BIPARTISANSHIP ALERT: Small Business Relief Tax Credit

Important Legislation Offers Tax Relief For Small Businesses Forced To Comply With Burdensome Paid Sick Leave Law

“I am again calling on the legislature to pass our Small Business Relief Tax Credit, which will provide our small business job creators the support they need to provide paid leave benefits and continue being successful." - Governor Larry Hogan, February 8, 2018

Small Business Relief Tax Credit

Governor Hogan’s Proposed Legislation Would Provide $100 Million Over Five Years In Tax Credits To Businesses With Fewer Than 50 Employees That Provide Paid Leave Benefits To Their Employees; Proposal Would Help Small Businesses Being Burdened By Paid Sick Leave Law Passed By Maryland Legislature. “The Department shall: approve all applications that qualify for a tax credit certificate under this subsection on a first-come, first-served basis… The total amount of credit certificates issued by the Department under this subsection may not exceed: for taxable year 2018, $5,000,000; for taxable year 2019, $15,000,000; for taxable year 2020, $35,000,000; for taxable year 2021, $75,000,000; and for taxable year 2022 and each taxable year thereafter, $100,000,000.” (“Senate Bill 134,” Maryland General Assembly, 1/11/18)
The Governor’s Proposal Would Provide A Tax Credit Up To $1,000 Per-Employee To Small Businesses Employing Less Than 50 Workers. “A small business that hires a qualified employee may claim a credit against the State income tax in the amount stated on the tax credit certificate issued under subsection (d) of this section. For each taxable year, the credit allowed under this section may not exceed the lesser of: an amount that equals $1,000 for each qualified employee; or an amount that equals the total amount of qualified employer benefits accrued by all qualified employees of the small business.” (“Senate Bill 134,” Maryland General Assembly, 1/11/18)

The Capital Gazette Editorial Board Called Governor Hogan’s Paid Sick Leave Proposal “Superior,” Specifically Noting The Governor’s Inclusion Of Tax Credits For Small Businesses. “In truth, Hogan’s proposal is superior to the Democrats’ legislation in several ways, not just in offering tax credits but in streamlining the paperwork and allowing the accrued leave to be used for any reason — a simple, nonintrusive policy toward which many employers are moving anyway.” (Editorial, “There’s Room For Compromise On Paid Sick Leave,” Capital Gazette, 12/1/17)

Senator Thomas "Mac" Middleton Has Stated That The Governor's Proposal "Makes A Lot Of Sense." “He said he would entertain changes. He praised Hogan's tax credit plan as ‘making a lot of sense.’” “Middleton said he is open to discussing Hogan’s proposal for providing tax credits to offset the costs of providing paid sick leave.” (Erin Cox, “Dueling Paid Sick Leave Plans Under Debate,” The Baltimore Sun, 2/9/17; Josh Hicks, “Hogan Unveils New Paid Sick-Leave Measure In Hopes Of Avoiding Veto Override,” The Washington Post, 11/28/17)

Governor Hogan Proposed Paid Leave Legislation Which Would Extend Paid Leave To Workers, Without Hurting Small Businesses And Killing Jobs

Under Governor Hogan’s Proposed Paid Leave Compromise Act Of 2018, Businesses With 25 Or More Employees Will Be Required To Offer Employees Paid Leave For Any Reason, No Questions Asked. “...An employer shall provide an employee with paid time off that is paid at the same wage rate as the employee normally earns and that an employee may use for any reason if, based on a calculation of the average monthly number of employees employed by the employer during the immediately preceding year: beginning January 1, 2018, the employer employs 50 or more employees; beginning January 1, 2019, the employer employs 40 or more employees; or beginning January 1, 2020, or any year thereafter, the employee employs 25 or more employees.” (“House Bill 98,” Maryland General Assembly, 1/12/18)

Governor Hogan’s Compromise Proposal Includes Language Originally Introduced By Democratic Senator Bobby Zirkin, Which Allows Qualifying Businesses That Can Demonstrate A Significant Financial Hardship To Be Exempt From Having To Provide Paid Leave Benefits By Applying For A Hardship Waiver. “An employer may apply to the Department for a hardship waiver form the requirements of this subtitle. The Department shall waive the requirements of this subtitle for an employer that can provide specific and demonstrated evidence that a significant financial hardship will result from the employer’s compliance with this subtitle.” (“House Bill 98,” Maryland General Assembly, 1/12/18)

The Paid Leave Compromise Act Of 2018 Protects Business Owners Acting In Good Faith From Facing Severe Civil Penalties For Potential Record Keeping Errors. “An employer shall keep for at least 3 years a record of; paid time off accrued by each employee… The Commissioner may waive a civil penalty assessed under this subtitle if the penalty was assessed for a violation that was due to an error caused by a third-party payroll service provider with whom the employer in good faith contracted for services… In determining whether there is a violation of this subtitle, the Commissioner shall consider whether the employee has been deprived of a right under this subtitle. In determining the amount of any civil penalty to be imposed, the Commissioner shall consider:... the employer’s good faith in complying with this subtitle…” (“House Bill 98,” Maryland General Assembly, 1/12/18)

Amendments Were Made To The Governor’s Original Small Business Tax Relief Proposal

Amended Version Of Governor Hogan’s Small Business Relief Tax Proposal Will Provide $40 Million Over Five Years In Tax Credits To Businesses With Fewer Than 25 Employees That Provide Paid Leave Benefits To Their Employees. The Department shall: approve all applications that qualify for a tax credit certificate under this subsection on a first-come, first-served basis… The total amount of credit certificates issued by the Department under this subsection may not exceed: for taxable year 2018, $5,000,000; for taxable year 2019, $15,000,000; for taxable year 2020, $25,000,000; for taxable year 2021, $35,000,000; and for taxable year 2022 and each taxable year thereafter, $40,000,000.” (“Senate Bill 134,” Maryland General Assembly, 3/16/18)
Members Of The Maryland Senate Voted Unanimously, 47-0, On Third Reading To Approve Senate Bill 134. (“Senate Bill 134,” Maryland General Assembly, 3/19/18)