September 27th, 2019
New Business, Tax, and Real Estate Laws Passed During Maryland’s 2019 Legislative Session
Posted in: Business Law Real Estate Law Tax Law Tagged: Michael Y. Goldberg
Author: Kristin A. Neubauer, Michael Y. Goldberg
Laws in Effect as of June 1, 2019
Maryland Sales and Use Tax – Short Term Rentals
This law imposes a sales tax on short term rentals. In addition to imposing the sales tax, the Bill imposed the collection obligation for the tax on internal based short-term rental platforms to ensure collection of the tax. Although the Bill appears to be directed at Airbnb, the legislative summary mentions multiple other popular short-term rental and vacation home sites such as VRBO, Booking.com, HomeAway and others. Maryland expects state sales and use tax collections to increase by a “potentially significant amount” starting in fiscal year 2020.
Laws in Effect as of July 1, 2019
Maryland Opportunity Zones
This Bill establishes the Opportunity Zone Enhancement Program to provide new incentives for businesses that are located in designated areas defined by the federal Opportunity Zone Program. The Opportunity Zone Program provides federal tax incentives for distressed communities over a 10-year period. A qualifying businesses within one of Maryland’s 149 designated Opportunity Zones can receive incentives even if they do not certify themselves for the federal Opportunity Zone program. Tax incentives available under the program include:
- Job Creation;
- One Maryland;
- Enterprise Zone;
- Biotechnology Investment Incentive;
- Cybersecurity Investment Incentive; and
- More Jobs for Marylanders.
Tax Lien Statute of Limitations
This Bill amends the current law to provide a 20-year statute of limitations after the date of assessment on taxes owed to the Comptroller of Maryland. The change comes shortly after a 2015 Court of Special Appeals opinion sided with the Comptroller that there was no statute of limitations on their assessments. The change will likely result in increased enforcement activities by the Comptroller in order to ensure that taxes are collected. The law change does not affect assessments made prior to July 1, 2019.
Laws Going into Effect on Oct. 1, 2019
Distributed Networks and Corporate Records Law
This Bill expands the definition of “electronic transmission” under Maryland’s corporate law to include the use or participation in electronic networks and databases, including distributed networks. By expanding this definition to include distributed networks, this Bill authorizes Maryland corporations to use distributed network technology (e.g. Blockchain) to maintain and share corporate records with their stockholders. The Bill also specifies that such records are deemed original written records and are admissible as evidence. Notably, the Bill allows this technology to be used by corporations for the purposes of:
- Identifying the proper stockholders in the corporation; and
- Generating a list of stockholders.
The Bill also provides that corporate records maintained on these distributed networks and databases must also be convertible to written form within a reasonable period of time for visual inspection purposes.
Business Data Security Breach Law
This Bill expands the types of businesses that are required to provide notification to consumers in the event the business suffers a data breach under the Maryland Personal Information Protection Act (MPIPA). While historically only businesses that owned or licensed computerized data were subject to the MPIPA, this Bill has expanded the MPIPA to apply to any business that maintains computerized data that includes personal information about a Maryland resident. In the event that a business collecting such personal data suffers from a data security breach, the business is required under the act to:
- Conduct a reasonable and prompt investigation of such data breach; and
- If a misuse of personal information occurred, or is reasonably likely to occur, the business is required to notify the individuals affected by the data breach.
In the event a business does not comply with these requirements, it may be found in violation of Maryland’s Consumer Protection Act and may face both civil and criminal penalties.
Written Escrow Agent Agreements In Residential Sales Transactions Law
This Bill requires escrow agents to enter into written escrow agreements with the buyer and seller of residential real property when the escrow agent intends to hold the buyer’s deposit or down payment in escrow prior to settlement on the sale of the property. This Bill also states that the following terms must be included in such written agreement:
- The amount of money given to the escrow agent;
- The date the money is given to the escrow agent;
- When the escrow agent must notify the buyer and seller that the deposited money was returned due to being dishonored;
- The conditions under which the escrow agent may release the money to buyer, seller, or other third-party; and
- A dispute resolution provision to resolve disagreements about the release of the funds.
This Bill does not apply to most financial institutions (e.g. banks, credit unions), registered home builders, or real estate salespersons, associate brokers, or brokers that are properly licensed as such under Maryland law.
Maryland Taxation of Online Sales – Collection by Marketplace Facilitators
This Bill provides that marketplace facilitators will need to begin collecting and remitting sales tax on behalf of sellers on their platforms under certain circumstances. The Bill expands the Supreme Court’s historic 2017 decision in South Dakota v. Wayfair Inc. to allow states to impose withholding requirements on out of state sellers. The Bill follows the lead of many other states to collect tax from market makers and is expected to increase overall sales tax collections.