Here’s one we missed during this year’s legislative session: A new Maryland tax credit taking effect this year is designed to help attract investment in tech companies based in the state.
The Maryland Department of Commerce opened applications in late October for the Maryland Innovation Investment Tax Credit. Starting Nov. 1, the rolling application cycle is open to investors in Maryland-based tech companies. It has $2 million in funding for fiscal year 2022, with funds available until they are used up.
Investors can receive a credit of 33% of an investment, up to $250,000. There’s added incentive for companies in rural areas: If a company is based in Allegany, Dorchester, Garrett or Somerset County, investors can receive a credit of 50% of the investment, up to $500,000.
Passed by the Maryland General Assembly and signed into law by Gov. Larry Hogan this year, the tax credit is designed to broaden a previous program specifically designed for cybersecurity. It came as the Department of Commerce sought to rework a number of existing tax credit programs for businesses during the annual legislative session in Annapolis.
“We felt there is a lot of different technology innovation happening in Maryland, and saw an opportunity to broaden the scope of this program to be inclusive of the diverse innovation sector,” said Heather Gramm, senior director of strategic industries and entrepreneurship at the Department of Commerce.
It also shows a broad-based early-stage investment incentive enacted after state lawmakers and entrepreneurs have attempted for the last several years to institute a separate angel investor tax credit for Maryland. Nearby states like Delaware have similar programs.
Companies in a dozen different sectors now qualify: advanced manufacturing, aerospace, agriculture, artificial intelligence, blue technology, cybersecurity, education, energy and sustainability, financial, life sciences, quantum, and sensors and robotics.
It’s designed for investors who back early stage companies. Companies must have less than 50 employees, and a capitalization of at least $100,000.
Within communities and inside the state’s universities and federal labs, technology that is being developed requires early funding as it advances to market. Often, during the product development phase, initial funding is provided by investors to help startups get to a point where they are generating revenue.
State government sees a role in helping that along. The program can also serve as an incentive to look at Maryland companies for investors who are casting a net around the country
“The idea is to help companies attract those investors and give that added incentive to them when they have a lot of investment choices around the country,” Gramm said. “I think it’s especially beneficial for early stage companies that haven’t attracted capital in the past and it’s their first time going out. It can help make the difference in investors taking that risk in those companies.”
It comes as the commerce department is seeking to spotlight startups. Last year, it released a list of Future 20 companies.