Maryland Income Tax - Decoupling From Amendments to the Internal Revenue Code - Depreciation and Business Interest Expenses
HB0880 would change how Maryland calculates state income tax by decoupling certain Maryland tax rules from later federal changes to the Internal Revenue Code. The bill updates Maryland’s conformity rules for depreciation and business interest deductions so that, for state tax purposes, taxpayers would continue to use Maryland’s own treatment rather than automatically following federal amendments made on or after specified dates. It specifically addresses depreciation under federal sections 167 and 168, the section 179 expensing rules, net operating loss carrybacks, depreciation for heavy duty SUVs, and the federal business interest limitation under section 163(j).
The bill also makes corresponding changes for corporations by requiring corporate taxable income to be adjusted in the same way as an individual’s Maryland adjusted gross income under the revised section. It applies beginning with taxable years after December 31, 2025, and would take effect July 1, 2026. In practical terms, the measure is aimed at preserving Maryland’s existing tax base and preventing automatic state revenue effects from future federal tax changes related to depreciation and interest deductions.
HB0880 would amend Title 10 of the Tax-General Article, specifically Maryland’s conformity provisions for individual and corporate income tax, by adding a new decoupling rule for federal business interest deductions and updating the state’s treatment of depreciation-related deductions. It would affect taxpayers claiming accelerated depreciation, section 179 expensing, net operating loss carrybacks, heavy duty SUV depreciation, and business interest deductions, while preserving Maryland’s independent tax treatment for those items. The bill would not change federal law, but it would change how federal taxable income and federal adjusted gross income are adjusted for Maryland tax purposes.
Based on the bill text and available context, the measure appears to be a technical tax policy bill with a neutral-to-supportive framing, focused on maintaining Maryland’s independent tax rules rather than adopting later federal tax changes automatically. There are no recorded votes or committee testimony in the provided materials, so there is no evidence of organized opposition or broad public controversy in the available record. The introduction and assignment to Ways and Means suggest it is being handled as a tax administration and revenue issue.
The main policy issue is whether Maryland should conform to federal changes that expand depreciation or business interest deductions, or instead decouple to preserve state revenue and maintain prior state tax policy. Taxpayers and businesses that benefit from larger federal deductions would likely prefer conformity, while state fiscal interests and those favoring revenue stability would support decoupling. The bill’s specific treatment of manufacturing entities, heavy duty SUVs, and the federal section 163(j) interest limitation may draw attention from manufacturers, capital-intensive businesses, and tax practitioners because those groups are most directly affected by the state-level adjustments.