Friday Five | March 13, 2020
Did you know that the fear of Friday the 13th is called paraskevidekatriaphobia? Good luck pronouncing that.
1. Protecting the workplace from coronavirus
Yesterday, in light of Governor Hogan’s declaration of a public health emergency, Senate President Bill Ferguson and House Speaker Adrienne Jones sent a memo to members of the General Assembly and the public stating that they have decided to end all public gatherings that are not related to the direct operation of the Legislature’s Committee and floor work. In addition, beginning next week, all bill hearings until Sine Die will be sponsor only. Legislators are encouraged to take electronic testimony from the public and upload it into the system, instead of encouraging citizens to travel to Annapolis.
“While the General Assembly continues to conduct the business of the people, we will continue to monitor the situation and take every step to make certain that the State House Complex remains a safe environment, and that we are taking necessary steps for the public health,” Ferguson and Jones wrote.
In response to the growing public health concern over the coronavirus (COVID-19), the Maryland Chamber of Commerce has compiled resources to help members of the Maryland business community and their employees stay safe and healthy during the viral outbreak.
In the midst of the overwhelming amount of information being circulated about the virus, we’d like to thank the U.S. Chamber of Commerce Foundation for putting together two succinct documents featuring workplace health and safety information from the Centers for Disease Control and Prevention (CDC). If you have not yet seen them, please click below. We encourage you to share the U.S. Chamber’s resources with all members of your organization.
Much of the U.S. Chamber’s content has been pulled from the CDC’s “Interim Guidance for Businesses and Employers.”
You may also find Governor Hogan’s website to be a useful resource as our state leaders continue to monitor the spread of the virus in Maryland.
Lastly, please join the Maryland Chamber and Shawe Rosenthal, a law firm that specializes in labor and employment matters, for a free 90-minute webinar on Tuesday, March 17: “Coronavirus in the Workplace: Practical Guidance for Employers.” The webinar will commence at 2 p.m. Eastern. Click here to register.
You can find all of the resources mentioned above and more at our website.
2. House and Senate continue to advance Kirwan revenue packages
Leaders in both the House and Senate continue to advance tax packages aimed at raising the revenue necessary to pay for implementation of the recommendations of the Kirwan Commission.
Leadership in the House is pursuing a number of measures, totaling roughly $700 million, that are on track or have already been approved by the House of Delegates. They are as follows:
- HB 473: Income Tax—Pass-Through Entities, Throwback Rule, and Combined Reporting
- The House Ways & Means Committee voted to package HB 295 (combined reporting), HB 473 (throwback rule) and HB 129 (the bill to address the SALT cap for PTEs) as one bill. A series of amendments was offered to HB 295, including an amendment adopting ASC740. Amendments were also offered to HB 129 to bring it in line with the Senate version. There was also an “intent” amendment offered on HB 473 to steer any revenue generated from the throwback rule toward the HBCUs settlement fund. For context, this puts the Chamber in an interesting position. We have actively supported HB 129, a bill that would provide millions of dollars in federal tax relief for small businesses organized as pass-through entities, while fervently opposing the other two measures—combined reporting and throwback rule—because of the negative economic impact that they would have on multi-state businesses and the state. The House passed this omnibus income tax package on Thursday.
- HB 932: 21st-Century Economy Sales Tax Act (tax on digital goods)
- HB 732: Electronic Smoking Devices, Other Tobacco Products, and Cigarettes–Taxation and Regulation (tobacco tax)
- HB 1354: Sales & Use Tax—Services (tax on “luxury services”)
- HB 1354, as introduced, expands Maryland’s sales tax to a list of what are being deemed “luxury services,” including things like golf course or country club memberships, dog walking services and art moving or storage, among other things. In an interesting turn of events, the House Ways & Means Committee voted to amend HB 1354 to include two sales tax exemption bills: 1) HB 1339: Sales and Use Tax and Personal Property—Exemptions–Data Centers, and 2) HB 16: Sales and Use Tax–Aircraft Parts and Equipment–Exemption. Again, this puts the Chamber in an interesting position as we have actively opposed any expansion of the sales tax to services. Meanwhile, we are leading a coalition in support of HB 1339 and a sales tax exemption for the purchase of data center equipment.
Update: We understand that an amendment to HB 1354 will be offered on the floor. The amendment will strip all services out of the bill except for lobbying services/public relations and telemarketing.
The Chamber is also actively monitoring HB 565: Income Tax–Business and Economic Development Tax Credits–Termination. As introduced, the bill seeks to freeze enterprise and RISE zones on or after 6/1/2020, terminate the One Maryland Economic Development tax credit and tax credits for certain biotechnology investment, certain cybersecurity purchases, certain film production activities and certain small businesses that provide employer benefits. When it was introduced, the bill did not reference Maryland’s R&D tax credit. However, the Revenues Subcommittee moved an amendment to HB 565 that would eliminate the basic portion of the R&D tax credit effective 1/1/2021. As drafted, the amendment preserves the growth portion of the R&D tax credit. The feeling of the subcommittee is that, conceptually, maintaining the basic portion of the tax credit does not actually incentivize economic innovation/expansion.
Meanwhile, the Senate is pursuing its own tax package, which includes the following:
- SB 2: Digital Advertising Gross Revenues–Taxation (tax on digital advertising)
- SB 24: Small Business Fairness Act (combined reporting for retail trade and food services)
- SB 3: Electronic Smoking Devices, Other Tobacco Products, and Cigarettes–Taxation and Regulation (tax on tobacco)
- Earlier this week, the Senate Budget & Taxation Committee voted to package SB 2 (digital ad tax), SB 24 (combined reporting for retail and food services) and SB 3 (tobacco tax) as one bill and moved it favorably out of Committee, as amended. SB 2 now includes an unusual amendment that makes it a supplementary appropriation bill. This allows the General Assembly to add money to the governor’s proposed budget. To this point, the Legislature has only been able to reduce or eliminate items in the budget, unless a new revenue source is created to cover an increased expense. As amended, SB 2 would send $440,000 to the Chesapeake Bay Foundation for a project focused on expanding educational programs.
- SB 1001: 21st-Century Economy Sales Tax Act (tax on digital goods)
- SB 4: Gaming–Sports Betting–Implementation (voter referendum on sports betting)
The House and Senate are on track to gain final approval on their revenue packages. Leadership in both Chambers maintain that each would provide enough revenue to move forward with the implementation of Kirwan recommendations. Still, differences between the two packages will need to be resolved by the House and Senate before they can be sent to the governor.
3. Kirwan policy legislation adopted by the House of Delegates; moves forward in the Senate
Last Friday night, the House of Delegates voted to adopt the massive education overhaul bill (HB 1300) known as the “Blueprint for Maryland’s Future,” which stemmed from the Kirwan Commission recommendations and was backed by Democrats in the General Assembly. The legislation passed with a party-line vote of 96-to-41 and is estimated to cost taxpayers about $32 billion over 10 years. According to the Baltimore Sun, “the legislation would impose a $3.8 billion annual funding mandate on state government, counties and Baltimore City without a clear way to pay for it” (see Item 2). State taxpayers would have to cover about three-fourths of the cost, with the rest covered by local jurisdictions.
The bill was then sent to the Senate. Late Wednesday night, the Senate’s Budget and Taxation and Education, Health and Environmental Affairs committees approved dozens of amendments to the bill. One such amendment included a provision that would require a “checkpoint” to test the success of the reforms by 2026.
The bill was considered on the Senate floor this morning, and it has been held over until tomorrow. It is on track for final passage, as amended, by the Senate in the coming days.
4. Data centers legislation advances in the House and Senate
Legislation that would provide a sales-and-use tax exemption for the sale of computer technology for use at a qualified data center is moving forward in both the House and the Senate. If passed, this legislation would level the playing field and attract data center business to Maryland, further supporting the state as a leader in innovation and investment in cyber and information technology.
The economic impact—both direct and indirect—of data centers is substantial. According to a report by the U.S. Chamber of Commerce Technology Engagement Center, during construction, a typical data center employs roughly 1,700 workers, provides $77.7 million in wages for those workers, produces $243.5 million in output along the local economy’s supply chain and generates $9.9 million in revenue for state and local governments. Every year thereafter, the same data center supports roughly 160 local jobs, paying $7.8 million in wages, injecting $32.5 million into the local economy and generating $1.1 million in state and local revenue.[1]
However, the positive economic impact of data centers does not stop there. The incremental local taxes paid by data centers directly and indirectly support schools and law enforcement, as well as improve local public infrastructure including the expansion of broadband. According to a study conducted by Mangum Economics on behalf of the Maryland Chamber Foundation, the potential economic and fiscal impact of data centers in Maryland is immensely positive. The study analyzed four Maryland counties for economic and fiscal impact of just one large data center locating in their jurisdictions. In their preliminary findings, analysts determined that a large data center would provide a very high benefit-to-cost ratio for these counties in terms of the tax revenue it would generate relative to the government services that it and its employees would require.
The Senate Budget & Taxation Committee issued SB 397 a favorable report earlier this week. It now awaits its turn on the Senate floor.
In the House, the House Ways & Means Committee voted to amend HB 1354 to include the data centers House cross-file, HB 1339. This puts the Chamber in an interesting position, as we have actively opposed any expansion of the sales tax to services as outlined by the base bill, HB 1354. Meanwhile, we are leading the coalition in support of HB 1339 and a sales tax exemption for the purchase of data center equipment.
5. Second-Chance Event with Rep. David Trone
On Monday, March 16, our president and CEO, Christine Ross, will participate in a panel discussion on justice reform and second-chance initiatives. The panel will be hosted by U.S. Congressman David Trone (D-MD) and will take place at the Nancy H. Dacek North Potomac Community Recreation Center Conference Room in Rockville.
Rep. David Trone is the owner of Total Wine & More, the largest independent alcoholic beverage retailer in the country. His company has hired more than 100 returning citizens, and he has been an outspoken advocate of giving this vulnerable population a fair chance at employment.
[1] Tim Day and Nam D. Pham, “Data Centers: Jobs and Opportunities in Communities Nationwide,” U.S. Chamber of Commerce Technology Engagement Center, 2017, https://www.uschamber.com/sites/default/files/ctec_datacenterrpt_lowres.pdf
