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Research and Development Tax Credit

Businesses with qualified research and development expenses in Maryland are entitled to a tax credit if eligible and certified by DBED.

Basic R&D Tax Credit

Three percent (3%) of eligible R&D expenses that do not exceed the firm’s average R&D expenses over the last four years. If the total credits applied for exceed $4 million, the business's Basic tax credit is prorated.

Growth R&D Tax Credit

Ten percent (10%) of eligible R&D expenses in excess of the firm’s average R&D expenses over the last four years. If the total credits applied for exceed $4 million, the business's Growth R&D tax credit is prorated.

Small Business Refund

R&D tax credits certified after December 15, 2012 are refundable for “small business” to the extent that the tax credits exceed the income tax liability for that taxable year.  A small business means a for profit corporation, limited liability company, partnership or sole proprietorship with net book value assets totaling, at the beginning or the end of the taxable year for which the Maryland Qualified Research and Development expenses are incurred, as reported on the balance sheet, less than $5,000,000.

Applying for the Credit

To qualify for the Basic and Growth R&D tax credit, a business must submit an application NO LATER THAN SEPTEMBER 15 of the year following the tax year the expenses were incurred.  DBED certifies the amount of R&D tax credits approved by December 15.  Eligible expenses for both credits are restricted to "Maryland qualified research and development, as defined in §41(d) of the Internal Revenue Code and regulations there under (the federal R&D tax credit), conducted in Maryland.

Application dates follow the filing date for taxes. After receiving certification, the firm may file an amended tax return for the year.

The tax credit remains in effect until January 1, 2020, subject to extension by the General Assembly.

Tax Year 2013 applications must be postmarked by September 15, 2014

Additional Resources
Tax Credit Application
Statute
2013 Amendment
Regulations
Frequently Asked Questions

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