Cyber and information security for federal agencies are two of the very few areas of the federal budget that are immune to the belt-tightening that is happening throughout the government.
For example, Maryland is offering a cybersecurity investment tax credit for the taxable years starting on or after Jan. 1, 2014, but prior to Jan. 1, 2019. It is a refundable credit equal to 33 percent of an investment (not to exceed $250,000) in a small cybersecurity company in the state.
The credit carves out a benefit for those who acquire equity in the new companies.
Under the credit, an “investment” is defined as a contribution of money, at a risk of loss, in exchange for stock, a partnership or membership interest or any other ownership interest in the cybersecurity company’s equity. An investment is considered to be “at risk of loss” when repayment depends entirely on the success of the company’s business operations.
Some of the requirements that a Maryland cybersecurity company must meet in order to qualify for the credit include:
- A headquarters and base of operations in Maryland;
- Not participating in the credit program for more than one prior fiscal year;
- Active in business no longer than five years;
- An aggregate capitalization of at least $100,000;
- Owns or properly licenses any proprietary technology;
- Has fewer than 50 full-time employees;
- Does not have its securities publicly traded on an exchange.
Maryland’s efforts to attract new investors into the state through its cybersecurity tax credit present tremendous opportunities that many companies should consider exploring.
If you are interested in learning more about how to take advantage of these tremendous tax benefits, please contact the SC&H Group’s Tax Services team here.
In addition, please listen to this podcast interview with Angelo Poletis, a Principal with SC&H Group’s Tax Services team, who discusses why businesses should leverage various tax credits in the State of Maryland.