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Paid Sick Leave Tax Credit Bill for Small Employers Passes in Maryland

Small businesses in Maryland may soon be eligible for a tax credit of up to $500 per employee under recently passed legislation.

The Small Business Relief Tax Credit bill proposed by Governor Larry Hogan passed the Maryland General Assembly on April 9, the last day of this year’s legislative session. Once Governor Hogan signs the bill, it will become effective on July 1, 2018.

Under the legislation, businesses with 14 or fewer employees are eligible for a tax credit for providing sick and safe leave to their employees, required by the the Maryland Healthy Working Families Act (Act), which took effect on February 11, 2018.

The credit can be up to $500 per qualified employee. A qualified employee is defined as an employee who earns at least 250% of the annual federal poverty guidelines for a single-person household (note: the number for 2017 was $30,150, so a qualified employee would have earned at least $75,375) and earns paid sick and safe leave in accordance with the Act.

The legislation requires that the Maryland Department of Commerce to issue a tax credit, on application of a small business. The application must include:

  • The name of the small business;
  • Evidence that the business is:
    • Duly organized and in good standing in the jurisdiction under the laws from which it is organized;
    • Current in the payment of all tax obligations to the state or any unit or subdivision of the state; and
    • Not in default under the terms of any contract with, indebtedness to, or grant from the state or any unit or subdivision of the state;
  • Proof of the wages paid to each qualified employee;
  • Proof of the type and value of qualified employer benefits accrued to each qualified employee (note: this would include paid sick and safe leave); and
  • Any other information that the department requires.

Because the law is awaiting the governor’s signature, details regarding the application process and what a form may look like have obviously not yet been released. The department will be required to specify criteria and procedures for the application and approval process.

However, the legislation has made it clear that the Department of Commerce approves of applications on a first-come, first-serve basis and must notify applicants of approval or denial of an application within 45 of days after receipt of the application. The bill provides a maximum of $5 million total for tax credit certificates issued under the bill annually.

Once Governor Hogan signs the bill, it will become effective on July 1, 2018.

Rick Vernon and Nida Kanwal are employment attorneys who represent management in workplace employment matters. For more information on the Small Business Relief Tax Credit bill, contact Rick at rgvernon@lerchearly.com or Nida at nkanwal@lerchearly.com.

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This content is for your information only and is not intended to constitute legal advice. Please consult your attorney before acting on any information contained here.

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