The 2016 legislation included two bills that were harmful to existing manufacturers in Maryland. Fortunately those bills were defeated partially by a group from members. Since that time has been contacted by Senator Roger Manno (D Montgomery County) and MD Department of Commerce to solicit suggestions for legislation that would improve the business climate for Maryland manufacturers. Below is a list of ideas originating from manufacturers across Maryland.

Please review the ideas and offer your feedback for inclusion in discussions about potential legislation favoring manufacturers. Please also contact the This email address is being protected from spambots. You need JavaScript enabled to view it. if you have new and or different ideas for legislation in support of the manufacturing industry. We will compile a list and get it into the hands of as many legislators as possible. 

All recommendations for consideration are limited to companies engaged in manufacturing, distribution, logistics, and fulfillment. All suggestions require that the company full time employee head count remain at or increase from current levels for the entire period. The maximum size of the company to qualify would be $50m (or some number) in annual revenue when the program starts.

The legislative ideas are not in any specific order.

Capital Equipment Refundable Tax Credit

Provide refundable tax credit of 50% for capital equipment up from $100k to $1m recovered over 2 years. Minimum investment by company of $250k. Company must maintain current number of full time employees for the 2-year period. Encourages companies to invest in capital equipment and provides an opportunity to recover training costs. Eligible companies must have 15 – 150 full time employees when the process starts. Equipment must be located and remain in Maryland at all times.

In order to compete and remain competitive, advanced manufacturers in Maryland must refresh their capital equipment at a substantially faster rate than their competitors in other states where the cost of labor, utilities and taxes are substantially smaller. 

Maryland manufacturers leverage technology for competitive advantage. New equipment requires a higher skill level to set up and operate but these jobs also command a higher wage. Simply stated, Maryland manufacturers have to do more with the machines and less with labor in order to complete domestically and internationally. For example: Average wage for a manufacturing worker in Texas is roughly $34,000 compared to the average wage of a Maryland manufacturing worker at $62,000.

This refundable tax credit will create and retain skilled manufacturing jobs in advanced manufacturing companies. It helps small and medium size manufacturers mitigate the higher than normal taxes, energy costs and labor rates. A refundable tax credit is also bankable making it easier for manufacturers to secure a loan.

Growth Tax Credit

Caps the companies tax burden at the current amount for 3 – 5 years provided the company leaves the money in the company. Encourages companies to increase their tolerance for risk and focus on growth.

The following conditions must be met.

1. Company must have 10 – 200 full time employees and the company may not fall below those employment numbers during the credit period.

2. S Corp or LLC

Example – A $10m business that invests in growth of their business will be taxed at lesser of actual rate or $10m rate. If that company grows to $15m during the period, the total corporate taxes paid will remain at the $10m rate. 

This program encourages business owners to increase their tolerance for risk and to invest in new markets, new technologies, and new people.  

S Corp, LLC Incentive to Invest in Maryland

Profits left in the corporation for use as working capital, capital expenditures and incremental growth will not be taxed for a period not to exceed 2 years at which time the company can choose to re-register. This money must remain active. Normal taxes will apply if the money is transferred for any reason. This will encourage business owners to keep their money in Maryland instead of pulling out and moving it to states like FL or DE. As information – it is increasingly difficult for manufacturers in Maryland to obtain loans from traditional banking sources. As banks grow larger their appetite for small manufacturers decreases sharply and their business practices regarding lines of credit become almost predatory. This incentive encourages manufacturers to leave their money in play as opposed to being taxed at the personal rate with no return.

Most small and medium size manufacturers in Maryland are S Corporations. At the end of the year their working capital for the next year is taxed as profits. The result is an immediate loss of cash flow.

Instant Expensing

One of the main expiring federal provisions was the end of a simple and powerful tax reform called “instant expensing,” which previously allowed many businesses including manufacturers to write off up to a certain amount, the investment they make in their company for the year in which they make it.

This allowed the average small- and medium-sized businesses to expense all of the new investment they made each year if they choose to. This helps to mitigate higher taxes. 

For example, an owner of a small business may need to buy a major piece of capital equipment in order to remain competitive with domestic or international business opportunities. Perhaps they need to purchase new computer equipment, software or maybe a 3D printer. Under current law manufacturers write off that investment on their taxes over a long period of time. Often too long to recoup their investment due in part to the ever improving technology base especially in Maryland. Under the instant expensing provisions, manufacturers would make those investments and realize the financial benefit when it most benefited your business. This will increase their banking position, lower their tax burden and increase the manufacturing business owner’s tolerance for risk.

Reports across the country have indicated that over the past decade, provisions like instant expensing have led to businesses expanding and hiring more workers.

Maryland can simply make this expensing provision – and the economic growth that comes from it – a permanent part of the tax code for manufacturers. All they need to do is embed in state tax law the provision for a write-off.

Instant expensing has the added advantage of being a tax provision that all small and medium manufacturers can take advantage of.

Additive Manufacturing

Maryland is quickly becoming a leader in additive manufacturing. Unfortunately, many of the companies that purchase desktop (smaller scale) 3D printers recognize they are underutilized. This incentive will encourage the purchase of multiple 3D printers in a production environment. For companies that purchase 2 or more production grade 3D printers at the same time, refundable tax credit of 25% is offered. Eligible companies must have 15 – 150 full time employees when the process starts. Equipment must be located and remain in Maryland at all times.

Manufacturers who embrace additive manufacturing are similar to those early adopters of CNC (Computer Numerical Controlled) Mills in the early 80’s. This is a new generation of skilled worker for manufacturers. The higher level of intelligence for Maryland workers (per NIST) lends itself well to the creation of these new “departments” within manufacturing. 

Skilled Worker Training Incentive

Funding requested for use similar to PWQ (a very successful program from the past). $1m requested for 50% reimbursement of training resulting in new wages rate of $12/hour or more. A Manufacturing team at Maryland Department of Labor or the Manufacturing Program Manager/Director at Maryland Department of Commerce will determine the reasonable grant amount per occurrence to avoid price gouging and abuse. The maximum allowable reimbursable amount per day would not exceed 50% of $1,500.00 per day. Maximum amount available to a single company is $25k. $100k of this money to be used exclusively for training of export related activities. Eligible companies will employ between 10 and 150 full time people when the program starts. This is substantially different from EARN as the training is specific and unique to each company. EARN has failed to produce sustainable jobs in Maryland manufacturing largely because the programs are generic and targeting unskilled labor while remaining unskilled at the completion. PWQ was one of the most successful State programs for manufacturers in history. Maryland manufacturers demand a higher skilled workforce and the people simply do not exist. This supports training of people to participate in the “digital thread”, programming, modeling and other advanced manufacturing careers.

DLLR has offered something similar this year funded at $500k for all industries combined. The approval process is unclear.

Startup Incentive

For new first time businesses with 1 - 15 FTE’s whose primary owner is a full time active employee and who demonstrate a capital equipment investment of $5m or more, corporate taxes and employer payroll taxes will be forgiven for the first two years. This will increase cash flow critical during the first 24 months of operation with a minimal fiscal note to Maryland.

Made in Maryland

For companies who can demonstrate that their product was manufactured in Maryland using 60% of total labor from Maryland and 60% of components/sub-assemblies manufactured in Maryland a designation of Made in Maryland will be available on a per product basis. This indicates the product is made in America without infringing on the ITA designation Made in USA. Most products simply cannot meet the Made in USA requirement. This does not require legislation but does require an act by the Governor.