Funding & Tax Resources for Manufacturers in Maryland

As an Engineering Research & Development company, we have come across quite a few resources for R&D manufacturers in Maryland that might apply to our customers. Whether you’re a startup or long-established business, it might be worth seeing if your business qualifies for any of these opportunities. Here’s the list, although they may change in the future.

Maryland Technology Internship Program (MTIP)

The Maryland Technology Internship Program (MTIP) helps Maryland retain top tech talent by increasing the number of paid technical internships offered in the state. Administered by UMBC and funded by the State of Maryland, the program offers financial assistance to technology-based businesses, as well as state and local agencies, to hire more interns. The year is broken up into 3 sections (Spring, Summer, Fall). For students studying technical fields at Maryland Universities, get up to $1,800 back for 1 section, $1,200 for a 2nd section. Be sure to get your applications in early, because this funding runs out.

Intern Unemployment Insurance Exemption

Internships for which work experience is combined with academic experience are exempt from paying Unemployment Insurance on top of wages. This was 2.30% for new employers up to 10.5% for Standard Employers for the first $8,500 of wages. For four interns, that is $3,400 for one summer. Exempting out of the Maryland Unemployment typically requires filing Federal Unemployment, but this is similarly exempt under Federal guidelines.

Maryland SUTA Exclusion

Per the “Employer’s Quick Reference Guide” issued by the State of Maryland DLLR Division of Unemployment Insurance (dated January 2019), page 14,

The following wages are not to be reported:10. Wages earned by an individual who is enrolled in a full-time educational program that combines academic instruction with work experience, which is an integral part of the educational program.

IRS Federal FUTA Exclusion

Per I.R.C. § 3306(c)(10)(C) — service performed by an individual who is enrolled at a nonprofit or public educational institution which normally maintains a regular faculty and curriculum and normally has a regularly organized body of students in attendance at the place where its educational activities are carried on as a student in a full-time program, taken for credit at such institution, which combines academic instruction with work experience, if such service is an integral part of such program, and such institution has so certified to the employer, except that this subparagraph shall not apply to service performed in a program established for or on behalf of an employer or group of employers…

Manufacturing and Research and Development Exemption

As a means of encouraging the growth of manufacturing businesses in Maryland, state law authorizes local governments to exempt from taxation personal property used in manufacturing. The application for the Manufacturing and Research & Development Exemption may be used for applying for a manufacturing exemption throughout the state, including research and development activities. The deadline for submitting the application is September 1st of each year.

Buy Maryland Cybersecurity Tax Credit

The Buy Maryland Cybersecurity Tax Credit Program is designed to encourage purchases from Maryland cybersecurity companies. Buyers get up to a 50% tax credit on cybersecurity expenditures from Qualified Maryland Cybersecurity Sellers. This is a big one, but funding is limited.

Research and Development Tax Credit (R&D)

Businesses that have qualified R&D expenditures in Maryland may qualify for the R&D Tax Credit. The tax credit remains in effect until June 30, 2027, subject to extension by the General Assembly. The tax credit is equal to ten percent (10%) of eligible R&D expenses incurred during the taxable year in excess of the Maryland Base Amount. If the total credits applied for exceed the statutory caps, the business’s R&D tax credit is prorated. The total statutory cap is $12 million with a small business set-aside of $3.5 million. A single applicant may not receive a tax credit exceeding $250,000.

Sales and Use Tax Exemptions for Production or Research & Development Activities

Every business that purchases materials for resale should have a Maryland Sales & Use Resale Certificate to provide vendors so Maryland Sales Tax is not collected. In addition, the Maryland sales and use tax does not apply to sales of tangible personal property for use in production activities or research & development. To find out if something you’re purchasing is tax exempt, you might enjoy a little light reading of the Maryland Tax Code Subsection 11

See Md. TAX-GENERAL Code Article § 11-210(b)(1) – (b) The sales and use tax does not apply to a sale of: (1) tangible personal property used directly and predominantly in a production activity at any stage of operation on the production activity site from the handling of raw material or components to the movement of the finished product, if the tangible personal property is not installed so that it becomes real property;

See Md. TAX-GENERAL Code Ann. § 11-217 (b) – The sales and use tax does not apply to a sale of tangible personal property, a digital code, or a digital product for use or consumption in research and development.

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