Technology Highlights of Governor Hogan’s
Proposed Budget

The Maryland General Assembly will begin its deliberation of Governor Hogan’s FY 2018 this month. Governor Hogan has proposed several items that have significance to Maryland’s technology community in particular, as well as to the business community in general. Most significant to all private sector entities, the Governor is proposing no new or increased taxes or fees for the coming year. Other highlights include:

• An increase of $10.2 million to the State’s primary economic development loan fund (Maryland Economic Development Assistance Authority and Fund, commonly referred to as MEDAAF);
• An allocation of $20 million to retain Marriott International’s new worldwide headquarters in Maryland;
• An initial $5 million on the commitment of $20 million to assist Northrop Grumman;
• $12 million for the Biotechnology Investment Incentive Tax Credit;
• $2 million for the Cybersecurity Investment Incentive Tax Credit;
• $4.8 million for the Maryland Innovation Initiative to promote commercialization of research from Maryland universities
• $900,000 for the Cyber Security Investment Fund

There is some controversy within the General Assembly about the Governor’s budget priorities. This means that the initiatives outlined above are by no means secure from reduction or even elimination. The Tech Council of Maryland will be directly involved with legislators in the coming months to make sure they maintain these critical programs.

Legislature Evaluates
Maryland Job Creation Tax Credit

Since 2012, Maryland has established 14 tax credits with eight of those primarily for businesses. Since then, each enacted tax credit is required to be formally evaluated by the Department of Legislative Services (DLS) and that evaluation is to be reviewed by a special legislative committee. This year, the Job Creation Tax Credit is the subject of this process. In 2018, the process is required to evaluate and review the Research and Development Tax Credit and the Biotechnology Tax Credit. The Cyber Security Investment Incentive will be the subject of the process in 2019.

Since its inception in 2002, the Job Creation Tax Credit has been claimed by 101 businesses who reported creating 17,692 jobs. The tax credits to those businesses totaled an estimated 21.8 million dollars.

To be eligible, a business must be involved in certain industries. Biotechnology, research, development and testing, and information technology are among those business sectors eligible for the credit.

The DLS evaluation found that the Job Creation Tax Credit provides a modest incentive to large businesses but it overlaps with other State employment tax credits. Small businesses are at a disadvantage in trying to use the credit because of its requirement to create at least 30 jobs within two years. Also, the requirement to have a certification from a CPA can be too costly.

The significant recommendation from the DLS evaluation is that the Maryland General Assembly consider consolidating the credit with other employment based credits and lower the job creation requirement to make the credit more broad based.

TCM anticipates legislation to change the eligibility of this tax credit and others during the upcoming 2017 legislative session. Any proposals in this area will be discussed by the Legislative Committee during their regular conference calls starting in January.

2016 Election to Effect Many 2017 Maryland Policy Decisions

The 2017 General Assembly session will be greatly affected by the results of the recently completed 2016 election. It will provide the overriding context for all the decisions that will be made between now and April.

Already certain questions are emerging which, although not answerable now, will shape all the public decisions made in Maryland over the next two years. Those include:

• Does Governor Hogan have the potential to get more votes in 2018 than he got in 2014?
• Will turnout in Democrat strongholds like Montgomery and Prince George’s counties continue a downward trend?
• Will Anne Arundel and Charles County continue to trend toward Democrat candidates?
• How will a Trump Presidency affect the candidacies of Democrat elected officials in rural Maryland in 2018?
• Can Republicans use the popularity of Governor Hogan and the votes for President –elect Trump to elected more Republicans in places like Baltimore County?

The Tech Council of Maryland will be analyzing many of the election results, including those in the attached chart, to determine how they will change Maryland policy makers and their thinking. Many of those effects will be discussed at the TCM legislative committee meeting over the next few months. Click here for election results.

COMING TO A STATE NEAR YOU?
STATE REGULATIONS REQUIRING MINIMUM CYBER SECUIRTY MEASURES

On September 13^th, 2016 Governor Andrew Cuomo announced that the State of New York, using its power to regulate state chartered banks and all insurance companies doing business in the State, would begin requiring those entities to have minimum cyber security standards in place. The minimum standards include:

• The establishment of a cyber security program
• The adoption of a cyber security policy
• A formal, required role for a chief information security officer
• Oversight of third-party service providers
• Additional items that relate to security practices and other matters

Although some of the proposed regulations closely align with current government and voluntary certification programs like the National Institute of Standards and Technology (NIST) Cyber Security Framework, International Standards Organization 27000 (ISO), Payment Card Industry (PCI) Security Standards and private/public partnerships like North American Electric Reliability Corporation (NERC) Critical Infrastructure Protection Standards, others do not.

For many regulatory areas, like insurance, utilities, health care and professional licensing there is no overarching Federal framework. Thus, states have the ability to impose their own standards on those entities that are operating within that state. This regulatory reach even extends to the new “sharing” economy businesses of ride sharing, space sharing and fantasy sports competition.

For some technology companies this new regulatory frontier will be a boon driving businesses to them in a scramble to get compliant with emerging state regulation. For others, overlapping regulations and competing contract compliance requirements will greatly increase risks associated with gathering, storing and managing data.

The Tech Council of Maryland will be monitoring all the legislation introduced in the 2107 Maryland General Assembly Session to see if any Maryland specific cyber security regulations are proposed. Please check the TCM website frequently from January to May to keep updated on developments in Annapolis as they occur.

Maryland General Assembly to Debate Price Regulation of Drugs
One of the major issues that will debated in the 2017 Maryland General Assembly Session will be a proposal regulating a number of aspects of pharmaceutical pricing. Proponents of the legislation, including major health care insurers, have said the legislation will include:

• Requiring “major” drug manufacturers to disclose the basis for prices of prescription drugs.
• Requiring “major” drug manufacturers to provide prior notice of increases on wholesale drug prices on any brand or specialty drug when the increase is 10 percent or more.
• Authorizing the Maryland Office of the Attorney General to take legal action to prevent price gouging by “major” drug corporations.

Earlier this year, Vermont passed legislation requiring pharmaceutical companies to justify price hikes on medicine.

If past this legislation would make Maryland the first state to authorize its Attorney General to investigate alleged price gouging and take pharmaceutical companies to court.