Bulletin: MD2008001

Date:
February 19, 2008
To:
All Maryland Issuing Offices
RE:
New Maryland nonresident entity withholding "holding" period requirement

Dear Associates:

All sellers of property located in Maryland that are considered "Non-Residents" are required to pay a Non-Resident Withholding tax before their deeds will be accepted for recording. In the past, many entities were able to avoid such tax if they were successful in appointing a resident agent with the Maryland State Department of Assessments and Taxation immediately prior to the transaction.

Effective October 22, 2007, certain withholding requirements for non-resident entities were amended. The Regulations were revised to alter the definitions of resident and non-resident entities. 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 below COMAR 03.04.12.02.B (7) and (11).

7) "Nonresident entity" means an entity that: (a) Is not formed under the laws of the State more than 90 days before the date of sale of the property; and

(b) Is not qualified by or registered with the Department of Assessments and Taxation to do business in the State more than 90 days before the date of sale of the property.

* * *

(11) "Resident entity" means an entity that:

(a) Is formed under the laws of the State more than 90 days before the date of sale of the property; or

(b) Is formed under the laws of another state and is qualified by or registered with the Department of Assessments and Taxation to do business in the State more than 90 days before the date of sale of the property.

The Clerks of each court have been advised by the Comptroller that the date of sale is the "settlement date." The "Certification of Exemption from Withholding" form has been revised, accordingly, and can be found at: www.marylandtaxes.com.

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." Forms for the Withholding Return, (MW506NRS), the Application for Exemption, (MW506AE) and the Application for Tentative Refund (MW506R) can also be found under 2008 Tax Forms.

Additionally, on January 1, 2008, the Non-Resident Withholding tax rate increased from 6 to 6.75% for individuals and from 7 to 8.25% for corporations. We have been informed that the Comptroller's office will only apply this increase to closings that occurred after January 1. As such, any deeds executed contemporaneously with closings occurring prior to January 1, 2008, will not be subject to the increase.

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THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
None
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
None