Income Tax - Credit for Income Taxes and Penalties Due to Financial Exploitation

EXPLANATION: CAPITALS INDICATE MATTER ADDED TO EXISTING LAW.
[Brackets] indicate matter deleted from existing law.
*sb0291*

SENATE BILL 291
Q3 6lr2560
CF HB 323
By: Senator Bailey
Introduced and read first time: January 21, 2026
Assigned to: Budget and Taxation

A BILL ENTITLED

AN ACT concerning 1

Income Tax – Credit for Income Taxes and Penalties Due to Financial 2
Exploitation 3

FOR the purpose of allowing a credit against the State income tax for certain income taxes 4
and penalties attributable to early withdrawal of re tirement funds due to financial 5
exploitation; and generally relating to a credit against the State income tax for 6
income taxes and penalties due to financial exploitation. 7

BY repealing and reenacting, without amendments, 8
Article – Estates and Trusts 9
Section 13–601(a), (d), (e), (g), (j), and (k) 10
Annotated Code of Maryland 11
(2022 Replacement Volume and 2025 Supplement) 12

BY adding to 13
Article – Tax – General 14
Section 10–758 15
Annotated Code of Maryland 16
(2022 Replacement Volume and 2025 Supplement) 17

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 18
That the Laws of Maryland read as follows: 19

Article – Estates and Trusts 20

13–601. 21

(a) In this subtitle the following words have the meanings indicated. 22

2 SENATE BILL 291

(d) “Deception” means a misrepresentation or concealment of a material fact 1
relating to services rendered, disposition of property, or the use of property intended to 2
benefit a susceptible adult or older adult. 3

(e) (1) “Financial exploitation” means an act taken by a person who: 4

(i) Stands in a position of trust and confidence with a susceptible 5
adult or older adult and who knowingly obtains or uses, or endeavors to obtain or use, a 6
susceptible adult’s or older adult’s funds, assets, or property with the intent to temporarily 7
or permanently deprive the susceptible adult or older adult of the use, benefit, or possession 8
of the funds, assets, or property for the benefit of someone other than the susceptible adult 9
or older adult, in such a manner that is not fair and reasonable; 10

(ii) By deception, false pretenses, false promises, larceny, 11
embezzlement, misapplication, conversion, intimidation, coercion, isolation, excessive 12
persuasion, or similar actions and tactics, obtains or uses, or endeavors to obtain or use, a 13
susceptible adult’s or older adult’s funds, assets, or property with the intent to temporarily 14
or permanently deprive the susceptible adult or older adult of the use, benefit, or possession 15
of the funds, assets, or property for the benefit of someone other than the susceptible adult 16
or older adult; or 17

(iii) Knows or should know that a susceptible adult or older adult 18
lacks capacity to consent and who obtains or uses, or endeavors to obtain or use, the 19
susceptible adult’s or older adult’s funds, assets, or property with the intent to temporarily 20
or permanently deprive the susceptible adult or older adult of the use, benefit, or possession 21
of the funds, assets, or property for the benefit of someone other than the susceptible adult 22
or older adult. 23

(2) “Financial exploitation” includes: 24

(i) Breach of a fiduciary relationship resulting in the unauthorized 25
appropriation, sale, or transfer of property; 26

(ii) Unauthorized taking of personal assets; 27

(iii) Misappropriation, misuse, or transfer of assets belonging to a 28
susceptible adult or older adult from a personal or joint account; and 29

(iv) Intentional failure to effectively use a susceptible adult’s or older 30
adult’s income and assets for the necessities required for the susceptible adult’s or older 31
adult’s support and maintenance. 32

(3) “Financial exploitation” does not include an individual’s good–faith use 33
of a susceptible adult’s or older adult’s assets, including for the purposes of establishing 34
and implementing an estate plan intended to reduce taxes or to maxi mize eligibility for 35
public benefits in order to preserve assets for an identified or identifiable person. 36

SENATE BILL 291 3

(g) “Intimidation” means a communication, by word or act, that a susceptible 1
adult or older adult will suffer physical violence or emotional injury or will be deprived of 2
food, nutrition, clothing, shelter, supervision, medicine, medical services, money, social 3
interaction, or emotional or financial support. 4

(j) “Position of trust and confidence” means a relationship, whether formed by a 5
formal or informal agreement between a susceptible adult or older adult and another 6
person or recognized by a formal declaration or court order, in which: 7

(1) A person is entrusted with the use or management of the property or 8
assets of the susceptible adult or older adult, or the susceptible adult’s or older adult’s care; 9
or 10

(2) There is a special confidence or trust placed in a person who, in equity 11
and good conscience, is bound to act in good faith and with due regard to the interests of 12
the susceptible adult or older adult. 13

(k) “Susceptible adult” means an adult who is unable to perform, without 14
prompting or assistance, one or more activities of daily living, is unable to protect the 15
adult’s rights, or has diminished executive functioning, due to: 16

(1) Advanced age; 17

(2) Mental, emotional, sensory, or physical disability or disease; 18

(3) Impaired mobility; 19

(4) Habitual drunkenness; 20

(5) Addiction to drugs; or 21

(6) Hospitalization. 22

Article – Tax – General 23

10–758. 24

(A) (1) IN THIS SECTION THE FOLLOWING WORDS HAVE THE MEANINGS 25
INDICATED. 26

(2) “ELIGIBLE TAXPAYER” MEANS AN INDIVIDUAL WHO IS SUBJECT 27
TO EARLY WITHDRAWAL PENALTIES UNDER § 72(T) OF THE INTERNAL REVENUE 28
CODE. 29

(3) “FINANCIAL EXPLOITATIO N” HAS THE MEANING STAT ED IN § 30
13–601 OF THE ESTATES AND TRUSTS ARTICLE. 31
4 SENATE BILL 291

(B) SUBJECT TO SUBSECTION (D) OF THIS SECTION, AN ELIGIBLE TAXPAYER 1
MAY CLAIM A CREDIT A GAINST THE STATE INCOME TAX IN A N AMOUNT EQUAL TO 2
THE LESSER OF: 3

(1) THE STATE INCOME TAX ATTR IBUTABLE TO AN EARLY 4
WITHDRAWAL OF RETIREMENT FUNDS DUE TO FINANCIAL EXPLOITATION; OR 5

(2) FEDERAL TAX PENALTIE S PAID BY THE ELIGIB LE TAXPAYER IN 6
ACCORDANCE WITH § 72(T) OF THE INTERNAL REVENUE CODE THAT ARE 7
ATTRIBUTABLE TO AN E ARLY WITHDRAWAL OF R ETIREMENT FUNDS DUE TO 8
FINANCIAL EXPLOITATION. 9

(C) WHEN CLAIMING A CREDI T UNDER THIS SECTION , AN ELIGIBLE 10
TAXPAYER SHALL PROVIDE: 11

(1) INFORMATION DEMONSTR ATING A LOSS RESULTI NG FROM 12
FINANCIAL EXPLOITATION, INCLUDING DOCUMENTATION FROM: 13

(I) ADULT PROTECTIVE SERVICES; 14

(II) A LAW ENFORCEMENT AGENCY; 15

(III) A FINANCIAL INSTITUT ION THAT HAS REPORTE D 16
SUSPECTED FINANCIAL EXPLOITATION UNDER THE MARYLAND STATUTE AGAINST 17
FINANCIAL EXPLOITATION (SAFE) ACT; OR 18

(IV) A COURT ORDER , A RESTITUTION ORDER , OR ANY OTHER 19
COURT ISSUED DOCUMENTATION RELATED TO THE FINANCIAL LOSS; AND 20

(2) AN AFFIDAVIT ATTESTI NG THAT FEDERAL TAX PENALTIES WERE 21
INCURRED AS A RESULT OF EARLY WITHDRAWAL OF RETIREMENT FUNDS DUE TO 22
FINANCIAL EXPLOITATION. 23

(D) IF THE CREDIT ALLOWED UNDER THIS SECTION IN ANY TAXABLE YEAR 24
EXCEEDS THE STATE INCOME TAX FOR THAT TAXABLE YEAR, THE UNUSED AMOUNT 25
OF THE CREDIT MAY NOT BE CARRIED OVER TO ANY OTHER TAXABLE YEAR. 26

SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect July 27
1, 2026, and shall be applicable to all taxable years beginning after December 31, 2025. 28