Maryland Decoupling Modification

Decoupling Modification
Tax Year 2023 Form 500DM Decoupling Modification
MARYLAND
FORM

500DM

2023

DECOUPLING
MODIFICATION

OR FISCAL YEAR BEGINNING	

	

Name of taxpayer(s)

Taxpayer Identification Number

Use this form only if the Maryland return is affected by the use (for any tax year) of any of the following federal provisions from which
Maryland has decoupled (Decoupled Provisions):
•

Certain provisions of the federal CARES Act of 2020 have an impact on business interest expense deductions, limitation on
excess business losses for non-corporate taxpayers, net operation loses (NOLs), and qualified improvement property (QIP) bonus
depreciation. For more information, see Tax Alert 7-24 at marylandtaxes.gov.

•

Special Depreciation Allowance under the federal Job Creation and Worker Assistance Act of 2002 (JCWAA) as increased and
extended under the federal Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA); and subsequent federal legislation,
including the American Recovery and Reinvestment Act of 2009 (ARRA).

•

Carryover of a net operating loss (NOL) under IRC Section 172 without regard to an election under IRC Section 172(b)(1)(H) for
a carryback period of up to 2 years (Farming loss only).

•

Federal Section 179 depreciation deductions taken for a tax year beginning on or after January 1, 2003. For Maryland tax purposes,
a taxpayer only is allowed to expense up to $25,000, reduced dollar-for-dollar by the amount over $200,000, of the cost of Section
179 property that is purchased and put in service for a trade or business for the tax year. For vehicles placed in service after May
31, 2004, Maryland also has decoupled from the higher depreciation deduction for certain heavy duty SUVs allowed under Internal
Revenue Code Section 280F.

•

Deferral of recognition of income from discharge of indebtedness under the ARRA.

•

Deferral of deduction for original issue discount in debt for debt exchanges under the ARRA.

Read instructions and complete the worksheet.

Column 1

Column 3

Column 2

Federal Return as Filed Federal Return without
Decoupled Provisions

Difference Increase/
Decrease (-)

1. Depreciation Deductions Subtract the amount in Column 2
from the amount in Column 1 and enter in Column 3. If less
than 0, enter as a negative amount (-).
2. NOL Deductions Subtract the amount in Column 2 from the

00

00

00

00

00

00

00

00

00

00

00

00

amount in Column 1 and enter in Column 3. If less than 0,
enter as a negative amount (-).
3. Original Issue Discounts Subtract the amount in Column 1
from the amount in Column 2 and enter in Column 3. If less
than 0, enter as a negative amount (-).
4. Discharge of Business Indebtedness Subtract the amount
in Column 1 from the amount in Column 2 and enter in
Column 3. If less than 0, enter as a negative amount (-).

5. Other Changes (See instructions.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Net Decoupling Modification Net the amounts on lines 1 through 5 of Column 3. This is the Decoupling

00

Modification. Enter here and include as a positive number on the appropriate line of the Maryland return being
filed. Also enter the applicable letter code(s) on the lines provided on the return. See table on page 2. . . . . . . . .
7. Decoupling from PTE. Enter code letter dp. (See instructions.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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MARYLAND
FORM

500DM

2023

DECOUPLING
MODIFICATION
INSTRUCTIONS

Use the following code if there is

Use the following code if there
Return

If line 6 above is

Filed

positive enter on

Line 1

Line 2

Line 4

the line for:

only

only

only

500

Addition Adjustments

e

f

502

Other Additions

l

m

504 Sch A

Other Additions

505

Other Additions

Multiple

negative enter on the

Line 1

Line 2

Line 4

Multiple

Lines

line for:

only

only

only

Lines

cd

dm

Subtraction Adjustments

j

k

cd

dm

cd

dm

Other Subtractions

bb

cc

cd

dm

No code required
j

k

an amount above on:

If line 6 above is

is an amount above on:

cd

Other Subtractions
dm

Other Subtractions

No code required
bb

cc

cd

dm

Subtractions from
502X

Additions to Income

No code required

Income
Subtractions from

No code required

505X

Additions to Income

No code required

Income

No code required

General Instructions	
Purpose of Form
Maryland has decoupled from certain federal provisions, as listed
at the top of Form 500DM, by enacting addition and subtraction
modifications which eliminate the effect of the changes on Maryland
and local taxes. This form is used to determine the amount of the
required modification.
Use of Pro Forma Returns
Separate (pro forma) federal and Maryland returns must be
prepared for use in completing Form 500DM. In addition to
calculating depreciation and NOL deductions without the benefits
afforded under the federal provisions from which Maryland has
decoupled, pro forma returns also will help to determine other
related items that affect Maryland and local income tax liability
(e.g., income items, addition and subtraction modifications,
deductions and credits).
Additional Information
For more information regarding these modifications, see
Administrative Release 38 at marylandtaxes.gov.
Specific Instructions
Column 1 – Federal Return as Filed
	 Column 1 (lines 1 through 4) is used for the amounts reported on
the federal return which include the impacts of the Decoupled
Provisions.
Column 2 – Federal Return Without Decoupled Provisions
	 Column 2 (lines 1 through 4) is for the amounts which would
have been reported on the federal return without regard to the
Decoupled Provisions.
Column 3 – Change – increase/decrease (-)
	Lines 1 and 2 – Subtract the amount in Column 2 from the
amount in Column 1. Enter in Column 3.
	 Lines 3 and 4 – Subtract the amount in Column 1 from the
amount in Column 2. Enter in Column 3.
	 Line 5 is for the change to taxable income in other related
items (calculated before and after application of the Decoupled
Provisions) that would affect taxable income.
	If the change decreases taxable income, enter the amount with
a minus sign (-) in front of the number.
Line 1 – Depreciation Deductions
Use line 1 only for the depreciation expense deductions.
Line 2 – NOL Deductions
Use line 2 for NOL deductions. For Columns 1 and 2, limit the
deductions for non-corporation taxpayers so that the deduction may
not exceed the federal modified taxable income as determined on
federal Form 1045, Schedule B. If more than one loss year, attach
a schedule providing the amounts on line 2 applicable to each loss
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year. For corporation taxpayers filing Form 500, the impact of
the decoupling on the NOL Deduction is no longer calculated on
Form 500DM with the other decoupling modifications. Instead,
a pro forma or adjusted federal taxable income is first computed
to include the effect of the other decoupling modifications, and
then the pro forma or adjusted federal NOL is applied to reduce
the pro forma or adjusted federal taxable income, to no less than
zero. For more information about these deductions, see
Administrative Release 18 and the CARES Act of 2020 (see
Tax Alert 7-24) at marylandtaxes.gov.
Line 3 – Deferred Deduction for Original Issue Discount
(OID)
Use line 3 to reflect the subtraction to income resulting from
Maryland’s decoupling from the federal deferral of deduction for
OID. The deferral or deduction must be claimed in debt-for-debt
exchanges, unless the deduction was deferred by a pass-through
entity. If the deduction was deferred by a pass-through entity,
use line 7. On line 7, partners, shareholders or members should
report only their share of the deferred deduction. In those years
when the Internal Revenue Code permits the deduction, line 3 will
reflect an addition to income.
Line 4 – Deferred Discharge of Indebtedness Income
Use line 4 to report the addition to income resulting from Maryland
decoupling with the federal deferral of income arising from business
indebtedness discharged by reacquisition of a debt instrument,
unless the income was deferred by a pass-through entity. If the
income was deferred by a pass-through entity, use line 7. On line
7, partners, shareholders or members should report only their
share of the deferred income. In those years when the Internal
Revenue Code requires the ratable inclusion of this income, line 4
will reflect a subtraction to income.
Line 5 – Other Changes
Decoupling also may affect other items included in federal adjusted
gross income and allowable itemized deductions, as well as Maryland
addition and subtraction modifications. Because these items also
affect Maryland taxable income, the decoupling modification must
include an adjustment for these changes. If the net change for these
items reduces taxable income, enter as a negative amount (-). See
Administrative Release 38 for scenarios with examples of
certain items that affect decoupling.
Line 6 – Net Decoupling Modification
Net the amounts from lines 1 through 5 and enter on line 6. If
line 6 is positive, include this amount in the appropriate line of the
Maryland tax return being filed. Also enter the appropriate code
letter(s) on the line(s) provided for the type of addition modification
(either depreciation or NOL, or both).
If line 6 is negative, include this amount as a positive number in
the appropriate line of the Maryland tax return being filed. Enter
the appropriate code letter(s) on the line(s) provided for the type

MARYLAND
FORM

500DM

DECOUPLING
MODIFICATION
INSTRUCTIONS

of subtraction modification (either depreciation or NOL, or both).
See the table at the bottom of Form 500DM for the line numbers
and code letters to use.
Note: there is no separate code for line 3 as this decoupling
would not occur if there was no entry on line 4, and therefore,
code dm would be used for multiple decoupling.
Infrequently, the only decoupling that may exist on the return
may be for “Other Changes.” In this case, use the code for the
decoupling issue that gave rise to the “Other Changes.”
Line 7 – Decoupling from Pass-Through Entity
Enter any decoupling modification resulting from income received
from a pass-through entity on line 7 and use code dp on the
member’s return as an addition or subtraction. If line 7 is
positive, include this amount as an addition on the appropriate
line for addition on the Maryland tax return being filed. If line
7 is negative, include this amount as a positive number on the
appropriate line for subtraction on the Maryland tax return being
filed. See Income from a PTE below.
Credits
For Maryland income tax credits affected by the Decoupling
Provisions, enter on the return to be filed credits as calculated on
the Maryland pro forma return without the Decoupling Provisions.
Note: If a credit for a tax paid to another state was claimed on
the original return and the tax liability to the other state and/
or Maryland changes as a result of the treatment of decoupling
provisions in either state, a revised Form 502CR must be
completed using the Maryland and the other state’s returns as
filed, including all amendments and modifications.
Pass-Through Entities (PTE)
If the entity is a PTE (partnership, S-corporation, limited liability
company or business trust), no adjustment is made on the PTE’s
Maryland income tax return (Form 510 or 511). However, Form
500DM must be submitted with Form 510 or 511 and the PTE
must provide each partner, shareholder or member a statement
showing their share of the decoupling modification.
Income from a PTE
Each partner, shareholder or member that has a decoupling
modification from a PTE also must complete Form 500DM. Enter
the decoupling modification from the PTE on line 7 of Form
500DM. Use code dp under other additions or subtractions on
the return being filed by the member. (Do not include in lines 1
through 4). Also use this amount to adjust the income from the
PTE on the pro forma federal return to determine if other related
changes exist. Other related changes would be entered on line
5 of Form 500DM. Do not include any decoupling modification
from a PTE on the Maryland pro forma return.

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2023

Attachment of Forms
	 • 	Original Return Attach the completed Form 500DM to the
Maryland income tax return to be filed. Pro forma returns
used to complete this form are not to be filed with
the Comptroller of Maryland or the IRS, but should
be retained with your tax records.
	•	
Amended Return Attach the completed Form 500DM,
schedules and pro forma returns to the amended return to
be filed.
For questions concerning Form 500DM contact:
	
Taxpayer Services Division
	
110 Carroll Street
	
Annapolis, Maryland 21411-0001
	
410-260-7980 or
	
toll-free at 1-800-MDTAXES or (800-638-2937)
	marylandtaxes.gov