With more than 700 bills pre-filed before New Year’s and multiple proposals to alter taxation and environmental laws, the Maryland General Assembly 2021 session is off to a busy start.
To date, the NAIOP-MD Legislative Committee has placed 104 bills on its watch list.
Two early legislative themes are emerging – taxes and the environment.
The first theme involves a series of bills that would change tax levels for high-income individuals, capital gains and pass-through business entities, such as partnerships and limited liability companies.
“I expect there will be more pressure this year to look at anything tax-related to try to deal with the financial shortfalls caused by COVID-19 and scheduled future spending, so we will watch for and evaluate those pieces of legislation,” said Tom Pilon, a member of the NAIOP-MD Board of Directors and Chair of the Legislative Committee.
General Assembly members have already filed several bills that propose to change Maryland tax law.
House Bill 215 / Senate Bill 288 includes “controlling interests” in its title but simply proposes a 17% surtax on management services, including real estate and other financial activities. A provision in the bill would exempt income from an entity with 80% or more of its assets in real estate. Although the bill acknowledges that real estate should not be taxed in this way, it does not provide much protection for the corporate structures used by many NAIOP-MD members.
House Bill 262 / Senate Bill 113 is the “Opportunity Zone Tax Deduction Reform Act”. It would add back capital gains that are deferred or excluded under the federal Qualified Opportunity Zones Program to Maryland taxable income. For Opportunity Zone projects already underway in Maryland, this would represent a retroactive tax on those projects, some of which are funded 30% or more by Opportunity Zone investors. Proponents argue the tax deferral passed by the U.S. Congress causes Maryland to lose tax revenues because the federal adjusted gross income is used to determine Maryland tax liabilities.
The second theme emerging this legislative session focuses on inspections, enforcement and litigation of environmental regulations.
For the third year in a row, the General Assembly is considering a “Constitutional Amendment to Environmental Rights” (House Bill 282 / Senate Bill 151). It would guarantee a basket of environmental rights, including undefined rights to clean air and clean water. It would also establish protections for scenic and historic values of the environment. The bill would create broad new rights for individuals to litigate government actions and inactions and take court action against the activities of individuals to personally enforce those rights.
The “Water Pollution Control, Intervention in Civil Actions” bill (House Bill 76 / Senate Bill 334) would allow any person who qualifies for standing to appeal requirements under the Clean Water Act to intervene in an enforcement action brought by a state agency in state court. The bill does not change the current process used for administrative enforcement actions or permit decisions.
In addition, the Legislative Committee is assessing a bill which could increase the frequency of changes in stormwater management requirements, and looking out for legislation which could require deep energy-reducing retrofits from commercial properties at change of occupancy, Pilon said.
The General Assembly will be in session until April.