2003 Maryland Legislative Update: Part 2
ESTATES AND TRUSTS
- Personal Representatives – Election for Modified Administration (10/1/03). Increases the availability of modified estate administration, providing a streamlined version of the probate process.
- Modified Administration – Final Report and Distribution – Extension (10/1/03). The new Bill is intended to make modified administration more user friendly. Modified administration under prior law required that a final report be filed within 10 months after the appointment of the personal representative and that final distribution of the estate occur within 12 months. The prior law did not permit extensions and failure to meet either of the deadlines revoked modified administration, thereby requiring the filing of an inventory and account. The new Bill provides for a 90-day extension of both time limits if a consent is: (1) signed by the personal representative and by each interested person, and (2) is filed within 10 months after the appointment of the personal representative. This Bill applies to estates of decedents dying on or after October 1, 2003.
The Budget Reconciliation and Financing Act of 2003 (HB 935) contains numerous revenue enhancement and tax compliance initiatives which become effective at various times between June 1, 2003 and January 1, 2004. Highlights of the Budget Reconciliation and Financing Act include the following:
- Income Tax – Withholding: Exemptions (07/01/03). An employer is required to base withholding for an employee on the number of exemptions stated in the certificate that the employee files or, if the employee does not submit an exemption certificate or files an invalid certificate, on one exemption. Under a new provision, the Comptroller is permitted to notify an employer that an employee has an unpaid tax liability and that the employer is required to base withholding for the employee on the number of exemptions not exceeding the actual number of exemptions allowed on the employee’s prior year’s income tax return, as specified by the Comptroller.
- Income Tax – Sales and Use Tax Remittance and Reports (07/01/03). A buyer or a vendor who is required to remit sales and use tax is now required to file a return and remit the tax on or before the 20th day of the month that follows a month in which the vendor makes any retail sale or sale for use or the buyer makes a purchase for use rather than the previously required 21st day.
- Tax Compliance – Verification (07/01/03). Before many licenses or permits may be renewed (does not apply to motor vehicle registrations and drivers’ licenses), the issuing authority is required to verify, through the Comptroller’s Office, that the applicant has paid all undisputed taxes and unemployment insurance contributions payable or that the applicant has provided for payment in a manner satisfactory to the unit responsible for collection. This provision is contained in the Business Occupations and Professions, Business Regulation, Environment, Health Occupations, Natural Resources, Tax-General and Transportation Articles.
- Tax Compliance – Nonresident Contractors (07/01/03). Any person doing business with a nonresident contractor under a contract entered into after July 1, 2003, equaling or reasonably can be expected to equal $50,000, is required to withhold payment of 3% of the contract price until 30 days after the nonresident has: (1) completed the contract; (2) requested in writing for the Comptroller to issue a tax clearance certificate; and (3) provided a receipted copy of the request to the person required to withhold the payment. Several exceptions apply for improvements to owner-occupied residences and improvements to real property if the total value of the improvements is less than $500,000. The Comptroller is required to furnish a certificate stating the amount of taxes due from the nonresident contractor or a certificate indicating that no taxes are due. Failure to withhold or pay over the withheld amounts will result in personal liability for the payment of any sales and use tax or income tax withheld attributable to the contract up to 3% of the contract price.
- Tax Compliance – Immediately Available Funds (07/01/03). In matters involving tax liability greater than or equal to $10,000, payment must be made in immediately available funds.
- Income Tax – Nonresident’s Transfer of Property in Maryland (10/01/03). The transferee of property sold or exchanged that is owned by a nonresident or a nonresident corporation is required to deduct and withhold from the payment to the transferor an amount equal to 4.75% of the total payment to a nonresident individual or 7% of the total payment to a nonresident entity. Payment must be remitted to the Clerk of the Circuit Court or to the Department of Assessments and Taxation when the document is presented for recordation. Amounts paid are deemed to have been paid by the transferor who will be credited for having paid the amounts for the tax year in which the transaction subject to the tax occurred. Several exceptions to the withholding and remittance provisions are provided.
- Income Tax – Streamlined Bank Attachment Process (10/01/03). Financial institutions are required to disclose information requested in writing by the Comptroller relative to funds held in a deposit account held by the fiduciary institution, except the balance of the deposit, in the name of an individual whose property is subject to a tax lien. The Comptroller is now permitted to give notice of a tax lien to any financial institution reasonably believed to hold property subject to a tax lien. That notice must contain information necessary to identify the taxpayer and a request to immediately seize and attach from one or more accounts held by the financial institution in the name of the obligor an aggregate amount equal to the lesser of the amounts in all accounts or the amount of the tax lien. The financial institution is required to notify the Comptroller within 30 days of notice of the aggregate amount held. The financial institution may assess a fee against the accounts or the obligor in addition to the amounts required to be held. Within 10 business days of the financial institution notification to the Comptroller, the Comptroller is required to send a notification, by first-class mail, to the obligor. That notice must include a statement that the Comptroller has directed the financial institution to seize and attach the amount of the tax lien as well as a statement informing the obligor that unless a timely challenge is made by filing a motion with the Circuit Court within 10 days of receipt of the notice, the Comptroller will notify the financial institution to forward the amount seized and attached to the Comptroller.
- Income Tax Withholding (01/01/04). Income tax required to be withheld on wages for purposes of the withholding tables and withholding schedules will be calculated at the top marginal state tax rate, without regard to the graduated income tax rates. In addition, the due date for the March, June, September and December returns is changed from the last day of the next month to the 15th day of the next month. If a person was required to withhold $15,000 or more for the preceding calendar year then the person is required to complete and file an income tax withholding return with the Comptroller within 3 business days following each payroll that causes the total accumulated tax withheld to equal or exceed $700. If a person is required to remit the tax within the 3 business days, the person is required to continue to file a return at least once every 3 months until the person gives the Comptroller written notice that the person no longer has employees or no longer is liable to file the return.
- Increased Filing Fees (12/31/03).
- Annual report of a corporation – increased from $100 to $300.
- Annual report of a Maryland financial institution – increased from $100 to $300.
- Annual report of an LLC or partnership – increased from $0 to $300.
- Annual report of a real estate investment trust – increased from $25 to $300
- Articles of incorporation and similar documents – generally increased to $100.
- Registration of a partnership or LLC – increased to $100.
- Assessment of Income Tax on Amended Returns (07/01/03). Provides that the Comptroller shall make an assessment of income tax arising out of an amended return and related to changes made by the amended items in the return within three years after the date that the amended return is filed.
- Claims for Refunds (07/01/03).
Allows a claim for refund or credit for overpayment of income tax attributable to a right to a reduction in a person's Maryland income tax that is established by a decision or by an appeal of a decision of an administrative board to be filed within one year after the date of a final decision of the board or court. Also provides that specified claims for refund or credit for overpayment of income tax filed prior to July 1, 2003 may not be denied on the basis that the late filing of the claim is attributable to a right to a reduction in a person's Maryland income tax that is established by a decision of an administrative board or by an appeal of a decision of an administrative board and was filed within 18 months after the date of a final decision of the administrative board or a final decision of the highest court to which an appeal of a final decision of the administrative board was taken.
Recordation and Transfer Tax
- Land Trusts – Exemption (7/01/03). Exempts cooperative agreements with the Maryland Environmental Trust that transfer specified conservation easements and fee simple interests from recordation and state and county transfer taxes under specified circumstances. Also exempts from recordation tax an instrument of writing conveying or assigning a conservation easement to both a land trust and the United States, the State, an Agency of the State, or a political subdivision of the State. An instrument of writing conveying a conservation easement or fee simple title to a land trust is not subject to recordation tax if the land trust files a declaration of intent to convey its conservation easement or fee simple title to the United States, the State, an agency of the State or a political subdivision of the state within 18 months of the date of the declaration.
- Streamlined Sales and Use Tax Agreement (07/01/03). Acknowledges the Streamlined Sales and Use Tax Agreement as adopted by the Streamlined Sales and Use Tax Project on November 12, 2002 which requires the Comptroller to prepare and submit a report regarding changes to the State's laws, regulations, or policies needed to bring the State into compliance with the Agreement and other changes recommended by the Comptroller.
Vessel Excise Tax
- Liability – Corporations and Companies (07/01/03). Extends personal liability for the vessel tax and specified interest and penalties to specified officers, members, managers, and partners of corporations, limited liability companies, and limited liability partnerships. In the case of a corporation, personal liability extends to the president, vice president, or the treasurer, and any officer of the corporation who directly or indirectly owns more than 20% of the stock of the corporation. In the case of a limited liability company, if the company does not have an operating agreement, liability extends to all members; however, if the company has an operating agreement, liability extends only to those members who manage the business and affairs of the company. In the case of a limited liability partnership, if the partnership does not have a written agreement, liability extends extend to all general partners; however, if there is a partnership agreement, liability extends only to those who manage the business and affairs of the partnership. The Act also provides that a vessel excise tax assessment by the Department of Natural Resources is prima facie correct.