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ROBERT L. EHRLICH, JR., Governor H.B. 638
1. is subject in another state OR IN A FOREIGN NATION THAT
HAS ENTERED INTO A COMPREHENSIVE TAX TREATY WITH THE UNITED STATES
GOVERNMENT to a tax that is measured by gross receipts or is measured by net
capital or net worth; and
2. is not subject in that state OR IN THAT FOREIGN NATION
to a tax measured by net income or receipts; or
(ii) under other circumstances demonstrating to the satisfaction of
the Comptroller that avoidance of any portion of the tax due under this title is not a
principal purpose of the transaction giving rise to the payment of the interest expense
or intangible expense between the corporation and the related member, the
Comptroller determines that it is impractical for a related member that is subject to
tax in this State [or], another state, OR A FOREIGN NATION THAT HAS ENTERED INTO
A COMPREHENSIVE TAX TREATY WITH THE UNITED STATES GOVERNMENT, where
the measure of the tax includes the payment to satisfy the requirements of subsection
(c)(3)(ii) of this section.
(e) If the payor and the recipient are both included in a combined or
consolidated report filed in a jurisdiction:
(1) for purposes of subsection (c)(3)(ii)2 of this section, the measure of the
tax imposed by that jurisdiction shall be deemed to include the interest expense or
intangible expense; and
(2) for purposes of determining the effective rate of tax imposed by the
jurisdiction, the applicable apportionment rate is the lesser of:
(i) the apportionment rate of the recipient corporation, determined
by using only that corporation's factors in the numerators and denominators of the
apportionment formula; or
(ii) the apportionment rate of the combined or consolidated group,
determined by combining the recipient corporation's factors with the factors of other
members of the group included in the combined or consolidated report.
(f) (1) In addition to the modifications under §§ 10-305 and 10-306 of this
subtitle, subject to paragraph (2) of this subsection, to determine Maryland taxable
income, an amount is subtracted from the federal taxable income of a corporation
equal to the amount received as royalties, interest, or similar income from intangibles
from a related member to the extent the related member, with respect to the
payment, is subject to the addition modification under subsection (b) of this section or
a similar addition modification of another state OR OF A FOREIGN NATION THAT HAS
ENTERED INTO A COMPREHENSIVE TAX TREATY WITH THE UNITED STATES
GOVERNMENT for intangible expenses or interest expenses paid to related members.
(2) The subtraction modification under this subsection is not allowed to
the extent that:
(i) the transaction giving rise to the payment of the interest
expense or intangible expense had as a principal purpose the avoidance of State
income taxes;
- 4147 -
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