Beware: New 90-Day Maryland Resident Entity Rule
By: Myles, March 7th, 2008
As stated in our earlier Blog posting of
A BIG CHANGE HAS BEEN ENACTED: The Regulations now provide that the non-resident entity must either qualify or register to do business in Maryland “more than 90 days before the sale of the property.” See COMAR 03.04.12.02.B (7) and (11). Therefore, an out of state entity must register to do business in Maryland with the State Department of Assessments and Taxation, at least 90 days in advance of settlement to qualify as a resident under the Maryland withholding tax law. This is a huge departure that requires more planning. Note that the Comptroller’s letter to the Clerks indicates that the date of sale of the property is the “settlement date.” For your review and use, here’s the newly revised “Certification of Exemption from Withholding” form: Affidavit of Residence.
As a result of this “new” 90-day rule, all real estate professionals must now anticipate this issue well in advance of closing, otherwise out-of-state entity client sellers will not be able register to do business in Maryland immediately (as was common practice previously), prior to closing, to avoid the settlement agent’s obligation to collect Maryland withholding tax, at the time of closing, at the increased withholding tax rate.
The regulations were also revised to provide that a party seeking an early refund may file the request for a refund at least 60 days after the tax was paid to the Clerk, “but no later than November 1 of the calendar year in which the tax was paid.” The following related forms can also be found on the State of Maryland’s Tax website:
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