Bill Summary – FastDemocracy

HB 1175
                      Department of Legislative Services
                              Maryland General Assembly
                                    2021 Session
                           FISCAL AND POLICY NOTE
                                  First Reader
House Bill 1175                 (Delegate Brooks)
Ways and Means
               Property Tax Credit for Disabled Veterans - Established
This bill requires the State, counties, and municipalities to grant a property tax credit for
the property tax imposed on the dwelling house of a disabled veteran. The amount of the
property tax credit is equal to the service-connected disability rating of the disabled
veteran. The bill specifies application criteria that a disabled veteran must follow when
applying for the property tax credit with the State Department of Assessments and
Taxation. 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 significant amount
beginning in FY 2022. Under one set of assumptions, special fund revenues may decrease
by approximately $4.1 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 tax credits being granted and stable assessments.
Local Effect: Local property tax revenues decrease by a significant amount beginning in
FY 2022. Under one set of assumptions, local property tax revenues may decrease by
approximately $43.2 million annually beginning in FY 2022. County expenditures are not
affected. The bill imposes a mandate on a unit of local government.
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.
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.
State Fiscal Effect: ABF revenues will decrease by a significant amount beginning in
fiscal 2022 as a result of the property tax credit for disabled veterans. The amount of the
revenue decrease depends on the number of eligible disabled veterans, each veteran’s
service-connected disability rating, and the assessed value of each residential property.
For illustrative purposes only, ABF revenues may decrease by approximately $4.1 million
annually beginning in fiscal 2022 as a result of the property tax credit required by the bill.
The estimate is based on the following:
      372,500 veterans living in Maryland;
      20% of veterans have a service-connected disability rating;
      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 a property tax exemption;
HB 1175/ Page 2
      38,500 additional disabled veterans may become eligible to receive a property tax
       credit under the bill;
      property tax credit amount for each disabled veteran varies by the level of
       service-connected disability rating;
      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, county property revenues may decrease
by approximately $43.2 million annually beginning in fiscal 2022. The impact on local
revenues may vary depending on the actual number of property tax credit recipients, where
each recipient resides, and the assessed value of each property.
                               Additional Information
Prior Introductions: None.
Designated Cross File: None.
Information Source(s): Baltimore, Charles, Frederick, and Montgomery counties;
City of Havre de Grace; Maryland Municipal League; State Department of Assessments
and Taxation; Department of Legislative Services
HB 1175/ Page 3
Fiscal Note History:   First Reader - March 1, 2021
rh/hlb
Analysis by: Michael Sanelli                      Direct Inquiries to:
                                                  (410) 946-5510
                                                  (301) 970-5510
HB 1175/ Page 4
Statutes affected: 
Text - First - Property Tax Credit for Disabled Veterans - Established: 9-112 Tax Property