Income Tax - Addition Modification for Federal Tax-Exempt Income - Study

EXPLANATION: CAPITALS INDICATE MATTER ADDED TO EXISTING LAW.
[Brackets] indicate matter deleted from existing law.
Underlining indicates amendments to bill.
Strike out indicates matter stricken from the bill by amendment or deleted from the law by
amendment.
Italics indicate opposite chamber/conference committee amendments.
*sb0163*

SENATE BILL 163
Q3 (6lr1302)
ENROLLED BILL
— Budget and Taxation/Ways and Means —
Introduced by Senator West Senators West and McCray

Read and Examined by Proofreaders:

_______________________________________________
Proofreader.
_______________________________________________
Proofreader.

Sealed with the Great Seal and presented to the Governor, for his approval this

_______ day of _______________ at __ ______________________ o’clock, ________M.

______________________________________________
President.

CHAPTER ______

AN ACT concerning 1

Income Tax – Addition Modification for Federal Tax–Exempt Income – 2
Alterations Study 3

FOR the purpose of providing that requiring the Office of the Comptroller, on or before a 4
certain date, to study and report to the Governor and the General Assembly regarding 5
certain matters related to an addition modification under the Maryland income tax 6
for certain income exempt from federal tax by federal law or treaty but not State tax 7
does not apply to certain foreign earned income ; and generally relating to the 8
calculation of Maryland adjusted gross income and a study on the taxation of federal 9
tax–exempt income. 10

BY repealing and reenacting, without amendments, 11
Article – Tax – General 12
Section 10–204(a) 13
Annotated Code of Maryland 14
2 SENATE BILL 163

(2022 Replacement Volume and 2025 Supplement) 1

BY repealing and reenacting, with amendments, 2
Article – Tax – General 3
Section 10–204(c)(1) 4
Annotated Code of Maryland 5
(2022 Replacement Volume and 2025 Supplement) 6

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 7
That the Laws of Maryland read as follows:, on or before December 1, 2026, the Office of the 8
Comptroller shall study and report to the Governor and, in accordance with § 2–1257 of the 9
State Government Article, the General Assembly regarding: 10

(1) the number of residents who have foreign earned income within the 11
meaning of § 911(b)(1) of the Internal Revenue Code; 12

(2) the number of residents who have foreign earned income that exceeds the 13
limitation under § 911(b)(2) of the Internal Revenue Code and the aggregate amount of that 14
income; and 15

(3) the countries from which the residents described under items (1) and (2) 16
of this section earned foreign earned income within the meaning of § 911(b) of the Internal 17
Revenue Code. 18

Article – Tax – General 19

10–204. 20

(a) To the extent excluded from federal adjusted gross income, the amounts under 21
this section are added to the federal adjusted gross income of a resident to determine 22
Maryland adjusted gross income. 23

(c) (1) (I) THIS PARAGRAPH DOES N OT APPLY TO FOREIGN EARNED 24
INCOME WITHIN THE MEANING OF § 911(B)(1) OF THE INTERNAL REVENUE CODE, 25
SUBJECT TO THE LIMIT ATION UNDER § 911(B)(2) OF THE INTERNAL REVENUE 26
CODE. 27

(II) If exempted by federal law or by treaty from federal but not State 28
tax on income, the addition under subsection (a) of this section includes salary, wages, or 29
other compensation for personal services. 30

SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect July 31
1, 2026, and shall be applicable to all taxable years beginning after December 31, 2025. 32