Protecting data and information systems is a priority for nearly every type of business and organization. The state of Maryland has recently stepped up to support businesses by passing a bill that enables small businesses to invest in security technologies while earning tax credits. There are several aspects of the Maryland Cyber Security Tax Credit that business executives and managers may not be aware of.
The Maryland Cyber Security Tax Credit is an incentive program for companies to buy cybersecurity technology from a cybersecurity provider. This particular tax credit encourages small businesses to purchase cyber technology which will ultimately help protect both their business and consumer information. It’s also being used to help promote the cybersecurity industry. Companies can apply for the tax credit anytime during the year. Applications must be submitted by January 31, however, to receive a credit for the previous year.
A company purchasing the credit can claim 50 percent of the net cost as a tax credit. It’s required that the credit is claimed for the same year that it’s purchased. The tax credit was initiated in 2018 and is awarded by first come, first serve. Currently, $1.5 million in funds is available through the Department of Commerce for cybersecurity technology while $500,000 has been set aside for cybersecurity services.
There are several specific benefits for companies when obtaining these tax credits.
The tax credit is for businesses that meet specific criteria. Before receiving the tax credit, it must be determined that the services or products being purchased meet the required definition of cybersecurity technology. Cybersecurity technology must be proprietary goods and services that have been created to protect electronically stored information or data. The products or services are created to prevent data extrusion or unauthorized access to data and information systems. Besides meeting the defined criteria for what constitutes cybersecurity technology, both the provider and the business buying the services must meet several eligibility requirements. The following are a few of the requirements that need to be met.
There are several steps a business must take to be a cybersecurity provider or to qualify to buy the tax credit. The Maryland Economic Development Association explains the steps for either process. The process to obtain the tax credit or to be a provider both involve providing several types of documentation such as a detailed business plan and a Certificate of Good Standing from the state of Maryland. There are currently eight businesses in Maryland that are qualified to sell cybersecurity technology.
Business owners now have a tax credit option that can help them protect their vital data and information. Maryland has taken a positive step in assisting companies to improve their cybersecurity while promoting local business.