Maryland tax lien certificate

Maryland: Multiple taxes: Budget act contains numerous tax, compliance provisions

The Budget Reconciliation and Financing Act, signed by Governor Robert L. Ehrlich, Jr., on May 13, 2003, contains numerous provisions dealing with Maryland corporate income tax, personal income tax, insurance premiums tax, and sales and use tax, and tax administration. In addition, the Act raises various fees.

Corporate and Personal Income Taxes

Heritage structure rehabilitation credit: For the heritage structure rehabilitation credit against corporate and personal income tax (which may also be taken against insurance premiums tax), a cap has been placed on aggregate approved expenditures for commercial rehabilitations for the period between February 1, 2003, and December, 2004. Between February 1, 2003, and December 31, 2003, the total credits may not be greater than $23 million. For calendar year 2004, the maximum aggregate amount is $15 million. In addition, subject to regulations which may be adopted, proposed rehabilitation plans must be approved in the order in which they are submitted, and a taxpayer whose plan that is not approved in one calendar year may reapply in the following calendar year.

Sale of property to nonresidents: Effective October 1, 2003, the sale or exchange of real property owned by a nonresident or nonresident entity is subject to corporate or personal income tax withholding at the time the change of ownership is effected. If the nonresident transferor is an individual, the rate is 4.75%; if not, the rate is 7%. The Comptroller is required to promulgate regulations to administer the withholding requirement.

Nonresident contractors: Nonresident contractors will be subject to Maryland corporate or personal income tax withholding for contracts for $50,000 or more, at a rate of 3%, for contracts entered into on or after July 1, 2003.

Pari-mutuel wagering: Effective July 1, 2003, winnings from pari-mutuel wagering are subject to Maryland personal income tax withholding to the extent they are subject to federal income tax withholding.

Amount withheld: Effective January 1, 2004, the amount of Maryland personal income tax withholding will be based on the top marginal rate of 4.75%, without regard to the lower marginal rates actually imposed on the first $3,000 of taxable income.

Due dates for returns: Effective January 1, 2004, employers with total withholding for the prior calendar year of $15,000 or more must file a return and remit withheld Maryland personal income tax within three days after payroll (biweekly for most employers) once $700 of liability is reached. Once such a return is filed, a return must be filed at least once every three months until the taxpayer notifies the Comptroller in writing that the taxpayer no longer has employees or is no longer liable to file the return. Monthly returns for March, June, September, and December are due on the 15th of the following month (previously the 30th or 31st).

Exemptions and unpaid tax: Effective July 1, 2003, the number of Maryland personal income tax exemptions delinquent taxpayers may claim is limited to the actual exemptions shown on the prior year's return. The limit is only imposed once the Comptroller notifies the employer of the number of exemptions that may be claimed.

Sales and Use Tax

Effective July 1, 2003, vendor and buyer Maryland sales and use tax returns (with payment of tax) are due by the 20th (formerly the 21st) day of the month in which the transaction takes place.

Practice and Procedure

Electronic funds transfer threshold: Effective July 1, 2003, for all tax types (but not applying to an individual's personal income tax liability), any tax payments exceeding $10,000 (formerly $20,000) must be made by electronic funds transfer.

Tax check for issuance of licenses or permits: Effective July 1, 2003, taxpayers applying for various business licenses or permits will be required to obtain a certificate from the Comptroller to the effect that the applicant does not owe any undisputed tax amount or unemployment insurance contribution before the license or permit may be issued or renewed.

Tax wage lien: Effective July 1, 2003, the Comptroller's authority to directly attach salaries for nonpayment of Maryland personal income tax is extended to all other taxes collected by the Comptroller.

Property held by financial institutions: Effective October 1, 2003, financial institutions are required to furnish information and assistance to enable the Comptroller to enforce the tax laws of the state. This includes information regarding accounts of persons whose property is subject to a tax lien. Also effective October 1, 2003, the Comptroller has detailed procedures through which to direct a financial institution to seize and attach accounts of persons whose property is subject to a tax lien.

Interest and penalties: Applicable to all taxable years beginning after December 31, 2003, the "safe harbor" amount for estimated tax is increased to 110% (instead of 100%) of the previous year's liability. The safe harbor amount allows taxpayers to avoid interest and penalties on taxes owed.

Incorporation and Qualification

Fees for various corporate filings with the State Department of Assessments and Taxation are increased. For example, after December 31, 2003, the filing fee for annual reports for various business entities is $300 (formerly $100). (Ch. 203 (H.B. 935), Laws 2003, effective as noted above; Fiscal Note, Department of Legislative Services, Maryland General Assembly, May 6, 2003.)