MARYLAND 2017

1 MARYLAND . 2017 . pass - through entity INCOME TAX RETURN INSTRUCTIONS. For filing calendar year or any other tax year or period beginning in 2017 . Peter Franchot, Comptroller MARYLAND pass - through entity Taxpayers Clean Energy Incentive Tax Credit**. This booklet contains the instructions necessary for a pass - Community Investment Tax Credit**. through entity (PTE) to file a 2017 MARYLAND tax return. Commuter Tax Credit Read the instructions carefully. Cybersecurity Investment Incentive Tax Credit**. Use blue or black ink when completing your forms and checks. Employer-Provided Long-Term Care Insurance Tax Credit To avoid delays in the processing of your return: do not use pencil or ink in any other color; do not print Endow MARYLAND Tax Credit**. returns on colored paper; do not write on, staple or Enterprise Zone Tax Credit**. punch holes in the barcode. Film Production Activity Tax Credit**. Form 510 and its related forms are to be used by partnerships, S corporations, limited liability companies First-Year Leasing Costs Tax Credit for Qualified and business trusts.

2 Small Businesses**. A business trust shall be classified as a corporation, a Health Enterprise Zone Hiring Tax Credit**. partnership, a trust or otherwise, as determined under the Heritage Structure Rehabilitation Tax Credit from United States Internal Revenue Code. Form 502S. The pass - through entity income tax return is generally an Job Creation Tax Credit**. information return. The entity 's income or loss is passed through to the separate members for taxation purposes. If MARYLAND Disability Employment Tax Credit**. a pass - through entity is owned by a nonresident, it may be MARYLAND Employer Security Costs Tax Credit**. subject to the nonresident pass -though entity income tax. MARYLAND Wineries and Vineyards Tax Credit**. Credit may be claimed on a member's income tax return for any tax paid on behalf of a nonresident member by the MARYLAND -Mined Coal Tax Credit**. pass - through entity . The pass - through entity may elect to One MARYLAND Economic Development Tax Credit**.

3 File a composite return on behalf of qualified nonresident Oyster Shell Recycling Tax Credit**. individual members under which the entity would be the agent to receive any refund or to pay any tax due. Preservation and Conservation Easements Tax Nonresident fiduciary and nonresident entity members Credit**. may not participate in the filing of the composite return. Qualified Farms Tax Credit**. See Administrative Release 6 for more information. You can obtain Administrative Release 6 from any MARYLAND Qualified Vehicle Tax Credit**. Taxpayer Service Branch office or from our Web site. Qualified Veteran Employees Tax Credit**. Certain investment partnerships are not subject to the Research and Development Tax Credits**. nonresident tax. See the Specific Instructions for line 4. Manufacturing corporations are subject to a special single **Required Certification must be included with factor formula of receipts. The rules for calculating this Form 500CR. single factor can be found in MARYLAND Tax Regulation REMINDER.

4 The MARYLAND Form 510. A pass through entity Income Tax Return must be filed Form 500CR electronically if the pass - through entity has generated MARYLAND Form 500CR is used to claim the following a business tax credit from MARYLAND Form 500CR or a business tax credits against corporation and individual Heritage Structure Rehabilitation Tax Credit from Form income tax. 502S to pass on to its members. Electronic Format In accordance with SB 36 of the Forms and help Acts of 2017 of the MARYLAND General Assembly, the Comptroller of MARYLAND may grant a taxpayer a waiver of For online business registration, tax forms, the requirement to file for certain tax credit(s) by electronic instructions, publications, and MARYLAND Tax means. Form 500 CRW, Request for a Waiver, must Regulations, visit be submitted with the Form 500CR that establishes a reasonable cause for not filing by electronic means or that E-mail your tax questions to there is no feasible means of filing electronically creating an undue hardship.

5 For assistance, call: 410-260-7980 in Central Aerospace, Electronics, or Defense Contracts Tax MARYLAND or 1-800-MDTAXES (638-2937) from Credit** elsewhere Apprentice Employee Tax Credit**. Filing electronically Bio-Heating Oil Tax Credit**. You may file your MARYLAND Corporation or pass - through Biotechnology Investment Incentive Tax Credit**. entity returns electronically using the Modernized Businesses That Create New Jobs Tax Credit e-File method of Federal/State 1120/1065 filing. For Cellulosic Ethanol Technology Research & more information, contact our e-File Help Desk at 410- Development Tax Credit** 260-7753 or visit i MARYLAND . FORM. pass - through entity 2017 . INCOME TAX RETURN INSTRUCTIONS. 510. GENERAL INSTRUCTIONS. FILING FORM 510 4 GENERAL INFORMATION FOR FORM 510. The MARYLAND Form 510 must be filed electronically if the pass - Accounting Periods The tax year or period used for the through entity has generated a business tax credit from federal return must be used for the MARYLAND return.

6 Accordingly, MARYLAND Form 500CR or a Heritage Structure Rehabilitation Tax calendar tax years, fiscal tax years, and short tax periods may Credit from Form 502S to pass on to its members. be necessary for MARYLAND filing purposes. Purpose of Form Form 510 is used by a pass - through entity If a federal return is filed or required, a corresponding MARYLAND (PTE) to file an information income tax return for a specific tax return must be filed. The form used for filing must reflect the year or period and to remit PTE nonresident tax. The term preprinted tax year in which the PTE's tax year begins. pass - through entity includes partnerships as defined in Use of Federal Figures In preparing Form 510, all items that Internal Revenue Code (IRC) Section 761, S corporations as are reported for federal purposes must be reported on the defined in IRC Sections 1361 and 1362, limited liability MARYLAND return in the same manner. The character of an item companies (LLC) as defined in MARYLAND Corporations and cannot be changed from that required or elected for federal Associations Article, Section 4A-101 and business trusts as purposes.

7 Defined in MARYLAND Corporations and Associations Article, Taxability Form 510 generally is an infor mation return. The Section 12-101. items of income or loss of the PTE are passed through to the A LLC is treated as a partnership for MARYLAND income tax members and subject to tax on the members' MARYLAND income purposes, unless it is treated as a corporation at the federal tax return. level. If there are nonresident members, the pass - through entity A business trust shall be classified as a corporation, a nonresident tax applies and must be paid by the PTE on behalf partnership, a trust or otherwise, as shall be determined at the of these members. federal level. PTEs must pay a tax consisting of , in addition to a special Unincorporated pass - through entities should follow the rules nonresident tax of , of the nonresident individual and for partnerships throughout these instructions. Incorporated nonresident fiduciary members' distributive or pro rata shares pass - through entities should follow the rules for S corporations.

8 Of income allocable to MARYLAND . The term member is used in these instructions to include PTEs also are required to pay a tax at the rate of of partners of partnerships, shareholders of S corporations, income allocable to MARYLAND on behalf of all members who are members of LLCs, and beneficiaries of business trusts. nonresident entities. A nonresident entity is an entity that is 1. not formed under the laws of MARYLAND ; and is not qualified by, WHO MUST FILE? or registered with, the Department of Assessments and Taxation to do business in MARYLAND . See Administrative Release 6. Entities Required to File Every MARYLAND PTE must file Form The PTE nonresident tax does not apply to a member that is a 510, even if it has no income or the entity is inactive. Every Real Estate Investment Trust (REIT) or to a member that is other PTE that is subject to MARYLAND income tax law also must tax-exempt under IRC Sections 408(e) or 501, unless the tax- file Form 510.

9 This includes any PTE that has credits in MARYLAND exempt member is subject to the federal income tax on its and a PTE that is a member of a PTE that is required to file in federal return on that share of PTE income. See Administrative MARYLAND . Release 6 for other members and certain PTEs that are Entities Not Required To File considered exempt. A multistate PTE that operates in MARYLAND but is not subject to Nonresident members must report their distributive or pro rata the MARYLAND income tax law is not required to file, although a shares of income or loss allowable to MARYLAND on their MARYLAND return reflecting no income allocable to MARYLAND may be filed income tax return. Such income must be reported in the for record purposes. Letters in lieu of filing will not be accepted. member's tax year in which the PTE's tax year ends. Credit for Qualified Sub-S Subsidiaries are treated as divisions under the taxes paid by the PTE must be claimed on the same return on IRC and are not considered as separate entities for MARYLAND which the nonresident member reports the income subject to purposes.

10 These divisions will be included on the parent that tax. company's annual MARYLAND return. The distributive share of income for partnerships is the net MARYLAND will follow the Internal Revenue Service (IRS) rules for amount of lines 1 through 11 of the federal Form 1065 Schedule certain partnerships that do not actively conduct a business that K. The distributive share of income for a large partnership have elected not to be treated as partnerships. MARYLAND also electing to file federal Form 1065-B is the net amount derived will follow the IRS rules for a single member LLC that is from adding lines 1a, 2 through 4b, 7, and 8 of the federal Form disregarded as a separate entity and the income (loss) will be 1065-B Schedule K. The pro rata share of income for S. included on the member(s) annual MARYLAND returns. corporations is the net amount of lines 1 through 10 of the federal Form 1120S Schedule K. 2 WHEN AND WHERE TO FILE? The amount of tax payable by the PTE may be limited based on the distributable cash flow.