Frequently asked Questions Regarding the State Agricultural Transfer Tax, MARBIDCO Surcharge and the County Agricultural Transfer Tax
The Office of Agriculture is often asked by landowners about when application of State Agricultural Transfer Tax, the MARBIDCO Surcharge and County Agricultural Transfer Tax are applied to a property when it is transferred. Which tax applies and how much tax is charged depends upon several factors. These factors include whether or not the property will remain in agricultural use, how long the property has been agriculturally assessed, whether or not the property is preserved by a perpetual agricultural preservation easement and how the property is zoned. Below are three examples with explanations detailing how these taxes and surcharge is applied, and how much the calculated tax would be depending upon the factors outlined above.
How Does the State and County Agricultural Transfer Tax including the MARBIDCO Surcharge Work?
Here are three examples detailing 2 properties that transferred showing the following:
How the State Agricultural Transfer Tax was calculated
How the County and State Shares of the State Ag Transfer Tax are distributed
How the MARBIDCO Surcharge is calculated
How the County Agricultural Transfer Tax was calculated
Explanation of how the Transfer Taxes are imposed on agriculturally assessed land when the property is removed from agricultural use
Example # 1:
When a property is transferred that is agriculturally assessed the State agricultural transfer tax is imposed if the property is removed from agricultural use. The State agricultural transfer tax is 5% of the sale price or consideration minus the value of the improvements. The State agricultural transfer taxes collected is then shared between the County-75% and the State-25%. An additional 25% MARBIDCO Surcharge is imposed and the County imposes a Local agricultural transfer tax.
Explanation of how Transfer Taxes are imposed when agricultural assessment and agricultural use continues
Example # 2:
For a Property Located in the Agricultural Reserve AR-zone:
When a property located in the Agricultural Reserve AR-zone is transferred that is agriculturally assessed and a Declaration of Intent is signed to continue the agricultural use the State agricultural transfer tax is waived. If the property is located in the Agricultural Reserve-AR zone or encumbered by a permanent agricultural easement the County agricultural transfer tax is 1% minus the value of the improvements.
For a Property Located Outside the Agricultural Reserve AR-zone:
Example # 3:
When a property located outside of the Agricultural Reserve AR-zone is transferred and the property is agriculturally assessed and a Declaration of Intent is signed to continue the agricultural use, the State agricultural transfer tax is waived. However, since the property is outside the AR zone the County imposes a County agricultural transfer tax on a sliding scale basis from 1-6 % depending on how many years the property has been agriculturally assessed minus the value of the improvements.
Property assessed for agricultural use for 1 year = 2.4%
Property assessed for agricultural use for 2 years = 3.8 %
Property assessed for agricultural use for 3 years = 5.2 %
Property assessed for agricultural use for +3 years = 6.0%
How does the Declaration of Intent for Maintaining Agricultural Use Assessment for the Agricultural Land Work
When a property that is agriculturally assessed is conveyed through a sale or change in ownership and it is determined that the agricultural use will no longer be ongoing, a State Agricultural Transfer Tax will be levied against the property. However if it is the intent of the purchaser or new owner to continue the agricultural use a Declaration of Intent may be executed at settlement.
The purpose of the Declaration of Intent is to declare a landowners intention to continue and/or place lands purchased into agricultural use in return for receiving a preferred agricultural use tax assessment on the land. In accordance with provisions of section 8-209 of the State of Maryland Tax-property article the property must remain in agricultural use for a period of at Least five (5) consecutive full taxable Years following the date of the declaration. If the land does not remain in agricultural use, the owner must notify the Department of Assessments and Taxation. Failure to comply with the requirements for agricultural use assessment
During the first five (5) full taxable years following the transfer will require the imposition of the agricultural transfer tax, it will be based upon a current fair market value appraisal and a 10% penalty. The ceasing of agricultural activities or the construction of non-agricultural improvements (structures) or site improvements on all or part of the parcel Is a violation of the declaration. A violation of the declaration of intent Subjects the property to a tax penalty.
How does the Agricultural Use Assessment Process Work
Maryland law provides that lands which are actively devoted to farm or agricultural use shall be assessed according to that use. In 1960 Maryland became the first state to adopt an agricultural use assessment law which has proved to be a key factor in helping to preserve the State's agricultural land.
The agricultural use assessment law and its corresponding programs are administered by the Department of Assessments and Taxation. This State agency is responsible for assessing all real property throughout the State and has offices located in the county seat of each of the 23 counties and in Baltimore City. Procedures governing the agricultural use assessment have been established to achieve uniformity among the 23 counties in which agricultural property is located. The Department of Assessments and Taxation recognizes the importance of this program to the individual land owner and to the farming community in the State. For more detailed information please follow the link below:
Link for Detailed Information Regarding the Agricultural Use Assessment
By clicking on the links below, you can access a copy of the Declaration of Intent, and the Application for Agricultural Use Assessment
Declaration of Intent (PDF)
Agricultural Use Assessment Application (PDF)