§ 10-306.1. Intangible property and expenses
West's Annotated Code of MarylandTax-GeneralEffective: July 1, 2018
Effective: July 1, 2018
MD Code, Tax - General, § 10-306.1
§ 10-306.1. Intangible property and expenses
(2) “Aggregate effective tax rate” means the sum of the effective rates of tax imposed by this State, other states or possessions of the United States, and foreign nations that have entered into comprehensive tax treaties with the United States government, where a related member receiving a payment of interest expense or intangible expense is subject to tax and where the measure of the tax imposed included the payment.
(i) a bank holding company as defined in the federal Bank Holding Company Act of 1956,1 as amended, or a bank, trust company, savings bank, or savings and loan association incorporated or chartered under the laws of this State, another state, or the United States; or
(i) an expense, loss, or cost for, related to, or in connection directly or indirectly with the direct or indirect acquisition, use, maintenance, management, ownership, sale, exchange, or any other disposition of intangible property, to the extent the expense, loss, or cost is allowed as a deduction or cost in determining taxable income for the taxable year under the Internal Revenue Code;
(i) a stockholder who is an individual or a member of the stockholder's family enumerated in § 318 of the Internal Revenue Code, if the stockholder and the members of the stockholder's family own directly, indirectly, beneficially, or constructively, in the aggregate, at least 50% of the value of the taxpayer's outstanding stock;
(ii) a stockholder or a stockholder's partnership, limited liability company, estate, trust, or corporation, if the stockholder and the stockholder's partnership, limited liability company, estate, trust, or corporation own directly, indirectly, beneficially, or constructively, in the aggregate, at least 50% of the value of the taxpayer's outstanding stock; or
(iii) a corporation or a party related to the corporation in a manner that would require an attribution of stock from the corporation to the party or from the party to the corporation under the attribution rules of § 318 of the Internal Revenue Code, if the taxpayer owns directly, indirectly, beneficially, or constructively, at least 50% of the value of the corporation's outstanding stock.
(b)(1) Except as otherwise provided in this section, in addition to the modifications under §§ 10-305 and 10-306 of this subtitle, the amounts under paragraph (2) of this subsection are added to the federal taxable income of a corporation to determine Maryland modified income.
(2) The addition under this subsection includes any otherwise deductible interest expense or intangible expense if the interest expense or intangible expense is directly or indirectly paid, accrued, or incurred to, or in connection directly or indirectly with one or more direct or indirect transactions with, one or more related members.
(c) The addition required under subsection (b) of this section does not apply to any portion of the interest expense or intangible expense to the extent that the corporation establishes, as determined by the Comptroller, that:
2. a measure of the tax imposed by this State, another state or possession of the United States, or a foreign nation that has entered into a comprehensive tax treaty with the United States government included the interest expense or intangible expense received by the related member from the corporation; and
(d)(1) Subject to regulations adopted by the Comptroller, the addition required under subsection (b) of this section does not apply if, in lieu of the 4% effective tax rate requirement under subsection (c)(3)(ii)3 of this section, the aggregate effective tax rate imposed on the amounts received by the recipient is greater than or equal to the aggregate effective tax rate that would have been imposed on the additional income of the payor corporation if the interest expense or intangible expense had not been deducted.
(ii) under other circumstances demonstrating to the satisfaction of the Comptroller that avoidance of any portion of the tax due under this title is not a principal purpose of the transaction giving rise to the payment of the interest expense or intangible expense between the corporation and the related member, the Comptroller determines that it is impractical for a related member that is subject to tax in this State, another state, or a foreign nation that has entered into a comprehensive tax treaty with the United States government, where the measure of the tax includes the payment to satisfy the requirements of subsection (c)(3)(ii) of this section.
(e) If the payor and the recipient are both included in a combined or consolidated report filed in a jurisdiction:
(f)(1) In addition to the modifications under §§ 10-305 and 10-306 of this subtitle, subject to paragraph (2) of this subsection, to determine Maryland taxable income, an amount is subtracted from the federal taxable income of a corporation equal to the amount received as royalties, interest, or similar income from intangibles from a related member to the extent the related member, with respect to the payment, is subject to the addition modification under subsection (b) of this section or a similar addition modification of another state or of a foreign nation that has entered into a comprehensive tax treaty with the United States government for intangible expenses or interest expenses paid to related members.
(g) This section may not be construed:
Credits
Added by Acts 2004, c. 556, § 1, eff. July 1, 2004. Amended by Acts 2005, c. 142, § 1, eff. July 1, 2005; Acts 2018, c. 12, § 6.
Footnotes
May 9, 1956, ch. 240, 70 Stat. 133, codified at U.S.C.A. § 1841 et seq.
MD Code, Tax - General, § 10-306.1, MD TAX GENERAL § 10-306.1
Current through legislation effective through May 9, 2024, from the 2024 Regular Session of the General Assembly. Some statute sections may be more current, see credits for details.
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