Agenda Item 4B
April 19. 2016
Introduction
MEMORANDUM
April 14,2016
TO:
FROM:
County C o u n c i l ,
Robert H. Drummer, Senior Legislative
Attomey~
SUBJECT:
Introduction:
Expedited Bill 15-16, Recordation Tax - Rates - Allocations -
Amendments
Expedited Bill 15-16, Recordation Tax - Rates - Allocations - Amendments, sponsored by
Lead Sponsor Council President Floreen, is scheduled to be introduced on April 19, 2016. A
public hearing is tentatively scheduled for May 10, 2016 at 1:30 p.m.
Bill 15-16 would increase the rate ofthe recordation tax levied under state law and allocate
the revenue received from the recordation tax for different uses.
Background
Recordation taxes are paid when a house or building is sold, or if the mortgage on a house
or building is refinanced. There are three elements of the recordation tax:
• The "base" recordation rate is $2.20/$500 on the sale price or,
if
refinancing, on the
additional amount borrowed over the remaining principal. (If acquiring a home, the first
$50,000 of the sale cost is exempt.) Bill 15-16 would not change the "base" rate or how
its revenue is allocated.
• The "school increment" went into effect in 2004 and its rate is $1.25/$500. It is also based
on the sale price or, if refinancing, on the additional amount borrowed over the remaining
principal. This Bill would raise the rate to $2.00/$500, effective July 1, and would generate
$125 million over the next six years. Currently the proceeds can be used for any
Montgomery County Public Schools (MCPS) capital project and for any Montgomery
College information technology capital project. The Bill would dedicate all the proceeds
to MCPS projects; College information technology projects can still be funded with general
Current Revenue.
• The "Recordation Tax Premium" went into effect in 2008 and its rate is $1.55/$500. Unlike
the other two elements, the Premium applies only to the cost of a property or a refinancing
that is in excess of $500,000. Half of the proceeds from the Premium are allocated to
 PDF to HTML - Convert PDF files to HTML files
County Government capital projects (i.e., capital projects of departments in the Executive
Branch); the other half is for rent assistance. This Bill would raise the rate to
$2.30/$500,
effective July 1, and would generate $30 million more for County Government projects
and $30 million more for rental assistance over the next six years. On March 22, the
Council heard from Enterprise Community Partners about the need for more affordable
housing in Montgomery County and that part of the solution is more money. The
Recordation Tax Premium is an important revenue source for the Housing Initiative Fund.
It
has been used for traditional monthly rental assistance and very effectively at the
Bonifant to make many of these new units affordable to very low income seniors. The
Department of Housing and Community Affairs has projects in the pipeline that may need
$40 to $50 million. This funding will help make sure there is adequate funding to move
forward when projects and programs are ready.
Lead Sponsor, Council President Floreen, explained the need for this Bill in an April 12
memorandum at
©5-6.
This packet contains:
Bill
15-16
Legislative Request Report
Council President Floreen April 12 Memorandum
Circle
#
1
4
5
F:\LAW\BILLS\1615 Recordation Tax - Rates - Amendments\Intro Memo.Docx
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No.
15-16
Concerning: Recordation Tax - Rates ­
Allocations - Amendments
Revised: April 14. 2016 Draft No.
L
Introduced:
April 19. 2016
Expires:
October 19. 2017
[date)
Enacted:
Executive:
[date signed)
Effective:
[date takes effect)
Sunset Date:
_N~o~n~e
_ _ _ _ __
Ch.
~,
Laws of Mont. Co.
[year]
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead Sponsor: Council President Floreen
AN EXPEDITED ACT
to:
(1)
increase the rate of the recordation
tax
levied under state law for certain transactions;
(2)
allocate the revenue received from the recordation tax for certain uses; and
(3)
generally amend the law governing the recordation tax
By amending
Montgomery County Code
Chapter 52, Taxation
Section 52-16B
.. .. ..
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unaffected
by
bill
The County Council for Montgomery County, Maryland approves the following Act:
 PDF to HTML - Convert PDF files to HTML files
ExPEDITED BILL
No.
15-16
1
2
Sec. 1. Section 52-16B
is
amended as follows:
52-16B. Recordation Tax.
(a)
3
Rates.
The rates and the allocations of the recordation tax, levied under
[state law] Md. Tax-Property Code §§12-101 to 12-118, as amended, are:
(1)
[$3.45] for each $500 or fraction of$500 of consideration payable
or ofthe principal amount ofthe debt secured for an instrwnent of
writing, including the amount of any mortgage or deed of trust
assumed by a grantee;
(A) $2.20, of which the net revenue must be reserved for and
allocated to the County general fund; and
4
5
6
7
8
9
10
11
12
13
14
15
ill)
$2.00, of which the net revenue must be reserved for and
allocated to the cost ofcapital improvements to schools; and
(2) if the consideration payable or principal amount of debt secured
exceeds $500,000, an additional [$1.55] $2.30 for each $500 or
fraction of $500 of the amount over $500,000.1 of which the net
revenue must be reserved for and allocated equally to:
(A) the cost of County government capital improvements; and
16
17
18
19
ill)
rent assistance for low and moderate income households,
which must not be used to supplant any otherwise available
funds.
(b)
Exemption.
The fIrst $50,000 of the consideration payable on the
20
21
22
conveyance of any owner-occupied residential property is exempt from
the recordation tax ifthe buyer ofthat property intends to use the property
as the buyer's principal residence by actually occupying the residence for
at least 7 months of the 12-month period immediately after the property
is conveyed.
23
24
25
26
27
Sec. 2. Prior aUocations.
o
f:\law\bills\1615 recortlation tax - rates - amendments\bill4.docx
 PDF to HTML - Convert PDF files to HTML files
EXPEDITED BILL
No.
15-16
1
2
3
4
The allocation of recordation tax revenue made in Section 1 replaces each
allocation of recordation tax revenue established in previously enacted uncodified
legislation.
Sec. 3. Expedited Effective Date.
S
6
7
8
The Council declares that this legislation is necessary for the immediate
protection ofthe public interest. This Act takes effect on the date on which it becomes
law, and applies to any transaction which occurs on or after July 1,2016.
Approved:
9
Nancy Floreen, President, County Council
10
Approved:
Date
11
Isiah Leggett, County Executive
12
This is a correct copy o/Council action.
Date
13
Linda M. Lauer, Clerk ofthe Council
Date
 PDF to HTML - Convert PDF files to HTML files
LEGISLATIVE REQUEST REPORT
Expedited Bill 15-16
Recordation Tax
-
Rates
-
Allocations
-
Amendments
DESCRIPTION:
Expedited Bill 15-16 would increase the recordation tax rates and
allocate the revenue received from the recordation tax. The portion of
the base rate allocated to school capital projects would increase from
$1.25/$500 to $2.00/$500 of value, effective July 1, 2016. The Bill
would also increase the premium rate charged against sales valued at
more than $500,000 from $1.55/$500 to $2.30/$500. The revenue
received frqm this premium rate would continue to be shared equally
between County capital projects and rent assistance.
The County needs to generate additional tax revenue to support MCPS
school construction and rent assistance for low and moderate income
households in the County.
Increased funding for MCPS school construction and rent assistance
for low and moderate income households in the County.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMP ACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITIDN
MUNICIPALITIES:
PENAL TIES:
To be requested.
To be requested.
To be requested.
To be researched.
Robert H. Drummer, Senior Legislative Attorney
To be researched.
Not applicable.
F:\LAW\BILLS\1615 Recordation Tax - Rates - Amendments\LRR.Docx
 PDF to HTML - Convert PDF files to HTML files
MONTGOMERY COUNTY COUNCil
ROCKVILLE, MARYLAND
NANCY FLOREEN
COUNCIL PRESIDENT
MEMORANDUM
April 12, 2016
TO:
FROM:
SUBJECT:
Nancy Fl
Proposed incre e to the recordation tax
As
I
talk
with residents across the county, it becomes increasingly clear to me that our
capital needs, particularly in the areas ofschool construction and affordable housing, far outweigh
our available resources. Times are tough to be sure, but we absolutely must keep up with our
obligations in these two important areas. That's why I
will
introduce a bill to increase the rate of
the recordation
tax
in a progressive way. The recordation
tax
is paid only when properties are sold
or refinanced. While nobody likes the idea of increasing taxes of any kind, our needs are great,
and this tax is less likely to affect those Montgomery County residents who are struggling most.
On the up side, it will generate millions of dollars to support our desperate need for new schools
and educational facility improvements. What's more, a portion ofthe recordation tax is earmarked
for affordable housing. I believe this proposal is the most progressive approach to meeting the
needs that our residents have clearly identified as their top priorities.
The attached expedited bill will raise both the School Increment of the Recordation Tax
and the Recordation Tax Premium by $0.75/$500 each. Over the six-year period these rates will
generate an estimated $155 million more in revenue for the CIP and $30 million more for rental
assistance for low and moderate income households.
There are
three
elements ofthe recordation tax:
• The "base" recordation rate is $2.20/$500 on the sale price or,
if
refmancing, on the
additional amount borrowed over the remaining principal. (If acquiring a home. the first
$50,000 of the sale cost is exempt.) This bill does not change the "base" rate or how
its
revenue is allocated.
• The "school increment" went into effect in 2004 and its rate is $1.25/$500.
It
is also based
on the sale price or, ifrefinancing, on the additional amount borrowed over the remaining
principal. This bill would raise the rate
to
S2.00/S500, effective July
1,
and would
generate S125 million over the next six years. Currently the proceeds can be used for any
Montgomery County Public Schools capital project and for any Montgomery College
100 MARYLAND AVENUE, 6TH FLOOR. ROCKVILLE, MARYLANO 20850
240n77-7959
FAX 2401777-7989 • COUNCILMEMBER.FLOREEN@MONTGOMERYCOUNTYMD.GOV
,~
PRINTED ON RECYCLED PAPER
 PDF to HTML - Convert PDF files to HTML files
information technology capital project. This bill would dedicate aU the proceeds to
MCPS projects; College information technology projects can be funded
with
general
. Current Revenue.
• The "Recordation Tax Premium" went into effect in 2008 and its rate is
$l.SSI$SOO.
Unlike
the other two elements, the Premium applies only to the cost of a property or a refinancing
that is in excess of $SOO,OOO. Half of the proceeds from the Premium are allocated
to
County Government capital projects (i.e., capital projects of departments in the Executive
Branch); the other
half
is for rent assistance. This bill would raise the rate to $2.30/$500,
effective July 1, and would generate $30 million more for County Government
projects and 530 million more for rental assistance over the next six years. On March
22 the Council heard from Enterprise Community Partners about the need for more
affordable housing in Montgomery County and that part of the solution is more money.
The Recordation Tax Premium is an important revenue source for the Housing Initiative
Fund.
It
has
been used for traditional monthly rental assistance and very effectively at the
Bonifant to make many of these new units affordable to very low income seniors. The
Department ofHousing and Community Affairs has projects in the pipeline that may need
$40 to $SO million. This funding will help make sure there is adequate funding to move
forward when projects and programs are ready.
Raising the two rates maintains a degree of progressivity in the recordation
tax.
The chart
below shows what the burden of the total recordation
tax
(i.e., all
three
elements) would
be
for
homes at different
sale
prices:
$300,000
$400,000
$SOO,OOO
$600,000
$700,000
$800,000
$900,000
$1,000,000 •
$1,100,000
$1,200,000
$1,300,000
$1,400,000
$1,500,000
Current Rates
$l,72S
$2,41S
$3,105
$4,10S
$S,10S
$6,105
$7,105
$8,10S
$9, lOS
$10,10S
$11,10S
$12,105
$13,105
Proposed Rates
$2,100
$2,940
$3,780
$5,080
$6,380
$7,680
$8,980
$10,280
$11,580
$12,880
$14,180
$15,480
$16,780
I
!
2