Frost Law
On May 12, 2022, Maryland Governor Larry Hogan, signed a law which significantly impacts business personal property tax exemption eligibility. Effective June 1, 2022, and applicable to all taxable years beginning after June 30, 2022, the law is intended to help strengthen Maryland’s economy by expanding “the business personal property tax exemption by increasing the value of personal property eligible for an exemption.”1 Specifically, the new law has raised the exemption for personal property assessment for all Maryland businesses from $2,500 to $20,000. This new law is projected to provide meaningful tax relief to thousands of Maryland businesses.
In Maryland, “the personal property tax has been a local tax exclusively since 1984 when the State tax rate on personal property was set at zero.”2 In other words, personal property in Maryland is subject to county, municipal, or special district property taxes. Significantly, business-owned personal property which is subject to local taxation may include furniture, fixtures, office and industrial equipment, machinery, tools, supplies, and inventory, but does not include real property or vehicles registered with the Maryland Vehicle Administration. The State Department of Assessments and Taxation (SDAT) collects personal property information from businesses via an annual personal property tax return, and subsequently assesses all personal property. Each county or municipal government then issues a personal property tax bill and collects the tax.
In 2018, in an effort to provide personal property tax relief to small businesses, legislation added Md. Code Ann. Tax-Prop. §7-245 which “established an exemption from personal property valuation and taxation if the total original cost of the personal property was less than $2,500.”3 And until June 1, 2022, the applicable limit for personal property used in connection with a home business was “less than $10,000.”
Briefly, the new law is an extension of the 2018 relief effort and alters eligibility for exemptions from the personal property tax for personal property of a home-based business or personal property, as follows:
(1) a taxpayer’s personal property is not subject to valuation or to property tax if all of the taxpayer’s personal property (statewide) has a total original cost of less than $20,000, instead of the previous $2,500 threshold;4
(2) a taxpayer’s personal property, used in connection with a business, occupation, or profession located at the taxpayer’s home, is tax exempt if the property’s total original cost value (excluding exempt vehicles) is less than $20,000, instead of the previous $10,000 threshold;5 and
(3) prohibits the Department of Assessments and Taxation from requiring a taxpayer to submit tax returns so long as the taxpayer attests to owning a sum total of personal property with an original cost of less than $20,000.6
Additionally, SDAT has clarified that:
Late filing penalties previously billed on 2022 business personal property returns reporting less than $20,000 have been abated and filers who have already paid a late filing penalty billed on a return filing reporting less than $20,000 are being mailed a refund check for the penalty paid.7
Against the backdrop of widespread economic uncertainty, Maryland businesses, already overburdened with tax requirements, will find a measure of relief now if they have less than $20,000 of personal property—they won’t be assessed personal property tax on those assets. And going forward, those businesses covered by the exemption will no longer be required to prepare and file a return for their personal property.
Our team at Frost Law will follow this development and provide any further updates on how the new exemption amount might affect your business. If you have questions about the new exemption and how it impacts your business, contact us at (410) 497-5947 or you can use our confidential contact form to schedule a call.
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On May 12, 2022, Maryland Governor Larry Hogan, signed a law which significantly impacts business personal property tax exemption eligibility. Effective June 1, 2022, and applicable to all taxable years beginning after June 30, 2022, the law is intended to help strengthen Maryland’s economy by expanding “the business personal property tax exemption by increasing the value of personal property eligible for an exemption.”1 Specifically, the new law has raised the exemption for personal property assessment for all Maryland businesses from $2,500 to $20,000. This new law is projected to provide meaningful tax relief to thousands of Maryland businesses.
In Maryland, “the personal property tax has been a local tax exclusively since 1984 when the State tax rate on personal property was set at zero.”2 In other words, personal property in Maryland is subject to county, municipal, or special district property taxes. Significantly, business-owned personal property which is subject to local taxation may include furniture, fixtures, office and industrial equipment, machinery, tools, supplies, and inventory, but does not include real property or vehicles registered with the Maryland Vehicle Administration. The State Department of Assessments and Taxation (SDAT) collects personal property information from businesses via an annual personal property tax return, and subsequently assesses all personal property. Each county or municipal government then issues a personal property tax bill and collects the tax.
In 2018, in an effort to provide personal property tax relief to small businesses, legislation added Md. Code Ann. Tax-Prop. §7-245 which “established an exemption from personal property valuation and taxation if the total original cost of the personal property was less than $2,500.”3 And until June 1, 2022, the applicable limit for personal property used in connection with a home business was “less than $10,000.”
Briefly, the new law is an extension of the 2018 relief effort and alters eligibility for exemptions from the personal property tax for personal property of a home-based business or personal property, as follows:
(1) a taxpayer’s personal property is not subject to valuation or to property tax if all of the taxpayer’s personal property (statewide) has a total original cost of less than $20,000, instead of the previous $2,500 threshold;4
(2) a taxpayer’s personal property, used in connection with a business, occupation, or profession located at the taxpayer’s home, is tax exempt if the property’s total original cost value (excluding exempt vehicles) is less than $20,000, instead of the previous $10,000 threshold;5 and
(3) prohibits the Department of Assessments and Taxation from requiring a taxpayer to submit tax returns so long as the taxpayer attests to owning a sum total of personal property with an original cost of less than $20,000.6
Additionally, SDAT has clarified that:
Late filing penalties previously billed on 2022 business personal property returns reporting less than $20,000 have been abated and filers who have already paid a late filing penalty billed on a return filing reporting less than $20,000 are being mailed a refund check for the penalty paid.7
Against the backdrop of widespread economic uncertainty, Maryland businesses, already overburdened with tax requirements, will find a measure of relief now if they have less than $20,000 of personal property—they won’t be assessed personal property tax on those assets. And going forward, those businesses covered by the exemption will no longer be required to prepare and file a return for their personal property.
Our team at Frost Law will follow this development and provide any further updates on how the new exemption amount might affect your business. If you have questions about the new exemption and how it impacts your business, contact us at (410) 497-5947 or you can use our confidential contact form to schedule a call.
