- February 19, 2008
- All Maryland Issuing Offices
- New Maryland nonresident entity withholding "holding" period requirement
All sellers of property located in Maryland that are considered "Non-Residents" are required to pay a Non-Resident Withholding tax before their deeds will be accepted for recording. In the past, many entities were able to avoid such tax if they were successful in appointing a resident agent with the Maryland State Department of Assessments and Taxation immediately prior to the transaction.
Effective October 22, 2007, certain withholding requirements for non-resident entities were amended. The Regulations were revised to alter the definitions of resident and non-resident entities. The Regulations now provide that the non-resident entity must either qualify or register to do business in Maryland "more than 90 days before the sale of the property." See below COMAR 03.04.12.02.B (7) and (11).
7) "Nonresident entity" means an entity that: (a) Is not formed under the laws of the State more than 90 days before the date of sale of the property; and
(b) Is not qualified by or registered with the Department of Assessments and Taxation to do business in the State more than 90 days before the date of sale of the property.
* * *
(11) "Resident entity" means an entity that:
(a) Is formed under the laws of the State more than 90 days before the date of sale of the property; or
(b) Is formed under the laws of another state and is qualified by or registered with the Department of Assessments and Taxation to do business in the State more than 90 days before the date of sale of the property.
The Clerks of each court have been advised by the Comptroller that the date of sale is the "settlement date." The "Certification of Exemption from Withholding" form has been revised, accordingly, and can be found at: www.marylandtaxes.com.
The Regulations were also revised to provide that a party seeking an early refund may file the request for a refund at least 60 days after the tax was paid to the Clerk, "but no later than November 1 of the calendar year in which the tax was paid." Forms for the Withholding Return, (MW506NRS), the Application for Exemption, (MW506AE) and the Application for Tentative Refund (MW506R) can also be found under 2008 Tax Forms.
Additionally, on January 1, 2008, the Non-Resident Withholding tax rate increased from 6 to 6.75% for individuals and from 7 to 8.25% for corporations. We have been informed that the Comptroller's office will only apply this increase to closings that occurred after January 1. As such, any deeds executed contemporaneously with closings occurring prior to January 1, 2008, will not be subject to the increase.
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