The boundaries of Baltimore City’s Enterprise Zone are set to be redrawn and expanded this month. As explained in more detail below, while businesses within the areas newly designated as within the City’s Enterprise Zone will be eligible for multiple tax benefits, while businesses within areas set to lose the designation must act quickly (by June 14th) to preserve the eligibility to obtain the tax benefits.
Background
Baltimore City’s Enterprise Zone (EZ) was established in 2002, and following the last update in 2012, consists of 13,453 acres. The current EZ map is set to expire on June 14, 2022. A proposed map approved by the Baltimore City Council in April and awaiting final approval from the Maryland Department of Commerce would add more than 3,200 acres to Baltimore’s EZ program.
A City Council report notes that the new map would for the inclusion of the following areas in the City’s EZ designation:
- Belair Road
- Downtown
- Edmondson Square
- Falls Road
- Fayette Street
- Frankford Avenue
- Greenmount Avenue
- Harford Corridor
- Highlandtown
- Greektown
- Port Covington
- Reisterstown Road
- Sinclair Lane
- North Washington Street
- York Road Corridor
The new map would also add EZ Focus Area (FA) designation to the South Industrial Areas as well as expand the FA boundaries in the Canton and Pulaski/Orangeville areas. This map depicts the areas to be designed EZ in blue and FA in green.
Some areas, however, will lose their EZ designation altogether. For example, Harbor Point and certain parts of Canton and Little Italy will be removed from the EZ program. This map depicts the areas to be added in yellow and the areas to be removed in orange.
Enterprise Zone Tax Benefits
Properties and businesses located in an Enterprise Zone are eligible for several tax benefits intended to encourage investment in distressed areas. Residential properties are not eligible.
Improvements to real property in an EZ are eligible for a 10-year credit against the property taxes attributable to the expansion, renovation, or capital improvement. The amount of the credit is 80% of the increased assessment in each of the first 5 years, which decreases 10% annually (70%, 60%, 50%, 40%, 30%) for the subsequent 5 years. Properties in the EZ are also eligible for enhanced Brownfields Tax Credits, which are extended from 5 years to 10 years.
EZ businesses are eligible for a state income tax credit of $1,000 for each new employee ($6,000 over a 3-year period for each qualified new “economically disadvantaged employee.”)
Focus Area Benefits
In an EZ Focus Area, the tax benefits are enhanced: the real property tax credit remains at 80 percent for the entire 10-year period and is extended to cover taxes on personal property attributable to new investment within a FA. Additionally, the state income tax credit is increased to $1,500 per new employee and $9,000 per economically disadvantaged new employee in a FA.
Continued Eligibility for Tax Benefits Following Removal from Enterprise Zone
Businesses and development projects in areas that will be losing EZ designation under the redesignation process will remain eligible for the tax benefits in certain instances.
Projects that have qualified for the real property tax credits at the time of expiration of the enterprise zone (June 14, 2022), may continue to claim the tax credits for the remainder of the 10-year period per Section 9-103(e)(2) of the Maryland Tax-Property Article.
Additionally, a business or real estate project that is certified by the Baltimore Development Corporation (BDC) prior to the expiration of the EZ, but that not completed improvements, will have an additional 5 years to complete the work, at which point the 10-year tax credit period would commence. § 9-103(e)(3). To qualify for this 5-year extension, businesses and developers have until June 14, 2022 to have their EZ eligibility certified by BDC.
For more information on the Enterprise Zone tax credit, or any economic development incentives, contact any of the members of the Land Use and Zoning Practice Group at RMG at 410.727.6600.
Authored by Amelia Miller, Law Clerk, and Justin Williams, Partner
For questions on this article, please contact info@rosenbergmartin.com.
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