CPA Resources
CPA Resources

New corporate reporting guidance available

BALTIMORE, Sept. 8, 2008 -- The deadline to comply with Maryland's new corporate reporting requirements is fast approaching, and members of the MACPA's State Tax Committee continue to work with the Maryland Comptroller's Office to provide tax practitioners and businesses with the latest information and guidance.

The following details are provided by Karen Syrylo and Bev Richard of the MACPA's State Tax Committee:

Filing information

We understand that the Comptroller's Office expects to have the electronic process available the week of Sept. 8, on the Web site at www.marylandtaxes.com/reporting. (The statute mandates electronic filing of this information.) The process will use Maryland's existing business tax filing system, "b-file," for secure filing of the data. Unfortunately, it appears that the process for this year will require manual keypunch of the data into the Comptroller's electronic system, because none of the software houses are currently developing software or electronic links (e.g., from a tax return preparation program) to facilitate the reporting.

Contact information

The Comptroller's Office also has established a process for taxpayers to send their specific questions:

By e-mail: cdcombinedreportingstudy@comp.state.md.us
By fax: (410) 974-5221
By phone: (410) 767-3015 or toll free at (866) 588-2086

The regulations and FAQs contain some definitions and explanations.

Penalties

The regulations and FAQs also include some discussion of the significant penalties that will be imposed for a corporation's failure to file, or failure to file accurately after the Comptroller's request for revised data:

  • $5,000 per day for the first month.
  • $10,000 per day afterward.

There is provision for abatement of the penalty "under extenuating circumstances only"; there is no discussion of what are acceptable extenuating circumstances or the usual "reasonable basis" language. The Comptroller's Office set the penalties at high levels as an incentive for corporations to comply with the information reporting. Officials with the Comptroller's Office have stated they hope not to have to impose penalties; they hope to receive all the data from all corporations on a timely basis.

We understand there is a possibility that one of the legislators who sits on the Joint Committee on Administrative, Executive and Legislative Review (AELR) will request a hearing on these emergency regulations, with particular focus on the penalties.

Other important points

  • The information is required for BOTH the 2006 and 2007 tax years. For all years that began in 2006, the due date is Oct. 15, 2008. For 2007 years, the due date is seven months after the original tax return due date -- also Oct. 15, 2008 for calendar-year corporations. Future reports will be due through 2010.
  • Corporations will NOT be filing a pro forma tax return or doing the pro forma tax calculations, but are merely required to provide the data to fill in the Comptroller's electronic form (income, intercompany eliminations, apportionment data under both "Joyce" and "Finnegan," throwback sales, non-operational income, etc.). The Comptroller's personnel will use the data to perform the calculations for the proforma "unitary combined reporting" tax, tax differential under apportionment method changes, etc.
  • All C corporations that are part of a "corporate group" and have at least one member that is currently subject to Maryland income tax must file the information report. (Excluded are those that are not subject to federal income tax, per the statute.)
  • The group should file a single report; columns are provided for each related corporation.
  • The numbers for corporations that are not currently subject to Maryland income tax AND do not make sales into Maryland can be aggregated in a single column.
  • S corporations are NOT subject to these requirements.
  • All corporations that received a notification letter from the Comptroller's Office in July but are not part of a "corporate group" or otherwise not subject to the requirements must still log on to the system by Oct. 15 and indicate that they are not subject.
  • The Comptroller's Office is NOT providing for an extension request process. They believe they need the data in October in order to perform their duties as mandated by the statute for reports to the legislature and governor regarding the estimated revenue effects of possible tax law changes. The Maryland Business Tax Reform Commission, created by statute to study possible tax changes, is now being formed.

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