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EXPLANATION: CAPITALS INDICATE MATTER ADDED TO EXISTING LAW.
[Brackets] indicate matter deleted from existing law.
*hb0801*
HOUSE BILL 801
Q3 6lr3450
By: Delegate Embry
Introduced and read first time: February 4, 2026
Assigned to: Ways and Means
A BILL ENTITLED
AN ACT concerning 1
Income Tax – Addition Modifications – Business Stock Gains, Fines, Penalties, 2
and Bonus Depreciation 3
FOR the purpose of providing an addition modification under the Maryland income tax for 4
the gain from the sale or exchange of certain small business stock excluded from 5
federal gross income and a certain amount of fines, penalties, and trade or business 6
expenses; providing certain modifications to the federal adjusted gross income of an 7
individual or federal taxable income of a corporation for Maryland income tax 8
purposes relating to certain deductions under the federal income tax for the 9
depreciation of certain property; and generally relating to addition modifications 10
under the Maryland income tax for certain business stock gains and expenses. 11
BY repealing and reenacting, without amendments, 12
Article – Tax – General 13
Section 10–204(a), 10–305(a), and 10–310 14
Annotated Code of Maryland 15
(2022 Replacement Volume and 2025 Supplement) 16
BY adding to 17
Article – Tax – General 18
Section 10–204(m) and (n) 19
Annotated Code of Maryland 20
(2022 Replacement Volume and 2025 Supplement) 21
BY repealing and reenacting, with amendments, 22
Article – Tax – General 23
Section 10–210.1 and 10–305(d) 24
Annotated Code of Maryland 25
(2022 Replacement Volume and 2025 Supplement) 26
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 27
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That the Laws of Maryland read as follows: 1
Article – Tax – General 2
10–204. 3
(a) To the extent excluded from federal adjusted gross income, the amounts under 4
this section are added to the federal adjusted gross income of a resident to determine 5
Maryland adjusted gross income. 6
(M) THE ADDITION UNDER SUBSECTION (A) OF THIS SECTION INCLUDES ANY 7
GAIN FROM THE SALE O R EXCHANGE OF QUALIF IED SMALL BUSINESS S TOCK 8
EXCLUDED FROM GROSS INCOME UNDER § 1202 OF THE INTERNAL REVENUE CODE. 9
(N) (1) SUBJECT TO PARAGRAPH (2) OF THIS SUBSECTION , THE 10
ADDITION UNDER SUBSE CTION (A) OF THIS SECTION INCL UDES ANY AMOUNT IN 11
EXCESS OF $50,000 PAID OR INCURRED DURING THE TAXABLE YEAR: 12
(I) FOR FINES , PENALTIES, AND OTHER AMOUNTS TH AT IS 13
REPORTED ON AN INTERNAL REVENUE SERVICE FORM 1098–F OR A 14
SUBSTANTIALLY EQUIVALENT FORM; AND 15
(II) THAT IS DEDUCTED AS A TRADE OR BUSINESS EXPENSE 16
UNDER § 162(F) OF THE INTERNAL REVENUE CODE. 17
(2) THE ADDITION UNDER PARAGRAPH (1) OF THIS SUBSECTION 18
DOES NOT INCLUDE ANY AMOUNT PAID OR INCUR RED AS TAXES DUE OR TO COME 19
INTO COMPLIANCE WITH ANY LAW THAT WAS VIOLATED. 20
10–210.1. 21
(a) (1) In this section the following words have the meanings indicated. 22
(2) “Depreciation” includes any deduction allowed under § 179 of the 23
Internal Revenue Code. 24
(3) “Heavy duty SUV” means a 4–wheeled vehicle that: 25
(i) is manufactured primarily for use on public streets, roads, and 26
highways; 27
(ii) is rated at more than 6,000 but n ot more than 14,000 pounds 28
gross vehicle weight; and 29
(iii) would be a passenger automobile as defined in § 280F of the 30
HOUSE BILL 801 3
Internal Revenue Code if it were rated at 6,000 pounds gross vehicle weight or less. 1
[(4) (i) “Manufacturing entity” means a person conducting or operating 2
a trade or business that is primarily engaged in activities that, in accordance with the 3
North American Industrial Classification System (NAICS), United States Manual, United 4
States Office of Management and Budget, 2012 Edition, would be included in Sector 31, 32, 5
or 33. 6
(ii) “Manufacturing entity” does not include a refiner, as defined in 7
§ 10–101 of the Business Regulation Article.] 8
(b) In addition to the modifications under §§ 10 –204 through 10 –210 of this 9
subtitle, to determine Maryland adjusted gross income of an individual: 10
(1) [(i) except as provided in item (ii) of this item, ] an amount is added 11
to or subtracted from federal adjusted gross income to reflect the determination of the 12
depreciation deduction provided under § 167(a) of the Internal Revenue Code and the 13
adjusted basis of property without regard to the additional allowance under § 168(k) of the 14
Internal Revenue Code; [and 15
(ii) item (i) of this item does not apply to property placed in service 16
by a manufacturing entity on or after January 1, 2019;] 17
(2) an amount is added to or subtracted from federal adjusted gross income 18
to determine the net operating loss deduction allowed under § 172 of the Internal Revenue 19
Code without regard to an election under § 172(b)(1)(H) of the Internal Revenue Code for a 20
carryback period of up to 5 years; 21
(3) [(i) except as provided in item (ii) of this item, ] an amount is added 22
to or subtracted from federal adjusted gross income to reflect the determination of the 23
maximum aggregate costs that the taxpayer may treat as an expense under § 179 of the 24
Internal Revenue Code for any taxable year without regard to an y changes made to that 25
section after December 31, 2002: 26
[1.] (I) increasing above $25,000 the dollar limitation set 27
forth in § 179(b)(1) of the Internal Revenue Code; or 28
[2.] (II) increasing above $200,000 the phase–out threshold 29
set forth in § 179(b)(2) of the Internal Revenue Code; [and 30
(ii) item (i) of this item does not apply to property that is placed in 31
service by a manufacturing entity on or after January 1, 2019;] 32
(4) an amount is added to or subtracted from federal adjusted gross income 33
to reflect the recognition of income from discharge of indebtedness and the allowance of any 34
deduction with respect to original issue discount without regard to § 108(i) of the Internal 35
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Revenue Code; and 1
(5) an amount is added to or subtracted from federal adjusted gross income 2
to reflect the determination of the depreciation deduction with respect to any heavy duty 3
SUV as if the heavy duty SUV were subject to the limitations of § 280F of the Internal 4
Revenue Code in the same manner as it would be if the vehicle were rated at 6,000 pounds 5
gross vehicle weight or less. 6
10–305. 7
(a) To the extent excluded from federal taxable income, the amounts under this 8
section are added to the federal taxable income of a corporation to determine Maryland 9
modified income. 10
(d) The addition under subsection (a) of this section includes the additions 11
required for an individual under: 12
(1) § 10–204(b) of this title (Dividends and interest from another state or 13
local obligation); 14
(2) § 10–204(c)(2) of this title (Federal tax–exempt income); 15
(3) § 10–204(e) of this title (Oil percentage depletion allowance); 16
(4) § 10 –204(i) of this title (Deduction for qualified production activities 17
income); 18
(5) § 10 –204(j) of this title (Deduction for costs for security clearance 19
administrative expenses and construction and equipment costs incurred to construct or 20
renovate a sensitive compartmented information facility); [and] 21
(6) § 10–204(l) of this title (Deduction for donations to qualified permanent 22
endowment funds); 23
(7) § 10–204(M) OF THIS TITLE (GAIN FROM THE SALE OR EXCHANGE 24
OF QUALIFIED SMALL BUSINESS STOCK); AND 25
(8) § 10–204(N) OF THIS TITLE (DEDUCTION FOR RESTITUTION). 26
10–310. 27
In addition to the modifications under §§ 10–305 through 10–309 of this subtitle, to 28
determine Maryland modified income the federal taxable income of a corporation shall be 29
adjusted as provided for an individual under § 10–210.1 of this title. 30
SECTION 3. AND BE IT FURTHER ENACTED, That this Act shall take effect July 31
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1, 2026, and shall be applicable to all taxable years beginning after December 31, 2025. 1