HARRY HUGHES, Governor

3473

to Maryland and to improve Maryland's reputation as a
financial and commercial center. Therefore by enacting this
legislation the General Assembly intends to permit financial
institutions to establish facilities based in the State for
the purpose of making loans to or accepting deposits from
certain foreign customers free from either interest rate
restrictions or reserve requirements, and the State
franchise tax. Related foreign exchange transactions would
also be eligible. To prevent favorable tax treatment on
income from loans which should properly be made through
domestic financial institutions, proceeds from loans to
foreign branches of a domestic corporation or foreign
affiliated corporation of a domestic corporation must be
used outside of the United States or in an approved foreign
trade zone. These provisions permit a domestic bank to make
loans to and accept deposits from specified foreign
customers through its Maryland-based international banking
facility under essentially the same conditions which exist
outside the United States where that business is now being
conducted; now, therefore,

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF
MARYLAND, That section(s) of the Annotated Code of Maryland
be repealed, amended, or enacted to read as follows:

Article 81 - Revenue and Taxes

128A.

[(a) A franchise tax is hereby annually levied and
imposed for each fiscal year of the State beginning after
June 30, 1968, upon every domestic financial institution for
the privilege of existing as a corporation during any part
of the State's fiscal year, and upon every financial
institution organized under the laws of the United States or
another state or nation for the grant to it of the privilege
in corporate or organized form of transacting or for the
actual transaction by it of any business within this State
during any part of the State's fiscal year. "Financial
institution" as used in this section shall include all
commercial banks, safe deposit and trust companies, and
finance corporations as defined in § 2(9) of this article
but shall not include domestic or foreign finance
corporations which make loans exclusively to farmers for
agricultural purposes or any corporation licensed under the
Small Business Investment Act of 1958, as amended (15 USCA
661 et seq., as amended).

(b) The tax imposed by this section shall be measured
by the net earnings of such financial institution for the
taxpayer's annual accounting period, whether calendar year
or fiscal year as defined in § 279(h) of this article,
ending within the fiscal year of the State for which the tax
is imposed. For the fiscal year of the State ending June 30,