The Montgomery County Council proposes to increase the recordation tax charged on the sale and refinance (in certain circumstances) of property. Expedited Bill 15-16 proposes to raise the recordation tax rate for taxable amounts lower than $500,000 (the base rate) from $3.45 per $500 or $6.90 per $1,000 to $4.20 per $500 or $8.40 per $1,000. For taxable amounts higher than $500,000 (the premium rate), the $5.00 per $500 or $10.00 per $1,000 recordation tax is proposed to increase to $6.50 per $500 or $13.00 per $1,000. Examples of the total tax increase based on prospective sale prices, are set forth in County Council President Nancy Floreen’s April 12, 2016 Memorandum to her fellow Councilmembers (relying on data from sales of owner occupied homes).
With each rate (base and premium) raised $0.75 per $500 or $1.50 per $1,000 (taxable amounts higher than $500,000 are subject to both the increased base and premium rates – an overall increase of $1.25 per $500 or $2.50 per $1,000), the County Council anticipates generating an additional $125 million from the base rate over six years and $30 million from the premium rate increase over six years. A portion of the base rate ($2.50 per $1,000) has historically been allocated to both Montgomery County Public Schools (“MCPS”) capital projects and Montgomery College information technology capital projects. If adopted, Expedited Bill 15-16 will dedicate $4.00 per $1000 of the base rate to MCPS capital improvement projects only, leaving Montgomery College to fund information technology improvements from general current revenue. The premium rate is dedicated to County Government capital projects and rental assistance. These allocations will remain, but the tax increase will generate increased funding for affordable housing.
On May 10, 2016 at 1:30 p.m., the Montgomery County Council will hold a public hearing on Expedited Bill 15-16. Although Council President Floreen is the Lead (and only) Sponsor of this bill, buzz around town indicates there is support from others on the Council. If adopted, Expedited Bill 15-16 will apply to real estate transactions beginning July 1, 2016 and has no proposed sunset date.
Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.
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