In this subtitle the following words have the meanings indicated. “Approved foreign trade zone” means an area designated as a foreign trade zone under Title 5, Subtitle 8 of the Economic Development Article. “Taxable net earnings” means the net earnings of a financial institution computed under § 8-204 of this subtitle and modified under §§ 8-205 and 8-206 of this subtitle.

For all taxable years beginning before January 1, 2001, a franchise tax, measured by taxable net earnings, is imposed annually on each financial institution existing or doing business in the State during any part of the fiscal year of the financial institution. For all taxable years beginning after December 31, 2000, the financial institution franchise tax is terminated, and Maryland taxable income of financial institutions shall be subject to taxation under Title 10 of this article. A county, municipal corporation, special taxing district, or other political subdivision of the State may not impose on a savings bank or savings and loan association any tax other than its regular tax on property.

The financial institution franchise tax rate is 7% of taxable net earnings as determined under §§ 8-204 through 8-206 of this subtitle.

A financial institution shall compute its net earnings: based on the accounting period used as its fiscal year; and subject to the modifications required under this section, in the manner that a corporation computes, for purposes of the income tax, the Maryland modified income. A financial institution shall add to its net earnings computed under subsection (a) of this section the amounts that, even if otherwise allowed to be subtracted under § 10–307(b) and (g)(1) and (4) of this article, equal: profit realized from the sale or exchange of bonds issued by this State or a political subdivision of this State; dividends received from foreign corporations and included in federal gross income under § 78 of the Internal Revenue Code; interest derived from a United States obligation; State tax–exempt interest received from a mutual fund and allowed to be subtracted under § 10–307(g)(4) of this article; and interest excluded from federal gross income under § 103 of the Internal Revenue Code and derived from a bond: issued by a state or a public corporation, special district, or political subdivision of a state or their instrumentalities; or under § 150 of the Internal Revenue Code, treated as a bond issued by a state or a public corporation, special district, or political subdivision of a state or their instrumentalities. A financial institution shall subtract from its net earnings computed under subsection (a) of this section interest expense incurred to purchase or carry a bond as defined in subsection (b)(5) of this section.

In this section the following words have the meanings indicated. “Foreign person” means: an individual who is not a resident of the United States; a company, partnership, or trust that is not organized under the laws of the United States or of a state; and a foreign branch of a company organized under the laws of the United States or of a state. “Foreign person” includes: a foreign government or any of its units; an international organization or any of its agencies; an international banking facility; or a company or partnership that is not organized under the laws of the United States or of a state and that has an office and activities within an approved foreign trade zone. “International banking facility” means a financial institution that: qualifies as an international banking facility under the laws of the United States or under regulations that the Board of Governors of the Federal Reserve System adopts; is located in a county where an approved foreign trade zone is located; and makes, arranges for, places, or services a loan to a foreign person for use outside the United States or in an approved foreign trade zone in the United States; or derives earnings from a foreign exchange trading or hedging transaction that is related to a loan described in item 1 of this item. “Liability” means the total liabilities shown in the records of an international banking facility. In computing taxable net earnings, an international banking facility shall: deduct the qualifying amount computed under subsection (c) of this section to the extent that the amount is not deductible in computing its federal taxable income; or add any loss computed under subsection (c) of this section to its taxable net earnings. To compute the qualifying amount allowed under this section, an international banking facility shall determine its gross earnings derived, directly or indirectly, from any foreign exchange trading or hedging transaction that relates to making, arranging for, placing, or servicing a loan to a foreign person if: substantially all of the proceeds of that loan are used outside the United States; or all of the proceeds are used in an approved foreign trade zone by: a foreign individual; an individual residing in the United States; or a foreign branch of a company that is organized under the laws of the United States or of a state, is not a bank, and has at least 80% ownership or control of the foreign branch. From the gross earnings computed under paragraph (1) of this subsection, an international banking facility shall subtract all deductions or expenses, directly or indirectly, related to those gross earnings. From the adjusted gross earnings calculated under paragraph (2) of this subsection, an international banking facility shall subtract the product of multiplying the adjusted gross earnings by a fraction: the numerator of which is the fiscal year average amount of liability that was neither owed to nor received from a foreign person; and the denominator of which is the fiscal year average amount of liability that was owed to or received from any person.

In computing taxable net earnings, a financial institution with net earnings derived outside the State shall allocate its net earnings, in the manner that the Department requires, based on the gross volume of the transactions of the financial institution inside and outside the State. In computing taxable net earnings, a financial institution shall include only that part of interest derived from the trade or business, in this State, of the subsidiaries of the financial institution, if the financial institution is a holding company because its only activities are to: maintain and manage intangible investments; and collect and distribute income from intangible investments.

A financial institution may claim a credit against the financial institution franchise tax equal to the estimated tax paid under § 8-210(b) of this subtitle.

A savings bank or savings and loan association doing business outside this State may claim a credit against the financial institution franchise tax equal to the amount paid to another jurisdiction as: a tax based on savings accounts or saving share accounts bought in this State; a tax on gross receipts from business done in this State; or a tax on income derived from business done in this State.

Each financial institution existing or doing business in the State during any part of the fiscal year of the financial institution shall complete, under oath, and file with the Department a financial institution franchise tax return on or before the 15th day of the 3rd month after the end of that fiscal year. Each financial institution that reasonably expects its financial institution franchise tax for a year to exceed $1,000 shall complete, under oath, and file with the Department a declaration of estimated tax, on or before the 15th day of the 4th month of the accounting period used as the fiscal year of the financial institution. A financial institution required under paragraph (1) of this subsection to file a declaration of estimated tax for a taxable year shall complete and file with the Department a quarterly estimated tax return on or before the 15th day of the 6th, 9th, and 12th months of that year. To properly identify persons listed in a return or document, a person shall include in a return or document the Social Security or other identifying number that the Department requires.

Except as provided in subsection (b) of this section, a financial institution shall pay the financial institution franchise tax with the return that covers the period for which the tax is due. Each financial institution required to file quarterly estimated financial institution franchise tax returns shall pay: at least 25% of the estimated financial institution franchise tax shown on the declaration or amended declaration for a taxable year: with the declaration or amended declaration that covers the year; and with each quarterly return for that year; and any unpaid financial institution franchise tax for the year shown on the financial institution franchise tax return that covers that year, with the return.

The Department shall: administer the laws that relate to the financial institution franchise tax, consistent with this subtitle and with Title 10 of this article; adopt reasonable regulations to administer the provisions of laws that relate to the financial institution franchise tax, including regulations that establish, without regard to the methods required under Title 10 of this article, methods for allocation of net earnings based on gross volume of transactions; design the returns and other forms that, on completion, provide the information required for the administration of the financial institution franchise tax law; collect the financial institution franchise tax revenue, including penalties and interest; and certify that revenue to the Comptroller.

If a financial institution franchise tax refund claim under § 13-901 of this article is allowed, the Department shall certify the amount to the Comptroller for payment.

A financial institution may claim a credit against the financial institution franchise tax for wages paid to qualified employees as provided under Title 6, Subtitle 3 of the Economic Development Article.

A financial institution may claim a credit against the financial institution franchise tax for neighborhood and community assistance contributions as provided under § 6-404 of the Housing and Community Development Article.

A financial institution may claim a credit against the financial institution franchise tax for: wages paid to a qualified employee with a disability; and child care provided or paid for by a business entity for the children of a qualified employee with a disability as provided under § 21–309 of the Education Article; or transportation provided or paid for by the business entity for a qualified employee with a disability as provided under § 21–309 of the Education Article.

A financial institution may claim a State tax credit against the financial institution franchise tax payable under this subtitle as provided under § 9-230 of the Tax - Property Article.

A financial institution may claim a credit against the financial institution franchise tax for employer-provided long-term care insurance as provided under § 10-710 of this article.

A financial institution may claim a credit against the financial institution franchise tax for One Maryland project costs and start–up costs as provided under Title 6, Subtitle 4 of the Economic Development Article.

A financial institution may claim a credit against the financial institution franchise tax for the cost of providing commuter benefits to the business entity’s employees as provided under § 2-901 of the Environment Article.