Assessments are based
upon estimates of the market value of real property, including vacant and
improved land. In addition to monitoring and analyzing all real
estate sales in Maryland, assessors use the Maryland Assessment Manual to
estimate the replacement cost values of various types of real property
improvements. Commercial and Industrial Assessors also utilize the
capitalization of net income in the valuation of income producing
properties. The Real Property Assessment Procedures Manual, the Code
of Maryland Regulations, and commercially produced references are also
used in the property valuation process. The Department’s Computer
Assisted Mass Appraisal System (CAMA) is used to improve data research,
retrieval, and valuation computations. Assessment values are
furnished to each county and municipality for tax billing
purposes.
Maryland law provides
for a three-level administrative appeal process: the Supervisor’s
Level Hearing, the Property Tax Assessment Appeals Board, and the Maryland
Tax Court. During FY 2004, 26,277 Supervisor’s Level Hearings were
conducted from the previous year’s reassessment. Approximately 4.0%
of the property owners subject to reassessment appealed their
assessments.
The foundation of
fair property taxation is uniform and accurate assessments. The
Department has adopted national standards for measuring property
assessment quality as outlined by the International Association of
Assessing Officers. Maryland has excellent assessment
uniformity. To ensure the accuracy of assessments, the Department
makes an annual assessment ratio survey by comparing actual sales with
assessment levels in the various subdivisions. This survey also
determines how well our local assessment offices are keeping pace with
current property values.
The Department is
committed to providing the citizens of Maryland with outstanding
service. In order to obtain input from the public, an ongoing survey
titled “How Are We Doing?” is used. The survey brochures are
prominently displayed in each office and are personally provided to
first-level appellants. The survey results indicate a high degree of
satisfaction for courtesy and professionalism.
This year the
Department changed the format of the reassessment notice. The
“Taxable Assessment” values for properties qualified for a Homestead
Credit were moved to a more prominent area. This enhancement will
allow property owners to more easily determine the assessment amount that
will be the basis of their property tax bill. Additionally, property
owners who receive a reassessment notice, can now be mailed their property
worksheet and sales analysis via an internet request without
appealing.
It is important to
the Department that property owners are informed on all assessment
programs, credits and processes. To insure accomplishing this
objective, informational brochures are continuously maintained. The
brochures are available on the internet website or from any local
assessment office.
TAXPAYER SERVICES DIVISION
Charter
Services:
Whenever anyone
creates a new business entity (a corporation, a limited liability company,
a limited partnership, a limited liability partnership, or a business
trust) that person files the formation documents with the central office
of the Department of Assessments and Taxation. This Charter Unit of
the Department is also the central filing location for: (1) the
registration of a foreign or out-of-state entity doing business in
Maryland; (2) the reporting of all resident agents for service of process,
(3) the service of process for certain special entities; (4) obtaining a
business trade name; (5) the submission of uniform commercial code (UCC)
financing statements; (6) the issuance of a certificate of good standing
for all entities in compliance with annual filing requirements; and (7)
the issuance of certified copies of all documents of record.
This unit of the
Department also collects several statutorily prescribed fees, including
recording fees, organization and capitalization fees, an annual report fee
by all for-profit entities, obtaining certified copies of documents, and
fees for filing documents. Last year, the Department collected and
deposited into the State General Fund $8,722,000 in document fees for
190,246 transactions. It also deposited $58.6 million in the $300
Annual Report fee collected from 198,000 for-profit entities doing
business in the State. Tables VIII and IX summarize the number of
documents and revenues collected by the Charter Unit.
To better serve the
business filing community, the Department has refined three of its public
information services. First, the agency maintains a Charter Help
e-mail service where filers can obtain answers to technical filing
questions. This past year, the Charter Unit answered 34,000 of these
e-mail inquiries. Second, the agency places on its website free
downloadable images of all filed Charter or UCC documents within 48 hours
of their processing. Third, there is a 24-hour a day website address
where the public can obtain for a fee a “certificate of good standing”
widely used in settlements, refinancing, and in business or professional
license renewals.
Business
Personal Property Valuation:
The Personal Property
Unit of the Department performs a significant function for local
governments by valuing all tangible personal property owned by businesses
operating in the State. The Unit then certifies that assessment
information to individual jurisdictions for their issuance of property tax
bills. In FY 2004, the total amount of assessable base certified to
local governments equaled $11,347,096,450, and it produced $340.4 million
in revenue to county governments.
The Personal Property
assessors reviewed 242,000 returns in FY 2004. Taxable assessments
were made on 113,140 of the returns. The assessors use the generally
accepted accounting practices and depreciation schedules in order to
certify assessments for each business location. From these returns,
the Personal Property Unit also certifies the amount of business inventory
reported for each company so that the local jurisdictions and the Clerk of
Court can determine the amount of the “trader’s license” fees for certain
businesses. There were 28,624 home-based businesses that were not
subject to a taxable assessment because they are sole proprietorships
which own property within an initial acquisition value of less than
$10,000.
The Personal Property
Unit also reviews applications for exemption from the personal property
tax by various charitable, educational, or religious organizations.
The State of Maryland has a stricter standard for granting property tax
exemptions than what is required for receiving a federal 501(c)(3)
non-profit determination. Finally, the Unit processes applications
from certain for-profit businesses seeking a “manufacturing exemption”
allowed in the law for equipment used in a manufacturing
process.
The Department has
improved again this year the ease of using its website for businesses or
professional tax return filers to obtain extensions to file personal
property returns after the April 15 deadline. The number of filers
who used the internet extension system increased by 65% from the prior
year’s total of 42,110 filers to 69,561 filers.
Table X lists the
personal property exemptions allowed by the respective local governments
for commercial inventory, manufacturing, and research and development
property. There are also two graphs following Table X which show the
10-year history of the growth in the personal property assessable base
certified to local governments.
Franchise
Taxes and Public Utility Valuation:
There are two
operating units within this area of the Department which process two
separate and distinct types of taxes. One section administers the
collection of franchise taxes on certain major utility companies, and the
other section performs the assessment valuation of the operating property
of utility companies and railroads.
Public service
company franchise taxes are imposed on public utility corporations such as
gas, electric and telephone companies for the privilege of doing business
in the State. Gas and electric utilities pay a two-part franchise
tax consisting of 2% of the gross receipts derived from business in
Maryland and a tax based on energy units delivered for final consumption
in the State. The rates are .062 cents for each kilowatt hour of
electricity and .402 cents for each therm of natural gas delivered for
final consumption in the State. Telephone companies pay a franchise
tax of 2% on the gross receipts derived from business in Maryland.
All franchise tax revenues are deposited into the State General
Fund.
For FY 2004, a total
of $136,880,003.00 in public service company franchise tax revenues was
collected and deposited into the State General Fund. Total receipts
increased 5.39% or $6,992,691.00, compared to FY 2003. Receipts from
gas and electric utilities increased by $1,874,637.00; while receipts from
telephone companies increased by $5,118,054.00.
Gas and electric
revenues slightly improved in FY 2004; however, the increase in receipts
was mainly attributable to the collection of deficiency assessments
successfully imposed on a number of gas and electric utilities covering
two or three calendar year filings. Maryland mined coal tax credits
claimed by electric utilities continued to increase.
The net increase in
receipts from telephone companies for FY 2004 compared to 2003 was simply
a result of the exhaustion of available carryover tax overpayments from
the previous tax period for one of the large telephone taxpayers.
Full remittances of quarterly estimated payments resumed in FY
2004.
Substantial
collection of interest arising from deficiency assessments imposed on the
public service company franchise taxpayers for FY 2004 amounted to
$512,917.
The Franchise Tax
Unit also continues to audit and process refunds claimed on the amended
financial institution franchise tax filings which are no longer subject to
the tax but may file amended prior year returns. FY 2004 ended with
positive net tax receipts (after refunds) of $453,362.00, and the total
amount of interest collected was $307,859.00.
The Utility Valuation
Section is responsible for the property tax assessment of the operating
real and personal property of electric companies, local gas distribution
companies, interstate natural gas and oil pipelines, railroads,
telecommunications companies, and water companies. All operating
property is assessed centrally as required by law in Sections 8-108 and
8-109 of the Maryland Tax Property Article. The Utility Valuation
Section is also responsible for the assessment of personal property for
cable companies and non-utility electric generating companies. The
total assessed value of these properties statewide is over $10
billion.
The operating unit of
the utility or railroad is valued as a whole by considering the earning
capacity of the unit using the income method of appraisal. The
income approach is the primary method, however, other information is
considered including the cost approach and market data when
available. The operating unit may include property functioning on an
interstate basis such as an interstate pipeline, railroad, or
telecommunications companies. Therefore, the Maryland portion of the
operating unit value is apportioned to the State. The Maryland
assessment is apportioned to 23 counties and Baltimore City and to all
incorporated municipalities based on the location of the
property.
Utility companies
reflect the changing economic environment. The Cove Point LNG Marine
Import Facility was recently reactivated to receive deliveries of liquid
natural gas. The current demand for natural gas has improved the
economic viability of this facility. The plant is one of four
currently active import terminals in the United States.
Telecommunication companies continue to restructure and consolidate.
Subsequent to the June 2004 Supreme Court decision not to require the
local incumbent telecommunication carriers to share their networks with
competitors at discounted prices, the three major long distance carriers
announced write-downs of the book value of their property. Two major
long distance companies are being purchased by incumbent local exchange
carriers. Electric companies continue to adjust to the restructured
environment as customers transition from capped rates to market based
rates for commodity electricity. Utilities continue to provide
delivery service to all customers in their territory.
Homeowners’
Tax Credit Program:
The Homeowners’ Tax
Credit Program has always been considered the State’s major property tax
relief program because it granted a property tax credit to homeowners of
all ages whose property tax bills are disproportionate to the amount of
their gross household income.
In 2004, there were
two major studies by the General Assembly’s Department of Legislative
Services and this Department showing that there has been a significant
decrease in the number of program recipients over the past five years
because State funding has not been available to adjust the parameters of
the program based upon current realities. Neither the credit formula
or the amount of assessment eligible for the credit has been increased to
reflect changing income and assessment
levels. The implied
guarantee of this program that no homeowner would have to sell his or her
home because of inability to pay the property tax bill can no longer be
stated.
The Department
continues its outreach efforts to attract new applicants to the program
each year, and for the past five years, there has been an average of 18%
of the total number of applicants who are new first time applicants.
However, these new applicants are not qualifying for the credit at the
same rate at which others have qualified in the past.
Table XI shows that
there were 1,292 fewer credit recipients in FY 05 in comparison to the
prior year. The total expenditure for credits between the two fiscal
years has declined from $40,471,945 to $39,869,755.
Renters’ Tax
Credit Program:
The Department
administers the State of Maryland Renters’ Tax Credit Program. The
program operates on the premise that renters should receive a tax credit
as homeowners do if they qualify on the basis of a comparison gross
household income to the amount of property taxes paid. The Renters’
Program assumes that 15% of the yearly rent goes toward the payment of
property taxes. The program is available to renters aged 60 or
older, to the 100% disabled, and to renters under age 60 with at least one
dependent child. An eligible renter can get a tax credit of up to
$600 a year in the form of a check payment from the State. The
Department processes the application forms on a monthly basis by verifying
the income reported and the amount of rent paid in order to authorize the
issuance of the check payment.
Table XII provides an
itemization by subdivision of the number of recipients and the amount of
Renters’ Tax Credit granted for the 2004 application year. The State
issued tax credit payments totaling $3,018,125.18 to 11,111 eligible
applicants. The statewide average credit received was $271.63.
Eighty percent of these recipients were 60 years of age or
older.
Exempt
Property:
The Maryland General
Assembly has enacted a series of laws dating back to 1972 that create a
method of granting property tax exemptions to organizations which serve
certain public and other communal purposes. Generally, exemptions
are granted to charitable, educational or religious organizations whose
property is “actually used exclusively” for the enumerated exempt
purpose.
The Department
conducts a thorough review of all applications for a property tax
exemption. The review includes an examination of the corporate and
financial records of the organization and a physical inspection of the
specific use of the subject property.
Table XIII shows the
amounts of real property assessable base exempted from State, County, and
municipal property taxes in the 2004-2005 tax year (FY 2005).
Obviously, the largest category of exempt property is government property
owned by the State, the counties, the municipalities, and the federal
government. The respective amounts of assessable base are:
$20.7 billion in county and municipal property; $10.2 billion in federal
property; and $7.9 billion in State owned property.
The largest amount of
exempt assessable base for privately held property is that owned by
religious organizations. For the 2004-2005 tax year, religious
organizations were exempted from paying property taxes on properties with
an assessable base in excess of $6.2 billion. It is interesting to
note that in any given tax year, the Department receives four exemption
applications from religious organizations for every one exemption
application it receives from a charitable or educational
organization.
The table further
shows that charitable, benevolent and fraternal organizations received
exemptions on real properties with a total assessable base in excess of
$5.3 billion. Educational organizations received exemptions on
properties with an assessable base in excess of $2.3 billion.
Disabled veterans, blind persons, and foreign embassies received
individual exemptions on properties with an assessable base of $1
billion.
Collectively, the
privately held or non-governmentally owned exempt properties received
approximately $225 million in annual property tax savings.
Enterprise
Zone Credits:
The Enterprise Zone
Tax Credit Program has established itself as one of the favored economic
development tools by businesses that are expanding or locating in the
State of Maryland. This Department administers the property tax
credit component, which business owners indicate is the most desirable of
these credits. The property tax credit allows eligible businesses in
the designated zones savings of 80% of the taxes on the increased
assessment on new construction for the first five tax years, and there are
savings of 70% to 30% over the next five tax years.
The Department has
significant communications with business owners explaining the tax savings
in individual instances. The agency also calculates the amount of
assessment eligible for each year’s credit and certifies that amount to
the local governments for the deduction of the credit from the July
property tax bills of the eligible businesses. Finally, the
Department authorizes payments to the local governments for the State’s
one-half share reimbursement for the credits granted in the previous tax
year.
Table XIV shows that
there are 557 businesses receiving Enterprise Zone Property Tax Credits
for the 2006 fiscal year. These businesses located throughout the
State have made new capital investments totaling $1,156,658,351.
This amount of capital investment can be measured against the State’s
one-half share reimbursement of $5,874,853.
OFFICE OF INFORMATION TECHNOLOGY
The Office of
Information Technology (OIT) provides the data, information and technology
support services for the Department, and assists county/local government
IT departments and finance offices. OIT supports the Department’s
Wide Area Network that connects over 800 personal computers, 70 network
servers linking all of the 23 county and Baltimore city assessment offices
to the Baltimore Preston Street Office Complex Headquarters (HQ) and the
State’s Annapolis Data Center (ADC). OIT also provides technical
support for the following SDAT automated applications: Real Property
Automated Data System (ADS), Homeowners’ and Renters’ Tax Credits,
Residential and Commercial Computer Assisted Mass Appraisal (CAMA),
Maryland Business Entity System (MBES), client server based Budgeting,
Personnel, Web and Imaging as well as office
automation.
2004 OIT
Accomplishments
Internet Services:
The Department offers
Internet real-time services that include a searchable database for real
and personal property assessments, tax maps, sales data, corporate charter
and Uniform Commercial Code (UCC) information. Current services
offered on the Department’s website include: requests for business
entity Good Standing Certificates, filing of Personal Property return
extension requests, UCC and corporate charter imaged document filings, and
real property assessment appeal requests. We also offer a variety of
on-line input capable forms, publications, and other information.
The services and information available are of great value to homeowners,
lenders, appraisers, real estate agents, businesses, and attorneys.
The use of the Internet services continues to climb each year as evidenced
by the statistics below and customers are finding the services user
friendly, efficient and expedient.
The Department
currently averages over 700,000 “hits” daily (over 21,000,000 monthly) on
our website, which is available 24 hours a day, seven days a
week. This is an increase of 40% from the prior
year.
The Department is
committed to moving services from "standing in line to being
online". Of the 29 Internet capable services that the Department has
inventoried, 26 or 89.7% have been web enabled.
UCC/Corporate Charter Imaging/Internet Service:
As identified in last
year’s annual report, the Department’s document imaging initiative was
expanded to include the UCC and Corporate Charter document filings.
Since April 2002, these imaged documents have been available by accessing
the Department’s website. This non-fee based service provides
accessibility to both UCC and Corporate Charter filings retroactive to
January 1, 2001. During FY 2004, approximately 375,000 document
images were requested via this service. This is an 88% increase over
the previous year.
Certificates of Good Standing Service:
The Department
continues to provide the ability for customers to acquire Certificates of
Good Standing for business entities over the web. During the past
year, approximately 25,000 or 50% of the 48,000 yearly requests were filed
using this web service and generated approximately $500,000 in
revenue. This is an increase of over 55% from the previous
year.
Personal Property Returns – Extension Requests:
The Department offers
customers the ability to file for personal property tax return extensions
over the web. During this past year, approximately 70,000 or 65% of
the overall 107,000 extension request were filed using this service.
This is an increase of 20% from the previous year.
Internet Advertising Initiative:
During the past year,
28 different advertisers used this service generating revenue that was
used to reduce the Department’s web site hosting costs.
Real Property Assessment Appeals:
Since January 2002,
property owners have been able to file real property assessment appeal
requests via the Internet. During 2004, property owners filed
approximately 5,380 appeals. This represents three times the number
filed in the previous year or an increase of 300%.
Document Output Services:
The Department
continues to expand its current document output management services
capability with additional laser designed forms and online applications.
During 2004, over 21,000 real property supplemental notices, 15,000
hearing notices, and 30,000 final notices were prepared. In
addition, 13,000 tax credit denial letters, 13,000 tax credit certificates
and 27,000 tax credit requests for additional information were printed,
processed, and mailed to homeowners under this service.
The daily average for
Corporate Charter and Uniform Commercial Code documents processed from the
Document Center is approximately 1,500 letters per day. In addition,
the following batch jobs were printed and processed from the center:
Personal Property estimated assessment notices 25,000; Foreign Corporation
Courtesy Notices 11,000; Domestic Corporation Final Forfeiture Notices
31,000 and Foreign Corporation Final Forfeiture Notices 10,000.
Real Property System/Other:
The Department has
significantly extended and streamlined its File Transfer Protocol (FTP)
services to county and local governments and tax billing
authorities. The Department now provides data and billing
information on-line to the majority of county finance offices and
municipalities. This effort has eliminated the use of outdated
off-line tape technology, reduced mailing costs, and expedited the
exchange of data between the Agency and county and local government
organizations.
Migrated and
converted all DAT communication circuits to Network.Maryland, a year ahead
of schedule.
The Disaster Recovery
Plan and Security Plan were completed and submitted to the Department of
Budget and Management to comply with State requirement; part of this
effort involved the successful completion of desktop testing for the
Disaster Recovery Plan.
Implemented ‘pilot’
project to convert a number of Group Wise users to web access email client
which resulted in a reduction of software maintenance costs while
providing comparable email functionality.
Maryland Business Entity System (MBES):
The implementation of
the new $300 filing fee requirement entities as result of the new $300
filing fee requirement for business entities as a result of new
legislation.
Implemented a new
ground rent document and inquiry application (in-house and on
Web)
Implementation of new
domestic forfeiture reason inquiry access via WEB. Replaced the manual
mailing of notices, saved on postage and more user friendly.
Automated Service of
Process task which was previously done manually.
Automated the receipt
process by county and local governments for personal property
reports. These reports are now done through FTP or emailed
eliminating the printing and mailing of reports except for a few
locations. This improved efficiency and saved on postage
costs.
Implemented
non-refundable fee collection which has resulted in the ability to absorb
monies for rejected documents over 180 days. Previously this
capability was not available.
The use of CPU
CICS transaction time was reduced by streamlining search keys and indexes
resulting in Annapolis Data Center cost
savings.