Bill Positions

Bill Number: SB 975

Bill Title: Income Tax - Corporations - Denial of Deduction for Excessive Compensation of Officers and Directors

Bill Sponsor(s): Senator Pinsky

Subject: B&T

Committee: SRU

Bill Summary: This bill would remove a corporation's deduction on its Maryland income tax return for salary, wages or other compensation for personal services paid or incurred by the corporation to an officer or director of the corporation in excess of 25 times the annual salary, wages, or other compensation for personal services of the lowest full-time employee of the corporation

History: SB 395 of 2007 was the exact bill except the threshold was 30 times instead of 25 times (see below). That bill was heard in B&T but the Committee took no action on it.

Chamber Position: Oppose

Position Summary: The bill hurts Maryland's competitive position for retaining businesses that provide jobs to Maryland's working families. None of our competitor states (indeed, it appears that no state) has adopted such a provision.

The provision is another complicating disconnect between Maryland's tax code and the rules in the federal Internal Revenue Code.

The limit of 25-times is an arbitrary number. And there is no provision for exception where circumstances of a particular business justify additional salary amounts.

Every industry is different and every corporation is different. A one-size-fits-all legislative policy is not reflective of the diversity of our economy. The nature of the specific industry, the specific corporation, and the requirements of the specific job all impact the differences in compensation.

Businesses compete for the services of talented officers and directors and the competitive points include compensation levels.

No arbitrary calculation and no government process can know best what the value of a particular individual's services is. Only the people who are familiar with the corporation's business can determine that value. In America's free enterprise system, the market forces, not government, should determine appropriate compensation levels.

Position Statement: Coming Soon

Chamber Staff: Karen Syrylo

General Assembly: Click here to view the bill on the Maryland General Assembly's website.