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Enterprise Zone Tax Credits
The City of Cambridge has one of the two Enterprise Zones located within Dorchester County. Businesses locating in a Maryland Enterprise Zone may be eligible for income tax credits in return for job creation; and real property tax credits for investing in capital enhancements made in the zone.
- Income Tax Credits: One or three-year credit for creating new jobs. The general credit is a one-time $1,000 credit per new employee. For economically disadvantaged employees, the credit increases to a total of $6,000 per employee distributed over three years. (based upon a salary requirements)
- Real Property Tax Credits: This is a ten year credit against local real property taxes on a portion of real property improvements. The credit is 80% the first five years, and decreases annually thereafter to 30% in the tenth and last year.
One Maryland Tax Credit
Businesses that invest in an economic development project in a "qualified distressed county", such as Dorchester, may qualify for project tax credits of up to $5 million and start-up tax credits of up to $500,000 under the One Maryland Income Tax Credit Program.
- Project Tax Credit: Project tax credits of up to $5 million are based on qualifying costs and expenses incurred by the business entity in connection with the acquisition, construction, rehabilitation, installation, and equipping of an eligible economic development project. Eligible costs may include, among others, land acquisition, performance and contract bonds, insurance, architectural and engineering services, environmental mitigation, and utility installation. Eligible project costs must be at least $500,000; project costs in excess of $5 million are not eligible for the project tax credit.
- Start-up Tax Credit: The start-up tax credit is for the expense of moving a business from outside Maryland and for the costs of furnishing and equipping a new location for ordinary business functions. Examples of eligible star-up costs include the cost of fixed telecommunications equipment, office equipment or office furnishings. The start-up credit earned may not exceed the lesser of $500,000 of the eligible start-up costs or $10,000 times the number of new, qualified positions created.
In order to claim the One Maryland project and start-up tax credits, a business entity must meet the following requirements:
- Location: A business must locate or expand in a "Priority Funding Area". Declaration of Intent: A business may not claim any employees hired or any project or start-up expenses incurred prior to notifying the Department of Business and Economic Development (DBED) of its intent to seek certification for One Maryland tax credits.
- Certification: A business must be certified as a qualified business entity eligible for One Maryland tax credits. To be certified, a business must submit applications to DBED.
- Job Creation Minimums: The business must create at least 25 new full-time positions at the project within 24 months of the date the project is placed in service, and the positions filled for 12 months. The project must be engaged in an eligible activity.
The Historically Underutilized Business Zone (HUB Zone) Empowerment Contracting Program is designed to stimulate economic development and create jobs in urban and rural communities by providing federal contracting preferences to small businesses. These businesses can obtain HUB Zone certification in part by employing staff or workers from a geographical area designated as a HUB Zone such as Cambridge. For more information go to: www.sba.gov/hubzone
Maryland Job Creation Tax Credit
Maryland's Job Creation Tax Credit program provides income tax credits to businesses that create new jobs to encourage them to expand or relocate in Maryland.
Calculating the Credit
In most cases, the credit is 2.5 percent of annual wages for all newly created, full-time jobs, subject to a limit of $1,000 per new job. In a state enterprise zone, a federal empowerment zone, or a Maryland Department of Housing and Community Development designated neighborhood, the credit is increased to five percent of annual wages for all newly created full-time jobs, subject to a limit of $1,500 per new job. The credit earned by a qualified business entity may not exceed $1 million per credit year.
If the credit is more than the tax liability the unused credit may be carried forward for five years following the credit year. The credit may be recaptured if the business experiences job losses.
Job Creation Tax Credit Priority Funding Areas
A business that locates or expands in a “Priority Funding Area” must only create a minimum of 25 new positions to qualify for the Job Creation Tax Credit. A “priority funding area” is defined for the purposes of the Job Creation Tax Credit as:
- State Enterprise Zones
- Federal Empowerment Zones
- DHCD Designated Neighborhoods
- Incorporated Municipalities
- Areas inside the I-495 and I-695 beltways
- A single growth area designated by each county for the purpose of this credit