Corporate, Securities & Tax

On March 5, 2020, Maryland Governor Larry Hogan proclaimed a state of emergency related to COVID-19. Pursuant to that proclamation, Governor Hogan and the Office of the Comptroller of Maryland (the “Comptroller”) have taken various actions to provide Maryland citizens with tax and reporting relief. Additionally, on March 23, 2020, Governor Hogan authorized $130 million in funding for the Maryland COVID-19 Emergency Relief Fund Programs for Small Businesses (the “Relief Fund”) and $7 million in funding for the COVID-19 Layoff Aversion Fund (the “Layoff Aversion Fund”). The Relief Fund provides small businesses impacted by the negative economic effects of COVID-19 with working capital to support payroll, rent, mortgage, utility or other similar expenses normally incurred during the ordinary course of business. The Layoff Aversion Fund is intended to prevent or minimize the duration of unemployment for Maryland workers. Here’s what else you need to know regarding available Maryland tax relief and the emergency relief fund programs:

Tax Filing, Payment and Collection Relief/Reporting Relief

• The income tax filing and payment deadline for individuals and businesses is extended to July 15, 2020. Estimated income tax payments for the first and second quarters of 2020 are also due on July 15, 2020. This change extends the three-year statute of limitations for filing a claim for refund of income taxes for a 2019 return filed by that date to July 15, 2023. The statute of limitations for tax year 2016 is also extended to July 15, 2020.
• Estates with a tax return due after April 1, 2020, but before July 15, 2020, must file the return and make payments by July 15, 2020. This change impacts the estates of decedents who died between July 1, 2019, and October 14, 2019, and those that made requests to extend the due date to between April 1, 2020, and July 15, 2020. Any requests for filing extensions beyond the July 15 due date will move the filing date to January 15, 2021, but will not impact the payment due date.
• Collection efforts (including issuance of liens and lien warning notices, attachment of bank accounts, and holds on renewal of licenses, including Maryland driver’s licenses) will cease until 30 days after the state of emergency is lifted by Governor Hogan. Taxpayers who are currently on a payment plan for delinquent business or income taxes and are unable to make those payments as a result of the COVID-19 crisis should contact the Comptroller’s office to request a payment deferral. Because the Comptroller’s taxpayer assistance lines are closed, a deferral request should be made by email to cdcollectionbizz@marylandtaxes.gov for business taxpayers and COVID19@marylandtaxes.gov for individual taxpayers.
• There is a filing and payment extension until July 15, 2020, for business-related taxes. These “business-related taxes” include sales and use, withholding, admissions and amusement, alcohol, tobacco, motor carrier and motor fuel taxes, and tire recycling and bay restoration fees.
• The unclaimed property reporting and payment deadline for insurance companies is extended until July 31, 2020.
• All expiration and renewal dates with the Maryland Department of Assessments and Taxation (SDAT) are extended until 30 days after the state of emergency is lifted by Governor Hogan.
• The Annual Report and/or Personal Property Return filing deadline with SDAT is extended until July 15, 2020, for all entities.
• Temporary Acceptance of Digital Signature and Secure Email Communications.
• The Comptroller is going to follow the Internal Revenue Service guidance regarding the acceptance of digital signatures on certain documents. The use of digital signatures is limited to the determination and collection of liabilities. Documents that may be signed digitally include extension of statute of limitations on assessment or collection, consents to assessment, or agreements to specific tax matters or tax liabilities (closing or settlement agreements).
• The Comptroller’s office will now allow Comptroller employees to send and accept documents via secure email. A taxpayer can request that a Comptroller employee send a secure email. Alternatively, the Comptroller will accept password-protected attachments using certain programs. The “programs,” however, have not been identified by the Comptroller.
• In order for the Comptroller to accept a document with a digital signature, the taxpayer or the taxpayer’s representative must include the following or similar statement in a cover letter or email transmitting the document: “The attached [name of document] includes [name of taxpayer]’s valid signature and the taxpayer intends to transmit the attached document to the Comptroller of Maryland.”

Relief Fund Loans

Maryland has established a $75 million loan fund to provide small businesses with Relief Fund loans upon the following terms and conditions:

• three-year loans of up to $50,000 for individual businesses (not to exceed three months of cash operating expenses);
• 0% APR for the first 12 months and 2% APR for the remaining 36 months;
• deferral of payments for the first 12 months and straight-line amortization from Month 13 through Month 36;
• no collateral requirements;
• businesses must provide two years of historical financial statements and the most recent interim statement;
• businesses must provide a six-month pro forma of estimated lost revenue or other documented loss evidence; and
• business owners must have a minimum personal credit score of 575.

Relief Fund Grants

Maryland has also established a $50 million grant fund to provide small businesses with Relief Fund grants upon the following terms and conditions:

• grants will be provided up to $10,000, but not to exceed three months of cash operating expenses;
• annual revenues of businesses are not to exceed $5 million, as evidenced by a financial statement or other documentation; and
• businesses applying for grants are expected to seek longer-term funding through banks, SBA, or other financing sources.

Relief Fund Eligibility

In order to be eligible for a Relief Fund loan or grant, Maryland businesses must meet the following qualifications:

• established prior to March 9, 2020, and currently in good standing;
• must have fewer than 50 employees on payroll for whom they have had payroll taxes withheld (i.e.,W-2 employees); and
• must demonstrate financial stress or disrupted operations, which may be evidenced by the following:
• notices from tenants closing operations and failing to pay rent due to loss of income,
• notice of inability to make loan payments due to reduced sales or suspended operations,
• increased cost related to COVID-19 prevention measures,
• notice of a disrupted supply network leading to a shortage of critical inventory or materials, or
• any other documented circumstances, which may be reviewed on a case-by-case basis.

Maryland COVID-19 Emergency Relief Manufacturing Fund

The Relief Fund also includes a $5 million incentive program to help Maryland manufacturers produce personal protective equipment for hospitals and healthcare workers across the country. More details of this program are expected to be announced Friday, March 27, 2020.

Layoff Aversion Fund:

Eligible Maryland businesses may apply to receive up to $50,000 in order to mitigate employee layoffs and adhere to “social distancing” policies established by health and public entities. Such uses of funds include purchasing remote access equipment and software to facilitate work from home, purchasing cleaning and sanitation supplies to allow businesses to maintain an on-site workforce, paying for additional liability insurance for businesses that convert to delivery business models and other strategies to reduce or eliminate the need for layoffs, subject to approval by the Maryland Department of Labor. Funds may not be used for hazard pay, employee wages other than those utilizing the Workshare Unemployment Insurance Program or support services such as childcare, transportation, lodging and meals.

Businesses eligible for assistance through the Layoff Aversion Fund:

• have 500 employees or fewer based within the State of Maryland,
• are up to date on Unemployment Insurance Taxes and in good standing with the Comptroller, and
• can demonstrate a need for layoff aversion support due to the impacts of COVID-19

We recommend eligible businesses apply for Relief Fund programs immediately. If you believe your business qualifies for a Relief Fund loan or grant, please contact the authors of this alert, who can provide additional information as well as support in completing an application.

This alert was written by Andrew Murphy and Kimberly Gilreath, lawyers in the Corporate, Securities & Tax practice group at Miles & Stockbridge.

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