We presented a detailed explanation of the new Maryland Transfer Tax in our post from November 26th.

The Daily Record and noted attorney Robert M. Ercole, Esquire, report that the Maryland General Assembly has voted in a new transfer and recordation tax that will affect landowners statewide.

The new law-which is intended to plug a “corporate loophole”-applies when the controlling interest in a business that owns Maryland real estate is transferred. Passed following 17 years of debate, it will become effective July 1, 2008.

The law, which is contained in Tax Property Article ¤12-117(c) and ¤13-103(b), provides for a tax on the transfer and recordation of a controlling interest in a business that owns real property. It defines controlling interest as more than 80 percent of the total value of all classes of stock of a corporation, the total interest in capital and profits of an unincorporated entity or the beneficial interest in a trust.

Currently, Maryland transfer and recordation taxes are paid for the privilege of recording a deed in official land records. For years, commercial real estate owners in Maryland have avoided paying these taxes by selling up to 100 percent of the intangible ownership interest in the business that actually owns the real estate, a procedure that does not require recordation in land records.

The new levy was fueled by the Maryland State Department of Assessments and Taxation (SDAT), which has complained of difficulties in obtaining purchase prices and valuations of properties involved in such transactions for the purpose of assessing taxes on their owners.

Recordation and transfer tax statutes have been in effect in New York, Pennsylvania, Delaware, and the District of Columbia for some time. However, because language in these statutes is not uniform, the language in the new Maryland law will nee to be interpreted.

While the new tax will clearly change how buyers and sellers transfer real property in Maryland, whether it will have the effect legislators desire remains to be seen, especially as several exemptions exist.

Tags: maryland general assembly, maryland real estate laws, maryland real property, maryland transfer and recordation taxes

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