Bulletin: MD2011001

Dear Associates:

Please accept this bulletin as an update regarding the decrease in percentage charge of non-resident withholding tax for individuals on the sale or transfer of real property in Maryland.

The Maryland Comptroller's office imposes upon a nonresident seller an income withholding tax at the time of settlement. Before a deed or other instrument of transfer from a non-resident individual or entity is recorded with the Clerk of the Circuit Court in the various land records departments across the State, title companies are required to collect withholding tax from the seller and submit such payment to the local Clerk of the Circuit Court or the Maryland Department of Assessments and Taxation (SDAT) (unless in receipt of a valid certificate of exemption). Effective immediately, the rate for Maryland Nonresident Withholding Tax has dropped from 7.5% to 6.75% for individuals selling property in Maryland. The tax for non-resident entities remains at 8.25%. Additionally, because the Comptroller has discovered an increasing number of sales by nonresident sellers involving properties that are claimed as principal residences but are not listed as owner-occupied by SDAT, the comptroller may soon ask the Clerks to investigate whether there is cause to collect the tax. If SDAT does not list the property as owner-occupied, the seller may request an exemption from the Comptroller's Office, but would not be entitled to use the affidavit attaching to the deed of transfer or otherwise certify the property as a principal residence. At settlement, the seller must complete Form MW506NRS, Return of Income Tax Withholding for Nonresident Sale of Real Property. The settlement agent must then present Copies A and B of Form MW506NRS to the clerk or SDAT, along with payment:

http://forms.marylandtaxes.com/11_forms/MW506NRS.pdf

Finally, evidently a number of title companies are still using the older form withholding exemption certification affidavits. Please utilize the new 2011 form (and as subsequently modified for future years):

http://forms.marylandtaxes.com/11_forms/Affidavit_of_Residence.pdf

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