Md. Code Regs. 24.05.24.02

Current through Register Vol. 51, No. 24, December 2, 2024

Section 24.05.24.02 - Definitions

A. In this chapter, the following terms have the meanings indicated.

B. Terms Defined.

(1) "Act" means Economic Development Article, Title 6, Subtitle 4, Annotated Code of Maryland.

(2) Central Administrative Offices.

(a) "Central administrative offices" means a facility where a business entity's central management or administrative functions are handled on either a regional or national basis.

(b) "Central administrative offices" includes offices or locations in its region where functions such as personnel, planning, general management, accounting and financial, purchasing, advertising, legal, data processing, and research and development are performed.

(3) "Central financial, real estate, or insurance services" means the performance of central management or administrative functions for a business entity engaged in financial, real estate, or insurance services.

(4) "Central management or administrative functions" includes general management, accounting, information technology, purchasing, transportation or shipping, advertising, legal, financial, and research and development.

(5) "Company headquarters" means a facility where the majority of a business entity's financial, personnel, legal, and planning functions are handled either on a regional or national basis.

(6) "Credit year" means the first taxable year in which an eligible economic development project is placed in service and each taxable year thereafter in which the qualified business entity is eligible to use a project tax credit or a start-up tax credit.

(7) "Department" means the Department of Commerce.

(8) "Eligible economic development project" means an economic development project establishing or expanding a business facility within a qualified distressed county that is approved by the Secretary to receive the tax credits under this chapter.

(9) Eligible Project Costs.

(a) "Eligible project costs" means up to $5,000,000 of costs and expenses incurred by a qualified business entity in connection with the acquisition, construction, rehabilitation, installation, and equipping of an eligible economic development project.

(b) "Eligible project costs " includes:

(i) The costs of acquiring, constructing, rehabilitating, installing, and equipping the eligible economic development project, including obligations incurred for labor and to contractors, subcontractors, builders, and materialmen;

(ii) The costs of acquiring land or rights in land, and costs incidental to acquiring land or rights in land, to the extent that the amount of land acquired is reasonably necessary for the eligible economic development project;

(iii) The costs of contract bonds and insurance that are required or necessary during the acquisition, construction, or installation of the eligible economic development project;

(iv) The costs of architectural and engineering services, including test borings, surveys, estimates, plans and specifications, preliminary investigations, environmental mitigation, and supervision of construction;

(v) The costs for the performance of all the duties required by or consequent to the acquisition, construction, and installation of the eligible economic development project;

(vi) The costs required for the installation of utilities such as water, sewer, sewer treatment, gas, electricity, communications, railroads, and similar facilities;

(vii) The interest costs before and during the acquisition, construction, installation, and equipment of the eligible economic development project and for a period of up to 2 years after completing the eligible economic development project;

(viii) The costs, expenses, and fees incurred in connection with the financing of the eligible economic development project, including legal, accounting, financial, printing, recording, filing costs, fees, and expenses;

(ix) The costs of obtaining bond insurance, letters of credit, or other forms of credit enhancement or liquidity facilities;

(x) The cost of the land on which an existing building is located, the cost of renovating or upgrading existing improvements to real property, and other costs specifically permitted under this chapter;

(xi) If approved in writing by the Secretary, a portion of the value of a capitalized lease for a newly constructed or purchased asset, so long as that portion is directly related to the eligible project costs, including only those interest costs described in §B(9)(b)(vii) of this regulation, actually expended on the asset after notice to the Department, but the portion of the value of a capitalized lease that is attributable to other interest costs and lease fees is not an eligible project cost; and

(xii) If approved in writing by the Secretary, the present value of that portion of the value of a long term lease expense that is directly related to eligible project costs, including only those interest costs described in §B(9)(b)(vii) of this regulation, that are actually expended on the real property portion of the eligible economic development project after notice to the Department.

(c) "Eligible project costs" does not include:

(i) Any costs incurred by a business entity before notifying the Department of its intent to seek certification as qualifying for the tax credit under this chapter;

(ii) Any costs incurred in dealings between related parties;

(iii) Any costs paid for with local, State, or federal government funds unless those funds are the proceeds of a loan that will be repaid by the business entity;

(iv) The cost of acquiring an existing building or improvement, unless the Secretary determines that the acquisition of the existing building or improvement is being made in connection with a project to reuse a vacant or underused facility, including the reuse of a property determined by the Department under Economic Development Article, § 5-338, Annotated Code of Maryland, to be a qualified brownfields site; or

(v) Any costs of acquiring vehicles to be used in whole or in part off the premises of an eligible economic development project.

(10) Eligible Start-Up Costs.

(a) "Eligible start-up costs" means up to a total of $500,000 of a company's:

(i) Costs to furnish and equip a new location for ordinary business functions, including computers, the initial software needed to operate the computers or other computerized equipment, nonrecurring costs of fixed telecommunications equipment, furnishings, and office equipment; and

(ii) Reasonable expenditures for moving costs, separation costs, including severance pay and lease cancellation charges, and any other reasonable expenditures incurred by a company directly related to a move from an existing location outside of Maryland to a location in a qualified distressed county in Maryland.

(b) "Eligible start-up costs" does not include any costs incurred by a business entity before notifying the Department of its intent to seek certification as qualifying for the tax credit under this chapter or after the date which is 3 years after the date on which the qualified business entity began construction, acquisition, or installment of the eligible economic development project.

(11) "Federal minimum wage" means the wage established by the Fair Labor Standards Act of 1938 as amended from time to time. For purposes of the tax credit, hourly wages may include bonuses and commissions, prorated on an hourly basis, if these bonuses and commissions are reported on the W-2 Wage and Tax Statements of the qualified employees.

(12) "Full-time position" means a position requiring an employee to work at least 840 hours during at least 24 weeks in a 6-month period.

(13) "Person" means an individual, corporation, business trust, partnership, limited liability company, association, two or more persons having a joint or common interest, or any other legal or commercial entity.

(14) "Placed in service" means the date on which an eligible economic development project meets all of the requirements to receive a project tax credit or a start-up tax credit.

(15) "Project tax credit" means the tax credit for up to $5,000,000 in eligible project costs as further described in Regulation .07 of this chapter.

(16) "Qualified business entity" means a person that:

(a) Conducts or operates a trade or business in Maryland or is an organization operating in Maryland that is exempt from taxation under § 501(c) (3) or (4) of the Internal Revenue Code;

(b) Establishes or expands a business facility that is located:

(i) In a qualified distressed county in the State; and

(ii) Within a priority funding area under State Finance and Procurement Article, § 5-7B-02, Annotated Code of Maryland, or is eligible for funding outside of a priority funding area under State Finance and Procurement Article, § 5-7B-05 or 5-7B-06, Annotated Code of Maryland;

(c) During any 24-month period occurring within the period beginning on the date of notification of an intent to seek certification and ending 24 months after a project is completed, creates at least 25 qualified positions at the new or expanded business facility; and

(d) Is certified by the Secretary under Regulation .04 of this chapter as qualifying for the tax credits under this chapter.

(17) "Qualified distressed county" has the meaning stated in Economic Development Article, § 1-101, Annotated Code of Maryland.

(18) "Qualified employee" means an employee filling a qualified position and who either is physically present in the qualified distressed county for a majority of the employee's work time or begins and ends the employee's work day in the qualified distressed county.

(19) Qualified Position.

(a) "Qualified position" means a position that:

(i) Is a full-time position;

(ii) Is of indefinite duration;

(iii) Pays at least 150 percent of the federal minimum wage;

(iv) Is located in a qualified distressed county in Maryland;

(v) Is newly created, as a result of the establishment or expansion of a business facility in one location in the qualified distressed county; and

(vi) Is filled.

(b) "Qualified position" does not include a position that is:

(i) Created when an employment function is shifted from an existing business facility of the business entity located in Maryland to another business facility of the same business entity if the position does not represent a net new job in the State;

(ii) Created through a change in ownership of a trade or business or acquisition of existing assets;

(iii) Created through a consolidation, merger, or restructuring of a business entity if the position does not represent a net new job in the State;

(iv) Created when an employment function is contractually shifted from an existing business entity located in the State to another business entity if the position does not represent a net new job in the State;

(v) Filled for a period of less than 12 months;

(vi) A temporary training position; or

(vii) Filled before the business entity has notified the Department in writing of its intent to seek certification for a tax credit.

(c) "Qualified position" includes a permanent position which is filled by hiring a successful trainee from a temporary training position that does not exceed 3 months in length.

(20) "Recreational business" means a business providing facilities for golf, water sports, skiing, or other similar sports or recreation activities, excluding adult entertainment.

(21) "Resort" means a lodging facility that includes, or is closely associated with, a recreational business, excluding adult entertainment.

(22) "Secretary" means the Secretary of Commerce or the Secretary's designee.

(23) "Start-up tax credit" means the tax credit for up to $500,000 in eligible start-up costs as further described in Regulation .06 of this chapter.

(24) "Tax credit" means the One Maryland Economic Development Tax Credits, including either the start-up tax credit or the project tax credit or both.

Md. Code Regs. 24.05.24.02

Regulation .02B amended effective April 14, 2003 (30:7 Md. R. 489); April 11, 2005 (32:7 Md. R. 686); adopted effective 45:10 Md. R. 503, eff. 5/21/2018