Summary of 2009 Tax Legislation for Individuals

The following is a brief summary of Maryland tax legislation affecting individuals that was passed during the 2009 session of the General Assembly and signed into law by Governor Martin O'Malley. All references are to the Tax-General Article (TG), Annotated Code of Maryland, unless otherwise noted. For more detailed information, see Summary of 2009 Tax Legislation. For information about other tax legislation, visit the Maryland General Assembly's Web site

INCOME TAX

Tax Amnesty Program - Senate Bill 552 (Chapter 277, Acts of 2009)
This Act requires the Comptroller to declare an amnesty period from September 1, 2009 to October 30, 2009, both inclusive, during which the Comptroller shall waive all civil penalties (except previously assessed fraud penalties) and one-half of the interest that would have been imposed on certain delinquent taxpayers for nonreporting of tax liability, underreporting of tax liability, and nonpayment of tax liability.

The amnesty program affects the individual income tax, corporate income tax, withholding tax, sales and use tax, or admissions and amusement tax. The program does not apply to certain large corporations, taxes that were granted amnesty under the 2001 tax amnesty program, or taxpayers who were eligible for the July 1, 2004 - November 1, 2004 settlement period provided by Chapter 557 of the Acts of 2004.

This Act takes effect June 1, 2009.

Chesapeake Bay Nitrogen Removal Act of 2009 - Senate Bill 554 (Chapter 280, Acts of 2009)
This Act prohibits a person from installing, or having installed, on property a person owns in the State in the Chesapeake and Atlantic Coastal Bays Critical Area, an on-site sewage disposal system to service a newly constructed building, unless the on-site sewage disposal system utilizes nitrogen removal technology. The Act also prohibits a person from replacing or having replaced, an existing on-site sewage disposal system on property a person owns in the State in the Chesapeake and Atlantic Coastal Bays Critical Area, unless the replacement on-site sewage disposal system utilizes nitrogen removal technology.

The Act also provides for a new subtraction modification on Maryland individual income tax returns for the amount by which the cost difference between a conventional on-site sewage disposal system and a system that utilizes nitrogen removal technology exceeds the amount of assistance the individual receives from the Department of the Environment. This Act takes effect October 1, 2009, but the subtraction modification will be applicable to all taxable years beginning after December 31, 2009.

Tax Credits for Qualifying Employees with Disabilities - Sunset Extension - Senate Bill 604 (Chapter 290, Acts of 2009)
This Act extends by one year the termination provision and dates of applicability of the tax credit that an employer may claim for wages, child care and transportation expenses for qualified employees with disabilities The new termination date for this Qualifying Employees with Disability Tax Credit is June 30, 2010. This Act takes effect on June 1, 2009.

Income Tax Refund - Direct Deposit - Multiple Accounts - Senate Bill 698 (Chapter 593, Acts of 2009) and House Bill 883 (Chapter 594, Acts of 2009)
These Acts require the Comptroller to directly deposit portions of an income tax refund into at least two accounts at one or more financial institutions, if requested by a refund claimant. These Acts will take effect January 1, 2011.

Biotechnology Investment Incentive Tax Credit - Senate Bill 800 (Chapter 605, Acts of 2009) and House Bill 493 (Chapter 606, Acts of 2009)
These Acts amend the Biotechnology Investment Incentive Tax Credit and clarify that a qualified investor includes both an individual and entity. In addition, the Acts provide that Chapter 518 remains effective as of July 1, 2008, but removes the language that the Chapter applies to all taxable years after December 31, 2008. The Acts provide that for Chapter 518, a tax credit for an investment shall be claimed for the taxable year in which the investments were made. This Act takes effect July 1, 2009.

Budget Reconciliation and Financing Act of 2009 - House Bill 101 (Chapter 487, Acts of 2009)
This Act contains multiple provisions related to balancing the State budget. The Act reduces the money appropriated for the Maryland-mined Coal tax credit; provides that a certain amount must be added to or subtracted from federal adjusted gross income to determine net operating loss deductions and income from discharge of indebtedness; and provides that Maryland's automatic decoupling provisions do not apply to any change included in the American Recovery and Reinvestment Act of 2009, except for specifically decoupled provisions provided for by statute. Maryland's Budget Reconciliation and Financing Act of 2009 takes effect June 1, 2009 (except for the changes to Tax-General Article §10-210.1(b) enacted by this Act, which will take effect July 1, 2009) and Tax-General Article §8-406(b)(2)(iv) as enacted by this Act shall be applicable to all taxable years beginning after December 31, 2008.

Mandatory Income Tax Return Preparer Requirements - House Bill 810 (Chapter 422, Acts of 2009)
This Act requires that a paid income tax return preparer who has prepared more than 300 qualified returns in the prior taxable year is required to file the returns electronically. For a taxable year beginning after December 31, 2009 but before January 1, 2011, it is more than 200 qualified returns in the prior taxable year. For any taxable year beginning after December 31, 2010, it is more than 100. This Act takes effect July 1, 2009, and shall be applicable to all taxable years beginning after December 31, 2008.

Neighborhood and Community Assistance Program - Individual Donor Eligibility - Tax Credit - House Bill 1399 (Chapter 166, Acts of 2009)
This Act amends the Housing and Community Development Article to expand the Neighborhood and Community Assistance Tax Credit by allowing the credit to be claimed by an individual, as defined under Section 10-101 of the Tax-General Article. Currently, the Neighborhood and Community Assistance Tax Credit is available only to a business entity. This Act takes effect July 1, 2009, and shall be applicable to all taxable years beginning after December 31, 2009.

SALES AND USE TAX

Sales and Use Tax Exemption for Veterans' Organization - Senate Bill 44 (Chapter 506, Acts of 2009)
This Act extends by three years the termination date for the sales and use tax exemption for sales to certain veterans' organizations, from June 30, 2009 to June 30, 2012. This Act takes effect June 1, 2009.

Sales and Use and Property Tax Exemptions for Solar Energy Equipment and Property - Senate Bill 621 (Chapter 574, Acts of 2009)
This Act expands the definition of "Solar energy equipment" in the Tax-General and Tax-Property Articles to include that the sales and use tax and real property tax does not apply to solar energy equipment that uses solar energy to generate electricity that is supplied to the electric grid. This Act takes effect July 1, 2009.

Alternative Energy Tax Incentive Act of 2009 - House Bill 1171 (Chapter 444, Acts of 2009)
This Act expands the Tax-General and Tax-Property Articles to provide an exemption from sales and use tax and real property tax on the sale of residential wind energy equipment installed on residential property that uses wind energy to generate electricity for use in a residential structure on the property. This Act takes effect July 1, 2009.

ESTATE TAX

Maryland Estate Tax Return Filing - Senate Bill 156 (Chapter 202, Acts of 2009)
This Act amends three sections of Title 7 of the Tax-General Article relating to the filing of the Maryland estate tax return. The amendments change the requirement that the Maryland estate tax return be filed with the registers of wills, to allow the Maryland estate tax return to be filed directly with the Comptroller. In addition, the amendments require that all amended Maryland estate tax returns be filed directly with the Comptroller. Finally, another amendment creates options concerning the mode of certification of inheritance taxes paid on behalf of each decedent. This Act takes effect July 1, 2009 and will be applicable to all decedents dying after December 31, 2008.