Maryland Governor OKs Billions in Incentives for Amazon HQ2

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Leslie A. Pappas

Amazon.com Inc. could get billions in state tax incentives and infrastructure improvements under an incentive package Maryland Gov. Larry Hogan (R) signed into law April 25.

S.B. 877, known as the PRIME Act, would offer state tax breaks to any “qualifying business” that commits to hiring a minimum of 40,000 people and spending $4.5 billion over a 17-year period. The tax breaks and exemptions could be worth $3 billion to Amazon if it locates its headquarters in Maryland, Hogan said in a press release April 25.

“This legislation puts Maryland in prime position to attract Amazon’s new headquarters, which would generate more than $17 billion annually to our state economy,” Hogan said in a statement. “This is the biggest and most substantial economic development opportunity in a generation.”

The incentive package as passed in the legislature April 4 called for $5.6 billion in tax incentives to any “qualifying business” that commits to hiring a minimum of 40,000 people and spending $4.5 billion over a 17-year period. The incentives only would take effect if Amazon comes to Maryland and would expire if a business doesn’t qualify before Jan. 1, 2022.

Hogan’s office didn’t immediately respond to requests for comment on whether the bill was modified in any way before he signed it. There was no indication of a change on the legislature’s website.

The legislation was written directly in response to Amazon’s September 2017 announcement that it would establish a second headquarters (HQ2). Amazon has put Montgomery County, Md., on its short list of potential HQ2 sites.

Amazon’s second headquarters would support more than 100,000 total jobs and bring Maryland an extra $17 billion per year in economic activity, an analysis from the Maryland Department of Commerce estimated.

Transit System Funding

Also signed April 25, the Maryland Metro/Transit Funding Act would provide $167 million in dedicated funding for the Metro transit system, which serves Maryland, Virginia, and Washington, D.C.

According to the press release, Hogan “was the first regional leader to propose a solution to address the half-billion dollar a year shortfall that Metro is currently experiencing.”

“The governor’s original proposal would have split the cost among Maryland, Virginia, Washington, D.C., and the federal government, however the federal government declined to increase their contribution despite federal workers making up nearly 40 percent of riders,” the press release said. “A three-way split between Maryland, Virginia, and Washington, D.C. was successfully negotiated, resulting in a steady stream of funding for this vital transit system, as the governor continues to advocate for the federal government to pay its fair share.”

To contact the reporter on this story: Leslie A. Pappas in Philadelphia at lpappas@bloomberglaw.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

For More Information

Text of S.B.877 is at http://src.bna.com/yii.

Copyright © 2018 Tax Management Inc. All Rights Reserved.

Request Daily Tax Report: State