GO Item 2
May 12,2016
Worksession
MEMORANDUM
May 10,2016
TO:
FROM:
Government Operations and
Fisc~o/l~
Committee
Josh Hamlin, Legislative
Attorn~
SUBJECT:
Worksession:
Expedited Bill 14-16, Taxation - New Jobs Tax Credit and
Enhanced New Jobs Tax Credit - Amount of Tax Credit - Term of Credit
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.
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 ofthese positions must receive an employer-provided subsidized
health care benefit package, be paid at least 150% of the federal minimum wage,
l
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
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).
1150% 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.
 PDF to HTML - Convert PDF files to HTML files
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 of the County Executive in support of the
Bill (©21).
Issues for Committee Discussion
1.
law?
Is the enactment of the Bill essentially a pro forma action, due to provisions in State
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 tenn 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 tenn 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 tenn 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 tenn 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 of a 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 of the 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 of the 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
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 until 12 years after such companies become eligible for the credit.
2
 PDF to HTML - Convert PDF files to HTML files
3.
What happens if a qualified recipient ofthe 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 ofthe 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
Bi1l14-16
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.
Staff recommendation:
Enact Expedited Bill
14-16.
2
httPs:llwww.
wash in gtonposLcom/business/capi ta Ibusinessld iscoverv-announces-buy-outs-possib le­
1~Y.9..ffgf_0~§,!.!,t~.f..Q.~.L~~J..Q.~~~<;.:12b£.:..!l~_6-~2Q7
-1f!J:.
733c56fl2
3
MD
&.tQ.f.Y:.n.t!!U
Tax-Property Code
§
9-230(d)(I) provides that "[flor a business entity to qualify for an enhanced property tax
credit under this subsection, the business entity, along with its affiliates, shall:
...
...
...
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 indefinite duration and contract positions of defmite 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% ofthe 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.
3
(iii)
 PDF to HTML - Convert PDF files to HTML files
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\GO Memo.Docx
Circle
#
1
4
5
6
11
13
16
21
4
 PDF to HTML - Convert PDF files to HTML files
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. _ __
I
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead Sponsor: Council President at the request ofthe County Executive
AN EXPEDITED ACT
to:
(1)
(2)
change the term ofthe Enhanced New Jobs Tax Credit; and
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 brackets))
* * *
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deleted from existing law or the bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
 PDF to HTML - Convert PDF files to HTML files
ExPEDITED BILL
No.
14-16
1
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
2
3
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:\LAWlBILLS\l614 Taxation-New Jobs Tax Credit\Billl.Doc
 PDF to HTML - Convert PDF files to HTML files
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 fITst [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
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:
31
32
33
34
Nancy Floreen, President, County Council
Date
35
Approved:
36
Isiah Leggett, County Executive
Date
37
This
is
a correct copy o/Council action.
38
Linda
1.
Lauer, Clerk ofthe Council
Date
F;\LAW\BILLS\1614 Taxation-New Jobs Tax Credit\Billl.Doc
 PDF to HTML - Convert PDF files to HTML files
LEGISLATIVE REQUEST REPORT
Expedited Bill 14-16
Taxation
-
New Jobs Tax Credit and Enhanced New Jobs Tax Credit
Credit
Amount ofTax Credit
-
Term of
DESCRIPTION:
This Bill would amend County law by changing the tenn 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 tenn 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.
Unknown
Michael J. Coveyou, Chief, Division of Treasury, Department of
Finance
None
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITIDN
MUNICIPALITIES:
PENALTIES:
None
F:\LAW\BILLS\1614 Taxation-New Jobs Tax Credit\LRR.Docx
 PDF to HTML - Convert PDF files to HTML files
"i
".--'
",',.'.', -',
"I
", J
i' '.'"
OFFICES OF THE COUNTY EXECUTIVE
Iaiah Leggett
County Executive
Rockville.
Maryland
20850
MEMORANDUM
April S, 2016
Nancy
Floree~
Council President
Isiah
Leggett,
County
Executive
')
~
TO:
FROM:
SUBJECT:
~
~
New Jobs
Tax
Credit Legislative Amendment
I am recommending an amendment to Chapter 52-72 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 ofFinance
Jennifer
A.
Hughes, Director, Office ofManagement and Budget
Patrick Lacefield, Director, Public Information Office
Sally Sternbach, Acting Director, Department of Economic Development
Joy Nurmi, 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
 PDF to HTML - Convert PDF files to HTML files
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. Definitions.
In
this Article, the following words have the meanings indicated:
(a)
Mfiliate, 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.
(b)
Finance Director means the Director of the Department of Finance or the
Director's designee.
(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
 PDF to HTML - Convert PDF files to HTML files
MONTGOMERY COUNTY CODE
or afterJuly 1, 1998:
(l)
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.
(b)
To qualify and be certified for an enhanced new jobs
tax
credit under this Article,
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.
To qualify for a credit against property
tax
imposed on personal property, a
(d)
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)
 PDF to HTML - Convert PDF files to HTML files
MONTGOMERY COUNTY CODE
1999 L.M.C., ch. 16,
§
1.)
Sec. 52-72. Amount of tax credit; pass4hrough 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:
(l)
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;
26% during the fifth and sixth taxable years in which a credit is allowed.
(2)
and
(3)
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 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
 PDF to HTML - Convert PDF files to HTML files
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 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.
(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)
 PDF to HTML - Convert PDF files to HTML files
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
 PDF to HTML - Convert PDF files to HTML files
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:
1.
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 fmancial, real estate, or insurance services
Operation of central administrative offices or a company headquarters
Public utility, warehousing, or business services
- 10­
 PDF to HTML - Convert PDF files to HTML files
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% of the 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 fmancial 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
1
1
-1 ­
@
 PDF to HTML - Convert PDF files to HTML files
TAX CREDIT FOR BUSINESSES THAT CREATE NEW... , 2012 Maryland Laws •••
2012
Maryland
Laws
Ch.
128
(H.B.
592)
MARYLAND 2012 SESSION LAWS
REGULAR SESSION
Additions are indicated by Text; deletions by
~.
Vetoes are indicated by
~
;
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 of this
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 of Maryland
(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)(I) 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 ofthe industries listed in paragraph (2) of this 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;
WESTLA'N
@
@
 PDF to HTML - Convert PDF files to HTML files
TAX CREDIT FOR BUSINESSES THAT CREArE
NEW.•.,
2012
Maryland
Laws..•
Oi)
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 ofindefinite
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% ofthe federal minimum wage; and
C. located in the new or expanded premises and, ifapplicable, 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:
(i) 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
§
6-101 ofthe Economic
Development Article;
(ix) 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:
 PDF to HTML - Convert PDF files to HTML files
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
(1)
ofthis 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) ofthis section and of applicable local
law adopted under subsection (b)( 1) ofthis 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 ofthe 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 ofthis 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) ofthis 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 ofthe 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 thatthe 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 of this Act.
«
Note: MD TAX PROPERTY
§
9-230
»
SECTION 3. AND BE IT FURTHER ENACfED, 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.
 PDF to HTML - Convert PDF files to HTML files
ROCKVILLE, MARYlAND
MEMORANDUM
Apri12S, 2016
TO:
FROM:
SUBJECT:
Nancy Floreen, President,
County
Council
Jennifer
A.
Director. Office
t .
Bud .
Joseph F. Beach. DJrector, Department ofFman"f6
~
Hugbes~
OfMa~age~.nn.~
~~
FEIS for Bill 14-16E. Taxation - NewJohs Tax Credit and Enhanced New Jobs
Tax Credit-Amount of Tax Credit- Term ofCred:it
Please find attached the fiscal and economic impact statements for the above­
referenced legislation.
JAH:fz
cc: Bonnie Kirkland,
AS$istant
ChiefAdministrative Officer
Lisa Austin. Offices of the
County
Executive
Joy
Nunni.
Special Assistant to the County Executive
Patrick Lacefield,
Director, Public
Information
Office
Joseph F. Beach, Director. Department of Finance
David Platt. Department
of Finance
Jane
Mukita,
Office
ofManagement
and
Budget
Alex Espinosa. Office ofManagement and Budget
Naeem Mia,.
Office of Management and Budget
 PDF to HTML - Convert PDF files to HTML files
Fiseal Impact Statement
County Executive Bill 14-16E, Taxation - New Jobs Tax
Credit and
Enhanced NelV
Jobs
Tax Credit - Amount of Tax Credit - Term Credit
1. Legislative Summary
This bill extends the tenn ofthe Enhanced New Jobs Tax Credit (h'NJTC)
to
24 years
from the current
12
years.
2. An estimate
of
changes
in
County revenues
and
expenditures regardless of
whether
the
revenues or expenditures are assumed in the
recommended
or
approved
budget. Includes
source of infonnation, assumptions,
and
methodologies used.
Since the adoption ofthe ENJTC only one company
has received
the credit
and
the
estimate ofthe annual effect of the credit is reduced revenues of $1.7 million. This
estimate is predicated on the extension of that one
credit. This
credit
will
be
in effect,
assuming
no
other companies
receive
the credi4
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
pemion or group
insurance
costs.
NA
5. An
estimate of
expenditures related to
County's
information
technology (IT) systems,
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 hill.
None
8.
An
explanation of
how
the addition ofnew staff responsibilities would affect other
duties.
None (see #7)
 PDF to HTML - Convert PDF files to HTML files
9.
An
estimate ofcosts when an additional appropriation is needed.
NA
lO. A
description
ofany
variable that could affect revenue and cost
estimates.
If oth.er companies become eligible, the credit
would
cost
mare.
11.
Ranges ofrevenue or
expenditures that are
uncertain
or difficult to project.
None
12.
If
a bill is likely to have no. fiscal impact. why that is the case.
NA
13. Other fiscal impacts or comments.
None
14.
Th¢
following contributed to
and
concurred
with
this
analysis:
Mike Coveyou,
Finance
Department
J'aneMukira, Office ofManagementand Budget
 PDF to HTML - Convert PDF files to HTML files
.FMlDOmic Impact Statement
Bill 14-16, Taxation - New Jobs Tax Credit and Enhanced New Jobs
Tax
Credit ..
Amendment
Background:
This legislation would extend the term of the Enhancc-d New Jobs Tax Credit (ENJTC) 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 Division. Department of Finance, there is one
company currently receiving the ENJTC.
nlat
company had 796 employees at the
time they intended to claim the ENJTC. When the company qualified for the.ENJTC,
employment reached 1,637 - an increase ofover 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 employees which
is
the difference
bet\Veen the number of employees before qualifying for the ENDT 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 01'$695 per employee in FY2004 ($1.138 millionJl,637)
and a credit of $998 per employee
in
FY2015
($1.665/1,668).
Once the company
qualified for the credit, employment increased
by
over one hundred percent
2. A
description of any variable that could atTeet the economic impact estimates.
The variables that could affect the economic impact estimates are the number of
companies
that
qualify for the
ENJTC
and the increase in employment attributed
to
the
ENJTC.
Since
the
inception
of the ENJTC.
only one company has received
the
ENJTC and employment increased by one htmdred percent Therefore, extending the
credit could have a positive economic impact, but v.'ith a limited sample currently
receiving the credit, the total impact on the County's economy is uncertain with any
specificity.
3. The BUl's
POSitil'C
or negative effect,
if
any on employment, spending,. savings.
investment, incomes, and property values in tbe County.
Given the very limited sample of companies that currently received the ENJTC., it is
uncertain whether the extension ofthe credit will have a significant impact on
employment, spending, savings, investment. and property 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 of companies that would receive the
credit~
such an impact is uncertain \\ith
any specificity.
Page]
of2
®
 PDF to HTML - Convert PDF files to HTML files
EC(Jnomic Impact Statemeat
Bill 14-16, Ta:sation - New Jobs
Tax
Credit and
Enhanced New
Jobs
Tax
Credit­
Amendment
4.
If
a Bill is likely
te)
have
no ecmtomic
impact,
why
is that the case?
See paragraph #3.
5. The following contributed to or
eonclUTed
with this analysis: David Platt and Rob
Hagedoom, Department of Finance.
_~1-lff/"/~
Date
Page2of2
 PDF to HTML - Convert PDF files to HTML files
TESTIM:ONY ON BEHALF OF COUNTY EXECUTIVE IS1AH 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 ofExpedited 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.