For the 2022 tax filing season, entities who file an Annual Report with the State Department of Assessments and Taxation (SDAT) will be required to answer certain questions on the newly added Corporate Diversity Addendum (the Addendum). Depending on your answers to these questions, you will either only have to sign the Corporate Diversity Addendum Affidavit or complete a questionnaire related to Corporate Diversity indicators. The Addendum became effective on August 18, 2022, under Section 11-101 of the Tax-Property Article and is applicable for all 2023 PPT filings.
Who Needs to Complete the Corporate Diversity Addendum?
Filers who meet the criteria below will be required to fill out the remainder of the Addendum.
- The entity is in good standing with the SDAT and meets the following definition: “a commercial enterprise or business that is formed in the State or registered with SDAT to do business in the State; or a corporation, foundation, school, hospital or other legal entity for which none of the net earnings inure to the benefit of any private shareholder or individual holding an interest to the entity.”
- The filer is not a sole proprietor, an LLC owned by a single member, a privately held company (at least 75% of the company’s shareholders are family members), an entity that has an annual operating budget or annual sales less than $5,000,000; and has neither qualified for nor applied for, and does not intend to apply for, a state benefit.
Most notably, there will be questions related to the makeup of the entity’s board as well as a questionnaire for 12 different Corporate Diversity Indicators. Lastly, filers will need to sign the affidavit attesting to the accuracy of responses.
What is the Real Impact?
The most significant impact relates to those who receive a state benefit. Entities that answer yes to at least 4 out of 12 (33%) Corporate Diversity Indicators will qualify to receive a state benefit. A state benefit is defined as:
- A state capital grant funding totaling $1.0 million or more in a single fiscal year (July 1 – June 30)
- State tax credits totaling $1.0 million or more in a single fiscal year (July 1 – June 30)
- The receipt of a state contract with a total value of $1.0 million or more. State contract means a contract that:
- resulted from a competitive procurement process; and
- is not federally funded in any way.
While you may not receive any state benefit, if you receive funding from any Maryland state agency and do not answer yes to at least 4 of the 12 Corporate Diversity Indicators, we advise you reach out to your respective funding agencies. All information that filers include in the Addendum may be shared with other Maryland State agencies. It would be prudent to verify if your respective funding agencies plan to track your responses to these indicators in determining allocation of future grant awards.
If you have any questions on the Corporate Diversity Addendum, please contact your BSSF advisor.
About the Author
Collins Lethbridge, CPA, is a Supervisor at Brown Schultz Sheridan & Fritz (BSSF). Collins provides tax services to clients within a variety of industries, with a specialization in the agriculture sector.