Maryland Legislature Passes Cybersecurity Legislation – Certain Tech Companies Win Big!

Pessin Katz Law, P.A.
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Pessin Katz Law, P.A.

With the passage of Senate Bill 228, Maryland is poised to start awarding tax credits to both investors in and purchasers of cyber related goods and services from Maryland cyber companies. 

Before diving in, investors and purchasers seeking the credit should carefully review as there are many qualifications and requirements peppered throughout the bill. 

Investors

Among other limitations, the bill limits the number of years the company receiving the investment has been in business to no longer than five years and it must have fewer than 50 full time employees.  The bill requires both the company receiving the investment and the investor to submit an application to the Maryland Department of Commerce 30 days prior to the transaction.  Upon approval the investor has 30 days to make the investment and within ten days after making the investment must provide proof of making the making the investment to the Department of Commerce.

Senate Bill 228 also authorizes certain buyers of certain technology to claim a credit against state income tax for certain costs incurred to purchase certain technology or service.  A “qualified buyer” has fewer than 50 employees in the state.  A “qualified seller” means a cybersecurity business that has its headquarters and operations in Maryland; less than $5,000,000 in annual revenue; is a minority, woman, veteran or service-disabled veteran owned business or located in historically underutilized business zone; and owns or has properly licensed cybersecurity technology or provides services. The business must also be in good standing with the State. 

There are also limits on the amount of credit allowed for each buyer and the aggregate credits to be claimed from purchases from a single seller.  The bill also allows the Department of Commerce to establish a panel of experts to assist them in determining whether a company is a qualified seller among other items.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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