANY TRANSACTI ONS AS 22
DETERMIN ED UNDER THE INTERNAL REVENUE CODE. 23
(4) (I) SUBJECT TO SUBPARAGRA PH (II) OF THIS PARAGRAPH , THE 24
COMBINED GROUP ’S MARYLAND APPORTIONMEN T FACTOR IS A FRACTI ON: 25
1. THE NUMERATOR OF WHI CH IS THE SUM OF THE 26
CORPORATION ’S AND EACH MEMBER ’S MARYLAND FACTO RS UNDER § 10–402 OF 27
THIS SUBTITLE; AND 28
2. THE DENOMINATOR OF W HICH IS THE SUM OF T HE 29
CORPORATION ’S AND EACH MEMBER ’S FACTORS UNDER § 10–402 OF THIS SUBTITLE. 30
(II) THE APPORTIONMENT FAC TORS OF PASS –THROUGH 31
ENTITY MEMBERS ARE I NCLUDED IN THE NUMER ATOR UNDER SUBPARAGRA PH (I)1 32
OF THIS PARAGRAPH AN D THE DENOMINATOR UN DER SUBPARAGRAPH (I)2 OF THIS 33
PARAGRAPH TO THE EXT ENT OF THE CORPORATI ON’S DIRECT AND INDIREC T 34
DISTRIBUTIVE SHARE O F THAT ENTITY. 35 8 SENATE BILL 576
(E) (1) SUBJECT TO REGULATION S ADOPTED BY THE COMPTROLLE R, A 1
CORPORATION THAT IS PART OF A COMBINED GROUP MAY ELECT TO DETERMINE ITS 2
INCOME DERIVED FROM OR ATTRIBUTABLE TO T RADE OR BUSINESS IN THE STATE 3
USING THE WATER ’S EDGE METHOD AS DES CRIBED IN THIS SUBSE CTION. 4
(2) UNDER THE WATER ’S EDGE METHOD , THE COMBINED GROUP FOR 5
PURPOSES OF THE COMB INED REPORTING METHO D REQUIRED UNDER THI S 6
SECTION SHALL INCLUD E ONLY THE FOLLOWING AFFILIATED ENTITIES : 7
(I) CORPORATIONS THAT AR E INCORPORATED IN TH E UNITED 8
STATES, EXCLUDING CORPORATIO NS MAKING AN ELECTIO N UNDER §§ 931 9
THROUGH 934 OF THE INTERNAL REVENUE CODE; 10
(II) DOMESTIC INTERNATION AL SALES CORPORATION S, AS 11
DESCRIBED IN §§ 991 THROUGH 994 OF THE INTERNAL REVENUE CODE; 12
(III) ANY CORPORATION OTHE R THAN A BANK , REGARDLESS OF 13
THE PLACE WHERE IT I S INCORPORATED , IF THE AVERAGE OF TH E CORPORATION ’S 14
PROPERTY, PAYROLL, AND SALES FACTORS WI THIN THE UNITED STATES IS 20% OR 15
MORE; 16
(IV) EXPORT TRADE CORPORA TIONS, AS DESCRIBED IN §§ 970 17
AND 971 OF THE INTERNAL REVENUE CODE; 18
(V) A FOREIGN CORPORATIO N DERIVING GAIN OR LOSS FROM 19
DISPOSITION OF AN IN TEREST IN REAL PROPE RTY IN THE UNITED STATES TO THE 20
EXTENT RECOGNIZED UN DER § 897 OF THE INTERNAL REVENUE CODE; AND 21
(VI) UNDER THE CIRCUMSTAN CES AND TO THE EXTEN T 22
PROVIDED BY REGULATI ONS THAT THE COMPTROLLER ADOPTS : 23
1. A CORPORATION NOT DE SCRIBED IN ITEMS (I) 24
THROUGH (V) OF THIS PARAGRAPH TO THE EXTENT OF THE CO RPORATION’S INCOME 25
DERIVED FROM OR ATTR IBUTABLE TO SOURCES WITHIN THE UNITED STATES AND 26
THE CORPORATION ’S FACTORS ASSIGNABLE TO A LOCATION WITHIN THE UNITED 27
STATES; OR 28
2. AN AFFILIATED CORPOR ATION THAT IS A 29
CONTROLLED FOREIGN C ORPORATION , AS DEFINED IN § 957 OF THE INTERNAL 30
REVENUE CODE. 31
(3) THE USE OF THE WATER ’S EDGE METHOD IS SUB JECT TO THE 32
TERMS AND CONDITIONS THAT THE COMPTROLLER REQUIRES BY REGULATION, 33 SENATE BILL 576 9
INCLUDING ANY CONDIT IONS THAT ARE NECESS ARY OR APPROPRIATE T O PREVENT 1
THE AVOIDANCE OF TAX OR TO REFLECT CLEARL Y THE INCOME FOR ANY PERIOD. 2
(F) (1) (I) AN ELECTION TO USE TH E WATER’S EDGE METHOD IN 3
ACCORDANCE WITH SUBS ECTION (E) OF THIS SECTION IS EFFECTIVE ONLY IF MA DE 4
ON A TIMELY FILED OR IGINAL RETURN FOR A TAX YEAR BY EVERY ME MBER OF THE 5
UNITARY BUSINESS . 6
(II) THE COMPTROLLER SHALL DEV ELOP REGULATIONS 7
GOVERNING THE IMPACT , IF ANY, ON THE SCOPE OR APPL ICATION OF AN ELECTI ON 8
TO USE THE WATER ’S EDGE METHOD , INCLUDING TERMINATIO N OR DEEMED 9
ELECTION, RESULTING FROM A CHA NGE IN THE COMPOSITI ON OF THE UNITARY 10
BUSINESS, THE COMBINED GROUP , THE TAXPAYER MEMBERS , OR ANY OTHER 11
SIMILAR CHANGE . 12
(2) AN ELECTION TO USE TH E WATER’S EDGE METHOD SHALL 13
CONSTITUTE CONSENT TO THE REASONABLE PRODUCTIO N OF DOCUMENTS AND 14
TAKING OF DEPOSITION S IN ACCORDANCE WITH THE MARYLAND RULES. 15
(3) AT THE DISCRETION OF THE COMPTROLLER , AN ELECTION TO 16
USE THE WATER ’S EDGE METHOD MAY BE DISREGARDED IN PART OR IN WHOLE, AND 17
THE INCOME AND APPORTION MENT FACTORS OF ANY MEMBER OF THE TAXPAY ER’S 18
UNITARY GROUP MAY BE INCLUDED IN THE COMB INED REPORT WITHOUT REGARD 19
TO THE PROVISIONS OF THIS SECTION, IF ANY MEMBER OF THE UNITARY GROUP 20
FAILS TO COMPLY WITH ANY PROVISION OF THI S SECTION O R IF A PERSON 21
OTHERWISE NOT INCLUD ED IN THE WATER ’S EDGE COMBINED GROU P WAS AVAILED 22
OF A SUBSTANTIAL OBJ ECTIVE OF AVOIDING STATE INCOME TAX . 23
(4) (I) SUBJECT TO SUBPARAGRA PHS (II) THROUGH (IV) OF THIS 24
PARAGRAPH , AN ELECTION TO USE T HE WATER’S EDGE METHOD IS BINDING FOR 25
AND APPLICABLE TO TH E TAXABLE YEAR IN WH ICH THE ELECTION IS MADE AND ALL 26
TAXABLE YEARS THEREA FTER FOR A PERIOD OF 10 YEARS. 27
(II) AN ELECTION TO USE TH E WATER’S EDGE METHOD MAY BE 28
WITHDRAWN OR REINSTI TUTED AFTER WITHDRAW AL, BEFORE THE EX PIRATION OF 29
THE 10–YEAR PERIOD, ONLY ON WRITTEN REQU EST FOR REASONABLE C AUSE AND 30
ONLY WITH THE WRITTE N PERMISSION OF THE COMPTROLLER . 31
(III) IF THE COMPTROLLER GRANTS A WITHDRAWAL OF THE 32
ELECTION UNDER SUBPA RAGRAPH (II) OF THIS PARAGRAPH , THE COMPTROLLE R 33
SHALL IMPOSE REASONA BLE CONDITIONS AS NE CESSARY TO PREVENT T HE EVASION 34
OF TAX OR TO CLEARLY REFLECT INCOME FOR T HE ELECTION PERIOD B EFORE OR 35
AFTER THE WITHDRAWAL . 36
10 SENATE BILL 576
(IV) 1. SUBJECT TO SUBSUBPARA GRAPH 2 OF THIS 1
SUBPARAGRAPH , ON THE EXPIRATION OF THE 10–YEAR PERIOD, A TAXPAYER MAY 2
WITHDRAW FROM THE EL ECTION TO USE THE WA TER’S EDGE METHOD . 3
2. THE WITHDRAWAL SHALL BE MADE IN WRITING 4
WITHIN 1 YEAR BEFORE THE EXPI RATION OF THE ELECTI ON AND IS BINDING FO R A 5
PERIOD OF 10 YEARS, SUBJECT TO THE SAME CONDITIONS AS APPLIE D TO THE 6
ORIGINAL ELECTION . 7
3. IF NO WITHDRAWAL IS P ROPERLY MADE UNDER T HIS 8
SUBPARAGRAPH , THE ELECTION TO USE THE WATER ’S EDGE METHOD SHALL 9
REMAIN IN EFFECT FOR AN ADDITIONAL 10–YEAR PERIOD, SUBJECT TO THE SAME 10
CONDITIONS AS APPLIE D TO THE ORIGINAL EL ECTION. 11
(G) (1) THE COMPTROLLER SHALL ADO PT REGULATIONS THAT ARE 12
NECESSARY AND APPROP RIATE TO CARRY OUT T HIS SECTION. 13
(2) THE REGULATIONS ADOPT ED BY THE COMPTROLLER SHALL BE 14
CONSISTENT WITH THE “PRINCIPLES FOR DETERMINING THE EXISTENCE OF A 15
UNITARY BUSINESS” (REG. IV.1.(B)) OF THE MODEL GENERAL ALLOCATION AND 16
APPORTIONMENT REGULATIONS, AS ADOPTED BY THE MULTISTATE TAX 17
COMMISSION. 18
10–811. 19
(A) (1) [Each member of] EXCEPT AS PROVIDED BY AND SUBJECT TO 20
REGULATIONS ADOPTED BY THE COMPTROLLER , an affiliated group of corporations 21
[shall file a separate income tax return] ENGAGED IN A UNITARY BUSINESS SHALL FILE 22
A COMBINED INCOME T AX RETURN REFLECTING THE AGGREGATE INCOME TAX 23
LIABILITY OF ALL THE MEMBERS OF THE AFFIL IATED GROUP THAT ARE ENGAGED IN 24
A UNITARY BUSINESS . 25
(2) THE RETURN REQUIRED U NDER PARAGRAPH (1) OF THIS 26
SUBSECTION SHALL INC LUDE THE INCOME AND APPORTIONMENT FACTOR S 27
DETERMINED UNDER § 10–402.1(D) AND (E) OF THIS TITLE, AND ANY OTHER 28
INFORMATION REQUIRED BY THE COMPTROLLER , FOR ALL MEMBERS OF T HE 29
COMBINED GROUP WHERE VER LOCATED OR DOING BUSINESS. 30
(3) (I) EXCEPT AS PROVIDED IN SUBPARAGRAPH (II) OF THIS 31
PARAGRAPH , THE COMBINED RETURN SHAL L BE FILED UNDER THE NAME AND 32
FEDERAL EMPLOYER IDE NTIFICATION NUMBER O F THE PARENT CORPORA TION IF 33
THE PARENT IS A MEMB ER OF THE COMBINED G ROUP. 34
(II) IF THERE IS NO PARENT CORPORATION OR IF TH E PARENT 35 SENATE BILL 576 11
IS NOT A MEMBER OF T HE COMBINE D GROUP, THE MEMBERS OF THE C OMBINED 1
GROUP SHALL CHOOSE A MEMBER TO FILE THE R ETURN. 2
(III) THE FILING MEMBER UND ER SUBPARAGRAPH (I) OR (II) OF 3
THIS PARAGRAPH SHALL CONTINUE TO FILE THE COMBINED RETURN UNLE SS THE 4
FILING MEMBER IS NO LONGER THE PARENT CO RPORATION OR NO LONG ER A 5
MEMBER OF THE COMBIN ED GROUP. 6
(4) THE RETURN SHALL BE S IGNED BY A RESPONSIB LE OFFICER OF 7
THE FILING MEMBER ON BEHALF OF THE COMBIN ED GROUP MEMBERS . 8
(5) MEMBERS OF THE COMBIN ED GROUP ARE JOINTLY AND 9
SEVERALLY LIABLE FOR THE TAX LIABILITY OF THE C OMBINED GROUP INCLUD ED 10
IN THE COMBINED RETU RN. 11
(B) (1) THE COMPTROLLER MAY , BY REGULATION , REQUIRE THAT THE 12
COMBINED RETURN INCL UDE THE INCOME AND A SSOCIATED APPORTIONM ENT 13
FACTORS OF ENTITIES THAT ARE NOT INCLUDE D IN THE COMBINED REPORT BUT 14
THAT ARE MEMBERS OF A UNITARY BUSINESS I N ORDER TO REFLECT P ROPER 15
APPORTIONMENT OF INC OME OF THE ENTIRE UN ITARY BUSINESS. 16
(2) IF THE COMPTROLLER DETERMINE S THAT THE REPORTED 17
INCOME OR LOSS OF A TAXPAYER ENGAGED IN A UNITARY BUSINESS W ITH A MEMBER 18
NOT INCLUDED IN THE COMBINED GROUP REPRE SENTS AN AVOIDANCE O R EVASION 19
OF TAX, THE COMPTROLLER MAY , ON A CASE–BY–CASE BASIS, REQUIRE THAT ALL 20
OR PART OF THE INCOM E AND ASSOCIATED APP ORTIONMENT FACTORS O F THE 21
MEMBER BE INCLUDED I N THE TAXPAYER ’S COMBINED RETURN. 22
(3) THE COMPTROLLER MAY REQUI RE: 23
(I) THE EXCLUSION OF ONE OR MORE FACTORS , THE 24
INCLUSION OF ONE OR MORE ADDITIONAL FACT ORS, OR THE EMPLOYMENT OF ANY 25
OTHER METHOD THAT WI LL FAIRLY REPRESENT THE TAXPAYER ’S BUSINESS IN THIS 26
STATE; OR 27
(II) THE EMPLOYMENT OF AN Y OTHER METHOD TO EF FECTUATE 28
A PROPER REFLECTION OF THE TOTAL AMOUNT OF INCOME SUBJECT TO 29
APPORTIONMENT AND AN EQUITABLE ALLOCATION AND APPORTIONMENT OF THE 30
COMBINED GROUP ’S OR ITS MEMBERS ’ INCOME. 31
(C) THE COMPTROLLER SHALL ADO PT REG ULATIONS THAT ARE 32
NECESSARY AND APPROP RIATE TO CARRY OUT T HIS SECTION. 33
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect July 34 12 SENATE BILL 576
1, 2024, and shall be applicable to all taxable years beginning after December 31, 2024. 1