The Buy Maryland Cybersecurity Tax Credit provides an incentive for Qualified Maryland Companies to purchase cybersecurity technologies and services from a Qualified Maryland Cybersecurity Seller. Qualified Maryland Companies may claim a tax credit for 50% of the net purchase price of cybersecurity technologies and services purchased from a Qualified Maryland Cybersecurity Seller. The tax credit must be claimed for the tax year in which a purchase is made.
The tax credit is awarded on a first come first served basis, and is subject to funding available to the Department of Commerce. Twenty-five percent of the annual funding amount is earmarked for cybersecurity service purchases, and the remaining 75% is available for cybersecurity technology purchases.
The tax credit was created in 2018. During its first year, cybersecurity technology and service purchases from a Qualified Maryland Cybersecurity Seller made from May 15, 2018 to December 31, 2018 are eligible for the tax credit. Beginning in 2019, a purchase from a Qualified Maryland Cybersecurity Seller from January 1, 2019 to December 31, 2019 may be eligible for the tax credit. The Department of Commerce has $4.0 million available for the tax credit for tax year 2019. This means $3.0 million is available for the purchase of cybersecurity technologies and $1.0 million is available for the purchase of cybersecurity services.
The Buy Maryland Cybersecurity Tax Credit is designed to promote the cybersecurity industry in Maryland by helping small businesses purchase cybersecurity technologies and services from Maryland cybersecurity companies to protect business information.
The following resources will assist a business with identifying its cybersecurity needs.
Benefit for Companies Purchasing Cybersecurity Technologies and Services
A Qualified Maryland Company that purchases cybersecurity technologies or services from a Qualified Maryland Cybersecurity Seller may claim up to $50,000 in tax credits in a single tax year. This means a Qualified Maryland Company may apply for the tax credit for up to $100,000 in cybersecurity purchases from Qualified Maryland Cybersecurity Sellers in a single tax year.
Benefit for Companies Selling Cybersecurity Technologies and Services
A single Qualified Maryland Cybersecurity Seller may have up to $400,000 in cybersecurity sales benefit from the tax credit in a single tax year. Once an aggregate of $200,000 in tax credits are claimed for the purchase of cybersecurity technologies or services from a single Qualified Maryland Cybersecurity Seller in a tax year, additional purchases from that Qualified Maryland Cybersecurity Seller in that tax year are not eligible for the tax credit.
Qualified Maryland Cybersecurity Sellers are certified by the Department of Commerce.
Cybersecurity purchases made from any company listed as a Qualified Maryland Cybersecurity Company on Commerce's website may be eligible for the tax credit.
A purchase of Qualified Maryland Cybersecurity Seller technologies or services from a third-party reseller are eligible for the tax credit. However, the purchase price of sales from a third-party reseller must be reduced by 20% before calculating the 50% tax credit. The 20% reduction to the purchase price from a third-party reseller is the Department of Commerce's estimate of the percentage added by third-party resellers.
A reseller is any company selling cybersecurity technologies or services which is not identified as a certified Qualified Maryland Cybersecurity Seller by the Department of Commerce. To be able to claim the tax credit for cybersecurity purchases from a third-party reseller, the cybersecurity technology or service being purchased must have originated from a Qualified Maryland Cybersecurity Seller. This requires that the name of the Qualified Maryland Cybersecurity Seller be identified on an invoice from a third-party seller along with a description of the cybersecurity technology or service that was purchased.
To be eligible for the tax credit a company must have fewer than 50 employees in Maryland and be required to file an income tax return in Maryland. A company is identified as a Qualified Maryland Company when applying for the tax credit by certifying the number of employees and that it is required to file a tax return in Maryland.
Eligible cybersecurity technologies are proprietary goods and products designed to protect information systems, electronically stored data or information, and electronic data and information transferred between information systems. This includes goods and products designed to detect and prevent:
- Unauthorized access to information systems, stored data, and information, and the transfer of data and information;
- Data exfiltration or extrusion; or
- Manipulation or impairment to the integrity, confidentiality, or availability of data and information stored or transferred by an information system.
To be considered a qualified cybersecurity service, the Cybersecurity Seller must perform an activity identified by the National Institute of Standards and Technology's (NIST) most recent Cybersecurity Framework: Framework Core.
For information about Buy Maryland Cybersecurity Tax Credit contact:
Abigail McKnight, Tax Specialist
Office of Finance Programs
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