2002 Maryland Legislative Update, Part 2
Each year the Maryland Legislature enacts a number of laws which impact in various degrees on the personal and business lives of people living in or doing business in the State of Maryland. The General Assembly adjourned on April 8, 2002, and the Session actively concluded when the Governor enacted legislation into State law during four separate signing ceremonies on April 9, April 25, May 6 and May 16. The WTP Annual Legislative Update is prepared each year for our clients and friends as a summary of important business, real estate, tax, health care and intellectual property legislation that was passed in the 2002 Maryland Legislative Session. The Legislative Update is divided into sections by topic and each Bill is noted by subject matter. The date following each subject matter description is the effective date of the legislation. As you will see in reviewing the enclosed summaries, effective dates vary, although most are either July 1, 2002 or October 1, 2002.
- Recordable Instruments - Filing and Recordation of State Highway Plat (10/01/02). Provides that, rather than filing state highway plats with the Clerks of the Circuit Courts in each jurisdiction, state highway plats are now to be filed and electronically recorded with the Maryland State Archives. The bill authorizes the Maryland State Archives to charge a reasonable fee to recover its costs of electronically posting and maintaining the plats and for the cost of reproducing a copy of a plat.
- Ground Rents on Abandoned Property - Baltimore City - Tax Sales- Donation (06/01/02). Significantly alters existing law with respect to a tax sale of real property located in Baltimore City that is subject to a ground rent. Legislation provides that if abandoned property located in Baltimore City is subject to a ground rent or lease for a term of 99 years and is sold at a tax sale, then the entire fee simple interest in the property must be sold. Also provides that reversion in a ground rent or a lease for 99 years, renewable forever, held on abandoned property, may be donated to Baltimore City or to an entity designated to Baltimore City.
- New Home Builders - Regulation (07/01/02). Transfers responsibility for holding surety bonds, letters of credit, and third party warranty plans from the Department of Labor, Licensing, and Regulation to the Consumer Protection Division (CPD) of the Office of the Attorney General. Also requires that a builder who does not participate in a new home warranty security plan provide written notice to a purchaser, at the time of the purchase or construction contract, as follows: (i) builders of new homes in Maryland are required to be registered with the CPD; (ii) without a new home warranty, the owner may only have limited implied warranties; and (iii) discloses any hazardous materials or states that the builder is not making any representations about hazardous materials. A builder who does participate in a home warranty security plan has to make the disclosure or disclaimer regarding hazardous materials set forth in clause (iii) above.
- Real Property - Sales of Homes in Anne Arundel County - Disclosure Requirements (10/01/02). Requires the following disclosure in contracts for the sale of single-family residential real property in Anne Arundel County: "The buyer fully understands that in order to become more fully informed of the current and future land-use plans, facility plans, public works, plans, school plans, or other plans affecting the property or area, the buyer should consult with the appropriate county agency or county internet web site for information regarding these plans."
- Time Shares - Termination (10/01/02). Provides that a time share owners' association may amend the time share instrument by a two-thirds vote to prevent the termination of time shares in the project on the date that is otherwise set forth in the time share instrument.
- Commercial Law - Payment Devices - Receipts (10/01/02). Prohibits the printing of more than eight digits of a credit card number or other payment device on a receipt provided to the holder of the credit card or other payment device in connection with the purchase of consumer goods or consumer services. Imposes a civil penalty not to exceed $25 for each violation. Provides that registers or other machines placed in use for the first time on or after October 1, 2002 must immediately comply with these provisions and that registers or other machines in use before October 1, 2002 must comply with these provisions by January 1, 2006.
- Maryland Service Contracts and Consumer Products Guaranty Act (10/01/02). Requires service contracts to be in writing and to specify: (i) duration; (ii) maintenance to be performed; (iii) price, terms, and a recital of the provider's obligations; (iv) merchandise and services to be provided; (v) procedure the person guaranteed must follow to obtain services or to file a claim; (vi) limitations, exceptions or inclusions; (vii) terms, restrictions or conditions governing cancellation by either the provider or person guaranteed; and (viii) dispute resolution. Grants the person guaranteed the right to cancel a service contract and receive a full refund of any consideration paid for the service contract, if no claims have been made, within 20 days after receipt of the service contract. Imposes a fine equal to 10% of the value of any consideration paid for a service contract, if the consideration is not refunded within 45 days of cancellation, for each month that the refund is not paid or credited to the person guaranteed.
- Limited Liability Companies - Membership and Activities (10/01/02). Expands the definition of a member of a limited liability company to include a person admitted as a member of a foreign or domestic limited liability company. Expands the definition of limited liability companies to permit Maryland nonprofit limited liability companies. Allows a person to become a member of a limited liability company without: (i) making a contribution; (ii) being obligated to make a contribution; or (iii) acquiring an interest. Prohibits a limited liability company from dissolving or winding up if, within 90 days after there are no remaining members, the last remaining member's personal representative agrees to be admitted as a member or to appoint a designee as a member, or a member is admitted to the limited liability company under a provision in the operating agreement that provides for the admission of a member after there are no remaining members. Provides that, unless otherwise provided in the operating agreement, the termination of a person's membership will not cause a limited liability company to be dissolved.
- Limited Liability Companies - Mergers (10/01/02). Permits a domestic limited liability company to merge into a foreign limited liability company and permits a foreign limited liability company to merge into a domestic limited liability company. Requires a domestic limited liability company to approve a merger by consent of members holding at least two-thirds of the interest in the profits of the limited liability company unless otherwise provided for in the operating agreement.
- Income Tax - Budget Reconciliation and Financing Act of 2002 (07/01/02). (i) Amendments to the Internal Revenue Code - Provides that an amendment to the Internal Revenue Code, which affects the determination of federal adjusted gross or taxable income in the year the amendment is enacted, will not affect the determination of Maryland taxable income for any taxable year that begins in the calendar year in which the federal amendment is enacted. If the Comptroller determines that the fiscal impact of the federal amendment will be less than $5,000,000 in the year in which the amendment is enacted, the new limitation will not apply. (ii) Maryland's Response to the Job Creation and Worker Assistance Act of 2002 ("JCWAA") - Provides that Maryland will not allow taxpayers a Maryland tax benefit based on the benefits provided at the federal tax level by the JCWAA. Taxpayers, who computed their federal taxable income taking into account the JCWAA benefits (i.e., accelerated depreciation, basis adjustment and special 5-year carryback period), will be required to add the amounts of these benefits back to their income in computing their Maryland taxable income. (iii) Maryland Estate Tax - Provides that, notwithstanding a Congressional act that repeals or reduces the credit for state death taxes (under Section 2011 of the Internal Revenue Code), the Maryland estate tax will be determined using the federal credit allowable by Section 2011, as in effect before any reduction or repeal of the credit pursuant to an act of Congress. (iv) Sales and Use Tax - This provision reduces the tax credit for the expense of collecting and paying the sales and use tax from 0.9% to 0.45% of the total sales tax collected and remitted by the vendor. The credit allowed on the first $6,000 of the total sales and use tax is reduced from 1.2% to 0.6%.
- Pilot Program for Long-Term Employment of Qualified Ex-Felons (07/01/02). Provides an income tax credit for businesses (including exempt organizations) that hire a "qualified ex-felon employee," as specifically defined within the bill. The credit is (i) 30% of up to the first $6,000 of wages paid to the employee during the first year of employment; and (ii) 20% of up to the first $6,000 of the employee's wages during the second year of employment. Excess credits can be carried over for 5 taxable years after the year in which the wages are paid to the ex-felon employee. This bill is effective for employees hired on or after July 1, 2002, but before December 31, 2004.
- Electronically-Filed Income Tax Returns (07/01/02). Alters the due date of an individual's income tax return in certain situations. If the due date for an electronically-filed federal income tax return is later than April 15 of the following taxable year, the due date for an electronically-filed Maryland income tax return is the same due date as for the federal income tax return.
- Commuter Benefits Act of 2002 (07/01/02). Increases the maximum income tax credit per employee that a business may claim for specified costs of providing commuter benefits to its employees. The bill increases the credit from $30 to $50 per employee per month. The credit may not exceed 50% of the costs incurred to provide certain commuter benefits. This bill will apply to all tax years beginning after December 31, 2001.
- Maryland Heritage Structure Rehabilitation Tax Credit (06/01/02). Significantly revises the current credit. The definition of "certified heritage structure" has been changed to require that the property be listed in the National Register of Historic Places or determined by the Director to be eligible (it is no longer sufficient to merely be listed in a local register). A definition of "commercial rehabilitation" has been added (i.e., a rehabilitation of a structure other than a single-family, owner-occupied residence). The definition of "qualified rehabilitation expenditure" has been modified to require (among other things) that no state financing be used for the rehabilitation and that a plan of proposed rehabilitation be approved by the Director of the Maryland Historical Trust. The credit has been reduced from 25% to 20% of the qualified rehabilitation expenditures and the total credit may not exceed $3 million. These changes will be applicable to all taxable years beginning after December 31, 2001.
- One Maryland Economic Development Tax Credits (07/01/02). Modifies the circumstances under which a business may claim refundable credits provided under the existing One Maryland Economic Development program. If the wage for the majority of the qualified positions is at least 250% of the federal minimum wage, the refundability provision shall apply beginning with the taxable year after the second taxable year following the taxable year in which the "qualified business entity" locates in a qualified distressed county.
- Out-of-cycle Petitions for Review (07/01/02). Eliminates the right of a county, a municipal corporation, or the Attorney General to appeal the value or classification of real property by submitting a petition for review to the supervisor on or before the date of finality for the next taxable year (i.e., an out-of-cycle petition for review).
- Reports and Refunds (07/01/02). Authorizes a person who has filed a personal property tax report with the Department of Assessments and Taxation to file an amended report within 3 years after the original report was due. Prior to this bill, the circumstances under which the three-year period applied were extremely limited.
- Country Clubs and Golf Courses (07/01/02). Provides that a golf course, which is open to the public, is eligible for a special use value assessment for property tax purposes if it is located on at least 50 acres of land on which is maintained a regular or championship golf course of at least 9 holes.
- Homeowners' Tax Credits (07/01/02). Extends the time during which a homeowner may apply for a property tax credit from one year to three years and sets forth the conditions for the application for the credit.
- Personal Property Tax Credit for Certain Business That Provide Computers (06/01/02). Authorizes counties and municipal corporations to grant, by law, a property tax credit against the county or municipal corporation property tax imposed on personal property (other than operating personal property of a public utility) of a business that provides computers to its employees for their use at home. This bill will apply to all tax years beginning after June 30, 2002.
- Cigarette Tax - Increased Tax (06/01/02). Increases the tobacco tax rate for cigarettes to $1.00 (i.e., a 34 cent-per-pack tax increase) and provides for the distribution of tobacco tax revenues for fiscal year 2003 to a special fund, to be used only for specified education aid purposes. The law also requires each county board to provide full-day kindergarten to all kindergarten students by the 2007-2008 school year.
- Vessel Excise Tax - Amnesty for Unpaid Vessel Excise Taxes (07/01/02). Requires the Secretary of Natural Resources to declare an amnesty period for delinquent taxpayers from September 1, 2002, through October 31, 2002, for penalties attributable to nonpayment, nonreporting, or underreporting of the excise tax on vessels that are paid during the amnesty period. This bill also increases specified criminal penalties under the vessel excise tax laws, which would be effective at the end of the amnesty period.
- Sales Tax - Sales Tax Exemption - Utilities Used to Produce Snow (10/01/02). Provides an exemption from the sales and use tax for the sale of electricity, fuel, and other utilities used in the production of snow used for commercial purposes.