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Luedtke: Personal property tax bill ‘doesn’t hurt anyone’

The hearing for a bill that would give local governments the option to provide personal property tax credits to new and small businesses was opened and closed within a few minutes Tuesday afternoon as its sponsor, Del. Eric G. Luedtke, D-Montgomery County, spoke in favor of the bill before the House Ways and Means Committee.

“It should be a very easy bill for this committee to pass, because it doesn’t hurt anyone,” Luedtke said.

The Personal Property Tax-Credit for New or Small Businesses, if passed, would give county governments and Baltimore City the option to offer a property tax credit of up to 100 percent against the county or municipal corporation property tax imposed on property owned or leased by a business less than two years old or which employs a maximum of 15 people.

Local governments would also have the flexibility to decide on the amount and duration of the tax credit and include any additional eligibility requirements.

Legislative analysts say the tax credit could be potentially “meaningful” to small businesses.

Currently, a tax is imposed and collected by local governments for business-owned personal property. That includes business property such as furniture, fixtures, office and industrial equipment, machinery, tools, supplies, inventory and any other property not classified as real property, analysts said.

The largest categories of personal property that may be exempt from the tax are commercial inventory, manufacturing and research and development inventory, and manufacturing and research and development machinery. Twenty-one counties offer exemptions for 100 percent in all of those categories. Five of those counties — Frederick, Garrett, Kent, Queen Anne’s, and Talbot — have chosen to exempt all business personal property from county taxation, analysts said.

The statewide assessable base for business personal property for this fiscal year is $12.3 billion. Montgomery County has the highest base among counties that impose the tax at $2.3 billion. Somerset County has the lowest base at $34.1 million. Baltimore has the highest personal property tax rate at $5.62 and Worcester County has the lowest at $2.09.

Legislative analysts predict that the counties would see a slight dip in revenue in the beginning of fiscal 2018, which is when the measure would take effect if enacted. The decrease would depend on the amount of businesses that are eligible for the tax credit and the value of the personal property owned by eligible businesses. For example, if eligible businesses in a county make up 5 percent of the business personal property assessable base, property tax revenues in that county would potentially decrease by $17.9 million per year beginning in fiscal 2018, analysts said.

“This estimate is based on the fact that the vast majority of the assessable base for business personal property in Maryland is owned by relatively large entities,” analysts said.

However, analysts do not think the tax credit would result in a “sizable reduction” in the overall business personal property base. Analysts found that less than 20 percent of personal property accounts had an assessed value of greater than $50,000. Those accounts represented more than 90 percent of the total assessable base for business personal property. On the other side, 71.7 percent of personal property accounts in Maryland had an assessed value of $25,000 or less but represent around 5 percent of the total assessable base for business personal property.

“It’s a good way to promote small biz growth and job growth,” said Luedtke.

The bill has bipartisan sponsors, including Dels. Jason C. Buckel, D-Alleghany County; Sheila E. Hixson, D-Montgomery County; Susan W. Krebs, R-Carroll County; Haven Shoemaker, D-Carroll County; and Jimmy Tarlau, D-Prince George’s County.