The segments below provide a brief overview of MACo’s work on tax policy in the 2023 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 sometimes focus exclusively on the state’s tax structure but sometimes extend to local revenues.
In general, MACo stands for local self-determination. Counties, led by their elected leaders who are directly accountable within the community, are best positioned 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 override local decision-making.
In addition to the swearing-in of a new governor, the 445th legislative session kicked off with more relaxed health and safety measures compared to the turbulence of the last few years. This enabled MACo’s policy team to dynamically engage with private-sector stakeholders, legislators, and representatives across all levels of government. Under these more conventional circumstances, MACo’s advocacy led to a plethora of favorable 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. As a result, only two of these bills passed the General Assembly, with a negligible fiscal impact on county governments.
MACo supported HB 142/SB 270 – More Local Tax Relief for Working Families Act of 2023, as it sought to provide counties with the necessary tools and flexibility to levy the local income tax with greater equity and fairness.
In 2021, the General Assembly approved legislation authorizing counties to levy the local income tax on a bracket basis – standard practice for state and federal tax regimes. While some counties have successfully enacted local brackets, others cannot achieve a more equitable system without jeopardizing significant resources for schools, housing, health, public safety, roadway maintenance, and other essential public services.
While the enabling legislation envisioned allows counties to enact revenue-neutral rate structures, half of Maryland counties levy the maximum income tax of 3.2%. Absent the flexibility to exceed the cap under limited circumstances, these counties cannot reduce the tax burden on low-to-moderate income earners while remaining revenue neutral. As such, for counties electing to impose the local income tax on a bracket basis, this bill would have raised the maximum rate from 3.2% to 3.7% for specified taxpayers and under specified circumstances.
Ultimately, the bill did not pass in the 2023 session.
MACo supported SB 114 – Property Tax – Real Property Tax Assessment and Tax Rate Increases – Notice Requirements. In a significant win for local governments and taxpayers alike, this bill eliminates the antiquated, inefficient, and confusing constant yield tax law and instead provides constituents with a more efficient, accurate, and transparent overview of local policy decisions and deliberations.
The constant yield concept is that, as assessments rise, the tax rate should drop so that the revenue derived from the property tax stays constant from one year to the next. Because property assessments typically grow in value, constant yield rates are lower than the previous year’s tax rate.
Under current law, local governments must advertise and hold public hearings regarding proposals to enact a tax rate that exceeds the constant yield rate — even if the actual rate remains unchanged. The advertisement must be published in a newspaper of general circulation, which is costly and inefficient — especially considering that in the sizable majority of cases, very few constituents submit testimony or attend the public hearing.
As amended, SB 114 repeals onerous and confusing constant yield notification requirements and instead requires a local government that intends to increase its real property tax rate to place a public notice in a newspaper of general circulation and publish a copy on its website. In addition, the bill requires local governments to include specified information on property tax bills.
This bill passed the General Assembly and awaits the governor’s signature.
MACo supported HB 404 – Property Tax – Local Homeowners’ Credit Supplement – Limitation on Combined Gross Income. The bill grants additional flexibility for local governments to provide tax relief to residents who need assistance but do not qualify for the State homeowners’ property tax credit.
This bill authorizes counties and municipalities to alter a certain limitation on a homeowner’s combined gross income for a local supplement to the homeowners’ property tax credit. This will allow each jurisdiction that enacts the credit to tailor it to their community needs. Additionally, it gives each county broad discretion to determine how much revenue it is willing to forego to provide the desirable benefits enabled by the bill.
This bill passed the General Assembly and awaits the governor’s signature.
MACo supported HB 508/SB 435 – Property Tax Credit – Disabled Law Enforcement Officers and Rescue Workers – Definition and Eligibility. The bill alters the eligibility criteria of an existing local option property tax credit by requiring local governments to define, by law, who is a law enforcement officer or rescue worker for the purpose of the credit.
By granting counties complete flexibility to determine eligibility for the credit, this bill will allow each jurisdiction that chooses to enact the credit to tailor it to their specific community needs. Additionally, it gives each county broad discretion to determine how much revenue it is willing to forego to provide the desirable benefits enabled by the bill.
This bill passed the General Assembly and awaits the governor’s signature.
MACo opposed HB 73 – Homestead Property Tax Credit – Calculation of Credit for Dwelling Purchased by First–Time Homebuyer. This bill would have opened up property tax savings under the Homestead Property Tax Credit to be “transferrable” to first-time Maryland homebuyers. This dramatically undermines the longstanding policy purpose of the credit – to ensure stability in tax bills after purchase.
The legislation subverted the primary policy goal of this longstanding and successful homeowner program and could potentially cost counties millions of dollars in revenue needed for essential local services. Ultimately, the bill did not advance in the 2023 session.
MACo supported SB 122 – Property Tax Exemption – Religious Group or Organization – Third-Party Leases. This bill would have promoted taxpayer equity by conditioning tax-exempt treatment of specified real property based on its actual use rather than its nominal ownership.
This bill specified that real property owned by a religious group or organization leased to a third party does not qualify for a specified property tax exemption. If only part of the real property is leased to a third party, only the leased part of the real property does not qualify for the exemption.
Mandated tax exemptions require counties to forego meaningful local revenues to support essential public services, even if the exemptions do not serve their best interests. In Baltimore City alone, the property value owned by universities, hospitals, nonprofits, and other tax-exempt organizations totals well over 30 percent of Baltimore’s assessed value.
SB 122 would have leveled the playing field for all taxpayers by ensuring properties owned by a tax-exempt entity but used by another entity for broader, traditionally taxable functions are subject to taxation. But, unfortunately, the bill failed to advance in the 2023 session.
MACo supported HB 896/SB 885 – Property Tax Appeals – Commercial and Industrial Property – Fees. This bill sought to apply reasonable fees for commercial and industrial property tax appeals under specified circumstances. This bill would have made meaningful progress toward eliminating a means of tax evasion that benefits commercial and industrial property owners at the expense of other property owners and taxpayers.
The bill passed the House but died in the Senate. Ultimately, the bill did not pass in the 2023 session.
MACo supported HB 898 – Property Tax – Renters’ Property Tax Relief and Homeowners’ Property Tax Credit Programs – Eligibility and Credit Amount. This bill sought to expand eligibility for specified property tax relief programs by increasing income thresholds used to determine eligibility for the credits. The bill also required the Maryland State Department of Assessments and Taxation to evaluate and recommend inflation-driven adjustments to the income eligibility requirements for the credits.
MACo strongly prefers that homeowners receive all counseling, education, information, and support, which may be available as additional assistance when appropriate, to help them pay on time and avoid going through tax sale. By making modest adjustments to eligibility criteria for the Homeowners’ and Renters’ Property Tax Credit Programs, this bill could have helped more Marylanders remain in their homes. Unfortunately, the bill failed to advance in the 2023 session.
MACo supported HB 1258/SB 134 – Property Tax Credit for Disabled Veterans – Established with amendments. This bill would have required local governments to grant, by law, a prescriptive property tax credit for specified disabled veterans and surviving spouses.
The bill was a significant unfunded mandate on county governments. As such, MACo requested a “local option amendment” to relieve that mandate and allow each jurisdiction to weigh these costs appropriately. Ultimately, the bill did not advance in the 2023 session.
MACo supported HB 592/SB 418 – Property Tax – Agricultural Land and Improvements – Assessment with amendments. This bill would have required an improvement on land that qualifies for an agricultural use assessment to be assessed as agricultural property under specified circumstances.
This bill created a new standard for assessing a large, fast-growing commercial property segment. Unfortunately, doing so would slash the assessable base by billions of dollars. As a result, local property tax revenues would decrease massively, jeopardizing limited funds for public schools, health, infrastructure, public safety, and other essential services.
Many counties are interested in promoting agricultural tourism to support the agricultural industry. Agritourism can be a means to keeping farms profitable during times of low production, and it offers opportunities to highlight Maryland counties’ unique agricultural assets. However, the significant costs of this bill were simply untenable.
As such, MACo offered amendments to address the fiscal note, but the bill did not advance in the 2023 session.
Counties will continue to work with the General Assembly and other stakeholders to hone a balanced policy that assesses active agricultural land with its historic preference, reinforces that locally approved value-added agricultural activities should not jeopardize that status, and grants local governments clear tools to create tax incentives for commercial or other activities that are ancillary to active farmlands.
MACo supported HB 1095 – Property Tax – Supervisors of Assessments – Alterations with amendments. This bill would have authorized the Maryland State Department of Assessments and Taxation (SDAT) to appoint a supervisor of assessments to oversee multiple counties.
As current law requires a supervisor for each county, MACo urged amendments to require each affected county’s governing body to sign off on a proposal to appoint a supervisor to oversee multiple jurisdictions. Ultimately, the bill failed to advance in the 2023 session.
MACo took no position on SB 364/HB 618 – Property Tax Credit – Dwellings of Public Safety Officers – Retired Personnel but submitted a letter of information on the tax policy matters raised by this bill.
MACo contends that any state legislation to expand eligibility for existing local-option tax credits, like this bill, should be subject to the discretion of the local governing body. As introduced, SB 364 expanded the definition of employees eligible for an existing credit program many local jurisdictions have already adopted. Without clarifying language that this expansion is itself subject to a local option, expanding the breadth of an existing credit may result in a more considerable fiscal loss than counties anticipated when originally enacting the credit. The bill did not advance in the 2023 session.
MACo took no position on SB 909 – Property Tax Credit – Public Safety Officer – Definition but submitted a letter of information on the tax policy matters raised by this bill.
MACo contends that any state legislation to expand eligibility for existing local-option tax credits, like this bill, should be subject to the discretion of the local governing body. As introduced, SB 364 expanded the definition of employees eligible for an existing credit program many local jurisdictions have already adopted. Without clarifying language that this expansion is itself subject to a local option, expanding the breadth of an existing credit may result in a more considerable fiscal impact than counties anticipated when originally enacting the credit. The bill did not advance in the 2023 session.
MACo supported HB 57 – Property Tax – Tax Sales – Requirement to Sell. This bill grants counties complete flexibility in determining the frequency of tax sales, which could help minimize tax collection costs, assist with paying overdue taxes, and ultimately allow homeowners to remain in their homes.
State law requires local governments to collect delinquent real property taxes and other unpaid charges, all of which are liens against real property. Under current law, county governments must bring to tax sale all property in arrears for at least two years. By granting counties complete flexibility in determining the frequency of tax sales, the bill provides additional flexibility for local governments to facilitate access to support services when it is most helpful.
HB 57 passed the General Assembly and awaits the governor’s signature.
MACo supported HB 236 – Tax Sales – Homeowner Protection Program – Outreach with amendments to bolster the outreach by expanding the methods for contacting homeowners and encouraging them to enroll in the Homeowner Protection Program. As amended, the bill establishes that it is the intent of the General Assembly that (1) at least 2% of the balance in the Homeowner Protection Fund be spent each year to conduct outreach to homeowners facing tax sale to encourage the homeowners to enroll in the Homeowner Protection Program, (2) the outreach consists of (a) live telephone calls to homeowners whenever practicable or (b) if live telephone calls are not practicable, methods of contacting homeowners other than sending information by mail, and (3) priority be given to contacting homeowners as soon as possible after their dwellings are sold at tax sale.
HB 236 passed with MACo’s amendments and awaits the governor’s signature.
MACo supported HB 1064/SB 691 – Home Amenity Rentals – Sales and Use Tax Imposed and Local Tax Authorized with amendments. This bill requires “home amenity rental intermediaries” or “home amenity rental platforms” – facilitators coordinating the sale or use of a home amenity between guests and hosts – to collect and remit specified state and local taxes. Counties suggested a simplifying amendment to merely subject these short-term amenity rentals to existing local taxes on hotels and similar short-term rental transactions.
This bill applies the state sales and use tax to home amenity rentals but arbitrarily caps the rates counties may apply to the same transactions. MACo urged amendments to automatically subject these transactions to applicable local hotel taxes, which would establish fair and equitable tax treatment of home amenity rentals for both state and local taxation purposes. Unfortunately, an AG opinion clarified that these transactions could not be subject to the local hotel tax, and thus MACo’s amendments were moot.
While this bill does grant counties the authority to tax these transactions, the bill passed the General Assembly without MACo’s amendments and awaits the governor’s signature.