HB 45
Department of Legislative Services
Maryland General Assembly
2020 Session
FISCAL AND POLICY NOTE
Third Reader - Revised
House Bill 45 (Delegate Palakovich Carr)
Ways and Means Budget and Taxation
Economic Development - Opportunity Zone Incentives - Alteration of the More
Jobs for Marylanders and Opportunity Zone Enhancement Programs
This bill alters the Opportunity Zone Enhancement Program by (1) limiting the enhanced
tax benefits available under the program to tax years 2019 through 2026; (2) restricting
eligibility for the enhanced benefits under the biotechnology investment incentive and
cybersecurity investment incentive tax credit programs to investments made in a company
that is newly established or expands into an opportunity zone on or after March 1, 2018;
(3) requiring businesses in a county with a minimum wage that exceeds the State minimum
wage to pay the greater of 120% of the State or county minimum wage; and (4) altering
certain application and reporting requirements. The bill also prohibits golf courses, country
clubs, tanning salons, and bail bondsmen from participating in the More Jobs for
Marylanders Program. The bill takes effect July 1, 2020, and applies to tax year 2020
and beyond.
Fiscal Summary
State Effect: State revenues may increase beginning in FY 2021, reflecting a reduction in
incentives claimed due to the change in program eligibility requirements. Any increase is
not expected to be significant. Expenditures are not materially affected.
Local Effect: Local revenues may increase beginning in FY 2021 due to a reduction in
tax credits claimed against the corporate income tax. Local expenditures are not affected.
Small Business Effect: Meaningful.
 Analysis
Bill Summary: The bill requires a business to include additional information in the impact
report submitted to the Department of Commerce (Commerce) in its Opportunity Zone
Enhancement Program application. The impact report must, as applicable, include data on
its progress toward (1) creating and retaining jobs; (2) promoting entrepreneurship,
including among women- and minority-owned businesses; (3) providing affordable
housing; (4) creating access to healthy food; (5) promoting environmental sustainability;
and (6) otherwise benefitting the communities in the opportunity zone.
Under current law, Commerce must publish on its website non-confidential information
about the program and information reported by a participating qualified opportunity fund.
The bill requires that Commerce publish this information itemized by qualified opportunity
fund and summarized in the aggregate.
Current Law:
Opportunity Zone Enhancement Program
The Opportunity Zone Enhancement Program, administered by Commerce, provides
enhanced incentives for qualifying businesses within a federal opportunity zone.
Qualifying businesses within an opportunity zone may qualify for enhanced incentives
under the following tax credit programs (1) job creation; (2) One Maryland; (3) enterprise
zone; (4) biotechnology investment incentive; (5) cybersecurity investment incentive; and
(6) More Jobs for Marylanders. The enhanced incentives do not apply to (1) the enterprise
zone property tax credit and (2) One Maryland tax credits unless the business hires at least
50 qualified employees.
Enhanced incentives can be claimed by a business that is within areas that are currently
designated as a federal opportunity zone under Section 1400Z-1 of the Internal Revenue
Code. These enhanced incentives (Level 1) are in addition to the standard credit provided
under each program and in certain circumstances in addition to the enhanced additional
credit available under each program. In addition, the program provides an additional
enhancement (Level 2) beyond the enhanced credit.
A qualified opportunity zone (QOZ) business or qualified opportunity fund (QOF) qualifies
for a Level 1 enhancement if it meets program requirements and provides specified
information to Commerce. A QOZ business or QOF qualifies for a Level 2 enhancement
if (1) the entity meets Level 1 requirements and (2) accountability to QOZ residents is
maintained through their representation on any governing board or advisory board of the
QOZ business; or a community benefits agreement or strategic industry partnership is
negotiated and agreed to by QOZ community groups and the QOF that specifies a range of
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community benefits that the fund agrees to provide as part of the development project,
including workforce development or local hiring requirements. In addition, if a QOZ
business is located entirely within a municipality, the municipality must approve the
Level 2 enhancement. Otherwise, the county in which the QOZ business is located must
approve the Level 2 enhancement.
A business must also satisfy each program’s applicable eligibility requirements and
investment and job creation minimums. For example, under the More Jobs for Marylanders
Program, a manufacturing business must pay a qualified employee 120% of the State
minimum wage and non-manufacturers must pay at least $50,000. The job creation and
One Maryland tax credits require a qualified employee to be paid 120% of the minimum
wage and the enterprise zone income tax credit requires a qualified position to be paid
150% of the federal minimum wage.
The enhanced tax credits can be claimed beginning with tax year 2019.
More Jobs for Marylanders
The More Jobs for Marylanders Program, administered by Commerce, provides State
income tax, sales tax, property tax, and fee benefits to certain businesses that create and
maintain a minimum number of qualified jobs. Eligibility for specific benefits is
determined by the type of business, its location, and whether or not it is a new business.
Generally, a business must operate or conduct a trade or business that is primarily engaged
in manufacturing, or else be located in an Opportunity Zone, and not be otherwise excluded
by law. A business within a “Tier I Area” must create at least 5 qualified positions, and a
business within a “Tier II Area” must create at least 10 qualified positions – there are
different requirements for both areas. Specific benefits are as follows:
 Tier I New Manufacturing Business: (1) a refundable credit against the State income
tax of 5.75% of wages for each qualified position; (2) a credit against the State’s
portion of the property tax; (3) a refund of sales and use tax; and (4) a waiver of the
annual corporate filing fee.
 Tier I or Tier II Existing Manufacturing Business: A refundable credit against the
State income tax of 5.75% of wages for each qualified position.
 Opportunity Zone New Non-manufacturing Business: (1) a refundable credit
against the State income tax of 5.75% of wages for each qualified position; (2) a
credit against the State’s portion of the property tax that is the lesser of 100% of the
State property tax or $250 per qualified position; (3) a refund of sales and use tax;
and (4) a waiver of the annual corporate filing fee.
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 Opportunity Zone Existing Non-manufacturing Business: A refundable credit
against the State income tax of 5.75% of wages for each qualified position.
Businesses excluded from program eligibility are (1) refiners; (2) those that provide adult
entertainment; (3) those that engage in retail activities, except for grocery stores located in
Opportunity Zones; and (4) those primarily engaged in the sale or distribution of alcoholic
beverages.
Tier I Areas include Baltimore City and Allegany, Baltimore, Caroline, Cecil, Dorchester,
Garrett, Kent, Prince George’s, Somerset, Washington, Wicomico and Worcester counties.
Tier I Areas also include Opportunity Zones located in any Maryland county. Tier II Areas
are any areas that are not Tier I Areas. Counties must meet specified income or
unemployment criteria, or be designated by Commerce, to be considered a Tier I Area.
Opportunity Zones are census tracts designated by the State as part of a federal program
established by the Federal Tax Cuts and Jobs Act of 2017.
Commerce may certify businesses as eligible for the program through June 1, 2022.
Commerce may annually award up to $9.0 million in credits against the State income tax
and up to $1.0 million in sales and use tax refunds. If other requirements continue to be
met, a business is eligible for 10 consecutive years of benefits. The Governor must
appropriate sufficient funds to two related reserve accounts each year, subject to specified
requirements. Therefore, each program certification year creates up to $100 million in
future amounts that must be appropriated to reserve funds through the annual budget
process. State property tax credits and corporate filing fee exemptions are unlimited.
In addition to providing tax benefits to businesses that meet program requirements and are
certified by Commerce, the program also allows a manufacturer located in the State to
claim increased expensing amounts under the State income tax by conforming State law to
the maximum aggregate costs of expensing allowed under Section 179 of the Internal
Revenue Code (IRC) and to claim any bonus depreciation amounts provided under
Section 168(k) of IRC. These benefits apply if the property was placed in service on or
after January 1, 2019.
Background: The Federal Tax Cuts and Jobs Act of 2017 established the Qualified
Opportunity Zones Program to incentivize private investment in certain communities.
Under the Act, states may nominate up to 25% of specified low-income census tracts for
designation by the U.S. Treasury as opportunity zones. Maryland nominated its zones in
March 2018 and the U.S. Treasury designated the zones in June 2018. The Administration
has also established the Opportunity Zone Leadership Task Force by executive order to
provide guidance and coordinate efforts related to opportunity zone investment.
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The program offers three federal tax incentives related to capital gains: (1) a temporary
tax deferral for capital gains reinvested in an Opportunity Fund; (2) a step up in basis for
capital gains reinvested in an Opportunity Fund, which excludes up to 15% of the original
capital gain from taxation; and (3) a permanent exclusion from taxable income of capital
gains from the sale or exchange of an investment in an Opportunity Fund, if the investment
is held for at least 10 years.
State Revenues: The bill (1) alters eligibility requirements under the Opportunity Zone
Enhancement Program and the More Jobs for Marylanders Program and (2) limits the
enhanced tax benefits under the Opportunity Zone Enhancement Program that can be
claimed to tax years 2019 through 2026. As a result, State revenues may increase minimally
beginning in fiscal 2021.
Tax credits awarded under the job creation, biotechnology investment incentive,
cybersecurity investment incentive, and sales tax and income tax credits under the More
Jobs for Marylanders programs are subject to an annual appropriation or maximum limit.
Altering eligibility requirements and the years in which credits may be claimed will not
materially impact State finances.
State property tax credits and the waiver of the annual corporate filing fee under the More
Jobs for Marylanders Program as well as enterprise zone income and One Maryland tax
credits are not subject to an annual limitation. Accordingly, the bill’s provisions altering
eligibility requirements for these incentives may increase State revenues minimally
beginning in fiscal 2021.
Small Business Effect: Small businesses that have a reduction or elimination in benefits
due to the change in program eligibility requirements will be negatively impacted by the
bill. In most programs the eligibility changes will result in a reallocation of some tax credits
and not change the total amount of tax credits awarded. Small businesses that continue to
meet the requirements under the bill and would not otherwise receive a tax credit under
current law due to program funding limitations will benefit due to this reallocation.
Additional Information
Prior Introductions: None.
Designated Cross File: SB 122 (Senator McCray) - Budget and Taxation.
Information Source(s): Department of Legislative Services
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Fiscal Note History: First Reader - January 13, 2020
rh/jrb Third Reader - March 14, 2020
Revised - Amendment(s) - March 14, 2020
Analysis by: Robert J. Rehrmann Direct Inquiries to:
(410) 946-5510
(301) 970-5510
HB 45/ Page 6


Statutes affected:
Text - First - Economic Development - Opportunity Zone Incentives - Alteration of the More Jobs for Marylanders and Opportunity Zone Enhancement Programs: 6-801 Economic Development, 6-1001 Economic Development, 6-1002 Economic Development, 6-1006 Economic Development, 6-1007 Economic Development, 9-110 Tax Property
Text - Third - Economic Development - Opportunity Zone Incentives - Alteration of the More Jobs for Marylanders and Opportunity Zone Enhancement Programs: 6-801 Economic Development, 6-1001 Economic Development, 6-1002 Economic Development, 6-1006 Economic Development, 6-1007 Economic Development, 9-110 Economic Development