HB 1255
Department of Legislative Services
Maryland General Assembly
2021 Session
FISCAL AND POLICY NOTE
Third Reader - Revised
House Bill 1255 (Delegate Ivey)
Ways and Means Budget and Taxation
Homestead and Homeowners' Property Tax Credits - Access and Eligibility
This bill requires the State Department of Assessments and Taxation (SDAT) to create a
specified document regarding the homestead property tax credit for inclusion with
contracts of sale for residential real property. The bill also establishes certain reporting
requirements for SDAT. The bill takes effect June 1, 2021.
Fiscal Summary
State Effect: General fund expenditures increase by $18,000 in FY 2022 for SDAT to hire
a usability consultant. Reporting requirements can be handled with existing budgeted
resources. State revenues are not affected.
(in dollars) FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
Revenues $0 $0 $0 $0 $0
GF Expenditure 18,000 0 0 0 0
Net Effect ($18,000) $0 $0 $0 $0
Note:() = decrease; GF = general funds; FF = federal funds; SF = special funds; - = indeterminate increase; (-) = indeterminate decrease
Local Effect: None.
Small Business Effect: None.
 Analysis
Bill Summary:
Homestead Property Tax Credit
The bill requires SDAT to design a document concerning the homestead property tax credit
that must be presented to the buyer of residential property at the settlement for the property
by the person conducting the settlement. The document must include, in conspicuous type,
the following statement:
If you plan to live in this home as your principal residence, you may qualify
for the homestead property tax credit. The homestead property tax credit may
significantly reduce the amount of property taxes you owe.
The document must also include instructions on how to apply for the homestead property
tax credit online and a complete application for the credit and instructions on how to submit
the paper application to the department. SDAT must make the document available on its
website where it may be easily accessed by persons conducting settlements for residential
property.
The bill also requires a contract of sale for residential property to include the statement
described above as well as the website address of the document described above.
Reporting Requirements
SDAT must contract with a usability consultant to review all the public informational
materials and forms produced by the department concerning the homestead and
homeowners tax credits by August 1, 2021. The consultant must make recommendations
to SDAT, by December 1, 2021, regarding ways the department’s public informational
materials and forms concerning the homestead and homeowners’ property tax credits could
be made more usable, especially for socioeconomically diverse communities. The
consultant must make specific recommendations concerning (1) how the department’s
website and other written materials could more clearly and effectively communicate
information concerning the tax credits, including why it is important and beneficial for
homeowners to apply; (2) how to simplify and clarify the applications for the credits and
minimize errors by individuals completing the applications; and (3) the design of the
addendum document required for the homestead property tax credit.
SDAT must submit a report, by February 1, 2022, to the Senate Budget and Taxation
Committee and the House Committee on Ways and Means that includes (1) the
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recommendations submitted by the consultant and (2) the actions the department has taken
or plans to take to implement the recommendations.
In addition, during the 2021 legislative interim, SDAT and the Comptroller’s Office must
collaborate with the Ways and Means Committee on a study of (1) how to simplify the
definition of “gross income” for purposes of the homeowners’ property tax credit, such as
by using Maryland Adjusted Gross Income without increasing State expenditures by
changing how the amount of the credit is calculated and (2) ways that the homeowners’
property tax credit could be made automatically renewable for recipients of the credit.
Current Law:
Homeowners’ Property Tax Credit Program
The Homeowners’ Property Tax Credit Program is a State funded program that provides
credits against State and local real property taxation for homeowners who qualify based on
a sliding scale of property tax liability and income. Homeowners must apply to SDAT each
year in order to be eligible for the property tax credit. The application is available on the
department’s website and current applications may be filed beginning February 1, 2021,
through October 1, 2021. The fiscal 2022 State budget includes $64.0 million in funding
for the program. Approximately 45,000 individuals receive the property tax credit each
year. SDAT reports that the average homeowners’ property tax credit is approximately
$1,350.
Homestead Property Tax Credit
The Homestead Property Tax Credit Program (assessment caps) provides tax credits
against State, county, and municipal real property taxes for owner-occupied residential
properties for the amount of real property taxes resulting from an annual assessment
increase that exceeds a certain percentage or “cap” in any given year. The State requires
the cap on assessment increases to be set at 10% for State property tax purposes; however,
local governments have the authority to lower the cap. A majority of local subdivisions
have assessment caps below 10%: 21 counties in fiscal 2021.
Subject to submitting a specified application to SDAT and having the application approved,
the department must authorize and the State, a county, or a municipality must grant a
homestead property tax credit for a taxable year unless during the previous taxable year
(1) the dwelling was transferred for consideration to new ownership; (2) the value of the
dwelling was increased due to a change in the zoning classification of the dwelling initiated
or requested by the homeowner or anyone having an interest in the property; (3) the use of
the dwelling was changed substantially; or (4) the assessment of the dwelling was clearly
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erroneous due to an error in calculation or measurement of improvements on the real
property.
In addition, in order to qualify for the property tax credit, a homeowner must actually reside
in the dwelling by July 1, of the taxable year for which the property tax credit is to be
allowed. A homeowner may claim a property tax credit for only one dwelling.
State Fiscal Effect: General fund expenditures for SDAT increase by $18,000 in
fiscal 2022 to hire a usability consultant to conduct the required review.
SDAT advises that the current homestead property tax credit application is two pages. The
department notes that creating a new document for the homestead property tax credit can
be handled with existing resources. In addition, the reporting requirements for both SDAT
and the Comptroller’s Office can be handled with existing budgeted resources.
Additional Information
Prior Introductions: None.
Designated Cross File: None.
Information Source(s): Comptroller’s Office; Judiciary (Administrative Office of the
Courts); State Department of Assessments and Taxation; Department of Legislative
Services
Fiscal Note History: First Reader - March 1, 2021
rh/hlb Third Reader - March 29, 2021
Revised - Amendment(s) - March 29, 2021
Analysis by: Michael Sanelli Direct Inquiries to:
(410) 946-5510
(301) 970-5510
HB 1255/ Page 4


Statutes affected:
Text - First - Homestead and Homeowners' Property Tax Credits - Access and Eligibility: 14-117 Real Property, 9-105 Tax Property, 8-401 Tax Property, 14-812 Tax Property, 9-104 Tax Property
Text - Third - Homestead and Homeowners' Property Tax Credits - Access and Eligibility: 14-117 Real Property, 9-105 Real Property, 9-105 Real Property, 8-401 Real Property, 14-812 Real Property, 9-104 Real Property