Maryland Board of Public Works Expected to Keep Property Taxes Flat

At its April 27 meeting, the Board of Public Works will set the state property tax rate for FY 2017. According to The Daily Record, the Board’s advisory group, the Commission on State Debt, has unanimously recommended that the tax rate remain flat – at the same 11.2 cents per $100 value for real property that has been in place for ten years.

Maryland’s Board of Public Works reviews projects, contracts, and expenditure plans for state agencies – many of which have effect on county governments. It meets on alternating Wednesdays and the meetings are open to the public.  The meeting will be held in Governor’s Reception Room on the 2nd floor of the State House in Annapolis.

The Board’s next meeting is scheduled for Wednesday, April 27, 2016 at 10 a.m. Material for the upcoming meeting is available online:

For “frequently asked questions” about the Board’s charge and meetings, visit the Board’s website.

Revised County Costs for Assessments Available Now

After budget actions affected the county costs for supporting the State Department of Assessments and Taxation, a new set of revised costs have been prepared – totaling nearly $22 million. The revision, assembled by the Department of Legislative Services, should help guide counties who are amidst their own budget processes in the weeks ahead.

View the revised county-by-county cost estimates from DLS.

The system of invoicing county governments for assessment and related function for this state department arose during the “great recession,” as the state faced severe budgetary shortfalls. For two years, counties were billed for 90% of these costs – that was reduced to 50%, but has remained at that level since, even as the state fiscal crises have abated.

The change in the figures (from the budget as submitted by the Governor) was due to the General Assembly’s rejection of proposed funds (and authorizing legislation) for aerial assessment technology. Those costs would have been shared with counties under the 50% formula.

 

2016 End of Session Wrap Up: Tax and Revenue – Income Taxes

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

checkSubtraction Modifications and Exemptions: HB 227/SB 1166 would provide for a subtraction modification for the first $15,000 of retirement income for individuals at least 55 years of age who are retired law enforcement officers or fire, rescue or emergency services personnel of the United States, State, or local government.  MACo opposed the bill raising concerns with the fiscal effects of this legislation and the mandatory effect. MACo prefers approaches that provide local autonomy to determine the best way to provide these incentives, rather than those that mandate reductions in local revenue sources.

Final Status: Both bills failed. However, the subtraction modification was amended into the House and Senate tax packages, SB 840 and HB 452. SB 840 failed in conference committee and HB 452 passed third reader in the Senate, but time ran out before further action was taken.

MACo testimony on SB 1166

checkHB 455/SB 387 would increase the personal exemption for individuals 65 and older from $1,000 to $5,000 over four years beginning with tax year 2017. MACo opposed the bill raising concerns with the fiscal effects of this legislation and stated it would prefer approaches that provide local autonomy to determine the best way to provide these incentives, rather than those that mandate reductions in local revenue sources.

Final Status: HB 455 was heard in the House Ways and Means Committee and SB 387 was heard in the Senate Budget and Taxation Committee. No further action was taken on either bill.

MACo testimony on SB 387

checkHB 738/SB 293 would further expand an existing military retirement income tax subtraction modification from $10,000 to $15,000 for military retirees at least 65 years of age. MACo supported the bill with amendments to change it to a credit against the state income tax and give consideration to exploring whether a local option income tax credit is feasible. This approach would preserve local autonomy to determine the best way to provide these incentives, rather than mandate reductions in local revenue sources.

Final Status: HB 738 was heard in the House Ways and Means Committee and SB 293 was heard in the Senate Budget and Taxation Committee. No further action was taken on either bill.

MACo testimony on SB 293

checkHB 1250/SB 841 would provide for a subtraction modification of up to the first $20,000 of nonpassive income that is attributable to a pass-through entity. A pass-through entity is defined as an S Corporation, Partnership, Limited Liability Company or business trust that is not taxed as a corporation, or a sole proprietorship. To be eligible, the pass-through entity and taxpayer must meet several conditions and an income limitation.

MACo supported the bill with amendments to change it to a credit against the state income tax and give consideration to exploring whether a local option income tax credit is feasible. This approach would preserve local autonomy to determine the best way to provide these incentives, rather than mandate reductions in local revenue sources.

Final Status: HB 1250 was heard in the House Ways and Means Committee and SB 841 was heard in the Senate Budget and Taxation Committee. No further action was taken on either bill.

MACo testimony on SB 841 / HB 1250

Collection of Retirement Income Information: HB 1148 would require the Comptroller to collect and report to the General Assembly by January 1, 2018 on the following taxpayer information: (1) amount and sources of retirement income; (2) total Social Security benefits received; and (3) State pension exclusion claimed. This information would be collected through the personal income tax form. MACo did not take a position on this bill.

Final Status: HB 1148 has passed the General Assembly and is being reviewed for the Governor’s signature.

House and Senate Tax Packages Fail: SB 840 and HB 452, as introduced, would have expanded and the Earned Income Tax Credit. As amended by the House and Senate, these bills became vehicles for enacting income tax reductions. The Senate plan, SB 840, would have (1) reduced over five tax years, State income tax rates imposed on certain higher income taxpayers; (2) expanded the State earned income tax credit that can be claimed by individuals without qualifying children; and (3) increased over four tax years the value of the personal exemption that can be claimed by taxpayers with federal adjusted gross income (FAGI) of $100,000 or less, or $150,000 or less if married filing jointly. The House plan would have (1) reduced the State’s middle income tax rate from 4.75% to 4.65%; (2) expanded the earned income tax credit that can be claimed by individuals without children; (3) increased the subtraction modification for certain retirement income of law enforcement, fire, rescue, and emergency services personnel (identical to HB 227 above); and (4) enacted single sales factor apportionment in calculating the corporate income tax. The Senate also supported the subtraction modification for law enforcement, fire, rescue, and emergency services personnel.

MACo did not take a position on either bill as introduced or amended.

Final Status: SB 840 failed in conference committee and HB 452 passed third reader in the Senate, but time ran out before further action was taken.

2016 End of Session Wrap-Up: Tax and Revenue – Property Taxes

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

checkLocal Option Personal Property Tax Break: HB 69 would authorize local jurisdictions to grant a personal property tax credit to a new business entity or a business entity with 15 or fewer employees operating within the jurisdiction. MACo supported the legislation as it provides broad local authority to enact tax incentives for economic development and tax relief purposes and does not mandate reductions in local revenue sources.

Final Status: HB 69 passed the General Assembly and is being reviewed for the Governor’s signature. 

MACo testimony on HB 69

checkTargeted Personal Property Tax Exemption – Government-Owned Land: SB 673/HB 1299, as introduced, would exempt from the property tax property located on governmental lands that is used for a public purpose. House and Senate bill sponsors acknowledged that the bill was overly broad as introduced and offered to amend the bill to narrow its scope. MACo supported the bill with amendments to reflect discussions that had taken place between the Maryland Port Administration, Baltimore City and County, and Ports America Chesapeake.

SB 673 was amended by the Senate to provide a personal property tax exemption for property being used for a public purpose under a public-private partnership agreement with a State entity; or cargo handling purposes. HB 1299 was amended by the House to provide an exemption if the personal property is a crane used for cargo handling purposes more accurately reflecting the agreed upon arrangement. MACo supported HB 1299 as amended and urged the committees to amend SB 673 in the same manner.

Final Status: A House and Senate conference committee was appointed to resolve the differences between the two committees on HB 1299. The Senate concurred with the House amendments to limit the bill only to cranes used for cargo handling purposes. SB 673 passed the Senate and had a hearing in the House Ways and Means Committee.  No further action was taken.

MACo testimony on SB 673

checkProperty Assessments: SB 115 as introduced would have authorized the State Department of Assessments and Taxation (SDAT) to use aerial or ground level photography or other similar technologies to perform property assessments. MACo supported the bill as the use of these technologies would create operational efficiencies and enable SDAT to adequately assess properties improving the accuracy and timeliness of assessments.

After concerns were raised by the Senate Budget and Taxation Committee during the bill hearing and SDAT’s budget hearing, the bill was amended by the Senate to forbid SDAT and its local offices from using aerial photography or other similar technologies to perform property assessments. MACo reviewed the heavily altered bill and ultimately opposed SB 115 as amended — stating that the bill was an inappropriate overreaction to mistaken impressions about the bill’s intent. MACo urged the committee to reject the bill to leave the matter open to further, more narrowly crafted, consideration.

Final Status: SB 115 was amended and passed by the Senate to forbid SDAT and its local offices from using aerial photography or other similar technologies to perform property assessments. The House Ways and Means Committee held a hearing on the bill, but no further action was taken.

MACo testimony on SB 115

checkHB 1363 would require the State Department of Assessments and Taxation to provide specific timely information to a homeowner appealing a property assessment. However, if the Department fails to meet the bill’s timetable, the homeowner effectively wins the appeal and earns an assessment freeze.

MACo supported HB 1363 with amendments to remove the assessment freeze language from the bill as its unfairly penalizes counties, who have no role in providing information for a property assessment appeal. Instead MACo suggested a reporting requirement that could be used to take appropriate SDAT action through the budget or subsequent legislation, without eroding local tax bases.

Final Status: HB 1363 passed the House as introduced, but was amended by the Senate. Senate amendments eliminate the assessment freeze at the supervisory level of the appeal and for appeals before the Property Tax Assessment Appeals Board.  The House concurred with the Senate amendments and the bill passed both chambers. The bill is now being reviewed for the Governor’s signature.

MACo testimony on HB 1363

Property Tax Credit: HB 898 authorizes local governments to provide a property tax credit for an individual who is at least 65 years old and has lived in the same home for at least the preceding 40 years or is a retired member of the U.S. Armed Forces who is at least 65 years old. The tax credit may be provided for up to five years and may not exceed 20% of the county or municipal property tax imposed on the property. Local governments have authority to set additional eligibility criteria. MACo did not take a position on this legislation.

Final Status: HB 898 passed the General Assembly and is being reviewed for the Governor’s signature.  

 

2016 End of Session Wrap-Up: Tax and Revenue – Economic Development Tax Credit Programs

This post summarizes the status of tax and revenue bills related to economic development tax credit programs that MACo took a position on during the 2016 General Assembly Session.

Manufacturing Tax Credits Fail: HB 450/SB 386 and HB 531/SB 181, two similar manufacturing tax credit bills, would have provided local governments with an economic development tool to help spur manufacturing growth within their jurisdictions by encouraging businesses that have manufacturing facilities outside of the state to locate in Maryland. MACo supported both bills with amendments. Amendments sought on HB 450/SB 386 would have given local governments a more defined role in the designation of a manufacturing empowerment zone, establish broader criteria to be used in the designation of the zone, and provide greater flexibility over the incentives drawn from local revenues – specifically, property tax credits. Amendments sought on HB 531/SB 181 would expand the definition of manufacturing and provide greater flexibility over the incentives drawn from local revenues. Under this bill, local governments determine the zones and apply to the Department of Economic Competitiveness and Commerce for the designation.

Final Status: Both bills were heard in their respective committees (SB 181 and SB 386 – Senate Budget and Taxation; HB 450 and HB 531- House Ways and Means). No further action was taken on either bill.

MACo testimony on SB 386

MACo testimony on SB 181

checkProperty Tax Credits Stay in Effect: HB 1255/SB 843, among other requirements, would have repealed the property tax credit components of the Enterprise Zone (EZ) and Regional Institution Strategic Enterprise (RISE) tax credit programs.  MACo supported the bill with amendments to strike the section that repealed these credits as local governments believe the property tax credits offered by these programs are extremely effective. The Senate passed SB 843 with the language to repeal the credits. However, the House adopted MACo’s amendment to keep the property tax credits intact. A conference committee was appointed to resolve the difference in the House and Senate versions of the bill. The Senate concurred with the House amendments effectively keeping the property tax credits in place for both programs.

Final Status: SB 843 passed the General Assembly and is being reviewed for the Governor’s signature. HB 1255 was heard in the House Ways and Means Committee and no further action was taken.

MACo testimony on SB 843

Rural and Statewide Economic Development Program: SB 737 (rural areas) and SB 738 (statewide) would establish Economic Development Programs to spur economic activity in rural and suburban parts of the state. MACo supported both bills with amendments to provide greater flexibility in determining the amount and duration of the local property tax incentives; establish job creation metrics that are better suited for rural and urban parts of the state; and limit incentives to businesses newly locating and expanding in the state.

Final Status: Both bills were heard in the Senate Budget and Taxation Committee. No further action was taken.

MACo testimony on SB 737 / SB 738

 

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

MACo Supports Moderate Reduction of Interest Rate on Tax Deficiencies & Refunds

Andrea Mansfield, on behalf of MACo, testified in support of SB 844, Interest Rate on Tax Deficiencies and Refunds, to the House Ways and Means Committee on April 5, 2016.

As amended by the Senate, this bill would reduce the monthly interest rate set by the Comptroller for tax deficiencies and refunds from 13% to 10% over six years.

Under current law, the Comptroller sets the annual interest rate by October 1 of each year. The rate is equal to the greater of 13% or three percentage points above the average prime interest rate for the previous fiscal year.

From the MACo testimony,

SB 844, as introduced, would have phased-in over three years a change toward a new rate from the current 13% to the average prime rate of interest quoted by commercial banks to large businesses during the State’s previous fiscal year, approximately 3.5%. In addition to fiscal concerns, MACo expressed concerns with the bill as introduced that it would both compromise collections from delinquent taxpayers, and perhaps more importantly, encourage more people to similarly flout timely tax payment laws.

As amended, the local revenue loss has been substantially moderated and the interest rate remains at a level that still encourages prompt compliance. For these reasons, MACo now offers its SUPPORT of SB 844.

This bill passed the Senate (46-0) on March 24, 2016.

An identical cross-filed bill, HB 1251, was heard on February 12 in the House.

For more on 2016 MACo legislation, visit the Legislative Database.

Wynne Repayments To Start In 2019

A helpful bill governing local income taxes has passed and will become law.

SB 766 was passed to oversee the county repayment of funds to the state’s income tax reserves – allowing a longer time to fully recognize and account for the Wynne income tax refunds. The bill also creates a statutory system to make whole a local government (either county or municipality) that has been under- or over-distributed its income taxes by accident.

Yesterday, Governor Hogan indicated that he would not sign the bill, but would not veto it — meaning the bill will become law without his signature.

From MACo’s testimony:

To address the Wynne Case, a repayment provision was included in the Budget Reconciliation and Financing Act of 2015 (Chapter 489, Acts of 2015) which spread the repayment of local income tax credits to the State over multiple quarterly distributions. Senate amendments, driven by bill testimony, also respond to these looming pressures, and adjust that timetable to replenish the reserve fund. The revised schedule would more realistically use 20 quarterly repayments, lessening the abrupt “cliff effect” that could otherwise be felt by county budgets as these refunds are absorbed locally.

See previous Conduit Street coverage, Senate Proposal: Delay, Stretch Out Wynne Paybacks.

Governor Pleased Key Initiatives Are Moving Forward, Urges Additional Actions

Screenshot 2016-04-05 16.32.29
Video and screen capture courtesy of CBS Baltimore.

In a press conference held one week before the end of the 2016 Legislative Session, the Governor thanked the Presiding Officers, and all Senators and Delegates on both sides of the aisle for their hard work and tireless efforts.

The Governor said he was pleased that the budget was passed, supported in both houses and on both sides of the aisle and that it was adopted more than two weeks early.

Our budget delivers, for the second year in the row, record investments in education, $6.3B, raises the balance in our Rainy Day Fund to over $1B, and delivers a $400M cash balance. Best of all, our budget includes no new taxes.

He said that he was also pleased to see that some of his Administration’s key legislative initiatives are moving forward, including:

In addition, the General Assembly is going to implement a couple of the Administration’s proposed fee cuts, and the Senate passed across-the-board much needed personal income tax reductions, he said.

The Governor noted that he would plan to veto a bill to change the nominating commission of the Anne Arundel County School Board, HB0172 Anne Arundel County Board of Education and School Board Nominating Commission.

On the remainder of the bills that have been passed by the General Assembly, the Governor said that he did not plan to veto any of them, letting some of them go into effect without his signature.

He also urged the General Assembly to bring a redistricting reform bill to a vote, noting that it is a bi-partisan issue that is supported by nearly all Marylanders. He said,

It is time for legislators to join with us and set an example for the entire nation. So let’s come together in a spirit of bi-partisanship to protect that most fundamental right of every American citizen, the right to free and fair elections.

That bill, SB0380 / HB0458 General Assembly and Congressional Legislative Redistricting and Apportionment Commission, has not been moved by the House or Senate. As described by the Department of Legislative Services, it proposes a constitutional amendment that, if approved by the voters at the next general election, requires the appointment of a new Redistricting and Apportionment Commission.

For more information on the press conference, see Hogan avoids confrontation with Maryland General Assembly over vetoes from the Baltimore Sun.

City Unveils Plan to Close $60 Million Budget Gap in 2017

Mayor Stephanie Rawlings-Blake proposed a $2.6 billion operating budget to the city’s Board of Estimates on Wednesday morning. The proposed spending plan calls for the city to use spending cuts and targeted tax increases and to address a $60 million budget gap for the upcoming fiscal year.

According to an article from the Baltimore Business Journal,

The mayor’s budget proposal includes plans to boost revenue by increasing parking taxes at garages and by raising emergency medical services fees. It calls for holding or cutting costs by freezing police salaries, not filling police vacancies and closing one of the city’s five community action centers. The budget also provides for a 1-cent decrease in residential property tax rates previously promised by Rawlings-Blake and her administration.

Baltimore’s general fund, the important pot of money that finances most city expenditures, would come in at $1.8 billion under the mayor’s proposal. That’s up 2.4 percent from the current fiscal year, which started in July.

The mayor’s office had to close a multimillion-dollar budget shortfall in the months leading up to Wednesday’s proposal. Initial projections showed the city with a gap as large as $75 million but were later revised to reflect new property tax assessments, higher income tax distributions and an increase in highway user revenue from the state.

General fund revenue was expected to rise $36 million, or 2.1 percent, next year amid employment and wage growth. Meanwhile, projected expenditures were set to increase $96 million, or 5.6 percent.

The mayor’s plan also increases funding for the city’s public schools by $10.4 million, which would be in addition to the $12.7 million allocated in Governor Hogan’s budget to help make up for a decline in state education aid.

The budget proposal will be reviewed by the City Council, which must approve the spending package by June 30.