Corporate Legislative Update

By Whiteford, Taylor & Preston L.L.P.

Listed below are several bills of general interest to corporate attorneys. This list only highlights certain bills before and/or passed by the Maryland legislature, and is not meant to include a full list or discussion of each and every bill.

1. Personal Information Protection Act (01/01/08)

SB 194 and HB 208 require all businesses and their contracted third parties to take reasonable steps to protect against unauthorized access to or use of such information when destroying customer records. Businesses that own or license the personal information of Maryland residents must implement and maintain reasonable security procedures and practices (including the retention of certain records for a period of time) and notify a consumer if their personal information was inadvertently disclosed.

2. Physical Therapists (10/01/07)

SB 483 and HB 386 include the services of a physical therapist as a “professional service” that may be rendered through a Maryland professional corporation.

3. Maryland Small Business Development Financing Authority Financing Limitations (10/01/07)

HB 989 alters the limitations on lending, guarantees, and equity participation financing by the Maryland Small Business Development Financing Authority. The maximum amount payable under a loan or guaranty increased to $2,000,000, and the authority may now guarantee any surety to the lesser of 90% or $5,000,000 of the surety’s losses incurred under a bid bond or a performance bond. An applicant’s minimum qualifications are altered to add a “combination of minimum net worth pledged as security and equity investment equal to at least 5% of the total cost of the acquisition” to the list of net worth and equity investment requirements.

4. Execution Requirements for Business Trusts (06/01/07)

HB 1165 amends Section 1-301 of the Corporations and Association Article to extend to Business Trusts the requirements applicable to corporations and real estate investment trusts (REITs) for signing, acknowledging, witnessing, attesting, and verifying specified charter documents.

5. Captive Real Estate Investment Trusts (07/01/07)

SB 945 and HB 1257 require that a “captive” Real Estate Investment Trust (REIT) add back any amounts claimed as dividend deductions to its calculation of federal taxable income for the purpose of calculating its Maryland modified income. Companies can no longer avoid portions of Maryland income tax by establishing captive REITs to own real property, leasing the property back to the company, and returning the lease payments back to the company as a deductible dividend. A captive REIT is one owned 50% or more by a single entity that is taxed under Subchapter C of the Internal Revenue Code.

6. Solar Energy Grants and Devices (06/01/07)

HB 590 grants a property tax exemption for solar energy devices used to heat, cool, generate electricity or provide hot water for dwellings in Maryland. It also permits amounts received as grants under the State’s Solar Energy Grant Program to be subtracted from a taxpayer’s calculation of their federal adjusted gross income for the purposes of calculating their Maryland adjusted gross income.

7. Income Tax Withholding Non-resident Contractors (07/01/07)

HB 1143 repeals the former Tax-General Section 13-803 that requires persons doing business with non-resident contractors on contracts that are, or are expected to be, in excess of $50,000 to withhold three percent of the contract price until the Comptroller has issued a tax clearance certificate.