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
0 comments:
Post a Comment