New Maryland Income Tax Credit for Security Clearance Costs & Construction of SCIFs

Beginning in 2013, Maryland individuals and corporations can claim an income tax credit to reduce their share of Maryland income taxes dollar-for-dollar for qualified expenses related to federal security clearance measures, including:

• Processing application requests for clearances of employees located in Maryland;
• Maintaining, upgrading or installing computer systems in Maryland to obtain federal security clearances;
• Training employees in Maryland to administer the application process (credit for all of the above allowed up to $100,000 per taxable year); and
• The costs of construction and equipment related to the construction or renovation of a SCIF (Sensitive Compartmented Information Facility, an enclosed area within a building that is used to process classified level information) (up to 50% of the costs or $100,000, whichever is less). The total credit for a taxpayer constructing or renovating multiple SCIFS located in Maryland is $250,000 per taxable year.

The Maryland Department of Business and Economic Development (DBED) will administer the credit and issue a total of $2 million in credits each calendar year on a pro-rata basis if the applications exceed $2 million (instead of on a first-come first-served basis).

To apply, the taxpayer must submit an application to DBED by September 15th of the year following the year the costs were incurred. DBED will then certify the “approved” amount for which the taxpayer will be required to file an amended income tax return to reflect the credit and attach a copy of the certification.

The nonrefundable credit is available for taxable years beginning after December 31, 2012, but before January 1, 2017 and can be carried forward until fully utilized.

Please do not hesitate to contact Hertzbach today if you would like additional information.