SB 258
Department of Legislative Services
Maryland General Assembly
2021 Session
FISCAL AND POLICY NOTE
First Reader
Senate Bill 258 (Senator Patterson, et al.)
Budget and Taxation
Property Tax Exemption - Disabled Veterans
This bill expands the eligibility criteria of a property tax exemption for specified disabled
veterans and surviving spouses of veterans to include veterans with at least an
80% service-connected disability. Under current law, veterans must have a
100% service-connected disability to be eligible for the property tax exemption. The bill
takes effect June 1, 2021, and applies to taxable years beginning after June 30, 2021.
Fiscal Summary
State Effect: Annuity Bond Fund (ABF) revenues decrease by a potentially significant
amount beginning in FY 2022. Under one set of assumptions, special fund revenues may
decrease by approximately $1.0 million annually beginning in FY 2022. This decrease may
require either (1) an increase in the State property tax rate or (2) a general fund
appropriation to cover debt service on the State’s general obligation bonds. Future year
revenues reflect a constant number of exemptions being granted and stable assessments.
Local Effect: Local property tax revenues decrease by a potentially significant amount
beginning in FY 2022. Under one set of assumptions, local property tax revenues may
decrease by approximately $10.5 million annually beginning in FY 2022.
County expenditures are not affected.
Small Business Effect: None.
 Analysis
Current Law: The real property owned by disabled veterans, as their legal residence, is
exempt from taxation, if specified requirements are met. A disabled veteran is an individual
who is honorably discharged or released under honorable circumstances from active
service in any branch of the U.S. Armed Forces. To qualify for the tax exemption, the
disabled veteran must have a 100% service-connected disability rating. Real property
owned by the surviving spouse of a disabled veteran and the surviving spouse of an
individual who died in the line of duty while in active military, naval, or air service of the
United States is exempt from taxation. In addition, a home owned by the surviving spouse
of a veteran of the U.S. Armed Forces who receives Dependency and Indemnity
Compensation from the U.S. Department of Veterans Affairs is eligible for a property tax
exemption under specified circumstances.
Major Property Tax Exemptions
The major exemptions from the local property tax are local, State, and federal government
property; property of religious organizations; cemeteries and mausoleums; nonprofit
hospitals; portions of continuing care facilities for the elderly; property of charitable,
fraternal, and educational institutions; property used for national defense or military
housing; property of national veterans’ organizations; homes of disabled veterans and the
blind (partial exemption), or a surviving spouse of either; property of historical societies
and museums; property owned by certain taxpayers engaged in building, operating, and
managing nonprofit multifamily units, subject to local government approval; and property
owned by fire companies, rescue squads, community water corporations, and housing
authorities.
A comprehensive overview on exempt property in Maryland can be found in Chapter 3 of
the Guide to the Property Tax Structure in Maryland.
Fiscal Impact of Current Exemption
For fiscal 2020, 12,386 property owners received a property tax exemption for being a
disabled veteran, a surviving spouse, or a disabled active duty service member, and the
assessment for these properties was approximately $4.1 billion. The associated State
revenue loss from these exemptions total approximately $4.6 million, based on a
$0.112 State property tax rate. All State property tax revenues are credited to a special
fund, the ABF, dedicated exclusively to paying the debt service on State general obligation
bonds. Local governments generally have the authority to set their own property tax rates.
Based on the average combined county-municipal property tax rate, the projected local
revenue loss from the current exemption could total approximately $50 million.
SB 258/ Page 2
State Fiscal Effect: ABF revenue will decrease by a potentially significant amount
beginning in fiscal 2022 as a result of expanding the exemption for disabled veterans and
surviving spouses. The amount of the revenue decrease depends on the number of eligible
disabled veterans and surviving spouses and the assessed value of each exempt property.
For illustrative purposes only, special fund revenues may decrease by approximately
$1.0 million annually beginning in fiscal 2022 as a result of the exemption provided by the
bill. The estimate is based on the following:
 372,500 veterans living in Maryland;
 19.7% of veterans have a service-connected disability rating, with 5.7% having a
disability rating of 70% or higher;
 12,386 property owners received a property tax exemption for being a disabled
veteran, a surviving spouse, or a disabled active duty service member in fiscal 2020;
 under current law, a disabled veteran must have a 100% service-connected
disability rating to receive the property tax exemption;
 the average taxable assessment (after the homestead property tax credit) for
residential property is $227,870 for State tax purposes and $221,937 for county tax
purposes; and
 67.5% homeownership rate in Maryland.
Debt service payments on the State’s general obligation bonds are paid from the ABF.
Revenue sources for the fund include State property taxes; premium from bond sales; and
repayments from certain State agencies, subdivisions, and private organizations. General
funds may be appropriated directly to the ABF to make up any differences between the
debt service payments and funds available from property taxes and other sources.
To offset the reduction in State property tax revenues, general fund expenditures could
increase in an amount equal to the decrease in ABF revenues, or the State property tax rate
would have to be increased in order to meet debt service payments. This assumes that the
ABF does not have an adequate fund balance to cover the reduction in State property tax
revenues.
Local Fiscal Effect: Based on the assumptions and data used above and an average local
property tax rate of $1.198 per $100 of assessment, local government revenues may
decrease by approximately $10.5 million annually beginning in fiscal 2022. The impact on
revenues may vary depending on the actual number of additional exemption recipients,
where each recipient resides, and the assessed value of each property.
SB 258/ Page 3
 Additional Information
Prior Introductions: SB 349 of 2020 received a favorable report from the Senate Budget
and Taxation Committee and passed the Senate. The bill was referred to the House Ways
and Means Committee, but no further action was taken. Its cross file, HB 708 received a
hearing in the House Ways and Means Committee, but no further action was taken. SB 357
of 2019 received a hearing in the Senate Budget and Taxation Committee, but no further
action was taken. Its cross file, HB 1396 was assigned to the House Rules and Executive
Nominations Committee. SB 459 of 2018 received a hearing in the Senate Budget and
Taxation Committee, but no further action was taken. SB 132 of 2017 received a hearing
in the Senate Budget and Taxation Committee, but no further action was taken. Its
cross file, HB 938, received a hearing in the House Ways and Means Committee, but no
further action was taken.
Designated Cross File: None.
Information Source(s): Maryland Association of Counties; Department of Veterans
Affairs; State Department of Assessments and Taxation; Department of Legislative
Services
Fiscal Note History: First Reader - January 12, 2021
rh/hlb
Analysis by: Michael Sanelli Direct Inquiries to:
(410) 946-5510
(301) 970-5510
SB 258/ Page 4


Statutes affected:
Text - First - Property Tax Exemption - Disabled Veterans: 7-208 Tax Property