On April 8, 2013, the Maryland legislature passed a bill that, following the Governor’s signature (which is expected), will now extend a real property transfer and recordation tax exemption to certain transfers among affiliated limited liability companies. Currently, Sections 12-108(p) and 13-207(a)(9) of the Maryland Code provide an exemption from real property transfer and recordation taxes for certain transfers among only affiliated corporations. Limited liability companies do not qualify for the exemption. The new legislation changes the term “corporation” in those provisions to “business entity,” which is defined for these purposes as a limited liability company or a corporation (but not a partnership). The exemption (when enacted) is applicable to the following three types of transfers:
- a transfer of real property between a parent business entity and its wholly owned subsidiary business entity or between 2 or more subsidiary business entities wholly owned by the same parent business entity. To qualify, (a) the parent business entity must be an original owner of the subsidiary business entity, or (b) it must have become an owner through gift or bequest from an original owner of the subsidiary business entity, in either event, for no consideration, nominal consideration or consideration that comprises only the issuance, cancellation, or surrender of the ownership interests of a subsidiary business entity;
- a transfer of real property resulting from a corporate reorganization described in § 368(a) of the U.S. Internal Revenue Code (which provision is not applicable to limited liability companies); or
- a transfer of real property from a subsidiary business entity to its parent business entity for no consideration, nominal consideration or consideration that comprises only the issuance, cancellation, or surrender of the subsidiary’s ownership interest. To qualify for this type of transfer, (a) the parent business entity must have previously owned the real property, (b) the parent business entity must have owned the ownership interest of the subsidiary for at least 18 months or (c) the parent business entity must have acquired the ownership interest when the subsidiary business entity was already in existence and had owned the real property for a period of at least 2 years prior to the acquisition.
Once signed by the Governor, the amended law will have an effective date of July 1, 2013 for all transfers occurring thereafter.