It’s That Time of Year!

by Pessin Katz Law, P.A.

One can always tell when an election year is upon us.  Maryland Republican lawmakers resume their quest to eliminate or severely curtail Maryland’s Estate Tax and Inheritance Tax and their Democratic counterparts oppose it.  This year is no different.  There are some bills introduced to eliminate those taxes (which are unlikely to pass); some to curtail them (which may come to pass because of the next category); and some that would bring Maryland in line with the Federal scheme of estate taxation, more or less (which have the greatest chance of passage).  Readers should bear in mind that a person “domiciled” (“living”, as a loose description) in Maryland is subject to three levels of taxation at death:  Federal Estate Tax, Maryland Estate Tax and Maryland Inheritance Tax.

So, let’s “review the bidding” on estate and inheritance taxes in the 2014 Maryland legislature:

Bill No. (House and/or Senate)


Probably Not




Estate and Inheritance Tax – Repeal.  The title of this bill speaks for itself and is unbelievably short, comprising only ONE page.





(HB351 Maryland Estate Tax – Unified Credit)

(SB163 – Maryland Estate Tax – Unified Credit and Exclusion Amount)

Estate Tax – Recoupling with Federal Law.  HB 186 conforms the Maryland estate tax to the value of the federal unified credit and the deduction allowed under the federal estate tax for state death taxes paid.  It represents a step back from outright repeal of the estate tax.  HB351 appears to represent a re-iteration of the same material by another Delegate.  SB163 is the Senate version of this bill.





Maryland Estate Tax – Unified Credit.  Maryland and Federal law differ on the size of the “unified credit” or what some refer to as the “exclusion amount” or “exemption”.  The Federal Unified Credit is equal to $5.340 million for those dying in 2014 while Maryland’s is $1 million.  The bill seeks to raise the Maryland amount in stages from a new $2 million level in 2014 to that used federally beginning January 1, 2017.





Estate Tax – Qualified Family-Owned Business Interests – Exclusion.  The bill exempts from the State estate tax up to $5.0 million in qualified family-owned business interests. In order to qualify for the exemption, the interests must pass from a decedent to a “Qualified Recipient”.  The bill represents an attempt to give small business owners a “break” when it comes to the Maryland estate tax.





Estate Tax – Qualified Agricultural Property – Repeal of Recapture Provisions.  Maryland currently provides favorable estate tax treatment to “Qualified Agricultural Property” which passes to a “Qualified Recipient”.  However, should the property cease to be used for “farming” within 10 years after a decedent’s death the estate tax which would have otherwise been due is “recaptured”.  This bill seeks to stop any recapture of the estate tax.






Maryland Estate Tax – Unified Credit.  HB739 and its cross-filed “kin”, SB602, is probably the Democratic response to Republican efforts to do away with the Estate Tax or link the Maryland unified credit to the federal one. Like HB188 and SB155 above it provides a sliding scale for the Maryland unified credit of $1.75 million for those dying in 2014 to $3.5 million in 2017.  Thereafter, it appears the Maryland exclusion would be linked to the Federal.  It differs from those bills in amount.  It has been introduced by the Speaker of the House of Delegates and has the support of other Democrats.  The “cross filed” version, SB602, was introduced by the President of the Senate and has the backing of other Democrats.  SB155 cross-filed with HB188 is another iteration of the Maryland “sliding scale unified credit” but with different amounts.





Maryland Estate Tax – Exclusion – Deceased Spousal Unused Exclusion Amount.  Similarly to Federal law, Maryland would seek to allow a surviving spouse to use the “unused” portion of a deceased spouse’s Maryland Estate Tax exclusion or “Unified Credit”.





Inheritance Tax – Repeal.  The second prong of Maryland’s “death tax” scheme is the State Inheritance Tax.  Maryland and New Jersey are the only two mid-Atlantic states to impose both an estate and an inheritance tax.  The title of this bill, as with HB184, above speaks for itself.





Estate Tax – Unified Credit.  This Senate bill is probably a “compromise”.  It sets the Maryland Unified Credit to $3 million without a sliding scale, as discussed in some of the bills above.





Maryland Estate Tax – Transfer of Qualified Agricultural Property by a Qualified Recipient.  Introduced by a farm-county Democrat, the bill specifies that “Qualified Agricultural Property” may be transferred between “Qualified Recipients” without triggering Maryland Estate Tax recapture.  However, should the property cease to be used for farming within 10 years following the death of the decedent then the last “Qualified Recipient” to own the property is responsible for any estate tax recapture.  This bill has no other sponsors other than the person who introduced the bill, otherwise its chances for passage might be greater.




What is apparent from the foregoing, even to a casual observer, is that there is a movement among Republicans and Democrats alike to raise the Maryland “Unified Credit” or “exclusion amount” from its present $1 million level.  Whether the Governor would support such a move is another question, but given the support of the Senate President and the Speaker of the House for some movement on the issue, individuals who have been so instrumental in securing the passage of legislation desired by the Governor, a gubernatorial veto is perceived as being unlikely.  Because, it’s that time of year!

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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