WILLIAM DONALD SCHAEFER, Governor

Ch. 2

(C) NONRESIDENT.

(1)  A NONRESIDENT SHALL; INCLUDE AS TAX PREFERENCE
ITEMS ONLY THOSE ITEMS THAT ARE BASED ON INCOME TAXABLE IN THE
STATE.

(2)  IF THE TAX PREFERENCE ITEMS ARE BASED ON INCOME
DERIVED BOTH IN AND OUT OF THE STATE, THE NONRESIDENT IS ALLOWED
ONLY A FRACTION:

(I)  THE NUMERATOR OF WHICH IS THE DOLLAR AMOUNT
OF THE TAX PREFERENCE ITEMS BASED ON INCOME TAXABLE IN THE STATE;
AND

(II)  THE DENOMINATOR OF WHICH IS THE TOTAL
DOLLAR AMOUNT OF THE TAX PREFERENCE ITEMS.

REVISOR'S NOTE: This section is new language derived
without substantive change from former Art. 81, §
280B(a), (c), and the second sentence of (b).

In subsection (a)(4)(i) of this section, the
cross-reference to "§ 613A of the Internal Revenue
Code" is added for clarity.

In subsection (b) of this section, the former
requirement to report the pro rata share "on his
individual return in a manner consistent with federal
requirements" is deleted as surplusage.

The first sentence of former Art. 81, § 280B(b), which
required an S corporation to prorate its tax
preference items among the shareholders of the
corporation, is deleted as surplusage in light of the
requirements of the Internal Revenue Code. This
deletion also avoids a potential misconstruction that
the S corporation uses tax preference items in
determining its tax liability.

Former Art. 81, § 280B(d), which excluded "State and
local income taxes" from tax preference items, is
deleted as obsolete since, under the federal Income
Tax Reform Act of 1986, those taxes are no longer
included under the federal computations.

As to special treatment of income, see Subtitle 4 of
this title.

Defined terms: "Internal Revenue Code" § 1-101
"Nonresident" § 10-101 "S corporation" § 10-101

SUBTITLE 3. MARYLAND TAXABLE INCOME
CALCULATIONS FOR CORPORATION.

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