Business Organization Filing Fees – Income Tax Credit (HB 1053): OPPOSE

This bill increases the annual report filing fee for corporations, partnerships, LLCs and LLPs from $300 to $1,000. It offers a $500 tax credit against the corporate or individual income tax paid on the entity’s income, but offers no provision to carry forward any unused amount. The fee was only just raised from $100 (zero in some cases) to $300 for calendar year 2004.

The bill is extremely unfair, especially to small businesses, due to the high amount of the fee. The proposed income tax credit will be a nightmare to administer for the many flow-through entities whose income tax is paid on the tax returns of its owners. According to MACPA State Tax Committee member Karen Syrylo, “The bill is unfair, and perhaps unconstitutional, in that it discriminates in favor of businesses that have enough Maryland activity to generate at least a $500 income tax in Maryland, and discriminates against foreign businesses and others whose income tax is under $500 and therefore would not generate the tax credit provided for in the bill; the latter businesses end up paying a higher net ‘filing fee.'”

The House Ways and Means Committee will hold a hearing for this bill on Thursday, March 15. In addition to the MACPA, the Maryland Chamber of Commerce and the Maryland State Bar Association plan to testify in opposition.

If you agree that this bill is unfair, please e-mail the Ways and Means Committee to voice your concern. Be sure to notify your clients who will be affected by this proposed fee increase.