The Maryland State Bar Association has developed a revised guide to the multiple facets of Maryland’s system of recordation and transfer taxes, as an aid to practitioners in real estate and land records. The 2025 revision updates documents last prepared in 2002, and covers both State and county-level tax systems, and the varying administration across the state.

Maryland levies both State and county taxes on real estate transactions, both those that effect a sale (the transfer tax) and those that document attachments to the real property (the recordation tax). Over time, these areas of law have become complicated by incremental legislation and regulations governing these processes, and by differential applications for specific classes of transactions and documents. As a service to professional practitioners and the public, the Maryland State Bar Association has developed a central guidance document (not an official publication of the State of Maryland, nor the Office of the Attorney General) to help navigate these sometimes complicated laws. The sought-after result: clearer compliance and fairer collections for all parties.

Here, we will highlight and break down specific elements from the tax guide, that connect to county-level implementation and policy debates.

Controlling Interests of Corporate-owned Property

Maryland passed laws in 2007 designed to close a longstanding “loophole” in transfer and recordation taxes, that afforded corporate-owned properties a tax evasion technique by merely transferring the corporate entity listed as the formal owner of a property. The Tax Guide includes this segment on that matter, with some history and context:

For many years, a transfer of property could be effected without payment of recordation and transfer taxes by conveying equity interests in the owner of the
property, whether stock in a corporation, membership interest in an LLC, partnership interests in a partnership or beneficial interest in a statutory trust. In
response to this practice, in 2007 the General Assembly enacted TP §12-117 which imposed the recordation tax on the transfer of the “controlling interest,”
which is more than 80% of the equity interests in a “real property entity,” which tax is paid at the SDAT.

Refer to the statutory language for details on the applicability, how the tax is imposed and the exemptions. TP §13-103 extends the State and County transfer taxes to transfers of controlling interests. After the enactment of these statutes, the practice of transferring equity interests to avoid recordation and transfer taxes largely stopped, and the parties that otherwise would have transferred controlling interests elected to effectuate their transfers by deed. At the time these code sections were enacted, the legislative findings included financial projections as to the extent of revenue expected to be generated by the transfer of controlling interests in real property entities. The revenue projections may have come to fruition, but they are included within the revenues from recordation and transfer taxes generally and are therefore indeterminable.

Nonetheless, there are other reasons to transfer controlling interest in a real property entity, and from time to time questions arise regarding the applicability
of exemptions. See TP §12-117(c) (applying the recordation tax exemptions in TP §12-108 to the transfer of controlling interests) and TP §13-207 (applying the
transfer tax exemptions in TP §12-108 to the transfer of controlling interests).

Note that the SDAT has issued regulations regarding the recordation and transfer taxes on the transfer of controlling interests. See COMAR 18.13.02.01 et seq.

The full set of regulations regarding these “controlling interest” transfers are online via the State Department of Assessments and Taxation.

It Quacks Like a Duck, Do We Tax Like a Duck?

A segment of the report includes specific references to “Transfers” that aren’t really transfers and are thus not subject to recording taxes:

(i) Deed confirming conversion of a partnership into a Maryland limited liability company pursuant to CA § 4A-211 is not a transfer (as stated in CA §
4A-213(a): “A general or limited partnership that has been converted to a limited liability company pursuant to [CA] § 4A-211 shall be deemed for all purposes the
same entity that existed before the conversion.”) – BUT if the property was not titled in the name of the partnership prior to such conversion, recording taxes
would be due for the implicit transfer into the partnership prior to the conversion [see Memorandum from Julia Freit, Asst. Att’y Gen., to all Clerks of the Circuit
Courts (Dec. 4, 1997)].

(ii) Deed confirming registration of a general partnership as a limited liability partnership (pursuant to CA § 9A-1001) or of a limited partnership as a limited
liability limited partnership (pursuant to CA § 10-805) – BUT if the property was not titled in the name of the partnership prior to such registration, recording taxes
would be due for the implicit transfer into the partnership prior to the conversion [see Memorandum from Julia Freit, Asst. Att’y Gen., to all Clerks of the Circuit
Courts (Dec. 4, 1997)].

NOTE: Transfers from a corporation to its stockholders, a partnership to its partners, or a limited liability company to its members not fitting within the exemptions described in TP §12-108 are subject to recordation and transfer taxes. TP 1§2-106. The taxes are computed on the full value of the property as determined by the SDAT as of the date of finality immediately before the date of transfer. TP §§12-105(g) and 13-205(d).

If nothing else, this detailed section of the report helps to illustrate the value of the Tax Guide as a reference for practitioners on both the real estate and government sides of such transactions.

Indemnity Deeds of Trust as a Limited, Special Case

Maryland lawmakers have grappled with the application of tax structures to a complex ownership/financing structure known as an Indemnity Deed of Trust, or colloquially I-DOT. Following multiple legislative enactments, the tax liability is framed in this report as well — again as a guide for both owners and collectors.

Indemnity Mortgage or Indemnity Deed of Trust (either of which is call an “IDOT”) – the mortgage or deed of trust secures a guaranty by the grantor of the
obligations of another person and under which the guarantor/grantor is not primarily liable. Typically the maker of the promissory note is a single member limited liability company whose sole member is the owner of the property, which in turn guarantees the debt and grants the IDOT.

The details of this section are too lengthy to excerpt here, but are in the online document, beginning on page 14.

Full Tax Guide is Online

The full report is available on the Maryland State Bar Association website: 2025 MARYLAND RECORDATION AND TRANSFER TAX GUIDE