Search By Practice Area
In a bid to provide a reliable source of funding for an affordable housing trust, Baltimore City has adopted a new excise tax on real estate transactions of more than $1 million. Adopted by the City Council in October, these new taxes took effect January 11, 2019.
By way of background, in 2016 Baltimore City voters approved a ballot initiative charter amendment to create an affordable housing trust, but the measure included no source of funding. Since then, activists have called for $20 million in annual funding, and in 2018 launched a petition drive to promote an additional ballot measure which would require the City to earmark a nickel of every $100 in assessed City property value to the trust. This "Fund the Trust” push garnered more than the necessary 10,000 signatures to get the measure on a ballot.
Hoping to avoid this budget mandate, the Pugh administration negotiated a Memorandum of Understanding with the activists for an excise tax on transfers of real estate valued at $1 million or more which adds an extra 0.6% to the transfer tax, and an extra 0.15% to the recordation tax. City estimates put the fees generated by these taxes at about $13 million a year for the housing trust fund, and Mayor Pugh committed an additional amount from the general fund to bring the total to $20 million by fiscal year 2023. Notwithstanding efforts from the development community to broaden the tax to include residential real estate transactions or to find other means to fund affordable housing needs, the City Council passed the legislation unanimously.
At the last moment, the City Council adopted certain exemptions to cover projects already in the works. As to the recordation tax, this exemption provides that the increase does not apply to any deed of trust or mortgage recorded within six months of the effective date securing a loan for the funding of construction where a certificate of use has been issued prior to the effective date. Another exemption applies to any deed and purchase money mortgage or deed of trust under a contract that has been entered into between the grantor and grantee within two years of the effective date.
The legislation provides that evasion of this tax now constitutes a criminal misdemeanor, subject to a fine of not more than $500 for each offense.
A drafting error was subsequently discovered in the original legislation which would have resulted in far less revenue from the measure, and the City Council is currently considering curative legislation to fix the problem. This new legislation is widely expected to pass the City Council and be signed by Mayor Pugh. As a result, Baltimore City (which already has the highest rate of transfer and recordation taxes in the state) will see an increase from 3% to 3.75% in the combined transfer and recordation taxes.see all Commercial Real Estate articles »
On June 5, 2019, the U.S. Securities and Exchange Commission (“SEC”) approved a new regulation…read more »
The Maryland Court of Special Appeals provides helpful guidelines to homeowners and HOAs in addressing…read more »
In June, the Securities and Exchange Commission (“SEC”) adopted a new regulation, Regulation…read more »
The National Association of Insurance Commissioners recommended that states pass the Insurance Data…read more »
On June 5, 2019, the Securities and Exchange Commission (SEC) approved the Regulation Best Interest,…read more »