www.baltimoresun.com/business/bs-bz-legislative-business-20140106,0,3640236.story

baltimoresun.com

Cybersecurity, film could receive boost in state budget

Governor interested in adding funds for tax credit programs

By Natalie Sherman, The Baltimore Sun

8:36 PM EST, January 6, 2014

Advertisement

Tax credits for the film and cybersecurity industries could expand as part of the legislative session that starts Wednesday.

Gov. Martin O'Malley is interested in adding money to the programs, said aides, who declined to provide details. The governor will release a budget and legislative package later this month, as lawmakers work to address a budget shortfall of about $500 million.

House Speaker Michael E. Busch said he shares the governor's interest in expanding the cybersecurity credit, as a way to encourage what he called an "emerging industry" in Maryland.

The first-come, first-served incentive, which targets companies less than five years old, started last year. Department of Business and Economic Development program manager Mark A. Vulcan said he expects the $3 million allocated for fiscal 2014 to be used up by June; the governor is required to appropriate at least $2 million each fiscal year.

"There's been a lot of interest," Vulcan said. "As soon as the statute passed last session, we started getting calls from the public and interested entitites and investors."

The cybersecurity incentive is just one credit among many that industry groups said they hope to see grow, even as big fights over increasing the minimum wage and changes to stormwater management loom for the session in the next 90 days.

"The minimum wage — I think that is going to be the No. 1, 2, 3 and biggest issue in Annapolis this year," said Kimberly Burns, president of Maryland Business for Responsive Government.

"It's a real concern to my members," said Patrick Donaho, president of the Maryland Retailers Association, who said small businesses forced to raise wages would likely lay off workers or curtail hiring.

The first-come, first-served film production tax credit, which is awarded based on spending and other metrics, is ripe for expansion, said Maryland Film Festival director Jed Dietz, an officer of the Maryland Film Industry Coalition, pointing to the success and high visibility of "Veep" and "House of Cards."

Last year, lawmakers boosted the credit to $25 million, up $17.5 million from the year before.

"This is the time to expand," said Dietz, adding that he hopes the cap will one day be lifted completely. "There's no reason to be turning these productions away. … They're pouring millions of dollars into our state economy, and we want more."

Expansions of the research and development and biotech credits, now capped at $8 million and $10 million, respectively, are supported by the Tech Council of Maryland and Greater Baltimore Committee.

The GBC also is hoping for renewal of the state's Sustainable Communities Tax Credit, which includes breaks for historic renovation and has been used for work on Baltimore's aging buildings. GBC President Donald C. Fry cautioned against simply assuming that the program will continue.

"These are things that are always closely evaluated, particularly when you have a tight budget year," he said.

Chamber of Commerce CEO Kathleen T. Snyder said efforts to make the state competitive for small businesses and well-paying industries such as cybersecurity should include a reduction in the personal income tax, which jumps significantly when an individual earns more than $100,000.

"If we're serious about growing more jobs, we have to take a look at … how can we help young professionals come to Maryland or stay in Maryland as residents and take advantage of these innovative jobs that are here without having an overburdened system of personal income tax," said Snyder, adding that she does not necessarily anticipate action on lowering taxes, either personal or corporate, to happen during this session.

A GBC commission examining Maryland's tax structure to make "revenue-neutral" recommendations about ways to improve economic competitiveness won't finish its work until May or June, after the session ends. The group expects to talk to candidates about the plan and aim for changes next year.

But others said they expect to at least hear talk of lowering taxes, given that the legislative session coincides with the primary campaign.

"I expect to see some proposals to provide tax relief to business. I expect that they will pop up in the fourth year of a four-year term," said Burns of Maryland Business for Responsive Government. "You've kind of got to wonder … why they've waited so long, if it was really a genuine concern."

The GBC's Fry said some candidates will treat the session as "de facto campaign time," and "there's still going to be some tough budget calls that are going to have to be made."

"I don't think the issues will be as controversial as they have in the past couple of years, but I still think it will be a vibrant session," Fry said.

Other issues that could surface include the use of "fracking" to obtain natural gas and changes to a state law that bars accident victims from receiving any compensation if they are found to be partially responsible.

Maryland Port Administration spokesman Richard Scher said the industry is hoping to establish a fixed taxi rate from the cruise terminal to Fort McHenry, the World Trade Center and Penn Station, similar to the fixed rate from the terminal to BWI.

The retailers association also wants changes to the state's small business health exchange and plans to support a proposal to offer a sales tax holiday to consumers on certain "emergency preparedness" items, such as generators.

Baltimore Sun reporters Erin Cox, Michael Dresser, Lorraine Mirabella, Kevin Rector and Jamie Smith Hopkins contributed to this article.

nsherman@baltsun.com