In a late-breaking stunning victory for corporate taxpayers, at a public hearing yesterday Maryland General Assembly’s Joint Committee on Administrative, Executive, and Legislative Review (“AELR”) extended the due date for Maryland’s new corporate income tax information reporting requirements for an additional 45 days. The corporate reports were originally scheduled to be due today, October 15. In addition, the Committee on AELR provided the Comptroller of Maryland (“Comptroller”) with authority to abate the stringent monetary penalties for any reason. While the relief may come a bit late for many corporate taxpayers, for others that are still assessing their reporting requirements, the extension will provide them an opportunity to timely file and comply with the new reporting requirements.

Extension of Corporate Reporting Requirements

The business community came out in full force again yesterday in a last-ditch effort to provide corporate taxpayers some reprieve from Maryland’s new corporate reporting requirements. The Committee on AELR had intended to meet and discuss the Comptroller’s proposed emergency regulations for corporate reporting (and regulations related to DNA samples). However, after testimony from representatives of the Maryland Chamber of Commerce, Maryland Association of CPAs and the Tax Section of the Maryland State Bar Association, the Committee on AELR agreed to provide corporate taxpayers an additional 45 days beyond the October 15 deadline to file their corporate income tax reporting requirements. The business community expressed concern that Maryland businesses need more time to reasonably and accurately provide the specific information that has been requested by the Comptroller. In addition, it was mentioned that assembling and manually entering the required data was very time consuming for corporate tax departments. It was also emphasized that the Maryland Business Tax Reform Commission that will review the data early in 2009 has not even been appointed yet. As a result, the Committee on AELR relinquished and granted the requested extension.

Penalty Relief!

The Comptroller’s emergency regulations issued in late August provided for onerous monetary penalties on taxpayers that did not comply with the reporting requirements or failed to file an accurate report. Taxpayers that fail to comply with the reporting requirements are subject to a $5,000 per day penalty for the first 30 days and then $10,000 per day thereafter until the report is filed. The penalties may also be assessed against a taxpayer that has filed a report but which the Comptroller determines was not filed accurately—if the taxpayer fails to correct the alleged inaccuracy 30 days after being noticed. The business community testified that these penalties were unprecented and too harsh, noting that they are more punitive than the penalties that were stricken from the original combined reporting statute by the General Assembly during the 2008 session. While the business community requested that the penalties be significantly reduced (to $1,000 per day) and waiver be provided for good cause, the Committee on AELR was only willing to grant the Comptroller authority to waive the penalties (without changing the amount) for any reason.