The segments below provide a brief overview of MACo’s work in the area of tax policy in the 2021 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 the Maryland General Assembly conducted a legislative session unlike any other due to the enduring COVID-19 pandemic. The unique circumstances surrounding the 442nd legislative session, including necessary health and safety measures, posed a challenge for lawmakers and advocates alike. Despite the unusual circumstances, MACo’s advocacy still led to more positive outcomes for its members.
MACo opposed dozens of subtraction modification bills, as subtraction modifications (income tax reductions) affect the taxable income base, which flows through to county revenues. Instead, MACo advocates for state income tax credits, which provide a similar benefit to residents without unnecessarily constraining local budgets. Only one subtraction modification bill passed advanced this year, with a negligible fiscal impact on county governments.
MACo supported legislation to provide counties with the proper tools and flexibility to levy the local income tax with greater equity and fairness. The Local Tax Relief for Working Families Act of 2021, which authorizes local governments to impose the county income tax on a bracket basis, 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 a “local option”, allowing counties maximum flexibility to achieve local goals. MACo will continue to urge the General Assembly to primarily 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 2021 General Assembly.
MACo opposed legislation that would have altered the calculation of the standard deduction allowed under the Maryland income ta to include an adjustment for certain charitable contributions. State proposals that involve local revenue sources can be enacted as a “local option”, allowing counties maximum flexibility to achieve local goals. MACo will continue to urge the General Assembly to primarily 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 – Standard Deduction – Charitable Contributions did not advance in the 2021 General Assembly.
MACo supported legislation to establish a Homeowner Protection Program to offer homeowners facing tax sale potential cost avoidance, and provide help like payment assistance, foreclosure mediation, and other services. The bill contemplates a novel approach to divert homeowners from the private tax lien process into an alternative program to minimize tax collection costs, assist with the payment of overdue taxes, and allow homeowners to remain in their homes. Property Tax – Tax Sales – Homeowner Protection Program passed the General Assembly and awaits the Governor’s signature.
MACo supported legislation to require the State to rectify errors made by the State Department of Assessments and Taxation (SDAT) which resulted in thousands of low-income Marylanders paying excessive property taxes. Property Tax – Homeowners’ Property Tax Credit – Calculation and Refunds passed the General Assembly and awaits the Governor’s signature.
MACo opposed legislation that would have extended the longstanding three-year assessment cycle for property tax assessments to a five-year cycle. By extending the assessment cycle to five years, impacting the accuracy and equity in assessments, exaggerating the lag in property values compared to current market conditions. This would negatively impact the ability of local government to collect fair property taxes, costing local governments millions in revenue. Property Tax Assessments – 5-Year Assessment Cycle did not advance in the 2021 General Assembly.
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 $3.5 million. Property Tax – Solar Energy Systems advanced in the Senate but died in the House.
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 opposed two pieces of legislation that would have restricted the Enterprise Zone program. These programs are designed to attract and retain businesses in areas where targeted investment for economic development is needed. Local governments believe the tax incentives offered by these programs are extremely effective and urged lawmakers to keep them intact. Neither of these bills advanced in this year’s General Assembly.
MACo supported legislation to repeal certain fees charged by SDAT for processing articles of dissolution, certificates of cancellation, and certain other documents filed by certain business entities with the Department. Because SDAT has no enforcement mechanism, particularly with entities that are nearing a point of dissolution, many such entities simply avoid filing articles of dissolution and instead force the Department to commence a lengthy forfeiture process. In the meantime, county governments expend significant time and resources on fruitless and administratively burdensome attempts to collect delinquent property taxes. Corporations and Associations – Fees for Processing Articles of Dissolution, Certificates of Cancellation, and Other Documents – Repeal passed the General Assembly and awaits the Governor’s signature.
MACo supported legislation that authorizes local governments to grant optional property tax credits to businesses affected by a state of emergency. This allows each jurisdiction that chooses to enact the credit to tailor it to their specific community needs and gives each county broad discretion to enact the credit. Property Tax Credit – Business Entities – State of Emergency passed both chambers and awaits the Governor’s signature.
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 the 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 did not advance in the 2021 General Assembly.
For more information on tax-related legislation tracked by MACo during the 2021 legislative session, click here.