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Job Creation Tax Credit (JCTC)

Changes were made to the Job Creation Tax Credit (JCTC) that impact qualified positions that were filled on or after Oct. 1, 2021.

BENEFIT

JCTC provides an income tax credit to eligible businesses that locate or expand in the state and create a minimum number of net new full-time positions. The credit is equal to $3,000 per new job. The credit increases to $5,000 per new job if the business locates or expands in a revitalization area (state enterprise zone, federal empowerment zone, DHCD Sustainable Community, or Tier 1 County). The credit increases if the new full-time position is filled by a qualified veteran employee. The enhanced credit is equal to $4,000 per job that is filled by a qualified veteran employee or $6,000 per job that is filled by a qualified veteran employee in a revitalization area.

JCTC also provides an income tax credit to small businesses that hire at least one qualified veteran employee to fill a net new full-time position. The credit is equal to $2,500 for each qualified veteran employee who has filled the position for at least one year. A small business may not claim the credit for more than five qualified veteran employees in a credit year, or for a qualified veteran employee who is hired to replace a laid-off employee or an employee who is on strike, or for a Qualified Veteran Employee who has filled the position for less than one year. This credit is available starting in tax year 2021. For prior tax years, a small business may be eligible for the Hire Our Veteran Tax Credit.

Note 1: Tier 1 Counties include: Allegany, Baltimore City, Caroline, Dorchester, Garrett, Kent, Somerset, Washington, Wicomico and Worcester Counties.

ELIGIBILITY

To qualify for JCTC:

  • Declaration of Intent - A business may not claim any employees hired prior to the business notifying the Department of Commerce ("Commerce") of its intent to seek certification for the JCTC.

  • Certification - A business must be certified as a qualified business entity eligible for the tax credit. To be certified, a business must submit an application to Commerce. Commerce will calculate the credit amount that the business entity is entitled to claim.

  • Job Creation Minimums to Qualify:
    • 60 jobs anywhere in the state
    • 25 jobs in a JCTC Priority Funding Area
    • 10 jobs in counties with (1) annual average employment less than 75,000 or (2) median household income less than two-thirds of the statewide median household income: Allegany, Baltimore City, Calvert, Caroline, Carroll, Cecil, Charles, Dorchester, Garrett, Kent, Queen Anne's, Saint Mary's, Somerset, Talbot, Washington, Wicomico, and Worcester Counties. This list is updated annually and subject to change.

  • The facility must be primarily engaged in a qualifying activity.
  • The expansion or establishment of a business must be at a single location in the state. A single business may have more than one eligible location if each is certified and meets the requirements of the statute.
  • The business must create the minimum number of "net new" jobs within a 24-month period.
  • The positions must be filled for 12 months before the business applies for final certification.
  • The position must be paid at least 120% or 150% of the state minimum wage. For positions filled before Oct. 1, 2021, the position must pay at least 120% of state minimum wage.

For positions filled on or after Oct. 1, 2021, the position must:

  • Pay at least the prevailing wage rate for an employee classification for which there is a prevailing wage rate under State Finance and Procurement Article 17-201, or 150% of the state minimum wage for any other employee classification;
     
  • Provide career advancement training;

  • Afford the employee the right to collectively bargain for wages and benefits;

  • Provide paid leave;

  • Be considered covered employment for the purposes of the unemployment insurance benefits in accordance with Title 8 of the Labor and Employment Article;

  • Entitle the employee to workers' compensation benefits in accordance with Title 9 of the Labor and Employment Article;

  • Offer employer-provided health insurance benefits with monthly premiums that do not exceed 8.5% of the employee's net monthly earnings; and

  • Offer retirement benefits.

The state minimum wage will be increasing beginning Jan. 1, 2020. Please see the scheduled below:

Effective date State Minimum Wage 120% State Minimum Wage 150% State Minimum Wage
1/1/2020
$11.00$13.20$16.50
1/1/2021$11.75
$14.10$17.63
1/1/2022$12.50$15.00$18.75
1/1/2023$13.25
$15.90$19.88
1/1/2024$14.00$16.80$21.00
1/1/2025$15.00 $18.00$22.50


SMALL BUSINESSES

To qualify for JCTC (small business hiring a qualified veteran employee):

  • Certification - A small business must apply for and receive certification to claim the JCTC.

  • Minimum Job Creation - The small business must hire at least one qualified veteran employee. A small business may not claim the credit for more than five qualified veteran employees in a credit year.

  • A "small business" is an individual, partnership, limited partnership, limited liability partnership, limited liability company, or corporation that employs 50 or fewer total full-time employees.

  • "Qualified veteran employee" means:
    • Is honorably discharged or released under honorable circumstances from active military, naval, or air service; and
    • Qualifies as a "qualified veteran" for purposes of the Federal Work Opportunity Tax Credit.

LIMITATIONS

  • The Job Creation Tax Credit remains in effect until Jan. 1, 2027, subject to extension by the Maryland General Assembly.

  • Credits are certified on a first-come, first-served basis based on when the Maryland Department of Commerce receives the final application and the availability of credits.

  • A business may not earn more than $1 million in a credit year.

  • The program is capped at $4 million in tax credits in a calendar year.

  • Unused credits may be carried forward through the fifth taxable year following the credit year.

  • A business may not be certified for both the One Maryland Tax Credit and Job Creation Tax Credit for the same qualified positions.

  • A small business may not claim the credit for more than five qualified veteran employees in a credit year, or for a qualified veteran employee who is hired to replace a laid-off employee or an employee who is on strike, or for a qualified veteran employee who filled the position for less than one year.

APPLY

  • If you are a small business, you may submit a Final Application when the qualified veteran employee has filled the position for at least one year.

  • If you are not a small business, you must declare your intent to Commerce prior to creating new qualified jobs, and you are encouraged to submit a Preliminary Application and Employment Affidavit to determine preliminary qualification for JCTC. The business must be certified as eligible for the tax credit by submitting a Final Application.

JCTC Application Materials:

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RESOURCES

CONTACT

For more information about JCTC contact:

Abigail McKnight, Tax Specialist
Maryland ​Department of Commerce, Office of Finance Programs
abigail.mcknight@maryland.gov
410-767-7234

FREQUENTLY ASKED QUESTIONS

  • What is the Job Creation Tax Credit?

    • The Job Creation Tax Credit is a state income tax credit to encourage eligible businesses to expand or relocate in Maryland, and to hire qualified veterans.

  • What is the benefit?

    • An eligible business that creates a minimum number of new full-time positions may receive an income tax credit for each newly created job. The credit is $3,000 per qualified position or $5,000 per qualified position if the facility is located in a revitalization area. The credit increases to $4,000 per position that is filled by a qualified veteran employee or $6,000 if the position is filled by a qualified veteran employee and the facility is located in a revitalization area.

      A small business need not create a set number of new jobs. It is eligible for a credit of $2,500 for each position that is filled by a qualified veteran for at least one year.

  • How do I qualify for the Job Creation Tax Credit?

    • An eligible business must declare its intent to seek the credit before hiring qualified employees and meet the minimum job creation requirements. Each position must be full-time and of indefinite duration, be filled for at least 12 months, and meet the wage and other eligibility requirements.

      A small business does not need to declare its intent prior to hiring the qualified veteran employee. The position must be filled for at least 12 months prior to seeking final certification.

  • What is a priority funding area?

    • A priority funding area (PFA) is a designated growth area. A business located in a PFA has a reduced job creation requirement of 25 qualified positions. PFAs include:

      • State enterprise zones
      • Federal empowerment zones
      • DHCD sustainable communities
      • Baltimore City
      • Incorporated municipalities
      • The area between the I-495 beltway and Washington, D.C., or the I-695 beltway and Baltimore City
      • ANY area in a county designated by the county as a priority funding area under § 5-7B-03(c) of the State Finance and Procurement Article

  • What is a Revitalization Area?

    • A "revitalization area" includes the following:

      • State enterprise zones
      • Federal enterprise zones
      • Federal empowerment zones
      • DHCD sustainable communities
      • Tier 1 Counties: Allegany, Baltimore City, Caroline, Dorchester, Garrett, Kent, Somerset, Washington, Wicomico, and Worchester

  • What is a full-time job?

    • A full-time position requires at least 840 hours of an employee's time during at least 24 weeks in a six-month period. This is an average work week of 35 hours per week.

  • What if state minimum wage increases?

    • If the state minimum wage increases, the wage must increase correspondingly in order for the position to remain qualified. This is required as part of the final certification as well as the recapture period once the credit is awarded to the business.

  • Can various income tax credit benefits be combined for a new job?

    • A business that qualifies for the JCTC may also qualify for other income tax credit programs like the Enterpise Zone and the More Jobs for Marylanders tax credit programs. One exception to this is that a business may receive the One Maryland Tax Credit and JCTC for the same qualified positions.

  • What if I do not have enough income tax liability to use all of the credit?

    • JCTC is not refundable. The credit may be carried forward for five years.

  • How do I claim the Job Creation Tax Credit?

    • JCTC is taken against the state income tax. It is not taken against the county income tax "add-on."

      The business must claim the JCTC on the Maryland Tax Form 500CR and attach a copy of the Final Certificate of Eligibility to the form.

  • What types of business activities are eligible for the tax credit?

    • ​The statute limits eligibility to specific industries. These include:

      • manufacturing or mining;
      • transportation or communications;
      • agriculture, forestry, or fishing;
      • a public utility or warehousing;
      • research, development, or testing;
      • biotechnology;
      • computer programming, data processing or other computer related services;
      • central services for financial, real estate, or insurance services;
      • the operation of central administrative offices or a company HQ (other than the HQ of a professional sports organization);
      • business services firms (only located in a state PFA)
      • entertainment, recreation, cultural, or tourism–related activities in a multi–use facility located within a revitalization area if the facility:
        • generates a minimum of 1,000 new full-time equivalent filled positions in a 24-month period; and is not primarily used by professional sports franchise or for gaming.

  • What is a central administrative office?

    • "Central administrative offices" are defined by regulation as a facility where a business entity's central management or administrative functions are handled on either a regional or national basis. Central administrative offices include offices or locations in the region where functions such as personnel, planning, general management, accounting and financial, purchasing, advertising, legal, data processing, and research and development are performed.

  • Can a not-for-profit entity qualify for the Job Creation Tax Credit?

    • Any Maryland business entity may qualify for the tax credit. However, the credit is of benefit only if the entity has a state income tax liability. Because most not-for-profit businesses owe no income tax, they will not benefit from the Job Creation Tax Credit. If the not-for-profit business has taxable income from business activities, it may be able to use the credit.

  • What if a business receiving the tax credit must reduce its workforce?

    • The purpose of this tax credit is to generate new, permanent, full-time jobs for Maryland workers. Therefore, the credit requires that jobs for which the credit is claimed must remain filled for at least three years following the credit year. If the number of jobs for which the credit is taken falls below the minimum threshold (60, 25, or 10), the credits used must be repaid in full. If the number of jobs for which the credit is taken falls more than 5% below the average number of qualified positions during the credit year but remains above the threshold, then the amount of the tax credit to be repaid is reduced in proportion to the decline in certified employees.

  • Would employees working at an address other than the address of the facility be considered qualified employees?

    • The JCTC statute requires a business entity to establish or expand a business facility at a single address. However, in some cases, the addition of new qualified positions causes the business to outgrow its existing space and acquire additional space within close proximity of the original single facility location. Based on the particular facts and circumstances of the case, the Secretary may determine that new positions at multiple facilities may be counted.

  • What if the business entity is a government contractor and the new employees work at the government facility?

    • Generally, these employees would not be qualified for the JCTC credit. An exception might be made if the business entity leases space for a business facility from a government entity. The JCTC statute requires that "[t]o qualify for the tax credit provided under this subtitle, a business entity must establish or expand a business facility, in the State" that results in the creation of a certain number of qualified positions, and a government facility is not a business facility.

  • What records must a business maintain?

    • ​The qualified business entity shall provide information verifying the jobs it created still exist during the three taxable years following the credit year.

  • Is business information submitted to Commerce confidential?

    • ​Generally yes, subject to the provisions of the Maryland Public Information Act and the Maryland Code, Tax-General Article, Title 13, Subtitle 2. In addition, the company consents to the release of certain information in the tax credit application.