Maryland Tax Law Changes from the “Special Legislative Session”

Maryland Tax Law Changes from the “Special Legislative Session”

State and Local Revenue and Financing Act of 2012

May, 2012

The Maryland legislature met last week in Special Session to complete the budget package from the regular legislative session. The end result was an increase in certain taxes and fees. As we are awaiting details of the ultimate legislation, a preliminary summary of the tax related provisions are described below:

  • State individual income tax rate brackets were changed moving more income into the higher rate brackets and adding a new top income tax bracket, beginning in tax year 2012. The changes impact Maryland individuals with taxable income in excess of $100,000 and households with taxable income in excess of $150,000;
  • The deduction for personal exemptions was reduced or eliminated for high income individual taxpayers.  Under the new law the phase-out of the exemption is accelerated for high income taxpayers and the minimum exemption amount is reduced to zero from $600.  Again, individual taxpayers with more than $100,000 (Single) and $150,000 (Households) of taxable income have been targeted for the change;
  • A tax compliance measure was implemented for Electing Small Business Trusts effectively eliminating the income exemption beginning with tax year 2013;
  • Increased the tobacco tax for other products such as premium cigars;
  • Increased the fee (from $125 to $150) for appeals of a decision by the Motor Vehicle Administration to suspend or revoke a drivers license;
  • Fees to obtain death certificates increase from $12 to $24;
  • Repealed the sales and use tax exemption for cylinder demurrage charges;
    • Applicable to all instruments of writing recorded on or after July 1, 2012, the recordation tax is applicable to an indemnity mortgage in the same manner as if the guarantor were primarily liable for the guaranteed loan. However, the recordation tax does not apply to the extent that recordation tax is paid on another instrument of writing that secures payment of the guaranteed loan; or to an indemnity mortgage that secures a guarantee of repayment of a loan for less than $1 million. An “indemnity mortgage” includes any mortgage, deed of trust, or other security interest in real property that secures a guarantee of repayment of a loan for which the guarantor is not primarily liable. Secured debt with respect to an indemnity mortgage is deemed to be incurred when and to the same extent as debt is incurred on the guaranteed loan;
  • Repealed the corporate income tax credit for 60% of State and local property taxes paid on certain telecommunications property.

The amount of increase in your Maryland tax obligation will depend on your individual situation.  For example a joint filer, living in Baltimore County with two children and $600,000 of Maryland taxable income will see their Maryland state and local tax increase approximately $2,000 or 5%.

As more information becomes available we will keep you informed. As always, the tax professionals at KatzAbosch are available to help you understand the impact tax law changes have on your business and personal finances. Please contact us to set up a meeting regarding your tax obligations and planning opportunities.

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