Beverly A. Richard, CPA Beverly A. Richard, MST CPA Manager SC&H Tax & Advisory Services, LLC Beverly is a State and

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1 Beverly A. Richard, CPA Beverly A. Richard, MST CPA Manager SC&H Tax & Advisory Services, LLC Beverly is a State and Local Tax specialist with the public accounting firm SC&H Group in their Sparks, MD location. Beverly handles nexus and apportionment issues, audit representation, voluntary disclosures, jurisdictional regulations and registrations, as well as compliance and research for sales tax, gross receipts tax, income and franchise tax. Beverly earned her undergraduate degree in accounting from Villa Julie (Currently called Stevenson University), and her Master's degree in Taxation from University of Baltimore. She is a member of the AICPA, the MACPA, and is the current chair of the MACPA's State Tax Committee.

2 Karen T. Syrylo, CPA - Karen is now a sole practitioner after a lifetime of work for major accounting firms; she has over 20 years experience in multistate tax consulting for clients in a wide variety of industries. - In addition to consulting work for her business clients, she is currently serving as State Tax Policy Consultant for the Maryland Chamber of Commerce, working in the Chamber's legislative and educational efforts on tax and fiscal matters. - Ms. Syrylo was formerly a Partner in the State and Local Tax Practice of one of the Big-4 accounting firms, a leader in the 50-person Mid-Atlantic area group that provided state and local tax services for worldwide clients having operations in Maryland, Pennsylvania, Virginia, Delaware and the District of Columbia. - She assists clients in all aspects of sales and use taxes, income and franchise taxes, real and personal property taxes, etc. - She has extensive experience in transactions analysis, overall tax planning, compliance, audit representation and protest proceedings. - She has been Vice Chair of the Maryland Chamber of Commerce Tax Committee; member of the Maryland Chamber of Commerce Legislative Committee; is a member of the Maryland Association of CPAs and former Chairman of the State Tax Committee; member of the American Institute of CPAs. - Karen speaks and writes frequently on state tax matters.

3 Ronald W. Wineholt Mr. Wineholt is Vice President for Government Affairs with the Maryland Chamber of Commerce. He is a lobbyist for the Chamber with responsibility for fiscal issues, health care, civil liability and state procurement matters. Mr. Wineholt previously worked for the State of Maryland as Director of the State Department of Assessments and Taxation, served on the staff of Governor Harry Hughes and was principal staff for the Senate Finance Committee, House Appropriations Committee and House Ways and Means Committee of the Maryland General Assembly. He earlier worked for the Maryland Municipal League, representing cities and towns throughout Maryland. Mr. Wineholt has over 30 years of experience in working with the Maryland General Assembly as lobbyist and member of the executive and legislative branches of state government. Mr. Wineholt has a B.A. and M.A. from the University of Maryland, College Park.

4 Maryland Tax Update Presented By: Beverly Richard, CPA SC&H Tax & Advisory Services, LLC & Karen T. Syrylo, CPA Topics to Discuss Legislative Changes Maryland Business Tax Reform Commission Corporate Information Reporting Status Happenings in the Comptroller s Office

5 Tax Amnesty Period (Senate Bill 552) 9/1/09 to 10/30/09 Pay unpaid personal income tax, corporate income tax, withholding tax, sales/use tax, or admissions/amusements tax All civil penalties and ½ interest will be waived Comptroller may agree to payment plan, must be paid by 12/31/2010 Must apply; application is not yet available Tax Amnesty Period (Senate Bill 552) Those NOT qualified are: Any taxpayer that has more than 500 employees in the US or is a member of a corporate group with more than 500 US employees Any taxpayer granted amnesty under the 2001 amnesty program Any taxpayer eligible for the 2004 Settlement Period regarding issues ruled on by court in the SYL, Inc. and Crown Cork & Seal Cases Comptroller s office is currently developing forms and FAQ s to post to the website

6 IRC Decoupling (House Bill 101 budget bill) Decouples Maryland from new 5 year NOL provision Decouples Maryland from cancellation of debt provisions Maryland s normal Decoupling provisions do not apply to the federal ARRA of 2009 (Therefore Maryland will follow the other provisions of the federal ARRA) Mandated Electronic Filing of Personal Income Tax Returns (SB 96 / HB 810) 2009 Returns if the preparer files more than 300 returns 2010 Returns if the preparer files more than 200 returns 2011 Returns if the preparer files more than 100 returns Comptroller may grant hardship exemption Penalties for noncompliance - $50 each return, $500 max Taxpayer may opt out

7 Changes to Biotech Investment Credit (SB 800 / HB 493) Administrative, definitions Individuals and entities timing for dollars/certification recapture provisions Mark Vulcan at DBED: Employee Independent Contractor Classification (Senate Bill 909) Applies to construction and landscaping businesses Creates PRESUMPTION that work performed by an individual paid by an employer creates an employee classification (not contractor) Investigation procedures and penalties for noncompliance Labor & industry classifications, and workers comp coverage, and SUTA

8 Employee Independent Contractor Classification (Senate Bill 909) Note implications for state unemployment tax [but see DLLR s current ABC test ] Note possible implications for income tax withholding [Comptroller is to use its own rules] Note difference between this bill and ABC test and IRS classification criteria Manufacturer s Personal Property Tax Exemption (Senate Bill 88) Additional time to file the personal property tax exemption application Within 6 months of the date of the assessment notice Previous law required an exemption to be filed by September 1 st of a taxable year

9 Legislation that DID NOT PASS Combined reporting for corporate income tax (SB603/HB1244) Sales tax nexus for internet sellers advertising in Maryland (SB1071) Limitation on deduction of corporate officer salaries (SB472) Property tax assessment changes (SB302/HB188) Legislation that DID NOT PASS Remove threshold, thus impose transfer and recordation taxes on transfers of controlling interests in small real estate businesses (SB727/HB983) Requirements for all Maryland employers to annually send an electronic or written notice to employees that may be eligible for the Maryland earned income credit (HB1061)

10 Maryland Business Tax Reform Commission Interim report due December 15, 2010 Final report & recommendations due December 15, 2011 Met May 13, 2009 Currently scheduled meetings: June 4 July 9 September 10 October 1 Corporate Information Reporting Status Corporations submitted 2006 and 2007 data so far Comptroller s staff found numerous interpretation problems several thousand letters for clarifications and corrections Not yet able to provide a tax revenue estimate for combined reporting adoption Electronic interface filing method is promised Do you know someone who didn t file? Do it now.

11 Happenings in the Comptroller s Office Personnel changes MITS modernized information tax system Compliance and audit projects The MACPA will stay involved and will keep you informed!

12 Contact Information Please feel free to contact us with any questions. Beverly Richard (410) Karen T. Syrylo (410) If you would like more information on SC&H Group, please visit us at

13 Ronald W. Wineholt Mr. Wineholt is Vice President for Government Affairs with the Maryland Chamber of Commerce. He is a lobbyist for the Chamber with responsibility for fiscal issues, health care, civil liability and state procurement matters. Mr. Wineholt previously worked for the State of Maryland as Director of the State Department of Assessments and Taxation, served on the staff of Governor Harry Hughes and was principal staff for the Senate Finance Committee, House Appropriations Committee and House Ways and Means Committee of the Maryland General Assembly. He earlier worked for the Maryland Municipal League, representing cities and towns throughout Maryland. Mr. Wineholt has over 30 years of experience in working with the Maryland General Assembly as lobbyist and member of the executive and legislative branches of state government. Mr. Wineholt has a B.A. and M.A. from the University of Maryland, College Park.

14 Legislative Update on Business Issues Ronald W. Wineholt Maryland Chamber of Commerce Presentation for MD Association of CPAs June 16, Session Business Issues State Budget and Taxes Health Care Workforce Regulation Civil Liability Energy and Environment Market Intervention Transportation 1

15 A Decade of Spending Beyond Our Means Fiscal Years $15,000 $14,000 $ In Millions $13,000 $12,000 $11,000 $10,000 $9, Ongoing Spending $9,295 $9,901 $10,240 $10,488 $11,159 $12,052 $13,430 $14,298 $14,593 $14,684 Ongoing Revenues 9,802 9,356 9,281 10,151 11,317 12,390 12,935 13,545 13,221 12,989 Structural Balance ,372-1,695 Fiscal Years Source: Dept. of Legislative Services Chasing Declining Revenues General Fund Revenue Write-downs (In Millions) FY 2009 FY 2010 Total Sep $ 432 $ 432 Dec ,351 Mar ,162 Cumulative Write-down 2,945 2

16 Balancing the Budget ($ in Millions) FY 2009 FY 2010 Total Budget Solution Fund Transfers ,002 33% Federal Stimulus 435 1,028 1,463 48% Reductions % Revenues % $3,044 Estimated Fund Balance 6/30/10 $96 Source: Dept. of Legislative Services Forecast of General Fund Revenues and Spending 18,000 17,000 16,000 $ in Millions 15,000 14,000 13,000 12,000 11,000 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Ongoing Revenue Ongoing Revenue less VLTs Ongoing Spending Ongoing Spending less stimulus Source: Dept. of Legislative Services 3

17 Future Budget Fixes Get Tougher Less federal stimulus funds in FY 2011, and none thereafter State has cleaned out cash balances of special funds Many 1 and 2 year budget freezes and temporary savings have already been used Cost of employee and teacher pensions increase due to investment market losses (-$13 billion) $16 billion unfunded liability for state employee and retiree health insurance benefits not addressed Slots revenues delayed 2/3 of state spending is formula driven in statute Election year Maryland tax rate rankings Individual income tax 4 th highest rate Corporate income tax 16 th highest rate Sales tax 11 th highest rate Cigarette tax 4 th highest rate Source: Federation of Tax Administrators 4

18 Health Care Small Group Reform (SB 637/HB 674) Health insurance for employers with 2-50 employees Market-based reforms to attract young & healthy Comparative pricing data on MHCC website Authorizes pre-existing condition exclusions Better aligns premiums with insured risk Health status may be considered for new employer groups in 1 st 3 years of enrollment Health Care Wellness Incentives (SB 638/HB 610) Expands authority of carriers to offer wellness incentives Premium discounts or other incentives to promote health or control injury Must be voluntary May not exceed 20% of premium cost 5

19 Health Care Employer Mandates failed 2% payroll tax on FICA wage base of all employers for universal health care (SB 813/HB 951) Open-ended pay or play employer assessment for health care expansion (SB 515/HB 860) Expanded coverage for autism spectrum disorders Congressional Action House and Senate leadership pledging action by August Workforce Regulation Flexible Leave (SB 562) Clarifies key terms of last year s flexible leave law, for employers with 15 or more employees Immediate family member Reinforces employer s right to set conditions for all sick leave usage Narrows provisions prohibiting an employer from discharging or disciplining an employee for leave usage 6

20 Workforce Regulation Employee Misclassification (SB 909) Applies to businesses performing construction services or landscaping services Creates a rebuttable legal presumption that work performed by an individual paid by the business creates an employer-employee relationship Designed to stop fraudulent avoidance of employers failing to withhold taxes, or pay unemployment insurance and workers comp Significantly increased investigative procedures and penalties for noncompliance Workforce Regulation Unemployment Insurance Part-Time Workers (SB 270/HB 310) Eligible for benefits if worked throughout the year at least 20 hours per week Emergency bill Increased Benefits (SB 576/HB 740) Maximum benefits increase by $30 October 4, 2009 and $20 October 3, 2010 Severance Pay (HB 242) Requires all severance pay be exhausted prior to eligibility for UI benefits, effective June 7,

21 Civil Liability Maryland ranked 30 th by U.S. Chamber survey and 46 th by Pacific Research Institute Medical liability insurance rates have stabilized at historically high levels Shortage of primary care physicians and some specialists Concern regarding bills that would have increased liability and lawsuits for business Civil Liability False Claims (failed) Would have allowed individuals to collect bounties by suing state government contractors (SB 830/HB 915) or health care providers (SB 272/HB 304) for filing a false claim for payment Market Share Liability (failed) Would have imposed an unprecedented standard of liability for companies that previously sold lead paint, based on their market share (HB 1156) 8

22 Civil Liability Noneconomic Damages (failed) Would have increased the cap on noneconomic damage awards for wrongful death resulting from medical malpractice (SB 505/HB 237) Consumer Protection Act Damages (failed) Would have increased class action lawsuits by allowing statutory damages and up to treble actual damages for violations of the Consumer Protection Act (HB 797) Energy and Environment Greenhouse Gases (SB 278/HB 315) Requires state to reduce greenhouse gas emissions by 25% from 2006 levels by 2020 Exempts manufacturers Sunsets in 2016 Standing (SB 1065/HB 1569) Allows judicial review of permits and licenses granted by state Dept. of Environment Grants standing to sue by more individuals and associations, if they participated in the issuance process 9

23 Energy and Environment Re-Regulation (SB 844/HB 1530) (failed) Attempted to partially re-regulate state s electricity market Would have allowed PSC to order utilities to build new, regulated power plants Would have ended customer choice for residential and small commercial users Would have imposed a surcharge on all electricity delivered to large commercial and industrial customers to fund new plants Market Intervention Price Controls (SB 707/HB 416) (failed) Would have authorized the Governor to impose price controls on a wide variety of goods and services during a state of emergency Right of First Refusal (failed) Would have required business owners to give a right of first refusal to employees (SB 820) or gas station tenants (SB 858/HB 1100) prior to selling their property 10

24 Transportation Maryland s transportation system is critical to our business climate, yet remains underfunded Revenue shortfalls resulting from reduced driving and car purchases have more than wiped out transportation revenue increases enacted at the 2007 special session Federal stimulus funds will provide temporary help in FY 10 ($360M) and FY 11 ($260M) The longstanding need for $400 - $600 million in new transportation revenues remains unfulfilled 11