Note: Several unrelated measures across states share the bill number “HB 414.” This summary covers the Maryland measure titled “Health and Taxation — Digital Social Media Services and the Mental Health Care Fund for Children and Youth” (first reader version cited below).
Summary — Maryland HB 414 (Digital Social Media Gross Revenues Tax & Mental Health Fund)
Purpose and intent
- Create a dedicated, special (non‑lapsing) Mental Health Care Fund for Children and Youth to improve access to mental health services for children and youth in Maryland.
- Fund that program by imposing a new gross‑revenues tax on large digital social media service providers that derive revenue from activity in Maryland.
Key provisions
- Mental Health Care Fund for Children and Youth (Health – General §10‑209)
- Established as a special, nonlapsing fund administered by the Secretary of Health.
- Accepts tax revenue, appropriations, interest, and other gifts; expenditures limited to improving access to children’s and youth mental health services. Money is explicitly supplemental to existing funding.
- Digital Social Media Gross Revenues Tax (Tax – General Title 7.7)
- Tax base: annual gross revenues (GAAP basis, before expenses) derived from “digital social media services” in Maryland.
- Definition: a “digital social media service” is a public internet website or mobile app that (1) permits user sharing of images/text/video with other users the person has met/identified/learned of through the service, and (2) either (a) has >1,000,000 monthly active U.S. users or (b) generates >$500 million in annual global gross revenues (threshold adjusted for inflation). Excludes services primarily used for professional services sales, commercial product sales, or one‑way news/information without user‑to‑user sending.
- Apportionment: the in‑state portion of a provider’s U.S. gross revenues is determined via an apportionment fraction (numerator = revenues from digital social media services in Maryland; denominator = revenues from such services in the U.S.). Comptroller to adopt rules to determine sourcing.
- Tax rates (tiered by global annual gross revenues):
- 5% for $500 million through $1 billion;
- 7.5% for $1 billion through $10 billion;
- 10% for over $10 billion.
- Filing and payment:
- Entities with at least $1.0 million in annual gross revenues derived from digital social media services in Maryland must file annual returns by April 15.
- Entities expecting >$1.0 million must file an estimated tax declaration and quarterly estimated payments.
- Recordkeeping and an attachment with required supporting information are mandated.
- Penalties: willful failure to file is a misdemeanor punishable by up to $5,000 fine and/or up to 5 years imprisonment.
- Administration: Comptroller may deduct administrative costs each quarter; remaining tax revenue is distributed to the Mental Health Care Fund for Children and Youth.
- Timing: bill text indicates effective date July 1, 2025, applying to taxable years beginning after December 31, 2025 (as drafted in the version cited).
Fiscal and implementation impacts (from fiscal note excerpts)
- Revenue: estimated to be significant. One set of assumptions projects roughly $30 million in the first full year of collection and over $50 million by year four.
- Administrative costs: special‑fund expenditures estimated at about $2.2 million in FY 2026 (start‑up/admin) and approximately $904,600 in FY 2030 (ongoing), with annualization and inflation thereafter.
- Local impact: none estimated. Small business effect: minimal (thresholds limit applicability to very large firms).
Who is affected
- Primary: large digital social media platforms meeting activity and revenue thresholds (platforms with substantial U.S. user bases or global revenues).
- Secondary: children’s and youth mental health service providers (potential funding boost), and state Comptroller/administrative agencies responsible for tax administration and distribution.
- Not directly aimed at small platforms or ordinary Maryland individuals, given size thresholds.
Other notable features
- The bill imposes the tax on gross revenues (before expenses), not net income.
- The Comptroller is given responsibility for regulation, sourcing rules, record oversight, and retention.
- Revenues are dedicated to an explicitly supplemental fund for youth mental health rather than the general fund.
If you would like, I can:
- Draft a short one‑page explainer for stakeholders (tech firms, providers, local governments).
- Produce a side‑by‑side comparison with Maryland’s existing digital advertising tax and how this new gross‑revenues tax differs.
