Maryland Laws Update for Financial Services

• CONSUMER PROTECTION

• CORPORATE/BUSINESS

• DEBT COLLECTION

• ECONOMIC DEVELOPMENT

• EMPLOYMENT

• ESTATES AND TRUSTS

• FINANCIAL INSTITUTIONS

• INSURANCE

• LICENSED ACTIVITIES

• REAL PROPERTY

• TAXES

• TAX SALES

Contacts

Please call or email us if you would like more information about these new laws and their impact on your business.

• Charles R. Bacharach, 410-576-4169
• Andrew D. Bulgin, 410-576-4280
• Douglas T. Coats, 410-576-4002
• Sudipta Das, 410-576-4048
• D. Robert Enten, 410-576-4114
• Robert A. Gaumont, 410-576-4007
• Ned T. Himmelrich, 410-576-4171
• Laura L. Johnson, 410-576-4065
• Christopher T. Magette, 410-576-4191
• Bryan M. Mull, 410-576-4227
• David S. Musgrave, 410-576-4194
• Christopher R. Rahl, 410-576-4222
• Peter B. Rosenwald, II, 410-576-4193
• Jason F. Weintraub, 410-576-4042

Maryland Laws Update

CONSUMER PROTECTION

Civil Actions — Financial Exploitation of Susceptible Adults and Older Adults (Maryland SAFE Act)
SB 327 (Chapter 311)
(effective October 1, 2021)

This law expands protections for older and vulnerable adults. This law adds definitions for “susceptible” and “older” adults and prohibits broad categories of financial exploitation. The law provides a new cause of action for financial exploitation with remedies similar to those in Maryland’s Consumer Protection Act. This new law exempts state or federal banks, trust companies, credit unions, or savings and loan associations (or any affiliates of such institutions).

CORPORATE/BUSINESS

Corporations and Real Estate Investment Trusts — Miscellaneous
HB 781/SB 263 (Chapters 779 and 780)
(effective October 1, 2021)

This law makes various changes to laws governing corporations and real estate investment trusts (REITs). Crucially, the new law confirms that the charter or bylaws of a Maryland corporation may require an internal corporate claim to be brought only in courts sitting in one or more specified jurisdictions, but the new law requires those jurisdictions to include, at a minimum, the State of Maryland. In addition, likely in response to the challenges presented by the COVID-19 pandemic, this law clarifies that Maryland corporations and REITs may hold stockholders’ meetings partially or solely by means of remote communication if certain conditions are satisfied. The law also eliminated the requirement that the board of directors provide a physical meeting place at the request of a stockholder in the case of a meeting to be held solely by remote communication. Currently, Maryland law does not expressly permit a meeting to be held partially by remote communication.

Corporate Diversity — Board, Executive Leadership and Mission
HB 1210 (Chapter 795)
(effective July 1, 2022)

This law will require commercial enterprises (including not-for-profit entities) that are registered to do business in the State of Maryland and that want to qualify for a “state benefit” to demonstrate that their boards of directors or executive leadership teams are represented by underrepresented communities or that their missions support underrepresented communities. The term “underrepresented community” means a community whose members self-identify as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, Native Alaskan or one or more of these racial or ethnic groups. A state benefit includes:

• A state capital grant funding totaling $1 million or more in a single fiscal year;
• State tax credits totaling $1 million or more in a single fiscal year; or
• The award of a state contract with a total value of $1 million or more.

These requirements will not apply to sole proprietorships, single-member limited liability companies, privately held companies with at least 75% family ownership and entities with annual operating budgets or annual sales of less than $5 million that do not qualify for a state benefit. A commercial enterprise subject to these requirements must include specified diversity data in the annual reports that it files with the State Department of Assessments and Taxation of Maryland (SDAT) each year. Implementation of the legislation requires rulemaking by the Maryland Department of Commerce and the Office of Small, Minority, and Women Business Affairs.

Foreign Corporations — Resident Agents — State Department of Assessments and Taxation
SB 320 (Chapter 107)
(effective October 1, 2021)

Before a corporation domiciled outside of Maryland engages in interstate, intrastate or foreign business in Maryland, it must register or qualify with the State Department of Assessments and Taxation of Maryland (SDAT) as a foreign corporation. The registration or qualification document must identify the name and address of the foreign corporation’s resident agent in Maryland (i.e., the person authorized to accept service of process in Maryland on behalf of the foreign corporation). Chapter 107 permits a foreign corporation to appoint SDAT as its resident agent. Prior to this law, a foreign corporation had to find a private party who resides in Maryland, such as an attorney or service entity, to serve as its resident agent (and sometimes pay a fee for that service). The legislation also permits SDAT to act as a foreign corporation’s resident agent for as long as the corporation is subject to suit in Maryland if the corporation is doing business without a resident agent or has a resident agent that cannot be found or served with the exercise of reasonable diligence. Oddly, Chapter 107 does not apply equally to other foreign entities, like limited liability companies, partnerships or trusts.

Practice Pointer: Given the operational challenges that SDAT seemed to experience during the COVID-19 pandemic and the resulting delays in processing filings, foreign corporations might want to think twice before choosing SDAT as their resident agent. In our experience, attorneys who provide Maryland legal advice to foreign corporations are willing to serve as a resident agent at no cost.

DEBT COLLECTION

Health Facilities — Hospitals — Medical Debt Protection
HB 565/SB 514 (Chapters 770 and 769)
(effective June 1, 2021, and January 1, 2022, for certain provisions)

This law seeks to address hospitals’ financial assistance and debt collection policies with respect to debtors eligible for certain payment accommodations. The law requires hospitals’ financial assistance policies to account for changes in the debtor’s circumstances in the months after receiving the initial bill.

The law also imposes new requirements on hospitals’ debt collection practices. Among other things, a hospital may not:

• Request a lien on the patient’s residence;
• Take action that would cause a body attachment;
• Request a wage garnishment for certain debtors;
• Make claims against certain deceased debtors’ estates;
• File an action against a debtor until at least 180 days have elapsed from the furnishing of the initial bill; or
• File an action against a debtor before determining whether that debtor is eligible for certain financial accommodations.

The law also requires that a hospital send a written notice of its intent to file an action against a debtor at least 45 days before doing so. The notice must include certain information, including the debtor’s options for payment accommodations. The law also requires that a complaint to collect a debt must include:

• An affidavit with specified information;
• A copy of the original and most recent hospital bill;
• A statement of the amount due;
• A copy of the notice of intent to file an action; and
• A copy of the patient’s signed certified mail acknowledgement of receipt of the written notice of intent to file an action if received by the hospital.

Notably, if a hospital delegates collection to a debt collector, the hospital must require a debt collector to be jointly and severally responsible for meeting the hospital debt collection requirements.

Practice Pointer: Debt collectors should work closely with their hospital clients to ensure that their policies for these accounts align with the new law’s requirements.

ECONOMIC DEVELOPMENT

Economic Development — Small Business Financing — Loan Loss Reserve (Maryland Capital Access Program)
HB 829 (Chapter 704)
(effective October 1, 2021)

This law establishes a Capital Access Program in the Maryland Department of Commerce. The program is intended to increase funding availability for certain small businesses that may otherwise have difficulty securing funding. Under the new program, lenders may register loans to certain small businesses with the Department of Commerce and thereafter establish a loan loss reserve account. The account is funded with a deposit by the lender of at least 2% of the loan amount and a deposit by the borrower between 0% and 7% of the loan amount. The Department of Commerce contributes a deposit to the loan loss reserve account that matches the sum of the lender’s and borrower’s deposits. Eligible loans cannot exceed $250,000 and their repayment terms cannot exceed 10 years.

EMPLOYMENT

Leave with Pay — Bereavement Leave
HB 56/SB 473 (Chapters 573 and 574)
(effective October 1, 2021)

Maryland’s Flexible Leave Act, which applies to employers of 15 or more employees, permits employees to use any employer-provided “leave with pay” to cover an absence occasioned by the illness of a child, spouse or parent. The new law expands the Flexible Leave Act by allowing employees to also use their earned paid leave for bereavement following the death of a child, spouse or parent. Significantly, while most employers limit paid bereavement leave to a week or less, there is no limit on the amount of an employee’s accrued paid leave that can be used for bereavement purposes under this law.

Employers are prohibited from retaliating against an employee who exercises this right to bereavement leave or against an employee who files a complaint or testifies against or assists in an action brought against an employer for a violation of this statute.

Practice Pointer: Employers that currently provide paid bereavement leave should examine their practices in light of this law. In particular, employers must decide whether to continue offering the separate paid bereavement benefit in light of the law. In addition, if the employer’s existing policy allows paid leave following the death of persons other than a parent, spouse or child, the employer must consider whether to allow the expanded leave rights to apply to such persons.

Employment Discrimination — Time for Filing Complaints
HB 290/SB 455 (Chapters 201 and 202)
(effective October 1, 2021)

This law increases the time that an individual can file a complaint with the Maryland Commission on Civil Rights (MCCR) alleging any unlawful employment practices other than harassment. Currently, employees have only six months to file a complaint with the MCCR. Under the amended law, employees will have up to 300 days to file a complaint. Employees have up to 300 days to file a complaint with the U.S. Equal Employment Opportunity Commission and most claims filed with one agency are cross-filed with the other. The amendment will bring the filing deadline for the state and federal agencies in line with each other.

This is the second time in recent years that the Maryland General Assembly has extended the time to submit complaints to the MCCR. In 2019, in response to the national #MeToo movement and complaints of harassment within the Maryland legislature, the General Assembly extended the time to file complaints alleging harassment from six months to two years.

Per the Maryland Department of Legislative Services’ analysis, this latest extension is unlikely to lead to a significant number of additional complaints.

Practice Pointer: Employers should ensure that they are maintaining personnel records, including complaints of discrimination and any investigations of such complaints, for at least three years. These documents are essential to any successful defense of an employer’s conduct in front of the MCCR. Human resource professional and managers should review their company’s record retention procedures to ensure vital documents are maintained.

Labor and Employment — Employment Standards During an Emergency (Maryland Essential Workers’ Protection Act)
HB 581 (Chapter 736)
(effective upon enactment)

This emergency law, which was effective immediately upon enactment, is intended to ensure greater benefits and protections for essential workers during a “catastrophic health emergency” that is the subject of an executive proclamation declared by the governor and is related to a communicable disease. It applies only to employers in industries identified by the governor or a federal or state agency “as critical to remain open during” the emergency. “Essential workers” are defined as individuals who perform work for an essential employer during the emergency that cannot be performed remotely or is required to be completed at the work site and who provide services the employer determines to be essential or critical to its operations.

Governor Lawrence Hogan, Jr. issued a proclamation declaring a catastrophic health emergency on March 5, 2020. On June 15, 2021, the Governor announced that most remaining rules and orders issued by the state relating to the pandemic will end July 1, 2021; however, the state of emergency will not expire until August 15, 2021. As a result, the essential worker law will be activated during a brief period and it is unknown whether the Maryland Department of Labor (MDL) will go to the effort of issuing regulations as required by the law.

The final version of the legislation was greatly reduced from the original proposal. Most significantly, the requirement that an employer provide hazard pay was dropped. Despite its reduced scope, the final law imposes significant burdens on covered employers. Among other requirements, essential employers must:

• Provide safe working conditions during an emergency, including providing, subject to availability, the necessary amounts of personal protective equipment at no cost to essential workers;
• Adopt, maintain and post written protocols to ensure essential workers’ access to information regarding the applicable safety standards in effect during the emergency;
• Notify the Maryland Department of Health (MDH) of a positive case of COVID-19 within 24 hours if an essential worker contracts the communicable disease at a worksite and pay for testing if the worker’s health insurance does not cover the test;
• Take proactive steps to minimize the risk of transmission of the communicable disease that created the emergency, including potentially paying for testing; and
• Not knowingly misclassify an essential worker to avoid this law.

The law also provides essential employees the right to refuse to perform assigned tasks. Essential employees are protected from discharge or other discrimination for refusing a task.

Essential employers must also provide paid “public health emergency leave,” which is in addition to any other earned leave allotment (e.g., vacation, sick, paid time off, etc.), to employees who are absent for specified COVID-19 related reasons. The paid leave requirement applies only if the federal or state government provides funding that can be used for the public health emergency leave. In April 2020, Congress provided funding for a mandatory coronavirus-related leave program through federal tax credits under the Families First Coronavirus Response Act. That mandatory program sunset on December 31, 2020, but has been extended on a voluntary basis under the American Rescue Plan Act of 2021 (ARPA). It is unclear whether the ARPA program under which covered employers can voluntarily elect to provide leave benefits through September 30, 2021, in return for tax credits triggers the paid public health emergency leave requirement. Employers will have to wait for guidance from MDL concerning this issue.

Finally, if the federal Occupational Safety and Health Administration (OSHA) adopts an emergency temporary standard related to COVID-19, the law requires the MDL to adopt that standard. If OSHA does not adopt such a standard, the law requires the MDL to adopt its own emergency temporary standard for the COVID-19 pandemic. OSHA issued an emergency temporary standard on June 10, 2021, but the standard is limited primarily to hospitals, nursing homes and other non-ambulatory health care settings. Employers will need to await guidance from the MDL to determine if that limited standard will satisfy the requirement of a federal standard under the new Maryland law.

Practice Pointer: This is a complex new law that will require many employers to institute workplace changes. In addition, many aspects of the law raise questions that need to be addressed through guidance and regulation. The MDL is required to issue such regulations “as soon as practicable” but none have yet been issued. As such, employers should reach out to their employment counsel for a better understanding of any new requirements. While some of these procedures will end once the COVID-19 pandemic is behind us, others will remain in place even after the emergency.

ESTATES AND TRUSTS

Estates and Trusts — Guardian of Property of Minor or Disabled Person — Prohibition on Distribution or Disbursement
HB 1000 (Chapter 511)
(effective October 1, 2021)

This law repeals and reenacts Estates and Trusts Article §13-214. The law safeguards the property of any minor or disabled person from wrongful conduct by the guardian of such property. A guardian of property for a minor or disabled person may normally distribute or disburse property without court authorization or confirmation. However, distribution or disbursement may not occur when the guardian is not a family member, and the distribution or disbursement would financially benefit a family member of the guardian (without reasonable compensation and reimbursement for expenses as authorized). Any such wrongful distribution or disbursement will expose the guardian to liability for breach of their fiduciary duty to the minor or disabled person.

A guardian may apply income or principal from the estate as needed in the following circumstances:

• For clothing, support, care, protection, welfare and education of the minor and/or disabled person, or for rehabilitation of the disabled person;
• For the benefit of persons legally dependent upon either the minor or disabled person;
• With approval from the court for the benefit of persons supported by the disabled person; or
• To establish or fund a special needs trust (in which the trustee is subject to the jurisdiction of the court) or a pooled asset special needs trust account approved by the attorney general of the state in which the minor or disabled person resides.

When a minor reaches the age of majority, the guardian must distribute the estate to the former minor unless they are established as disabled. If a disabled person is no longer found to be disabled by either the guardian or a court under Estates and Trust Article §13-221, then the guardian shall distribute the estate to the formerly disabled person.

Wills, Powers of Attorney and Advance Directives — Electronic Execution
HB 1261 (Chapter 686)
(effective October 1, 2021, retroactive to March 10, 2020)

Under this law, wills or powers of attorney (POA) are now allowed to be electronically executed or remotely witnessed. To be effective, an electronically executed or remotely witnessed will or POA must satisfy the following:

• At the time of signing, the testator and witnesses must be in either the physical presence or electronic presence of one another and a supervising attorney (who may also be a witness).
• At the time of the signing, the testator must be a resident of or physically be located in the state that will hold jurisdiction over the will or POA.
• Any witness in the electronic presence of the testator when signing and attesting to the instrument must be physically located in the United States at the time of signing and must also be a resident of the United States.
• The testator and witnesses must each sign the same instrument or any counterpart thereof.
• The supervising attorney must create a certified will or POA with an included paper version of all pages of the instrument and an original paper certification by the supervising attorney. The original certification must state the date on which the supervising attorney observed the signing and ensures that the attorney took reasonable steps to verify the following: that the signatures are original signatures; the identities of each witness and testator; and all parties involved were physically present in the United States at the time of signing and attestation.
• A certified will created by a supervising attorney must also include acknowledgment of the testator and the affidavits of the attesting witnesses before a notary public under seal.

“Electronic presence” means two or more individuals who can communicate in real time using electronic audiovisual means to the same extent as if they were in each other’s physical presence.

Estates and Trusts — Wills — Custodianship
HB 1266 (Chapter 513)
(effective October 1, 2021)

This law adds to Estates and Trusts Article §§ 4-201, 4-204 and 4-205. Under this law, a person having custody of a will (and who is not the testator of the will) has a duty to maintain custody of the will. As such, without authorization by the testator, the custodian may not:

• Destroy or dispose of the will;
• Disclose the contents of the will to any other person; or
• Deliver the will to anyone other than the testator.

The custodian, testator or testator’s agent may deposit the will for safekeeping to the register of the county in which the testator resides or resided when the will was executed. A custodian in actual custody of the will shall deliver the will upon demand to:

• The testator;
• A court-appointed guardian of the testator’s property; or
• An attorney-in-fact acting under a durable power of attorney signed by the testator.

After the death of the testator, a custodian in possession of the will shall deliver it to the appropriate county’s register for administration. Willful failure to deliver the will may result in liability to any person aggrieved for damages sustained by such failure or refusal.

Attorneys who have custody of a will may dispose of the will in certain circumstances, including:

• If they are licensed to practice within the state at issue;
• At least 25 years have passed since the will’s execution date;
• The attorney cannot ascertain the address of the testator after reasonable inquiry; and
• The will is not subject to any contracts concerning specific devises or revocations.

The attorney must then still file the will with the register of the county in which the will was executed and submit an affidavit certifying the above conditions were met. The attorney may also destroy the will without notice in the instance that the will has not been offered for probate within 10 years of the testator’s death. Attorneys or registers who dispose of a will in accordance with this law are not liable to the testator or any other person for damages as a result of the disposal.

FINANCIAL INSTITUTIONS

Financial Institutions — Security Questions and Measures
HB 471/SB 185 (Chapters 409 and 410)
(effective October 1, 2021)

This law applies to financial institutions of the type supervised by the Maryland Commissioner of Financial Regulation whether or not state chartered. If a financial institution requires a customer to provide an answer to a security question to verify the identity of the customer in connection with the provision of any account, the financial institution must allow the customer to choose from at least two security question options to satisfy the required security verification step.

Practice Pointer: Financial institutions will need to adjust their online account access procedures to provide at least two security question choices for any security verification steps where a security question is used in the customer verification process.

Financial Institutions — Commissioner of Financial Regulation — Credit Union Power
HB 1004 (Chapter 427)
(effective July 1, 2021)

Maryland law permits Maryland-chartered credit unions to seek approval from the Maryland Commissioner of Financial Regulation to engage in activities in which a federally chartered credit union may engage. This new law allows Maryland-chartered credit unions to engage in such activities beginning 45 days after providing a specified notice of the proposed activities to the Commissioner of Financial Regulation unless the commissioner determines that the proposed activities would:

• Adversely affect the safety and soundness of the credit union;
• Be detrimental to the welfare of Maryland’s economy; or
• Be detrimental to the public interest or credit unions in general.

Financial Institutions — Determination of Creditworthiness — Evaluation Rules and Alternative Methods
HB 1213 (Chapter 426)
(effective October 1, 2021)

This law was created to help individuals who do not fit traditional mortgage underwriting guidelines. The law applies to Maryland banks, trust companies, savings banks, credit unions, savings and loan associations, community development financial institutions, and any credit grantor regulated by the Maryland Commissioner of Financial Regulation under Title 11 of the Financial Institutions Article (covering nondepository licensees, such as installment loan, sales finance and mortgage lender licensees). The law requires covered entities to follow applicable federal Equal Credit Opportunity Act application evaluation requirements including the consideration of other verifiable alternative indications of creditworthiness provided by an applicant for a primary residential mortgage loan or other “extension of credit.” Other alternative indications of creditworthiness include:

• History of rent or mortgage payments;
• History of utility payments;
• School attendance;
• Work attendance; or
• Other alternative data that is verifiable and presented by an applicant.

Practice Pointer: It is probably unlikely that applicants will furnish the verifiable information specified in the legislation. In addition, because the Equal Credit Opportunity Act does not include requirements that this information be considered, it is questionable just what the impact of this legislation will be. Financial institutions should expect guidance and/or regulations from the Commissioner of Financial Regulation concerning implementation of the new law.

INSURANCE

Insurance — Impaired Entities — Delinquency Proceedings
HB 504/SB 458 (Chapters 765 and 766)
(effective June 1, 2021)

This law, which aligns Maryland with 19 other states, enables a federal home loan bank (FHLB) to exercise its rights in collateral pledged by an insurer-member in the event an insurer-member becomes subject to a delinquency proceeding before the Maryland Insurance Administration. The law also sets forth certain actions that a FHLB must take in response to a receiver’s request in connection with an insurer-member’s delinquency proceeding. This change adds certainty to the delinquency process for an FHLB, thereby enabling insurer-members to secure better financing terms with an FHLB.

LICENSED ACTIVITIES

Financial Institutions — Commissioner of Financial Regulation — Money Transmissions
SB 219 (Chapter 100)
(effective October 1, 2021)

This law expands the type of “money transmission” activities that will require a license from the Maryland Commissioner of Financial Regulation. This law incorporates federal law definitions of “currency” and expands Maryland money transmission activities to include engaging in the business of issuing, selling, transferring or facilitating the transfer of “prepaid access,” currency, funds or other value that substitutes for currency. The law defines prepaid access to include any access to funds or the value of funds that have been paid in advance and can be retrieved or transferred though an electronic device or vehicle, such as a card, code, electronic serial number, mobile identification or personal identification. The law also provides for the licensing of each self-service financial kiosk where a consumer may obtain money transmission services.

Commissioner of Financial Regulation — Licensing of Nondepository Institutions — Elimination of Paper Licenses
SB 251 (Chapter 101)
(effective October 1, 2021)

This law seeks to streamline the licensing process for nondepository financial institutions, such as collection agencies, credit services businesses, mortgage lenders and originators, sales finance business, and money transmission businesses. Prior to this law, licensees would have to apply for and obtain a paper license through the Maryland Office of the Commissioner of Financial Regulation (OCFR) and an electronic license issued by the Nationwide Multistate Licensing System (NMLS). This law eliminates the need to obtain a paper license through the OCFR and the OCFR will rely on the NMLS instead.

REAL PROPERTY

Landlord and Tenant — Residential Tenants — Access to Counsel
HB 18 (Chapter 746)
(effective October 1, 2021)

This law seeks to increase residential tenants’ access to legal counsel in connection with eviction proceedings. The law establishes the Access to Counsel in Evictions Program to provide certain tenants in the state with access to legal representation in eviction proceedings. The goal is for the legal representation program to be fully implemented by October 1, 2025, but this will depend on the speed with which the program is funded. The law also creates a task force to evaluate the program.

The law provides for certain procedural provisions for failure to pay rent actions. Before filing a failure to pay rent action, the landlord must provide written notice of the landlord’s intent to file such a claim if the tenant does not cure within 10 days after the notice is provided. The notice must be in a form created by the judiciary and occurs once the notice is:

• Sent by first-class mail;
• Affixed to the door of the premises; or
• If elected by the tenant, delivered by either electronic mail message, text message or an electronic tenant portal.

Practice Pointer: The legislature is signaling an increased focused on protecting residential tenants. While funding remains an issue for implementation of the Access to Counsel in Evictions Program, landlords may expect continued focus on evictions and further efforts to protect tenant’s interest in their residence.

Landlord Tenant — Nonrenewal of Lease — Notice Requirements
SB 401 (Chapter 803)
(effective October 1, 2021)

This law requires specific notices by landlords in situations where the landlord does not intend to renew a residential lease. These leases include those executed on or after October 1, 2021, and those executed before October 1, 2021, where the term expires and a tenancy is created after the stated term — e.g., month-to-month tenancy — on and after October 1, 2021. This law applies to tenancies created at expiration of a stated lease term (including year-to-year, month-to-month and week-to-week tenancies) and requires advance written notice to tenants varying from seven to 180 days, based on the lease term. This law does not apply to properties:

• In Baltimore City or Montgomery County;
• Owned by a landlord who offers five or more residential dwelling units for rent in Maryland; or
• Where foreclosure proceedings have been initiated.

Practice Pointer: Financial institutions that own and lease property subject to the new law should adjust procedures to provide the specified advance notice of intent not to renew.

TAXES

Income Taxation — Internal Revenue Code Amendments Act — Decoupling
HB 495 (Chapter 763)
(effective July 1, 2021)

This law changes the one-year decoupling provision under Maryland’s personal and corporate income tax by expanding its application to any change in the Internal Revenue Code (IRC) that reduces state revenues by at least $5 million in any taxable year that precedes the calendar year of enactment. Prior to this change, the General Assembly could decide whether an IRC amendment would affect Maryland taxable income in the calendar year of the amendment’s enactment, but that did not extend to previous tax years. This law grants the General Assembly greater discretion to determine how IRC amendments affect Maryland revenues.

Taxes — Whistleblower Reward Program and Statute of Limitations for Tax Collections
HB 804 (Chapter 515)
(effective October 1, 2021)

This law creates a whistleblower reward program to be administrated by Maryland’s comptroller and extends the statute of limitations for tax collections to 10 years, applied retroactively. The amount of the whistleblower reward is in the sole discretion of the comptroller after consideration of statutorily required factors. This program does not preempt or diminish the powers already granted to the comptroller or other Maryland officials to enforce the state tax code. Both parts of this law could significantly increase state revenues depending on the number of whistleblower actions and the number of additional delinquent taxpayers captured by the extended statute of limitations.

Income Tax — Subtraction Modification — First-Time Homebuyer Savings Accounts
HB 1178 (Chapter 512)
(effective July 1, 2021)

This law allows Maryland taxpayers to designate an account with a financial institution as a first-time homebuyer savings account. The designation allows taxpayers to claim a subtraction modification for the amount contributed to the account, up to $5,000. The taxpayer must use the funds within 15 years or else risk the funds becoming subject to ordinary income taxation. If the funds are used for any ineligible purpose, the funds are subject to ordinary income taxation and the taxpayer may be subject to penalties. This law is likely to result in state revenue decreases but is a significant benefit to Maryland residents.

Maryland Small Business Innovation Research and Technology Transfer Incentive Program — Alterations
HB 654 (Chapter 205)
(effective July 1, 2021)

This law requires the Maryland Small Business Innovation Research and Technology Transfer Incentive Program to prioritize funds for recipients engaged in research and development aimed at public health crises in Maryland. The recipient must remain eligible following the award or investment and must remain in Maryland for two years following the award or risk complete return of the funds. While this alteration amounts to a reallocation, rather than an increase, in funding, it represents a renewed focus on dealing with public health issues as they continue to arise in the future.

TAX SALES

Tax Sales — Owner-Occupied Residential Property
HB 252 (Chapter 75)
(effective June 1, 2021, and terminates June 30, 2023)

This law authorizes the governing body of a county or municipal corporation to withhold owner-occupied residential property from tax sale during the period from June 1, 2021, through June 30, 2023.

Practice Pointer: During the period this law is in effect, there may be dearth of owner-occupied residential property available in tax sales if the counties exercise their authority under this provision of the law.

Property Tax — Tax Sales — Homeowner Protection Program
HB 852 (Chapter 382)
(effective June 1, 2022)

This law establishes the Homeowner Protection Program, within the State Department of Assessments and Taxation (SDAT), and the Homeowner Protection Fund to support the program. The law requires the governor to include an appropriation of $750,000 in the annual budget bill in FY 2023, 2024 and 2025 to fund the program. The law prohibits a tax collector from selling, at a tax sale, the dwelling of a homeowner enrolled in the Homeowner Protection Program.

Practice Pointer: The purpose of the Homeowner Protection Program is to divert vulnerable homeowners from the private tax lien sale process into an alternative program with the primary purpose of:

• Minimizing tax collection costs to homeowners;
• Assisting homeowners to pay their taxes; and
• Allowing homeowners to remain in their homes.

To be eligiblefor the program, homeowners must reside in a dwelling that has an assessed value of $300,000 or less and have a combined income of $60,000 or less. SDAT may establish additional eligibility criteria and has been directed to establish a process to give priority for enrollment in the program to homeowners who are at least 60 years old or currently receiving certain disability benefits.The SDAT tax ombudsman may forgive all or part of the tax debt owed to the department by a homeowner enrolled in the program who faces particular hardship or has a special need.

Tax — Property — Tax Sales
HB 1182 (Chapter 87)
(effective July 1, 2021, and terminates June 30, 2023)

This law requires a county tax collector to sell a property at a tax sale if all of the following apply:

• The property is a vacant lot;
• The tax on the property is in arrears for at least eight years;
• The property consists of a narrow strip of land no more than 15 feet wide and is surrounded on two sides by adjoining property owned by the same property owner;
• The property prevents the owner of the adjoining property from connecting improvements that the adjoining property owner wishes to make to the adjoining property owner’s property; and
• The adjoining property owner petitions the tax collector to sell the property.

Practice Pointer: During the period that this law is in effect, adjoining landowners that meet the law’s requirements may force a tax sale of the adjoining property. This is narrow and limited law that supersedes the standard exceptions to tax sale requirements.