EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTING LAW.
[Brackets] indicate matter deleted from existing law.
*hb1400*
HOUSE BILL 1400
I3, K3, Q3 5lr1537
CF SB 823
By: Delegates Boafo, Turner, Acevero, Allen, Behler, Foley, Harris, Kaiser,
Kaufman, Lopez, Martinez, Terrasa, Williams, Wims, Woods, and Wu
Introduced and read first time: February 7, 2025
Assigned to: Economic Matters and Ways and Means
A BILL ENTITLED
AN ACT concerning 1
No Tax on Tips Act 2
FOR the purpose of establishing consumer protections related to service fees charged by 3
food service facilities; specifying the State minimum wage rate and tip credit amount 4
that is in effect for certain time periods; prohibiting certain employers of tipped 5
employees, beginning on a certain date, from including a tip credit amount as part 6
of the employees’ wages; allowing a subtraction under the State income tax for 7
certain qualified tips received by individuals during the course of employment; 8
allowing a person a credit against the State income tax for up to a certain amount 9
paid to an employee of the person based on the payment of certain wages and tips; 10
and generally relating to service fees, the payment of wages, tip credits, and State 11
income taxes. 12
BY repealing and reenacting, with amendments, 13
Article – Commercial Law 14
Section 13–301(14)(xlii) 15
Annotated Code of Maryland 16
(2013 Replacement Volume and 2024 Supplement) 17
BY repealing and reenacting, without amendments, 18
Article – Commercial Law 19
Section 13–301(14)(xliii) 20
Annotated Code of Maryland 21
(2013 Replacement Volume and 2024 Supplement) 22
BY adding to 23
Article – Commercial Law 24
Section 13–301(14)(xliv) and 14–1328 25
Annotated Code of Maryland 26
(2013 Replacement Volume and 2024 Supplement) 27 2 HOUSE BILL 1400
BY repealing and reenacting, with amendments, 1
Article – Labor and Employment 2
Section 3–413 and 3–419 3
Annotated Code of Maryland 4
(2016 Replacement Volume and 2024 Supplement) 5
BY repealing and reenacting, without amendments, 6
Article – Tax – General 7
Section 10–207(a) 8
Annotated Code of Maryland 9
(2022 Replacement Volume and 2024 Supplement) 10
BY adding to 11
Article – Tax – General 12
Section 10–207(qq) and 10–758 13
Annotated Code of Maryland 14
(2022 Replacement Volume and 2024 Supplement) 15
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 16
That the Laws of Maryland read as follows: 17
Article – Commercial Law 18
13–301. 19
Unfair, abusive, or deceptive trade practices include any: 20
(14) Violation of a provision of: 21
(xlii) Section 12–6C–09.1 of the Health Occupations Article; [or] 22
(xliii) Title 14, Subtitle 48 of this article; or 23
(XLIV) SECTION 14–1328 OF THIS ARTICLE; OR 24
14–1328. 25
(A) (1) IN THIS SECTION THE F OLLOWING WORDS HAVE THE MEANINGS 26
INDICATED. 27
(2) “FOOD SERVICE FACILITY ” HAS THE MEANING STAT ED IN § 28
21–301 OF THE HEALTH – GENERAL ARTICLE. 29
(3) “SERVICE FEE” MEANS A FEE ADDED BY A FOOD SERVICE 30
FACILITY TO A CUSTOM ER’S TOTAL CHARGE THAT IS SEPARATE FROM : 31 HOUSE BILL 1400 3
(I) THE PRICE LISTED ON T HE MENU FOR FOOD, DRINKS, OR 1
MERCHANDISE SOLD BY THE FOOD SERVICE FAC ILITY; AND 2
(II) ANY SALES TAX THE FOO D SERVICE FACILITY I S REQUIRED 3
TO COLLECT. 4
(B) A FOOD SERVICE FACILIT Y MAY NOT CHARGE A S ERVICE FEE UNLESS 5
THE FOOD SERVICE FAC ILITY PROMINENTLY DI SCLOSES TO THE CUSTOMER ON TH E 6
MENU OR IN A LOCATIO N THAT IS VISIBLE TO THE CUSTOMER BEFORE THE 7
CUSTOMER PLACES AN O RDER: 8
(1) THE AMOUNT AND PURPOS E OF THE SERVICE FEE ; AND 9
(2) WHETHER THE SERVICE F EE IS PAID DIRECTLY TO EMPLOYEES IN 10
ADDITION TO THEIR WA GES. 11
(C) A VIOLATION OF THIS SE CTION BY A FOOD SERV ICE FACILITY IS: 12
(1) AN UNFAIR, ABUSIVE, OR DECEPTIVE TRADE P RACTICE WITHIN 13
THE MEANING OF TITLE 13 OF THIS ARTICLE; AND 14
(2) SUBJECT TO THE ENFORC EMENT AND PENALTY PR OVISIONS 15
CONTAINED IN TITLE 13 OF THIS ARTICLE. 16
Article – Labor and Employment 17
3–413. 18
(a) [(1)] In this section [the following words have the meanings indicated. 19
(2) “Employer”], “EMPLOYER” includes a governmental unit. 20
[(3) “Small employer” means an employer that employs 14 or fewer 21
employees.] 22
(b) Except as provided in subsection (d) of this section and § 3–414 of this subtitle, 23
each employer shall pay: 24
(1) to each employee who is subject to both the federal Act and this subtitle, 25
at least the greater of: 26
(i) the minimum wage for that employee under the federal Act; or 27
(ii) the State minimum wage set under subsection (c) of this section; 28 4 HOUSE BILL 1400
and 1
(2) to each other employee who is subject to this subtitle, at least the 2
greater of: 3
(i) the highest minimum wage under the federal Act; or 4
(ii) the State minimum wage set under subsection (c) of this section. 5
(c) [(1) Except as provided in paragraph (2) of this subsection, the] THE State 6
minimum wage rate is: 7
[(i) for the 12–month period beginning January 1, 2023, $13.25 per 8
hour; and 9
(ii)] (1) FOR THE 36–MONTH PERIOD beginning January 1, 2024, 10
$15.00 per hour[.]; 11
[(2) The State minimum wage rate for a small employer is: 12
(i) for the 12–month period beginning January 1, 2023, $12.80 per 13
hour; and 14
(ii) beginning January 1, 2024, $15.00 per hour.] 15
(2) FOR THE 12–MONTH PERIOD BEGINNI NG JANUARY 1, 2027, 16
$17.00 PER HOUR; 17
(3) FOR THE 6–MONTH PERIOD BEGINNI NG JANUARY 1, 2028, $18.50 18
PER HOUR; AND 19
(4) BEGINNING JULY 1, 2028, $20.00 PER HOUR. 20
(d) An employer may pay an employee a wage that equals a rate of 85% of the 21
State minimum wage established under this section if the employee is under the age of 18 22
years. 23
3–419. 24
(a) (1) Except as provided in § 3–1604(d) of this title, this section applies to 25
each employee who: 26
(i) is engaged in an occupation in which the employee customarily 27
and regularly receives more than $30 each month in tips; 28
(ii) has been informed by the employer about the provisions of this 29 HOUSE BILL 1400 5
section; and 1
(iii) has kept all of the tips that the employee received. 2
(2) Notwithstanding paragraph (1)(iii) of this subsection, this section does 3
not prohibit the pooling of tips. 4
(b) Subject to the limitations in this section, an employer may include, as part of 5
the wage of an employee to whom this section applies: 6
(1) an amount that the employer sets to represent the tips of the employee; 7
or 8
(2) if the employee or representative of the employee satisfies the 9
Commissioner that the employee received a lesser amount in tips, the lesser amount. 10
(c) (1) The tip credit amount that the employer may include under subsection 11
(b) of this section may not exceed the minimum wage established under § 3–413 of this 12
subtitle for the employee less [$3.63]: 13
(I) FOR THE 12–MONTH PERIOD BEGINNING JANUARY 1, 2027, 14
$12.00; AND 15
(II) FOR THE 6–MONTH PERIOD BEGINNI NG JANUARY 1, 2028, 16
$13.50. 17
(2) BEGINNING JULY 1, 2028, AN EMPLOYER : 18
(I) MAY NOT INCLUDE A TI P CREDIT AS PART OF THE WAGE OF 19
AN EMPLOYEE SUBJECT TO THIS SUBTITLE; AND 20
(II) SHALL PAY AN EMPLOYE E A WAGE THAT IS AT LEAST EQUAL 21
TO THE STATE MINIMUM WAGE SE T UNDER § 3–413 OF THIS SUBTITLE. 22
(3) THIS SECTION MAY NOT BE CONSTRUED AS PROH IBITING THE 23
PAYMENT OF TIPS TO E MPLOYEES. 24
(d) (1) The Commissioner shall adopt regulations, in consultation with payroll 25
service providers and restaurant industry trade group representatives, to require 26
restaurant employers that include a tip credit as part of the wage of an employee to provide 27
tipped employees with a written or electronic wage statement for each pay period that 28
shows the effective hourly tip rate as derived from employer–paid cash wages plus all 29
reported tips for tip credit hours worked each workweek of the pay period. 30
(2) The Commissioner shall provide notification of the tip credit wage 31 6 HOUSE BILL 1400
statement regulations on the Department’s website. 1
Article – Tax – General 2
10–207. 3
(a) To the extent included in federal adjusted gross income, the amounts under 4
this section are subtracted from the federal adjusted gross income of a resident to determine 5
Maryland adjusted gross income. 6
(QQ) (1) (I) IN THIS SUBSECTION THE FOLLOWING WORDS HAVE THE 7
MEANINGS INDICATED . 8
(II) “EMPLOYMENT ” MEANS WORK IN AN OCCUPATION OR 9
INDUSTRY IN WHICH AN INDIVIDU AL IS CUSTOMARILY CO MPENSATED THROUGH A 10
COMBINATION OF WAGES AND TIPS, SUCH AS BARBERING, COSMETOLOGY , 11
HOSPITALITY, FOOD AND BEVERAGE SE RVICE, PARKING SERVICES, AND CUSTODIAL 12
SERVICES. 13
(III) “QUALIFIED TIPS” MEANS TIP S RECEIVED BY AN 14
INDIVIDUAL DURING THE COURSE OF EMPLOYMENT THAT ARE PAID TO THE 15
INDIVIDUAL BY AN UNRELATED PARTY WHO DOES NOT H AVE AN OWNERSHIP STA KE 16
IN THE BUSINESS PROV IDING THE EMPLOYMENT . 17
(2) THE SUBTRACTION UNDER SUBSECTION (A) OF THIS SECTION 18
INCLUDES THE AMOUNT OF QUALIFIED TIPS RECEIVED BY AN INDIVIDUAL DURING 19
THE TAXABLE YEAR . 20
10–758. 21
(A) SUBJECT TO THE LIMITA TIONS OF THIS SECTIO N, FOR A TAXABLE YEAR 22
BEGINNING AFTER DECEMBER 31, 2026, BUT BEFORE JANUARY 1, 2029, A PERSON 23
MAY CLAIM A CREDIT A GAINST THE STATE INCOME TAX IN AN AMOUNT EQUAL T O 24
50% OF THE DIFFERENCE BETWEEN: 25
(1) THE MINIMUM WAGE PAI D TO AN EMPLOYEE OF THE PERSON IN 26
ACCORDANCE WITH § 3–413 OF THE LABOR AND EMPLOYMENT ARTICLE; AND 27
(2) THE TIP CREDI T AMOUNT ALLOWED UND ER § 3–419 OF THE 28
LABOR AND EMPLOYMENT ARTICLE. 29
(B) (1) FOR ANY TAXABLE YEAR , THE TOTAL AMOUNT OF THE CREDIT 30
ALLOWED UNDER THIS S ECTION MAY NOT EXCEE D: 31
HOUSE BILL 1400 7
(I) THE STATE INCOME TAX IMPO SED FOR THAT TAXABLE 1
YEAR; OR 2
(II) $10,000. 3
(2) ANY UNUSED AMOUNT OF THE CREDIT FOR ANY T AXABLE YEAR 4
MAY NOT BE CARRIED O VER TO ANY OTHER TAX ABLE YEAR. 5
SECTION 2. AND BE IT FURTHER ENACTED, That this Act is contingent on the 6
passage of Chapter(s) ___(S.B. 809 or H.B. 1458) of the Acts of the General Assembly of 7
2025, a constitutional amendment, and its ratification by the voters of the State. 8
SECTION 3. AND BE IT FURTHER ENACTED, That, subject to Section 2 of this 9
Act, this Act shall take effect on the proclamation of the Governor that the constitutional 10
amendment, having received a majority of the votes cast at the general election, has been 11
adopted by the people of Maryland. 12