AGENDA ITEM #4A
September 10, 2013
Introduction
MEMORANDUM
September 6, 2013
TO:
FROM:
SUBJECT:
County Council
Amanda Mihill, Legislative
Attomey~
.
Introduction: Bill
25-13, Economic Development - Cybersecurity Credit
County Supplement
Bill 25-13, Economic Development - Cybersecurity Credit - County Supplement, sponsored by
Councilmembers Riemer, Floreen, and Leventhal, is scheduled to be introduced on September
10,2013. A public hearing is tentatively scheduled for October 1 at 1:30 p.m.
Bill
25-13 would authorize the County to supplement the state cybersecurity investment
incentive tax credit. The amount of the supplement would be determined by a formula that takes
into account the number of companies that receive credits and the amount of funds appropriated
during the annual budget (©2-3, lines 19-28). The supplement paid to an eligible company must
not exceed 50% of the state credit or 15% of the annual appropriation for the program (©3, lines
29-35). The Executive transmitted a memorandum
in
support ofthe bill (©6).
This packet contains:
Bill 25-13
Legislative Request Report
Executive memorandum
State tax credit law
1
5
6
7
F:\LAW\8ILLS\ 1325 Cybersecurity Supplement\lntro Memo,Doc
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Bill No.
25-13
Concerning: Economic Development -
Cybersecurity Credit -
County
Supplement
Draft No. 2
Revised:
6/28/2013
Introduced:
September 10, 2013
Expires:
March 10, 2015
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _-'--_ _ _ _ _ _ __
Sunset Date: -'--'.N""on.!.!:e"--_ _ _ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council members ltiemer, Floreen, and Leventhal
AN
ACT to:
(1)
(2)
authorize the County to supplement the state cybersecurity investment incentive
tax
credit; and
generally amend the law governing County financ'ial incentives for investment in
certain businesses.
By amending
Montgomery County Code
Chapter 20, Finance
Section 20-76D
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface bracketsll
* * *
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unqffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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BILL No. 25-13
1
Sec. 1. Section 20-76D is added as follows:
20-76D. Cybersecurity Investment Incentive Tax Credit Supplement.
2
3
4
W
The Director of Finance must
~
subject to appropriation, a
Credit Supplement to each
Cybersecurity Investment Incentive
5
Cybersecurity Company who meets certain eligibility standards.
6
7
®
A Cybersecuity Company is eligible to receive the Supplement if:
ill
the Company has been designated as
£!
qualified Cybersecurity
Company under state law and has received
£!
final tax credit
certificate for the Maryland cybersecurity investment incentive
tax credit for the preceding calendar year; and
8
9
10
11
12
ill
the
tax
credit received
Qy
the Cybersecurity Company was
generated
Qy
an investment in
£!
qualified Maryland cybersecurity
company, as defined in state law, that has its headquarters and
base of operations in the County.
13
14
15
16
(£)
The County Executive,
Qy
regulations issued under Method
ill
may
impose other eligibility standards. However, those standards must not
make any Cybersecurity Company ineligible to receive the Supplement
who would be eligible under subsection
®
@
17
18
19
ill
The Supplement paid to each eligible Cybersecurity Company
must equal the product of:
fA)
20
21
the amount of the credit the Company received under the
State Cybersecurity Investment Tax Credit Program,
divided
Qy
the total amount of credits all Montgomery
County cybersecurity companies received under the State
Cybersecurity Investment Tax Credit Program during the
preceding calendar year; and
22
23
24
25
26
o
f:\law\bills\1325 cybersecurity supplement\bill2.doc
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BILL
No. 25-13
27
.ill}
the total amount of funds appropriated to the Supplement
Program for that fiscal year.
28
29
30
31
32
33
34
35
36
37
38
39
m
The Supplement paid to any Cybersecurity Company must not
exceed:
(A)
50% of the State tax credit that the Company receives from
the Maryland Cybersecurity Investment Tax Credit
Program in the preceding calendar year; or
.ill}
15% of the total annual appropriation for the Supplement
program.
ill
The Director of Economic Development must request from the
Comptroller of the Treasury and Department of Business and Economic
Development,
Qy
April 30 of each year,
f!:
list of each Cybersercuity
Company, headquartered and based in Montgomery County that was
issued
f!:
final credit certificate
Qy
the State during the preceding
calendar year. The Executive may issue regulations under Method
to implement this Section.
40
41
42
43
44
45
ill
ill
If the Comptroller of the Treasury agrees, the Director of Finance may
arrange for the Comptroller to 00 the Supplement on behalf of the
County.
To the extent that the Comptroller does not 00 the
46
47
48
49
supplement, the Director must 00 the supplement within 60 days after
receiving this list to each qualified Cybersecurity Company that was
issued
f!:
final credit certificate from the State.
(g)
A Cybersecurity Company who submits
f!:
false or fraudulent
application, or withholds material information, to obtain
f!:
payment
under this Section has committed
f!:
Class A violation. In addition, the
Cybersecurity Company must repay the County for all amounts
improperly paid and all accrued interest and penalties that would
f!:PPly
50
51
52
53
o
f:\law\bills\1325 cybersecurity supplement\bilI2.doc
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BILL
No.
25-13
54
55
56
57
58
59
60
61
62
to those amounts as if they were overdue taxes.
A Cybersecurity
Company who violates this Section is liable for all court costs and
expenses of the County in any civil action brought
Qy
the County to
recover any payment, interest, or penalty. The County may collect any
amount due, and otherwise enforce this Section,
Qy
any appropriate
legal action.
ili1
If all or part of the allowed state tax credit is recaptured under the
applicable state law, the Cybersecurity Company must repay the County
within 60 days the portion of any Supplement paid
Qy
the County that
was based on the recaptured credit.
63
64
65
Approved:
Nancy Navarro, President, County Council
Date
66
67
Approved:
Isiah Leggett, County Executive
Date
68
69
This is a correct copy o/Council action.
Linda M. Lauer, Clerk of the Council
Date
f:\law\bills\132S cybersecurity supplement\bill 2.doc
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LEGISLATIVE REQUEST REPORT
Bill 25-13
Economic Development Cybersecurity Credit
DESCRIPTION:
County Supplement
Authorizes the County to supplement the state cybersecurity
investment incentive tax credit, allowed under Maryland Code, Tax­
General Article
§
10-733.
Need for further incentives to invest in local startup cybersecurity
firms.
To supplement the state tax credit program for investments in startup
cybersecurity companies.
Finance Department, Department of Economic Development
To be requested.
To be requested.
To be requested.
To be researched.
Amanda Mihill, Legislati ve Attorney, 240-777-7815
Applies to credits offered for companies anywhere in the County.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
Not applicable.
F:\LAw\BILLS\I325 Cybersecurity Supplement\LRR.Doc
f:\law\biJIs\1325 cybersecurity supplement\lrr.doc
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OFFICE OF THE COUNTY EXECUTIVE
ROCKVILLE. MARYLAND 208S0
Isiah Leggett
County Executive
August 5, 2013
TO:
FROM:
SUBJECT:
Hans Riemer, Councilmember
~
Isiab Leggett,
County
Executive
~
Proposed Legislation to Create Cybersecurity Supplement
I am writing to support your draft bill creating a cybersecurity tax credit
supplement program. In your memo of March 18,2013, you describe the rapid growth of
cybersecurity firms and the many advantages that Maryland and Montgomery County have in
competing for jobs in that industry. I agree. In fact, the County has been focusing on
cybersecurity for some time. For example:
The County co-sponsored the creation of the National Cybersecurity
Center of Excellence at the National Institute of Standards and
Technology (NIST) in Gaithersburg. The Center is a pUblic-private
collaboration for accelerating the widespread adoption of integrated
cybersecurity tools and technologies.
The cybersecurity industry is a key part of the FY14-15 Strategic Plan
developed by the Department of Economic Development (DED).
DED plans to focus one of the County's incubators on cybersecurity.
Montgomery College has a degree program for entry-level cybersecurity
jobs.
Your bill, which would add a County supplement to the State's new
cybersecurity tax credit, is a useful complement to my administration's work on growing jobs in
this industry. I look forward to working with you to enact it.
c:
Joseph Beach, Director, Department of Finance
Marc Hansen, County Attorney
Jennifer Hughes, Director, Office of Management and Budget
Steve Silverman, Director, Department of Economic Development
montgomerycountymd.gov/311
240-113-3556 TTY
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MARTIN O'MALLEY, Governor
Ch.390
Chapter 390
(House Bill 803)
AN ACT concerning
Income Tax - Business and Economic Development - Cybersecurity
Investment Incentive Tax Credit
FOR the purpose of providing for credits against the State income tax for
@ertaifl
il¥l€J8tmt:mts ifl
certain cybersecurity companies
under certain circumstances;
providing for
certain
applications to the Department of Business and Economic
Development for approval
and certification
of
tftS
@l'S~t
afla @@rtifi@athnl
I'll
tft@
D@~artmeRt
t@ iRv@st8rs
If
a~~r8v9a
@r@fiit am8tmts
certain credits;
providing
for the issuance of certain initial credit certificates by the Department, subject
to certain requirements and limitations; providing certain limits on the amount
of credits that can be claimed; requiring the Secretary of the Department to
issue final credit certificates under certain circumstances; making certain
credits refundable under certain circumstances; authorizing the Department to
establish a panel of experts in the area of cybersecurity technology to assist the
Department in making certain determinations; providing for an exemption from
certain provisions of the procurement law to procure the services of certain
experts to serve on a certain panel; establishing the Maryland Cybersecurity
Investment Tax Credit Reserve Fund; requiring the Governor to include
aft
.!!
certain appropriation to the Reserve Fund in the annual budget bill; providing
for the payment of certain administrative costs from a certain fund; requiring
the Comptroller to transfer certain amounts from the Reserve Fund to the
General Fund under certain circumstances; requiring the Comptroller to
transfer certain amounts from the Reserve Fund to the Department for certain
purposes; specifying the year in which certain credits may first be claimed;
limitiRg tft@ manimMm am8MRt ef iRitial @l'sfiit esrtifieat@s tftat may
~@
issti@e ifl
a
ee~aiR
fis@al yea}'; pnwieiflg tftat @9rtaift @l:'@ait am8Mflts may
~e
@al'Fiea 8ver
ts soose€jti9ftt taxaBle 1'9al'S; pr8vifiiflg tftai eertaift @r9fiit ametiftts ftet iS8Mee.
Mftfisl' iftitial el'sfiit @@l'tifi@at98 ift a €l8rtaifl fis@al year revert is ift@ G@fl81'al
Ftifle.; limitiftg tfte maximMm am@Mflt 8f e1'geits tftat may @e @laimee 8fl @91'taift
!!ltats ift@8mS
ta~r
FsttirftS;
providing for certain procedures to claim approved
credits; providing for revocations or recapture of a credit under certain
circumstances; requiring the Department to make a certain report by a certain
date each year; requiring the Department and the Comptroller jointly to adopt
certain regulations; defining certain terms; providing for the application of this
Act; providing for the termination of this Act; and generally relating to credits
against the State income tax
~a8ge
8ft eertaifl iWf98tm9flts ifl @9rtaift
@y@@l'ss@Mrity In:lsifls8S@8 ift tftS !!ltats
for certain cybersecurity companies in the
State based on certain investments.
-1­
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Ch.390
2013 LAWS OF MARYLAND
BY adding to
Article Tax - General
Section 10-733
Annotated Code of Maryland
(2010 Replacement Volume and 2012 Supplement)
SECTION
1.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF
MARYLAND, That the Laws of Maryland read as follows:
Article - Tax - General
10-733.
(A)
(1)
IN THIS
MEANINGS INDICATED.
SECTION THE
FOLLOWING WORDS
HAVE
THE
(I)
"COMPANY" MEANS ANY ENTITY OF ANY FORM DULY
ORGANIZED AND EXISTING UNDER THE LAWS OF ANY JURISDICTION FOR THE
PURPOSE OF CONDUCTING BUSINESS FOR PROFIT.
(II)
PROPRIETORSHIP.
"COMPANY"
DOES
NOT
INCLUDE
A
SOLE
(2)
"CYBERSECURITY COMPANY" MEANS A COMPANY ORGANIZED
FOR PROFIT THAT IS ENGAGED PRIMARILY IN THE DEVELOPMENT OF
INNOVATIVE AND PROPRIETARY CYBERSECURITY TECHNOLOGY.
"CYBERSECURITY TECHNOLOGY" MEANS PRODUCTS OR
GOODS INTENDED TO DETECT OR PREVENT ACTIVITY INTENDED TO RESULT IN
UNAUTHORIZED ACCESS TO, EXFILTRATION OF, MANIPULATION OF, OR
IMPAIRMENT TO THE INTEGRITY, CONFIDENTIALITY, OR AVAILABILITY OF AN
INFORMATION SYSTEM OR INFORMATION STORED ON OR TRANSITING AN
INFORMATION SYSTEM.
"DEPARTMENT" MEANS THE DEPARTMENT OF BUSINESS AND
ECONOMIC DEVELOPMENT.
(I)
"INVESTMENT" MEANS THE CONTRIBUTION OF MONEY
IN CASH OR CASH EQUIVALENTS EXPRESSED IN UNITED STATES DOLLARS, AT A
RISK OF LOSS, TO A QUALIFIED MARYLAND CYBERSECURITY COMPANY IN
EXCHANGE FOR STOCK, A PARTNERSHIP OR MEMBERSHIP INTEREST, OR ANY
OTHER OWNERSHIP INTEREST IN THE EQUITY OF THE QUALIFIED MARYLAND
CYBERSECURITY COMPANY, TITLE TO WHICH OWNERSHIP INTEREST SHALL
VEST IN THE QUALIFIED INVESTOR.
(3)
(4)
(5)
(6)
-2­
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MARTIN O'MALLEY, Governor
Ch.390
(II)
"INVESTMENT" DOES NOT INCLUDE DEBT.
(III) FOR PURPOSES OF THIS SECTION, AN INVESTMENT IS
AT RISK OF LOSS WHEN REPAYMENT ENTIRELY DEPENDS ON THE SUCCESS OF
THE BUSINESS OPERATIONS OF THE QUALIFIED COMPANY.
(7)
"PANEL" MEANS THE PANEL THAT THE DEPARTMENT MAY
ESTABLISH UNDER SUBSECTION (E) OF THIS SECTION COMPOSED OF EXPERTS
IN THE AREA OF CYBERSECURITY TECHNOLOGY.
(I)
"QUALIFIED INVESTOR" MEANS ANY INDIVIDUAL OR
ENTITY THAT INVESTS AT LEAST $25,000 IN A QUALIFIED MARYLAND
CYBERSECURITY COMPANY AND THAT IS REQUIRED TO FILE AN INCOME TAX
RETURN IN ANY JURISDICTION.
(II) "QUALIFIED INVESTOR" DOES NOT INCLUDE A
QUALIFIED PENSION PLAN, AN INDIVIDUAL RETIREMENT ACCOUNT, OR ANY
OTHER QUALIFIED RETIREMENT PLAN UNDER THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, OR FIDUCIARIES OR
CUSTODIANS UNDER SUCH PLANS, OR SIMILAR TAX-FAVORED PLANS OR
ENTITIES UNDER THE LAWS OF OTHER COUNTRIES.
(9)
"QUALIFIED MARYLAND CYBERSECURITY COMPANY" MEANS
A CYBERSECURITY COMPANY THAT HAS MET THE CRITERIA SET FORTH IN
SUBSECTION (C)(2) OF THIS SECTION AND BEEN DETERMINED UNDER
SUBSECTION (C)(3)(II)2 OF THIS SECTION TO QUALIFY FOR INVESTME1'ITS TlIllf
ARE ELIGIBLE FOR THE TAX CREDIT UNDER THIS SECTION.
(10) "SECRETARY" MEANS THE SECRETARY OF BUSINESS AND
ECONOMIC DEVELOPMENT.
(B)
(1)
SUBJECT TO
P.ARAGR:l~PIIS
(2)
i\:1'U)
(3)
PARAGRAPH
(2)
OF
THIS SUBSECTION AND SUBSECTIONS (D) AND (F) OF THIS SECTION, FOR THE
TAXABLE YEAR IN WHICH AN INVESTMENT IN A QUALIFIED MARYLAND
CYBERSECURITY COMPANY IS MADE, A QUALIFIED INVES!JlOR
MARYLAND
CYBERSECURITY COMPANY
MAY CLAIM A CREDIT AGAINST THE STATE INCOME
TAX IN AN AMOUNT EQUAL TO THE AMOUNT OF TAX CREDIT STATED IN THE
FINAL CREDIT CERTIFICATE APPROVED BY THE SECRETARY FOR THE
INVESTMENT AS PROVIDED UNDER THIS SECTION.
(8)
00
Pz\:R!.tGBI~pn
To
BE ELIGIBLE FOR TilE
!Jlt\*
OREIH!Jl DESORIBED Uf
(1)
OF TillS SUBSEOTI01'f, TilE QUz\LIFIED UlVES!JlOR
SIhA~LL
BE:
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Ch.390
~
2013 LAWS OF MARYLAND
FOR A
COMPo:~lY,
I)UJ:...¥ ORGANI1!iED ANI)
Hi
G009
S!J\\P'II)ING
HI
TIlE JYRIS9IC'I'IO'P'f U'P'lI)ER TIlE Lt.'lllS YN9ER lNIIICH
I'I'
IS
o
RGl:'Y'H1!iEI);
FOR!.. COMPo:'Y'lY, Ul GOOD S'I'l\Nl)lNG AN9 !..u'I'1I0RI1!iEI)
OR REGIS'I'EREI) TO 1)0 BUSINESS U1 THE
~!J\A..'J'E;
CURRE)l'I' Uf THE Po:A..YliIE'P'l'I' OF ALL 'I't'aX OBLIG!..'I'IONS
TO THE
~!J\A
..'I'E OR MlY YNI'I' OR SYBI)IVISIOP'T OF THE STATE; ANI)
:NO'I' UT I)EFl..uL'I' u)II)ER THE TERMS OF
l\]'lY
CON'I'RaA..C'I'
""11TH, lNI)EB'I'EI)NESS TO, OR G"&'Y'l'I' FROM TIlE
~'I'i\'I'E
OR
i'Y'lY
U)ITI' OR
SYBDIVISIO)l OF THE
~'I'A'I'E.
~
~
~
~
ill
To
BE ELIGIBLE FOR
FOR PURPOSES OF
THE TAX
CREDIT DESCRIBED IN PARAGRAPH
(1)
OF THIS SUBSECTION, THE QUALIFIED
INVESTOR~
Mt'\¥
)tOT,
f ..
FTER MAKING THE PROPOSEI) INVES'I'ME)l'I', OlllN OR
CONTROL MORE THAN
25%
OF TIlE EQUITY INTERESTS IN TilE QUALIFIEI)
Mt..
R¥LMfD C¥BERSECURI'I'¥ COMPo:\N¥ UIlJ,zIIICII THE INVESTMENT IS MABE.
MAY NOT. AFTER MAKING THE PROPOSED INVESTMENT,
OWN OR CONTROL MORE THAN
25%
OF THE EQUITY INTERESTS IN THE
QUALIFIED MARYLAND CYBERSECURITY COMPANY IN WHICH THE INVESTMENT
IS MADE; AND
(II)
SHALL SUBMIT AN APPLICATION TO THE DEPARTMENT
CONTAINING THE FOLLOWING:
EVIDENCE THAT THE INVESTOR IS:
IF A COMPANY, DULY ORGANIZED AND IN GOOD
STANDING IN THE JURISDICTION UNDER THE LAWS UNDER WHICH IT IS
ORGANIZED;
CURRENT IN THE PAYMENT OF ALL
OBLIGATIONS TO A STATE OR ANY UNIT OR SUBDIVISION OF A STATE; AND
m
A.
B.
TAX
NOT IN DEFAULT UNDER THE TERMS OF ANY
CONTRACT WITH, INDEBTEDNESS TO. OR GRANT FROM A STATE OR ANY UNIT OR
SUBDIVISION OF A STATE; AND
c.
2.
REQUIRE.
ANY OTHER INFORMATION THE DEPARTMENT MAY
-4
@
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MARTIN O'MALLEY, Governor
Ch.390
AT LEAST
30
DAYS PRIOR TO l\'li\KING
RECEIVING
AN
INVESTMENT IN A QUALIFIED MARYLAND CYBERSECURITY COMPANY FOR
WHICH A QUALIFIED INVESTOR
MARYLAND CYBERSECURITY COMPANY
WOULD
BE ELIGIBLE FOR AN INITIAL TAX CREDIT CERTIFICATE, THE QUALIFIED
ltWESTOR
MARYLAND CYBERSECURITY COMPANY
SHALL SUBMIT AN
APPLICATION TO THE DEPARTMENT.
(c)
(1)
(2)
THE APPLICATION SHALL EVIDENCE THAT THE QUALIFIED
MARYLAND CYBERSECURITY COMPANY HAS SATISFIED THE FOLLOWING
MINIMUM REQUIREMENTS FOR CONSIDERATION AS A QUALIFIED MARYLAND
CYBERSECURITY COMPANY:
(I)
THIS STATE;
(II) HAS NOT PARTICIPATED IN THE TAX CREDIT PROGRAM
UNDER THIS SECTION FOR MORE THAN
1
PRIOR FISCAL YEAR;
(III)
YEARS;
(IV)
HAS AN AGGREGATE CAPITALIZATION OF AT LEAST
HAS BEEN IN ACTIVE BUSINESS NO LONGER THAN
5
HAS ITS HEADQUARTERS AND BASE OF OPERATIONS IN
$100,000;
(V)
TECHNOLOGY;
(VI)
HAS FEWER THAN
50
FULL-TIME EMPLOYEES;
OWNS OR HAS PROPERLY LICENSED ANY PROPRIETARY
(VII) DOES NOT HAVE ITS SECURITIES PUBLICLY TRADED ON
ANY EXCHANGE;
(VIII) IS IN GOOD STANDING;
(IX) IS CURRENT IN THE PAYMENT OF ALL TAX OBLIGATIONS
TO THE STATE OR ANY UNIT OR SUBDIVISION OF THE STATE;
IS NOT IN DEFAULT UNDER THE TERMS OF ANY
CONTRACT WITH, INDEBTEDNESS TO, OR GRANT FROM THE STATE OR ANY UNIT
OR SUBDIVISION OF THE STATE; AND
(XI) MEETS ANY OTHER REASONABLE REQUIREMENTS OF
THE DEPARTMENT EVIDENCING THAT THE COMPANY IS A GOING CONCERN
(x)
-5­
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Ch.390
2013 LAWS OF MARYLAND
OF
INNOVATIVE
AND
PRIMARILY ENGAGED IN THE DEVELOPMENT
PROPRIETARY CYBERSECURITY TECHNOLOGY.
(3)
THE DEPARTMENT SHALL:
(I)
APPROVE ALL APPLICATIONS THAT QUALIFY FOR
CREDITS UNDER THIS SECTION ON A FIRST-COME, FIRST-SERVED BASIS; AND
(II)
APPLICATION:
CERTIFY THE AMOUNT OF ANY APPROVED TAX
CREDITS TO A QUALIFIED lNVES'JOR
MARYLAND CYBERSECURITY COMPANY;
AND
DETERMINE
WHETHER
A
CYBERSECURITY
COMPANY QUALIFIES FOR INVESTMENTS THAT ARE ELIGIBLE FOR THE TAX
CREDIT UNDER THIS SECTION.
(I)
AFTER THE DATE ON WHICH THE DEPARTMENT ISSUES
AN INITIAL TAX CREDIT CERTIFICATE UNDER THIS SECTION, A QUALIFIED
INVESTOR SHALL HAVE
30
CALENDAR DAYS TO MAKE AN INVESTMENT IN A
QUALIFIED MARYLAND CYBERSECURITY COMPANY UNDER THIS SECTION.
(II) WITHIN
10
CALENDAR DAYS AFTER THE DATE ON
WHICH A QUALIFIED INVESTOR MAKES THE INVESTMENT, THE QUALIFIED
INVES'JOR
MARYLAND CYBERSECURITY COMPANY
SHALL PROVIDE TO THE
DEPARTMENT NOTICE AND PROOF OF THE MAKING OF THE INVESTMENT,
INCLUDING:
WITHIN
30
CALENDAR DAYS OF RECEIPT OF AN
1.
2.
(4)
1.
THE DATE OF THE INVESTMENT;
THE AMOUNT INVESTED;
2.
3.
PROOF OF THE RECEIPT OF THE INVESTED FUNDS
BY THE QUALIFIED MARYLAND CYBERSECURITY COMPANY;
A COMPLETE DESCRIPTION OF THE NATURE OF
THE OWNERSHIP INTEREST IN THE EQUITY OF THE QUALIFIED MARYLAND
CYBERSECURITY COMPANY ACQUIRED IN CONSIDERATION OF THE INVESTMENT;
AND
4.
-6
@
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MARTIN O'MALLEY, Governor
Ch.390
ANY REASONABLE SUPPORTING DOCUMENTATION
THE DEPARTMENT MAY REQUIRE.
(III) IF A QUALIFIED HfVES'FOB
MARYLAND CYBERSECURITY
COMPANY
DOES NOT PROVIDE THE NOTICE AND PROOF OF THE MAKING OF THE
INVESTMENT REQUIRED IN SUBPARAGRAPH (II) OF THIS PARAGRAPH WITHIN
40
CALENDAR DAYS AFTER THE DATE ON WHICH THE DEPARTMENT ISSUES AN
INITIAL TAX CREDIT CERTIFICATE UNDER THIS SECTION:
THE DEPARTMENT SHALL RESCIND THE INITIAL
TAX CREDIT CERTIFICATE; AND
THE CREDIT AMOUNT ALLOCATED TO THE
RESCINDED CERTIFICATE SHALL REVERT TO THE MARYLAND CYBERSECURITY
INVESTMENT TAX CREDIT RESERVE FUND AND SHALL BE AVAILABLE IN THE
APPLICABLE FISCAL YEAR FOR ALLOCATION BY THE DEPARTMENT TO OTHER
INITIAL TAX CREDIT CERTIFICATES IN ACCORDANCE WITH THE PROVISIONS OF
THIS SECTION.
(D)
(1)
THE TAX CREDIT ALLOWED IN AN INITIAL TAX CREDIT
CERTIFICATE ISSUED UNDER THIS SECTION IS
33%
OF THE INVESTMENT IN A
QUALIFIED MARYLAND CYBERSECURITY COMPANY, NOT TO EXCEED
$250,000.
DURING ANY FISCAL YEAR, THE SECRETARY MAY NOT
CERTIFY ELIGIBILITY FOR TAX CREDITS FOR INVESTMENTS IN A SINGLE
QUALIFIED MARYLAND CYBERSECURITY COMPANY THAT IN THE AGGREGATE
EXCEED
15%
OF THE TOTAL APPROPRIATIONS TO THE MARYLAND
CYBERSECURITY INVESTMENT TAX CREDIT RESERVE FUND FOR THAT FISCAL
YEAR.
IF 'FIlE 'l\:\K ORE9I'I' i\l:;IsOVlE9 lJ)f9EB 'I'I1IS SEO'FION IN z\)l¥
'Fi\XABIsE YEAR EXOEE9S 'FIlE 'FO'F..
\ I:;
'l\:\X O'FIIERl;\'ISE l\:\YABIsE B¥ 'FIlE
QlJz\l:;IFIE9 HfVES'FOR FOB 'I'I1i'.t'F 'F£\X:\i8IsE YEi'.tR, 'FIlE QlJz\l:;IFIE9 INVES'FOR l\IhY
CI:aMM A BEFUN9 IN 'FIlE l.tl\I[OU)l'I' OF 'FIlE E;XOESS.
IF THE CREDIT ALLOWED UNDER THIS SECTION IN ANY
TAXABLE YEAR EXCEEDS THE STATE INCOME TAX FOR THAT TAXABLE YEAR, AN
INDIVIDUAL OR A CORPORATION MAY APPIs¥ 'FHE EXCESS
z\S
A OBE91'F AGl..l)lS'I'
'FIlE S'I'l'.r'l'E INCOME 'I'i\X FOR SlJOOEEDING 'l'AXt\:BIsE YE/.tRS lJN'FIIs 'FIlE EI.tBIsIER
~
5.
1.
2.
(2)
~
ill
ffi
'FIlE FlJIsIs zYIOUN'F OF 'FHE E;XOESS IS USE9; OB
-7
@
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Ch.390
2013 LAWS OF MARYLAND
'PilE EKPIRt..'PIO)l" OF 'PIlE SE'VEN'PH 'Ps:\JiLWI:.E YEAR
AF'PER 'PIlE 'l'f..xABI:.E YEAR
Ht
VfIlIOII 'PilE INVE8'PMEN'P EXPENSE Vh\S
UWURRED
CLAIM A REFUND IN THE AMOUNT OF THE EXCESS.
(E)
(1)
THE DEPARTMENT MAY ESTABLISH A PANEL COMPOSED OF
EXPERTS IN THE AREA OF CYBERSECURITY TECHNOLOGY.
(2)
THE DEPARTMENT MAY ESTABLISH THE PANEL UNDER
SERVICE CONTRACTS WITH INDEPENDENT REVIEWERS.
THE PANEL SHALL ASSIST THE DEPARTMENT IN ITS
DETERMINATION AS TO WHETHER A COMPANY IS A QUALIFIED MARYLAND
CYBERSECURITY COMPANY.
A MEMBER OF THE PANEL IS NOT ELIGIBLE TO RECEIVE
ANY
BENEFIT. DIRECT OR INDIRECT, FROM
THE TAX CREDIT UNDER THIS SECTION.
(I)
EXCEPT AS PROVIDED IN SUBPARAGRAPH (II) OF THIS
PARAGRAPH, DIVISION
II
OF THE STATE FINANCE AND PROCUREMENT
ARTICLE DOES NOT APPLY TO A SERVICE THAT THE DEPARTMENT OBTAINS
UNDER THIS SECTION.
(II)
THE DEPARTMENT IS SUBJECT TO TITLE
12,
SUBTITLE
4
OF THE STATE FINANCE AND PROCUREMENT ARTICLE FOR SERVICES THE
DEPARTMENT OBTAINS UNDER THIS SECTION.
(F)
(1)
IN THIS SUBSECTION, "RESERVE FUND" MEANS THE
MARYLAND CYBERSECURITY INVESTMENT TAX CREDIT RESERVE FUND
ESTABLISHED UNDER PARAGRAPH
(2)
OF THIS SUBSECTION.
(I)
THERE IS A MARYLAND CYBERSECURITY INVESTMENT
TAX CREDIT RESERVE FUND WHICH IS A SPECIAL CONTINUING, NONLAPSING
FUND THAT IS NOT SUBJECT TO
§ 7-302
OF THE STATE FINANCE AND
PROCUREMENT ARTICLE.
(II)
THE MONEY IN THE RESERVE FUND SHALL BE
INVESTED AND REINVESTED BY THE TREASURER, AND INTEREST AND
EARNINGS SHALL BE CREDITED TO THE GENERAL FUND.
(III) THE MONEY IN THE RESERVE FUND MAY BE USED BY
THE DEPARTMENT TO PAY THE COSTS OF ADMINISTERING THE TAX CREDIT
PROGRAM UNDER THIS SECTION.
£Hi
(3)
(4)
(5)
(2)
-8­
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MARTIN O'MALLEY, Governor
(3)
Ch.390
(I)
SUBJECT TO THE PROVISIONS OF THIS SUBSECTION,
THE SECRETARY SHALL ISSUE AN INITIAL TAX CREDIT CERTIFICATE
TO A
QUALIFIED MARYLAND CYBERSECURITY COMPANY
FOR EACH APPROVED
INVESTMENT IN A QUALIFIED MARYLAND CYBERSECURITY COMPANY ELIGIBLE
FOR A TAX CREDIT.
(II)
.AN
INITIAL TAX CREDIT CERTIFICATE ISSUED UNDER
THIS SUBSECTION SHALL STATE THE MAXIMUM AMOUNT OF TAX CREDIT FOR
WHICH THE QUALIFIED INVESTOR
MARYLAND CYBERSECURITY COMPANY
IS
ELIGIBLE.
(III)
1.
ExCEPT AS OTHERWISE PROVIDED IN THIS
SUBPARAGRAPH, FOR ANY FISCAL YEAR, THE SECRETARY MAY NOT ISSUE
INITIAL TAX CREDIT CERTIFICATES FOR CREDIT AMOUNTS IN THE AGGREGATE
TOTALING MORE THAN THE AMOUNT APPROPRIATED TO THE RESERVE FUND
FOR THAT FISCAL YEAR IN THE STATE BUDGET AS APPROVED BY THE GENERAL
ASSEMBLY, AS REDUCED BY THE AMOUNT NEEDED TO PAY THE COSTS OF
ADMINISTERING THE TAX CREDIT PROGRAM UNDER THIS SECTION.
IF THE AGGREGATE CREDIT AMOUNTS UNDER
INITIAL TAX CREDIT CERTIFICATES ISSUED IN A FISCAL YEAR TOTAL LESS THAN
THE AMOUNT APPROPRIATED TO THE RESERVE FUND FOR THAT FISCAL YEAR,
ANY EXCESS AMOUNT SHALL REMAIN IN THE RESERVE FUND AND MAY BE
ISSUED UNDER INITIAL TAX CREDIT CERTIFICATES FOR THE NEXT FISCAL YEAR.
FOR ANY FISCAL YEAR, IF FUNDS ARE
TRANSFERRED FROM THE RESERVE FUND UNDER THE AUTHORITY OF ANY
PROVISION OF LAW OTHER THAN UNDER PARAGRAPH (4) OF THIS SUBSECTION,
THE MAXIMUM CREDIT AMOUNTS IN THE AGGREGATE FOR WHICH THE
SECRETARY MAY ISSUE INITIAL TAX CREDIT CERTIFICATES SHALL BE REDUCED
BY THE AMOUNT TRANSFERRED.
(IV) FOR El'JtGII FISGAL YEAR, FISCAl", YEi\R
2QHi
i'\tm
El'JtCII
FISCAL Y13s:\.:R TIIEREhFTER
EACH FISCAL YEAR.
THE GOVERNOR SHALL
INCLUDE IN THE BUDGET BILL AN APPROPRIATION OF AT LEAST
$2,000,000
TO
THE RESERVE FUND.
(V)
NOTWITHSTANDING THE PROVISIONS OF
§
7-213
OF
THE STATE FINANCE AND PROCUREMENT ARTICLE, THE GOVERNOR MAY NOT
REDUCE AN APPROPRIATION TO THE RESERVE FUND IN THE STATE BUDGET AS
APPROVED BY THE GENERAL ASSEMBLY.
2.
3.
-9
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Ch.390
2013 LAWS OF MARYLAND
(VI) BASED ON THE ACTUAL AMOUNT OF AN INVESTMENT
MADE BY A QUALIFIED INVESTOR, THE SECRETARY SHALL ISSUE A FINAL TAX
CREDIT
CERTIFICATE
TO
THE
QUALIFIED
nfVES~OR
MARYLAND
CYBERSECURITY COMPANY.
(I)
EXCEPT AS OTHERWISE PROVIDED IN THIS PARAGRAPH
i\:JlD
Ht PARl.li:GBAPII (8) OF
~IIIS SYBSEC~IO)t,
MONEY APPROPRIATED TO THE
RESERVE FUND SHALL REMAIN IN THE RESERVE FUND.
(II)
1.
WITHIN
15
DAYS AFTER THE END OF EACH
CALENDAR QUARTER, THE DEPARTMENT SHALL NOTIFY THE COMPTROLLER AS
TO EACH FINAL CREDIT CERTIFICATE ISSUED DURING THE QUARTER:
THE MAXIMUM CREDIT AMOUNT STATED IN THE
INITIAL TAX CREDIT CERTIFICATE FOR THE INVESTMENT
IN THE QUALIFIED
MARYLAND CYBERSECURITY COMPANY;
AND
B.
THE FINAL CERTIFIED CREDIT AMOUNT FOR THE
INVESTMENT
IN THE QUALIFIED MARYLAND CYBERSECURITY COMPANY.
ON NOTIFICATION THAT AN INVESTMENT HAS
BEEN CERTIFIED, THE COMPTROLLER SHALL TRANSFER AN AMOUNT EQUAL TO
THE CREDIT AMOUNT STATED IN THE INITIAL TAX CREDIT CERTIFICATE FOR
THE INVESTMENT FROM THE RESERVE FUND TO THE GENERAL FUND.
(III)
1.
PERIODICALLY, BUT NOT MORE FREQUENTLY
THAN QUARTERLY, THE DEPARTMENT MAY SUBMIT INVOICES FOR COSTS THAT
HAVE BEEN INCURRED OR ARE ANTICIPATED TO BE INCURRED IN
ADMINISTERING THE TAX CREDIT PROGRAM UNDER THIS SECTION.
THE COMPTROLLER SHALL TRANSFER MONEY
FROM THE RESERVE FUND TO THE DEPARTMENT TO PAY FOR COSTS THAT
HAVE BEEN INCURRED OR ARE ANTICIPATED TO BE INCURRED IN
ADMINISTERING THE TAX CREDIT PROGRAM UNDER THIS SECTION.
FROM
~IIE Al:\IOY)~
iWPROPRIIA'ED
~O ~IIE
RESERVE
FUNI) IN FISCAL
¥Et..
R
2014.
~IIE
DEPl..
R!]?MElt~
l\1A¥
NO~
ISSUE INI!]?It\:L
!J?z\X
CREI)I~ CER~IFIGl
..!]?ES FOR
CREI)I~ t'..p,fOYN~S
IN
~IIE
AGGREGltFE
~UA!F
E;.XCEEI)
$2.000.000.
AllY l ..
MOUl't~
REl\fAINING IN
~IIE
RESERVE FmrD
ISSUMlCE OF
INI~It\:L ~i\K
CREDI!]?
CER~IFICA~ES
UNI)ER
~
~
(4)
A.
2.
2.
fa:
AF!]?ER
~IIE
10­
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MARTIN O'MALLEY, Governor
Ch.390
SURPARa\GR,l..PII (I) OF 'FInS PARa"'!lGRl..PII SIMdsL REVER'F 'FO 'FilE CE)lERaA.,L
FUND.
(G)
(1)
THE CREDIT CLAIMED UNDER THIS SECTION SHALL BE
RECAPTURED AS PROVIDED IN PARAGRAPH
(2)
OF THIS SUBSECTION IF WITHIN
2
YEARS FROM THE CLOSE OF THE TAXABLE YEAR FOR WHICH THE CREDIT IS
CLAIMED:
THE QUALIFIED INVESTOR SELLS, TRANSFERS, OR
OTHERWISE DISPOSES OF THE OWNERSHIP INTEREST IN THE QUALIFIED
MARYLAND CYBERSECURITY COMPANY THAT GAVE RISE TO THE CREDIT; OR
'FilE QUi\LIFIEJ) 1\1I"R¥LANJ) O¥BERSEOUIU'l'Y GOMPANY
'FIIA'F Gl.VE RISE 'FO 'FilE GREDI'F GK\sES OPEIU',,'FI'NG i'"S
l~l
l ..G'FIVE BUSUTESS
'lJl'FII ITS HEADQU{\:BTERS
i~lD
BASE OF OPERA'FIONS IN THE S'Fi'iTE.
~
(I)
(II)
THE QUALIFIED MARYLAND CYBERSECURITY COMPANY
THAT RECEIVED THE CREDIT:
CEASES OPERATING AS AN ACTIVE BUSINESS WITH
ITS HEADQUARTERS AND BASE OF OPERATIONS IN THE STATE; OR
PAYS OUT
DISTRIBUTES THE EQUITY INVESTMENT.
1.
2.
AS
DIVIDENDS
OR
OTHERWISE
THE AMOUNT REQUIRED TO BE RECAPTURED UNDER THIS
SUBSECTION IS THE PRODUCT OF MULTIPLYING:
(I)
THE TOTAL AMOUNT OF THE CREDIT CLAIMED OR, IN
THE CASE OF AN EVENT DESCRIBED IN PARAGRAPH
(1)(1)
OF THIS SUBSECTION,
THE PORTION OF THE CREDIT ATTRIBUTABLE TO THE OWNERSHIP INTEREST
DISPOSED OF; AND
(II)
1.
100%,
IF THE EVENT REQUIRING RECAPTURE OF
THE CREDIT OCCURS DURING THE TAXABLE YEAR FOR WHICH THE TAX CREDIT
IS CLAIMED;
(2)
2.
67%,
IF THE EVENT REQUIRING RECAPTURE OF
THE CREDIT OCCURS DURING THE FIRST YEAR AFTER THE CLOSE OF THE
TAXABLE YEAR FOR WHICH THE TAX CREDIT IS CLAIMED; OR
33%,
IF THE EVENT REQUIRING RECAPTURE OF
THE CREDIT OCCURS MORE THAN
1
YEAR BUT NOT MORE THAN
2
YEARS AFTER
THE CLOSE OF THE TAXABLE YEAR FOR WHICH THE TAX CREDIT IS CLAIMED.
3.
11-
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Ch.390
2013 LAWS OF MARYLAND
THE QUALIFIED INVES1'OR
MARYLAND CYBERSECURITY
COMPANY
THAT CLAIMED THE CREDIT SHALL PAY THE AMOUNT TO BE
RECAPTURED AS DETERMINED UNDER PARAGRAPH
(2)
OF THIS SUBSECTION AS
TAXES PAYABLE TO THE STATE FOR THE TAXABLE YEAR IN WHICH THE EVENT
REQUIRING RECAPTURE OF THE CREDIT OCCURS.
(H)
(1)
THE DEPARTMENT MAY REVOKE ITS INITIAL OR FINAL
CERTIFICATION OF AN APPROVED CREDIT UNDER THIS SECTION IF ANY
REPRESENTATION MADE IN CONNECTION WITH THE APPLICATION FOR THE
CERTIFICATION IS DETERMINED BY THE DEPARTMENT TO HAVE BEEN FALSE.
THE REVOCATION MAY BE IN FULL OR IN PART AS THE
DEPARTMENT MAY DETERMINE AND, SUBJECT TO PARAGRAPH
(3)
OF THIS
SUBSECTION, SHALL BE COMMUNICATED TO THE QUALIFIED INVESTOR,
THE
QUALIFIED MARYLAND CYBERSECURITY COMPANY,
AND THE COMPTROLLER.
THE QUALIFIED UNES!;POR
MARYLAND CYBERSECURITY
COMPANY
SHALL HAVE AN OPPORTUNITY TO APPEAL ANY REVOCATION TO THE
DEPARTMENT PRIOR TO NOTIFICATION OF THE COMPTROLLER.
THE COMPTROLLER MAY MAKE AN ASSESSMENT AGAINST
THE QUALIFIED UWES!;POR
MARYLAND CYBERSECURITY COMPANY
TO
RECAPTURE ANY AMOUNT OF TAX CREDIT THAT THE QUALIFIED INVES1'OR
MARYLAND CYBERSECURITY COMPANY
HAS ALREADY CLAIMED.
(I)
(1)
ON OR BEFORE JANUARY
10
OF EACH YEAR, THE
DEPARTMENT SHALL REPORT TO THE GOVERNOR AND, SUBJECT TO
§ 2-1246
OF THE STATE GOVERNMENT ARTICLE, THE GENERAL AsSEMBLY, ON THE
INITIAL TAX CREDIT CERTIFICATES AWARDED UNDER THIS SECTION FOR THE
PRIOR CALENDAR YEAR.
THE REPORT REQUIRED UNDER PARAGRAPH
(1)
OF THIS
SUBSECTION SHALL INCLUDE FOR EACH INITIAL TAX CREDIT CERTIFICATE
AWARDED:
(I)
THE NAME OF THE QUALIFIED INVESTOR AND THE
AMOUNT OF CREDIT AWARDED OR ALLOCATED TO EACH nrVES1'OR
QUALIFIED
MARYLAND CYBERSECURITY COMPANY;
(II)
THE NAME AND ADDRESS OF THE QUALIFIED
MARYLAND CYBERSECURITY COMPANY THAT RECEIVED !;PilE UNES1'MEl'l'1'
(3)
(2)
(3)
(4)
(2)
-12
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MARTIN O'MALLEY, Governor
Ch.390
GIVUtC RISE TO
THE CREDIT UNDER THIS SECTION AND THE COUNTY WHERE
THE QUALIFIED MARYLAND CYBERSECURITY COMPANY IS LOCATED; AND
(III) THE DATES OF RECEIPT AND APPROVAL BY THE
DEPARTMENT OF ALL APPLICATIONS FOR INITIAL TAX CREDIT CERTIFICATES.
THE REPORT REQUIRED UNDER PARAGRAPH
(1)
OF THIS
SUBSECTION SHALL SUMMARIZE FOR THE
CATEGORY
CATEGORIES
OF
QUALIFIED
INVESTORS
AND
QUALIFIED
MARYLAND
CYBERSECURITY
COMPANIES:
(I)
THE TOTAL NUMBER OF APPLICANTS FOR INITIAL TAX
CREDIT CERTIFICATES UNDER THIS SECTION IN EACH CALENDAR YEAR;
(II) THE NUMBER OF APPLICATIONS FOR WHICH INITIAL
TAX CREDIT CERTIFICATES WERE ISSUED IN EACH CALENDAR YEAR; AND
(III) THE TOTAL INITIAL TAX CREDIT CERTIFICATES
AUTHORIZED UNDER THIS SECTION FOR ALL CALENDAR YEARS UNDER THIS
SECTION.
(J)
THE DEPARTMENT AND THE COMPTROLLER JOINTLY SHALL ADOPT
REGULATIONS TO CARRY OUT THE PROVISIONS OF THIS SECTION AND TO
SPECIFY CRITERIA AND PROCEDURES FOR APPLICATION FOR, APPROVAL OF,
AND MONITORING CONTINUING ELIGIBILITY FOR THE TAX CREDIT UNDER THIS
SECTION.
(3)
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect
July 1, 2013, and shall be applicable to all taxable years beginning after December 31,
2013, but before January 1, 2019. This Act shall remain effective for a period of 6
years and, at the end of June 30,2019 with no further action required by the General
Assembly, this Act shall be abrogated and of no further force and effect.
Approved by the Governor, May 2, 2013.
13 ­