The following special limitations on applications are contained in the tax
credit enabling statute found at Section 9-104 Tax-Property Article of
the Maryland Annotated Code, and some of the individual restrictions have been
clarified further by the Maryland Courts as well as by formal regulations
promulgated by the Department in the Code of Maryland Regulations (COMAR).
1. The dwelling for which a credit application is being made must be the
principal residence of the applicant, where he or she resides or expects to
reside for more than 6 months of some 12-month period, unless unable to do so
for reasons of illness or need of special care. [Section 9-104(a)(b) and (j)].
Such 6-month period begins with July 1, of the taxable year for which the credit
is sought. Sally G. Plager v. State Dept. of Assessments and Taxation,
Maryland Tax Court, Miscellaneous No. 421 (1981).
The six (6) month residency requirement as interpreted by the Maryland Tax
Court has certain practical results for the processing of applications. First,
if an applicant has filed before July 1, but dies before six months has elapsed
from the July 1, date, then no credit will be allowed unless there is a
surviving spouse or resident heir. A discussion at item 13 under this same topic
as to why an attorney may not delay the termination of the credit by waiting
until the end of the year to transfer the property to a nonresident heir.
Second, if an applicant dies before filing the application but he or she was
living in the property after July 1, then no credit may be issued to the estate
because there is not a possibility or an expectation of the applicant residing
in the dwelling for six months of the taxable year. Of course, any heir who was
residing in the property with the deceased owner as of July 1, could reapply for
the credit in his or her own right once the necessary legal interest was
established. Finally, if an applicant files before July 1, but the Department
learns that the applicant died before July 1, then no amount of credit should be
issued since there was no homeowner resident in the dwelling as of the specific
July 1, date.
2. A homeowner or homeowners may
claim credit in only one dwelling. [Section 9-104(i)(3)].
3. The credit shall not be allowed to any applicant homeowner and spouse whose
combined net worth is in excess of $200,000 as of December 31 of the calendar
year preceding the year in which the application is made for the tax credit.
[Section 9-104 (i)(1); COMAR 18.07.01.0lB(5)]. Net worth is defined at Section
9-104(a)(2) & (12) to mean the value of assets less their outstanding
liabilities but does not include the value of the dwelling for which the credit
is sought, except insofar as there is acreage in excess of the homesite
curtilage.
4. The taxes subject to credit consideration are limited to the total real
property taxes calculated on the assessed valuation of the dwelling and the lot
or homesite curtilage on which it is erected [Subsection 9-104(a)(6) &
(13)]. In the cases where the applicant owns a dwelling surrounded by a large
tract of land, the credit shall be limited to "curtilage" which is that amount
of land necessary and/or used for the dwelling. [COMAR 18.07.0l.02(A)(1)]. A
detailed explanation of how the "curtilage" value is calculated by Assessment
Office personnel is in procedure 19:30:12.
5. A maximum of $150,000 of assessed valuation shall be eligible for
consideration in calculation of the tax credit [Section 9-104(a)(13)].
6. The credit does not include the taxes on any portion of a dwelling used
for a commercial business or nonresidential purpose [COMAR
18.07.0l.0l.(B)(8)].
7. Any metropolitan or fixed charges that may appear on the applicant
homeowner's tax bill are not taxes subject to credit consideration [Section
9-104(a)(13)].
8. Any tax credit allowed under the separate provisions at Section 9-105 for
assessment increases in excess of certain limits shall be deducted from the
total real property taxes subject to Homeowners' Tax Credit consideration
[Section 9-104(a)(13)].
9. Eligible homeowners shall receive a tax credit equal to the amount when the
total real property taxes subject to credit consideration are in excess of 0% of
the applicant's first $4,000; 1% of the next $4,000; 4.5% of the next $4,000;
6.5% of the next $4,000 and 9.0% of all combined gross household income over
$16,000 [Section 9-104(g)].
10. If an applicant homeowner is eligible for a credit of less than $1.00 in
any taxable year, a credit will not be allowed for that year [Section
9-104(i)(2)].
11. Eligible homeowners shall redeem the tax credit provided under this
program in the taxable year in which it was issued or in the next succeeding
taxable year only [Section 9-104(i)(4)]. For example, a 2000 Homeowners' Tax
Credit issued for taxable year beginning July 1, 2000 could not be redeemed
after June 30, 2002. The one exception to the two year limitation on the
validity of a tax credit is in cases where the homeowner's property is being
sold at tax sale. In that limited instance, the credit may be redeemed after two
years because of the presumption that the homeowner did not have the financial
means to redeem the credit by paying the remaining outstanding tax
liability.
12. Whenever a homeowner sells or transfers his or her legal interest in a
dwelling subject to this property tax credit, a portion of the tax credit shall
be repaid to the State by the purchaser or transferee reflecting the extent to
which the amount of credit bears to the remainder of the taxable year on the
date of transfer [Section 9-104(0); COMAR 18.07.01.03(G)(1)(a) & (b)]. In
cases of the death the applicant homeowner, who is not survived by a spouse, the
date of death is the date of transfer no matter when record title is recorded in
the name of the subsequent transferee. Death operates as a transfer "by
operation of law." In the case of sales of property, the date of settlement
shall be deemed the transfer date.
The tax credit is recaptured on a
daily prorata basis, and the local Finance Office may calculate the repayment of
the tax credit on a 360-day calendar year (30-day per month) method. No tax
credit repayment need be collected when only five days or less remain in the
taxable year. [See a detailed discussion of the specific requirements for
recapture of tax credits at the separate topic in this manual entitled "Audit of
Recaptured Tax Credits", procedure 12:50:20].
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