Legislative

Maryland Attorney General's Advice on Taxes for Short Sale Transactions

Maryland Attorney General's letter: On Wednesday January 27, Maryland Attorney General Doug Gansler's office released an advice letter on whether a county has the authority to assess recordation taxes on debt of a "short sale" seller of real property that is forgiven by the lender.  Speaking to over 200 REALTORS® at the Maryland Association of REALTORS® legislative day, Attorney General Gansler discussed the letter that states, "While not expressly prohibited, it is my view that the counties do not have the authority to include debt forgiven by the seller's lender in calculating the consideration on which the recordation tax will be calculated."  To read a copy of the AG's letter, please click here.
 
Background: GCAAR recently informed members that several counties in Maryland had recently started charging recordation and/or transfer taxes on the unpaid principal balance of the mortgage instead of the sales price on short sales.  On Tuesday, January 12, GCAAR was informed that the Montgomery County's Department of Finance Transfer Office had decided to hold off temporarily on their position that short sales should be taxed on the unpaid principal balance of the mortgage as if the excess debt over and above the sale price is being waived/cancelled.
 
However, both Anne Arundel County and Prince George's County had moved forward with this position.  REALTORS® reported that settlements were being delayed because of this new unexpected additional tax on short sale transactions.  GCAAR along with AACAR and PGCAR worked with MAR to try to stop the counties from charging these "new taxes."  MAR sought a legal opinion from the Maryland Attorney General's office to clarify the definition of "consideration" for these taxes on short sale transactions.  
 
Counties Status as of Friday, January 29: GCAAR has been informed that Montgomery County is still at a temporary halt, while the County Attorney's office continues to conduct its own legal analysis.  They are hoping to release a formal opinion within the next 30 days.  Anne Arundel County has stated that they will no longer be charging taxes on the forgiven debt and will continue the practice of just charging taxes on the sales price agreed upon by the buyer and seller.  PGCAR has stated that Prince George's County has also not released a formal opinion and is suggesting that REALTORS® and title professionals who have settlements pending over the next several days contact Michael Dougherty, Finance Director, directly to negotiate the tax.  Mr. Dougherty offered his direct line at 301-952-4013.
 
Associations Seeking Legislation: The Attorney General's office has said that in their view the counties do not have the authority to include debt forgiven by the sellers' lender in calculating the consideration on which the tax will be calculated.  However, they have also stated that taxing recordation taxes on the forgiven debt in a short sale is not expressly prohibited by statute.  Therefore, the associations are preparing to move forward and seek legislation that will clarify that the excess debt owed on a mortgage is NOT part of the "consideration" between the two parties in a real estate transaction.  GCAAR's government affairs staff is working diligently on this issue and will keep members informed as we receive any new information.  If you have any questions, please contact Meredith Weisel, VP of Public Policy for Maryland at mweisel@gcaar.com.   

 

legislative success - tax issue Affecting Short Sale Transactions put on hold!!January 13, 2010

On Tuesday, January 12, GCAAR was informed that the County’s Department of Finance Transfer Office has decided to hold off on their recent position regarding recordation and transfer taxes on short sales until further review.  Their position is that short sales should be taxed on the unpaid principal balance of the mortgage as if the excess debt over and above the sale price is being waived/cancelled.  Below is the new memo released from the Department:

Dear Clients of the Montgomery County Transfer Office:

We have decided to initiate further review of the Short Sale issue.

Until our review is complete, you may continue to submit Short Sales for processing (at the contract purchase price) as in the past.
 
Note: If, after further review, the final conclusion is that “consideration” may exceed the Short Sale purchase price, we will give you ample advance notice of this result and the appropriate procedure for calculating “consideration”.

Thank you,
Tim Jones
Tax Operations Manager


GCAAR's government affairs staff is working diligently on this issue and will keep members informed as we receive any new information. If you have any questions, please contact Meredith Weisel, VP of Public Policy for Maryland at mweisel@gcaar.com.

NEW:  DC Real Estate Guaranty Fund - June 1, 2009
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  • GCAAR supports housing policies that help to place home ownership within reach of all who desire it.
  • GCAAR opposes any efforts to place a tax on commissions or expand the sales tax to real estate related functions.
  • GCAAR opposes all efforts to increase transfer and recordation taxes as a means to increase general county or city revenues, and support the elimination of taxes on the transfer of property.
  • GCAAR opposes impact fees and other “nuisance” taxes, which discourage the development of new homes and businesses.
  • GCAAR supports a concerted effort to reduce barriers to home ownership by seeking a reduction in closing costs.
  • GCAAR believes that the sign ordinance enacted by Montgomery County in 1997 should be repealed because it obstructs the rights of property owners, hinders free speech, imposes unnecessary costs, and serves no legitimate public policy purpose.
  • GCAAR supports construction of the Master Plan or “G” Alignment of the Inter-County Connector and other reasonable alternatives to move people “East-West” efficiently across Montgomery County.
  • GCAAR supports the renewal of the DC first-time homebuyer federal tax credit and strongly advocates making the credit permanent.
  • GCAAR believes that people have a right to live wherever they can afford to live, and REALTORS® have an obligation to protect that right by complying with all fair housing laws. There is no room in our profession for housing discrimination.
  • GCAAR opposes rent control and related government regulations in both Montgomery County and the District of Columbia.