Maryland Tech Council 2021 General Assembly Final Report
The Maryland General Assembly began its 442nd Session at noon on Wednesday, January 10th and concluded its legislative work at midnight on Monday, April 12th. As expected, this was a unique Session, conducted entirely virtually via YouTube and Zoom due to the COVID-19 pandemic. This format created many challenges but also provided opportunities. The main challenge was the lack of face-to-face discussions with legislators and colleagues to ascertain bill status and work through issues, which one legislator aptly described as “the lack of curbside chats.” The main opportunity was the ability to watch all committee voting sessions, which typically have been closed door meetings.
Despite this being a virtual Session and a Session operating during a catastrophic health emergency, the number of bills introduced was higher than in previous sessions. For example, this Session, the General Assembly considered 2,788 bills and resolutions. As a comparison, the General Assembly considered approximately 2,499 bills and resolutions during the 2019 Session. Another stark difference this Session was that approximately 783 bills were pre-filed and introduced on the first day of Session, a record-breaking number. Overall, the 2020 Session can be characterized as a positive Session for the biotechnology community, given the successful passage of several initiatives designed to address investment and workforce development.
Below is a brief overview of the Fiscal Year (FY) 2022 budget and a summary of relevant labor and employment legislation followed by a summary of the primary bills of interest to the Council divided into subject categories.
FY 2022 Budget
This was an extraordinary budget year. Due to the COVID-19 pandemic, the State started 2020 forecasting a $5 billion deficit for FY 2022 and FY 2023. However, because of higher-than-expected State revenues and an infusion of federal funds, ongoing general fund revenues exceed ongoing expenditures by $79 million in FY 2022, and a structural surplus of $121 million is forecast by FY 2026. With respect to the State’s response to the COVID-19 Public Health Emergency: $572 million of federal funding is provided for testing, contract tracing, and vaccinations. The RELIEF Act authorized $687 million of State spending and provided $585 million of targeted tax relief across FY 2021 and FY 2022 to support Maryland’s recovery. The Budget also invests Federal Stimulus Funds in Maryland’s Future: $300 million of federal stimulus funding is allocated to expanding access to broadband by building out the infrastructure and subsidizing service and devices for low-income households. $75 million is invested in workforce training and apprenticeships to enable the unemployed and underemployed to obtain jobs in the evolving economy.
Labor and Employment
Essential Worker Protections:
Several bills were introduced this Session related to essential workers and the COVID-19 pandemic. However, in the end, only one bill passed and was heavily amended. As introduced, House Bill 581: Labor and Employment – Employment Standards During an Emergency (Maryland Essential Workers’ Protection Act) (passed) would have required, among other provisions, for employers to pay essential workers $3/hour hazard pay; 14 days paid sick leave; and any unreimbursed health care costs, including travel to medical appointments under an “emergency.” The term “emergency” was broadly defined and could have encompassed a weather event, such as a snowstorm or a flood. The bill would also have allowed workers to leave a work site if the worker believed that the site was unsafe and would have required an employer to evacuate and sanitize a work site if a worker contracted an infectious disease. After many weeks of debate, the bill was amended to limit an emergency to a proclamation by the Governor of a catastrophic health emergency caused by a communicable disease. The bill also removes the requirement for hazard pay, requires paid sick leave to be granted only if State or federal funds are available to the employer to cover the costs, and requires the employer to only pay for the cost of testing if it is not covered by insurance or obtained free of charge. The bill also clarifies that Maryland Occupational Safety and Health Division standards apply for when a worker can leave work for an unsafe working condition and eliminates the requirement for evacuation of a work site in lieu of requiring an employer to implement mitigation strategies.
House Bill 581 incorporated several requirements/amendments offered in other bills. For example, as introduced, House Bill 124: Occupational Safety and Health Standards to Protect Employees – Aerosol Transmissible Diseases and COVID-19 (failed) contained very specific requirements on how employers must respond to aerosol transmissible diseases. Rather than pass House Bill 124, the General Assembly incorporated into House Bill 581 amendments that had been offered on House Bill 124. Consequently, House Bill 581 also requires the Commissioner of Labor, within two weeks of the passage of the legislation, to adopt an emergency temporary standard related to COVID-19 unless the federal government already has adopted a standard. By July 1st, the Maryland Department of Health (MDH) and the Maryland Department of Labor (MDL) must create a template for employers to use in responding to a catastrophic health emergency.
Likewise, Senate Bill 727/House Bill 1326: Maryland Healthy Working Families Act – Revisions and Public Health Emergency Leave (failed), which would have required employers to provide additional paid sick leave during a public health emergency, failed to pass because House Bill 581 addressed the issue.
Several bills passed this Session to ensure that employers would not encounter significant increases in their unemployment insurance rates due to the COVID-19 pandemic. The bills listed below have all passed and have already been enacted.
Senate Bill 816/House Bill 908: Unemployment Insurance – Employer Contributions and Reimbursement Payments (passed) requires the Secretary of Labor to offer payment plans in years in which Table F is applicable. Senate Bill 817/House Bill 907: Unemployment Insurance – Study on System Reforms (passed) requires the Secretary of Labor to study and make recommendations regarding reforms to the unemployment insurance system in Maryland. Senate Bill 496/House Bill 612: Recovery for the Economy, Livelihoods, Industries, Entrepreneurs, and Families (RELIEF) Act (passed) allows small businesses and nonprofits with fewer than 50 employees to defer unemployment insurance tax payments in calendar year 2021 to January 2022 and allowing an employer’s 2021 tax rate to be calculated based on their non-pandemic experience by excluding the 2020 FY, and instead by using the last three FYs of 2017, 2018, and 2019.
House Bill 1034: Prescription Drug Affordability Board – Plan of Action – Repeal of Date for Submission (passed) which repealed the date by which the Board must submit a plan of action, if drafted, to the Legislative Policy Committee for approval. The bill recognized that the Board just began its work, the submission date was arbitrary, and due to the complexity of the work, more time may be necessary to complete it. The legislation was passed without objection.
House Bill 1107: Maryland Medical Assistance Program – Supplemental Rebate Program – Subscription Model for Hepatitis C Therapies (failed) would have authorized the Medical Assistance Program as well as the Corrections Health Care Division to contract under a subscription model with a single company for Hepatitis C Therapies. Concerns about limiting access to the full range of Hepatitis C therapies were raised by a range of stakeholders and quickly understood by Delegate Hill, the bill’s sponsor. Her intent was to broaden access to Hepatitis C treatment cost-effectively but did not initially understand the unintended consequences of this model. There was discussion about limiting the legislation only to the Corrections system as a pilot program, but that concept did not gain traction and the bill was never acted upon.
House Bill 1256: Maryland Department of Health – Gene Synthesis Providers and Manufacturers of Gene Synthesis Equipment – Certification (failed) would have required MDH to develop guidelines that include requirements for gene synthesis providers and manufacturers of gene synthesis equipment. It also required the Department to develop a process to certify that gene synthesis providers and manufacturers of gene synthesis equipment comply with guidelines, are certified by the State, or are subject to penalty. MTC understood the sponsor’s intent and voiced that its members believe that this issue should in fact be carefully regulated. However, MTC opposed the bill based on its concern about unintended consequences associated with legislating the requirements of this bill in State law and that it should be addressed federally. Despite its opposition, MTC indicated that if the State chose to move forward with State level regulation, the issue should be further considered over the interim with the input from MTC and other affected stakeholders to resolve issues that raise concern about State level regulation. Given that the bill was brought to the sponsor by Dr. Matt Sharkey, Chair of the City of Frederick Containment Lab Community Advisory Council, it is likely there will be further consideration of the issue going forward.
There were three bills introduced by the Department of Commerce that addressed tax credit programs that have been utilized by MTC members. MTC supported these initiatives and worked with Commerce to address questions and concerns raised through their deliberation. Ultimately, all three initiatives were enacted.
Senate Bill 19: Economic Development – Biotechnology Investment Incentive Tax Credit Program – Alterations and Study (passed) specifies that the biotechnology investment incentive tax credit is intended to foster the growth of Maryland’s biotechnology industry by increasing investment in early stage companies with the goal of increasing the number of companies developing biotechnologies in Maryland, increasing overall investments in the biotechnology sector, and increasing the number of individual investors actively investing in Maryland’s life sciences companies. Under current law, an investor who invests at least $25,000 in a qualified Maryland biotechnology company (QMBC) can claim a credit equal to 50% of the investment, not to exceed $250,000. If the qualified biotechnology company is located in Allegany, Dorchester, Garrett, or Somerset counties, the value of the credit for investments made in these companies is equal to 75% of the investment, not to exceed $500,000. The bill as enacted reduces the percentage value of the tax credit from 50% to 33% of the investment and from 75% to 50% for investments in companies located in the counties described above. The bill specifies that a qualified investor does not include a founder or current employee of the QMBC if the company has been in active business for more than five years. The bill also specifies that a QMBC is a company that (1) has been in active business no longer than 12 years; or (2) meets specified program requirements within two months of receiving a qualified investment. Commerce must report annually on (1) the initial tax credit certificates awarded for investments in QMBCs that were not certified by the Department in the previous year; and (2) for each QMBC that receives an investment, the number of years the company has been in active business and the number of years qualified investors in the company have received tax credits. In addition, Commerce must, in consultation with qualified experts in the biotechnology industry, (1) study the methods and criteria by which the Department might competitively award tax credits; (2) develop strategies to increase tax credits awarded to early-stage biotechnology companies; and (3) report its findings to the General Assembly by December 1, 2021.
Senate Bill 160: Economic Development – Cybersecurity Investment Incentive Tax Credit Program – Expansion, Extension, and Study (passed), as enacted, extends the duration of the Cybersecurity Investment Incentive Tax Credit Program by two years, through June 30, 2025, and expands the applicability of the program to technology companies, rather than solely cybersecurity companies. The program and its reserve fund are renamed accordingly. The bill also establishes an evaluation and recommendation process involving the Maryland Economic Development Commission (MEDC) and MDL for determining eligible industry sectors and modifies other program requirements. Each year, upon conclusion of an evaluation and recommendation process involving Commerce as well as MEDC and MDL, Commerce must establish a list of eligible technology sectors for the program. Other program requirements are also modified, including (1) limiting aggregate awards to a single technology sector to 25% of the total annual program appropriation and (2) allowing companies to qualify for the program for up to four consecutive years, instead of two. The bill is applicable to all initial tax credit certificates issued after June 30, 2021.
Senate Bill 196: Economic Development – Research and Development Tax Credit – Alterations (passed) This departmental bill specifies that the purpose of the research and development (R&D )tax credit is to foster increased research activities and expenditures in Maryland and extends the termination date for the R&D tax credit to June 30, 2025. The bill increases to $12 million the amount of growth tax credits that can be awarded each tax year. It alters the tax credit by requiring Commerce to set aside $3.5 million annually to award to qualified small businesses and may award up to $8.5 million in tax credits to all other businesses. The bill establishes the process for prorating the tax credits for each type of business if the amount of credits sought exceeds the amount available and reallocating tax credits if the amount of tax credits sought is less than the amount available for each type of business. Under current law, a business that meets certain requirements, including net book value assets totaling less than $5.0 million, can claim a refundable tax credit. The bill alters the definition of net book value assets as the total of a business’s net value of assets, including intangibles but not including liabilities, minus depreciation and amortization for the purpose of determining small business eligibility. Finally, the bill limits to $250,000 the maximum value of the tax credit and applies to tax years 2021 through 2025.
House Bill 1086: Maryland Tax Credit Evaluation Act – Alterations (passed) alters the Tax Credit Evaluation Act, which established a legislative process providing for the review of State tax credits. The bill eliminates the Tax Credit Evaluation Committee and charges the Department of Legislative Services (DLS) with evaluating a tax credit, tax exemption, or tax preference on request from the Senate Budget and Taxation Committee, the House Ways and Means Committee, the Executive Director of DLS, or the Director of the Office of Policy Analysis of DLS. For each evaluation conducted, DLS must include specified information and report its findings to the General Assembly. DLS must also (1) beginning on October 1, 2022, evaluate at least once every 10 years each income tax credit that is primarily claimed by businesses and has an annual fiscal impact exceeding $5.0 million; and (2) in consultation with the Senate Budget and Taxation Committee and the House Ways and Means Committee, publish on its website a schedule of the evaluations that will be conducted.
House Bill 360/Senate Bill 246: Income Tax – Angel Investor Tax Credit Program (failed) would have created a nonrefundable tax credit against the State income tax for investors who make qualified investments in certain Maryland innovation businesses.
House Bill 262/Senate Bill 113: Opportunity Zone Tax Deduction Reform Act of 2021 (failed) was opposed by MTC. The legislation would have required a person to add back to Maryland adjusted gross income or Maryland modified income the amount of capital gains excluded under the federal Qualified Opportunity Zones Program. The bill, which passed the House in 2020, was again passed by the House, but was not acted upon by the Senate.
House Bill 892/Senate Bill 709: Economic Development – Maryland Technology Infrastructure Pilot Program – Establishment (failed) would have established the Maryland Technology Infrastructure Pilot Program, Authority, and Fund (MTIF) in the Maryland Technology Development Corporation (TEDCO). The pilot program was to be focused on the Western Maryland innovation economy. The MTIF was to provide advice to and consult with TEDCO in connection with the administration of the program. The bill passed the House but was not acted upon in the Senate, primarily due to the $2.5 million fiscal note.
Senate Bill 639: Maryland Technology Development Corporation – Inclusion Fund – Establishment (passed) establishes the Inclusion Fund in TEDCO as a special, nonlapsing fund. The purpose of the fund is to provide capital investment in technology-based businesses that (1) would qualify for investment under the Builder Fund; (2) are at least 30% owned by individuals who demonstrate economic disadvantage; and (3) are controlled and managed for at least one year after the time of investment by an individual or individuals who demonstrate economic disadvantage. TEDCO must include, in its annual report, information on implementation of the fund.
House Bill 218/Senate Bill 16: Commercial Law – Consumer Protection – Biometric Identifiers and Biometric Information Privacy (failed) would have required each “private entity” in possession of “biometric identifiers” or “biometric information” to develop a publicly available written policy establishing a retention schedule and guidelines for permanently destroying the biometric identifiers and information. The bill also established various other standards and requirements related to biometric identifiers and information, including authorizing an aggrieved individual to bring a civil action against a private entity that violates the bill’s requirements. Based on the strong opposition of a number of interests including MTC, who argued that this issue is a federal issue and should not be addressed at the State level, the bill was not acted upon by either Chamber.
House Bill 1323: Algorithmic Decision Systems – Procurement and Discriminatory Acts (failed) would have required State agencies that purchase a product or service that is or contains an algorithmic decision system to purchase only products or services that adhere to responsible artificial intelligence standards. The bill also included specified acts performed through an algorithmic decision system in the definition of “discriminatory acts” subject to adjudication by the Maryland Commission on Civil Rights (MCCR). MTC appreciated the intent of the legislation but objected to the legislation based on the fact that algorithmic systems are a new and innovative area of technology design that offers great promise but is not sufficiently established and defined to reasonably be able to determine if an action performed through an algorithmic decision system is discriminatory. Subjecting this technology to possible actions under the MCCR would have created tremendous disincentives for the development of algorithmic decision systems. Proponents, MTC, and other stakeholders, such as Amazon, met with the sponsor following the hearing and it was decided that the issue would be further discussed over the interim.
House Bill 97/Senate Bill 66: Department of Housing and Community Development – Office of Statewide Broadband – Established (Digital Connectivity Act of 2021) (passed) establishes the Office of Statewide Broadband (OSB) within the Department of Housing and Community Development (DHCD) as the successor to the Office of Rural Broadband, albeit with expanded responsibilities. The bill establishes the Digital Inclusion Fund and the Digital Connectivity Fund within DHCD, to provide grants to local governments and nonprofits to increase access to high-speed Internet and to assist in the development of affordable broadband Internet infrastructure. The bill also transfers the Rural Broadband Coordination Board and the Rural Broadband Assistance Fund from Commerce to OSB. The bill sunsets June 30, 2030. The bill was passed as an emergency bill. Emergency bills need a 3/5 vote in the General Assembly and take effect immediately upon the Governor’s signature or within 30 days of presentation to the Governor if the Governor decides to let it go into effect without his signature.
House Bill 419/Senate Bill 460: Economic Development – Advanced Clean Energy and Clean Energy Innovation Investments and Initiatives (passed) requires the Maryland Energy Innovation Institute (MEII) and the Maryland Clean Energy Center (MCEC) to implement an accelerator program for Maryland-based technology companies engaged in clean energy innovation. The accelerator program must feature seed funding, training, developmental support for the companies, and pilot projects focused on on-site clean energy generation for buildings. MCEC may enter into financing transactions with, on behalf of, or for the benefit of any State agency for the purposes of a project on State-owned or State-leased property. Financing may be in any form, including bonds, loans, grants, energy performance contracts, shared energy savings contracts, participation agreements, lease agreements, and reimbursement agreements but may not pledge the faith and credit of the State. The Strategic Energy Investment Fund must transfer at least $2.1 million annually to the Maryland Energy Innovation Fund, which must be apportioned to MEII (at least $0.9 million) and MCEC (at least $1.2 million).
House Bill 654: Maryland Small Business Innovation Research and Technology Transfer Incentive Program – Alterations (passed) modifies and clarifies requirements for the Maryland Small Business Innovation Research and Technology Transfer Incentive Program established in legislation passed in 2020, which was vetoed by the Governor and overridden by the General Assembly in the beginning of this Session. Under the bill, the program must prioritize awards and investments to eligible small businesses that are engaged in research and development activities that assist in the prevention of, preparedness for, or response to a public health crisis in the State. A recipient of funding under the program must remain a “qualified business” for at least two years or return the funds. An existing coordination and marketing requirement is broadened to specifically include minority-owned, women-owned, and rural small businesses. Finally, defined terms used for purposes of qualifying under the program are clarified.
Senate Bill 459/House Bill 987: Economic Development – Comprehensive Technical Assistance Program – Establishment (passed) establishes the Comprehensive Technical Assistance Program in TEDCO. The purpose of the program is to provide comprehensive technical assistance to any business that qualifies for financial assistance under a TEDCO program. The program must (1) incorporate TEDCO’s existing services; (2) include flexible and customized applied training services; (3) include the use of a network of experienced advisors to serve as mentors and loaned executives; and (4) include support with attracting and accessing private capital. TEDCO must include information related to the program in its annual report and must adopt regulations to implement the bill. (Note: The House and Senate bills were not introduced as crossfiles but as amended were passed in identical form.)
House Bill 658/Senate Bill 444: Transforming Manufacturing in a Digital Economy Workgroup (Making It in Maryland) (passed) establishes the Workgroup to Study the Transformation of Manufacturing in Maryland’s Emerging Digital Economy and is staffed by Commerce. MTC has a designated representative on the membership of the Workgroup. The Workgroup is charged with a wide variety of issues to examine and on which to make recommendations, such as relevant professional research, public-private partnerships, State funding levels, new tax credits, and the State’s current statutory and regulatory authority over manufacturing. By December 1, 2021, the Workgroup must submit an interim report of its findings to the Governor and the General Assembly. By December 1, 2022, the Workgroup must report its final findings and recommendations to the Governor and General Assembly. The legislation sunsets June 30, 2023.
Senate Bill 732: Economic Development – Maryland Innovation Initiative University Partnership Pilot Program – Establishment (passed) establishes the Maryland Innovation Initiative (MII) University Partnership Pilot Program. The Pilot Program is implemented and administered by MII, which already exists in TEDCO. The purpose of the Pilot Program is to expand opportunities at Bowie State University and Frostburg State University for technology validation, entrepreneurial development, and industry engagement. Each university must pay an annual contribution of $50,000 to qualify for participation in the Program, and only these universities are eligible to submit project proposals for funding under the Pilot Program. The Governor must include an appropriation of $500,000 in FY 2023 and FY 2024 for the Program. The bill sunsets June 30, 2024. House Bill 1169/Senate Bill 802: Economic Development – Maryland Innovation Initiative University Expansion Pilot Program – Establishment (failed) proposed the same program only for Frostburg University and therefore duplicated the provisions of the bill that was enacted.
House Bill 1342: Economic Development – Partnership for Workforce Quality Program – Alterations (passed) is also a Commerce initiative that expands the eligible use of funds under the Partnership for Workforce Quality Program to include training for new employees.
Senate Bill 902: Economic Development – Cyber Workforce Program and Fund – Established (failed) would have established the Cyber Workforce Program in Commerce’s Partnership for Workforce Quality Program. The purposes of the program were to support cyber careers, provide educational and training scholarships in cyber-related fields, and provide funding for specified cyber-related activities, including cyber-related workforce development and apprenticeship programs. The bill passed the Senate in an amended form in the last days of the Session but was not considered by the House prior to Sine Die.
House Bill 1211: Economic Development – Maryland Technology Development Corporation – Pre-Seed Builder Fund (passed) establishes the Pre-Seed Builder Fund in TEDCO as the successor to the Pre-Seed Builder Fund established in TEDCO regulations. The purpose of the Fund is to support the development of start-up companies run by entrepreneurs from socially or economically disadvantaged backgrounds that hinder access to traditional forms of capital and executive networks at the pre-seed stage. TEDCO must manage and supervise the Fund. The Governor must include an appropriation to the fund of $5.0 million in FY 2023, $6.2 million in FY 2024, and $7.5 million annually beginning in FY 2025.
House Bill 1279/Senate Bill 778: Regional Institution Strategic Enterprise Zone Program – Alterations (passed) specifies that the purpose of the Regional Institution Strategic Enterprise (RISE) Zone Program includes incentivizing the location of innovative start-up businesses based on technology developed, licensed, or poised for commercialization at or in collaboration with qualified Maryland institutions. This bill alters the existing RISE Zone Program by establishing for qualified businesses a rental assistance grant program and enhanced biotechnology investment incentive and cybersecurity investment incentive tax credits. Under the legislation as enacted, enhanced biotechnology and cybersecurity investment incentive tax credits can be claimed by an investor who invests in a company (1) located within a RISE Zone; (2) that has been in active business for a maximum of seven years; and (3) based on technology that has been developed at the qualified institution of the Zone. The percentage value of these tax credits is increased to 75% and 50%, respectively, with the maximum value increased to $500,000. A business may receive funds under a program for a maximum of three years. The bill also limits to 500 acres the maximum size of a Zone and limits existing income tax and property tax credits to businesses that locate in a RISE Zone before January 1, 2023. A maximum of 25% of program funds may generally be distributed to businesses within a single RISE Zone. The Program’s tax credits and benefits terminate January 1, 2028.
A priority of the Speaker of the House, House Bill 1210: Corporate Diversity – Board, Executive Leadership, and Mission (passed), as amended, does not apply to 1) sole proprietors; 2) LLCs owned by a single member; 3) a privately held company if at least 75% of the shareholders are family members; and 4) an entity whose annual operating budget or sales are under $5 million and does not qualify for a State benefit. In order to qualify for a State benefit (i.e., State capital grants, tax credits, or contracts worth more than $1.0 million; a State contract must be competitively bid and not include federal funds), the bill requires a business in the State to demonstrate either (1) diversity in its board or executive leadership; or (2) support for “underrepresented communities” in its mission. “Underrepresented community” is defined as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native. The bill also separately requires Commerce and the Governor’s Office of Small, Minority, and Women Business Affairs to develop a State equity report that compiles diversity data relating to corporate boards, leadership, and missions obtained from information on the entity’s filing of its personal property tax report. Commerce is to develop regulations to implement the legislation. The bill takes effect July 1, 2022.