Maryland: 2005 Maryland Legislative Summary
 
September 21, 2005
 
Barbara Wilkins- Bethesda

The Maryland General Assembly concluded its 90-day Session in Annapolis on April 11, 2005. While the Session was largely dominated by addressing the state’s structural budget deficit and debating the legalization of video lottery terminals (slot machines) which was defeated for the third consecutive year, other changes to Maryland law impacting business interests include:

Business

Minimum Wage (HB 391). Maryland will be the fifteenth state to require a wage rate exceeding the federal rate. The minimum wage is increased from $5.15 to $6.15 and includes a tip credit in the amount of 50 percent of the minimum wage amount (employers are required to pay tipped employees a wage rate of $3.08 per hour). Effective January 1, 2006.

Fair Share Health Care Fund Act (SB 790/HB 1284). Private employers with 10,000 or more employees not spending at least 8 percent of payroll on health insurance costs (6 percent for nonprofits) are required to pay to the Department of Labor, Licensing and Regulation an amount equal to the difference between what the employer spends on health insurance and the required percentage of total wages paid. Walmart is currently the only Maryland employer impacted. Effective January 1, 2007.

Gift Certificates and Gift Cards (SB 8). Gift certificates and gift cards may not be issued, if they expire or impose fees on consumers within four years of issuance. Free or prepaid gift cards are not subject to this law. Gift cards that may be used at multiple unaffiliated businesses are subject to different provisions. Effective July 1, 2006, and does not apply to any cards or certificates issued before July 1, 2006.

Environment

Uniform Environmental Covenants Act (HB 679). Model legislation was adopted to establish provisions governing the creation, applicability, maintenance and enforcement of environmental covenants in the state. Environmental covenants impose activity and use limitations as part of the remediation process for contaminated real property. UECA encourages transfer of ownership and property reuse by offering a clear and objective process for creating, modifying, or terminating environmental covenants and for recording those actions so that they are reflected in the title abstract of the property in question. Effective October 1, 2005. Environmental practice leader, Amy Edwards (Washington, D.C. office,) was a member of the Maryland workgroup that reviewed the model legislation proposed by the National Conference of Commissioners on Uniform State Laws.

Energy Efficiency Standards (SB 464/HB 1030). Energy efficiency standards for certain industrial and consumer products was enacted in 2004. However, the impact of the standard on Maryland businesses prompted legislative changes to: repeal the energy efficiency standards for ceiling fans, large-packaged air-conditioning equipment over 80 tons, and refrigerators and freezers designed for medical, scientific, or research purposes; modify the requirements relating to unit heaters and ceiling fan light kits; limit the labeling requirements to products sold through retainers; and delay the effective date of the labeling requirements for one year. Various effective dates.

Government Contracts

Debarment-Violations of Law (SB 234/HB 262). Clarifying provisions were added to the debarment statute authorizing the debarment from state contracting of a person, officer, partner, controlling stockholder or principal, or any other person substantially involved in that person’s contracting activities that has been debarred from federal contracts (FAR, 48 CFR Chapter I).

Payment Security and Performance Security (SB 324). The bonding threshold on state projects was increased from $100,000 to $200,000, thereby only requiring payment and performance bonds on projects of $200,000 or more. The bonding threshold on local projects remains unchanged at $100,000. Effective October 1, 2005.

Procurement Exemptions (HB 109). Various units of government currently exempt from the state procurement law, including the Maryland Stadium Authority, Maryland Economic Development Corporation, Maryland Environmental Service, and State Retirement and Pension System, must implement written policies and procedures for the unit’s procurements. See § 11-203 of the State Finance and Procurement Article for a list of exempt agencies. Effective October 1, 2005.

Transportation

Intercounty Connector Funding-GARVEE Bonds (SB 255/HB 1352). Financing for the $2.4 billion, 18-mile, limited access highway linking the technology corridor of I-270 in Montgomery County to I-95 in Prince George’s County has been approved by limiting to $750 million the amount of the State’s federal highway aid that can be pledged to pay debt service on GARVEE (Grant Anticipation Revenue Vehicles) bonds. This signature highway project is anticipated to be put out for bid in Spring 2006 and begin construction in Fall 2006.

Commercial Driving Standards (SB 640/HB 789). Changes to commercial driving licensing and sanctioning procedures were imposed to comply with Federal Motor Carrier Safety Administration rules. Disqualifying offenses for commercial drivers include operating a commercial vehicle with a suspended or disqualified license and, doing any of the following while operating any vehicle: (1) refusing to take a sobriety test; (2) leaving the scene of an accident; (3) using the vehicle to commit certain felonies; and (4) driving under the influence of alcohol or drugs. Penalties for conviction are a one-year license disqualification and a lifetime disqualification for a second offense. Drivers who transport hazardous materials are subject to a three-year license disqualification for a first offense. Effective September 30, 2005.

Taxes

Unemployment Insurance (SB 703/HB 798). The unemployment insurance taxation system is altered by relying on a series of six tax tables (.3 percent - 7.5 percent to 2.2 percent - 13.5 percent) based on the ratio of the Trust Fund balance and taxable wages, rather than imposing a surtax on all employers when the Trust Fund balance declines. The maximum weekly benefit amount is increased from $310 to $340. Tax rates are effective January 1, 2006; maximum weekly benefit amount is effective October 1, 2005, and applies to claims filed on or after October 2, 2005.

Research and Development Tax Credit (SB 217). The research and development tax credit is extended until June 30, 2012, providing for $6 million in total credits annually. Unused credits can be carried forward for seven years.

Biotechnology Investment Incentive Act (HB 664). Individuals, corporations and venture capital firms that invest in qualified Maryland biotechnology companies may receive a tax credit equal to 50 percent of the investment. A qualified Maryland biotechnology company is one with its headquarters and base of operations in Maryland that has been in business for less than 10 years and has fewer than 50 employees. The maximum amount of the credit is $50,000 for individuals and $250,000 for corporations and venture capital firms. The program is dependent upon an annual appropriation in the state budget.

Film Production Activity-Employer Wage Rebate Grant (SB 215/HB 253). As an incentive to attract feature films to Maryland, film producers may receive a rebate of 50 percent of the first $25,000 of employees’ wages, up to a maximum of $2 million for each production.

Budget Reconciliation and Financing Act (HB 147). This bill contains a variety of provisions to effectuate a balanced state budget. In part, tax provisions, effective for tax year beginning January 1, 2005, include:

• Requiring pass-through entities to withhold income tax for nonresident shareholders or partners that are entities, rather than individuals. A nonresident entity is one not formed under Maryland law and not qualified or registered to do business in Maryland. The withholding does not apply to shareholders or partners that are Real Estate Investment Trusts or to a publicly traded pass-through entity that agrees to provide the comptroller with a report containing the names and contact information for all members who received more than $500 for the taxable year. The income tax rate required for withholding by a pass-through entity for nonresident individuals is effectively 6 percent.

• Permanently decouples from Internal Revenue Code, § 199 (production activities deduction for manufacturers).

For more information, e-mail Barbara J. Wilkins or David Winstead at barbara.wilkins@hklaw.com or david.winstead@hklaw.com, respectively, or call toll free, 1-888-688-8500.