CPA Resources
CPA Resources

Maryland lawmakers OK changes to corporate reporting requirements

ANNAPOLIS, March 26, 2008 -- Lawmakers in both the Maryland House of Representatives and the Senate have approved bills that reduce the most onerous elements of corporate reporting requirements that were enacted during a special legislative session last fall.

House Bill 664 and Senate Bill 444 "reduce the most onerous and unnecessary aspects of the reporting requirements while still gathering the data the state needs for calculating more accurate fiscal note estimates on corporate tax matters," writes William Burns of the Maryland Chamber of Commerce.

In a note to the Maryland Chamber of Commerce Tax Committee, Karen Syrylo, a member of the MACPA's State Tax Committee, writes that the bills call for the following changes in the state's corporate reporting requirements:

  • Remove the ongoing nature of these reports by having these requirements terminate with the tax year that ends in 2010. (The report of the Tax Reform Study Commission, that will use the gathered data, is due in 2011.)
  • Change the due date of the reports the Comptroller must submit about this data from Dec. 1 of each year to March 1 of each year, starting with March 1, 2009. This also allows for the change that gives corporations more time to file the reports relative to their 2006 year; those reports are now due with the 2007 Maryland income tax return. The data requirements are still retroactive to the 2006 year.
  • Note that the above two changes also apply to the reports on single factor apportionment calculations that manufacturers must file under section 10-402.
  • Exclude from the “corporate group” requiring to file these reports:
    • any corporation that for any reason is not subject to the United States federal income tax (thus eliminating the reporting of information for foreign companies that would not be includable in a “water’s edge” unitary combined tax return);
    • an insurer as defined in section 1-101 of the Insurance Article (thus eliminating from these income tax information reporting requirements all insurance companies because they aren’t subject to corporate income tax in Maryland, they pay a gross premiums tax instead);
    • a regulated investment company as defined in section 851(A) of the Internal Revenue Code (thus eliminating these entities that do not pay corporate income tax in Maryland, instead, their shareholders pay the income tax).
  • Remove the expanded definition of “doing business” which in the original law reflected an extremely broad economic presence approach, e.g., by requiring reports by corporations that merely had customers in the state. Information is now required of a corporation required to file a Maryland corporate income tax return and its affiliates that are part of a waters’-edge combined income tax return.
  • Replace much of the detailed data required under the original statute (such as the list of other states in which each corporation filed tax returns, statements regarding why any affiliates that were not filing Maryland income tax returns were not subject to Maryland income tax) with a single proforma water’s edge combined income tax return. The method for filing this proforma is to be developed in regulations to be adopted by the Comptroller.
  • Continue to require reporting of how much a corporation’s Maryland income tax would increase if the state used a throwback rule for sales apportionment; and for corporations whose commercial domicile is in Maryland, how much their Maryland income tax would increase if non-operational income were fully allocated to Maryland.
  • Continue the requirements of section 10-402, for manufacturers to report the difference in their Maryland tax under the current single factor apportionment versus three-factor double-weighted sales factor apportionment.
  • Remove the provision for the Comptroller to require an individual with Schedule C or Schedule E income to attach a full copy of his federal return to his Maryland return.

The bills also remove the penalty -- $10,000 fine and five years in prison -- and replace it with the provision that "the Comptroller shall develop and implement an oversight and penalty system to insure that corporations provide the required disclosure statements in a timely and accurate manner."

Bookmark and Share

This content has not yet been Rated.

To Rate content, please Login.