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MARYLANDFORM5002020CORPORATION INCOME TAXRETURN INSTRUCTIONSGENERAL INSTRUCTIONS Nonprofit organizations that are exempt from taxationunder IRC Section 501, except those with taxable income forfederal purposes, such as unrelated business taxable incomeor exempt function income under IRC Section 527.FILING FORM 500Form 500 must be filed electronically if the corporation plansto claim a business income tax credit from Form 500CR or theHeritage Structure Rehabilitation Tax Credit from Form 502S.Under Section 501, a variety of organizations, generallynonprofit groups organized for charitable or mutual benefitpurposes, are exempt from income taxation. However, it maybe subject to income tax if it has income from the operation ofa business not related to the purpose for which they receivedtheir exemption.PURPOSE OF FORM Form 500 is used by a corporation andcertain other organizations to file or to amend an income taxreturn for a specific tax year or period.NOTE: S corporations must use Form 510 — Maryland PassThrough Entity Income Tax Return, or Form 511 - Pass-ThroughEntity Election Income Tax Return.1The same tax treatment afforded for federal income taxpurposes is afforded for Maryland income tax purposes.Income that is taxable for federal purposes also is taxable forMaryland purposes. Exempt corporations with federal taxableincome must file Form 500 to report the income and pay thetax.WHO MUST FILE?TAXPAYERS REQUIRED TO FILE Every Maryland corporationmust file an income tax return on Form 500, even if it has notaxable income or if the corporation is inactive. Every othercorporation that is subject to Maryland income tax law and hasincome or losses attributable to sources within Maryland alsomust file Form 500.Whether or not required to file Form 500, nonprofitorganizations operating in Maryland that are subject to federalexempt-status notification requirements must register withthe Maryland Revenue Administration Division. To register, anauthorized official must submit a letter of request accompaniedby a copy of the Internal Revenue Service (IRS) determinationof tax-exempt status.Corporations operating in Maryland and in one or more otherstates are subject to Maryland income tax if their Maryland activityexceeds the provisions for federal protection from state taxation.U.S.C.A. Title 15, Section 381 of the Interstate Commerce TaxAct (P.L. 86-272) prescribes the extent of business activityrequired before states may impose income taxes.Other agencies such as the State Executive Department Secretary of State, State Department of Assessments andTaxation and Attorney General’s Office each has its ownspecific requirements for nonprofit organizations. Investment conduits such as a Regulated InvestmentCompany (RIC), and a Real Estate Mortgage InvestmentConduit (REMIC), except those with taxable income for federalpurposes. Investment conduits with such taxable incomemust file Form 500 reporting the taxable income. Real EstateInvestment Trust should see Special Requirements For CertainOrganizations.A multistate corporation that operates in Maryland but is notsubject to the Maryland income tax law is not required to file,although a return reflecting an apportionment factor of zero maybe filed for record purposes. Letters in lieu of filing will not beaccepted.All financial institutions are subject to corporation income tax andhave special apportionment rules. See Maryland Tax Regulation03.04.08. Individual retirement account (IRA) trusts that areexempt from taxation under IRC Section 408 (e)(1), exceptthose with taxable income for federal purposes. IRA trustswith such taxable income must file Form 504 reporting thetaxable income.ORGANIZATIONS EXEMPT FROM FILING The followingorganizations are not subject to the Maryland corporation incometax and are exempt from filing an income tax return on Form500, except as specified: Pass-through entities defined as partnerships in IRCSection 761, S corporations in IRC Sections 1361 and 1362,Limited Liability Companies (LLC) in Maryland Corporationsand Associations Article Section 4A-101 and business trusts inMaryland Corporation and Associations Article Section 12-101. Insurance companies within the meaning of the InsuranceArticle, Annotated Code of Maryland, Managed CareOrganizations and Health Maintenance Organizations aresubject to the insurance company premium tax. Insurancecompanies must contact the Maryland Insurance Administrationregarding filing requirements and taxation.LLCs and Business Trusts are treated as partnerships forMaryland income tax purposes, unless they are treated ascorporations for federal income tax purposes. Common trust funds as defined in the Maryland FinancialInstitutions Article Section 3-501(b). Fiduciary taxpayers must file an income tax return on Form504. Fiduciaries who are an Electing Small Business Trust(ESBT) are taxable by Maryland. See Form 504 Instructionsfor more information.Pass-through entities must file an income tax return on Form510 or Form 511. Additionally, each member must file anincome tax return.An S corporation that is subject to federal income tax at thecorporate level, also is subject to Maryland corporation incometax and Form 500 must be filed.SPECIAL REQUIREMENTS FOR CERTAIN ORGANIZATIONS Affiliated corporations that file consolidated federalreturns must file separate Maryland returns for each membercorporation. Each member corporation must file and reportthe taxable income or loss on a separate basis, withoutregard to the consolidation for federal income tax purposes.Consolidation adjustments reported for federal purposes arenot allowed for Maryland purposes.Maryland will follow the IRS rules for a single member LLCthat is disregarded as a separate entity (“check-the-box”) andcertain partnerships that do not actively conduct a businessand have elected not to be treated as a partnership.For additional information regarding the taxation and filingrequirements of pass-through entities, see the instructionsprovided with Form 510 and Form 511. Qualified Sub-S Subsidiaries are treated as divisions by theIRC and are not considered as separate entities for Marylandpurposes. These divisions will be included on the parent1

MARYLANDFORM5002020CORPORATION INCOME TAXRETURN INSTRUCTIONScompany’s annual Maryland return.to audit for up to three years from the date the amended returnis filed. For more information regarding refund limitations, seeAdministrative Release 20. The Returns must be filed with the A Real Estate Investment Trust (REIT) is subject to theMaryland income tax when the REIT has taxable income at thefederal level, as computed on Federal Form 1120-REIT, thatis taxed on the REIT’s federal return. In addition, a CaptiveREIT may have a Maryland income tax liability even if thatentity does not have a federal income tax liability on its federalreturn.Comptroller of MarylandRevenue Administration Division110 Carroll StreetAnnapolis, MD 21411-0001Corporations and organizations that are afforded a later due datefor federal returns under the Internal Revenue Code (IRC) areafforded the same due date for Maryland income tax returns.A Captive REIT is a corporation, trust, or association that is: Considered an REIT for the taxable year under IRC Section856;3 Not regularly traded on an established securities market; and More than 50% of the voting power or value of the beneficialinterests or shares of which, at any time during the last halfof the taxable year, are owned or controlled (directly orindirectly) by a single entity that is a C corporation.Form 500 must be signed by a duly authorized corporate officer.Preparers, other than corporate employees, also must printname and sign the return.If a return is filed by a fiduciary, the fiduciary must print nameand sign the return and attach verification of the authority to doso. See Instruction 9 - Signatures and VerificationRefer to Maryland Tax-General Article Section 10-306.1(a)(2)for certain exceptions. A Captive REIT is required to report aMaryland addition modification for the amount of its federaldividends paid deduction.4 Manufacturing Corporations are subject to a special singlefactor formula of receipts. The rules for calculating the singlefactor can be found in Maryland Regulation 03.04.03.10.2SIGNATURES REQUIREDGENERAL INFORMATION FOR FORM 500Accounting Periods The tax year or period used for the federalreturn must be used for the Maryland return. Accordingly,calendar tax years, fiscal tax years, 52-53 week tax years, andshort tax periods may be necessary for Maryland filing purposes.WHEN AND WHERE TO FILEA Maryland return must be filed for each reporting period forwhich a federal return is filed or required. The form used for filingmust reflect the preprinted tax year in which the corporation’stax year begins.File the original Form 500 by the 15th day of the 4th monthfollowing the close of the tax year or period, or by the originaldue date required for filing the federal return.Amended returns must be filed within 3 years from the datethe original return was due or filed. A return filed before the duedate is considered to have been filed on the date it was due. Thefollowing exceptions apply:In a 52-53 week tax year, Maryland follows federal treatment asto effective dates or the applicability of any provision expressed interms of tax years beginning, including or ending with referenceto a specified date. A claim for refund filed within 3 years after the date of filingthe return is limited to the amount paid within the 3 years(including extensions) before you filed the claim.Use of Federal Figures In preparing Form 500, all itemsreported for federal purposes must be reported on the Marylandreturn in the same manner. The character of an item cannot bechanged from that required or elected for federal purposes. A claim for refund filed after 3 years, but within 2 years fromthe date the tax was paid is limited to the amount paid withinthe 2 years immediately before filing the claim.Copy of Federal Return Required A copy of the actual federalincome tax return through Schedule M2 as filed with the IRS forthe corresponding tax period must be attached to Form 500. TheMaryland filing will not be complete unless the required federalcopy is attached. A claim for refund based on a federal NOL carryback must befiled within 3 years after the due date (including extensions)of the return for the tax year of the NOL. If the Internal Revenue Service (IRS) issues a finaldetermination of adjustments that would result in an increaseto Maryland taxable income, file the amended return within90 days after the final determination.Corporations included in a consolidated filing for federal incometax purposes must file separate returns for Maryland purposesand attach a copy of the actual consolidated federal returnthrough Schedule M2 to each Maryland filing. Each Marylandfiling also must include a copy of the columnar schedules ofincome and expense and of balance sheet items (which arerequired for the federal filing), reconciling the separate items ofeach member corporation to the consolidated totals. If the IRS issues a final report of adjustments that wouldresult in a decrease to Maryland taxable income, file theamended return within 1 year after the final adjustmentreport or the final court decision, if appealed.Taxable Income The starting point for Form 500 is taxableincome as developed for the federal income tax return afterspecial deductions for dividends. (See “Specific Instructions” forline 1a and 1b.) No modification of the federal net operatingloss or special deductions is allowed under Maryland incometax law except in the case of a Foreign Dividend SubtractionCarryforward (FDSC), decoupling modifications, and Section 10306.1 related party transactions. If the claim for refund or credit for overpayment resultedfrom a final determination made by an administrative boardor an appeal of a decision of an administrative board, that ismore than 3 years from the date of filing the return or morethan 2 years from the time the tax was paid, the claim forrefund must be filed within 1 year of the date of the finaldecision of the administrative board or final decision of thehighest court to which an appeal of the administrative boardis taken.The federal net operating loss deduction effectively is allowedfor the Maryland filing by using federal taxable income. TheNote: Changes made as part of an amended return are subject2

MARYLANDFORM5002020CORPORATION INCOME TAXRETURN INSTRUCTIONSfederal provisions for carryback and carryforward also applyfor purposes of the Maryland return unless you are followingcertain provisions of the Job Creation, Worker Assistance Act of2002, the American Recovery and Reinvestment Act of 2009. Ifan election to forgo a carryback is made, a copy of the federalelection must have been included with the Maryland return forthe loss year.consolidated filing and files a separate return with the IRS.Maryland modified income is federal taxable incomeafter statutory addition and subtraction adjustments and/ormodifications. For a list of the statutory addition and subtractionadjustments and modifications, see Specific Instructions.Maryland apportioned income is applicable only for multistatecorporations and is developed by applying the apportionmentfactor to Maryland modified income. For an explanation ofapportionment provisions, see Instructions for Schedule A –Computation of Apportionment Factor.For the tax year in which a net operating loss occurs, thatcurrent operating loss is used to offset Maryland modifications.If the total of addition modifications exceeds the totalsubtraction modifications in the tax year of the net operatingloss, a modification to recapture the excess of additions oversubtractions is required when claiming the corresponding netoperating loss deduction. For more information, see Section 10205 of the Maryland Tax-General Article.Maryland taxable income is federal taxable incomeafter statutory adjustments, modifications and applicableapportionment.Maryland Business Income Tax Credits For informationabout credits against the tax, see Specific Instructions for lines15c and 15d or the instructions provided for Form 500CR Maryland Business Income Tax Credits. Form 500CR Instructionsare available online at www.marylandtaxes.gov. You must fileForm 500CR electronically to claim a business income tax credit.NET OPERATING LOSS DEDUCTIONS. The NOL for Marylandpurposes is the federal net operating loss. No modification ofthe federal NOL is allowed under Maryland income tax law exceptin the case of a foreign source dividend subtraction. For moreinformation about foreign source dividend subtractions, refer toAdministrative Release 18.Tax, Interest and Penalty The tax rate is 8.25%. The annualrate of interest charged for taxes owed to the State is 10.5%from 01/01/20 through 12/31/20. The annual interest rateafter 12/31/20 is 10%. For more information, visit www.marylandtaxes.gov.A corporation included in a consolidated federal filing must useits separate federal NOL. An NOL should be entered on line 5 onForm 500 but may not be used to reduce line 6 to less than zero.Note: For 2020, Maryland has decoupled certain provisionsfrom the CARES Act. For more information, see Tax Alert7-24 at www.marylandtaxes.gov.A penalty is applicable for late filing of tax returns and/or latepayment of any taxes due. Additional penalties are applicable forthe filing of false, fraudulent or frivolous returns and civil and/orcriminal fines and imprisonment may apply.Generally, the carryback of an NOL does not change thepreviously reported addition or subtraction modifications in acarryback year.In the case of delinquent taxes, the State will record a lien andjudgment and proceed with legal action as necessary to effectcollection of the balance due.The federal provisions for carryback and carryforward applyfor purposes of the Maryland return unless you are followingcertain provisions of the Internal Revenue Code (IRC) fromwhich the State of Maryland has decoupled, including certainspecial depreciation allowances and 2-year carryback provisions(farming loss only). If an election to forgo a carryback is made,a copy of the federal election must have been included with theMaryland return for the loss year.5OTHER MATTERSExtension of Time to File If unable to file Form 500 by thedue date, a corporation must submit Form 500E - MarylandApplication for Extension to File Corporation Income Tax Return.Maryland law provides for an extension of time to file, but in nocase can an extension be granted for more than seven monthsbeyond the original due date.An addition modification may be required in a carryback orcarryforward year if the total Maryland addition modificationsexceed the total Maryland subtraction modifications in the lossyear (NAM or net operating loss modification recapture).The request for extension of time to file will be granted for sevenmonths, provided that:The required addition modification represents a recapture ofthe excess additions over subtractions and generally is equalto the lesser of the NOL deduction in the carryback year or thenet addition modification in the loss year. For more informationregarding net addition modification, refer to AdministrativeRelease 18.1) The application is properly filed and submitted by the 15thday of the 4th month following the close of the tax year orperiod, or by the original due date required for filing of thefederal return; and2) Full payment of any balance due is submitted with theapplication.NET CAPITAL LOSSES. If a net capital loss carryback is usedto reduce federal taxable income, an addition modification isrequired for the amount of the income reduction.The application extends only the time allowed to file the annualincome tax return and not the time allowed to pay the tax.The federal special deduction for dividends is treated asa current year deduction. It is deducted from federal taxableincome before application of the net operating loss deduction.The deduction reduces taxable income and may create a netoperating loss.For additional information regarding extensions of time to file,see the instructions provided with Form 500E.Estimated Income Tax Every corporation that reasonablyexpects its Maryland taxable income to develop a tax in excessof 1,000 for the tax year or period must make estimatedincome tax payments with Form 500D - Maryland Declaration ofEstimated Corporation Income Tax. If the corporation is requiredto make multiple payments it will use a Form 500D for eachof the additional payments. This form is available at www.marylandtaxes.gov.If an affiliated group of corporations files a consolidatedreturn for federal purposes, each member corporation mustcalculate any net operating loss and special deductions basedon its separate federal taxable income and loss. The deductionsmust be calculated in strict accordance with federal income taxprovisions, as if the member corporation is not involved in a3

MARYLANDFORM5002020CORPORATION INCOME TAXRETURN INSTRUCTIONSDeclaration of estimated income tax payments are due by the15th day of the 4th, 6th, 9th and 12th months following thebeginning of the tax year or period. The total estimated taxpayments for the year must be at least 90% of the tax developedfor the current tax year or 110% of the tax that was developedfor the prior tax year. At least 25% of the total estimated taxmust be remitted by each of the four installment due dates.together with a copy of the final IRS adjustment report must besubmitted within 90 days.Each affected member of a consolidated federal filing also mustinclude a schedule reconciling the separate adjustments of eachmember corporation to the consolidated totals.Refund Claims Generally, a claim for a refund (amendedreturn) must be filed within 3 years from the date the originalreturn was filed or within 2 years from the date the tax was paid,whichever is later. A return filed early is considered filed on thedate it was due.In the case of a short tax period, the total estimated tax requiredis the same as for a regular tax year: 90% of the tax developedfor the current (short) tax year or 110% of the tax that wasdeveloped for the prior tax year. The minimum estimated taxfor each of the installment due dates is the total estimatedtax required divided by the number of installment due datesoccurring during the short tax year.If the claim for refund resulted from an IRS adjustment or finaldecision of a federal court which is more than 3 years from thedate of filing the return or more than 2 years from the time thetax was paid, a claim for refund must be filed within 1 year fromthe date of the adjustment or final decision.For additional information regarding estimated income tax, seethe instructions provided with Form 500D.A claim for refund based on a federal net operating loss carrybackmust be filed within 3 years after the due date of the return forthe tax year of the net operating loss.Audits and Appeals All items reported on Form 500 are subjectto audit, verification and revision, including items reported forfederal purposes. Returns and amendments are subject to auditand adjustment for a period of 3 years from the date the returnwas due (including extensions) or the date the return was filed,whichever is later.Taxpayer Identification Required for Returns and OtherDocuments All returns, correspondence, payments or otherdocuments must indicate the corporation name, FederalEmployer Identification Number (FEIN), type of tax and taxyear(s) to which the document relates.In the event of revision and assessment or reduced refund, theComptroller will notify the corporation. If in disagreement withthe assessment or denial of the refund, the corporation may filewith the Compliance Division a written request for revision of theassessment or reconsideration of the refund denial. The request,in either case, must be made by submitting an application for aninformal hearing with the Compliance Division within 30 days ofthe assessment or denial of the refund.All corporations are required to secure a FEIN from the IRS. TheFEIN is the number used by the IRS for processi

Maryland may grant a taxpayer a waiver of the requirement to file for certain tax credit(s) by electronic means. Form 500CRW, Request for a Waiver, must be submitted with the Form 500CR that establishes a reasonable cause for not filing by electronic means or that there is no feasible means of filing electronically creating an undue hardship.