A MARYLAND ACCOUNTING FIRM

As a Maryland Accounting Firm we deliver top level service to both individual and business clientele. Throughout our years in business, we’ve had the good fortune to work with, and develop growth for individuals and businesses in a number of different industries.

A MARYLAND ACCOUNTING FIRM

As a Maryland Accounting Firm we deliver top level service to both individual and business clientele. Throughout our years in business, we’ve had the good fortune to work with, and develop growth for individuals and businesses in a number of different industries.

A MARYLAND ACCOUNTING FIRM

As a Maryland Accounting Firm we deliver top level service to both individual and business clientele. Throughout our years in business, we’ve had the good fortune to work with, and develop growth for individuals and businesses in a number of different industries.

A MARYLAND ACCOUNTING FIRM

As a Maryland Accounting Firm we deliver top level service to both individual and business clientele. Throughout our years in business, we’ve had the good fortune to work with, and develop growth for individuals and businesses in a number of different industries.

A MARYLAND ACCOUNTING FIRM

As a Maryland Accounting Firm we deliver top level service to both individual and business clientele. Throughout our years in business, we’ve had the good fortune to work with, and develop growth for individuals and businesses in a number of different industries.

Friday 6 February 2015

The SALT Shaker: The State of Maryland is Ready for Tax Season

The State of Maryland has issued updates and reminders for individual and business taxpayers that will impact the 2014 returns prepared during tax season 2015.
  • Maryland began processing 2014 individual income tax returns on January 20th. 2014 business returns processing began on January 9th.
  • Certain tax credits may only be claimed on electronically filed forms:
    • Businesses and individuals must claim business income tax credits by electronically filing Form 500CR or 502CR.
    • Form 500 or 510 must be filed electronically to claim a Sustainable Communities Tax Credit from Form 502S.
  • There are new tax credits for business taxpayers including credits for qualified vehicles (Class F tractors) and cyber-security investments.
  • The maximum pension exclusion for qualified taxpayers has increased to $29,000 for 2014.
  • For tax year 2014, Maryland is no longer decoupled from the federal itemized deduction limitation threshold.
  • There are new subtraction modifications available for tax year 2014 including:
    • Up to $1,500 of approved un-reimbursed expenses that a foster parent incurs for a foster child.
    • The amount of student loan indebtedness discharged due to total and permanent disability or death.
Please contact the SALT Group if you have any questions regarding these Maryland updates for tax year 2014.

KatzAbosch Raises Awareness for Client, The Children’s Guild, Through Fundraiser with GiftCards.org

KatzAbosch is pleased to announce a fundraising campaign for client, The Children’s Guild, through GiftCards.org. The fundraiser will begin on January 20, 2015 and run for 45 days to end on March 6, 2015. KatzAbosch will raise funds by way of asking our associates, friends and family to turn in any gift cards, gift card balances and store credits to Giftcards.org. The gift cards and store credits will be turned into cash to be given to The Children’s Guild. The funds collected will go toward improving programs for special education, group living, treatment foster care and family mental health services in Maryland. The firm hopes to also raise awareness for the mission of the The Children’s Guild to teach children the values and life skills necessary for a successful life, one filled with caring, contribution and commitment, empowering each child with the vision to see, the courage to try and the will to succeed through a process of adult and organizational transformation.

If you would like to help a child in need through the support of The Children’s Guild, please visit our website: http://giftcards.org/childrens-guild. KatzAbosch will also take collections of gift cards and store credit on the following days to be processed for cash donation to The Children’s Guild. This is a tax-deductible donation.
  • February 6, 2015
  • February 20, 2015
  • March 6, 2015
“We are very excited for the opportunity to help our client (The Children’s Guild) in raising money for their mission. The work that The Children’s Guild has done for children in the community is remarkable and unique.  It is really a place where children in need can thrive and build skills for a better future,” says Kelly Ernest, Marketing Manager, at KatzAbosch. “We hope to raise a sizable donation to help them continue their amazing efforts and build a better world for our children of tomorrow.”

About The Children’s Guild

The Children’s Guild is a nonprofit, child-serving organization dedicated to serving children and adolescents with trauma disorders, who have been traumatized by life experiences or who have autism spectrum disorder and/or multiple disabilities in Maryland and Washington D.C. Founded in 1953, The Children’s Guild has become one of the largest providers of special education, group living, treatment foster care and family mental health services in Maryland.

The Children’s Guild programs are guided by Transformation Education (TranZed), an organizational philosophy that fosters a culture of flexibility. This culture creates management and staff who are agile thinkers. This assures children are treated as individuals and taught the way they learn best.

About KatzAbosch

Founded in 1969, KatzAbosch is one of the largest CPA and business consulting services in the Mid-Atlantic region. As a regional accounting firm, our mission is to provide the highest quality accounting, tax, financial and management consulting services to our clients. We understand the needs and challenges of our clients and we have made it our obligation to create, grow and protect asset value. KatzAbosch is consistently named a Best Accounting Firm to Work For in Accounting Today and as one of the Top Workplaces in The Baltimore Sun. Our firm is also ranked among the Top 15 Largest Accounting Firms in the Baltimore Area by the Baltimore Business Journal and among the Top 200 Accounting Firms in the U.S. by Inside Public Accounting.

Client Spotlight: BridgeEdU Expanding and Showcasing New Website Design

KatzAbosch client, BridgeEDU, has recently updated their website.  BridgeEdU is a unique first year college program that combines core academic courses, real-world internships and service experiences, with the coaching to help students succeed in academics and life. BridgeEdU Scholars will have the opportunity to earn 20+ transferable college credits. Our curriculum focuses on courses necessary for your degree such as writing, communications, and math. Your professional internships will be matched to your interests, and they will be integral to the BridgeEdU experience. Throughout the year, you will work in an environment rich with resources to develop the skills that will lead to timely college completion.

The new website includes a YouTube video, mobile-responsiveness and long-scrolling design where content is more organized and in a much easier format to digest.  BridgeEDU has also created a multi-media blog.  Check the blog out here.

The SALT Shaker: New Tax Credit for 2015 – Endow Maryland

Commencing in 2015, contributions to Qualified Community Foundations will qualify for a 25% Maryland tax credit. There are 14 charities in Maryland that qualify for the tax credit program. Donations to any of these 14 charities will qualify for a 25% Maryland tax credit that can be used to reduce income tax.

The 14 charities can be found at this link – http://www.mdcommunityfoundations.org/. The total annual amount of credit available is $250,000 and approval from the Maryland Department of Housing and Community Development must be obtained to claim the credit.

The KatzAbosch SALT Group can help you determine if this charitable giving would make sense for you. Please contact the KatzAbosch SALT Group if you have any questions regarding SALT issues.

KatzAbosch
9690 Deereco Road, Suite 500
Timonium, MD 21093
410.828.2727

KatzAbosch Announces That Linda J. Lang Has Joined The Firm

LJL for web

KatzAbosch is pleased to announce that Linda J. Lang has joined the firm as Government Contracting Advisor effective January 5, 2015. Linda will provide a specialized list of consultative services to include, but not limited to, proposal review and analysis, assistance with proposal preparation, contract maintenance, GSA scheduling, small business reporting, contract administration, and training. She has spent over 25 years as a government contractor for large and small businesses in the Baltimore and DC Metro areas, where she specialized in both contracting and subcontracting. Linda’s experience working alongside government contractors such as Northrop Grumman, Lockheed Martin, Boeing, Innoplex and TASC has positioned her as one of the most sought-after experts in her industry.

She earned her M.S. in Business Finance and Management from Johns Hopkins University and her B.A. in Business from University of Maryland. Linda has extensive experience with in-house teaching and program specific training on topics to include compliance training in exports and organizational conflicts of interest. She is a member of National Contract Management Association (NCMA) and Armed Forces Communications & Electronics Association (AFCEA). Linda practices her craft through her business philosophy to develop profitable relationships for everyone. During her free time, she enjoys boating, watersports, outdoor hiking and football.

“Linda’s ability to manage complex projects coupled with her commitment to the ever-changing government contracting industry very much align with the firm’s mission to provide exceptional service to our clients, and we are delighted to welcome her to our senior team,” said CEO, Mark Cissell.

About KatzAbosch

Founded in 1969, KatzAbosch is one of the largest CPA and business consulting services in the Mid-Atlantic region. As a Maryland accounting firm, our mission is to provide the highest quality accounting, tax, financial and management consulting services to our regional clients. We understand the needs and challenges of our clients and we have made it our obligation to create, grow and protect asset value. KatzAbosch is consistently named a Best Accounting Firm to Work For in Accounting Today and has been named a Top 200 Accounting Firms in the Nation by Inside Public Accounting for 2014. Our firm is also ranked among the Top 15 Largest Accounting Firms in the Baltimore Area by the Baltimore Business Journal and as a Top 100 Workplace in Baltimore by The Baltimore Sun.

For more information, contact: Kelly Ernest, 410.307.6388 or kernest@KatzAbosch.com.

KatzAbosch Client, BITHENERGY, Partners with Columbia Association (CA) on New Energy Project

Columbia Association (CA) has taken a significant stride in using clean energy and reducing its carbon footprint by partnering with BITHENERGY and SunEdison on a cutting-edge project.
Each year for the next 20 years, CA will be purchasing 2,500 megawatt-hours of solar electricity generated from approximately 2 megawatts of a new 10-megawatt solar farm being built off Route 32 near Interstate 70, in western Howard County. This 2-megawatt portion of the farm is a total of 12 acres, equivalent to nine football fields of solar panels.

The energy produced will provide enough clean, renewable power to meet the needs of two of CA’s fitness facilities – Columbia Athletic Club and Columbia Gym – the equivalent of nearly 25% of CA’s total electricity consumption each year. The project also will eliminate about 1,000 metric tons of carbon dioxide emissions associated with CA’s operations.

“We are delighted that the Columbia Association will benefit from the clean, renewable energy that will be generated from our 10-megawatt solar power plant that is being built in Howard County,” said Robert Wallace, president and CEO of BITHENERGY. “Our engineering staff has worked diligently over the last few years to make the Nixon Solar Farm a model solar energy project that simplifies the process by which governments, nonprofits and commercial businesses seamlessly benefit from robust renewable energy options. Once completed, the Nixon Solar Farm will be the largest solar power plant in Howard County and one of the largest in the state of Maryland.”

A video about CA’s solar farm project can be seen at www.youtube.com/watch?v=adbAYx58shg.

Contractor Business Systems

DFARS

Finalized in 2012, the “Business Systems Rules” outlined mandatory requirements for certain contractor business systems, further defined as (1) accounting and billing; (2) estimating; (3) purchasing; (4) material management; (5) government property; and (6) earned value management. Applying only to contracts awarded after May 18, 2011, the DOD Federal Acquisition Supplement (DFARS) 242.70 specified requirements for each system, and established financial penalties for instances of noncompliance qualifying as “significant deficiencies.” There has been a lack of clarity in how these business systems are analyzed by the government, and in many cases, significant business systems have not been reviewed for many years.

The matter at hand, has prompted the issuance of a proposed rule to amend DFARS aspiring to improve the backlogged audit situation and increase effectiveness of auditing contractors’ accounting systems, estimating systems, and material management and accounting systems.

Note: These proposed rules are not applicable to all contractors, generally will not be applicable to small businesses unless contracts exist which are covered by Cost Accounting Standards.

The proposed rule issued on July 15th, 2014 places the responsibility on the individual contractors to demonstrate compliance with DFARS systems criteria related to the contractors accounting systems, estimating systems, and material management and accounting systems. Simply stated, contractors’ will now perform self-evaluations and hire an independent CPA of their choosing to perform an audit on such criteria. Additionally, the contractor is responsible for disclosing any significant deficiencies discovered during these evaluation engagements. Contracting officers and government auditors will then review the results of the independent CPA audits and self-evaluations.

The proposed rule is not without significant controversy, and in August 2014, the DOD held a public meeting. Questions included in the public meeting were items such as whether or not the Defense Contract Audit Agency (DCAA) would provide an audit program to CPA’s, or if DCAA would be performing re-audits after CPA reports are submitted. DCAA indicated they would provide feedback on a CPA’s audit program, and indicated they do not intend to perform re-audits. Questions have also been raised regarding the level of access provided to government auditors, and expected increased costs as a result of the rule. Needless to say, the proposed rules have several glitches to be improved upon.

Katz Abosch will provide further updates as appropriate and when available.

For more information, contact Josh Sutherland, CPA.

Year-end Holiday Giving: What You Need to Know

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With the holiday season upon us, many of you give generously to your favorite charities and we applaud your efforts. However, to ensure that your donations are tax deductible, there are a number of important points to keep in mind.

Rules for Charitable Contributions of Clothing and Household Items

Household items include furniture, furnishings, electronics, appliances and linens. Clothing and household items donated to charity generally must be in good used condition or better to be tax deductible. A clothing or household item worth over $500 does not have to meet this standard if you include a qualified appraisal of the item with your return.

To be deductible, you must generally get a receipt from the charity showing the date and place of the contribution and a description of the property. However, for gifts under $250, if it is impractical to obtain a receipt (e.g., goods are delivered to an unattended drop site) a receipt is not required if you have written records with the same information as required for gifts over $500 (as described below).
If the gift is worth $250 or more, you must get a written acknowledgment from the charity that includes a description of what was donated and when, and a statement either that no goods or services were rendered in return for the donation or describing and valuing what the charity provided in return. The acknowledgment must be obtained by the time the tax return for the year of the donation is filed or due, whichever comes first.

If the amount of your deduction for all similar non-cash contributions (such as clothing, jewelry, furniture, electronic equipment, household appliances) is over $500, you must keep written records that (1) indicate the appropriate date each non-cash item was acquired, (2) include a reasonably detailed description of the donated property along with its condition, (3) estimate the purchase price of the item, (4) describe its current retail (usually second-hand or thrift-store) value, and (5) explain how this value was determined (e.g., from the Salvation Army’s online donation guide). If the amount of your deduction for all similar non-cash contributions is over $5,000, you’ll generally need to have the items appraised by a qualified appraiser.

Guidelines for Monetary Donations

You must have a bank record or a written statement from the charity to deduct any donation of money, regardless of amount. The record must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, and bank, credit union, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.

Donations of money include those made in cash or by check, electronic funds transfer, credit card, and payroll deduction. For payroll deductions, you should retain a pay stub, a Form W-2 wage statement or other document furnished by your employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.

These requirements do not change the long-standing requirement that you must obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet both requirements.

Other Important Reminders

Other important reminders to keep in mind while planning your holiday and year-end charitable giving include the following:
Qualified Charities. It is important to check to see if the charity is eligible to receive tax-deductible donations. “Select Check,” a searchable online tool available on IRS.gov, lists most such eligible organizations. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in the tool’s database.

Year-end Gifts. Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2014 count for 2014, even if the credit card bill isn’t paid until 2015. Also, checks count for 2014, as long as they are mailed in 2014.

Itemize Deductions. For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction.

Special Rules for Cars Boats, and Airplanes. The deduction for a car, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. The organization must give you Form 1098-C or a similar statement that you can attached to your tax return.Please give us a call if you have any questions or need further information,
Very truly yours,

Your trusted advisors at KatzAbosch

Copyright © 2014 Thomson Reuters/Practitioners Publishing Company. All Rights Reserved. Practitioners Tax Action Bulletins®, Five-Minute Tax Briefing®, Tax Action Memo®, and National Tax Advisory® are registered trademarks used herein under license. For subscription information, call (800) 431-9025. This publication is designed to provide accurate information on the subject matter covered. The publisher is not engaged in rendering professional advice or service. If such expert assistance is required, the services of a competent professional should be sought.

KatzAbosch Has Been Selected as one of The Baltimore Sun’s Top Workplaces

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Baltimore, MD. – December 5, 2014 – KatzAbosch is pleased to announce that it has been selected as one of The Baltimore Sun‘s Top Workplaces.

On Sunday, December 7th, The Baltimore Sun is publishing “The Baltimore Sun Top Workplaces”– a list of the best places to work in the Baltimore metro area. KatzAbosch has been named for the past three years consecutively. KatzAbosch attributes the award to the many professional perks we offer to help our employees grow such as:
  • A great work/life balance.
  • A high-tech education facility with training that exceeds professional requirements.
  • Every employee has an office; no cubes.
  • High-tech paperless office environment.
  • Work from home options.
  • Performance evaluations that provides timely career development.
  • Coaching/mentor program that enhances career paths.
  • Diverse clients for a better learning experience.
  • Extensive research resources to ensure quality and efficiency.
“We are honored to have been selected for the award, particularly as the judges were our employees,” said Mark Cissell, President and CEO.

The Top Workplaces are determined based solely on employee feedback. The employee survey is conducted by WorkplaceDynamics, LLP, a leading research firm on organizational health and employee engagement. WorkplaceDynamics conducts regional Top Workplaces programs with 40 major publishing partners across the United States. Over the past year, more than 5,000 organizations and 1 in every 88 employees in the U.S. have turned to WorkplaceDynamics to better understand what’s on the minds of their employees. Through its workplace improvement offerings, WorkplaceDynamics provides solutions, training and tools to help clients improve their workplace. For more information about the Top Workplaces lists and WorkplaceDynamics, please visit www.topworkplaces.com and www.workplacedynamics.com.

About KatzAbosch

Founded in 1969, KatzAbosch is one of the largest CPA and business consulting services in the Mid-Atlantic region. As a Maryland accounting firm, our mission is to provide the highest quality accounting, tax, financial and management consulting services to our regional clients. We understand the needs and challenges of our clients and we have made it our obligation to create, grow and protect asset value. KatzAbosch is consistently named a Best Accounting Firm to Work For in Accounting Today and has been named a Top 200 Accounting Firms in the Nation by Inside Public Accounting for 2014. Our firm is also ranked among the Top 15 Largest Accounting Firms in the Baltimore Area by the Baltimore Business Journal.
For more information, contact: Kelly Ernest, 410.307.6388 or kernest@KatzAbosch.com

The SALT Shaker: U.S. Supreme Court Hearing – Comptroller vs. Wynne

On Wednesday the Supreme Court hearing for the Wynne’s was held. Quick reminder – this case involves offsetting the Maryland Piggyback taxes with taxes paid to other states. This is an interesting case when you look beyond the details. The real issue for the court to decide is which is more important – states’ rights or the Commerce Clause in the Constitution. The decision could have an impact well beyond Maryland taxes.

I read the transcript from the hearing and based on the questions asked by the justices, there seems to be a lean towards the taxpayers. The Maryland Solicitor General represented Maryland; the justices interrupted him many times to challenge what he was saying. Several justices asked pointed questions that seemed to indicate they disagree with the Maryland position, particularly Chief Justice Roberts. The court has until the end of the current term in June to make a decision, so we will not know for sure until then.

Please contact the KatzAbosch SALT Group if you have any questions regarding Maryland tax filings, or any other SALT issues.

The SALT (State and Local Tax) Shaker is prepared by Andy Bareham, CPA, MST, Chair of the KatzAbosch SALT Group.

Are Your Medical Records Safe?

By Nathalie Griffin-Ames, CPA

md physicians mag

According to Redspin, a leader in healthcare IT security, a total of 804 large breaches of protected health information affecting over 29.2 million patient records were reported to the secretary of Health and Human Services between August 2009 and December 2013.
The 2013 statistics reported by Redspin are alarming:
  • Over 7 million patient health records were breached
  • There was a 137% increase in the number of patient records breached vs. 2012
  • 83% of patient records breached resulted from theft
  • 22% of breach incidents resulted from unauthorized access
  • 35% of incidents were due to the loss or theft of an unencrypted laptop or other portable electronic device
Medical record protection is an important part of today’s medical practice. Although the switch to electronic record keeping has many advantages, it also entails many new risks. The reasons that so many medical records are at risk include:
  • Hackers – the number of attacks on hospitals, private clinics and medical practices has substantially increased to where it accounted for 33% of all medical record theft in 2013.
  • Lost or stolen electronic devices
  • Failure to delete – equipment used by medical practices are being discarded without fully deleting the sensitive information they contain.
  • Third-party error – many healthcare organizations outsource medical record storage and management to third-party vendors, but in some cases these vendors are not qualified to secure this information.
  • Open Wi-Fi networks that are not properly secured
  • Insider access –examples include employees that leave a file open on their computer or allow an unauthorized person to view a medical record.
  • The ‘Cloud’ – more healthcare organizations are moving their patient health records to the cloud. However, very few are confident that they can protect this information from thieves.
How Can You Protect Your Medical Records?
Security tips to combat some of the risks listed above include:
  • Install USB locks on computers, laptops and other mobile devices to prevent unauthorized data transfer.
  • Install Geolocation tracking software on mobile devices, which allows for tracking, locating and wiping a mobile device of all data in the event it is lost or stolen.
  • Encrypt all mobile devices and USB drives that will be used remotely and that contain sensitive data. Even if you allow employees to use their own tablets, laptops and/or smart phones, you should require encryption.
  • Turn all computers completely off when not in use, even if you have installed full-disk encryption. Most leading encryption products are configured so that once the password has been entered, the laptop is unencrypted and unprotected until it is booted down. Simply putting the laptop in “sleep” mode does not cause the encryption protection to kick in.
  • Educate your employees about security awareness. Discourage them from downloading applications and free software that may contain malware, turning off security settings and not encrypting data in transit or at rest, as these are all behaviors that put you at risk. Provide frequent IT security awareness training for your staff.
  • Before disposing of equipment, including copiers, smart phones, laptops and ultrasound machines, wipe hard drives of all data.
  • Implement Electronic Protected Health Information (EPHI) security – As electronic medical records are being accessed more frequently from mobile devices, the risk of contamination from a virus increases significantly and makes investing in a proactive data management strategy even more critical.
  • Conduct an Annual HIPAA Security Risk Analysis – periodic risk analysis is a requirement of the HIPAA Security Rule, and practices should plan and budget for it in advance. Assess security risk by identifying real vulnerabilities and developing a solution to those vulnerabilities. It is recommended that healthcare organizations engage in ongoing vulnerability scanning and remediation by implementing a monthly or quarterly test schedule.
  • Ensure your business associates are effectively safeguarding your electronic medical records.
Nathalie Griffin-Ames, CPA, is a Manager at KatzAbosch. She can be reached at ngriffinames@katzabosch.com.

TAX ALERT: IRS Mandates New Depreciation Regulations

The IRS has mandated that all taxpayers who incur costs to acquire, produce, or improve fixed assets adhere to new depreciation regulations. All taxpayers that this applies to are required to adopt these new regulations for the 2014 tax year. The adoption is considered an accounting method change and requires form 3115 to be filed. The preparation of this form will result in additional time and cost for all 2014 returns.

In addition to this, we recommend that all taxpayers for whom these regulations apply have a capitalization policy on record effective 1/1/2014. Below are links to two templates which you may use. The first should be used if you do not have annual audited financial statements. The second should be used if you have annual audited financial statements.

Please feel free to contact us if you have any questions.

Sincerely,
Your trusted advisors at KatzAbosch
Capitalization Policy 1 no audit
Capitalization Policy 2 with audit

KatzAbosch Client – The Classic Catering People Was Named Winner of Maryland’s 2014 Business Philanthropy Award in the Small Business Category



On Friday, October 24, 2014, The Classic Catering People, was named winner in the small business category at the 2014 Maryland Business Philanthropy Awards.The Maryland Business Philanthropy Awards program is a joint effort between the Maryland Chamber of Commerce and the Baltimore Business Journal to recognize Maryland businesses that have demonstrated a commitment to improving the quality of life for residents of the state through their philanthropic efforts. All Maryland-based businesses that have made a positive contribution to Maryland residents through financial support, in-kind donations or volunteer efforts were eligible for nomination. A panel of business and community leaders judge the nominees based on the extent of the service provided to the community, the impact on the community and the commitment the business has shown to the community over time. Judges also take into consideration the size of the business relative to their corporate giving.

For more than 40 years, the Classic team has been bringing people together over memorable cuisine. All along the way, they have served the community as passionately as their clients.

Maryland – Cash Investments and Tax Credits Add up to Business Success for Cybersecurity Companies



The Internet Age has changed the business environment in the world. For instance, Silicon Valley in California has become the home to many high-tech business giants. New businesses attracted to Silicon Valley have brought high-paying jobs and with the jobs comes tax revenue for the state. With the changeover from a manufacturing economy to a digital economy, the states want to attract new age businesses that employ highly paid professionals and the tax base that comes with this industry.

Recognizing the positive impact having a high-tech industry centered in your state can bring, Maryland is offering incentives for Cybersecurity companies that locate here. With its close proximity to Washington DC and a highly educated workforce, Maryland has the perfect combination of factors for rapid growth of the Cybersecurity industry. Recognizing the benefits of Maryland, the federal government has made Fort Meade, Maryland a hub for Cybersecurity and is looking for other locations in the nearby Maryland suburbs to establish relationships with Cybersecurity businesses. Many of the federal government agencies that are focused on Cybersecurity are centered in Maryland including NSA, U.S. Cyber Command and the National Institute of Standards and Technology, making this area one of the fastest growth areas in the country for the industry.

With the rapid expansion of Cloud Computing and the steady stream of new “Bugs,” everyone is worried about their online security. Both government and commercial businesses need help with protecting their computer operations and are seeking qualified consultants. Like other states, Maryland has developed Cybersecurity experts, education and training programs, technology, products, systems and infrastructure. These programs are specifically tailored to the needs of the emerging Cybersecurity industry. The states are fighting to attract these types of businesses to their state because of the good jobs and tax revenue that comes from this new age business model. Recently Maryland lured a Cybersecurity company – Luminal – to relocate to the state with several cash and tax credit incentives. The incentive package included a $600,000 investment by the state in the company and tax credits. These incentives helped the company secure a new round of market investments so the company can move up to the next level of growth.Beginning in 2014, Maryland began offering a tax credit to Cybersecurity companies. The Maryland Cybersecurity Tax Credit is based on new investments in the Maryland-based company. The investors do not get the tax credit, because the Maryland lawmakers wanted the incentive to stay in Maryland. Instead the tax credit is given to the Cybersecurity company. The tax credit is equal to 33% of investments in the Qualified Maryland Cybersecurity company. The credit can be up to $250,000 per investor and 15% of the program appropriation. The tax benefit is realized in one of three ways – reduce the income tax obligation of the company or reduce the owner’s tax bill or the company can get the credit in cash if there is no tax obligation. The details as to what is a qualified Cybersecurity company are extensive. In summary it is a Maryland-based, small non publicly traded company that does specific activities and has a qualified investor, who leaves the investment in the company for a period of time.In late 2013, the Maryland Department of Business and Economic Development began accepting applications for the first year of the state’s CyberSecurity tax credit. When the state’s fiscal year ended June 30, 2014, a little over $1 Million of credits had been issued to three qualified companies based on 15 investments in these companies. The state budgeted $3 Million for the credit and only one-third of the money was claimed. There were several reasons suggested why some of the state money was left on the table such as the short six-month period for applying for the credit, the strict qualification requirements and the fact that the credit dollars must remain in Maryland. For the new year starting July 1, 2014, state officials are hoping more businesses will be attracted to apply for the credit and other incentives offered to businesses. The Maryland Business and Economic Development officials are working on ways to bring new investments to the state by actively courting Cybersecurity companies with cash investments of state dollars and tax credits. The state is hoping the creativity of the investment market will find new ways to entice investors into the Cybersecurity industry and overcome the rule about the investment remaining in Maryland.

It is pretty obvious that Cybersecurity will be a high priority for government agencies and businesses for the foreseeable future. The almost daily news reports about high profile digital “breakins” will ensure this industry enjoys above average growth and business success. Cybersecurity companies should make sure they take advantage of the government incentives – such as the Maryland tax credits and cash investments – to improve their bottom line and add to their growth factor.

Andy Bareham, a Principal with KatzAbosch, joined the firm in 2008. He has more than 25 years of tax experience with a focus on helping businesses with state tax matters. He is a member of the firm’s Tax Department and is chair of the firm’s State and Local Tax group. Andrew speaks frequently on state tax topics such as planning strategies, audit and appeals representation and compliance issues. For more information, please contact Andy at abareham@katzabosch.com or 410.307.6442. www.katzabosch.com