Chapter 02. Individual
Regulation .01 Definitions.LinkCopy Citation
A.
In this chapter, the following terms have the meanings indicated.
B.
Terms Defined.
(1)
“Day”, for purposes of §B(7) of this regulation, includes any part of a day, provided, however, that a continuous period of 24 hours or less may not constitute more than 1 day.
(2)
“Dependent” means any individual as defined in §152 of the Internal Revenue Code.
(3)
“Individual” means a natural person.
(4)
“Member” means:
(a)
A shareholder of an S Corporation;
(b)
A general or limited partner of a partnership, limited partnership, or limited liability partnership;
(c)
A member of a limited liability company as defined under Corporations and Associations Article, Title 4A, Annotated Code of Maryland, if the limited liability company is taxable as a partnership under §761 of the Internal Revenue Code; or
(d)
A beneficiary of a business trust.
(5)
“Nonresident” means an individual who is not a resident of this State.
(6)
“Pass-through entity” means:
(a)
An S Corporation;
(b)
A partnership;
(c)
A limited liability company as defined under Corporations and Associations Article, Title 4A, Annotated Code of Maryland, if the limited liability company is taxable as a partnership under §761 of the Internal Revenue Code; or
(d)
A business trust that is not taxed as a corporation under this title.
(7)
Resident.
(a)
“Resident” means an individual as defined in Tax-General Article, §10-101(k), Annotated Code of Maryland.
(b)
“Resident” includes an individual who:
(i)
For more than 6 months of the taxable year maintains a place of abode in this State; and
(ii)
Spends, in the aggregate, 183 days or more within this State during the taxable year.
Regulation .02 Resident Filing Status.LinkCopy Citation
A.
Except as otherwise provided in this regulation, each resident of this State shall use the same filing status:
(1)
As used to file their federal income tax return; or
(2)
As if the individual had been required to file a federal income tax return.
B.
An individual who is single and may be claimed as a dependent on another taxpayer's return shall use the filing status “dependent taxpayer”.
C.
A married couple who files a joint federal income tax return may file separate State income tax returns if:
(1)
One spouse is a resident and the other spouse is a nonresident;
(2)
The spouses are domiciled, or maintain principal places of abode, in different counties on the last day of the taxable year;
(3)
The spouses have different taxable periods; or
(4)
The Comptroller determines circumstances warrant.
Regulation .03 Nonresident Filing Status.LinkCopy Citation
A.
An individual who maintains a place of abode in this State for more than 6 months of the taxable year, and is not domiciled in this State, is considered a nonresident if the individual is:
(1)
An active member of the armed forces;
(2)
A midshipman of the Naval Academy in Annapolis;
(3)
A commissioned officer of the United States Public Health Service;
(4)
A commissioned officer of the National Oceanic and Atmospheric Administration; or
(5)
The spouse of a servicemember that is an active member of the armed forces, the commissioned corps of the National Oceanic and Atmospheric Administration, or the commissioned corps of the United States Public Health Service, who is present in this State solely to be with the servicemember that is present in this State in compliance with military orders.
B.
Except as otherwise provided in this regulation, each nonresident individual required to file a State income tax return shall:
(1)
Use the same filing status used to file their federal income tax return; or
(2)
Use the same filing status as if the individual had been required to file a federal income tax return.
C.
A married couple who files a joint federal income tax return may file separate State income tax returns if:
(1)
One spouse is a resident and the other spouse is a nonresident;
(2)
The spouses have different taxable periods; or
(3)
The Comptroller determines circumstances warrant.
D.
Single Dependent. “Dependent taxpayer” filing status shall be used by each individual who is:
(1)
Single;
(2)
Claimed as a dependent by another taxpayer; and
(3)
Required to file a State income tax return.
Regulation .04 Filing Composite Return on Behalf of a Nonresident.LinkCopy Citation
A.
Who May File.
(1)
Subject to the provisions under §§B and C of this regulation, a pass-through entity doing business in this State that pays tax on behalf of nonresident members as required under Tax-General Article, §10-102.1(b)(2)(i), Annotated Code of Maryland, may file a composite return on behalf of all or some of its nonresident members.
(2)
A pass-through entity doing business in this State and electing to pay tax with respect to the distributive or pro rata shares of all members under Tax-General Article, §10-102.1(b)(2)(ii), Annotated Code of Maryland, is not permitted to file a composite return on behalf of any member.
(3)
Due Date. A composite return shall be filed by the due date for the filing of an information return under COMAR 03.04.07.03A.
B.
Nonresident Qualifications. Nonresident members may not be included in a composite return unless:
(1)
They are individuals;
(2)
They elect in writing to the pass-through entity to be included in the composite return;
(3)
Their only source of income in Maryland is from the pass-through entity filing the composite return;
(4)
They agree that the Maryland taxable income reported on the composite return shall be taxed at a rate which is the sum of:
(a)
The top marginal State income tax rate for individuals under Tax-General Article, §10-105(a), Annotated Code of Maryland; and
(b)
The rate of tax imposed under Tax-General Article, §10-106.1, Annotated Code of Maryland;
(5)
They agree that the pass-through entity is acting as their agent for the following purposes:
(a)
Filing an income tax return on their behalf;
(b)
Receipt of any refund; and
(c)
Payment of any tax due;
(6)
They are members of a pass-through entity that pays tax on behalf of nonresident members as required under Tax-General Article, §10-102.1(b)(2)(i), Annotated Code of Maryland; and
(7)
They have no modifications to income other than the modification required as a result of Maryland's decoupling from the additional depreciation allowance and special 5-year net operating loss carryback provisions that may be claimed on a composite return and, for tax years 2020 and 2021, the subtraction of a coronavirus relief payment under Tax-General Article, §10-207(jj), Annotated Code of Maryland.
C.
Requirements for Filing.
(1)
Statement of Verification. The composite return shall contain a statement signed by an authorized official of the pass-through entity verifying that the nonresident individuals included in the return qualify under §B of this regulation.
(2)
Tax Rate. The Maryland taxable income reported on the composite return shall be taxed at a rate which is the sum of:
(a)
The top marginal State income tax rate for individuals under Tax-General Article, §10-105(a), Annotated Code of Maryland; and
(b)
The rate of tax imposed under Tax-General Article, §10-106.1, Annotated Code of Maryland.
(3)
The composite return shall contain a schedule which includes:
(a)
A statement showing the percentage of stock ownership or shares in the pass-through entity of each nonresident member;
(b)
The total income of the pass-through entity and the amount attributable to Maryland sources;
(c)
The name, address, and Social Security number or federal identification number of each nonresident member;
(d)
The filing status of each nonresident member;
(e)
The distributive income allocable to Maryland for each nonresident member;
(f)
The allowable exemptions for each nonresident member, which equal the total of allowable exemptions for a resident multiplied by a fraction:
(i)
The numerator of which is the nonresident taxable income as defined in COMAR 03.04.07.01; and
(ii)
The denominator of which is the distributive or pro rata share of pass-through entity income as defined in COMAR 03.04.07.01B(2) and (9);
(g)
The amount of the standard deduction of each nonresident member which equals the maximum standard deduction allowed a resident having the same filing status multiplied by a fraction:
(i)
The numerator of which is the nonresident taxable income as defined in COMAR 03.04.07.01; and
(ii)
The denominator of which is the distributive or pro rata share of the pass-through entity income as defined in COMAR 03.04.07.01B(2) and (9);
(h)
The taxable income of each nonresident member;
(i)
The income tax liability of each nonresident member using the top marginal State income tax rate for individuals under Tax-General Article, §10-105(a), Annotated Code of Maryland;
(j)
The additional tax liability of each nonresident member using the tax rate under Tax-General Article, §10-106.1, Annotated Code of Maryland;
(k)
The amount of taxes paid on behalf of the nonresident member;
(l)
The balance of tax due which shall be paid in full with the filing of the composite tax return; and
(m)
The amount of any refund.
(4)
Credit for Taxes Paid Other States. Credit for taxes paid other states is not permitted on the composite return.
(5)
Signature.
(a)
Partnership. A general partner shall sign the composite return.
(b)
S Corporation. The president or other authorized officer of the S corporation shall sign the composite return.
(c)
Limited Liability Company. An authorized member of the limited liability company shall sign the composite return.
(6)
Effect of Filing a Composite Return. The filing of a composite return on behalf of nonresident members is considered the return of each nonresident member included in the return.
Regulation .05 Allocation of Nonresident Business Income.LinkCopy Citation
A.
Income of a nonresident for personal services rendered partly within and partly without this State shall be determined as follows:
(1)
Commissions of a traveling salesman or agent which depend directly on sales made are allocated outside this State if the:
(a)
Sales are outside this State, or
(b)
Merchandise is delivered to points outside this State;
(2)
Compensation other than commissions which depend directly on sales made for service performed partly within and partly outside this State shall be allocated based on the total number of working days employed outside this State compared to all working days employed both within and outside this State.
B.
Nonbusiness income derived from interest, dividends, and annuities is allocable to the nonresident's state of domicile and not to this State.
C.
Income from a business, trade, profession, or occupation carried on partly within and partly outside this State shall be determined by separate accounting when practicable. If separate accounting is not practicable, income allocable outside this State shall be determined by:
(1)
Percentage allocation which is:
(a)
The average value of tangible business property outside this State over the average value of all tangible business property multiplied by 100,
(b)
Business income outside this State over total business income multiplied by 100,
(c)
The average of the percentages determined in §C(1)(a) and (b) of this regulation, and
(d)
The average percentage arrived at in §C(1)(c) of this regulation applied to total business income to arrive at income allocable outside this State;
(2)
Apportionment of sales as described in COMAR 03.04.03.08; or
(3)
A method or methods subject to approval by the Comptroller.
Regulation .06 Maryland Adjusted Gross Income of a Nonresident Individual.LinkCopy Citation
A.
The Maryland adjusted gross income of a nonresident individual is the individual's federal adjusted gross income for the taxable year as determined under the Internal Revenue Code with the adjustments described in §§B and C of this regulation.
B.
Additions to Federal Adjusted Gross Income shall be:
(1)
Wages, salary, or other compensation for services performed in this State which are exempt by federal law or treaty from federal but not State tax on income;
(2)
Oil percentage depletion allowance as provided for under Tax-General Article, §10-204(e), Annotated Code of Maryland, to the extent attributable to sources in this State;
(3)
50 percent of the sum of the tax preference items as provided for under Tax-General Article, §10-205(f), to the extent derived from real or tangible personal property located in this State;
(4)
Amount of the credit claimed under Tax-General Article, §10-702, Annotated Code of Maryland, for wages paid to an employee in an enterprise zone located in this State;
(5)
Amount of expenses for reforestation or timber stand improvement as provided for under Tax-General Article, §10-205(c); and
(6)
The amount of any loss or adjustment to income that is:
(a)
Included in computing federal adjusted gross income; and
(b)
Not attributable to sources within this State.
C.
Subtractions from Federal Adjusted Gross Income. To the extent included in computing federal adjusted gross income, the following are subtracted from the federal adjusted gross income of a nonresident individual to determine Maryland adjusted gross income:
(1)
Income derived from:
(a)
Real or tangible personal property located outside this State;
(b)
Services performed outside this State;
(c)
A business, occupation, profession, or trade that is carried on wholly outside this State;
(d)
That part of a business, occupation, profession, or trade carried on by the individual both within and without this State that is attributable to the business, occupation, profession, or trade carried on outside this State;
(e)
A pass-through entity that is equal to the member's distributive or pro rata share attributable to the business carried on outside this State;
(f)
Annuities, pensions, state and local income tax refunds, interest, dividends, or other intangible property except if from:
(i)
Maryland State lottery prizes or other gambling winnings derived from this State; or
(ii)
A business, occupation, profession, or trade carried on by the individual in this State;
(g)
Distributions, to a beneficiary, of accumulated income on which a fiduciary has paid Maryland income tax; and
(h)
Salary, wages, or other compensation received as:
(i)
An active member of the armed forces;
(ii)
A midshipman of the Naval Academy at Annapolis;
(iii)
A commissioned officer of the United States Public Health Service;
(iv)
A commissioned officer of the National Oceanic and Atmospheric Administration; or
(v)
The spouse of a servicemember that is an active member of the armed forces, the commissioned corps of the National Oceanic and Atmospheric Administration, or the commissioned corps of the United States Public Health Service, who is present in this State solely to be with the servicemember that is present in this State in compliance with military orders;
(2)
Amounts derived from:
(a)
Adoption expenses as provided for under Tax-General Article, §10-208(b);
(b)
Blindness-related expenses as provided for under Tax-General Article, §10-208(c);
(c)
Enhanced agricultural management equipment expenses as provided for under Tax-General Article, §10-208(d), to the extent that the expenses are incurred for conservation of land located in this State;
(d)
Dependent care and household expenses as provided for under Tax-General Article, §10-208(e), to the extent the expenses are attributable to income received from services performed or business carried on within this State;
(e)
Value of fringe benefits attributable to an employer-provided police or fire department vehicle as provided for under Tax-General Article, §10-207(d);
(f)
Volunteer travel expenses as provided for under Tax-General Article, §10-208(j);
(g)
Reforestation or timber stand expenses as provided for under Tax-General Article, §10-208(i), to the extent incurred for land located in this State;
(h)
Wage expenses for targeted jobs as provided for under Tax-General Article, §10-208(k), to the extent that the wages are paid for services performed in Maryland;
(i)
The amount by which the cost difference between a conventional on-site sewage disposal system and a system that utilizes nitrogen removal technology exceeds the amount of assistance the individual receives from the Department of the Environment under the Environment Article, §9-1108, Annotated Code of Maryland; and
(3)
The value of:
(a)
Donated artwork to the extent provided for under Tax-General Article, §10-208(f); and
(b)
Donated farm products as provided for under Tax-General Article, §10-208(g), to the extent that the products are donated to a gleaning cooperative located in this State.
D.
A net operating loss generated when an individual is not subject to Maryland income tax law may not be allowed as a deduction to offset the Maryland income from any year when that individual is subject to Maryland income tax law.
Regulation .07 Exemptions Allowed a Nonresident.LinkCopy Citation
Whether or not a federal return is filed a nonresident may claim the personal and dependent exemptions provided for under Tax-General Article, §10-219, Annotated Code of Maryland.
Regulation .08 Deductions Allowed a Nonresident.LinkCopy Citation
A.
A nonresident individual may use the standard deduction as provided for under Tax-General Article, §10-219, Annotated Code of Maryland, or itemize deductions as provided for under Tax-General Article, §§10-218 and 10-219, Annotated Code of Maryland.
B.
Standard Deduction.
(1)
A nonresident individual may elect to use the standard deduction whether or not the individual itemizes deductions on the individual's federal income tax return in determining federal taxable income.
(2)
Limitation. A nonresident may claim the standard deduction on the Maryland return in the amount computed by multiplying the appropriate standard deduction by a fraction:
(a)
The numerator of which is Maryland adjusted gross income; and
(b)
The denominator of which is federal adjusted gross income.
C.
Itemized Deductions.
(1)
Only an individual who itemizes deductions on the federal income tax return may elect to itemize deductions on the individual's Maryland income tax return.
(2)
Limitation. A nonresident may claim itemized deductions on the Maryland income tax return:
(a)
In the amount computed by multiplying federal itemized deductions, reduced by the amount claimed as taxes on income paid to a state or political subdivision of a state, by a fraction:
(i)
The numerator of which is Maryland adjusted gross income, and
(ii)
The denominator of which is federal adjusted gross income; or
(b)
Actual itemized deductions verifiable by the individual as paid in Maryland.
Regulation .09 Maryland Taxable Income of a Nonresident.LinkCopy Citation
The Maryland taxable income of a nonresident individual is the individual's Maryland adjusted gross income less the:
A.
Exemptions allowed a nonresident under Regulation .07 of this chapter; and
B.
Deductions allowed a nonresident under Regulation .08 of this chapter.
Regulation .10 Income Tax Deficiency Assessment.LinkCopy Citation
A.
When an income tax deficiency is developed from an audit of a taxpayer's return, the Comptroller may make an assessment under Tax-General Article, §13-401, Annotated Code of Maryland.
B.
A taxpayer may appeal an assessment by applying for a hearing as provided under COMAR 03.01.01.04.
Regulation .11 Reporting Federal Tax Adjustments.LinkCopy Citation
A.
When the amount of a taxpayer's federal net taxable income reported on the federal return is increased by the Internal Revenue Service (IRS) or any change is required by the IRS in the method of reporting, accounting for, or treatment of particular income, the taxpayer shall report to the Revenue Administration Division the increase of federal net taxable income or the nature of the change within 90 days after the IRS has issued its final determination.
B.
A disposition of an assessment by the IRS by way of abatement, settlement, or compromise may not be construed as an abatement, settlement, or compromise of the taxpayer's liability to this State.
C.
The report filed with the Comptroller's Office shall consist of:
(1)
A complete copy of the federal audit including any exhibits attached to it; and
(2)
The taxpayer's acceptance of the IRS final determination or the taxpayer's grounds for objection to the IRS determination.
D.
If the taxpayer fails to file the report within 90 days, the Comptroller may make an assessment under Tax-General Article, §13-1101(b), Annotated Code of Maryland.
E.
If a taxpayer files a timely report, the Comptroller shall make an assessment within 1 year after receipt of the report as provided by Tax-General Article, §13-1101(c), Annotated Code of Maryland.
F.
After receipt of the federal audit report, the Comptroller shall re-compute the amount of tax due on the Maryland return and mail a report of income tax audit changes to the taxpayer's last known address.
G.
A taxpayer may appeal an assessment by applying for a hearing as provided under COMAR 03.01.01.04.
Regulation .12 Limitation for Part-Year Resident.LinkCopy Citation
Unless the Comptroller requires or allows another method, for taxable years beginning after December 31, 1992, an individual who is a resident for only part of the taxable year shall prorate the deduction for exemptions under Tax-General Article, §10-211 or 10-212, Annotated Code of Maryland, and the standard deduction under Tax-General Article, §10-217, or itemized deductions under Tax-General Article, §10-218, by using a fraction, the:
A.
Numerator of which is the individual's Maryland adjusted gross income; and
B.
Denominator of which is the individual's federal adjusted gross income.
Regulation .13 Income Tax Checkoffs.LinkCopy Citation
A.
An individual taxpayer may designate a contribution on the taxpayer's return to be credited towards the:
(1)
Chesapeake Bay and Endangered Species Fund, as established under Natural Resources Article, §1-701 et seq., Annotated Code of Maryland;
(2)
Developmental Disabilities Waiting List Equity Fund, as established under Health-General Article, §7-205, Annotated Code of Maryland;
(3)
Maryland Cancer Fund, as established under Health-General Article, §20-117, Annotated Code of Maryland; or
(4)
Maryland Fair Campaign Financing Fund, as established under Election Law Article, §15-103, Annotated Code of Maryland.
B.
A taxpayer may direct that the contribution be made as either:
(1)
An addition to the tax owed by the taxpayer; or
(2)
A reduction of the refund due the taxpayer.
C.
Amount of Contribution.
(1)
A taxpayer may designate a contribution which is greater than or less than the refund due on the return.
(2)
If a taxpayer designates a contribution which is less than the refund due, then the taxpayer's designation shall be given effect up to the full amount of the designated contribution, with the balance of the tax refund to be processed according to the procedures generally applicable to refunds.
(3)
If the taxpayer's designated contribution is greater than the refund due, then:
(a)
If one fund is designated, the designated contribution shall be given effect, up to the full amount of the refund plus any additional payment made with the filing of the return, less any reduction for taxes due;
(b)
If more than one fund is designated, then the full amount of the refund, plus payments less any reductions for taxes, shall be divided between the funds with each fund receiving a proportionate amount of the contribution.
Regulation .14 Extension of Time to File.LinkCopy Citation
A.
Except as provided in §D of this regulation, an individual who is unable to file a personal income tax return by the due date shall file an Application for Extension of Time to File Maryland Income Tax Return (Form 502E).
B.
The application:
(1)
Shall be filed by the original due date of the return; and
(2)
Extends only the time allowed to file the income tax return.
C.
Full payment of the expected tax due is required with the filing of the application.
D.
An individual is not required to file an Application for Extension of Time to File Maryland Income Tax Return (Form 502E) if the individual:
(1)
Expects to owe no tax for the taxable year; and
(2)
Has filed federal Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, with the IRS.
Regulation .15 Maryland Senator Edward J. Kasemeyer College Investment Plan.LinkCopy Citation
A.
Definitions.
(1)
In this regulation, the following terms have the meanings indicated.
(2)
Terms Defined.
(a)
“Account holder” means the person who establishes an investment account on behalf of a qualified designated beneficiary.
(b)
“Contributor” means an individual who contributes to a Maryland Senator Edward J. Kasemeyer Prepaid College Trust Account under Education Article, §18-1903, Annotated Code of Maryland.
(c)
Investment Account.
(i)
“Investment account” means an account established by an account holder under Education Article, Title 18, Subtitle 19A, Annotated Code of Maryland, on behalf of a qualified designated beneficiary for the purpose of applying distributions toward qualified higher education expenses at eligible educational institutions.
(ii)
“Investment account” may include more than one investment option.
(d)
“Investment option” means the investment portfolios available to account holders in the Maryland Senator Edward J. Kasemeyer College Investment Plan.
(e)
“Qualified designated beneficiary” has the meaning stated in §529(e) of the Internal Revenue Code.
(f)
“Qualified higher education expenses” has the meaning stated in §529(e) of the Internal Revenue Code.
B.
Subtraction Modification.
(1)
Regardless of the number of investment options included in an investment account:
(a)
All contributions by an account holder or contributor on behalf of one qualified designated beneficiary constitute one investment account; and
(b)
The subtraction modification in Tax-General Article, §10-208(o), Annotated Code of Maryland, is limited to $2,500 per year per qualified designated beneficiary.
(2)
For a married couple, if each spouse makes a contribution of at least $2,500 to an investment account for the same qualified designated beneficiary, and the couple files a joint Maryland income tax return, the subtraction modification for the couple on the joint return is $5,000.
C.
Addition Modification.
(1)
An account holder is required to add to federal adjusted gross income in computing Maryland taxable income any distribution received from the Maryland Senator Edward J. Kasemeyer College Investment Plan in the taxable year that is not used on behalf of the qualified designated beneficiary for qualified higher education expenses.
(2)
The addition required in §C(1) of this regulation shall be reduced by any amount included in the account holder's federal adjusted gross income as a result of the distribution.
(3)
The cumulative amount of the addition required under this section for the taxable year and all prior taxable years may not exceed the cumulative amount allowed as a subtraction under §B of this regulation and Tax-General Article, §10-208(o), Annotated Code of Maryland, for the taxable year and all prior taxable years for contributions made by an account holder to an investment account under which the distribution is received.
Regulation .16 Limitation for Resident.LinkCopy Citation
A.
An individual shall itemize deductions on the individual's federal income tax return in order to elect to itemize deductions on the individual's State income tax return.
B.
An individual who does not elect to itemize deductions may claim the standard deduction.
C.
Resident with Nonresident Spouse.
(1)
If a married couple files a joint federal income tax return but elect to file separate income tax returns pursuant to Regulation .02 of this chapter, or if the nonresident spouse is not required to file an income tax return, then the resident individual may, unless the Comptroller requires or allows another method:
(a)
Claim the standard deduction;
(b)
Claim:
(i)
Only the individual's federal itemized deductions, from among those deductions claimed on the federal return, as limited under Tax-General Article, §10-218(b), Annotated Code of Maryland, that are attributable exclusively to the individual; and
(ii)
From among those federal itemized deductions of the individual not claimed under §C(1)(b)(i) of this regulation, a prorated amount of the itemized deductions in accordance with §C(1)(c) of this regulation; or
(c)
Claim a prorated amount of the itemized deductions claimed on the federal income tax return by using a fraction, the:
(i)
Numerator of which is the individual's Maryland adjusted gross income; and
(ii)
Denominator of which is the married couple’s joint federal adjusted gross income.
(2)
For purposes of allocating itemized deductions under §C(1)(b)(i) of this regulation, “attributable exclusively” means that:
(a)
The individual is solely responsible for the payment of an expense claimed as an itemized deduction, including compliance with a valid court order or separation agreement; or
(b)
The individual jointly responsible for the payment of an expense claimed as an itemized deduction can demonstrate payment of the full amount of the itemized deduction with funds that are not attributable, in whole or in part, to the other jointly responsible individual.
Regulation .17 Donations to Diaper Banks and Other Charitable Entities.LinkCopy Citation
A.
Definitions.
(1)
In this regulation, the following terms have the meanings indicated.
(2)
Terms Defined.
(a)
“Diaper bank” means a nonprofit organization located in the State that:
(i)
Is qualified as tax exempt under the Internal Revenue Code, §501(c)(3);
(ii)
Is established and operating primarily for the purpose of collecting or purchasing disposable diapers or other hygiene products for infants or children; and
(iii)
Distributes those diapers or hygiene products through schools, health care facilities, government agencies, or other nonprofit entities for eventual distribution to individuals free of charge.
(b)
“Donation” means an irrevocable gift of:
(i)
Disposable diapers, other hygiene products for infants or children, or feminine personal hygiene products; or
(ii)
Cash that is specifically designated for the purchase of disposable diapers, other hygiene products for infants or children, or feminine personal hygiene products.
(c)
“Feminine personal hygiene products” means sanitary pads, tampons, menstrual sponges, menstrual cups, or other similar feminine hygiene products, whether reusable or disposable.
(d)
“Qualified charitable entity” means a diaper bank, homeless shelter, domestic violence shelter, religious organization, or other charitable organization that distributes diapers, other hygiene products for infants or children, or feminine personal hygiene products, and that is registered with the Comptroller as a distributor of disposable diapers, other hygiene products for infants or children, or feminine personal hygiene products as described in §C of this regulation.
B.
Subtraction for Individual Taxpayers.
(1)
For any taxable year beginning after December 31, 2020, but before January 1, 2024, an individual may subtract up to $1,000 of donations made by the taxpayer during the taxable year to a qualified charitable entity from federal adjusted gross income to determine Maryland adjusted gross income.
(2)
To claim the subtraction under §B(1) of this regulation, the taxpayer shall file with the income tax return on which the subtraction modification is taken a statement with the following information:
(a)
The name of each qualified charitable entity to which a donation was made;
(b)
The value of the donation to each qualified charitable entity identified in §B(2)(a) of this regulation, which the Comptroller may verify with the qualified charitable entity; and
(c)
Any other information that the Comptroller requires.
C.
Qualified Charitable Entities.
(1)
In order to register with the Comptroller as a qualified charitable entity, an entity shall:
(a)
Submit an application in the form and manner prescribed by the Comptroller;
(b)
Submit with the application required under §C(1)(a) of this regulation the following documents:
(i)
The entity’s organizing instrument, such as its articles of incorporation;
(ii)
The entity’s current operating instrument, such as its by-laws;
(iii)
The entity’s determination letter from the Internal Revenue Service designating the entity as a §501(c)(3) charitable organization; and
(iv)
Certification that the entity is in good standing;
(c)
Operate in compliance with all applicable federal, State, and local laws;
(d)
Be registered as a charity with the Maryland Secretary of State; and
(e)
Provide additional documentation as required by the Comptroller.
(2)
Upon request by a donor, a qualified charitable entity shall issue to the donor a receipt indicating:
(a)
For a cash donation, the amount donated that is specifically designated for the purchase of disposable diapers, other hygiene products for infants or children, or feminine personal hygiene products;
(b)
For a noncash donation, a description of the noncash contribution;
(c)
The name of the organization;
(d)
A statement that no goods or services were provided by the organization, if that is the case;
(e)
A description and good faith estimate of the value of goods or services, if any, the organization provided in return for the contribution;
(f)
A statement that goods or services, if any, that the organization provided in return for the contribution consisted entirely of intangible religious benefits, if that was the case; and
(g)
The date of the donation.
(3)
When the value of a donation equals or exceeds $250, the donor shall obtain and keep in their records a receipt from the qualified charitable entity as described in §C(2) of this regulation.
(4)
A qualified charitable entity shall provide annually to the Comptroller by January 31 for the prior tax year:
(a)
A list of donors from whom the charity has received donations; and
(b)
To the extent available, the value of each donor’s donation.
Regulation .18 Subtraction for Contributions to First-Time Homebuyer Savings Accounts.LinkCopy Citation
A.
Definitions.
(1)
In this regulation, the following terms have the meaning indicated.
(2)
Terms Defined.
(a)
“Account holder” means a first-time homebuyer who establishes a first-time homebuyer savings account.
(b)
“Allowable closing costs” means a disbursement listed on a settlement statement for the purchase of a home in the State by an account holder.
(c)
“Eligible costs” means the down payment and allowable closing costs for the purchase of a home in the State by an account holder.
(d)
“Financial institution” has the meaning stated in Financial Institutions Article, §1-101, Annotated Code of Maryland.
(e)
“First-time homebuyer” means an individual who is a resident of the State and who has not owned or purchased, either individually or jointly, a home in the State in the last 7 years.
(f)
“First-time homebuyer savings account” or “account” means an account with a financial institution that an account holder designates as a first-time homebuyer savings account on the account holder’s Maryland income tax return for taxable year 2021 or any following taxable year and that is established for the sole purpose of paying or reimbursing eligible costs for the purchase of a home in the State by the account holder.
(g)
“Home” means a single-family residential real property, including a mobile home as defined in Real Property Article, §8A-101, Annotated Code of Maryland.
(h)
“Settlement statement” means the statement of receipts and disbursements for a transaction related to real estate, including a statement prescribed under the Real Estate Settlement Procedures Act of 1974, 12 U.S.C. §§2601—2617 and 12 CFR 1024.
B.
Availability of Subtraction.
(1)
Subject to the limitations in §B(2) of this regulation, the following amounts are allowed as a subtraction from the federal adjusted gross income to determine Maryland adjusted gross income:
(a)
Up to $5,000 of the amount contributed by an account holder to a first-time homebuyer savings account during the taxable year; and
(b)
The earnings, including interest and other income on the principal, from the account during the taxable year.
(2)
Limitations.
(a)
An account holder may claim the subtraction under §B(1) of this regulation:
(i)
For a period not to exceed 10 years;
(ii)
For total earnings not to exceed $50,000 during the 10-year period; and
(iii)
Except as provided for in §D(2) and (3) of this regulation, if the principal and earnings of the account remain in the account until a withdrawal is made for eligible costs related to the purchase of a home by the account holder.
(b)
An account holder may not be the account holder of more than one account.
(c)
The account holder shall use the funds in the account for eligible costs related to the purchase of a home within 15 years following the date on which the account was established.
(d)
Any funds in the account for which a subtraction was claimed and not expended on eligible costs by December 31 of the last year of the 15-year period under §B(2)(c) of this regulation shall be subject to taxation as ordinary income.
(e)
A person other than the account holder who transfers money to the account is not entitled to the subtraction.
(f)
The subtraction is available in all taxable years beginning after December 31, 2020.
(3)
An individual may jointly establish an account with another person if the joint account holders are both first-time homebuyers and file a joint State income tax return.
(4)
Joint Returns.
(a)
Each spouse on a joint return who is the sole account holder of a first-time homebuyer savings account may claim up to the full amount of the subtraction under §B(1) of this regulation.
(b)
The amount claimed by each spouse is limited to their:
(i)
Contributions to the account on which they are the account holder; and
(ii)
Earnings on the account on which they are the account holder.
C.
Claiming the Subtraction.
(1)
An account holder claiming a subtraction shall file with the income tax return on which the subtraction is claimed, and each subsequent year, whether or not the subtraction is claimed in each subsequent year, until the funds are used for eligible costs, a list of transactions for the account during the taxable year.
(2)
On withdrawal of funds from the account, submit to the Comptroller a detailed account of the eligible costs toward which the account funds were applied and a statement of the amount of funds remaining in the account, if any.
(3)
The detailed account of the eligible costs described in §C(2) of this regulation shall include:
(a)
Copies of statements provided by the account holder’s financial institution; and
(b)
The settlement statement related to the purchase of the home in the State by the account holder.
D.
Withdrawal for Purposes Other than Eligible Costs.
(1)
Except as authorized under §D(2)(a) and (3) of this regulation, if the account holder withdraws any funds for which a subtraction has been claimed from the account for a purpose other than eligible costs for the purchase of a home:
(a)
The funds shall be taxed as ordinary income of the account holder for the tax year in which they were withdrawn; and
(b)
The account holder shall pay a penalty to the State equal to 10 percent of the amount withdrawn.
(2)
Rollovers.
(a)
An account holder may withdraw money from the account and deposit the money in a new first-time homebuyer savings account held by a different financial institution or the same financial institution.
(b)
An account holder who withdraws funds from an account but does not deposit the funds in a new first-time homebuyer savings account within 60 days of withdrawal shall be subject to the tax and penalty described in §D(1) of this regulation.
(3)
A disbursement of any assets of a first-time homebuyer savings account under a filing by an account holder for protection under the United States Bankruptcy Code, 11 U.S.C. §§101—1330, does not subject the account holder to the liabilities described in §D(1) of this regulation.
(4)
A use of the account funds to pay a financial institution’s administrative costs is not be considered a withdrawal from the account subject to the provisions of §D(1) of this regulation if the administrative costs:
(a)
Are disclosed by the financial institution, in writing, to the account holder at the time the account is opened; and
(b)
Do not inure to the benefit of the account holder.
Chapter annotations
Authority: Tax-General Article, §§2-103, 10-102.1, 10-208, and 10-823, Annotated Code of Maryland
History: Effective date:
History: Regulations .01—.05 adopted as an emergency provision effective November 3, 1980 (7:23 Md. R. 2159); adopted permanently effective March 13, 1981 (8:4 Md. R. 337)
History: Regulations .01E—H, .02B—I, .04C, and .05A—D amended effective September 26, 1983 (10:19 Md. R. 1689)
History: Regulations .01—.05, Tax Refund Intercept Program, repealed effective October 3, 1988 (15:20 Md. R. 2333)
History: Regulations .01—.11, Individual, adopted effective January 9, 1989 (15:27 Md. R. 3126)
History: Regulation .01 amended effective March 29, 1993 (20:6 Md. R. 579); January 24, 2000 (27:1 Md. R. 74)
History: Regulation .01B amended effective October 9, 2006 (33:20 Md. R. 1612); February 9, 2009 (36:3 Md. R. 207)
History: Regulation .02 amended effective October 12, 1992 (19:20 Md. R. 1813)
History: Regulation .02A amended and C adopted effective November 20, 1994 (21:23 Md. R. 1931)
History: Regulation .02C amended effective March 31, 2014 (41:6 Md. R. 377)
History: Regulation .03 amended effective October 12, 1992 (19:20 Md. R. 1813); November 20, 1994 (21:23 Md. R. 1931)
History: Regulation .03A amended effective March 21, 2011 (38:6 Md. R. 393); July 8, 2013 (40:13 Md. R. 1073)
History: Regulation .03C amended effective March 31, 2014 (41:6 Md. R. 377)
History: Regulation .04 repealed and new Regulation .04 adopted effective January 20, 1992 (19:1 Md. R. 23)
History: Regulation .04 amended effective May 2, 2022 (49:9 Md. R. 529)
History: Regulation .04A amended effective October 9, 2006 (33:20 Md. R. 1612)
History: Regulation .04B amended effective October 9, 2006 (33:20 Md. R. 1612); February 9, 2009 (36:3 Md. R. 207)
History: Regulation .04C amended effective March 29, 1993 (20:6 Md. R. 579); January 14, 1999 (26:1 Md. R. 21); October 9, 2006 (33:20 Md. R. 1612); February 9, 2009 (36:3 Md. R. 207)
History: Regulation .06 amended effective August 20, 1990 (17:16 Md. R. 1989); October 12, 1992 (19:20 Md. R. 1813); December 28, 1998 (25:26 Md. R. 1919); January 14, 1999 (26:1 Md. R. 21)
History: Regulation .06C amended effective October 9, 2006 (33:20 Md. R. 1612); April 19, 2010 (37:8 Md. R. 614); March 21, 2011 (38:6 Md. R. 393); April 30, 2012 (39:8 Md. R. 533); March 31, 2014 (41:6 Md. R. 377)
History: Regulation .06D adopted effective October 22, 2007 (34:21 Md. R. 1913)
History: Regulation .06D amended effective May 2, 2022 (49:9 Md. R. 529)
History: Regulation .07 amended effective October 12, 1992 (19:20 Md. R. 1813)
History: Regulation .07A amended effective August 20, 1990 (17:16 Md. R. 1989)
History: Regulation .08 amended effective October 12, 1992 (19:20 Md. R. 1813)
History: Regulation .08B amended effective October 9, 2006 (33:20 Md. R. 1612)
History: Regulation .10 repealed and new Regulation .10 adopted effective January 14, 1999 (26:1 Md. R. 21)
History: Regulation .11A amended effective April 28, 2014 (41:8 Md. R. 469)
History: Regulation .11A, G amended effective January 14, 1999 (26:1 Md. R. 21)
History: Regulation .12 adopted effective October 25, 1993 (20:21 Md. R. 1653)
History: Regulation .13 adopted effective December 18, 1995 (22:25 Md. R. 1961)
History: Regulation .13 amended effective March 21, 2011 (38:6 Md. R. 393)
History: Regulation .13A amended effective October 9, 2006 (33:20 Md. R. 1612); February 9, 2009 (36:3 Md. R. 207); May 2, 2022 (49:9 Md. R. 529)
History: Regulation .13D amended effective February 9, 2009 (36:3 Md. R. 207)
History: Regulation .14 adopted effective December 28, 1998 (25:26 Md. R. 1919)
History: Regulation .15 adopted effective December 23, 2002 (29:25 Md. R. 1981)
History: Regulation .15 amended effective February 9, 2009 (36:3 Md. R. 207); May 2, 2022 (49:9 Md. R. 529)
History: Regulation .15B amended effective March 31, 2014 (41:6 Md. R. 377)
History: Regulation .16 adopted effective April 25, 2005 (32:8 Md. R. 741)
History: Regulation .16C amended effective March 31, 2014 (41:6 Md. R. 377)
History: Regulation .17 adopted effective March 21, 2022 (49:6 Md. R. 404)
History: Regulation .18 adopted effective March 21, 2022 (49:6 Md. R. 404)