The Maryland Department of Commerce has published regulations to implement House Bill 1210 of 2021, a central piece of the General Assembly’s diversity and inclusion legislative agenda. The bill established a broad reporting requirement about the makeup of corporate boards and business activities that support “underrepresented communities.” This requirement applies to commercial enterprises and businesses registered to do business in the state. The Maryland Department of Assessments and Taxation estimates there are 430,000 entities that submit annual reports in-state.
Businesses that receive a state benefit must further demonstrate diversity in their corporate board or executive leadership or show that the organization’s mission supports underrepresented communities to qualify for state tax credits or capital grants worth more than $1 million per year. In 2020, 1,940 vendors received payments from the state of $1 million or more; more than 12,000 entities received state grants of more than $1 million.
The legislation states the intent of the General Assembly that an entity that proposes to locate within a tax increment financing district or to enter into a payment in lieu of taxes agreement with a local jurisdiction must first demonstrate their corporate leadership or mission meets the bill’s requirements. For state benefits that are intended to be disbursed over more than one year, only the amount that will be disbursed in one fiscal year counts toward the $1 million threshold.
House Bill 1210 of 2021 includes provisions that exempt certain entities. Those include sole proprietors, limited liability companies owned by a single member, privately held companies where at least 75% of the stock is owned by family members, or entities with an annual operating budget or sales of less than $5 million.
A similar California law was challenged and struck down for violating the Equal Protection Clause of the U.S. Constitution. The Maryland Attorney General provided the General Assembly with a letter of information on these issues and advice on how to frame the bill in a way that incorporates constitutional considerations.