2016 End of Session Wrap-Up: Tax and Revenue Legislation

This post summarizes the status of tax and revenue bills that MACo took a position on during the 2016 General Assembly Session.

checkVessel Excise Tax: HB 14/SB 58 would permanently keep in place the vessel excise tax cap, which was due to terminate as of June 30, 2016. The cap, currently set at $15,000, will increase by $100 annually beginning July 1, 2016. MACo supported the bill as data indicates that the imposition of this cap has spurred the sale of higher-end vessels and is having a positive effect on the boating industry in Maryland.

Final Status: HB 14/SB 58 has passed the General Assembly and is being reviewed for the Governor’s signature.

MACo testimony on SB 58

Recordation and Transfer Tax: HB 44 would create a new exemption from the transfer and recordation tax for the transfer of property from a sole proprietorship to a limited liability company (LLC) if the sole member of the limited liability company is identical to the converting sole proprietor. MACo supported HB 44.

Final Status: HB 44 passed the House and had a hearing in the Senate Budget and Taxation Committee.  No further action was taken.

MACo testimony on HB 44

HB 1226/SB 597 would exempt from the recordation tax and State transfer tax certain transfers of controlling interest between subsidiaries of the same limited liability companies (LLC) and transfers between an existing subsidiary LLC and a new LLC that have identical ownership. MACo did not take a position on this bill as it is clarifying in nature.

Final Status: HB 1226/SB 597 has passed the General Assembly and is being reviewed for the Governor’s signature.

Interest Rates on Tax Deficiencies and Refunds: HB 1251/SB 844, as introduced, would have reduced the monthly interest rate set by the Comptroller for tax deficiencies and refunds to the prime rate of interest over three years. MACo opposed the bill for fiscal reasons and raised concerns that the bill would both compromise collections from delinquent taxpayers, and perhaps more importantly, encourage more people to similarly flout timely tax payment laws.

Following the hearing, the Senate Budget and Taxation Committee amended SB 844 to reduce the interest rate on deficiencies and refunds to 10% over 6 years. As amended, the local revenue loss was substantially moderated and the interest rate remained at a level that still encouraged prompt compliance. MACo supported the bill as amended.

Instead of moving HB 1251, the House Ways and Means Committee moved HB 422, which as introduced would have reduced the interest rate to 12%. As amended by the House, HB 422 would reduce the interest rate to 9% over four years. MACo did not take a position on the bill as introduced, but supported the amended bill with further amendment to put it in the same posture as SB 844.

Final Status: A conference committee was appointed to resolve the differences on HB 422. The agreed upon conference committee amendments will reduce the interest rate to 9% over seven years. The bill passed the General Assembly. HB 1251 had a hearing in the House Ways and Means Committee, but no further action was taken. SB 844 passed the Senate and was heard in the House Ways and Means Committee. No further action was taken.

MACo testimony on HB 1251

MACo testimony on SB 844

checkWynne Interest Rate: SB 1024 would establish a punitive interest rate paid by the State to income tax payers receiving refunds under the recent Maryland State Comptroller of the Treasury v. Brian Wynne court decision, overriding prior General Assembly action to set the rate for this class of refunds at a more reasonable market-based rate. MACo opposed the legislation and does not contest the need to refund taxpayers based on prior overpayment, and to compensate them fairly with interest. The General Assembly’s actions in 2014 anticipated this eventuality – and correctly determined that these cases merited reasonable, but not punitive, compensatory interest payments. The issuance of a 3% “market rate” interest (substantially greater than what the State earned on these holdings during that time, incidentally) accomplishes this balanced policy goal. This bill creates an unwarranted windfall to taxpayers who have suddenly benefited from an unexpected court ruling, at the expense of other taxpayers and local services.

Final Status: SB 1024 was heard by the Senate Budget and Taxation Committee and no further action was taken.

MACo testimony on SB 1024

checkTaxation of Online Booking Platforms (Airbnb): HB 1361/SB 776 would create statewide taxation and oversight for online “hosting platforms” that facilitate short term lodging services. The bill seeks to treat these services similarly to the state and local treatment of conventional hotels and motels.

MACo supported the bill with amendments to correctly identify commercial transactions and the appropriate components of the taxable base, to limit the administrative costs of state regulation to those direct and reasonable costs attributed to its collection, preserve local action already in place and not override or pre-empt this action, and explicitly rule out any inadvertent preemption of local zoning, safety ordinances, code requirements, or other matters traditionally and properly the province of local governments.

Final Status: HB 1361 was heard by the House Ways and Means Committee and SB 776 was heard by the Senate Budget and Taxation Committee. No further action was taken by either committee.

MACo testimony on SB 776

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