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Maryland Innovation Investment Tax Credit (IITC)

The fiscal year 2023 program will begin accepting applications as follows:  Commerce will begin accepting Form B QMTC applications  on 8/23/2022 and Form A Investor applications on 9/7/2022. Additional information is available under the “Apply” section.

IITC fosters the growth of Maryland's technology sectors by incentivizing investment in early-stage companies with the goal of increasing the number of companies developing innovative technologies in Maryland, increasing overall investments in current and emerging technology sectors, and increasing the number of individual investors actively investing in Maryland technology companies.

BENEFIT

IITC provides a refundable income tax credit to a qualified investor for an eligible investment made in a qualified Maryland technology company ("QMTC").  The amount of the income tax credit is equal to 33% of an eligible investment in a QMTC up to $250,000 in tax credits.  The amount of the income tax credit increases to 50% of an eligible investment in a QMTC up to $500,000 in tax credits if the QMTC is located in Allegany, Dorchester, Garrett or Somerset County. Enhanced tax credits are also available for eligible investments made in certain QMTCs located in Opportunity Zones.

The income tax credit is subject to certain limitations. A single QMTC may not receive the benefits of total credits exceeding 15% of the total fiscal year appropriation. A single technology sector cannot receive the benefit of total credits exceeding 25% of the fiscal year appropriation.  Total credits issued during the fiscal year cannot exceed the appropriated amount and are, therefore, issued on a first-come, first served basis.

The credit is refundable to the extent that the amount of the credit exceeds the qualified investor's Maryland income tax liability.

ELIGIBILITY

A qualified investor is an individual or entity that invests at least $25,000 in a QMTC and is required to file an income tax return in any jurisdiction.

A QMTC must be engaged in an eligible technology sector and meet following minimum requirements as certified by the Department of Commerce (Commerce):

  • Organized for profit, and engaged in the research, development, or commercialization of innovative and proprietary technology in an eligible technology sector;
  • Has its headquarters and base of operations in Maryland;
  • Owns or has properly licensed any proprietary technology;
  • Has an aggregate capitalization of at least $100,000;
  • Has fewer than 50 full-time employees;
  • Has not participated in the Innovation Investment Incentive Tax Credit program for more than three prior fiscal years;
  • Does not have its securities publicly traded securities on any exchange; and
  • Is in good standing with the Maryland Department of Assessments and Taxation, is current on the payment of all tax obligations, and is not in default under any contract with the State of Maryland or any of its units or subdivisions.

The eligible technology sectors are advanced manufacturing, aerospace, agriculture, artificial intelligence, blue technology, cybersecurity, education, energy and sustainability, financial, life sciences, quantum, and sensor and robotics.

A company that has been certified as a qualified Maryland biotechnology company through the Biotechnology Investment Incentive Tax Credit Program is ineligible to qualify as a QMTC.

APPLY

All applications must be submitted with all attachments through Commerce's online system. Please read the instructions below before visiting the online portal.

Apply Online

All applications must be submitted with all attachments through Commerce's online system. Please read the instructions below before visiting the online portal.

  • Beginning on August 23, 2022, Commerce will begin accepting the Form B QMTC application through the online system. The Form B QMTC application must be completed and submitted before Commerce will accept investor applications.
  • Beginning on September 7, 2022, Commerce will begin accepting the Form A investor applications through the online system. Investor applications must be submitted no later than September 28, 2022  at 11:59 p.m. in order to be eligible for the Online Electronic Queue Investor Registration. Investor applications submitted after September 28 at 11:59 p.m. will be issued a username and reference number after September 29.
        • Investors must separately register and apply through the online system. Investors may not apply through the registration of the technology/company.
        • Investors will receive a five-letter username and six-digit reference number in an email confirming timely submission of the investor application. The username and reference number are required for the second step of the investor application process, which is to determine order in the first come, first serve allocation of funds using the Online Electronic Queue Investor Registration system.
  • Beginning on September 29, 2022 at 9:00 a.m. EST, Commerce will open the Online Electronic Queue Investor Registration, which will require investors to use the username and reference number received during the first part of the investor application process.
        • Submission order under the Online Electronic Queue Investor Registration will determine the first come, first serve allocation of funds. No other application may be filed for the purposes of determining submission order.
        • Investors must have Javascript and Adobe Flash plugins to view the official clock and Recaptcha verification.
        • Multiple submissions by an applicant using the same username and reference number will be considered filed at the date and time of the LAST submission. This rule is to ensure that the application procedure is as fair and equitable as possible. Applications are reviewed and approved based on the order received.
        • An eligible investor has 30 days from the date when Commerce issues the initial tax credit certificate to make the investment in a QMTC or prospective QMTC. Within 10 days of making the investment, the eligible investor shall provide written notice with the required supporting proof of investment documentation to Commerce. If the qualified investor fails to provide notice of investment to Commerce within 40 days after the issuance of the initial tax credit certificate, Commerce shall rescind the initial tax credit certificate. Commerce will issue a final tax credit based on the actual investment, not to exceed the approved amount certificate.
        • Any decision made by Commerce during the application process is considered final.
        • To qualify for the credit, the applications must be submitted through Commerce's online system. Paper forms are for informational use only.
    • Commerce will review the Form A investor applications based on the submission order determined by the Online Electronic Queue Investor Registration. If the Form A investor application is approved, Commerce will issue an “Initial Certificate of Approval” to authorize the investment by the qualified investor in the biotechnology company.  The qualified investor must provide proof of investment to Commerce, and if the investment is approved, Commerce will issue a “Final Certificate of Approval” awarding the tax credit to the qualified investor. 

Investor Application Forms:


(For informational purposes only)

Individual Investors: Download Form A1
Corporate Investors: Download Form A2
Pass-Through Entities: Download Form A3

QMTC Application Form:


(For Informational purposes only)

Form B 

RESOURCES


CONTACT

For more information about IITC contact:

Jason Sobel, Tax Specialist
Office of Finance Programs
jason.sobel1@maryland.gov

FREQUENTLY ASKED QUESTIONS



  • What is the Maryland Innovation Investment Tax Credit?
    • ​The program provides a refundable income tax credit to qualified investors in a Qualified Maryland Technology Company (QMTC). The investor in the QMTC receives a credit of 33% of the investment up to $250,000.  The credit increases to 50% for investments in QMTCs in Allegany, Dorchester, Garrett and Somerset Counties up to $500,000.

  • What are the eligible technology sectors?
      • Advanced Manufacturing
      • Aerospace
      • Agriculture
      • Artificial Intelligence
      • Blue Technology
      • Cybersecurity
      • Education
      • Energy and Sustainability
      • Financial
      • Life Sciences
      • Quantum
      • Sensors & Robotics


  • Could I invest $10,000 in a QMTC A and $15,000 in QMTC B to satisfy the minimum investment of $25,000?
    • ​No, you must invest at least $25,000 in one transaction in a Qualified Maryland Technology Company (QMTC) to claim the tax credit.

  • If I do not have a Maryland income tax liability, what will happen to my refundable credit? Am I able to claim a carry back or carryforward?
    • ​There is no carryback or carry forward. A refundable credit means that a qualified investor is entitled to the credit against Maryland income tax, and to the extent that the credit exceeds the Maryland income tax liability, the investor will receive a refund from the State upon filing a Maryland income tax return.

  • When does an investment have to be made if an investor is approved for the tax credit?
    • Within thirty (30) calendar days of the date of the Initial Certificate of Approval.

  • What type of information does Commerce require to verify an investment was made?
    • ​Commerce requires the date of the investment, the amount of the investment, proof of receipt by the QMTC, a complete description of the nature of ownership interest in the equity of the QMTC, and any other reasonable supporting documentation Commerce may require.

  • What type of investors are disqualified from the program?
    • A qualified investor does not include: (1) a qualified pension plan, an individual retirement account, or other qualified retirement plans under the Employee Retirement Income Security Act of 1974, as amended, or fiduciaries or custodians under such plans, or similar tax-favored plans or entities under the laws of other countries;  (2) a founder or current employee of the qualified Maryland technology company ("QMTC") if the company has been in active business for more than 5 years.
       
      The term "employee" is determined by looking at the measure of control and independence in the employer/worker relationship. "Employee" includes any person performing paid or unpaid work where the Department can reasonably determine and establish the employer/worker relationship based on those elements.   The term "current employee" includes any person receiving pay for services performed for the QMTC or a related company. A related company includes an entity under the same or common control. "Pay for services" includes wages, deferred compensation, stock, current or future stock options, and any other type of benefits provided by the company for services. Spouses and minor children of current and former employees will be ineligible for certification as a qualified investor, if such employees either currently work for the company, or previously worked for the company within the one-year period prior to the date that the spouse or minor child seeks to apply for an initial certificate of eligibility for the tax credit.
       
      "Founder" includes persons who were actively engaged in, and had a decisive role in the establishment of the company as an active business. Founders include, but are not limited to those individuals involved with the company at the time of the legal organization, appointment or election of initial officers or managers, initial capitalization, and establishment of business offices. Spouses and minor children of founders are ineligible for certification as qualified investors.
       
      In the case of a proposed investor that is an entity (LLC, corporation, partnership, trust, etc.), which is itself owned, directly or indirectly, by an individual (or entity) who is disqualified for any of the above reasons, the entity investor is itself disqualified unless the ownership interest in the entity investor attributable to the disqualified individual (or entity) is less than 5%. Where there are 2 or more disqualified individuals (or entities) that own a portion of the proposed entity investor, the entity investor is itself disqualified unless the ownership interest in the entity investor attributable to the disqualified individuals (or entities) is cumulatively less than 5%.

  • What types of investments qualify for the tax credit?
    • The contribution of money in cash or cash equivalents expressed in United State dollars, at a risk of loss, to a QMTC in exchange for stock, a partnership or membership interest, or other ownership interest. 

      Investment includes a convertible debt that is created by the investor within one year prior to the date that the investor applies to the program and such convertible debt is converted to an equity interest within 30 days after the issuance of an initial certificate of eligibility for tax credit. 

      Investment does not include any transaction in which a purchase of an interest in a qualified Maryland technology company is to be financed, in whole or part, by the qualified Maryland technology company (or any of its subsidiaries). This would include a transaction in which a potential investor has agreed to pay any portion of the tax credit to the qualified Maryland technology company.


  • What constitutes a headquarters and base of operations?
    • ​"Headquarters and base of operations" means the facility or facilities are located in the State where the qualified Maryland technology company's financial, personnel, planning, management, administrative, technology research, technology development, and technology production activities are primarily handled. The headquarters and base of operations cannot be a personal residence.

  • What is the active business of a technology company?
    • "Active business" means that the Department can reasonably determine and establish the nature of the Company's commercial technology research, development or production operations. The mere legal organization, appointment or election of officers or managers, initial capitalization, and establishment of business offices of a company, alone or in combination, are not sufficient to establish that the company is engaged in active business for the purposes of this tax credit.

      The period of "active business" by a predecessor in interest, parent company, subsidiary or affiliate may be attributed to the Company based on the totality of the circumstances and key factors include, but are not limited to, commonality in ownership, management, personnel, headquarters, and intellectual property.


  • May subsidiaries participate in the IITC Program?
    • ​A subsidiary is eligible for participation in the IITC program to the extent the Department can reasonably determine and establish the qualifications of the subsidiary as being independent of any existing relationship with a parent company or affiliate.  The constructive ownership rules under IRC 267 apply.

  • Who are the essential employees in order for a technology company to be certified as a QMTC?
    • ​The company must have at least one full-time, non-executive employee engaged in qualified technology research and development in Maryland.

  • How do I claim the Innovation Investment Tax Credit?
    • ​The investor must claim the tax credit on a Maryland Tax Return and attach a copy of the Final Certificate of Approval to the return, along with any required forms.  For additional questions on how to claim the tax credit, the investor should contact the Comptroller of Maryland at 1-800-MD TAXES or taxhelp@marylandtaxes.gov.

  • Will I have to repay the tax credit?
    • ​This tax credit is subject to recapture if, within 2 years from the close of the taxable year for which the credit is claimed by the investor, (1) the qualified investor sells, transfers, or otherwise disposes of the ownership interest in the QMTC that gave rise to the credit; or (2) the QMTC that gave rise to the credit ceases operating as an active business with it headquarters and base of operations in the State or pays out as dividends or otherwise distributes the equity investment. The former includes a situation where all of the QMBC’s shares are purchased during the 2 year recapture period.  The investor must notify Commerce and the Comptroller of Maryland in the event of a recapture. 


      The applicable recapture amount is calculated by multiplying the total amount of the credit claimed (or in the case of a sale, transfer or other disposition of the ownership interest, the portion of the credit attributable to the ownership interest disposed of), by one of the following percentages: (i) 100%, if the event requiring recapture of the credit occurs during the tax year for which the tax credit is claimed; (ii) 67%, if the event requiring recapture of the credit occurs during the first year after the close of the tax year for which the tax credit is claimed; or, (iii) 33%, if the event requiring recapture of the credit occurs more than 1 year but not more than 2 years after the close of the tax year for which the tax credit is claimed.