Legislative / Regulatory

Special session: Senate OKs revised package

Good news: Our grassroots efforts generated more than 250 letters and e-mails to the House, and we believe lawmakers will not include CPA services (consulting, management consulting and tax preparation) in HB 11. On the Senate side, our key persons and communications from the MACPA have helped keep us out of the Senate's bill, which was completed yesterday and will be voted on today.

At this point, we have been successful keeping us out of the governor's package, the House's revised version of HB 11 (pending an official amendment / vote) and the Senate. With a major effort by the Maryland Chamber of Commerce and ourthe MACPA's State Taxation Committee, we were also able to keep combined reporting out of the Senate bill (amending the governor's package).

The bad news is that the Senate decidee to expand the sales tax base to include computer services, landscaping and video arcade games (see page 19 of the revised bill) to generate $240 million in new revenues. The Maryland Chamber has a brief analysis here.

Sales_tax_3The full Senate met today in session to do "second readers" of the bills approved by the Senate Budget and Tax Committee. Lawmakers presented SB 1 (the budget bill) and SB 2 . They are expected to vote on these in a "second reader" this morning at 10 a.m. If you want to submit comments, you need to get them to your senators before then.

Some notable changes include the following:

  • The top tax bracket was reduced from 6.5 percent to 5.5 percent, largely due to pressure from the Montgomery County delegation, headed by our friend and fellow CPA, Brian Feldman.
  • The sales tax rate is increased from 5 percent to 6 percent.
  • The tobacco tax is increased.
  • The corporate income tax rate is increased from 7 percent to 8 percent.

The disturbing thing I found is the additional reporting contained in this bill. The bill establishes the Maryland Business Tax Reform Commission to "review and evaluate the State's current business tax structure" (starting on page 30). It imposes new business reporting requirements and severe penalties -- a $10,000 fine and imprisonment of up to five years. The reporting requirements include alternate tax calculations and apply to manufacturers, companies with a related group, public companies, partnerships, S corporations, estates and even individuals who file Schedule C (see page 32). This gives the comptroller the authority to require additional reporting for any of these taxpayers for purposes of studying Maryland's tax system.

While listening to the Senate deliberations of this bill, it was clear that many of the 47 senators did not have an advanced copy or plain-English recap prior to the hearing. They did receive them last night to review before voting this morning at 10 a.m.