HB 1210
Department of Legislative Services
Maryland General Assembly
2021 Session
FISCAL AND POLICY NOTE
Enrolled - Revised
House Bill 1210 (The Speaker)
Economic Matters Finance
Corporate Diversity - Board, Executive Leadership, and Mission
This bill requires specified businesses in the State to demonstrate either (1) diversity in
their board or executive leadership or (2) support for “underrepresented communities” in
their mission in order to qualify for specified State capital grants, tax credits, or contracts
worth more than $1.0 million. The bill requires the Department of Commerce and the
Governor’s Office of Small, Minority, and Women Business Affairs (GOSBA) to develop
a State equity report that compiles diversity data relating to corporate boards, leadership,
and missions. Additionally, the bill requires a person that submits an annual report to the
State Department of Assessments and Taxation (SDAT) to submit related diversity data.
The bill applies prospectively and does not apply to any application or claim for a contract,
grant, or tax credit submitted before the bill’s effective date. The bill takes effect
July 1, 2022.
Fiscal Summary
State Effect: General fund expenditures increase by at least $686,200 in FY 2023 to
implement the bill’s requirements; out-years reflect ongoing costs and the elimination of
one-time contractual costs. General fund expenditures likely increase further for
Commerce beginning in FY 2023 (not shown below), but a reliable estimate is not feasible,
as discussed below. State revenues are not affected.
(in dollars) FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
Revenues $0 $0 $0 $0 $0
GF Expenditure 0 686,200 109,600 112,500 118,400
Net Effect $0 ($686,200) ($109,600) ($112,500) ($118,400)
Note:() = decrease; GF = general funds; FF = federal funds; SF = special funds; - = indeterminate increase; (-) = indeterminate decrease
Local Effect: The bill does not directly affect local governmental operations or finances.
Small Business Effect: Meaningful.
 Analysis
Bill Summary:
Definitions
“Entity” means (1) a commercial enterprise or business that is in good standing with SDAT
and is incorporated in the State or registered to do business in the State or (2) a corporation,
foundation, school, hospital, or other legal entity for which none of the net earnings inure
to the benefit of any private shareholder or individual holding an interest in the entity. The
bill does not apply to (1) a sole proprietor; (2) a limited liability company owned by a
single member; (3) a privately held company if at least 75% of the company’s shareholders
are family members; or (4) an entity that has an annual operating budget or annual sales
less than $5.0 million and does not qualify for a State benefit.
“State benefit” means (1) a State capital grant funding totaling $1.0 million or more in a
single fiscal year; (2) State tax credits totaling $1.0 million or more in a single fiscal year;
or (3) the receipt of a State contract with a total value of $1.0 million or more. “State
contract” means a contract that (1) resulted from a competitive procurement process and
(2) is not federally funded in any way.
“Underrepresented community” means a community whose members self-identify (1) as
Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American,
Native Hawaiian, or Alaska Native or (2) with one or more of those racial or ethnic groups.
Diversity Requirements for State Benefits
An entity may not qualify for a State benefit, as defined, unless the entity is able to
demonstrate (1) membership of underrepresented communities in the entity’s board or
executive leadership or (2) support for underrepresented communities in the entity’s
mission. An entity required to submit an annual report to SDAT must include with the
report the diversity data required by Commerce and GOSBA under the bill.
State Equity Report
Commerce and GOSBA must develop and maintain a State equity report that compiles
diversity data for each entity on (1) the membership of underrepresented communities in
the entity’s board or executive leadership and (2) the support of underrepresented
communities in the entity’s mission. Commerce and GOSBA must also adopt regulations
to carry out the bill’s requirements, including directives for State agencies and entities to
comply with the bill’s requirements.
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Other Provisions
The bill states that it is the intent of the General Assembly that, if an entity receives a State
benefit that is intended to be disbursed over more than one year, only the amount that will
be disbursed in one fiscal year counts toward the $1.0 million threshold in a single year
established under the bill. The bill also states that it is the intent of the General Assembly
that an entity that proposes to locate within a tax increment financing district or enter into
a payment in lieu of taxes agreement with a local jurisdiction first demonstrate the
membership of underrepresented communities in the entity’s board or executive leadership
or support for underrepresented communities in the entity’s mission. Provisions of the bill
are severable.
Current Law/Background:
Annual Reports to the State Department of Assessments and Taxation
SDAT serves as custodian of documents relating to the organization and ownership of
many types of business entities that are required to file documents with the State, including
charters for Maryland corporations and qualifications and registrations for foreign
corporations. All Maryland (domestic) and non-Maryland (foreign) legal entities are
required to file an annual report every year by April 15 (or June 15 if they apply for an
extension). Failure to file the required report will result in the legal entity’s charter being
forfeited. Subject to a specified exception, if the person submitting the annual report is a
tax-exempt, domestic nonstock corporation with an operating budget exceeding
$5.0 million, or a domestic stock corporation with total sales exceeding $5.0 million, the
annual report must include the number of female board members and the total number of
members on the person’s board of directors. SDAT advises that approximately
430,000 entities must submit annual reports; sole proprietors and general partnerships that
are not organized as legal entities are not required to submit annual reports.
Governor’s Office of Small, Minority, and Women Business Affairs
GOSBA is established in the Executive Department; the head of the office is a
Special Secretary who is appointed by and serves at the pleasure of the Governor. The
Special Secretary’s general duties are to advise the Governor on activities to promote the
employment of minority persons in the State and any other matters that affect the rights
and interests of minority persons and the communities in which they live. GOSBA has
designated oversight, reporting, and outreach responsibilities related to the State’s Minority
Business Enterprise program and responsibility for overseeing the State’s Small Business
Reserve program.
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State Benefits of More Than $1.0 Million
In fiscal 2020, 1,940 vendors received payments of more than $1.0 million from the State,
and 12,136 entities received grants of more than $1.0 million.
California’s Corporate Diversity Requirements
California’s AB 979, signed into law September 30, 2020, requires public companies
headquartered in California to have at least one board director who is from an
“underrepresented community” – defined as “an individual who self-identifies as Black,
African American, Hispanic, Latino, Asian, Pacific Islander, Native American,
Native Hawaiian, or Alaska Native, or who self-identifies as gay, lesbian, bisexual, or
transgender.” The law requires additional board members from underrepresented
communities by the end of calendar 2022, depending on the total number of members on a
company’s board. Companies that violate the law may be fined $100,000 for the
first violation and $300,000 for subsequent violations.
AB 979 followed an earlier California law from September 2018 (SB 826), that required a
public company headquartered in California to have at least one woman on its board of
directors by the end of 2019, with future increases pegged to a company’s board size. A
2020 report from the California Partners Project found that while nearly 30% of public
boards in California were all male in 2018, the figure decreased to less than 3% after the
passage of SB 826 – an increase of 669 board seats filled by women.
State Fiscal Effect:
State Department of Assessments and Taxation
General fund expenditures for SDAT increase by $556,160 in fiscal 2023, which accounts
for the bill’s July 1, 2022 effective date. This estimate reflects the cost of hiring one desktop
support technician to maintain SDAT’s systems and each year’s data, including conducting
follow-up with entities that do not comply with the reporting requirement. It also includes
costs for contractual information technology (IT) support to update SDAT’s software and
data programming systems in order to be able to receive and process the new diversity data
information submitted by business entities. It includes a salary, fringe benefits, and ongoing
operating expenses, including licensing fees related to maintaining SDAT’s IT systems.
New Position 1.0
Salaries and Fringe Benefits $70,415
Contractual IT Costs 450,000
Database Licensing Fees 30,000
Other Operating Expenses 5,745
Total FY 2023 SDAT Expenditures $556,160
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Out-year expenditures reflect annual increases and employee turnover and ongoing
operating expenses and the termination of one-time IT costs. The Department of
Legislative Services (DLS) notes that the delayed effective date of July 1, 2022, does not
allow SDAT to incur costs to hire staff or reprogram its IT systems in the year leading up
to the bill’s effective date.
Department of Commerce
Although the bill requires Commerce and GOSBA to collaborate on the State equity report,
this analysis assumes that all expenditures related to the report are borne by Commerce.
General fund expenditures for Commerce increase, likely significantly, to develop and
maintain the State equity report, but a reliable estimate is not feasible as it depends on a
number of factors, including the number of entities covered by the report’s data diversity
requirement. The bill requires Commerce and GOSBA to develop and maintain a State
equity report with diversity data “for each entity”; under the bill, an “entity” is defined, in
part, as a commercial enterprise or business in good standing with SDAT that is
incorporated or registered to do business in the State, excluding specified types of entities
(i.e., excluding sole proprietors, limited liability companies owned by a single member,
privately held companies if at least 75% of a company’s shareholders are family members,
or entities that have an annual operating budget or annual sales of less than $5.0 million
and do not qualify for a State benefit). As noted above, SDAT advises that approximately
430,000 entities are in good standing with SDAT, including small, privately owned
businesses that do not have corporate boards or leadership structures. To the extent this
figure of approximately 430,000 entities in good standing with SDAT includes entities
excluded from the bill’s requirements, the potential number of entities required to satisfy
the bill’s requirements is lower. However, a reliable estimate of the number of entities
covered by the data diversity requirement is not feasible, as SDAT advises that it does not
currently track specified financial information that determines eligibility under the bill,
including whether a business is privately or publicly held or the percentage of a business’s
shareholders that are family members. Additionally, this analysis assumes that many, if not
most, sole proprietors do not form legal entities and thus are not included in the
430,000 entities required to submit annual reports to SDAT. By contrast, the California
law referenced above covers fewer than 700 public corporations based in the state.
According to Commerce, the Latino Corporate Directors Association, which maintains a
“scorecard” only for Latino representation on California boards, has reported that it takes
two full-time staff researchers to monitor information for approximately 700 public
companies on a daily basis, along with specialized database costs of approximately
$100,000. Although a reliable estimate of the number of affected entities is not feasible,
the baseline figure of 430,000 reporting entities suggests that the number of affected
entities may be significant. If Commerce were to develop and maintain a sophisticated
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report, expenditures likely are substantial. However, DLS notes that such costs could be
mitigated to the extent that data reported to SDAT could be provided to Commerce in an
automated format that could easily be uploaded into a report format. The feasibility of this
approach is unknown,
Of course, costs could be considerably greater if Commerce is required to verify the
information reported to SDAT, which SDAT advises it cannot do.
Comptroller’s Office
General fund expenditures for the Comptroller’s Office increase on a one-time basis by
approximately $130,000 to alter or create new tax credit forms and for programming costs
related to changes to the tax system. The Comptroller’s Office further advises that
depending on the complexity of tax credit processing under the bill, hiring an additional
revenue specialist may be necessary, but any such costs are not reflected in this analysis.
Small Business Effect: Small businesses are not eligible to receive State capital grant
funding, tax credits, or State contracts totaling $1.0 million or more in a single fiscal year
unless they are able to demonstrate diversity in their boards or executive leadership, or
support for underrepresented communities in their corporate missions. Additionally,
entities throughout the State must submit diversity data to SDAT and Commerce/GOSBA,
as described above.
Additional Information
Prior Introductions: None.
Designated Cross File: None.
Information Source(s): Governor’s Office of Small, Minority, and Women Business
Affairs; Department of Commerce; Comptroller’s Office; Maryland Department of Labor;
State Department of Assessments and Taxation; Department of Legislative Services
HB 1210/ Page 6
Fiscal Note History: First Reader - February 23, 2021
an/mcr Third Reader - March 22, 2021
Revised - Amendment(s) - March 22, 2021
Enrolled - May 4, 2021
Revised - Amendment(s) - May 4, 2021
Analysis by: Tyler Allard Direct Inquiries to:
(410) 946-5510
(301) 970-5510
HB 1210/ Page 7


Statutes affected:
Text - First - Corporate Diversity - Board, Executive Leadership, and Mission: 19-106 Business Regulation, 11-101 Tax Property
Text - Third - Corporate Diversity - Board, Executive Leadership, and Mission: 19-106 Tax Property, 11-101 Tax Property
Text - Enrolled - Corporate Diversity - Board, Executive Leadership, and Mission: 19-106 Business Regulation, 11-101 Tax Property