The Maryland Court of Special Appeals heard oral arguments October 1, 2020 in the case of Shelter Senior Living IV LLC. v. Baltimore County, Md. The hearing was part of an appeal of rulings by the Maryland Tax Court and Circuit Court for Baltimore County that transfer and recordation tax can be imposed on the value of goodwill and other intangible personal property.

The case involves the sale of a three-facility senior living business, which included real estate, furniture, fixtures and equipment as well as the brand identity or goodwill of the business.  When the sellers presented recordation and transfer taxes based on the value of the consideration paid for the real estate, the clerks in Baltimore and Montgomery counties refused to record the deeds unless the seller paid recordation and transfer tax on the value of the goodwill and intangible personal property associated with the business. 

During oral arguments before the Court of Special Appeals, the taxing authorities reasoned that they are not bound by the consideration on the deed for the real estate assets. Instead, they can base the recordation and transfer tax on the amount paid for the business which triggered transfer of the deed. The appeals court challenged this interpretation, stating that discretion only goes to valuing the real estate assets. 

If upheld, the lower court ruling would greatly expand the scope of Maryland recordation and transfer tax which until now has only been assessed on the value of real property conveyed by a recorded deed. Taxing goodwill presents the possibility that tangible and intangible asset classes would be subject to multiple layers of federal and state tax. Consequently, branded business districts and other distinctive commercial facilities could be exposed to higher transaction costs. 

Given the expansion in taxing scope and authority presented by the case, NAIOP Maryland joined an Amicus Brief filed by the American Seniors Housing Association, LifeSpan Network, and the Maryland Chamber of Commerce. The brief was prepared by Ed Levin and Doug Coats of Gordon Feinblatt.