Agenda Item 3C
May 18,2016
Action
MEMORANDUM
May 16,2016
~
TO:
County Council
FROM:
Josh
Hamlin, Legislative
Attome~
SUBJECT:
Action:
Expedited Bill 14-16, Taxation New Jobs Tax Credit and Enhanced New
Jobs Tax Credit - Amount of Tax Credit - Term of Credit
Government Operations and Fiscal Policy Committee recommendation (3-0): Enact
Expedited
Bill 14-16.
Expedited Bill 14-16, Taxation-New Jobs Tax Credit and Enhanced New Jobs Tax Credit
- Amount of Credit - Term of Credit, sponsored by Lead Sponsor Council President
at
the request
of the County Executive, was introduced on April 19. A public hearing was held on May 10 and a
Government Operations and Fiscal Policy Committee worksession was held on May 12.
Bill 14-16 would change to term during which the Enhanced New Jobs Tax Credit may be
claimed from 12 taxable years to 24 taxable years.
Background
Under State law, the County may provide by law for a property tax credit for certain
businesses that create at least 25 new, permanent, full-time jobs. The County may also provide for
an "enhanced" property
tax
credit for certain businesses that expend at least $150 million to obtain
at least 700,000 square feet ofnew or expanded business premises (through purchase, construction,
or lease), and employ at least 1,100 individuals full-time, including at least 500 in new, permanent
full-time jobs. Individuals in all of these positions must receive an employer-provided subsidized
health care benefit package, be paid at least 150% of the federal minimum wage,
I
and work in the
new or expanded premises, or in newly renovated premises neighboring the new or expanded
premises.
The County has implemented this authority, and provided for a "New Jobs Tax Credit and
Enhanced New Jobs Tax Credit" (see
©6-1O).
These credits are applied against the business'
County property
tax,
in amounts and for terms set forth in the law. In general terms, the amount
of the New Jobs Tax Credit decreases over the first six taxable years that it is allowed, and is not
allowed after the sixth taxable year. The Enhanced New Jobs Tax Credit is 58.5% of the property
tax imposed on the
increase in assessment
of the new or expanded premises and any substantially
150% of the federal minimum wage of $7.25 per hour is $10.88. Under County law, effective July 1, 2017, the
County minimum wage will be $11.50 per hour.
1
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renovated real property adjoining or neighboring the new or expanded premises. Under current
law, the Enhanced credit may be claimed in each of the first 12 taxable years after the Director
certifies eligibility. The fiscal impact of these two credits since 1999 is shown in the Tax
Expenditure Report prepared by the Department of Finance (see © 11-12).
In 2012, the General Assembly amended the State enabling law (see ©13-16), changing
the 12-year period in which the Enhanced credit is allowed to 24 years. This Bill will amend the
County law to be consistent with that change to State law.
Public Hearing
A public hearing on the Bill was held on May 10, at which there was one speaker. Michael
Coveyou of the Department of Finance spoke on behalf ofthe County Executive in support of the
Bill (©21).
Issues
1.
Is the enactment of the Bill essentially a pro forma action, due to provisions in State
law?
As mentioned above, prior to a 2012 amendment, the State enabling law authorized local
governments to enact a law allowing the Enhanced New Jobs Tax Credit to be claimed for a term
of 12 years. This 12-year term is reflected in the existing County law that this Bill would amend,
and the threshold question for the Council's consideration of the Bill is whether the County has
any discretion in setting a term that is different from that set in State law.
Both Council staff and the County Attorney's Office interpret certain provisions of the
State law as precluding the County from providing for the credit for a term different from that set
in
State law. The State enabling law, Maryland Tax-Property Code
§
9-230 provides that "[a]fter
a business entity has complied with all the requirements provided in this section and in any
applicable local law for a particular credit, the business entity shall be entitled to claim the credits
for
the term provided in this section."
(Emphasis supplied) The "term provided in this section" is
24 years. Also, the 2012 Bill that amended the term from 12 to 24 years contains an uncodified
section that reads: "it is the intent of the General Assembly that the extension of the duration of
the tax credits provided for under this Act shall apply to any business entity or affiliate ofa business
entity that qualified for the tax credits before the effective date of this Act." (See ©15)
Together, these two provisions in the State enabling law appear to divest the County from
exercising discretion as to the length ofthe term ofthe credit.
In
particular, the uncodified section
in the 2012 Bill seems to directly preclude any variance from the term provided in State law for
an already-eligible business. Under this reading of the law, enactment of this Bill is essentially a
pro forma action - the length ofthe term ofthe credit was effectively extended with the enactment
of the 2012 law.
2.
What is the fiscal impact of the Bill?
According to the Fiscal and Economic Impact Statement (see ©16), the fiscal impact of
extending the term of the Enhanced New Jobs Tax Credit will be approximately $1.7 million per
2
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year for the next six fiscal years. To date, only one company has qualified for the credit.
It
is
possible that there will be an additional impact, should other companies qualify, but such impact
would not be realized unti112 years after such companies become eligible for the credit.
3.
What happens if a qualified recipient of the Enhanced New Jobs Tax Credit reduces
its workforce below the eligibility threshold or otherwise does not meet the eligibility
requirements?
State law authorizes, and County law provides for, the recapture of allowed credits if a
business claiming the credit does not meet the credit's eligibility requirements. County Code § 52­
73 provides that if a business does not satisfy all of the eligibility requirements to claim the credit
during the three taxable years after any year when a credit was allowed, the business must repay
the tax credit to the County after receiving notice from the Finance Director. Further, any unrepaid
tax
credit is a lien on real and personal property owned by the business entity in the same manner
as unpaid real property taxes under state and County law.
On May 5, the Washington Post ran a story about Discovery Communications, the only
County business eligible for and receiving the credit, announcing a round of voluntary buyouts
that may lead to layoffs later this year.
2
The story indicated that Discovery employs approximately
1,500 people locally. To be eligible to claim the credit, among other things, an employer must
employ at least 1,100 people in the County.3 The most recent available information indicates that
local employment at Discovery is 1,563. Using this number, if Discovery reduces its County
workforce by 464 positions, it would not meet the 1,100 jobs requirement and would not be eligible
for the credit, and would have to repay any credits allowed during the three preceding
tax
years.
4
4.
Should the Council enact the Bill?
As discussed above, the term of the Enhanced New Jobs Tax Credit was effectively
extended to 24 years by the General Assembly in 2012. Expedited Bill 14-16 will simply make
the provision in the County Code consistent with that
in
State law, which would likely govern
regardless. If the Council wishes to consider imposing additional eligibility requirements for the
credit, it may do so in separate legislation.
2
https:!/www.washingtonpost.com/bus iness/ capita Ibusin ess/d iscovery-announces-buv-outs-possi b Ie­
.!.~Y9.ff$.aJ).J"§'1t2LQji.~
..
~.1..Q_~_<:.I.~£:..L~J?£:J..L~§._:.s.!tQ.1:I~(;]J.l~~§tlL~!Q[.Y.:.h!m.!
MD Tax-Property Code
§
9-230(d)(J) provides that "[f]or a business entity to qualify for an enhanced property tax
credit under this subsection, the business entity, along with its affiliates, shall:
3
in Montgomery County only:
1.
expend at least $150 million to obtain at least 700,000 square feet of new or expanded
premises by purchasing newly constructed premises, constructing new premises, causing
new premises to be constructed, or leasing newly constructed premises; and
2.
employ a total of at least 1,100 individuals in full-time positions consisting of both full­
time positions of indefmite duration and contract positions of definite duration lasting at
least 12 months with an unlimited renewal option, and including at least 500 individuals in
new permanent full-time positions, with all positions:
A.
receiving an employer provided subsidized health care benefits package;
B.
paying at least 150% of the federal minimum wage; and
C.
located in the new or expanded premises and, if applicable, in newly renovated
premises adjoining or otherwise neighboring the new or expanded premises.
4
Similarly, if the square footage of Discovery's "premises" went below the 700,000 square foot eligibility threshold,
it would also cease to be eligible to claim the credit and be subject to the law's recapture provisions.
(iii)
3
*
*
*
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Committee recommendation (3-0):
Enact Expedited Bill 14-16.
This packet contains:
Expedited Bill 14-16
Legislative Request Report
Memo from County Executive
County Code, Chapter 52, Article X
Tax Expenditure Report - New Jobs Tax Credit
2012 Maryland Laws Ch. 128
(H.B.
592)
Fiscal and Economic Impact statement
County Executive testimony
F:\LAW\BILLS\I614 Taxation-New Jobs Tax Credit\Action Memo.Docx
Circle
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11
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Expedited Bill No"-....:..14...:...-....:..16=--:--_____­
.
Concerning: Taxation - New Jobs Tax
Credit and Enhanced New Jobs Tax
Credit - Amount of Tax Credit - Term
of Credit
Revised: April 13, 2016 Draft No. _1_
Introduced:
April 19, 2016
Expires:
October 19, 2017
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: --!-N:.:o""'ne"'--_ _ _ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead Sponsor: Council President at the request of the County Executive
AN EXPEDITED ACT
to:
(1)
change the tenn ofthe Enhanced New Jobs Tax Credit; and
(2)
generally amend the law governing the Enhanced New Jobs Tax Credit
By amending
Montgomery County Code
Chapter 52, Taxation
Article X, New Jobs Tax Credit and Enhanced New Jobs Tax Credit
Section 52-72
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 unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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EXPEDITED BILL
No. 14-16
1
2
3
Sec. 1. Section 52-72(b) is amended as follows:
52-72. Amount of tax credit; pass-through to lessees.
(a)
The new jobs tax credit that a taxpayer may claim against County
property taxes under this Article is the following percentage of the
property tax imposed on the assessment of the new or expanded
premIses:
(1)
52% during the first and second taxable years
in
which a credit is
allowed;
(2) 39% during the third and fourth taxable years in which a credit is
allowed; and
(3) 26% during the fifth and sixth taxable years in which a credit is
allowed.
After the sixth taxable year, the Finance Director must not allow a new jobs
tax credit under this Article.
(b) The enhanced new jobs tax credit that a taxpayer may claim against
County property taxes under this Article is 58.5% of the property tax
imposed on the increase in assessment of:
(1) the new or expanded premises; and
(2) any
substantially
renovated
real
property
adjoining
or
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
neighboring the new or expanded premises.
A renovation is
F:\LAW\BILLS\1614 Taxation-New Jobs Tax Credit\BiIll.Doc
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EXPEDITED BILL
No.
14-16
21
22
23
24
25
26
substantial for purposes of this subsection if the renovation
results in a complete rehabilitation of at least 50% of each
building on the property.
The taxpayer may claim this credit in each of the first [12] 24 taxable years
after the Director certifies that the taxpayer is eligible for the credit.
(c)
A lessor of real property must reduce the amount of taxes for which an
eligible business entity is contractually liable under a lease or rental
agreement by the amount of any tax credit allowed under this Article.
Section 2. Expedited Effective Date
27
28
29
30
31
32
The Council declares that this legislation is necessary for the immediate
protection of the public interest. This Act takes effect on the date on which it
becomes law.
Approved:
33
34
Nancy Floreen, President, County Council
Date
35
36
Approved:
Isiah Leggett, County Executive
Date
37
This is a co"ect copy o/Council action.
38
Linda
L.
Lauer, Clerk ofthe Council
Date
F:\LAW\BILLS\1614 Taxation-New Jobs Tax Credit\BilIl.Doc
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LEGISLATIVE REQUEST REPORT
Expedited Bill 14-16
Taxation
-
New Jobs Tax Credit and Enhanced New Jobs Tax Credit
-
Amount ofTax Credit
-
Term of
Credit
DESCRIPTION:
This
Bill
would amend County law by changing the term of the
Enhanced New Jobs Tax Credit from 12 to 24 years, as is currently
allowed under State law.
In 2012, the State changed the term during which the Enhanced New
Jobs Tax Credit may be claimed by an eligible taxpayer.
Align the County law with the State law.
Department of Finance
To be requested.
To be requested.
Subject to the general oversight of the County Executive and the
County Council.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITIDN
MUNICIPALITIES:
PENALTIES:
Unknown
Michael J. Coveyou, Chief, Division of Treasury, Department of
Finance
None
None
F:\LAW\BILLS\l614 Taxation-New Jobs Tax Credit\LRR.Docx
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OFFICES OF THE COUNTY EXECUTIVE
Isiah Leggett
County Executive
Rockville, Maryland 20850
MEMORANDUM
AprilS,2016
TO:
FROM:
SUBJECT:
')
~
Nancy Floreen, Council President
lsiah Leggett, County Executive
-P
~
New Jobs Tax Credit Legislative Amendment
I
am recommending an amendment to Chapter
S2~72
of the County Code to
change the term ofthe Enhanced New Jobs Tax: Credit from twelve to twenty-four years, as is
currently allowed under State law. I believe this change is consistent with our shared priority of
attracting and retaining key industries within the County to promote sustainable economic
growth and new job creation.
I urge the Council to support this legislation. My staff are available to respond to
any questions you may have on this amendment or provide additional clarification.
Attachments
cc: Timothy
L.
Firestine, Chief Administrative Officer
Joseph F. Beach, Director, Department of Finance
Jennifer
A.
Hughes, Director, Office ofManagement and Budget
Patrick Lacefield, Director, Public Information Office
Sally Sternbach, Acting Director, Department ofEconomic Development
Joy Nunni, Special Assistant to the County Executive
Bonnie Kirkland, Assistant Chief Administrative Officer
Lily
Qi,
Assistant Chief Administrative Officer
Michael Coveyou, Chief, Division of Treasury, Department of Finance
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MONTGOMERY COUNTY CODE
Article X. New Jobs Tax Credit and Enhanced New Jobs Tax
Credit.
Sec. 52-69. Tax credits.
The Director of Finance must allow a new jobs tax credit or an enhanced new jobs tax
credit against the County property tax imposed on real property owned or leased by a business
entity or its affiliate and on personal property owned by that business entity or its affiliate if the
business entity qualifies for either credit under this Article. (1998 L.M.C., ch. 9,
§
1; 1999
L.M.C., ch. 16,
§
1.)
Sec. 52-70. Defmitions.
In
this Article, the following words have the meanings indicated:
(a)
Affiliate, Business Entity, New or Expanded Premises, New Permanent Full-Time
Position, and Notification Date have the meanings defined in Section 9-230, Tax-Property
Article, Maryland Code, or any successor provision.
Finance Director means the Director of the Department of Finance or the
Director's designee.
(b)
(c)
New Jobs Tax Credit means the credit granted under this Article to a qualified
business entity against the County property tax imposed on the new or expanded premises and
the personal property located on those premises.
(d)
Enhanced New Jobs Tax Credit means the credit granted under this Article to a
qualified business entity against the County property tax imposed on the new or expanded
premises that qualify under state law for an enhanced new jobs credit and the personal property
located on those premises. (1998 L.M.C., ch. 9,
§
1; 1999 L.M.C., ch. 16,
§
1.)
Sec. 52·71. Eligibility for
tax
credit.
(a)
To qualify for a new jobs tax credit under this Article, a business entity must, on
1
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MONTGOMERY COUNTY CODE
or after July 1, 1998:
(1)
construct, or expand by at least 5,000 square feet, premises in the County
on which it conducts business by buying, building, or leasing new premises; and
(2)
employ at least 25 persons in new permanent full-time positions located in
the new or expanded premises in the County during a 24-month period when it occupies the new
or expanded premises.
To qualify and be certified for an enhanced new jobs tax credit under this Article,
(b)
a business entity must, on or after December 31, 1998:
(1)
notify the Finance Director as required under state law; and
meet all requirements under state law to qualify for an enhanced new jobs
(2)
tax credit.
(c)
if:
A business entity does not qualify for a new jobs tax credit or enhanced tax credit
(1)
the business entity has moved the operations which are located on new or
expanded premises from another county (including Baltimore City) in Maryland;
(2)
the business entity or another taxpayer has been given a tax credit or
exemption for the new or expanded premises during the same taxable year under any other state
or County law;
(3)
the new permanent full-time positions are solely or primarily involved in
retail sales of goods or services, except when a small number of positions involved in retail sales
are incidental to the primary purpose of a building;
(4)
the business entity is a type of business entity that the County Council by
resolution before the Notification Date has made ineligible for a new jobs tax credit or enhanced
new jobs tax credit, or the new permanent full-time positions are a type of position that the
Council by resolution before the Notification Date has made ineligible for a new jobs tax credit
or enhanced new jobs tax credit, or the new or expanded premises are located in a geographic
area that the Council by resolution before the Notification Date has made ineligible for a new
jobs tax credit or enhanced new jobs tax credit; or
(5)
the location of the new or expanded premises is inconsistent with any
applicable land use master plan.
(d)
To qualify for a credit against property tax imposed on personal property, a
business entity must certify that the personal property is located on premises that qualify for a
new jobs tax credit or enhanced new jobs tax credit under this Article. (1998 L.M.C., ch. 9,
§
1;
2
(j)
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MONTGOMERY COUNTY CODE
1999 L.M.C., ch. 16,
§
1.)
Sec. 52·72. Amount of
tax
credit; pass.through to lessees.
(a)
The new jobs tax credit that a taxpayer may claim against County property taxes
under this Article is the following percentage of the property tax imposed on the assessment of
the new or expanded premises:
(1)
(2)
and
(3)
26% during the fifth and sixth taxable years in which a credit is allowed.
52% during the first and second taxable years in which a credit is allowed;
39% during the third and fourth taxable years in which a credit is allowed;
After the sixth taxable year, the Finance Director must not allow a new jobs tax credit
under this Article.
(b)
The enhanced new jobs tax credit that a taxpayer may claim against County
property taxes under this Article is 58.5% of the property tax imposed on the increase in
assessment of:
(I)
the new or expanded premises; and
(2)
any substantially renovated real property adjoining or neighboring the new
or expanded premises. A renovation is substantial for purposes of this subsection if the
renovation results in a complete rehabilitation of at least 50% of each building on the property.
The taxpayer may claim this credit in each of the first 12 taxable years after the Director
certifies that the taxpayer is eligible for the credit.
(c)
A lessor of real property must reduce the amount of taxes for which an eligible
business entity is contractually liable under a lease or rental agreement by the amount of any tax
credit allowed under this Article. (1998 L.M.C., ch. 9,
§
1; 1999 L.M.C., ch. 16,
§ 1.)
Sec. 52·73. Recapture of tax credit.
(a)
A business entity which does not satisfy all applicable requirements under this
Article to qualify for a tax credit during the three taxable years after any year when a credit was
allowed must repay the
tax
credit to the County after receiving notice from the Finance Director
3
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MONTGOMERY COUNTY CODE
that the credit must be repaid.
(b)
Interest must accrue on any repayable tax credit at the rate established for overdue
property taxes, beginning 30 days after the notice from the Finance Director.
(c)
Any umepaid tax credit is a lien on real and personal property owned by the
business entity in the same manner as unpaid real property taxes under state and County law.
(1998 L.M.C., ch. 9, § 1; 1999 L.M.C., ch. 16, §
1.)
Sec. 52-74. Administration of tax credit.
(a)
A business entity must apply for either tax credit on a form furnished by the
Finance Director, and must state which tax credit it intends
to
request and when and how it
expects
to
qualify for the credit.
(b)
When a business entity believes it has met all requirements for the tax credit, it
may apply for certification on a form furnished by the Director, and must provide sufficient
information to show that all requirements under this Article and applicable state law have been
met.
(c)
The Finance Director must:
(1)
determine the eligibility of the business entity for the tax credit;
(2)
notify the State Department of Assessments and Taxation that a business
entity has been approved for the tax credit; and
(3)
require submission of reports by the business entity during the three
taxable years after any year when the tax credit was earned
to
verify that the business entity
continues to satisfy all applicable requirements under this Article.
(d)
A person who submits a false or fraudulent application, or withholds information,
to obtain a tax credit under this Article has committed a Class A violation.
In
addition, the
person must repay the County for all amounts credited and all accrued interest and penalties that
would apply to those amounts as overdue taxes. A person who violates this subsection is liable
for all court costs and expenses of the County in any civil action brought by the County against
the violator. The County may collect any repayable tax credit, and otherwise enforce this
Article, by any appropriate legal action.
(e)
The County Executive may adopt regulations under method (2) to administer this
Article. (1998 L.M.C., ch. 9,
§
1; 1999 L.M.C., ch. 16,
§
1; 2001 L.M.C., ch. 28,
§§
12, 15 and
16.)
4
(j)
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MONTGOMERY COUNTY CODE
Editor's note-The
effective date of the amendments made to this section
by
2001
L.M.C., ch. 28,
§
12, is the same effective date as 1999 L.M.C., ch. 16,
§
1.
5
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New Jobs Tax Credit
Description
This program consists of the New Jobs Tax Credit and the Enhanced New Jobs Tax Credit, and
benefits businesses that are planning to increase both their space and staff. A business seeking
either credit must notify the County of its intent to claim the credit
before
the expansion. This
credit is applied against the General County and Special Service Area real property taxes.
New Jobs Tax Credit
This is a six-year credit available to businesses that increase their space by at least 5,000 square
feet and their employee count by at least 25 new jobs. Businesses that are already resident in the
County or that are moving from outside of Maryland are eligible to apply. The credit is not
available to businesses that move to Montgomery County from another Maryland county or
Baltimore City, and it is not available to retailers. The 25 new jobs must be permanent full-time
positions and must last for at least 24 months. The new space must be occupied during the period
the business retains the 25 new employees. The credit is based on the increase in both real and
personal property tax assessments resulting from the business's expansion. The credit decreases
over six years, as follows:
Years 1 and 2: Credit
=
52% of tax attributable to the assessment increase
Years 3 and 4: Credit
=
39%
Years 5 and 6: Credit
=
26%
New Jobs Tax Credit recipients receive an additional State of Maryland tax credit which uses the
same calculation method. However, the State credit is given against one of the following taxes
and requires that recipients file Form 500CR with their State of Maryland Income Tax return:
• Corporate or personal income taxes
• Financial institutions franchise tax
• Insurance premiums tax
Enhanced New Jobs Tax Credit
This 12-year credit benefits large expansion projects and is available when businesses either:
l.
Increase their space. by at least 250,000 square feet, and
either
(A) create 1,250 new
permanent, full-time positions
or
(B) create 500 new permanent, full-time positions in
addition to retaining at least 2,500 existing permanent, full-time positions,
OR
2. Expend at least $150 million to obtain at least 700,000 square feet of new space and
employ at least 1,100 individuals, with at least 500 being in new, permanent, full-time
positions.
To qualify for the Enhanced New Jobs Tax Credit, a business must pay all these employees at
least 150% of the federal minimum wage and it must be engaged in one of the following
industries:
Manufacturing, mining, transportation, communications, agriculture, forestry or fishing
Research, development, testing or biotechnology
Computer programming, data processing, or other computer-related services
Central financial, real estate, or insurance services
Operation ofcentral administrative offices or a company headquarters
Public utility, warehousing, or business services
- 10­
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A business has six years from the notification date to create and fill the required number of new
jobs and acquire and inhabit the new space. When this is accomplished and the business files a
completed application, the business will begin receiving the credit. The Enhanced Tax Credit,
like the regular New Jobs Tax Credit, is given against the local real and personal property tax
and is based on the amount of additional taxes due as a result of the expansion. Unlike the
regular New Jobs Tax Credit, however, the Enhanced Tax Credit is calculated at the same rate
for all 12 years. The rate is 58.5% ofthe additional local tax liability.
The State also will give a credit based on this additional local tax liability. The State credit is
31.5% for each of the 12 years and is given against the same State taxes as the regular New Jobs
Tax Credit (corporate or personal income taxes, the fmancia1 institutions franchise tax, or the
insurance premiums tax). Both the regular and enhanced State tax credits allow a business to
"roll" the credit for up to five years. This means that if the State tax credit is higher than the
amount of taxes due in any given year, the business can claim the difference for up to five years.
Both tax credits also contain a "recapture" provision that requires a business to repay the credits
if they fail to maintain the job and space requirements for three years. This provision is
applicable to each individual year, so that if a business maintains the requirements for 14 years, it
will have to repay only the last year of the credit.
Authority
Montgomery County Code, Chapter 52, Article X
Effective Date
July 1, 1998
Contact
Montgomery County Treasury in Rockville,
MD
at (240) 777-8931
Fiscal Impact:
Levy Year
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
Amount
($)
1,284,939
1,379,483
1,391,761
1,344,424
1,342,339
1,449,507
1,444,926
2,479,151
2,501,136
2,743,060
2,911,520
2,465,987
863,011
109,749
35,220
30,137
Recipients
2
2
2
2
2
5
8
10
14
14
14
12
6
2
I
I
- 11 ­
@
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TAX CREDIT FOR BUSINESSES THAT CREATE NEW••., 2012 Maryland Laws...
2.012. Maryland
Laws Ch.
12.8 (H.B. 592.)
MARYLAND
2012
SESSION LAWS
REGULAR SESSION
Additions are indicated by Text; deletions by
!ffirt .
Vetoes are indicated by Text ;
stricken material by Text
Chapter
128
H.B.
No.
592
TAX CREDIT FOR BUSINESSES THAT CREATE NEW JOBS--ENHANCED CREDIT--EXTENSION
AN ACT concerning
Tax Credit for Businesses That Create New Jobs--Enhanced Credit--Extension
FOR the purpose of extending the duration of certain property
tax
and State tax credits granted
to certain business entities that construct or expand certain business premises under certain
circumstances; declaring the intent ofthe General Assembly; providing for the application ofthis
Act; and generally relating to property and State
tax
credits granted to certain business entities.
BY repealing and reenacting, with amendments,
Article--Tax--Property
Section
9-230(
d)
Annotated Code ofMaryland
(2007
Replacement Volume and
2011
Supplement)
SECTION
1.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, That the Laws of Maryland read as
follows:
Article--
Tax--Property
«MD TAX PROPERTY
§
9-230
»
9-230.
(d)( 1) For a business entity to qualifY for an enhanced property
tax
credit under this subsection, the business entity, along with
its affiliates, shall:
(i)
1.
obtain at least
250,000
square feet of new or expanded premises by purchasing newly constructed premises,
constructing new premises, causing new premises to be constructed, or leasing newly constructed premises;
2.
continue to employ at least
2,500
individuals in existing permanent full-time positions paying at least
150%
of
the federal minimum wage and located at premises in the State where the business entity, along with its affiliates,
is primarily engaged in one or more of the industries listed in paragraph (2) ofthis subsection; and
3. employ at least
500
individuals in new permanent full-time positions paying at least
150%
ofthe federal minimum
wage and located in the new or expanded premises, and, if applicable, in newly renovated premises adjoining or
otherwise neighboring the new or expanded premises;
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TAX CREDIT FOR BUSINESSES THAT CREATE
NEW•..,
2012 Maryland
Laws ...
(ii)
1.
obtain at least 250,000 square feet of new or expanded premises by purchasing newly constructed premises,
constructing new premises, causing new premises to be constructed, or leasing newly constructed premises; and
2. employ at least 1,250 individuals in new permanent full-time positions paying at least 150% of the federal
minimum wage and located in the new or expanded premises and, if applicable, in newly renovated premises
adjoining or otherwise neighboring the new or expanded premises; or
(iii)
in Montgomery County only:
1. expend at least $150 million to obtain at least 700,000 square feet of new or expanded premises by purchasing
newly constructed premises, constructing new premises, causing new premises to
be
constructed, or leasing newly
constructed premises; and
2. employ a total ofat least 1,100 individuals in full-time positions consisting ofboth full-time positions ofindefmite
duration and contract positions of definite duration lasting at least 12 months with an unlimited renewal option,
and including at least 500 individuals in new permanent full-time positions, with all positions:
A.
receiving an employer provided subsidized health care benefits package;
B. paying at least 150% of the federal minimum wage; and
C.located in the new or expanded premises and, if applicable, in newly renovated premises adjoining or
otherwise neighboring the new or expanded premises.
(2) For a business entity to qualifY for an enhanced property tax credit under this subsection, the business entity, along with
its affiliates, shall be primarily engaged in one or more of the following at the qualifYing premises:
0)
manufacturing or mining;
(ii)
transportation or communications;
(iii) agriculture, forestry, or fishing;
(iv) research, development, or testing;
(v) biotechnology;
(vi) computer programming, data processing, or other computer-related services;
(vii) central services as defined in
§
6-101 of the Economic Development Article;
(viii) the operation of central administrative offices or a company headquarters as defined in
§
6-10
1 ofthe Economic
Development Article;
Ox) a public utility;
(x) warehousing; or
(xi) business services.
(3) To qualifY for the enhanced property tax credit under this subsection, a business entity shall:
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TAX CREDIT FOR BUSINESSES THAT CREATE
NEW•.•,
2012
Maryland Laws ••.
(i) within a 6-year period beginning on the notification date, employ individuals in the number of new permanent full·
time positions required under paragraph (l) of this subsection;
(ii) during the 6-year hiring period, obtain and occupy the new or expanded premises and, if applicable, the newly
renovated premises adjoining or otherwise neighboring the new or expanded premises; and
(iii) during the 6-year hiring period, comply with all other requirements for the credits described in this subsection and
in any applicable local law.
(4 )(i) If a business entity meets the requirements ofthis subsection and subsection (b) of this section and of applicable local
law adopted under subsection (b)(l) of this section, for each ofthe first
H
24 taxable years after
it
qualifies for the credit, a
property tax credit may be claimed against the county or municipal corporation property taxes that would otherwise be due.
(ii) The county or municipal corporation shall compute the amount of the property tax credit granted to equal 58.5% of
the amount of property tax imposed on the increase in assessment of:
1. the new or expanded premises;
2. newly renovated real property improvements adjoining or otherwise neighboring the new or expanded
premises, if the renovations are substantial, as defined in legislation enacted by the county or municipal
corporation to grant the credits under this subsection; and
3. the personal property located on the premises described in items 1 and 2 of this subparagraph.
(iii) The increase in assessment shall be measured from the notification date to the applicable annual assessment date
after the county or municipal corporation has certified that the business entity has qualified for the credit.
(5) On receipt of notification under subsection (b)(7) of this section that a business entity has been certified for an enhanced
property tax credit under this subsection, the Department shall compute and certifY to the Comptroller or, in the case of
the insurance premiums tax, the Maryland Insurance Commissioner the amount of the State tax credit authorized under this
subsection that may be claimed by the business entity or any of its affiliates against the individual or corporate income tax,
insurance premiums tax, or financial institution franchise tax that would otherwise be due to
equal
31.5% of the amount of
property tax imposed on the increase in assessment of the real and personal property described in paragraph (4)(ii) of this
subsection for each of the first
H
24 taxable years for which the credit is allowed.
(6) If a business entity or any of its affiliates claim the enhanced tax credits under this subsection for a certain premises, they
may not claim the tax credits under subsection (c) ofthis section.
«Note: MD TAX PROPERTY § 9-230
»
SECTION 2. AND BE IT FURTHER ENACTED, That it is the intent ofthe General Assembly that the extension ofthe duration
of the tax credits provided under this Act shall apply to any business entity or affiliate of a business entity that qualified for
the tax credits before the effective date ofthis Act.
«Note: MD TAX PROPERTY § 9-230
»
SECTION 3. AND BE IT FURTHER ENACTED, That this Act shall take effect July
1, 2012,
and shall be applicable
to all taxable years beginning after December
31, 2012.
Approved April 10, 2012.
Effective date: July
1, 2012.
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ROCKVILLE, MARYlAND
MEMORANDUM
Apri125,2016
TO:
Nancy Floreen, President, County Council
Jennifer A Hughes,
Director,
Office ofManage
Joseph P.
Beach.
Director,
DepartmentofFinwlc~~
TaxCredit-Arnount of Tax Credit- Term of Credit
FROM:
SUBJECT:
Bud~
FElS
for
Bill 14-16E, Taxation - NewJobs Tax
Credit and
Enhanced New
Jobs
Please find attached the fiscal and economic impact statements for
the
above~
referenced legislation.
JAH:fz
cc: Bonnie Kirkland, Assistant
ChiefAdministrative
Officer
Lisa Austin" Offices ofthe County Executive
Joy Nurmi, Special Assistant to the County
Executive
Patrick Lacefield. Director, Public Information Office
Josepb F. Beach. Director, Department of Finance
David Platt, Department
of
Finance
Jane Mukira, Office ofManagement and Budget
Alex Espinosa. Offic·e ofManagement and Budget
Naeem Mia,. Office
of
Management
and
Budget
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Fiscal Impact Statement
County Executive Bill 14-16E,
Taxation-New Jobs
Tax.
Credit
and Enbanced New Jobs
Tax Credit-Amount of Tax Credit- Term Credit
LLegislative
Summary
This bill extends the term
of
the Enhanced New Jobs Tax: Credit (ENJTC)
to
24
years
from the current
12
years.
2.
An
estimate ofchanges
in
County revenues and expenditures regardless of whether the
revenues or expenditures are assumed in the recommended or approved budget. Includes
source of
infonnatio~
assumptions, and methodologies used.
Since the adoption ofthe ENJTC only onc company has received the credit and the
estimate of the annual effect of the credit is reduced revenues of
$
L7 million. This
estimate is predicated on the extension ofthat one credit. This credit will
be
in
effect,
assuming no other companies receive the credit, through FY2027.
3. Revenue and expenditure estimates covering at least the
next
6 fiscal
years.
Increased tax credit (or reduced tax revenues) of approximately $1.7 million.for the next
6 fiscal years.
4. An actuarial analysis through the entire amortization period for each bill that would affect
retiree
pension or
group
insurance
costs,
NA
5. An estimate ofexpenditures related to
County's
information technology (IT)
system.s~
including Enterprise Resource Planning (ERP) systems,
NA
6. Later actions
that
may affect future revenue and expenditures
if
the bill authorizes future
spending.
NA
7.
An
estimate of the staff time needed to implement the bill.
None
8. An explanation of how the addition of new staff responsibilities would affect other duties.
None (see
#7)
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9. An estimate ofcosts
when an
additional
appropriation
is needed
NA
10, A description
ofany variable
that could
affect
revenue and
cost estimates.
Ifother companies become eligible, the credit would
cost
more.
11. Ranges ofrevenue or expenditures
that
are uncertain or difficult
to
project.
None
12.
If
a bilI is likely
to
have no fiscal impact, why that is the case.
NA
13.
Other fiscal impacts or comments.
None
14. The following contributed to and concurred
with
this analysis:
Mike Coveyou,Firutnce Department
JancMukira, Office of Management and
Budget
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Economic Impact Statement
8ill 14-16, Taxation - New Jobs Tax Credit and Enhanced New Jobs Tax
Credit
~
Amendment
Background:
This legislation would extend the term of the Enhance-d New Jobs Tax Credit (ENITC) to
twenty-four (24) taxable
years
from the
current
twelve (12)
taxable
years.
1.
The sources of information, assumptions, and methodologies
used.
Based on data provided by the Treasury
Divisio~
Department of Finance, there is one
company currently re<.."Civing the ENITC. That company 11ad 796 employees at the
time
they intended
to
claim the ENJTC.
Vvnen
the company qualified for theENJTC.
employment reached
1,637
-an increase of over one hundred percent. As of
July
2015, there were 1,668 employees. Based on the sample of one company, extending
the credit may increase employment
by
800 emplQyees which is the difference
between the number of employees before qualifying
for
the ENJTC and after
qualification.
Data provided
by
Treasury Division show that the company received
$1.138
million
in property
tax
credits in FY2004 and $1.665 million in FY2015. That is. the
company received a credit of
$695
per employee in FY2004
($1.138 million/l,637)
and a credit of
$998
per employee
in
FY20l5
($L665f1~668).
Once the company
qualified for the credit, employment increased by over one hundred percent
2. A description of
any
,,'ariahle tbat could affect the economic impact estimates.
The variables that could affect the economic impact estimates are the number of
companiesiliat qualify for the ENJTC and the increase in employment attributed to
the ENJTC. Since the inception ofthe ENJTC, only one company has received the
ENJTC and employment increased by one hundred percent. Therefore, extending the
credit could have a positive economic impact, but with a limited sample currently
receiving the credit, the total impact on the County's economy is uncertain with any
specificity.
3. Tbe Bill's positive or negative
effcct~
if
any on employment, spending, savings
t
investment,
incomes,
and property values
in
the County.
Given the very limited sample ofcompanies that currently received the ENJTC, it is
uncertain whether the extension of the credit
-will
have a significant impact on
employment, spending. savings, investment. and pr01X-"Tty values in the County.
However~
the credit does provide an
employment
and retention incentive to a
company as well as other prospective employers. But 'without specific data on the
number ofcompanies that would receive the
credit~
such an impact is uncertain \\'ith
any specificity.
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.Eeonomic Impact Statement
Bill 14-16, Taxation - NtlV Jobs Tax Credit and Enhanced New Jobs Tax Credit­
Amendment
4.
If
a
Bill
is
likely
to have
no eeonomic impact,
wby
is that the case?
See paragraph #3.
5. The following contributed to or concurred with
this analysis; David Platt
and.
Rob
Hagedoorn, Department ofFinance.
J>age2of2
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TESTIMONY ON BEHALF OF COUNTY EXECUTIVE ISIAH LEGGETT ON
EXPEDITED BILL 14-16, NEW JOBS TAX CREDIT AND ENHANCED NEW JOBS
TAX CREDIT - AMOUNT OFTAX CREDIT - TERM OF CREDIT
May 10,2016
Good afternoon, my name is Mike Coveyou, Chief of the Division of
Treasury in the County Department of Finance, and I am here on behalf of County
Executive Isiah Leggett to testify in support of Expedited Bill 14-16, New Jobs
Tax Credit and Enhanced New Jobs Tax Credit.
The County Executive transmitted this legislation to align the duration ofthe
local enhanced new jobs tax credit with state law which is 24 years instead of 12
years. The Executive believes that extending this credit will provide another tool
for the County in retaining and attracting businesses as well as incentivizing
existing businesses to expand within the County.
I urge the Council to support this expedited legislation. Thank you for
permitting me the time to address the Council on this important matter.