The segments below provide a brief overview of MACo’s work in the area of tax policy in the 2020 General Assembly.
The General Assembly routinely considers proposals to change tax structures, often seeking to stimulate economic growth, encourage beneficial activities, or attract and retain residents. These proposals often are focused exclusively on the state’s tax structure, but sometimes extend to local revenues as well.
In general, MACo stands for local self-determination. Counties, led by their elected leaders who are directly accountable within the community, are in the best position to make decisions on local affairs – ranging from land use to budget priorities. MACo steadfastly guards this local autonomy, and frequently advocates against statewide solutions that mandate county compliance or otherwise override local decision-making.
This year, for the first time in since the Civil War, the General Assembly closed session early on March 18, due to precautionary social distancing measures taken to curb the spread of COVID-19. Consequently, many bills did not have hearings or did not move forward due to time constraints to meet the new deadline. For more information on Maryland’s response to the COVID-19 pandemic visit MACo’s COVID-19 Resource Page.
Follow links for more coverage on Conduit Street and MACo’s Legislative Database.
Subtraction Modification Bills
As a whole, MACo opposed almost twenty pieces of income tax subtraction modification legislation. MACo opposed these bills because subtraction modifications applied to the State income tax directly reduce local government revenues. Credits against the state income tax provide a similar benefit to residents without unnecessarily constraining local budgets. None of the income tax subtraction modification bills advanced in this year’s General Assembly.
MACo opposed two pieces of legislation that would have repealed the One Maryland Tax Credit, Enterprise Zone, and Focus Area/RISE programs – incentive programs designed to attract and retain businesses in areas where targeted investment is most needed. Local governments believe the tax incentives offered by these programs are extremely effective and urged the lawmakers to keep them intact. The End Ineffective Business Subsidies Act of 2020 did not advance following its public hearing.
Income Tax – Business and Economic Development Tax Credits – Termination, Alteration, and Evaluation passed third reading in the House with amendments but did not clear the Senate.
MACo opposed legislation to alter the amount that the State must reimburse to local governments for property tax credits issued under the Enterprise Zone tax credit program. Counties expressed concerns that the bill would eliminate incentives designed to attract and retain businesses in areas where targeted investment is most needed, undermining county revenue structures and support for education, public safety, roadway maintenance, and other essential services. Economic Development – Enterprise Zone Program – Alterations did not advance after its public hearing in the House.
State Department of Assessments and Taxation
MACo supported legislation that would have repealed certain fees charged by the State Department of Assessments and Taxation for processing articles of dissolution, certificates of cancellation, and certain other documents filed by certain business entities with the Department. To avoid paying fees, businesses often stop paying annual license fees and the local offices must waste resources to follow-up with lapsed businesses that have no intention of renewing their licenses. Corporations and Associations – Fees for Processing Articles of Dissolution, Certificates of Cancellation, and Other Documents – Repeal did not have a public hearing before the General Assembly adjourned sine die.
MACo opposed legislation that would have significantly expanded an existing property tax exemption for disabled veterans and surviving spouses. MACo raised concerns with the carryover county fiscal effects of this legislation, and generally prefers approaches that provide local autonomy to determine the best way to provide tax incentives, rather than those that mandate reductions in local revenue sources. Property Tax Exemption – Disabled Veterans passed through the Senate but did not advance in the House.
MACo opposed legislation that would have created a very broad and retroactive tax benefit for a potentially wide swath of residents, and exempted the principal residence of a qualified disabled active duty service member, qualified disabled veteran, or qualified surviving spouse from all state, county, and municipal taxes, fees, and other charges. MACo expressed concerns with the carryover county fiscal effects from exempting government charges that fund critical programs and projects, including the Bay Restoration Fund, public safety priorities, and capital facilities necessary to accommodate development impacts on public schools and libraries.
Property Tax Exemption – Disabled Active Duty Service Members, Disabled Veterans, and Surviving Spouses – Refund passed through the Senate with amendments removing the exemptions from governmental fees, but did not advance from the House Ways and Means Committee.
MACo opposed legislation that would have opened up property tax savings under the Homestead Property Tax Credit to be “transferrable” to new homebuyers, if it is their first home in Maryland. MACo’s testimony made clear that if the tax credit were expanded to all homes transferred to new homeowners, counties could lose up to $12.5 million from their most reliable revenue source by fiscal 2025. Homestead Property Tax Credit – Calculation of Credit for Dwelling Purchased by First-Time Homebuyer did not advance following its public hearing in the House Ways and Means Committee.
MACo raised concerns with a bill that would have granted broad tax exemptions for rooftop community solar energy generating systems. The bill also designated certain solar energy property as a new subclass of personal property and authorized local governments to impose a lower personal property tax rate on solar energy equipment. Counties appreciated the flexibility to impose a lower personal property tax rate on solar energy equipment, as many counties are interested in promoting community solar on rooftops, brownfields, or less desirable lands as alternatives to large-scale energy generation facilities. However, MACo sought amendments to remove the mandatory tax exemption for community solar energy that would have decreased local revenues by $2.7 million. Property Tax – Solar Energy Systems did not advance following the public hearings.
MACo supported legislation to alter the eligibility criteria for an existing local option property tax credit by adding active duty or retired members of the uniformed services of the United States, disabled veterans, or surviving spouses to the definition of individuals that are eligible recipients of the tax credit. The language allows each jurisdiction that chooses to enact the credit to tailor it to their specific community needs and gives each county broad discretion to determine how much revenue it is willing to forego to provide the desirable benefits enabled by the bill. Property Tax Credit – Disabled Military Personnel and Surviving Spouses passed both chambers with amendments and awaits the Governor’s signature. Adopted amendments clarify that the tax credit will be available to active duty, retired, or honorably discharged members of the U.S. armed forces and their surviving spouses.
MACo supported legislation to alter the eligibility criteria for a property tax credit that local governments are authorized to provide homeowners in order to offset increases in local income tax revenues. Under the bill, in order to remain eligible for the property tax credit, the homeowner must have an application for the homestead property tax credit on file with the State Department of Assessments and Taxation.
Property Tax – Credit to Offset Increases in Local Income Tax Revenues – Eligibility passed the General Assembly and awaits the Governor’s signature. MACo also supported amendments to clarify that any increase in county property tax revenue resulting from this legislation will not count against local revenue caps.
MACo supported legislation that would have extended the time period in which a county may appeal a commercial real property tax assessment from 30 days to 180 days, making meaningful progress toward eliminating a means of tax evasion that benefits commercial property owners at the expense of other property owners and taxpayers. Property Tax – Appeals of Assessments – Commercial Real Property did not advance from the House Ways and Means Committee.
MACo supported legislation that would have expanded the subclasses of real property that are established in state law for the purposes of uniform assessment methodology and authorized counties to impose different tax rates on each subclass. Municipalities already have broad discretion to impose separate tax rates, and counties welcome the same flexibility. Unfortunately, County Property Tax – Classifications of Real Property and Authority to Set Special Rates did not advance from the House Ways and Means Committee.
MACo supported legislation to delay the requirement for local governments to repay the Local Income Tax Reserve Account for refunds paid pursuant to the Maryland State Comptroller of the Treasury v. Brian Wynne court decision (Wynne case).
Taxpayers have already received their proper refunds and interest. This legislation merely addresses the remaining matter of bookkeeping for the state-managed reserve account. The amount of money owed by counties for the refunds paid pursuant to the Wynne case is extraordinarily high, at around $250 million. Further, litigation over the interest rate applied to these refunds remains on appeal, leaving uncertainty in the final toll for this court decision. The County Tax Fairness Act passed the General Assembly and awaits the Governor’s signature.
MACo opposed legislation that would have authorized individuals who have a permanent physical disability to deduct $1,000 as a personal exemption under the Maryland income tax. State proposals that involve local revenue sources can be enacted as “local option” offerings, to allow counties maximum flexibility to achieve local goals. MACo will continue to urge he General Assembly to primarily consider state income tax credits as the best means to incorporate local tax relief as part of a broader policy. MACo and county governments stand ready to work with state policymakers to develop flexible and optional tools to create broad or targeted tax incentives, but resist state-mandated changes that preclude local input. Income Tax – Personal Exemption – Disabled Individuals did not advance in the House or Senate.
MACO offered amendments to legislation that would have established the Maryland Tax Revision Commission to review and make recommendations on issues related to the State’s revenue structure. Insofar as this Commission would study and make recommendations on fiscal policies that directly affect local revenues, MACo opposed the bill without amendments to add necessary county members to provide valuable input and properly assure balanced representation. Maryland Tax Revision Commission did not advance after the public hearing in the House Ways and Means Committee.
Sales and Use Tax
MACo supported legislation that enables tax incentives to increase Maryland’s competitiveness as a host of data centers by authorizing local governments to reduce or eliminate assessments for their personal property, as well as providing a sales and use tax exemption for the sale of specified equipment for use at these facilities. Counties believe the ability to offer incentives to technology sector businesses will create jobs and increase salaries, expanding the tax base both locally and statewide, and may lead to the expansion of high-speed internet service to underserved areas of the state. The General Assembly passed Sales and Use Tax and Personal Property Tax – Exemptions – Data Centers, which awaits the Governor’s signature.
MACo opposed legislation that would prohibit local governments from imposing the admissions and amusement tax on the gross receipts on certain businesses. Counties expressed concerns over the bill’s impact on local revenues, which are sorely needed to fund education, public safety, infrastructure, and other essential services. Admissions and Amusement Tax – Small Business Exemption did not advance from the House Ways and Means Committee.