Quarterly: Spring 2004 - GWCAR - Greater Washington Commercial Association of REALTORS

CBQ >> Spring 2004 Issue

News from 'nnapolis
2004 Session Full of Victories for RPAC

by Meredith Weisel, Vice President of Public Policy/MD and Legal Counsel

The 2004 Maryland legislative session presented some very difficult challenges for the business community as a host of anti-business bills, mainly tax increases, surfaced during the 90-day session. In the end a large majority of the tax proposals were either defeated or are expecting a Governor's veto. GWCAR worked closely with the Maryland Association of REALTORS^® (MAR), the Maryland Chamber of Commerce and various other business and real estate related groups to oppose any legislation that would hurt the real estate industry and business community as a whole.

There were many significant pieces of legislation that GWCAR worked very tirelessly on to defeat.

The House of Delegates once again passed legislation that would impose the recordation and transfer taxes on the transfer of a controlling interest in certain business entities that own real estate in Maryland. Although the bill was the same legislation that has been introduced in previous years, it was introduced this year by the Speaker of the House, Michael Busch, as HB 1, entitled "Public School Construction Assistance Act of 2004." HB 1 passed by a vote of 124-17. The legislation then crossed over to the Senate and was heard by the Budget & Taxation Committee. GWCAR has always opposed this bill because it imposes a new tax on Maryland business entities that will complicate and detract from the Maryland business climate. The bill in the Senate that was ultimately defeated, as it never came up for a vote in the Budget & Tax committee.

When the House passed the Senate version of the Budget Reconciliation & Financing Act (SB 508) by a vote of 75-65 it included a $670 million tax package to address the state's budget deficit. The tax package plan included an increase in the sales tax rate, increase in the income tax rate for higher wage earners and an amendment that would impose a new tax on real property management services. The property management services tax included all types of property management, including residential and commercial. Due to the efforts of GWCAR, MAR, the chambers of commerce, other business groups and the threat of a Governor's veto, in the final hours of Sine Die (last day of session) the tax package was defeated and removed from the bill.

Late in the session HB 1490, entitled "Recordation Tax-Indemnity Mortgages," was introduced and if passed would have charged the guarantor of a loan for an indemnity mortgage (IDOT) a recordation tax, even though the guarantor is not the person primarily liable for the guaranteed loan. In other words, HB 1490 would have placed a recordation tax on the guaranteed debt for an individual who is putting up real property for collateral. Currently, if you are not the individual who is directly benefiting from a real property indemnity mortgage loan, you do not have to pay the recordation tax. GWCAR was very adamant at the public hearing that this bill would drastically hurt commercial real estate because a large majority of commercial real estate transactions are conducted using IDOTs. HB 1490 sought to penalize the individual or entity that is willing to put up a form of real property as collateral, thus creating the IDOT. Fortunately, the bill was defeated when it never came up for a vote in the House Ways & Means Committee.

On the transportation front, the Intercounty Connector (ICC) continued to move forward. GWCAR along with GCAAR, MAR, the Montgomery County Chamber of Commerce and the Greater Washington Board of Trade among others worked to defeat several bills that would have put a massive roadblock in front of the ICC. Legislation that would have prohibited any state funding for the ICC in the future (HB 732) and legislation that would have prohibited the state from issuing GARVEE bonds for the ICC (HB 962) was given an unfavorable report by the House Appropriations Committee. During the first official bill signing on April 13, Governor Ehrlich signed HB 1467, making it law for an increase to transportation investment by about $300 million per year over the next six years.

Here is a list of other important business related bills and how they performed during the 2004 session:

Corporate Income Tax Increase -- A 10% corporate income tax increase passed both the House and Senate that will be applied for taxable years 2004 through 2006. The Governor is expected to veto the bill.
Slots Proposal -- Once again Governor Ehrlich's slots proposal was defeated by the House Ways & Means Committee by a vote of 21-0.
HMO Tax Increase -- 2% tax on HMO premiums paid by Maryland businesses and employees was defeated.
Maryland Spam Deterrence Act -- Anti-Spam legislation passed that would coincide with the new Federal Anti-Spam law. The law provides for penalties ranging from a misdemeanor with maximum penalties ranging from one year's imprisonment and/or a $5,000 fine to five years' imprisonment and/or a $10,000 fine. Further, violation of provisions other than the harvesting provisions in furtherance of a felony or by a person who has previously been convicted of an offense involving the transmission of multiple commercial e-mail messages is a felony subject to maximum penalties of 10 years imprisonment and/or a $25,000 fine. The Governor is expected to sign the bill.