Howard County Maryland Blog

Local Politics and Current Events

I Wish the Grown-Ups Were In Charge in Annapolis

Posted by Jim Walsh on Monday, March 5, 2007

HB 1053 – ANNUAL BUSINESS ENTITY FILING FEE INCREASE

Sponsored by Delegates Hucker, Barve, Gutierrez, Hixson, Howard, Ivey, Kaiser, Lawton and Stukes

Currently every corporation, limited partnership and limited liability company doing business in the State of Maryland must pay an annual filing fee of $300. HB 1053 increases that fee to $1000. This fee was previously increased from $100, and imposed on limited partnerships and limited liability companies for the first time, in 2004.

The bill does provide for a nonrefundable credit of up to $500 againt the Maryland income tax, which cannot be carried forward. Most small businesses are organized as a “passthrough entity” (PTE in Comptroller jargon) , meaning that the businesses themselves do not pay tax on their income, but the owners add their share of the PTE’s income to their own taxable income and pay the additional income tax personally. The bill does not address if, or how, the credit is claimed by owners of PTEs. Regardless of whether or not a partial credit might be allowed (which can easily be taken away later), this fee increase really hurts. An extra $700 for the privilege of opening your door for business each January 1 is a significant burden to most businesses. For liability purposes, many if not most small businesses that operate at different locations, or along different lines of business, are organized as separate business entities. This means that the actual additional cost ends up being $700 per location or line. I doubt that any of the sponsors has any experience in running a small business; they exhibit the mentality that because a tax or fee is imposed on business it is just somehow “absorbed”. Killing the goose that lays golden eggs, each incremental increase in costs will drive more business out of Maryland.

A hearing on this bill is scheduled before the House Ways and Means Committee on Thursday, March 15 at 1:00 p.m.

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10 Responses to “I Wish the Grown-Ups Were In Charge in Annapolis”

  1. Melissa said

    Any word on whether non-profits are included in this? They are organized as Corp. or LLCs and this will really hurt them.
    My brother is in the process of establishing a non profit to help transport wounded soliders from Walter Reed/ Bethesda to and from Western/Rodeo events that he sponsors (It’s all free for the troops) But since they don’t raise that much money, this will really hurt…

  2. Ben Dover said

    Non profits are ALWAYS corps. Never an LP or LLC. And yes, they do pay the Form 1 filing fee, but pay no personal property tax. This fee is really insurance. It keeps your legal entity alive so there is seperation between business and personal assets. $1,000 is too much to raise this fee to. I was surprised when it went from $100 to $300.

  3. Jim Walsh said

    Melissa:

    The filing fee applies only to those corporations that are authorized to issue stock. As far as I know, all incorporated charitable organization are organized as non-stock corporations so the fee would not apply to them.

  4. Melissa said

    Ben – Yes, I remember now that they are only Corps – must have been on auto-pilot writing the post – thanks!

    Jim – Thanks for the info.

  5. Below is a letter to the folks in Annapolis from one of our local lawyers (Katherine L. Taylor — http://www.taylorlegal.com) who works with small businesses in Howard County. She’s encouraging small businesses who oppose the legislation to write their legislators and let them know.


    To: ‘kumar.barve@house.state.md.us’; ‘tom.hucker@house.state.md.us’; ‘ana.gutierrez@house.state.md.us’; ‘sheila.hixson@house.state.md.us’; ‘carolyn.howard@house.state.md.us’; ‘jolene.ivey@house.state.md.us’; ‘anne.kaiser@house.state.md.us’; ‘jane.lawton@house.state.md.us’; ‘melvin.stukes@house.state.md.us’
    Cc: ‘Gail.Bates@house.state.md.us’; ‘Guy.Guzzone@house.state.md.us’; ‘Warren.Miller@house.state.md.us’
    Subject: Opposed to House Bill 1053

    Dear Delegates Barve, Hucker, Gutierrez, Hixson, Howard, Ivey, Kaiser, Lawton and Stukes:

    As a small business owner, and as a lawyer who assists individuals with starting small businesses, I am wholly against the proposed House Bill that will increase the Annual Report filing fee for entities from $300 to $1000. While this Bill will have very little effect on large companies, the small business owner, like myself, especially those who own LLC’s and “S” corporations, will feel the hit directly in their own pockets. The tax credit to offset the increase is not comforting, as the credit is received more than a year after the fee is paid.

    Do you realize that the Annual Report for which you are requesting an increase in the filing fee is the report required by the SDAT for purposes of assessing personal property tax? The actual personal property tax that my business pays is about $150 per year, yet your Bill will require me to pay an additional $700 just to file the report.

    This is unacceptable. At a minimum, small businesses should pay a lower fee. The fee could be based on capitalization amounts — companies with higher capitalization can bear the brunt of the increase.

    This may seem, at first glance, like a good way to raise revenue. It’s easy to claim that you are not taxing individuals, that you are taxing the businesses. But, small business owners like me will be penalized. This is an anti-small business Bill – as such, it is an anti-working mother, working-parent Bill. Many people have decided to start their own businesses as a result of layoffs, lack of flexible schedules, etc. We are not the Wal-Marts of the world, we are the every-day people working to make a living and you have said to us that you are taking money out of our pockets.

    Please look more closely at what you are doing and do not pass this Bill.

    Best regards,

    Katherine L. Taylor, Esquire

  6. I am wholly against the proposed House Bill that will increase the Annual Report filing fee for entities from $300 to $1000.

    How much more revenue do you need to run corruption?

    Where does all the bridge toll money go?

    Are you people out to lunch or what?

  7. Donna H. said

    This is bad news for small business….If I had not read this here, I would not be aware …has this been covered in the mainstream media? Yuk-pooey!
    I sent off my thoughts to those who sponsored..thanks for the info!

  8. C. Couey said

    I am also opposed to House Bill 1053. This bill provides the incentive to register small businesses in a state other than Maryland and clearly says Maryland is not kind to small businesses.

    As a one member LLC who provides techncial consulting services, I can not afford such a tax. I already have a major issue with the $300 per year filing fee, particularly since I have less than $2,000 worth of personal property.

    If Maryland Legislators have a strong reason for raising taxes (which I doubt) and can justify hitting businesses with that tax (which I doubt) it should be based on the value of the personal property or better yet assessed on the income. Either way this motivates me to look for a state that encourages small business and to re-open my business there.

  9. R. Couey said

    This move will cost Maryland the strength of small business which employs the largest percentage of workers. And when the state’s economy sags from the flight of these businesses, you can bet the small-minded politicians behind this move will either be in hiding, or blame it on someone else.

  10. This is disappointing. I am thinking about re-registering in Delaware. Pay additional money for what? For “proud” letters MD on your company address? I am totally fine with “DE”

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