Maryland Bill Seeks to Impose Tax on Economic Transfers
 
March 25, 2004
 
Curtis L. Sano- Washington

The Maryland House of Delegates introduced a bill designated as H.B. 1, entitled the “Public School Construction Assistance Act of 2004,” that would impose transfer and recordation taxes on transfers of 80 percent or more of the economic interests within entities that primarily own real estate in Maryland. The bill was assigned to the Ways and Means Committee and to the Appropriations Committee of the House of Delegates on January 23, 2004. If passed in its current form, the law would take effect on January 1, 2005.

Presently, transfers of economic interests are not subject to Maryland’s transfer and recordation taxes. Accordingly, real property transactions are often structured as sales of partnership, corporate or limited liability company interests in order to avoid transfer and recordation taxes, as these taxes are significant (e.g., total state and county transfer and recordation taxes for fee transfers in Montgomery County, Maryland are an aggregate of 2.19 percent of the higher of the consideration paid for, or the value of the property). H.B. 1 would severely limit the ability to structure transactions in this manner to avoid Maryland’s high transfer and recordation taxes.

This bill is the latest in a series of similar bills, all seeking to close this perceived loophole. A pair of similar bills, H.B. 19 and S.B. 120 of the 2003 legislative session, nearly passed last year and the expectation is high that the current H.B. 1 will pass this year.

A description of the status of the bill and a link to the bill text can be found at: http://mlis.state.md.us/2004rs/billfile/hb0001.htm.

For more information, e-mail Curtis L. Sano at curtis.sano@hklaw.com, David L. Winstead at david.winstead@hklaw.com, Robert L. Gorham at robert.gorham@hklaw.com, or Joseph B. Whitebread at joseph.whitebread@hklaw.com, or call toll free, 1-888-688-8500.