The Budget Reconciliation and Financing Act, signed by Governor Robert L. Ehrlich, Jr., on May 13, 2003, contains numerous provisions dealing with various Maryland taxes.
Personal income tax withholding
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.
Sale of real 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%.
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.
Due dates for withholding tax 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 claimed
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.
Rehab credit
A cap has been placed on aggregate approved expenditures for the heritage structure
rehabilitation credit against corporate and personal income tax. For expenditures
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 proposed rehabilitation plans must be approved in the order in which they are
submitted, and a taxpayer whose plan is not approved in one calendar year may reapply in
the following calendar year.
Due dates for Sales and Use tax returns
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.
New threshold for electronic funds transfer
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.
Fees for various corporate filings with the State Department of Assessments and
Taxation are increased
Fees for filing new incorporations have been increased to $100 (from $40.) The filing fee
for annual reports for various business entities is $300 (from $100). Additionally,
limited liability entities (LLC's, LLP's, etc.,) are now subject to this filing fee,
(previously there was no annual filling fee.)
(Ch. 203 (H.B. 935), Laws 2003, effective as noted above; Fiscal Note, Department of Legislative Services, Maryland General Assembly, May 6, 2003.)
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