Legislative Update
REALTORS^® are successful in having “Property Management Tax” removed from the Governor’s Package!  The Special Session of the Maryland General Assembly ended on November 19 after three weeks of intense work by both chambers.  After almost a year of intense work by the Maryland Association of REALTORS^® (MAR) and the local associations throughout the state, we were able to stop taxation of real estate services.  Below is  an  outline of general real estate provisions addressed during the Special Session:

• Tax on Property Management Services: The tax on property management services was defeated.  The final version of the Tax Reform Act extended the sales tax only to computer services.
• Green Fund: Originally proposed as an impact fee last year, the Green Fund was redrafted as a flat, annual fee on all residential and commercial property.  The fee would have been very small for most homeowners ($5-$20 per year), but the impact on certain commercial properties was significant, and MAR opposed the legislation. When both the House and Senate met on this proposal, the Green Fund was renamed the Chesapeake Bay 2010 Trust Fund, and real estate was removed as a funding source. Instead, the General Assembly approved general fund appropriations, and dedicated revenue from the motor fuel tax and rental car tax as the funding sources.
• Maryland Resident Real Estate Withholding Tax: This bill would have raised revenue for the State by creating a Maryland Resident Real Estate Withholding Tax. The legislation would have subjected all Maryland residents to a 4.75% withholding tax on any gain from the sale of their real estate when net proceeds of sale exceed $250,000 or $500,000, based on the seller’s tax filing status. MAR was able to convince the Senate Budget and Taxation Committee not to include this provision in the Tax Reform Act.
• Change of Residency from 6 months to 3 months:  The bill, introduced in the Senate, would have required a nonresident of Maryland to file Maryland taxes if that person resided in Maryland for more than 3 months in order to capture revenue from “snowbirds” who live in low tax states like Florida but still keep Maryland property.  This bill was added to the Senate version of the Tax Reform Act by means of a floor amendment that passed 24-23. MAR worked to remove this provision when the Senate bill was considered by the House. As a result, the House did not include a similar provision in its version of the Tax Reform Act, and the provision was removed from the final bill.
• State Property Tax Reduction: Both the House and Senate Tax Committees removed the Governor’s proposed reduction in the State Property Tax. The Legislature did not believe that it could afford to give this tax break when other taxes were being increased.
• Controlling Interests: As drafted, this provision would levy real estate recordation and transfer taxes on the transfer of “controlling interest” in a real property. To trigger the taxes, more than 80% of the controlling interest in the business entity would have to be transferred.  In addition, the business entity would have to be valued at more than $1 million and real property would have to constitute more than 80% of the value of the business entity. An amendment supported by MAR and other commercial real estate groups delayed the effective date of the law until July 1, 2008.