Maryland Research and Development Tax Credit Summary

Businesses that have qualified research expenses (QREs) in Maryland may qualify for two state income tax credits, the Basic R&D Tax Credit and the Growth R&D Tax Credit. Here is a summary of the credits:

  • The Basic R&D Tax Credit equals three percent (3%) of QREs that do not exceed the Maryland Base Amount.
  • The Growth R&D Tax Credit equals ten percent (10%) of QREs in excess of the Maryland Base Amount.
  • The Base Amount is determined by dividing the aggregate QREs by the aggregate Maryland gross receipts for the four years prior to the credit year.
  • If either of the credits applied for exceeds $4.5 million, the tax credit is prorated.
  • Maryland follows the federal definition of qualified R&D and QREs, as defined by § 41(b) of the Internal Revenue Code in Maryland.
  • The business must submit an application by September 15th for expenses incurred in the previous calendar year.
  • R&D tax credits certified after December 15, 2012 are refundable for “small businesses” to the extent that the tax credits exceed the income tax liability for that taxable year.
  • The tax credit remains in effect until January 1, 2020, subject to extension by the General Assembly.

Maryland R&D Tax Credit Case Study

An Annapolis firm designs components for the telecommunications industry. The company claims R&D credits each year for the design and development activities of its engineers. This project involved a multi-year study covering the tax years 2011 – 2014. The Company qualified for The federal R&D Tax Credit of $847,000 and an additional $149,500 in Maryland state R&D Tax Credit. Summary of credits:

Year Total QREs Credit Total QREs Credit
2014 $3,000,000 $261,333 $3,000,000 $149,500
2013 2,600,000 224,000
2012 2,200,000 184,333
2011 2,000,000 177,334
Total $9,800,000 $847,000 $3,000,000 $149,500

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