What is the Maryland SDAT and why do I care?

SDAT OVERVIEW FOR MARYLAND BUSINESSES

Anyone doing or planning to do business in Maryland should be familiar with the State Department of Assessments & Taxation ("SDAT").  As a broad overview, SDAT governs business formation and taxation.  The SDAT website,  http://www.dat.maryland.gov, provides a wealth of information and many forms and required filing information may be found there.

Register, Change, Revive or Dissolve a Business

SDAT filing services include filing forms to register a business in Maryland. These can include: Maryland Limited Liability Company, Foreign (Non-Maryland) Limited Liability Company, Stock Corporation, Tax-Exempt Nonstock Corporation, Close Corporation, and Foreign (Non-Maryland) Corporation.  SDAT also has forms to change, revive, or dissolve a business. However, a business owner should be cautioned that many considerations go into what type of business to register and what the tax and other legal ramifications are. SDAT does not provide legal advice on these issues. Instead, an experienced business attorney can offer such advice.

Look for an Existing Business or Find Out if a Business Name

 is Taken for Your New Business

SDAT also provides a search engine for business name availability. You can search to see if any other company has registered a company name you want to use. If not, you can.register the name. You can also register a trade name which is commonly known as a t/a or d/b/a name. This name is different from the actual registered entity name but one that the SDAT authorizes you to use. (For example, my business is registered as Katherine L. Taylor, P.A., but the trade name is registered as Taylor Legal.)

Obtain Information About a Business

The status of a business can be checked through SDAT. SDAT can provide certified copies of Articles of Organization or Incorporation.  It lists the "Resident Agent," (person authorized to receive service of process for a Maryland business) and the legal status of a business (whether the charter is active or forfeited). In addition, SDAT can provide specific information about a business. For instance, you may want to see if a business is legally registered in Maryland, whether it is a close corporation or a stock corporation, the purpose of the business, or if it is in good standing or forfeited.

File Personal Property Tax Returns

SDAT has forms for filing personal property tax returns. SDAT administers the valuation of annual property taxes based on the value of a business' personal property.  SDAT automatically registers corporations, limited liability companies, limited partnerships, and limited liability partnerships for this type of tax and once your business is registered, you will receive notice that you are required to file property tax returns. However, sole proprietorships and general partnerships, which are not registered with the SDAT, must obtain an SDAT registration number and file an annual business personal property form for this assessment.

Learn How the SDAT Website Can Help You!

The website is easy to navigate but can be overwhelming, content wise, for someone not familiar with the intricacies of business requirements in Maryland. While attorney advice is recommended, it is a good idea to check out and become familiar with all SDAT has to offer.

Zombie Ground Rents

Just when I thought Halloween was over, zombie ground rents seem to have risen from the dead.

The Baltimore Sun had a great article detailing the recent Maryland Court of Appeals ruling which overturned the method of extinguishing ground rents created by the Maryland Legislature in 2007. Ground rents are a tenure, created by a grant in fee simple, where the grantor reserves to himself and his heirs a  rent, which is the interest of the money value of the land. Ground rents apply to the real estate, but not the structures attached to the land, such as a home or outbuilding. Zombie ground rents are those with no active - or in some cases known - ground rent owner.

Ground rents in Maryland are often vestiges of colonial America, with some dating back to the 1600s. The fees associated with the ground rent are often nominal. Some ground rent owners do not attempt to collect the fees, as the costs associated with the collection are deemed too high compared to the actual rent. Additionally, some ground rent owners do not know that they have the right to collect at all, as they received the right as an inheritance. Absentee ground rent owners can make selling property incredibly difficult for homeowners, especially those seeking a mortgage from an out-of-state bank unfamiliar with the peculiarities of Maryland's ground rent system. Additionally, in Maryland, the owner of the ground rent can place a lien against the buildings if the ground rent is not paid. This has led to many difficulties for homeowners who are looking to sell their home, only to discover that a lien was placed upon the building.

In 2007, the Maryland State legislature attempted to remedy these difficulties by passing a law requiring ground rent owners to register their right with the State Department of Assessments and Taxation. If the ground rent was not registered, a homeowner whose property was encumbered could pay a fee and have the property released from the ground rent. On October 25, 2011, the Maryland Court of Appeals ruled that this provision of the ground rent legislation was invalid. The case, Charles Muskin, Trustee v. State Department of Assessments and Taxation, No. 140, September Term, 2010, held that not registering a property did not eliminate the property rights held by the ground rent owner. The Court held that the legislation provided for a taking without just compensation of the property rights of the ground rent owner, and noted that the legislation provided no method for appeal once the rights were extinguished. The court also noted:

Real property and contractual rights form the basis for economic stability, such as it is, has been, and will become again hopefully. Allowing the “mere will of the Legislature” to shift drastically the fee simple ownership of land or cancel contractualobligations will shake further the confidence of citizens in their constitutional protections from government interference.