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New Baltimore City Affordable Housing Tax May Yield Much Less Than Anticipated

On December 12, 2018, Mayor Catherine Pugh signed into law Baltimore City Council Bill 18-0221 as Ordinance 18-215, which imposes a “yield” excise tax on documents that are recorded in the Land Records of Baltimore City and that is in addition to the current recordation and transfer taxes. This new tax applies to both residential and commercial transactions over $1 million. The yield tax is a dedicated revenue source for Baltimore’s Affordable Housing Trust Fund.

The Ordinance takes effect on January 11, 2019. However, it is not applicable to a construction mortgage or deed of trust recorded by July 11, 2019, with respect to which a full building permit has been issued before January 11, 2019. Also, the new law will not apply to any deed or any purchase money mortgage or deed of trust for a residential sale or transfer if a bona fide contract of sale has been executed within two years of the effective date of the law.

Publicity about the new yield tax indicated that, where the law applied, it was going to increase the Baltimore City transfer tax by 0.6 percent and that it would increase the Baltimore City recordation tax by 0.15 percent. This was promoted as a $13 million revenue enhancer. 

However, the Ordinance as written provides that the yield tax is only 0.6 percent of the transfer tax and 0.15 percent of the recordation tax. In other words, the tax under the language of the law is calculated based on the applicable percentage of the recordation and transfer taxes; it is not based on the consideration for a deed or the amount secured by a deed of trust or mortgage. The Ordinance, therefore, provides for a yield tax of only 2.5 percent of the advertised amount.

Forthcoming regulations may provide guidance on the City’s view of the yield tax. In the meantime, we look forward to seeing whether documents that are submitted with the yield tax calculated in accordance with the language of Ordinance 18-215 will be accepted even though the yield tax does not meet the City’s expectations.

If you would like to discuss this topic further, please contact any of the lawyers on Gordon Feinblatt's Real Estate Team:

Edward J. Levin, Chair (410) 576-1900

Timothy D.A. Chriss (410) 576-4237

Christopher T. Magette (410) 576-4191

Searle E. Mitnick (410) 576-4107

Peter B. Rosenwald, II (410) 576-4193

Neil J. Schechter (410) 576-4236

William D. Shaughnessy, Jr. (410) 576-4092

Y. Jeffrey Spatz (410) 576-4124

Caroline E. Sweet (410) 576-4275

Danielle S. Zoller (410) 576-4036

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Date

01.03.19

Type

Publications

Authors

Levin, Edward J.

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