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Maryland Tax Reform Act of 2007: Additional Tax Reporting For Corporate Groups - October 15, 2008 Deadline

The Maryland General Assembly enacted a statute last November that included a provision that requires each corporation doing  business in Maryland, which is a member of an affiliated group of corporations,  to file with the Comptroller  a “pro forma” combined corporate income tax return.  The Comptroller has issued regulations that allow such a group to file a single “pro forma” statement for the entire group.  This filing is informational and is designed to assist the State in determining how it should modify the Maryland corporate income tax.

Every corporate group is required to file with the Comptroller the following reports:
 (1)  A pro forma water’s edge combined corporate income tax report, including taxable income of the corporate group, eliminations to account for intercompany transactions within the corporate group, and apportionment computed under both Joyce and Finnigan methods of apportionment.
 (2)  A report that reflects the dollar value of all property that is shipped from an office, store, warehouse, factory, or other place of storage in Maryland where the purchaser is the United States government.
 (3)  A report that reflects the dollar value of all property that is shipped from an office, store, warehouse, factory, or other place of storage in this State where the seller is not taxable in the state in which the purchaser takes possession.
 (4)  A report that reflects the amount and source of nonoperational income of each member of the corporate group whose commercial domicile is in Maryland.

This provision does not require the payment of any additional taxes. The filing is made under oath and subject to audit, and the Comptroller is required to publish the name of, and penalty imposed upon, any corporation failing to file or filing an inaccurate statement. 

The Comptroller has issued emergency regulations that provide for penalties for failure to file these reports in the amount of $5,000 per day, for the first 30 days, and $10,000 per day thereafter for late filing. The pro forma returns are due on October 15, 2008 for tax years 2006 and 2007 (for calendar year taxpayers).  The reports are required to be submitted electronically at www.marylandtaxes.com.